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. [ ]
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Post-Effective Amendment No. 13 [ X ]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 15 [ X ]
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COLONIAL TRUST VI
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(Exact Name of Registrant as Specified in Charter)
One Financial Center, Boston, Massachusetts 02111
-------------------------------------------------
(Address of Principal Executive Offices)
(617) 426-3750
--------------
(Registrant's Telephone Number, including Area Code)
Name and Address of Agent for Service: Copy to:
- ------------------------------------- -------
Michael H. Koonce, 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 27, 1997 pursuant to paragraph (b).
[ ] 60 days after filing pursuant to paragraph (a)(1).
[ ] on [date] pursuant to paragraph (a)(1) of Rule 485.
[ ] 75 days after filing pursuant to paragraph (a)(2).
[ ] on [date] pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
<PAGE>
COLONIAL TRUST VI
Cross Reference Sheet (Colonial U.S. Stock Fund, formerly 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 and
Certain Risk Factors; 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
<PAGE>
October 27, 1997 SF-01/300E-1097
COLONIAL U.S. 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 U.S. 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 large 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
Fund. Read it carefully and retain it for future reference. More detailed
information about the Fund is in the October 27, 1997 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 1-800-426-3750. The
Statement of 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 are subject to an annual distribution fee and a
declining contingent deferred sales charge on redemptions made within six years
after purchase; and Class C shares are offered at net asset value and are
subject to an annual distribution fee and a contingent deferred sales charge on
redemptions made within one year 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 and
Certain Risk Factors
How the Fund Measures its Performance
How the Fund is Managed
How the Fund Values its Shares
Distributions and Taxes
How to Buy Shares
How to Sell Shares
How to Exchange Shares
Telephone Transactions
12b-1 Plan
Organization and History
- ----------------------------------- -----------------------------------
NOT FDIC-INSURED MAY LOSE VALUE
NO BANK GUARANTEE
- ----------------------------------- -----------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
1
<PAGE>
SUMMARY OF EXPENSES
Expenses are one of several factors to consider when investing in the Fund. The
following tables summarize your maximum transaction costs and annual expenses
for an investment in the Class A, Class B and Class C shares of the Fund. See
"How the Fund is Managed" and "12b-1 Plan" for more complete descriptions of the
Fund's various costs and expenses.
Shareholder Transaction Expenses(1)(2)
Class A Class B Class C
Maximum Initial Sales Charge
Imposed on a Purchase
(as a % of offering price)(3) 5.75% 0.00%(5) 0.00%(5)
Maximum Contingent Deferred Sales Charge
(as a % of offering price)(3) 1.00%(4) 5.00% 1.00%
(1) For accounts less than $1,000 an annual fee of $10 may be deducted. See
"How to Buy Shares."
(2) Redemption proceeds exceeding $1,000 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 C
shares, long-term Class B and Class C 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 Class
B shares automatically convert to Class A shares after approximately 8
years, this is less likely for Class B shares than for a class without a
conversion feature.
Annual Operating Expenses (as a % of average net assets)
Class A Class B Class C
Management fee 0.80% 0.80% 0.80%
12b-1 fees 0.25 1.00 1.00
Other expenses 0.40 0.40 0.40
---- ---- ----
Total operating expenses 1.45% 2.20% 2.20%
==== ==== ====
Total expenses, excluding brokerage, interest, taxes, 12b-1 distribution and
service fees and extraordinary expenses, are, until further notice, voluntarily
limited by the Adviser to 1.25% of average net assets.
Example
The following Example shows the cumulative expenses attributable to a
hypothetical $1,000 investment in each of the Class A, Class B and Class C
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 C
Period: (6) (7) (6) (7)
1 year $ 71 $ 72 $ 22 $ 32 $ 22
3 years 101 99 69 69(9) 69
5 years 132 138 118 118 118
10 years 221 234(8) 234(8) 253 253
(6) Assumes redemption at period end.
(7) Assumes no redemption.
(8) Class B shares automatically convert to Class A shares after approximately
8 years; therefore, years 9 and 10 reflect Class A share expenses.
(9) Class C shares do not incur a contingent deferred sale charge on
redemptions made after one year.
2
<PAGE>
THE FUND'S FINANCIAL HISTORY (a)
The following financial highlights for a share outstanding throughout each
period have been audited by Price Waterhouse LLP, independent accountants. Their
unqualified report is included in the Fund's 1997 Annual Report and is
incorporated by reference into the Statement of Additional Information. The
following data reflects, in part, performance of the Fund while its portfolio
was being managed by a former sub-adviser, using different investment policies
than are now in effect, whose services were terminated on November 15, 1996. The
results shown do not necessarily represent the results that would have been
achieved under the Fund's current investment approach.
<TABLE>
<CAPTION>
Class A
----------------------------------------------------------------
Year ended June 30
----------------------------------------------------------------
1997 1996 1995 1994 1993(g)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $14.470 $13.260 $11.460 $11.820 $10.000
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (a) 0.099 0.121 0.165 0.142 0.103(e)
Net realized and unrealized gain (a) 4.314 2.292 2.530 (0.119) 1.784
------- ------ ------ ------ ------
Total from Investment Operations 4.413 2.413 2.695 0.023 1.887
------- ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.072) (0.118) (0.160) (0.138) (0.067)
In excess of net investment income (0.011) -- -- -- --
From net realized gains (1.250) (1.085) (0.735) (0.245) --
------- ------- ------- ------- -------
Total Distributions Declared
to Shareholders (1.333) (1.203) (0.895) (0.383) (0.067)
------- ------- ------- ------- -------
Net asset value - End of period $17.550 $14.470 $13.260 $11.460 $11.820
======= ======= ======= ======= =======
Total return(b) 32.13% 18.85% 24.84% 0.05% 18.90%(f)
======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses 1.45%(c) 1.45%(c) 1.46% 1.49% 1.50%
Fees waived by the Adviser -- -- -- -- 0.01%
Net investment income 0.65%(c) 0.87%(c) 1.37% 1.19% 0.93%
Portfolio turnover 83% 89% 84% 117% 98%
Average commission rate (d) $ 0.0370 $ 0.0461 -- -- --
Net assets at end of period (000) $215,680 $168,554 $124,171 $97,180 $44,009
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
3
<PAGE>
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
(e) Net of fees and expenses waived or borne by the Adviser which amounted to
$0.001 and $0.001, respectively.
(f) Had the Adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
4
<PAGE>
THE FUND'S FINANCIAL HISTORY (CONT'D)(a)
<TABLE>
<CAPTION>
Class B Class C(c)
-----------------------------------------------------------------------------------------
Year ended June 30 Year ended June 30
-----------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1997 1996 1995
---- ---- ---- ---- ------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $14.360 $13.180 $11.400 $11.770 $10.000 $14.410 $13.240 $11.460
-------- ------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) (0.015) 0.017 0.075 0.053 0.020(d) (0.015) 0.016 0.074
Net realized and unrealized
gain (loss) (a) 4.275 2.265 2.513 (0.122) 1.763 4.295 2.268 2.534
-------- ------- ------- ------- ------- ------ ------ -------
Total from Investment Operations 4.260 2.282 2.588 (0.069) 1.783 4.280 2.284 2.608
-------- ------- ------- ------- ------- ------ ------ -------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS:
From net investment income -- (0.017) (0.073) (0.056) (0.013) -- (0.029) (0.093)
From net realized gains (1.250) (1.085) (0.735) (0.245) -- (1.250) (1.085) (0.735)
-------- ------- ------- ------- ------ ------- ------- -------
Total Distributions Declared
to Shareholders (1.250) (1.102) (0.808) (0.301) (0.013) (1.250) (1.114) (0.828)
-------- ------- ------- ------- ------- ------- ------- -------
Net asset value - End of period $17.370 $14.360 $13.180 $11.400 $11.770 $17.440 $14.410 $13.240
======== ======= ======== ======= ======== ======== ======= =======
Total return(e) 31.21% 17.91% 23.94% (0.71)% 17.84% (f) 31.24% 17.84% 24.01%
======== ======= ======= ======= ======== ====== ====== =======
RATIOS TO AVERAGE NET ASSETS
Expenses 2.20%(b) 2.20%(b) 2.21% 2.24% 2.25% 2.20%(b) 2.20%(b) 2.21%
Fees waived by the Adviser -- -- -- -- 0.01% -- -- --
Net investment income (0.10)%(b) 0.12%(b) 0.62% 0.44% 0.18% (0.10)%(b) 0.12%(b) 0.62%
Portfolio turnover 83% 89% 84% 117% 98% 83% 89% 84%
Average Commission rate (g) $0.0370 $0.0461 --- -- -- $0.0370 $0.0461 --
Net assets at end of period (000) $411,670 $306,718 $218,201 $150,121 $89,737 $11,553 $8,458 $3,028
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(c) Class C 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.
(e) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(f) Had the Adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
(g) For fiscal years beginning on or after September1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
Further performance information is contained in the Fund's Annual Report to
shareholders, which is obtainable free of charge by calling 1-800-426-3750.
5
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks long-term growth by investing primarily in large capitalization
equities.
HOW THE FUND PURSUES ITS OBJECTIVE AND CERTAIN RISK
FACTORS
The Fund normally invests at least 65% of its total assets in common stock of
U.S. companies with equity market capitalizations at the time of purchase in
excess of $3 billion. Up to 35% of total assets may be invested in common stock
of U.S. companies with equity market capitalizations at the time of purchase
between $1 billion and $3 billion. Up to 10% of total assets may be invested in
sponsored and unsponsored American Depositary Receipts (receipts issued in the
U.S. by banks or trust companies evidencing ownership of underlying foreign
securities (ADRs)). Up to 10% of total assets may be invested in any combination
of (i) convertible debt securities (i.e., debt securities that are convertible
into common stock at the holder's option), (ii) other corporate debt securities
rated investment grade by at least two nationally recognized rating agencies,
and (iii) debt securities issued or guaranteed by the U.S. government or its
agencies. Such investments will be made when the Adviser believes equity values
are high relative to debt securities. The Fund will not concentrate more than
25% of its total assets in any one industry.
Equity Securities Generally. Equity securities generally include common and
preferred stock, warrants (rights) to purchase such stock, debt securities
convertible into such stock and sponsored and unsponsored ADRs. The Fund will
purchase equity securities that the 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 as the core of the process. Fundamental
company analysis is then used to select securities.
Debt Securities Generally. The Fund may invest in investment grade corporate
debt securities and debt securities issued or guaranteed by the U.S. government
or its agencies. The market values of U.S. government securities and corporate
debt securities generally will fluctuate inversely with changes in interest
rates.
U.S. Government Securities. U.S. government securities in which a Fund may
invest consist of (i) U.S. treasury obligations; (ii) obligations issued or
guaranteed by U.S. government agencies and instrumentalities (agencies) which
are supported by: (a) the full faith and credit of the U.S. government, (b) the
right of the issuing agency to borrow under a line of credit with the U.S.
treasury, (c) the discretionary power of the U.S. government to purchase
obligations of the agency or (d) the credit of the agency. Agency securities
include securities commonly referred to as mortgage-backed securities, the
principal and interest on which are paid from principal and interest payments
made on pools of mortgage loans. These include securities commonly referred to
as "pass-throughs," "collateralized mortgage obligations" (CMOs), and "real
7
estate mortgage investment conduits" (REMICs).
Mortgage-Backed Securities. Mortgage-backed securities, including CMOs and
REMICs, evidence ownership in a pool of mortgage loans made by certain financial
institutions that may be insured or guaranteed by the U.S. government or its
agencies. CMOs are obligations issued by special-purpose trusts, secured by
mortgages. REMICs are entities that own mortgages and elect REMIC status under
the Internal Revenue Code. Both CMOs and REMICs issue one or more classes of
securities of which one (the Residual) is in the nature of equity. The Fund will
not invest in the Residual class. Principal on mortgage-backed securities, CMOs
or REMICs, may be prepaid if the underlying mortgages are prepaid. Prepayment
rates for mortgage-backed securities tend to increase as interest rates decline
(effectively shortening the security's maturity) and decrease as interest rates
rise (effectively lengthening the security's maturity). Because of the
prepayment feature, these securities may not increase in value as much as other
debt securities when interest rates fall. The Fund may be able to invest prepaid
principal only at lower yields. The prepayment of such securities purchased at a
premium may result in losses equal to the premium.
Foreign Investments. Investments in sponsored and unsponsored ADRs have special
risks related to political, economic and legal conditions outside of the U.S. As
a result, the prices of such securities may fluctuate substantially more than
the prices of securities of issuers based in the U.S. Special risks associated
with such securities 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. See "Foreign Securities" in the Statement of
Additional Information for more information about investments in ADRs.
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 will be added so that the obligation will at all times be fully
collateralized. However, if the bank or dealer defaults or enters bankruptcy,
the Fund may experience costs and delays in liquidating the collateral and may
experience a loss if it is unable to demonstrate its rights
8
to the collateral in a bankruptcy proceeding. Not more than 15% of the Fund's
net assets will be invested in repurchase agreements maturing in more than
seven days and other illiquid assets.
Securities Loans. The Fund may lend securities to certain institutions (that the
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 cash or liquid securities having a value
at least equal to the amount of collateral received on the loan in a segregated
account with its custodian.
Borrowing of Money. The Fund may borrow 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.
Other. The Fund may not always achieve its investment objective. The Fund's
investment objective and non-fundamental investment policies may be changed
without shareholder approval. The Fund will notify investors in connection with
any material change in the Fund's investment objective. If there is a change in
the investment objective or investment policies, 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 investment objective or
investment policies. 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 and Class C 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.
Liberty Financial Services, Inc. (Distributor), a subsidiary of the Adviser,
serves as the distributor for the Fund's shares. Colonial
9
Investors Service Center, Inc. (Transfer Agent), an affiliate of the Adviser,
serves as the shareholder services and transfer agent for the Fund. Each of the
Adviser, the Distributor and the Transfer Agent is an indirect 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 workers' 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 pays the Adviser
0.80% of the Fund's average daily net assets.
Mark Stoeckle, Vice President of the Adviser, has managed or co-managed the Fund
since November 1996. Prior to joining the Adviser in 1996, Mr. Stoeckle was a
portfolio manager at Massachusetts Financial Services Company and an investment
banker at Bear, Stearns & Co. Inc.
The Adviser also provides pricing and bookkeeping services to the Fund for a
monthly fee of $2,250 plus a percentage of the Fund's average net assets over
$50 million. The Transfer Agent provides transfer agency and shareholder
services to the Fund for a fee of 0.25% annually of average net assets plus
certain out-of-pocket expenses. Commencing in October 1997, the fee for such
transfer agency and shareholder services will be reduced monthly through
September 1998 until the fee reaches 0.236%.
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 by such broker-dealers to the Adviser and its affiliates. In
recognition of the research and brokerage services provided, the Adviser may
cause the Fund to pay the selected broker-dealer a higher commission than would
have been charged by another broker-dealer not providing such services. 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.
The Adviser may use the services of AlphaTrade Inc., its registered
broker-dealer subsidiary, when buying or selling equity securities for the
Fund's portfolio, pursuant to procedures adopted by the Trustees and Investment
Company Act Rule 17e-1.
HOW THE FUND VALUES ITS SHARES
Per share net asset value is calculated by dividing the total value of each
Class's net assets by its number of outstanding shares. Shares of the Fund are
valued as of the close (normally 4:00 p.m. Eastern time) 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 current market
value. Short-term investments maturing in 60 days or less are valued at
amortized cost when the Adviser determines, pursuant to procedures adopted by
the Trustees, that such cost approximates current market value. All
10
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 net income at least
semiannually and any net realized gain, at least annually.
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. If a shareholder has elected to receive dividends
and/or capital gain distributions in cash and the postal or other delivery
service selected by the Transfer Agent is unable to deliver checks to the
shareholder's address of record, such shareholder's distribution option will
automatically be converted to having all dividend and other distributions
reinvested in additional shares. No interest will accrue on amounts represented
by uncashed distribution or redemption checks. To change your election, call the
Transfer Agent for information.
Whether you receive distributions in cash or in additional Fund shares, you must
report them as taxable income unless you are a tax-exempt institution. If you
buy shares shortly before a distribution is declared, the distribution will be
taxable although it is in effect a partial return of the amount invested. Each
January, information on the amount and nature of distributions for the prior
year is sent to shareholders.
HOW TO BUY SHARES
Shares of the Fund are offered continuously. Orders received in good form prior
to the time at which the Fund values its shares (or placed with a financial
service firm before such time and transmitted by the financial service firm
before the Fund processes that day's share transactions) will be processed based
on that day's closing net asset value, plus any applicable initial sales charge.
The minimum initial investment is $1,000; subsequent investments may be as small
as $50. The minimum initial investment for the Colonial Fundamatic program is
$50; and the minimum initial investment for a Colonial retirement account is
$25. Certificates will not be issued for Class B and Class C shares and there
are some limitations on the issuance of Class A share certificates. The Fund may
refuse any purchase order for its shares. See the Statement of Additional
Information for more information.
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 A Shares. Class A shares are offered at net asset value plus an initial
sales charge as follows:
Initial Sales Charge
-----------------------------------
Retained
by Financial
Service
as % of Firm
------------------- 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%
11
<PAGE>
$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.
In determining the sales charge and commission applicable to a new purchase
under the above schedules, the amount of the current purchase is added to the
current value of shares previously purchased and still held by an investor. If a
purchase results in an account having a value from $1 million to $5 million,
then the shares purchased will be subject to a 1.00% contingent deferred sales
charge payable to the Distributor, if redeemed within 18 months from the first
day of the month following the purchase. If the purchase results in an account
having a value in excess of $5 million, the contingent deferred sales charge
will not apply to the portion of the purchased shares comprising such excess
amount.
Class B Shares. Class B shares are offered at net asset value, without an
initial sales charge, and are subject to a 0.75% annual distribution fee for
approximately eight years (at which time they automatically convert to Class A
shares not bearing a distribution fee) and a declining contingent deferred sales
charge if redeemed within six years after purchase. As shown below, the amount
of the contingent deferred sales charge depends on the number of years after
purchase that the redemption occurs:
Contingent Deferred
Years After Purchase Sales Charge
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
More than 6 0.00%
Year one ends one year after the end of the month in which the purchase was
accepted and so on. The Distributor pays financial service firms a commission of
4.00% on Class B share purchases.
Class C Shares. Class C shares are offered at net asset value and are subject to
a 0.75% annual distribution fee and a 1.00% contingent deferred sales charge on
redemptions made within one year after the end of the month in which the
purchase was accepted.
The Distributor pays financial service firms an initial commission of 1.00% on
Class C share purchases and an ongoing commission of 0.75% annually, commencing
after the shares purchased have been outstanding for one year. Payment of the
ongoing commission is conditioned on receipt by the Distributor of the 0.75%
annual distribution fee referred to above. The commission may be reduced or
eliminated by the Distributor at any time.
12
<PAGE>
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). When a
redemption subject to a contingent deferred sales charge is made, generally,
older shares will be redeemed first unless the shareholder instructs otherwise.
See the Statement of Additional Information for more information.
Which Class is more beneficial to an investor depends on the amount and intended
length of the investment. Large investments, qualifying for a reduced Class A
sales charge, avoid the distribution fee. Investments in Class B shares have
100% of the purchase invested immediately. Investors investing for a relatively
short period of time might consider Class C shares. Purchases of $250,000 or
more must be for Class A or Class C shares. Purchases of $1,000,000 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. See the
Statement of Additional Information for more information.
Special Purchase Programs. The Fund allows certain investors or groups of
investors to purchase shares with reduced or without initial or contingent
deferred sales charges. The programs are described in the Statement of
Additional Information under "Programs for Reducing or Eliminating Sales
Charges."
Shareholder Services and Account Fees. 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.
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. The Fund may also deduct annual maintenance and processing fees
(payable to the Transfer Agent) in connection with certain retirement plan
accounts. See "Special Purchase Programs/Investor Services" in 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
13
<PAGE>
your request is ceived in good form). However, for shares recently purchased by
check, the Fund will send proceeds as soon as 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. dditional documentation is required for sales by corporations,
agents, fiduciaries, surviving joint owners and individual retirement
account holders. For details contact:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Selling Shares Through Financial Service Firms. Financial service firms must
receive requests prior to the time at which the Fund values its shares to
receive that day's price, are responsible for furnishing all necessary
documentation to the Transfer Agent, and may charge for this service.
General. The sale of shares is a taxable transaction for income tax purposes and
may be subject to a contingent deferred sales charge. The contingent deferred
sales charge may be waived under certain circumstances. See the Statement of
Additional Information for more information. Under unusual circumstances, the
Fund may suspend repurchases or postpone payment for up to seven days or longer,
as permitted by federal securities law.
HOW TO EXCHANGE SHARES
Except as described below with respect to money market funds, Fund shares may be
exchanged at net asset value for shares of other mutual funds distributed by the
Distributor, including funds advised by the Adviser, Stein Roe & Farnham
Incorporated and Newport Fund Management, Inc. Generally, such exchanges must be
between the same classes of shares. Consult your financial service firm or the
transfer agent for information regarding what funds are available. 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 1-800-426-3750 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. The Fund
will terminate the exchange privilege as to a particular shareholder if the
Adviser determines, in its sole and absolute discretion, that the shareholder's
exchange activity is likely to adversely impact the Adviser's ability to manage
the Fund's investments in accordance with its investment objective or otherwise
harm the Fund or its remaining shareholders.
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.
14
<PAGE>
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 C Shares. Exchanges of Class C shares are not 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.
Only one "round-trip" exchange of the Fund's Class C shares may be made per
three-month period, measured from the date of the initial purchase. For example,
an exchange from Fund A to Fund B and back to Fund A would be permitted only
once during each three-month period.
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 time at
which the Fund values its shares. Telephone redemption privileges for larger
amounts may be elected on the account application. The Transfer Agent will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine and may be liable for losses related to unauthorized or
fraudulent transactions in the event reasonable procedures are not employed.
Such procedures include restrictions on where proceeds of telephone redemptions
may be sent, limitations on the ability to redeem by telephone shortly after an
address change, recording of telephone lines and requirements that the redeeming
shareholder and/or his or her financial adviser provide certain identifying
information. 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
and/or their financial advisers are not obligated to transact by telephone.
12B-1 PLAN
Under a 12b-1 Plan, the Fund pays the Distributor monthly a service fee at an
annual rate of 0.25% of the Fund's net assets attributed to its Class A, Class B
and Class C shares. The 12b-1 Plan also requires the Fund to pay the Distributor
monthly a distribution fee at an annual rate of 0.75% of the average daily net
assets attributed to its Class B and Class C shares. Because the Class B and
Class C 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 C 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
15
to wholesalers. Should the fees exceed the Distributor's expenses in any year,
the Distributor would realize a profit. The Plan also authorizes 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. Shareholders receive one vote for
each Fund share. Shares of the Trust vote together except when required by law
to vote separately by fund or by class. Shareholders owning in the aggregate ten
percent of Trust shares may call meetings to consider removal of Trustees. Under
certain circumstances, the Trust will provide information to assist shareholders
in calling such a meeting. See the Statement of Additional Information for more
information.
16
<PAGE>
Investment Adviser
Colonial Management Associates, Inc.
One Financial Center
Boston, MA 02111-2621
Distributor
Liberty Financial Investments, Inc.
One Financial Center
Boston, MA 02111-2621
Custodian
Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02108-2624
Custodian
(Effective December 1997)
The Chase Manhattan Bank
4 Chase MetroTech Center
Brooklyn, NY 11245
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 27, 1997
COLONIAL U.S. STOCK FUND
PROSPECTUS
Colonial U.S. Stock Fund seeks long-term growth by investing primarily in large
capitalization equities.
For more detailed information about the Fund, call the Adviser at 1-800-426-3750
for the October 27, 1997 Statement of Additional Information.
- ----------------------------------- --------------------------------
NOT FDIC-INSURED MAY LOSE VALUE
NO BANK GUARANTEE
- ----------------------------------- --------------------------------
17
<PAGE>
Colonial Mutual Funds
Please send your completed application to:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, Massachusetts 02105-1722
New A, B & C Shares Account Application/Revision to Existing Account
To open a new account, complete sections 1, 2, 3, & 7.
To apply for special services for a new or existing account, complete sections
4, 5, 6, or 8 as appropriate.
___ Please check here if this is a revision.
1-----------Account ownership--------------
Please choose one of the following.
__Individual: Print your name, Social Security #, U.S. citizen status.
__Joint Tenant: Print all names, the Social Security # for the first person,
and his/her U.S. citizen status.
__Uniform Gift to Minors: Names 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
______________________________________
Account 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 C shares. If no distribution
option is selected, distributions will be reinvested in additional fund
shares. Please consult your financial adviser to determine which class of
shares best suits your needs.
Fund Fund Fund
________________ ___________________ _____________________
Name of Fund Name of Fund Name of Fund
$_______________ $__________________ $____________________
Amount Amount Amount
Class
___ A Shares ___ B Shares (less than $250,000) ___ C Shares (less than
$1,000,000, available on certain funds after July 1,
1997; see prospectus)
___ D Shares (less than $500,000, available on certain funds; see prospectus)
Method of Payment Choose one
___Check payable to the Fund ___Bank wired on ____/____/____ (Date)
Wire/Trade confirmation #_____________
Ways to receive your distributions
Choose one (If none chosen, dividends and capital gains will be reinvested)
Distributions of $10.00 or less will automatically be reinvested in additional
fund shares.
___Reinvest dividends and capital gains
___Dividends and capital gains in cash
___Dividends in cash; reinvest capital gains
___Automatic Dividend Diversification See section 5A, inside
___Direct Deposit via Colonial Cash Connection Complete Bank information
in section 4B. I understand that my bank must be a member of the
Automated Clearing House System.
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. 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.
I certify, under penalties of perjury, that:
1. The Social Security # or Taxpayer I.D. # provided is correct.
You must cross out Item 2a, b or c below only if you have been notified by the
Internal Revenue Service (IRS) that you are currently subject to back-up
withholding because of under-reporting interest or dividends on you tax return.
2. I am not subject to back-up withholding because: (a) I am exempt from back-
up withholding, or (b) I have not been notified by the IRS that I am
subject to back-up withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified me that I am no longer
subject to back-up withholding.
The Internal Revenue Service does not require your consent to any provision of
this document other than the certifications required to avoid backup
withholdings.
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 sections 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 preceding business day if the 10th falls on a non-business day. If you
receive your SWP payment via electronic funds transfer (EFT), you may request
it to be processed any day of the month. Withdrawals in excess of 12% annually
of your current account value will not be accepted. Redemptions made in
addition to SWP payments may be subject to a contingent deferred sales charge
for Class B or C shares. Please consult your financial or tax adviser before
electing this option.
Funds for withdrawal:
___________________
Name of fund
Withdrawal amount
Redeem shares from account as follows:
Dollar amount of payment $___________
or
Total annual %_________
Frequency (choose one)
__Monthly __Quarterly __Semiannually
I would like payments to begin _____/_____ (day, if indicating EFT, month).
___________________
Name of fund
Withdrawal Amount
Redeem shares from account as follows:
Dollar amount of payment $___________
or
Total annual %_________
Frequency (choose one)
__Monthly __Quarterly __Semiannually
I would like payments to begin _____/_____ (day,if indicating EFT, month).
Payment instructions
Send the payment to (choose one):
__My address of record.
__My bank account via EFT. Please complete the Bank Information section below.
All EFT transactions will be made two business days after the processing date.
Your bank must be a member of the Automated Clearing House System.
__The payee listed at right. If more than one payee, provide the name,
address, payment amount, and frequency for other payees (maximum of 5) on
a separate sheet. If you are adding this service to an existing account,
please sign below and have your signature(s) guaranteed.
______________________________________________
Name of payee
______________________________________________
Address of payee
______________________________________________
City
______________________________________________
State Zip
______________________________________________
Payee's bank account number, if applicable
B. Telephone withdrawal pptions
All telephone transaction calls are recorded. These options are not available
for retirement accounts. Please sign below and have your signature(s)
guaranteed.
1. Fast Cash
You are automatically eligible for this service. You or your financial
adviser can withdraw up to $50,000 from your account and have it sent to your
address of record. For your protection, this service is only available on
accounts that have not had an address change within 30 days of the redemption
request.
2. Telephone Redemption
__I would like the Telephone Redemption privilege either by federal fund wire
or EFT. Telephone redemptions over $500 will be sent via federal fund wire,
usually on the next business day ($7.50 will be deducted). Redemptions of
$500 or less will be sent by check to your designated bank.
3. On-Demand EFT Redemption
__I would like the On-Demand EFT Redemption Privilege. Proceeds paid via EFT
will be credited to your bank account two business days after the process
date. You or your financial adviser 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.
Bank Information (For Sections A and B Above)
I authorize deposits to the following bank account:
____________________________________________________________
Bank name City Bank account number
____________________________________________________________
Bank street address State Zip Bank routing # (your bank
can provide this)
X__________________________________
Signature of account owner(s)
X__________________________________
Signature of account owner(s) Place signature guarantee here.
5-----Ways to make additional investments--------
These services involve continuous investments regardless of varying share
prices. Please consider your ability to continue purchases through periods of
price fluctuations. Dollar cost averaging does not assure a profit or protect
against loss in declining markets.
A. Automatic Dividend Diversification
Please diversify my portfolio by investing distributions from one fund into
another Colonial fund. These investments will be made in the same share class
and without sales charges. Accounts must be identically registered. I have
carefully read the prospectus for the fund(s) listed below.
____________________________
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 exchanged into the same share
class of up to four other identically registered Colonial accounts, on a
monthly basis. The minimum amount for each exchange is $100. Please complete
the section below.
____________________________________
Fund from which shares will be sold
$_________________________
Amount to redeem monthly
____________________________________
Fund to invest shares in
$_________________________
Amount to invest monthly
____________________________________
Fund to invest shares in
$_________________________
Amount to invest monthly
C. Fundamatic/On-Demand EFT Purchase
Fundamatic automatically transfers the specified amount from your bank
checking account to your Colonial fund account on a regular basis. The On-
Demand EFT Purchase program moves money from your bank checking account to
your Colonial fund account by electronic funds transfer based on your
telephone request. You will receive the applicable price two
business days after the receipt of your request. Your bank needs to be a
member of the Automated Clearing House System. Please attach a blank check
marked "VOID." (Deposit slips are not a substitution). Also, complete the
section below. Please allow 3 weeks for Colonial to establish these services
with your bank.
____________________________________
Fund name
_________________________________
Account number
$_____________________ _________________
Amount to transfer Month to start
___________________________________
Fund name
________________________________
Account number
$_____________________ _________________
Amount to transfer Month to start
__On-Demand Purchase (will be automatically established if you choose
Fundamatic)
__Fundamatic Frequency
__Monthly or __Quarterly
Check one:
__EFT- Choose any day of the month_____________________
__Paper Draft-Choose either the:
__5th day of the month
__20th day of the month
Authorization to honor checks drawn by Colonial Investors Service Center,
Inc. Do Not Detach. Make sure all depositors on the bank account sign to
the far right. Please attach a blank check marked "VOID" here. (Deposit slips
are not a substitution). See reverse for bank instructions.
I authorize Colonial to draw on my bank account, by check or electronic funds
transfer, for an investment in a Colonial fund. Colonial and my bank are not
liable for any loss arising from delays or dishonored draws. If a draw is not
honored, I understand that notice may not be given and Colonial may reverse
the purchase and charge my account $15.
______________________________________
Bank name
______________________________________
Bank street address
______________________________________
Bank street address
______________________________________
City State Zip
______________________________________
Bank account number
______________________________________
Bank routing #
X_____________________________________
Depositor's Signature(s)
Exactly as appears on bank records
X_____________________________________
Depositor's Signature(s)
Exactly as appears on bank records
6------------Ways to reduce your sales charges------------
These services can help you reduce your sales charge while increasing your
share balance over the long term.
A. Right of Accumulation
If you, your spouse or your children own any other shares in other
Colonial funds, you may be eligible for a reduced sales charge. The combined
value of your accounts must be $50,000 or more. Class A shares of money market
funds are not eligible unless purchased by exchange from another Colonial fund.
The sales charge for your purchase will be based on the sum of the purchase(s)
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.
7-------------Financial service firm---------------------
To be completed by a Representative of your financial service firm.
This application is submitted in accordance with our selling agreement with
Colonial Investment Services, Inc. (CISI), the Fund's prospectus, and this
application. We will notify CISI, Inc., of any purchase made under a Statement
of Intent, Right of Accumulation, or Sponsored Arrangement. We guarantee the
signatures on this application and the legal capacity of the signers.
_____________________________________
Representative's name
_____________________________________
Representative's number
_____________________________________
Representative's phone number
_____________________________________
Account # for client at financial
service firm
_____________________________________
Branch office address
_____________________________________
City
_____________________________________
State Zip
_____________________________________
Branch office number
_____________________________________
Name of financial service firm
_____________________________________
Main office address
_____________________________________
Main office address
_____________________________________
City
_____________________________________
State Zip
X____________________________________
Authorized signature
8----------Request for a combined quarterly statement mailing-----------
Colonial can mail all of your quarterly statements in one envelope. This
option simplifies your record keeping and helps reduce fund expenses.
__I want to receive a combined quarterly mailing for all my accounts. Please
indicate account numbers or tax I.D. numbers of accounts to be linked.
________________________________________________________________________
Fundamatic (See reverse side)
Applications must be received before the start date for processing.
This program's deposit privilege can be revoked by Colonial without prior
notice if any check is not paid upon presentation. Colonial has no obligation
to notify the shareholder of non-payment of any draw. This program may be
discontinued by Colonial by written notice at least 30 business days prior
to the due date of any draw or by the shareholder at any time.
To the Bank Named on the Reverse Side:
Your depositor has authorized Colonial Investors Service Center, Inc. to
collect amounts due under an investment program from his/her personal checking
account. When you pay and charge the draws to the account of your depositor
executing the authorization payable to the order of Colonial Investors
Service Center, Inc., Colonial Investment Services, Inc., hereby indemnifies
and holds you harmless from any loss (including reasonable expenses) you may
suffer from honoring such draw, except any losses due to your payment of any
draw against insufficient funds.
SH-823D-0697 (6/97)
COLONIAL TRUST VI
Cross Reference Sheet
(Colonial U.S. Stock Fund Class Z, formerly Colonial U.S. Fund for Growth
Class Z)
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 and
Certain Risk Factors; 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
<PAGE>
October 27, 1997 SF-01/294E-1097
COLONIAL U.S. 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 U.S. 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 large 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
Class Z shares of the Fund. Read it carefully and retain it for future
reference.
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.
More detailed information about the Fund is in the October 27, 1997 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
1-800-426-3750. 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 and
Certain Risk Factors
How the Fund Measures its Performance
How the Fund is Managed
How the Fund Values its Shares
Distributions and Taxes
How to Buy Shares
How to Sell Shares
How to Exchange Shares
Telephone Transactions
Organization and History
- ----------------------------------- --------------------------------
NOT FDIC-INSURED MAY LOSE VALUE
NO BANK GUARANTEE
- ----------------------------------- --------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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SUMMARY OF EXPENSES
Expenses are one of several factors to consider when investing in the Fund. The
following tables summarize your maximum transaction costs and your annual
expenses for an investment in Class Z shares of the Fund. See "How the Fund is
Managed" for a more complete description of the Fund's various costs and
expenses.
Shareholder Transaction Expenses(1)(2)
<TABLE>
<S> <C>
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%
</TABLE>
(1) For accounts less than $1,000 an annual fee of $10 may be deducted. See
"How to Buy Shares."
(2) Redemption proceeds exceeding $1,000 sent via federal funds wire will be
subject to a $7.50 charge per transaction.
Annual Operating Expenses (as a % of average net assets)
Management fee 0.80%
12b-1 fee 0.00
Other expenses 0.40
----
Total operating expenses 1.20%
====
Total expenses, excluding brokerage, interest, taxes and extraordinary expenses,
are, until further notice, voluntarily limited by the Adviser to 1.25% of
average net assets.
Example
The following Example shows the cumulative expenses attributable to a
hypothetical $1,000 investment in Class Z shares of the Fund for the periods
specified, assuming a 5% annual return with or without redemption at period end.
The 5% return and expenses used in this Example should not be considered
indicative of actual or expected Fund performance or expenses, both of which
will vary:
Period:
1 year $ 12
3 years 38
5 years 66
10 years 145
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THE FUND'S FINANCIAL HISTORY (a)
The following financial highlights for a share outstanding throughout each year
have been audited by Price Waterhouse LLP, independent accountants. Their
unqualified report is included in the Fund's 1997 Annual Report and is
incorporated by reference into the Statement of Additional Information. The
following data reflects, in part, performance of the Fund while its portfolio
was being managed by a former sub-adviser, using different investment policies
that are now in effect, whose services were terminated on November 15, 1996. The
results shown do not necessarily represent the results that would have been
achieved under the Fund's current investment approach. The information presented
is for other classes of shares offered by the Fund. As of June 30, 1997, no
Class Z shares had been issued.
<TABLE>
<CAPTION>
Class A
----------------------------------------------------------------
Year ended June 30
----------------------------------------------------------------
1997 1996 1995 1994 1993(g)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $14.470 $13.260 $11.460 $11.820 $10.000
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (a) 0.099 0.121 0.165 0.142 0.103(e)
Net realized and unrealized gain (a) 4.314 2.292 2.530 (0.119) 1.784
------- ------ ------ ------ ------
Total from Investment Operations 4.413 2.413 2.695 0.023 1.887
------- ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.072) (0.118) (0.160) (0.138) (0.067)
In excess of net investment income (0.011) -- -- -- --
From net realized gains (1.250) (1.085) (0.735) (0.245) --
------- ------- ------- ------- -------
Total Distributions Declared
to Shareholders (1.333) (1.203) (0.895) (0.383) (0.067)
------- ------- ------- ------- -------
Net asset value - End of period $17.550 $14.470 $13.260 $11.460 $11.820
======= ======= ======= ======= =======
Total return(b) 32.13% 18.85% 24.84% 0.05% 18.90%(f)
======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses 1.45%(c) 1.45%(c) 1.46% 1.49% 1.50%
Fees waived by the Adviser -- -- -- -- 0.01%
Net investment income 0.65%(c) 0.87%(c) 1.37% 1.19% 0.93%
Portfolio turnover 83% 89% 84% 117% 98%
Average commission rate (d) $ 0.0370 $ 0.0461 -- -- --
Net assets at end of period (000) $215,680 $168,554 $124,171 $97,180 $44,009
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
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(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
(e) Net of fees and expenses waived or borne by the Adviser which amounted to
$0.001 and $0.001, respectively.
(f) Had the Adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
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THE FUND'S FINANCIAL HISTORY (CONT'D)(a)
<TABLE>
<CAPTION>
Class B Class C(c)
-----------------------------------------------------------------------------------------
Year ended June 30 Year ended June 30
-----------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1997 1996 1995
---- ---- ---- ---- ------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $14.360 $13.180 $11.400 $11.770 $10.000 $14.410 $13.240 $11.460
-------- ------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) (0.015) 0.017 0.075 0.053 0.020(d) (0.015) 0.016 0.074
Net realized and unrealized
gain (loss) (a) 4.275 2.265 2.513 (0.122) 1.763 4.295 2.268 2.534
-------- ------- ------- ------- ------- ------ ------ -------
Total from Investment Operations 4.260 2.282 2.588 (0.069) 1.783 4.280 2.284 2.608
-------- ------- ------- ------- ------- ------ ------ -------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS:
From net investment income -- (0.017) (0.073) (0.056) (0.013) -- (0.029) (0.093)
From net realized gains (1.250) (1.085) (0.735) (0.245) -- (1.250) (1.085) (0.735)
-------- ------- ------- ------- ------ ------- ------- -------
Total Distributions Declared
to Shareholders (1.250) (1.102) (0.808) (0.301) (0.013) (1.250) (1.114) (0.828)
-------- ------- ------- ------- ------- ------- ------- -------
Net asset value - End of period $17.370 $14.360 $13.180 $11.400 $11.770 $17.440 $14.410 $13.240
======== ======= ======== ======= ======== ======== ======= =======
Total return(e) 31.21% 17.91% 23.94% (0.71)% 17.84% (f) 31.24% 17.84% 24.01%
======== ======= ======= ======= ======== ====== ====== =======
RATIOS TO AVERAGE NET ASSETS
Expenses 2.20%(b) 2.20%(b) 2.21% 2.24% 2.25% 2.20%(b) 2.20%(b) 2.21%
Fees waived by the Adviser -- -- -- -- 0.01% -- -- --
Net investment income (0.10)%(b) 0.12%(b) 0.62% 0.44% 0.18% (0.10)%(b) 0.12%(b) 0.62%
Portfolio turnover 83% 89% 84% 117% 98% 83% 89% 84%
Average Commission rate (g) $0.0370 $0.0461 --- -- -- $0.0370 $0.0461 --
Net assets at end of period (000) $411,670 $306,718 $218,201 $150,121 $89,737 $11,553 $8,458 $3,028
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(c) Class C 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.
(e) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(f) Had the Adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
(g) For fiscal years beginning on or after September1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
Further performance information is contained in the Fund's Annual Report to
shareholders, which is obtainable free of charge by calling 1-800-426-3750.
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks long-term growth by investing primarily in large capitalization
equities.
HOW THE FUND PURSUES ITS OBJECTIVE AND CERTAIN RISK FACTORS
The Fund normally invests at least 65% of its total assets in common stock of
U.S. companies with equity market capitalization at the time of purchase in
excess of $3 billion. Up to 35% of total assets may be invested in common stock
of U.S. companies with equity market capitalizations at the time of purchase
between $1 billion and $3 billion. Up to 10% of total assets may be invested in
sponsored and unsponsored American Depositary Receipts (receipts issued in the
U.S. by banks or trust companies evidencing ownership of underlying foreign
securities (ADRs)). Up to 10% of total assets may be invested in any combination
of (i) convertible debt securities (i.e., debt securities that are convertible
into common stock at the holder's option), (ii) other corporate debt securities
rated investment grade by at least two nationally recognized rating agencies,
and (iii) debt securities issued or guaranteed by the U.S. government or its
agencies. Such investments will be made when the Adviser believes equity values
are high relative to debt securities. The Fund will not concentrate more than
25% of its total assets in any one industry.
Equity Securities Generally. Equity securities generally include common and
preferred stock, warrants (rights) to purchase such stock, debt securities
convertible into such stock and sponsored and unsponsored ADRs. The Fund will
purchase equity securities that the 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 as the core of the process. Fundamental
company analysis is then used to select securities.
Debt Securities Generally. The Fund may invest in investment grade corporate
debt securities and debt securities issued or guaranteed by the U.S. government
or its agencies. The market values of U.S. government securities and corporate
debt securities generally will fluctuate inversely with changes in interest
rates.
U.S. Government Securities. U.S. government securities in which a Fund may
invest consist of (i) U.S. treasury obligations; (ii) obligations issued or
guaranteed by U.S. government agencies and instrumentalities (agencies) which
are supported by: (a) the full faith and credit of the U.S. government, (b) the
right of the issuing agency to borrow under a line of credit with the U.S.
treasury, (c) the discretionary power of the U.S. government to purchase
obligations of the agency or (d) the credit of the agency. Agency securities
include securities commonly referred to as mortgage-backed securities, the
principal and interest on which are paid from principal and interest payments
made on pools of mortgage loans. These include securities commonly referred to
as "pass-throughs," "collateralized mortgage obligations" (CMOs), and "real
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estate mortgage investment conduits" (REMICs).
Mortgage-Backed Securities. Mortgage-backed securities, including CMOs and
REMICs, evidence ownership in a pool of mortgage loans made by certain financial
institutions that may be insured or guaranteed by the U.S. government or its
agencies. CMOs are obligations issued by special-purpose trusts, secured by
mortgages. REMICs are entities that own mortgages and elect REMIC status under
the Internal Revenue Code. Both CMOs and REMICs issue one or more classes of
securities of which one (the Residual) is in the nature of equity. The Fund will
not invest in the Residual class. Principal on mortgage-backed securities, CMOs
or REMICs, may be prepaid if the underlying mortgages are prepaid. Prepayment
rates for mortgage-backed securities tend to increase as interest rates decline
(effectively shortening the security's maturity) and decrease as interest rates
rise (effectively lengthening the security's maturity). Because of the
prepayment feature, these securities may not increase in value as much as other
debt securities when interest rates fall. The Fund may be able to invest prepaid
principal only at lower yields. The prepayment of such securities purchased at a
premium may result in losses equal to the premium.
Foreign Investments. Investments in sponsored and unsponsored ADRs have special
risks related to political, economic and legal conditions outside of the U.S. As
a result, the prices of such securities may fluctuate substantially more than
the prices of securities of issuers based in the U.S. Special risks associated
with such securities 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. See "Foreign Securities" in the Statement of
Additional Information for more information about investments in ADRs.
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 will be added so that the obligation will at all times be fully
collateralized. However, if the bank or dealer defaults or enters bankruptcy,
the Fund may experience costs and delays in liquidating the collateral and may
experience a loss if it is unable to demonstrate its rights to the collateral in
a bankruptcy proceeding. Not more than 15% of the Fund's net assets will be
invested in repurchase agreements maturing in more than seven days and other
illiquid assets.
Securities Loans. The Fund may lend securities to certain institutions (that the
Adviser considers qualified) to increase income. The loans will not exceed 30%
of the Fund's total assets. Securities lending involves the risk of loss to the
Fund if the borrower defaults. The Fund will place cash or liquid securities
having a value at least equal to the amount of collateral received on the loan
in a segregated account with its custodian.
Borrowing of Money. The Fund may borrow 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.
Other. The Fund may not always achieve its investment objective. The Fund's
investment
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objective and non-fundamental investment policies may be changed
without shareholder approval. The Fund will notify investors in connection with
any material change in the Fund's investment objective. If there is a change in
the investment objective or investment policies, shareholders should consider
whether the Fund remains an appropriate investment in light of their 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.
Liberty Financial Investments, Inc. (Distributor), a subsidiary of the Adviser,
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. Each of the Adviser, the
Distributor and the Transfer Agent is an indirect 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 workers' 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 pays the Adviser
0.80% of the Fund's average daily net assets.
Mark Stoeckle, Vice President of the Adviser, has managed or co-managed the Fund
since November 1996. Prior to joining the Adviser in 1996, Mr. Stoeckle was a
portfolio manager at Massachusetts Financial Services Company and an investment
banker at Bear, Stearns & Co. Inc.
The Adviser also provides pricing and bookkeeping services to the Fund for a
monthly fee of $2,250 plus a percentage of the Fund's average net assets over
$50 million. The Transfer Agent provides transfer agency and shareholder
services to the Fund for a fee of 0.25% annually of average net assets plus
certain out-of-pocket
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expenses. Commencing in October 1997, the fee for such transfer agency and
shareholder services will be reduced monthly through September 1998, until the
fee reaches 0.236%.
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 by such broker-dealers to the Adviser and its affiliates. In
recognition of the research and brokerage services provided, the Adviser may
cause the Fund to pay the selected broker-dealer a higher commission than would
have been charged by another broker-dealer not providing such services. 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.
The Adviser may use the services of AlphaTrade Inc., its registered
broker-dealer subsidiary, when buying or selling equity securities for the
Fund's portfolio, pursuant to procedures adopted by the Trustees and Investment
Company Act Rule 17e-1.
HOW THE FUND VALUES ITS SHARES
Per share net asset value is calculated by dividing the total value attributable
to Class Z shares by the number of Class Z shares outstanding. Shares of the
Fund are valued as of the close (normally 4:00 p.m. Eastern time) 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
current market value. Short-term investments maturing in 60 days or less are
valued at amortized cost when the Adviser determines, pursuant to procedures
adopted by the Trustees, that such cost approximates current 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 net income at least
semiannually and any net realized gain, at least annually.
Distributions are invested in additional lass Z shares at net asset value unless
the shareholder elects to receive cash. Regardless of the shareholder's
election, distributions of $10 or less will not be paid in cash to shareholders
but will be invested in additional Class Z shares at net asset value. If a
shareholder has elected to receive dividends and/or capital gain distributions
in cash and the postal or other delivery service selected by the Transfer Agent
is unable to deliver checks to the shareholder's address of record, such
shareholder's distribution option will automatically be converted to having all
dividend and other distributions reinvested in additional shares. No interest
will accrue on amounts represented by uncashed distribution or redemption
checks. 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
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Class Z shares are offered continuously at net asset value without a sales
charge. Orders received in good form prior to the time at which the Fund values
its shares (or placed with a financial service firm before such time and
transmitted by the financial service firm before the Fund processes that day's
share transactions) will be processed based on that day's closing net asset
value.
Certificates will not be issued for Class Z shares. The Fund may refuse any
purchase order for its shares. See the Statement of Additional Information for
more information.
Shareholder Services and Account Fees. 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.
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. The Fund may also deduct annual maintenance and processing fees
(payable to the Transfer Agent) in connection with certain retirement plan
accounts. See "Special Purchase Programs/Investor Services" in the Statement of
Additional Information for more information.
Other Classes of Shares. In addition to Class Z shares, the Fund offers three
other classes of shares, Classes A, B and C, through a separate Prospectus.
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, which do not bear 12b-1 fees or contingent deferred sales charges,
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 as soon as the check has cleared (which may take up to
15 days).
Selling Shares Directly To The Fund. Send a signed letter of instruction or
stock power form to the Transfer Agent, along with any certificates for shares
to be sold. The sale price is the net asset value (less any applicable
contingent deferred sales charge) next calculated after the Fund receives the
request in proper form. Signatures must be guaranteed by a bank, a member firm
of a national stock exchange or another eligible guarantor institution. Stock
power forms are available from financial service firms, the Transfer Agent and
many banks. Additional documentation is required for sales by corporations,
agents, fiduciaries, surviving joint owners and individual retirement account
holders. For details contact:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Selling Shares Through Financial Service Firms. Financial service firms must
receive requests prior to the time the Fund values its shares
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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.
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
the exchange will go before submitting the request. Call 1-800-426-3750 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. The Fund will terminate the exchange privilege as to a particular
shareholder if it is determined by the Adviser, in its sole and absolute
discretion, that the shareholder's exchange activity is likely to adversely
impact the Adviser's ability to manage the Fund's investments in accordance with
its investment objective or otherwise harm the Fund or its remaining
shareholders.
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 time at
which the Fund values its shares. Telephone redemption privileges for larger
amounts may be elected on the account application. The Transfer Agent will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine and may be liable for losses related to unauthorized or
fraudulent transactions in the event reasonable procedures are not employed.
Such procedures include restrictions on where proceeds of telephone redemptions
may be sent, limitations on the ability to redeem by telephone shortly after an
address change, recording of telephone lines and requirements that the redeeming
shareholder and/or his or her financial adviser provide certain identifying
information. 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
and/or their financial advisers are not obligated to transact by telephone.
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. Shareholders receive one vote for
each Fund share. Shares of the Trust vote together except when required by law
to vote separately by fund or by class. Shareholders owning in the aggregate ten
percent of Trust shares may call meetings to consider removal of Trustees. Under
certain circumstances, the Trust will provide information to assist shareholders
in calling such a meeting. See
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the Statement of Additional Information for more
information.
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Investment Adviser
Colonial Management Associates, Inc.
One Financial Center
Boston, MA 02111-2621
Distributor
Liberty Financial Investments, Inc.
One Financial Center
Boston, MA 02111-2621
Custodian
Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02108-2624
Custodian
(Effective December 1997)
The Chase Manhattan Bank
4 Chase MetroTech Center
Brooklyn, NY 11245
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 27, 1997
COLONIAL U.S. STOCK FUND
CLASS Z SHARES
PROSPECTUS
Colonial U.S. Stock Fund seeks long-term growth by investing primarily in large
capitalization equities.
For more detailed information about the Fund, call the Adviser at 1-800-426-3750
for the October 27, 1997 Statement of Additional Information.
- ----------------------------------- -------------------------------
NOT FDIC-INSURED MAY LOSE VALUE
NO BANK GUARANTEE
- ----------------------------------- -------------------------------
13
<PAGE>
COLONIAL TRUST VI
Cross Reference Sheet
(Colonial Small Cap Value Fund, formerly Colonial Small Stock Fund Classes
A, B, C)
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 and
Certain Risk Factors; 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
<PAGE>
October 27, 1997
COLONIAL SMALL CAP VALUE 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 Cap Value 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
Fund. Read it carefully and retain it for future reference.
More detailed information about the Fund is in the October 27, 1997 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
1-800-426-3750.
SC-
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 are subject
to an annual distribution fee and a declining contingent deferred sales charge
on redemptions made within six years after purchase; and Class C shares are
offered at net asset value and are subject to an annual distribution fee and a
contingent deferred sales charge on redemptions made within one year 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
and Certain Risk Factors
How the Fund Measures its Performance
How the Fund is Managed
How the Fund Values its Shares
Distributions and Taxes
How to Buy Shares
How to Sell Shares
How to Exchange Shares
Telephone Transactions
12b-1 Plan
Organization and History
- ----------------------------- --------------------------
NOT FDIC-INSURED MAY LOSE VALUE
NO BANK GUARANTEE
- ----------------------------- --------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
SUMMARY OF EXPENSES
Expenses are one of several factors to consider when investing in the Fund. The
following tables summarize your maximum transaction costs and your annual
expenses for an investment in the Class A, Class B and Class C shares of the
Fund. See "How the Fund is Managed" and "12b-1 Plan" for more complete
descriptions of the Fund's various costs and expenses.
Shareholder Transaction Expenses (1)(2)
<TABLE>
Class A Class B Class C
<S> <C> <C> <C>
Maximum Initial Sales Charge Imposed on a Purchase (as a % of offering price)(3) 5.75% 0.00%(5) 0.00%(5)
Maximum Contingent Deferred Sales Charge (as a % of offering price)(3) 1.00%(4) 5.00% 1.00%
</TABLE>
(1) For accounts less than $1,000 an annual fee of $10 may be deducted. See
"How to Buy Shares."
(2) Redemption proceeds exceeding $1,000 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 C
shares, long-term Class B and Class C 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)
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
Management fee(6) 0.80% 0.80% 0.80%
12b-1 fee 0.25 1.00 1.00
Other expenses 0.47 0.47 0.47
---- ---- ----
Total operating expenses 1.52% 2.27% 2.27%
==== ==== ====
</TABLE>
(6) On September 30, 1997, the Fund's shareholders approved a management fee
increase from 0.60% to 0.80% which became effective on October 1, 1997.
Example
The following Example shows the cumulative expenses attributable to a
hypothetical $1,000 investment in each of the Class A, Class B and Class C
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.
<TABLE>
<CAPTION>
Class A Class B Class C
Period: (7) (8) (7) (8)
<S> <C> <C> <C> <C> <C>
1 year $ 72 $ 73 $ 23 $ 33 $ 23
3 years $103 $101 $ 71 $ 71(10) $ 71
5 years $136 $142 $122 $122 $122
10 years $228 $242(9) $242(9) $261 $261
</TABLE>
(7) Assumes redemption at period end.
(8) Assumes no redemption.
(9) Class B shares convert to Class A shares after approximately 8 years;
therefore, years 9 and 10 reflect Class A share expenses.
(10) Class C shares do not incur a contingent deferred sales charge on
redemptions made after one year.
<PAGE>
THE FUND'S FINANCIAL HISTORY
The following financial highlights for a Class A, Class B and Class C share
outstanding throughout each period have been derived from the Fund's financial
statements, which have been audited by Price Waterhouse LLP, independent
accountants. Their unqualified report is included in the Fund's 1997 Annual
Report, and is incorporated by reference into the Statement of Additional
Information. The Fund adopted the objective of seeking long-term growth and
became actively managed on November 2, 1992. The data presented for the Fund
prior to November 2, 1992, represent operations under earlier objectives and
policies of the Fund's predecessor, Colonial Small Stock Index Trust.
<TABLE>
<CAPTION>
CLASS A
Year ended June 30
----------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $26.480 $22.260 $16.670 $15.860 $12.330 $11.570 $13.560 $13.540
-------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(a) (0.003) 0.036(b) 0.002 (0.047) (0.083) (0.127) 0.045 0.048
Net realized and unrealized gain
(loss) on investments(a) 5.073 5.479 5.588 0.857 3.613 0.887 (1.992) 0.017
------ ------ ------ ------ ------ ------ ------- ------
Total from investment operations 5.070 5.515 5.590 0.810 3.530 0.760 (1.947) 0.065
------ ------ ------ ------ ------ ------ ------- ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income ---- ---- ---- ---- ---- ---- (0.043) (0.045)
From net realized gains on investments (0.980) (1.295) ---- ---- ---- ---- ---- ----
------- ------- ------- --------- -------- -------- -------- -------
Total distributions declared to
shareholders (0.980) (1.295) ---- ---- ---- ---- (0.043) (0.045)
------- ------- ------- -------- -------- -------- ------- -------
Net asset value - End of period $30.570 $26.480 $22.260 $16.670 $15.860 $12.330 $11.570 $13.560
====== ====== ====== ======= ======== ======== ======== ========
Total return(d) 19.54% 25.31% 33.53% 5.11% 28.63% 6.57% (14.34)% 0.49%
====== ====== ====== ===== ====== ===== ===== =====
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.32%(f) 1.38%(f) 1.45% 1.56% 1.88% 2.13% 1.91% 1.67%
Interest expenses ---- ---- ---- ---- 0.01% 0.06% 0.03% 0.02%
Net investment income (loss) (0.01%)(f) 0.15%(f) 0.01% (0.27%) (0.60%) (0.91%) 0.33% 0.35%
Portfolio turnover 54% 46% 64% 35% 29% 0% 79% 17%
Average commission rate(g) $0.0422 $0.0440 ---- ---- ---- ---- ---- ----
Net assets at end of period(000) $131,151 $89,924 $40,661 $24,760 $23,716 $22,002 $28,943 $42,888
- ---------------------------------
</TABLE>
CLASS A
Year ended June 30
----------------------
1989 1988
---- ----
Net asset value - Beginning of period $12.940 $13.810
-------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(a) 0.061 0.066(c)
Net realized and unrealized gain
(loss) on investments(a) 0.929 (0.357)
------ -------
Total from investment operations 0.990 (0.291)
------ -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.060) (0.074)
From net realized gains on investments (0.330) (0.505)
------ -------
Total distributions declared to
shareholders (0.390) (0.579)
------ -------
Net asset value - End of period $13.540 $12.940
====== ======
Total return(d) 8.07% (2.18)%(e)
===== ====
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.69% 1.48%(c)
Interest expenses ---- 0.01%
Net investment income (loss) 0.48% 0.54%(c)
Fees and expenses waived
or borne by the Adviser ---- 0.23%
Portfolio turnover 25% 42%
Net assets at end of period(000) $46,415 $44,596
- ---------------------------------
(a) Per share data were calculated using average shares outstanding during the
period.
(b) Includes distribution from Advo, Inc., which amounted to $0.047 per share.
(c) Net of fees and expenses waived or borne by the Adviser which amounted to
$0.028.
(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 borne certain expenses, the Fund's total
return would have been lower.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(g) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
<PAGE>
THE FUND'S FINANCIAL HISTORY (CONT'D)
<TABLE>
<CAPTION>
CLASS B
Year ended
June 30
---------------------------------------------------------------------------------
1997 1996 1995 1994 1993 (a)
---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $25.770 $21.840 $16.470 $15.790 $13.010
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss(c) (0.199) (0.147)(d) (0.139) (0.176) (0.100)
Net realized and unrealized gain(c) 4.899 5.372 5.509 0.856 2.880
------ ------ ------ ------ ------
Total from investment operations 4.700 5.225 5.370 0.680 2.780
------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net realized gain on investments (0.980) (1.295) ---- ---- ----
------- ------- ------ ------ --------
Net asset value - End of period $29.490 $25.770 $21.840 $16.470 $15.790
======== ======== ======== ======== ========
Total return(e) 18.63% 24.44% 32.60% 4.31% 21.37%(f)
====== ====== ====== ===== ======
RATIOS TO AVERAGE NET ASSETS
Expenses 2.07%(g) 2.13%(g) 2.20% 2.31% 2.63%(h)
Interest expense ---- ---- ---- ---- 0.01%
Net investment loss (0.76)%(g) (0.60)%(g) (0.74)% (1.02)% (1.35)%(h)
Portfolio turnover 54% 46% 64% 35% 29%
Average commission rate(i) $0.0422 $0.0440 ---- ---- ----
Net assets at end of period (000) $178,234 $96,158 $29,458 $8,489 $1,665
- ---------------------------------
</TABLE>
CLASS C
Year ended
June 30
-------------------------------
1997 1996 (b)
---- --------
Net asset value - Beginning of period $26.400 $22.550
-------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss(c) (0.208) (0.072)(d)
Net realized and unrealized gain(c) 5.028 3.922
------ -----
Total from investment operations 4.820 3.850
------ -----
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net realized gain on investments (0.980) ---
------ ------
Net asset value - End of period $30.240 $26.400
======== =======
Total return(e) 18.64% 17.07%(f)
====== =====
RATIOS TO AVERAGE NET ASSETS
Expenses 2.07%(g) 2.15%(g)(h)
Interest expense ---- ----
Net investment loss (0.76)%(g) (0.54)%(g)(h)
Portfolio turnover 54% 46%
Average commission rate(i) $0.0422 $0.0440
Net assets at end of period (000) $8,194 $2,585
- ---------------------------------
(a) Class B shares were initially offered on November 9, 1992. Per share
amounts and total return reflect activity from that date.
(b) Class C shares were initially offered on January 15, 1996. Per share
amounts and total returns reflect activity from that date.
(c) Per share data were calculated using average shares outstanding during the
period.
(d) Includes distribution from Advo, Inc., which amounted to $0.047 per share.
(e) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact. prior years' ratios are net of benefits
received, if any.
(h) Annualized.
(i) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
Further performance information is contained in the Fund's Annual Report to
shareholders, which is obtainable free of charge by calling 1-800-426-3750.
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks long-term growth by investing primarily in smaller capitalization
equities.
HOW THE FUND PURSUES ITS OBJECTIVE AND CERTAIN RISK FACTORS
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 at the
time of investment by the Fund between $20 million and the largest market
capitalization in the Russell 2000 Index (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, which may be considered to be derivative securities. Such
transactions will be entered into to invest cash temporarily in anticipation of
a market advance or 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 U.S.
stock index futures contract is a type of instrument akin to a group of
securities representative of the underlying U.S. stock index. 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 will be added so that the obligation will at all times be fully
collateralized. However, if the bank or dealer defaults or enters bankruptcy,
the Fund may experience costs and delays in liquidating the collateral, and may
experience a loss if it is unable to demonstrate its right to the collateral in
a bankruptcy proceeding. Not more than 15% of the Fund's net assets will be
invested in repurchase agreements maturing in more than seven days and other
illiquid assets.
Borrowing of Money. The Fund may borrow 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.
Other. The Fund may not always achieve its investment objective. The Fund's
investment objective and non-fundamental investment policies may be changed
without shareholder approval. The Fund will notify investors in connection with
any material change in the Fund's investment objective or investment policies.
If there is a change in the investment objective or investment policies,
shareholders should consider whether the Fund remains an appropriate investment
in light of their financial position and needs. Shareholders may incur a
contingent deferred sales charge if shares are redeemed in response to a change
in investment objective or investment policies. 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 and Class C shares. Other total returns differ from 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.
Liberty Financial Investments, Inc. (Distributor), a subsidiary of the Adviser,
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. Each of the Adviser, the
Distributor and the Transfer Agent is an indirect 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 workers' 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 1997. On September 30,
1997, the Fund's shareholders approved a management fee increase from 0.60% to
0.80%, which became effective on October 1, 1997.
James P. Haynie, Vice President of the Adviser, has managed or co-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.
Michael Rega, Vice President of the Adviser, has been employed by the Adviser as
an analyst since 1993 and has co-managed the Fund and another Colonial equity
fund since 1996. Prior to joining the Adviser in 1993, Mr. Rega was a Project
Manager at the Massachusetts Institute of Technology's Lincoln Laboratory.
The Adviser also provides pricing and bookkeeping services to the Fund for a
monthly fee of $2,250 plus a percentage of the Fund's average net assets over
$50 million. The Transfer Agent provides transfer agency and shareholder
services to the Fund for a fee of 0.25% annually of average net assets plus
certain out-of-pocket expenses. Commencing in October, 1997, the fee for such
transfer agency and shareholder services will be reduced monthly through
September, 1998, until the fee reaches 0.236%.
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 by such broker-dealers to the Adviser and its affiliates. In
recognition of the research and brokerage services provided, the Adviser may
cause the Fund to pay the selected broker-dealer a higher commission than would
have been charged by another broker-dealer not providing such services.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.
The Adviser may use the services of AlphaTrade Inc., its registered
broker-dealer subsidiary, when buying or selling equity securities for the
Fund's portfolio, pursuant to procedures adopted by the Trustees and Investment
Company Act Rule 17e-1.
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 (normally 4:00 p.m. Eastern time) 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 current market value. Short-term
investments maturing in 60 days or less are valued at amortized cost when the
Adviser determines, 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 net income at least
semi-annually and any net realized gain at least annually.
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. If a shareholder has elected to receive dividends
and/or capital gain distributions in cash and the postal or other delivery
service selected by the Transfer Agent is unable to deliver checks to the
shareholder's address of record, such shareholder's distribution option will
automatically be converted to having all dividend and other distributions
reinvested in additional shares. No interest will accrue on amounts represented
by uncashed distribution or redemption checks. To change your election, call the
Transfer Agent for information.
Whether you receive distributions in cash or in additional Fund shares, you must
report them as taxable income unless you are a tax-exempt institution. If you
buy shares shortly before a distribution is declared, the distribution will be
taxable although it is, in effect, a partial return of the amount invested. Each
January, information on the amount and nature of distributions for the prior
year is sent to shareholders.
HOW TO BUY SHARES
Shares of the Fund are offered continuously. Orders received in good form prior
to the time at which the Fund values its shares (or placed with a financial
service firm before such time and transmitted by the financial service firm
before the Fund processes that day's share transactions) will be processed based
on that day's closing net asset value, plus any applicable initial sales charge.
The minimum initial investment is $1,000; subsequent investments may be as small
as $50. The minimum initial investment for the Colonial Fundamatic program is
$50, and the minimum initial investment for a Colonial retirement account is
$25. Certificates will not be issued for Class B or Class C shares, and there
are some limitations on the issuance of Class A share certificates. The Fund may
refuse any purchase order for its shares. See the Statement of Additional
Information for more information.
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 A Shares. Class A shares are offered at net asset value plus an initial
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.
In determining the sales charge and commission applicable to a new purchase
under the above schedules, the amount of the current purchase is added to the
current value of shares previously purchased and still held. If a purchase
results in an account having a value from $1 million to $5 million, then the
shares purchased will be subject to a 1.00% contingent deferred sales charge,
payable to the Distributor, if redeemed within 18 months from the first day of
the month following the purchase. If the purchase results in an account having a
value in excess of $5 million, the contingent deferred sales charge will not
apply to the portion of the purchased shares comprising such excess amount.
Class B Shares. Class B shares are offered at net asset value, without an
initial sales charge and are subject to a 0.75% annual distribution fee for
approximately eight years (at which time they automatically convert to Class A
shares not bearing a distribution fee) and a declining contingent deferred sales
charge if redeemed within six years after purchase. As shown below, the amount
of the contingent deferred sales charge depends on the number of years after
purchase that the redemption occurs:
Years Contingent Deferred
After Purchase Sales Charge
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
More than 6 0.00%
Year one ends one year after the end of the month in which the purchase was
accepted and so on. The Distributor pays financial service firms a commission of
4.00% on Class B share purchases.
Class C Shares. Class C shares are offered at net asset value and are subject to
a 0.75% annual distribution fee and a 1.00% contingent deferred sales charge on
redemptions made within one year after the end of the month in which the
purchase was accepted.
The Distributor pays financial service firms an initial commission of 1.00% on
purchases of Class C shares and an ongoing commission of 0.75% annually,
commencing after the shares purchased have been outstanding for one year.
Payment of the ongoing commission is conditioned on receipt by the Distributor
of the 0.75% annual distribution fee referred to above. The commission may be
reduced or eliminated by the Distributor at any time.
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). When a
redemption subject to a contingent deferred sales charge is made, generally
older shares will be redeemed first unless the shareholder instructs otherwise.
See the Statement of Additional Information for more information.
Which Class is more beneficial to an investor depends on the amount and intended
length of the investment. Large investments, qualifying for a reduced Class A
sales charge, avoid the distribution fee. Investments in Class B shares have
100% of the purchase invested immediately. Investors investing for a relatively
short period of time might consider Class C shares. Purchases of $250,000 or
more must be for Class A or Class C shares. Purchases of $1,000,000 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. See the
Statement of Additional Information for more information.
Special Purchase Programs. The Fund allows certain investors or groups of
investors to purchase shares at a reduced or without an initial or contingent
deferred sales charge. These programs are described in the Statement of
Additional Information under "Programs for Reducing or Eliminating Sales
Charges."
Class A shares of the Fund may also be purchased at net asset value by (i)
investment advisors or financial planners who have entered into agreements with
the Distributor (or who maintain a master account with a broker or agent that
has entered into such an agreement) and who charge a management, consulting or
other fee for their services, and clients of such investment advisors or
financial planners who place trades for their own accounts if the accounts are
linked to the master account of such investment advisor or financial planner on
the books and records of the broker or agent; and (ii) retirement and deferred
compensation plans and trusts used to fund those plans, including, but not
limited to, those defined in Section 401(a), 403(b), or 457 of the Internal
Revenue Code and "rabbi trusts," where the plans or trusts are administered by
firms that have entered into agreements with the Distributor or the Transfer
Agent.
Investors may be charged a fee if they effect transactions in Fund shares
through a broker or agent.
Shareholder Services and Account Fees. 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.
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. The Fund may deduct annual maintenance and processing fees (payable to
the Transfer Agent) in connection with certain retirement plan accounts. See
"Special Purchase Programs/Investor Services" in 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 as soon as the check has cleared (which may take up to
15 days).
Selling Shares Directly To The Fund. Send a signed letter of instruction or
stock power form to the Transfer Agent, along with any certificates for shares
to be sold. The sale price is the net asset value (less any applicable
contingent deferred sales charge) next calculated after the Fund receives the
request in proper form. Signatures must be guaranteed by a bank, a member firm
of a national stock exchange or another eligible guarantor institution. Stock
power forms are available from financial service firms, the Transfer Agent and
many banks. Additional documentation is required for sales by corporations,
agents, fiduciaries, surviving joint owners and individual retirement account
holders. For details contact:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Selling Shares Through Financial Service Firms. Financial service firms must
receive requests prior to the time at which the Fund values its shares to
receive that day's price, are responsible for furnishing all necessary
documentation to the Transfer Agent and may charge for this service.
General. The sale of shares is a taxable transaction for income tax purposes and
may be subject to a contingent deferred sales charge. The contingent deferred
sales charge may be waived under certain circumstances. See the Statement of
Additional Information for more information. Under unusual circumstances, the
Fund may suspend repurchases or postpone payment for up to seven days or longer,
as permitted by federal securities law.
HOW TO EXCHANGE SHARES
Except as described below with respect to money market funds, Fund shares may be
exchanged at net asset value for shares of other mutual funds distributed by the
Distributor, including funds advised by the Adviser, Stein Roe & Farnham
Incorporated and Newport Fund Management, Inc. Generally, such exchanges must be
between the same classes of shares. Consult your financial service firm or the
Transfer Agent for information regarding what funds are available. 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 1-800-426-3750 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. The Fund
will terminate the exchange privilege as to a particular shareholder if the
Adviser determines, in its sole and absolute discretion, that the shareholder's
exchange activity is likely to adversely impact the Adviser's ability to manage
the Fund's investments in accordance with its investment objectives or otherwise
harm the Fund or its remaining shareholders.
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 C Shares. Exchanges of Class C shares are not 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.
Only one "roundtrip" exchange of the Fund's Class C shares may be made per
three-month period, measured from the date of the initial purchase. For example,
an exchange from Fund A to Fund B and back to Fund A would be permitted only
once during each three-month period.
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 time at
which the Fund values its shares. Telephone redemption privileges for larger
amounts may be elected on the account application. The Transfer Agent will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine and may be liable for losses related to unauthorized or
fraudulent transactions in the event reasonable procedures are not employed.
Such procedures include restrictions on where proceeds of telephone redemptions
may be sent, limitations on the ability to redeem by telephone shortly after an
address change, recording of telephone lines and requirements that the redeeming
shareholder and/or his or her financial adviser provide certain identifying
information. 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
and/or their financial advisors are not obligated to transact by telephone.
12B-1 PLAN
Under a 12b-1 Plan, the Fund pays the Distributor monthly a service fee at an
annual rate of 0.25% of the Fund's net assets attributed to its Class A, Class B
and Class C shares. The 12b-1 Plan also requires the Fund to pay the Distributor
monthly a distribution fee at an annual rate of 0.75% of the average daily net
assets attributed to its Class B and Class C shares. Because the Class B and
Class C 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 C 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 Plan also
authorizes 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. Shareholders receive one vote for
each Fund share. Shares of the Trust vote together except when required by law
to vote separately by fund or by class. Shareholders owning in the aggregate ten
percent of Trust shares may call meetings to consider removal of Trustees. Under
certain circumstances, the Trust will provide information to assist shareholders
in calling such a meeting. See the Statement of Additional Information for more
information.
<PAGE>
Investment Adviser
- -----------------------------------------------------
Colonial Management Associates, Inc.
One Financial Center
Boston, MA 02111-2621
- -----------------------------------------------------
Distributor
Liberty Financial Investments, Inc.
One Financial Center
Boston, MA 02111-2621
- -----------------------------------------------------
Custodian
Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02108-2624
- -----------------------------------------------------
Custodian
(Effective Late November 1997)
The Chase Manhattan Bank
4 Chase MetroTech Center
Brooklyn, NY 11245
- -----------------------------------------------------
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 27, 1997
COLONIAL SMALL
CAP VALUE FUND
PROSPECTUS
Colonial Small Cap Value 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 27, 1997 Statement of Additional Information.
- ----------------------------- --------------------------
NOT FDIC-INSURED MAY LOSE VALUE
NO BANK GUARANTEE
- ----------------------------- --------------------------
COLONIAL TRUST VI
Cross Reference Sheet
(Colonial Small Cap Value Fund Class Z, formerly Colonial Small Stock Fund
Class Z)
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 and
Certain Risk Factors; 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
<PAGE>
October 27, 1997
COLONIAL SMALL CAP VALUE 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 Cap Value 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. Read it carefully and retain it for future
reference.
SC--
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.
More detailed information about the Fund is in the October 27, 1997, 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
1-800-426-3750. 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 and
Certain Risk Factors
How the Fund Measures its Performance
How the Fund is Managed
How the Fund Values its Shares
Distributions and Taxes
How to Buy Shares
How to Sell Shares
How to Exchange Shares
Telephone Transactions
Organization and History
- ----------------------------- --------------------------
NOT FDIC-INSURED MAY LOSE VALUE
NO BANK GUARANTEE
- ----------------------------- --------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
SUMMARY OF EXPENSES
Expenses are one of several factors to consider when investing in the Fund. The
following tables summarize your maximum transaction costs and your annual
expenses for an investment in the 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 Buy Shares."
(2) Redemption proceeds exceeding $1,000 sent via federal funds wire will be
subject to a $7.50 charge per transaction.
Annual Operating Expenses (as a % of average net assets)
Management fee (3) 0.80%
12b-1 fee 0.00
Other expenses 0.47
----
Total expenses 1.27%
====
(3) On September 30, 1997, the Fund's shareholders approved a management fee
increase from 0.60% to 0.80% which became effective on October 1, 1997.
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 $ 13
3 years $ 40
5 years $ 70
10 years $ 153
<PAGE>
THE FUND'S FINANCIAL HISTORY
The following financial highlights for a Class Z share outstanding throughout
the period has been derived from the Fund's financial statements, which have
been audited by Price Waterhouse LLP, independent accountants. Their unqualified
report is included in the Fund's 1997 Annual Report, and is incorporated by
reference into the Statement of Additional Information.
<TABLE>
<CAPTION>
Class Z
Year ended Period ended
June 30 June 30
--------------------------------------------------------
1997 1996 (a)
---- --------
<S> <C> <C>
Net asset value - Beginning of period $26.550 $24.780
-------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(b) 0.065 0.096(c)
Net realized and unrealized gain on investments(b) 5.105 2.959
------ ------
Total from investment operations 5.170 3.055
------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net realized gain on investments (0.980) (1.295)
------- ------
Net asset value - End of period $30.740 $26.550
======== -------
Total return(d) 19.87% 12.81%(e)
====== ======
RATIOS TO AVERAGE NET ASSETS
Expenses(f) 1.07% 1.13%(g)
Net investment income(f) 0.24% 0.41%(g)
Portfolio turnover 54% 46%
Average commission rate(h) $0.0422 $0.0440
Net assets at end of period (000) $4,825 $3,616
- ---------------------------------
</TABLE>
(a) Class Z shares were initially offered on July 31, 1995. Per share data
reflects activity from that date.
(b) Per share data were calculated using average shares outstanding during the
period.
(c) Includes distribution from Advo, Inc., which amounted to $0.047 per share.
(d) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charges.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(g) Annualized.
(h) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
Further performance information is contained in the Fund's Annual Report to
shareholders, which is obtainable free of charge by calling 1-800-426-3750.
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks long-term growth by investing primarily in smaller capitalization
equities.
HOW THE FUND PURSUES ITS OBJECTIVE AND CERTAIN RISK FACTORS
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 at the
time of investment by the Fund between $20 million and the largest market
capitalization in the Russell 2000 Index (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 or 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 will be added so that the obligation will at all times be fully
collateralized. However, if the bank or dealer defaults or enters bankruptcy,
the Fund may experience costs and delays in liquidating the collateral, and may
experience a loss if it is unable to demonstrate its right to the collateral in
a bankruptcy proceeding. Not more than 15% of the Fund's net assets will be
invested in repurchase agreements maturing in more than seven days and other
illiquid assets.
Borrowing of Money. The Fund may borrow 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.
Other. The Fund may not always achieve its investment objective. The Fund's
investment objective and non-fundamental investment policies may be changed
without shareholder approval. The Fund will notify investors in connection with
any material change in the Fund's investment objective or investment policies.
If there is a change in investment objective or investment policies,
shareholders should consider whether the Fund remains an appropriate investment
in light of their 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.
Liberty Financial Investments, Inc. (Distributor), a subsidiary of the Adviser,
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. Each of the Adviser, the
Distributor and the Transfer Agent is an indirect 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 workers' 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 1996. On September 30,
1997 the Fund's shareholders approved a management fee increase from 0.60% to
0.80%, which became effective on October 1, 1997.
James P. Haynie, Vice President of the Adviser, has managed or co-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.
Michael Rega, Vice President of the Adviser, has been employed by the Adviser as
an Analyst since 1993 and has co-managed the Fund and another Colonial equity
fund since 1997. Prior to joining the Adviser in 1993, Mr. Rega was a Project
Manager at MIT's Lincoln Laboratory.
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. Commencing in October, 1997, the fee for such transfer
agency and shareholder services will be reduced monthly through September 1998
until the fee reaches 0.236%.
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 by such broker-dealers to the Adviser and its affiliates. In
recognition of the research and brokerage services provided, the Adviser may
cause the Fund to pay the selected broker-dealer a higher commission than would
have been charged by another broker-dealer not providing such services. 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.
The Adviser may use the services of AlphaTrade Inc., its registered
broker-dealer subsidiary, when buying or selling equity securities for the
Fund's portfolio, pursuant to procedures adopted by the Trustees and Investment
Company Act Rule 17e-1.
HOW THE FUND VALUES ITS SHARES
Per share net asset value is calculated by dividing the total net asset value
attributable to Class Z shares by the number of Class Z shares outstanding.
Shares of the Fund are valued as of the close (normally 4:00 p.m. Eastern time)
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 current market value. Short-term investments maturing in 60 days or
less are valued at amortized cost when the Adviser determines, pursuant to
procedures adopted by the Trustees, that such cost approximates current 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 net income at least
semi-annually and any net realized gain at least annually.
Distributions are invested in additional Class Z shares at net asset value
unless the shareholder elects to receive cash. Regardless of the shareholder's
election, distributions of $10 or less will not be paid in cash to shareholders
but will be invested in additional Class Z shares at net asset value. If a
shareholder has elected to receive dividends and/or capital gain distributions
in cash and the postal or other delivery service selected by the Transfer Agent
is unable to deliver checks to the shareholder's address of record, such
shareholder's distribution option will automatically be converted to having all
dividend and other distributions reinvested in additional shares. No interest
will accrue on amounts represented by uncashed distribution or redemption
checks. To change your election, call the Transfer Agent for information.
Whether you receive distributions in cash or in additional Fund shares, you must
report them as taxable income unless you are a tax-exempt institution. If you
buy shares shortly before a distribution is declared, the distribution will be
taxable although it is, in effect, a partial return of the amount invested. Each
January, information on the amount and nature of distributions for the prior
year is sent to shareholders.
HOW TO BUY SHARES
Class Z shares are offered continuously at net asset value without a sales
charge. Orders received in good form prior to the time at which the Fund values
its shares (or placed with a financial service firm before such time and
transmitted by the financial service firm before the Fund processes that day's
share transactions) will be processed based on that day's closing net asset
value. Certificates will not be issued for Class Z shares. The Fund may refuse
any purchase order for its shares. See the Statement of Additional Information.
Shareholder Services and Account Fees. 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.
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. The Fund may deduct annual maintenance and processing fees (payable to
the Transfer Agent) in connection with certain retirement plan accounts. See
"Special Purchase Programs/Investor Services" in the Statement of Additional
Information for more information.
Other Classes of Shares. In addition to Class Z shares, the Fund offers three
other classes of shares, Classes A, B and C, through a separate Prospectus.
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, which do not bear 12b-1 fees or contingent deferred sales charges,
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 as soon as 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.
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
the exchange will go before submitting the request. Call 1-800-426-3750 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. The Fund will terminate the exchange privilege as to a particular
shareholder if the Adviser determines, in its sole and absolute discretion, that
the shareholder's exchange activity is likely to adversely impact the Adviser's
ability to manage the Fund's investments in accordance with its investment
objectives or otherwise harm the Fund or its remaining shareholders.
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 time at
which the Fund values its shares. Telephone redemption privileges for larger
amounts may be elected on the account application. The Transfer Agent will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine and may be liable for losses related to unauthorized or
fraudulent transactions in the event reasonable procedures are not employed.
Such procedures include restrictions on where proceeds of telephone redemptions
may be sent, limitations on the ability to redeem by telephone shortly after an
address change, recording of telephone lines and requirements that the redeeming
shareholder and/or their financial adviser provide certain identifying
information. 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,
and/or their financial advisers 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. Shareholders receive one vote for
each Fund share. Shares of the Trust vote together except when required by law
to vote separately by fund or by class. Shareholders owning in the aggregate ten
percent of Trust shares may call meetings to consider removal of Trustees. Under
certain circumstances, the Trust will provide information to assist shareholders
in calling such a meeting. See the Statement of Additional Information for more
information.
<PAGE>
Investment Adviser
Colonial Management Associates, Inc.
One Financial Center
Boston, MA 02111-2621
- -----------------------------------------------------
Distributor
Liberty Financial Investments, Inc.
One Financial Center
Boston, MA 02111-2621
- -----------------------------------------------------
Custodian
Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02108-2624
- ----------------------------------------------------
Custodian
(Effective Late November 1997)
The Chase Manhattan Bank
4 Chase MetroTech Center
Brooklyn, NY 11245
- -----------------------------------------------------
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 27, 1996
COLONIAL SMALL
CAP VALUE FUND
CLASS Z SHARES
PROSPECTUS
Colonial Small Cap Value Fund seeks long-term growth by investing primarily in
smaller capitalization equities.
For more detailed information about the Fund, call the Adviser at 1-800-426-3750
for the October 27, 1996, Statement of Additional Information.
- ----------------------------- --------------------------
NOT FDIC-INSURED MAY LOSE VALUE
NO BANK GUARANTEE
- ----------------------------- --------------------------
COLONIAL TRUST VI
Cross Reference Sheet (Colonial International Equity 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 and
Certain Risk Factors; 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
<PAGE>
October 27, 1997
COLONIAL
INTERNATIONAL EQUITY
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 International Equity Fund (Fund), a diversified portfolio of Colonial
Trust VI (Trust), an open-end management investment company, seeks total return
through a combination of long-term growth of capital and income by investing
primarily in equity securities of companies outside the United States. The Fund
is managed by the Adviser, an investment adviser since 1931.
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 27, 1997 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 1-800-426-3750. The
Statement of Additional Information is incorporated by reference in (which means
it is considered to be a part of) this Prospectus.
IE-01/331E-1097
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 are subject to an annual distribution fee and a
declining contingent deferred sales charge on redemptions made within six years
after purchase; and Class C shares are offered at net asset value and are
subject to an annual distribution fee and a contingent deferred sales charge on
redemptions made within one year 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 and
Certain Risk Factors
How the Fund Measures its Performance
How the Fund is Managed
How the Fund Values its Shares
Distributions and Taxes
How to Buy Shares
How to Sell Shares
How to Exchange Shares
Telephone Transactions
12b-1 Plan
Organization and History
- ----------------------------- --------------------------
NOT FDIC-INSURED MAY LOSE VALUE
NO BANK GUARANTEE
- ----------------------------- --------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
2
<PAGE>
SUMMARY OF EXPENSES
Expenses are one of several factors to consider when investing in the Fund. The
following tables summarize your maximum transaction costs and your annual
expenses for an investment in each Class of the Fund's shares. See "How the Fund
is Managed" and "12b-1 Plan" for more complete descriptions of the Fund's
various costs and expenses.
Shareholder Transaction Expenses (1)(2)
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
Maximum Initial Sales Charge Imposed on a Purchase (as a % of offering price)(3) 5.75% 0.00%(5) 0.00%(5)
Maximum Contingent Deferred Sales Charge (as a % of offering price)(3) 1.00%(4) 5.00% 1.00%
</TABLE>
(1) For accounts less than $1,000 an annual fee of $10 may be deducted.
See "How to Buy Shares."
(2) Redemption proceeds exceeding $1,000 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
C shares, long-term Class B and Class C 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 Class B shares automatically convert to Class A
shares after approximately 8 years, this is less likely for Class B
shares than for a class without a conversion feature.
Annual Operating Expenses (as a % of average net assets)
Class A Class B Class C
Management fee (after fee waiver) 0.48% 0.48% 0.48%
12b-1 fees 0.25 1.00 1.00
Other expenses 1.02 1.02 1.02
Total operating expenses 1.75% 2.50% 2.50%
The Adviser has agreed, until further notice, to waive fees and bear certain
Fund expenses to the extent that "Total operating expenses" (exclusive of
service fees, distribution fees, brokerage commissions, interest, taxes, and
extraordinary expenses, if any) exceed 1.50% annually of the Fund's average net
assets. Absent such agreement, the "Management fee" would be 0.95% for each
Class and "Total operating expenses" would be 2.22% for Class A shares and 2.97%
for each of Class B shares and Class C shares.
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 C
Period: (6) (7) (6) (7)
1 year $ 74 $ 75 $ 25 $ 35 $ 25
3 years 109 108 78 78(8) 78
5 years 147 153 133 133 133
10 years 252 265(9) 265(9) 284 284
If the Adviser did not continue to waive or bear certain Fund expenses, the
amounts in the Example would be:
Class A Class B Class C
Period: (6) (7) (6) (7)
1 year $ 79 $ 80 $ 30 $ 40 $ 30
3 years 123 122 92 92(8) 92
5 years 170 176 156 156 156
10 years 298 311(9) 311(9) 329 329
(6) Assumes redemption at period end.
(7) Assumes no redemption.
(8) Class C shares do not incur a contingent deferred sales charge on
redemptions made after one year.
(9) Class B shares convert to Class A shares after approximately 8 years;
therefore, years 9 and 10 reflect Class A share expenses.
3
<PAGE>
THE FUND'S FINANCIAL HISTORY
The following financial highlights for a share outstanding throughout the period
from March 31, 1996 (effective date of registration) through June 30, 1997 have
been audited by Price Waterhouse LLP, independent accountants. Their unqualified
report is included in the Fund's 1997 Annual Report and is incorporated by
reference into the Statement of Additional Information.
<TABLE>
<CAPTION>
Class A Class B Class C
------- ------- ------
Year ended Period ended Year ended Period ended Year ended Period ended
------------ ------------- ------------- -------------- ---------- -------------
June 30 June 30 June 30 June 30 June 30 June 30
------------ ------------- ------------- -------------- ---------- ------------
1997 1996(c) 1997 1996(c) 1997 1996(c)
---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $10.300 $9.930 $10.280 $9.930 $10.280 $9.930
-------- ------- -------- ------- -------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a)(b) 0.093 0.055 0.014 0.035 0.014 0.035
Net realized and unrealized gain(b) 1.456 0.315 1.450 0.315 1.450 0.315
------ ------ ------ ------ ------ -----
Total from Investment Operations 1.549 0.370 1.464 0.350 1.464 0.350
------ ------ ------ ------ ------ -----
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.055) --- --- --- --- ---
From net realized gains (0.084) ------- (0.084) --- (0.084) ---
------- --- ------- ------- ------- -------
Total Distributions Declared to Shareholders (0.139) ------- (0.084) --- (0.084) ---
------- --- ------- --- ------- -------
Net asset value - End of period $11.710 $10.300 $11.660 $10.280 $11.660 $10.280
======== ======== ======== ======== ======== =======
Total return(d)(e) 15.20% 3.73% (f) 14.34% 3.52% (f) 14.34% 3.52% (f)
====== ===== ====== ===== ====== =====
RATIOS TO AVERAGE NET ASSETS
Expenses(h) 1.75% 1.75% (g) 2.50% 2.50% (g) 2.50% 2.50% (g)
Fees and expenses waived or borne by
the Adviser(h) 0.47% 0.22% (g) 0.47% 0.22% (g) 0.47% 0.22% (g)
Net investment income(h) 0.88% 2.17% (g) 0.13% 1.42% (g) 0.13% 1.42% (g)
Portfolio turnover 40% 4% (f) 40% 4% (f) 40% 4% (f)
Average Commission Rate $0.0238 $0.013 $0.0238 $0.013 $0.0238 $0.013
Net assets at end of period (000) $15,108 $14,929 $294 $257 $294 $257
<FN>
(a) Net of fees and expenses waived or borne by the
Adviser which amounted to: $0.049 $0.006 $0.049 $0.006 $0.049 $0.006
(b) Per share data was calculated using average shares outstanding during the period.
(c) The Fund commenced investment operations on March 25, 1996. The activity shown is from the effective date of registration
(March 31, 1996) with the Securities and Exchange Commission.
(d) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred
sales charge.
(e) If the Adviser had not waived or reimbursed a portion of expenses, total return would have been reduced.
(f) Not annualized.
(g) Annualized.
(h) The benefits derived from custody credits and directed brokerage arrangements had no impact.
</FN>
</TABLE>
Further performance information is contained in the Fund's Annual Report to
shareholders, which is obtainable free of charge by calling 1-800-426-3750.
4
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks total return through a combination of long-term growth of capital
and income by investing primarily in equity securities of companies outside the
United States.
HOW THE FUND PURSUES ITS OBJECTIVE AND CERTAIN RISK FACTORS
The Fund seeks to achieve its objective by investing primarily in equity
securities of companies domiciled or with primary operations outside the United
States. Such companies may be located or operate in developed, newly
industrialized or emerging markets. Investments in foreign securities involve
special risks. See "Foreign Investments" below. In selecting investments, the
Adviser uses a disciplined process intended to create a diversified portfolio
whose performance (before expenses) will exceed that of the universe of
international equity funds while maintaining risk characteristics that are
generally consistent with that universe. However, there is no assurance that the
portfolio's performance will exceed (or its risk characteristics will match)
that of the international equity fund universe, or that the Fund will achieve
its objective.
Equity Securities Generally. Equity securities generally include common and
preferred stock, warrants (rights) to purchase such stock, debt securities
convertible into such stock, sponsored and unsponsored American Depositary
Receipts (receipts issued in the U.S. by banks or trust companies evidencing
ownership of underlying foreign securities) and Global Depositary Receipts
(receipts issued by foreign banks or trust companies). Equity securities also
include shares issued by investment companies that invest primarily in the
foregoing securities.
Debt Securities Generally. The Fund may invest in foreign government debt
securities of any maturity that pay fixed, floating or adjustable interest
rates. The values of debt securities generally fluctuate inversely with changes
in interest rates in the countries where the securities are issued.
Foreign Investments. Investments in foreign securities (both equity and debt),
American Depositary Receipts and Global Depositary Receipts have special risks
related to political, economic, and legal conditions outside of the U.S. As a
result, the prices of foreign securities and, therefore, the net asset value of
Fund shares, may fluctuate substantially more than the prices of securities of
issuers based in the U.S. Special risks associated with foreign securities
include the possibility of unfavorable movements in currency exchange rates,
difficulties in obtaining and enforcing judgments abroad, the existence of less
liquid and less regulated markets, the unavailability of reliable information
about issuers, the existence (or potential disposition) of different accounting,
auditing and legal standards in foreign countries, the existence (or potential
imposition) of exchange control regulations (including currency blockage), and
political and economic instability, among others. In addition, transactions in
foreign securities may be more costly due to currency conversion costs and
higher brokerage and custodial costs. See "Foreign Securities" and "Foreign
Currency Transactions" in the Statement of Additional Information for more
information about foreign investments.
Emerging Markets. The Fund's investments may consist of securities issued by
companies located in countries whose economies or securities markets are not yet
highly developed. Special risks associated with these investments (in addition
to the considerations regarding foreign investments generally) may include,
among others, greater political uncertainties, an economy's dependence on
revenues from particular commodities or on international aid or development
assistance, highly limited numbers of potential buyers for such securities,
heightened volatility of security prices, restrictions on repatriation of
capital invested abroad and delays and disruptions in securities settlement
procedures.
5
<PAGE>
Small Companies. The smaller, less well established companies in which the Fund
may invest may offer greater opportunities for capital appreciation than larger,
better established companies, but may also involve certain special risks. Such
companies often have limited product lines, operating histories, markets or
financial resources and depend heavily on a small management group. Their
securities may trade less frequently, in smaller volumes, and fluctuate more
sharply in value than exchange-listed securities of larger companies.
Other Investment Companies. Up to 10% of the Fund's total assets (at the time of
purchase) may be invested in other investment companies. Such investments will
involve the payment of duplicative fees through the indirect payment of a
portion of the expenses, including advisory fees, of such other investment
companies.
Index and Interest Rate Futures; Options. The Fund may purchase and sell (i)
U.S. and foreign stock and bond index futures contracts, (ii) U.S. and foreign
interest rate futures contracts and (iii) options on any of the foregoing, all
of which may be considered to be derivative securities. Such transactions may be
entered into (i) to gain exposure to a particular market pending investment in
individual securities, or (ii) to hedge against increases in interest rates. The
Fund may also purchase and write options on individual securities. 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. An option
generally gives the option holder the right, but not the obligation, to purchase
or sell the underlying instrument prior to the option's specified expiration
date. If the option expires un-exercised, the holder will lose any amount it
paid to acquire the option. Transactions in futures and related options may not
precisely achieve the goals of hedging or gaining market exposure to the extent
there is an imperfect correlation between the price movements of the contracts
and of the underlying index or securities. In addition, if the Adviser's
prediction of rates or stock market movements is inaccurate, the Fund may be
worse off than if it had not purchased or sold the contract or option. The total
market value of securities to be acquired or delivered pursuant to options
contracts entered into by the Fund will not exceed 5% of the Fund's total
assets. In addition, the Fund may not purchase or sell futures contracts or
purchase related options if immediately thereafter the sum of the amount of
deposits for initial margin or premiums on existing futures and related options
positions would exceed 5% of the Fund's total assets.
Foreign Currency Transactions. In connection with its investments in foreign
securities, the Fund may purchase and sell (i) foreign currencies on a spot or
forward basis, and (ii) foreign currency futures contracts. Such transactions
may be entered into (i) to lock in a particular foreign exchange rate pending
settlement of a purchase or sale of a foreign security or pending the receipt of
interest, principal or dividend payments on a foreign security held by the Fund,
or (ii) to hedge against a decline in the value, in U.S. dollars or in another
currency, of a foreign currency in which securities held by the Fund are
denominated. The Fund will not attempt, nor would it be able, to eliminate all
foreign currency risk. Further, although hedging may lessen the risk of loss if
the hedged currency's value declines, it limits the potential gain from currency
increases. See the Statement of Additional Information for information relating
to the Fund's obligations in entering into such transactions.
Leverage. The purchase and sale of futures and forward currency contracts and
the purchase and sale of certain options may present additional risks associated
with the use of leverage. Leverage may magnify the effect on Fund shares of
fluctuations in the values of the securities underlying these transactions. In
accordance with Securities and Exchange
6
<PAGE>
Commission pronouncements, to reduce (but not necessarily eliminate) leverage,
the Fund will either "cover" its obligations under such transactions by holding
the securities (or rights to acquire the securities) it is obligated to deliver
under such transactions, or deposit and maintain in a segregated account with
its custodian cash or high quality liquid debt securities equal in value to the
Fund's obligations under such transactions.
Temporary/Defensive Investments. Temporarily available cash may be invested in
U.S. or foreign currency denominated cash equivalents and short-term debt
obligations, including certificates of deposit, time deposits, bankers'
acceptances, commercial paper, treasury bills and repurchase agreements. Some or
all of the Fund's assets also may be invested in such investments 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 rights to the collateral in a bankruptcy proceeding. Not more
than 15% of the Fund's net assets will be invested in repurchase agreements
maturing in more than 7 days and other illiquid assets.
Borrowing of Money. The Fund may borrow money from banks for temporary or
emergency purposes up to 10% of its net assets; however, the Fund will not
purchase additional portfolio securities (other than short-term securities)
while borrowings exceed 5% of net assets.
Other. The Fund may not always achieve its investment objective. The Fund's
investment objective and non-fundamental investment policies may be changed
without shareholder approval. The Fund will notify investors in connection with
any material change in the Fund's investment objective. If there is a change in
the investment objective or investment policies, shareholders should consider
whether the Fund remains an appropriate investment in light of their financial
position and needs. Shareholders may incur a contingent deferred sales charge if
shares are redeemed in response to a change in investment objective or
investment policies. 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 and Class C 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
7
<PAGE>
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.
Liberty Financial Investments, Inc. (Distributor), a subsidiary of the Adviser,
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. Each of the Adviser, the
Distributor and the Transfer Agent is an indirect 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 workers' 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 pays the Adviser
0.95% of the Fund's average daily net assets. In fiscal year 1997, the Fund paid
the Adviser 0.48% of the Fund's average daily net assets.
Gita Rao, Vice President of the Adviser, co-manages the Fund and has co-managed
various other Colonial funds since 1996. Prior to joining the Adviser in 1995,
Ms. Rao was a Quantitative Research Analyst at Fidelity Management & Research
Company, and a Vice President in the equity research group at Kidder, Peabody
and Company.
The Adviser also provides pricing and bookkeeping services to the Fund for a
monthly fee of $2,250 plus a percentage of the Fund's average net assets over
$50 million. The Transfer Agent provides transfer agency and shareholder
services to the Fund for a fee of 0.25% annually of average net assets plus
certain out-of-pocket expenses. Commencing in October 1997, the fee for such
transfer agency and shareholder services will be reduced monthly through
September 1998, until the fee reaches 0.236%.
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 by such broker-dealers to the Adviser and its affiliates. In
recognition of the research and brokerage services provided, the Adviser may
cause the Fund to pay the selected broker-dealer a higher commission than would
have been charged by another broker-dealer not providing such services. Subject
to seeking best execution, the Adviser
8
<PAGE>
may consider sales of shares of the Fund (and of certain other Colonial funds)
in selecting broker-dealers for portfolio security transactions. The Adviser may
use the services of AlphaTrade, Inc., its registered broker-dealer subsidiary,
when buying or selling equity securities for the Fund's portfolio, pursuant to
procedures adopted by the Trustees and Investment Company Act Rule 17e-1.
Fund expenses consist of management, bookkeeping, shareholder service and
transfer agent fees discussed above, 12b-1 service and distribution fees
discussed under the caption "12b-1 Plan," and all other expenses, fees, charges,
taxes, organization costs and liabilities incurred or arising in connection with
the Fund or Trust or in connection with the management thereof, including but
not limited to, Trustees' compensation and expenses and auditing, counsel,
custodian and other expenses deemed necessary and proper by the Trustees.
HOW THE FUND VALUES ITS SHARES
Per share net asset value is calculated by dividing the total value of each
Class's net assets by its number of outstanding shares. Shares of the Fund are
valued as of the close of the New York Stock Exchange (Exchange) (normally 4:00
p.m. Eastern time) each day the Exchange is open. Portfolio securities for which
market quotations are readily available are valued at current market value.
Short-term investments maturing in 60 days or less are valued at amortized cost
when the Adviser determines, pursuant to procedures adopted by the Trustees,
that such cost approximates current 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 net income at least
annually and any net realized gain, at least annually.
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. If a shareholder has elected to receive dividends
and/or capital gain distributions in cash and the postal or other delivery
service selected by the Transfer Agent is unable to deliver checks to the
shareholder's address of record, such shareholder's distribution option will
automatically be converted to having all dividend and other distributions
reinvested in additional shares. No interest will accrue on amounts represented
by uncashed distribution or redemption checks. To change your election, call the
Transfer Agent for information.
Whether you receive distributions in cash or in additional Fund shares, you must
report them as taxable income unless you are a tax-exempt institution. If you
buy shares shortly before a distribution is declared, the distribution will be
taxable although it is in effect a partial return of the amount invested. Each
January, information on the amount and nature of distributions for the prior
year is sent to shareholders.
HOW TO BUY SHARES
Shares of the Fund are offered continuously. Orders received in good form prior
to the time at which the Fund values its shares (or placed with a financial
service firm before such time and transmitted by the financial service firm
before the Fund processes that day's share transactions) will be processed based
on that day's closing net asset value plus any applicable initial sales charge.
The minimum initial investment is $1,000; subsequent investments may be as small
as $50. The minimum initial investment for the Colonial Fundamatic program is
$50; and the minimum initial investment for a Colonial
9
<PAGE>
retirement account is $25. Certificates will not be issued for Class B or Class
C shares and there are some limitations on the issuance of Class A share
certificates. The Fund may refuse any purchase order for its shares. See the
Statement of Additional Information for more information.
Class A Shares. Class A shares are offered at net asset value, plus an initial
sales charge as follows:
Initial Sales Charge
---------------------------------
Retained
by Financial
Service
as % of Firm
--------------------- 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 shares
remain outstanding.
In determining the sales charge and commission applicable to a new purchase
under the above schedules, the amount of the current purchase is added to the
current value of shares previously purchased and still held by an investor. If a
purchase results in an account having a value from $1 million to $5 million,
then the shares purchased will be subject to a 1.00% contingent deferred sales
charge payable to the Distributor, if redeemed within 18 months from the first
day of the month following the purchase. If the purchase results in an account
having a value in excess of $5 million, the contingent deferred sales charge
will not apply to the portion of the purchased shares comprising such excess
amount.
Class B Shares. Class B shares are offered at net asset value, without an
initial sales charge, subject to a 0.75% annual distribution fee for
approximately eight years (at which time they automatically convert to Class A
shares not bearing a distribution fee) and a declining contingent deferred sales
charge if redeemed within six years after purchase. As shown below, the amount
of the contingent deferred sales charge depends on the number of years after
purchase that the redemption occurs:
Years Contingent Deferred
After Purchase Sales Charge
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
More than 6 0.00%
Year one ends one year after the end of the month in which the purchase was
accepted and so on. The Distributor pays financial service firms a commission of
4.00% on Class B share purchases.
Class C Shares. Class C shares are offered at net asset value and are subject to
a 0.75% annual distribution fee and a 1.00% contingent
10
<PAGE>
deferred sales charge on redemptions made within one year after the end of the
month in which the purchase was accepted.
The Distributor pays financial service firms an initial commission of 1.00% on
Class C share purchases and an ongoing commission of 0.75% annually, commencing
after the shares purchased have been outstanding for one year. Payment of the
ongoing commission is conditioned on receipt by the Distributor of the 0.75%
annual distribution fee referred to above. The commission may be reduced or
eliminated by the Distributor at any time.
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). When a
redemption subject to a contingent deferred sales charge is made, generally,
older shares will be redeemed first unless the shareholder instructs otherwise.
See the Statement of Additional Information for more information.
Which Class is more beneficial to an investor depends on the amount and intended
length of the investment. Large investments, qualifying for a reduced Class A
sales charge, avoid the distribution fee. Investments in Class B shares have
100% of the purchase invested immediately. Investors investing for a relatively
short period of time might consider Class C shares. Purchases of $250,000 or
more must be for Class A or Class C shares. Purchases of $1,000,000 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. See the
Statement of Additional Information for more information.
Special Purchase Programs. The Fund allows certain investors or groups of
investors to purchase shares with reduced, or without, initial or contingent
deferred sales charges. These programs are described in the Statement of
Additional Information under "Programs for Reducing or Eliminating Sales
Charges."
Shareholder Services and Account Fees. 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.
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. The Fund may deduct annual maintenance and processing fees (payable to
the Transfer Agent) in connection with certain retirement plan accounts. See
"Special Purchase Programs/Investor Services" in the Statement of Additional
Information for more information.
11
<PAGE>
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 as soon as the check has cleared (which may take up to
15 days).
Selling Shares Directly To The Fund. Send a signed letter of instruction or
stock power form to the Transfer Agent, along with any certificates for shares
to be sold. The sale price is the net asset value (less any applicable
contingent deferred sales charge) next calculated after the Fund receives the
request in proper form. Signatures must be guaranteed by a bank, a member firm
of a national stock exchange or another eligible guarantor institution. Stock
power forms are available from financial service firms, the Transfer Agent and
many banks. Additional documentation is required for sales by corporations,
agents, fiduciaries, surviving joint owners and individual retirement account
holders. For details contact:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Selling Shares Through Financial Service Firms. Financial service firms must
receive requests prior to the time at which the Fund values its shares to
receive that day's price, are responsible for furnishing all necessary
documentation to the Transfer Agent and may charge for this service.
General. The sale of shares is a taxable transaction for income tax purposes and
may be subject to a contingent deferred sales charge. The contingent deferred
sales charge may be waived under certain circumstances. See the Statement of
Additional Information for more information. Under unusual circumstances, the
Fund may suspend repurchases or postpone payment for up to seven days or longer,
as permitted by federal securities law.
HOW TO EXCHANGE SHARES
Except as described below with respect to money market funds, Fund shares may be
exchanged at net asset value for shares of other mutual funds distributed by the
Distributor, including funds advised by the Adviser, Stein Roe & Farnham
Incorporated and Newport Fund Management, Inc. Generally, such exchanges must be
between the same classes of shares. Consult your financial service firm or
transfer agent for information regarding what funds are available. 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 1-800-426-3750 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. The Fund
will terminate the exchange privilege as to a particular shareholder if the
Adviser determines, in its sole and absolute discretion, that the shareholder's
exchange activity is likely to adversely impact the Adviser's ability to manage
the Fund's investments in accordance with its investment objective or otherwise
harm the Fund or its remaining shareholders.
12
<PAGE>
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 C Shares. Exchanges of Class C shares are not 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.
Only one "round-trip" exchange of the Fund's Class C shares may be made per
three-month period, measured from the date of the initial purchase. For example,
an exchange from Fund A to Fund B and back to Fund A would be permitted only
once during each three-month period.
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 time at
which the Fund values its shares. Telephone redemption privileges for larger
amounts may be elected on the account application. The Transfer Agent will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine and may be liable for losses related to unauthorized or
fraudulent transactions in the event reasonable procedures are not employed.
Such procedures include restrictions on where proceeds of telephone redemptions
may be sent, limitations on the ability to redeem by telephone shortly after an
address change, recording of telephone lines and requirements that the redeeming
shareholder and/or his or her financial adviser provide certain identifying
information. 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 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 and/or their
financial advisers are not obligated to transact by telephone.
12B-1 PLAN
Under a 12b-1 Plan, the Fund pays the Distributor monthly a service fee at an
annual rate of 0.25% of the Fund's net assets attributed to each Class of
shares. The 12b-1 Plan also requires the Fund to pay the Distributor monthly a
distribution fee at an annual rate of 0.75% of the average daily net assets
attributed to its Class B and Class C shares. Because the Class B and Class C
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
C 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 Plan also
authorizes other payments to the Distributor and its affiliates (including the
Adviser) which may be construed to be indirect financing of sales of Fund
shares.
13
<PAGE>
ORGANIZATION AND HISTORY
The Trust is a Massachusetts business trust organized in 1991. The Fund
commenced operations in 1996 as a separate portfolio of the Trust.
As of the date of this Prospectus, the Adviser owned 100% of each Class of
shares of the Fund and therefore may be deemed to "control" the Fund.
The Trust is not required to hold annual shareholder meetings, but special
meetings may be called for certain purposes. Shareholders receive one vote for
each Fund share. Shares of the Trust vote together except when required by law
to vote separately by fund or by class. Shareholders owning in the aggregate ten
percent of Trust shares may call meetings to consider removal of Trustees. Under
certain circumstances, the Trust will provide information to assist shareholders
in calling such a meeting. See the Statement of Additional Information for more
information.
14
<PAGE>
Investment Adviser
Colonial Management Associates, Inc.
One Financial Center
Boston, MA 02111-2621
Distributor
Liberty Financial Investments, Inc.
One Financial Center
Boston, MA 02111-2621
Custodian
Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02108-2624
Custodian
(Effective Early December 1997)
The Chase Manhattan Bank
4 Chase MetroTech Center
Brooklyn, NY 11245
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 27, 1997
COLONIAL
INTERNATIONAL EQUITY
FUND
PROSPECTUS
Colonial International Equity Fund seeks total return through a combination of
long-term growth of capital and income by investing primarily in equity
securities of companies outside the United States.
For more detailed information about the Fund, call the Adviser at 1-800-426-3750
for the October 27, 1997 Statement of Additional Information.
- ----------------------------- --------------------------
NOT FDIC-INSURED MAY LOSE VALUE
NO BANK GUARANTEE
- ----------------------------- --------------------------
<PAGE>
COLONIAL TRUST VI
Cross Reference Sheet (Colonial Equity Income 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 and
Certain Risk Factors; 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
<PAGE>
October 27, 1997
COLONIAL EQUITY INCOME 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 Equity Income Fund (Fund), a diversified portfolio of
Colonial Trust VI (Trust), an open-end management investment company,
seeks current income and long-term growth. The Fund is managed by the
Adviser, an investment adviser since 1931.
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
27, 1997 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 1-800-426-3750. The Statement of
Additional Information is incorporated by reference in (which means it
is considered to be a part of) this Prospectus.
EI-01/327E-1097
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 are
subject to an annual distribution fee and a declining contingent
deferred sales charge on redemptions made within six years after
purchase; and Class C shares are offered at net asset value and are
subject to an annual distribution fee and a contingent deferred sales
charge on redemptions made within one year 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
and Certain Risk Factors
How the Fund Measures its Performance
How the Fund is Managed
How the Fund Values its Shares
Distributions and Taxes
How to Buy Shares
How to Sell Shares
How to Exchange Shares
Telephone Transactions
12b-1 Plan
Organization and History
Appendix
NOT FDIC-INSURED MAY LOSE VALUE
NO BANK GUARANTEE
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SUMMARY OF EXPENSES
Expenses are one of several factors to consider when investing in the
Fund. The following tables summarize your maximum transaction costs
and your annual expenses for an investment in each Class of the Fund's
shares. See "How the Fund is Managed" and "12b-1 Plan" for more
complete descriptions of the Fund's various costs and expenses.
Shareholder Transaction Expenses (1)(2)
Class A Class B Class C
Maximum Initial Sales Charge Imposed on a
Purchase (as a % of offering price)(3) 5.75% 0.00%(5) 0.00%(5)
Maximum Contingent Deferred Sales Charge
(as a % of offering price)(3) 1.00%(4) 5.00% 1.00%
(1) For accounts less than $1,000 an annual fee of $10 may be deducted.
See "How to Buy Shares."
(2) Redemption proceeds exceeding $1,000 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 C shares, long-term Class B and Class C 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 Class B shares automatically
convert to Class A shares after approximately 8 years, this is
less likely for Class B shares than for a class without a
conversion feature.
Annual Operating Expenses (as a % of average net assets)
Class A Class B Class C
Management fee
(after fee waiver) 0.00% 0.00% 0.00%
12b-1 fees 0.25 1.00 1.00
Other expenses
(after fee waiver) 1.30 1.30 1.30
---- ---- ----
Total operating
expenses 1.55% 2.30% 2.30%
==== ==== ====
The Adviser has agreed, until further notice, to waive fees and bear
certain Fund expenses to the extent that total operating expenses
(exclusive of service fees, distribution fees, brokerage commissions,
interest, taxes and extraordinary expenses, if any) will not exceed
1.30% annually of the Fund's average net assets. Absent such
agreement, the "Management fee" would be 0.80% for each Class of
shares, "Other expenses" would be 3.14% for each Class of shares and
"Total operating expenses" would be 4.19% for Class A shares and 4.94%
for each of Class B and Class C shares.
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 C
Period: (6) (7) (6) (7)
1 year $ 72 $ 73 $ 23 $ 33 $ 23
3 years 104 102 72 72(9) 72
5 years 137 143 123 123 123
10 years 231 245(8) 245(8) 264 264
If the Adviser did not continue to waive or bear certain Fund
expenses, the amounts in the Example would be:
Class A Class B Class C
Period:
(6) (7) (6) (7)
1 year $ 97 $ 99 $ 49 $ 59 $ 49
3 years 177 178 148 148(9) 148
5 years 259 267 247 247 247
10 years 469 481(8) 481(8) 495 495
(6) Assumes redemption at period end.
(7) Assumes no redemption.
(8) Class B shares automatically convert to Class A shares after
approximately 8 years; therefore, years 9 and 10
reflect Class A share expenses.
(9) Class C shares do not incur a contingent deferred sales charge on
redemptions made after one year.
THE FUND'S FINANCIAL HISTORY (b)
The following financial highlights for a share outstanding throughout the period
from March 31, 1996 (effective date of registration) through June 30, 1997 have
been audited by Price Waterhouse LLP, independent accountants. Their
unqualified report is included in the Fund's 1997 Annual Report and is
incorporated by reference into the Statement of Additional Information.
Class A
-------------------------
Year ended Period ended
June 30 June 30
-------------------------
1997 1996 (c)
---- ----
Net Asset Value -
Beginning of period $10.280 $9.940
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a)(b) 0.141 0.044
Net realized and unrealized gain(b) 2.428 0.296
Total from Investment Operations 2.569 0.340
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.159) ---
Net asset value - End of period $12.690 $10.280
Total return(d)(e) 25.53% 3.42%(f)
RATIOS TO AVERAGE NET ASSETS
Expenses(g) 1.55% 1.55%(h)
Fees and expenses waived or borne
by the Adviser(g) 2.64% 1.55%(h)
Net investment income(g) 1.27% 1.77%(h)
Portfolio turnover 129% 16%(f)
Average commission rate $0.0330 $0.0305
Net assets at end of period (000) $3,217 $2,570
(a) Net of fees and expenses
waived or borne by the
Adviser which amounted to: $0.292 $0.039
Class B
-------------------------
Year ended Period ended
June 30 June 30
-------------------------
1997 1996 (c)
---- ----
Net Asset Value -
Beginning of period $10.260 $9.940
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a)(b) 0.058 0.024
Net realized and unrealized gain(b) 2.413 0.296
Total from Investment Operations 2.471 0.320
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.101) ---
Net asset value - End of period $12.630 $10.260
Total return(d)(e) 24.23% 3.22%(f)
RATIOS TO AVERAGE NET ASSETS
Expenses(g) 2.30% 2.30%(h)
Fees and expenses waived or borne
by the Adviser(g) 2.64% 1.55%(h)
Net investment income(g) 0.52% 1.02%(h)
Portfolio turnover 129% 16%(f)
Average commission rate $0.0330 $0.0305
Net assets at end of period (000) $319 $257
(a) Net of fees and expenses
waived or borne by the
Adviser which amounted to: $0.292 $0.039
Class C
-------------------------
Year ended Period ended
June 30 June 30
-------------------------
1997 1996 (c)
---- ----
Net Asset Value -
Beginning of period $10.260 $9.940
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a)(b) 0.058 0.024
Net realized and unrealized gain(b) 2.413 0.296
Total from Investment Operations 2.471 0.320
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.101) ---
Net asset value - End of period $12.630 $10.260
Total return(d)(e) 24.23% 3.22%(f)
RATIOS TO AVERAGE NET ASSETS
Expenses(g) 2.30% 2.30%(h)
Fees and expenses waived or borne
by the Adviser(g) 2.64% 1.55%(h)
Net investment income(g) 0.52% 1.02%(h)
Portfolio turnover 129% 16%(f)
Average commission rate $0.0330 $0.0305
Net assets at end of period (000) $319 $257
(a) Net of fees and expenses
waived or borne by the
Adviser which amounted to: $0.292 $0.039
(b) Per share data was calculated using average shares outstanding during
the period.
(c) The Fund commenced investment operations on March 25, 1996. The
activity shown is from the effective date of registration (March 31,
1996) with the Securities and Exchange Commission.
(d) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(e) If the Adviser had not waived or reimbursed a portion of expenses, total
return would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(h) Annualized.
Further performance information is contained in the Fund's Annual Report to
shareholders, which is obtainable free of charge by calling 1-800-426-3750.
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks current income and long-term growth.
HOW THE FUND PURSUES ITS OBJECTIVE AND CERTAIN RISK FACTORS
The Fund seeks to achieve its objective by investing primarily in U.S.
and foreign income-producing equity securities. Normally at least 65%
of the Fund's assets will be invested in equity securities. The Fund
also may invest up to 35% of its assets in U.S. or foreign debt
securities.
Equity Securities Generally. Equity securities generally include
common and preferred stocks, warrants (rights) to purchase such stock,
debt securities convertible into stock, sponsored and unsponsored
American Depositary Receipts (receipts issued in the U.S. by banks or
trust companies evidencing ownership of underlying foreign securities)
and Global Depositary Receipts (receipts issued by foreign banks or
trust companies). Stocks represent shares of ownership in a company.
Generally, preferred stock has a specified dividend and ranks after
debt securities and before common stocks in its claim on income for
dividend payments and on assets should the issuer be liquidated. Debt
or preferred equity securities convertible into or exchangeable for
equity securities traditionally pay dividends or interest at rates
higher than common stock but lower than non-convertible securities.
Warrants are options to buy a stated number of shares of common stock
at a specified price anytime during the life of the warrants
(generally two or more years).
The Fund may invest in equity securities on a "when-issued" or forward
basis. This means that the Fund will enter into a contract to
purchase the underlying security for a fixed price on a date beyond
the customary settlement date. No interest accrues until settlement.
Debt Securities Generally. The Fund may invest in debt securities,
without regard to quality or rating. Up to 20% of the Fund's assets
may be invested in lower rated debt securities (commonly referred to
as "junk bonds"). Lower rated debt securities are debt securities
which, because of the greater possibility that the issuers will
default, are not investment grade (i.e., are rated below BBB by
Standard & Poor's Corporation or below Baa by Moody's Investors
Service, or are unrated but considered by the Adviser to be of
comparable credit quality). Because of the increased risk of default,
these securities generally have higher nominal or effective interest
rates than higher quality securities. Lower rated bonds also are
generally considered significantly more speculative and likely to
default than higher quality bonds. Relative to other debt securities,
their values tend to be more volatile because: (1) an economic
downturn may more significantly impact their potential for default,
and (2) the secondary market for such securities may at times be less
liquid or respond more adversely to negative publicity or investor
perceptions, making it more difficult to value or dispose of the
securities. The likelihood that these securities will help the Fund
achieve its investment objective is more dependent on the Adviser's
own credit analysis.
Foreign Investments. Investments in foreign securities (both equity
and debt), sponsored and unsponsored American Depositary Receipts and
Global Depositary Receipts have special risks related to political,
economic and legal conditions outside of the U.S. As a result, the
prices of foreign securities may fluctuate substantially more than the
prices of securities of issuers based in the U.S. Special risks
associated with foreign securities include the possibility of
unfavorable 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. In addition, transactions in foreign securities may be
more costly due to currency conversion costs and higher brokerage and
custodial costs. See "Foreign Securities" and "Foreign Currency
Transactions" in the Statement of Additional Information for more
information about foreign investments.
Foreign Currency Transactions. In connection with its investments in
foreign securities, the Fund may purchase and sell (i) foreign
currencies on a spot or forward basis, (ii) foreign currency futures
contracts, and (iii) options on foreign currencies and foreign
currency futures. Such transactions will be entered into (i) to lock
in a particular foreign exchange rate pending settlement of a purchase
or sale of a foreign security or pending the receipt of interest,
principal or dividend payments on a foreign security held by the Fund,
or (ii) to hedge against a decline in the value, in U.S. dollars or in
another currency, of a foreign currency in which securities held by
the Fund are denominated. The Fund will not attempt, nor would it be
able, to eliminate all foreign currency risk. Further, although
hedging may lessen the risk of loss if the hedged currency's value
declines, it limits the potential gain from currency value increases.
See the Statement of Additional Information for information relating
to the Fund's obligations in entering into such transactions.
Temporary/Defensive Investments. Temporarily available cash may be
invested in U.S. or foreign currency-denominated cash equivalents and
short-term debt obligations, including certificates of deposit, time
deposits, bankers' acceptances, commercial paper, Treasury bills and
repurchase agreements. Some or all of the Fund's assets also may be
invested in such investments 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 will be
added so that the obligation will at all times be fully
collateralized. However, if the bank or dealer defaults or enters
bankruptcy, the Fund may experience costs and delays in liquidating
the collateral, and may experience a loss if it is unable to
demonstrate its right to the collateral in a bankruptcy proceeding.
Not more than 15% of the Fund's net assets will be invested in
repurchase agreements maturing in more than seven days and other
illiquid assets.
Borrowing of Money. The Fund may borrow money from banks for
temporary or emergency purposes up to 10% of its net assets; however,
the Fund will not purchase additional portfolio securities (other than
short-term securities) while borrowings exceed 5% of net assets.
Other. The Fund may not always achieve its investment objective. The
Fund's investment objective and non-fundamental investment policies
may be changed without shareholder approval. The Fund will notify
investors in connection with any material change in the Fund's
investment objective. If there is a change in the investment
objective or investment policies, shareholders should consider whether
the Fund remains an appropriate investment in light of their financial
position and needs. Shareholders may incur a contingent deferred
sales charge if shares are redeemed in response to a change in
investment objective or investment policies. 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 and Class C shares.
Other total returns differ from 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 quarter's
distributions, annualized, by the maximum offering price of that Class
at the end of the quarter. 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.
Liberty Financial Investments, 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
workers' 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 pays the Adviser an annual rate of 0.80% of the Fund's
average daily net assets.
John E. Lennon, Vice President of the Adviser, co-manages the Fund.
He has managed various other Colonial equity funds since 1982.
Michael Rega, Vice President of the Adviser, has been employed by the
Adviser as an Analyst since 1993 and has co-managed the Fund and
another Colonial equity fund since 1996. Prior to joining the Adviser
in 1993, Mr. Rega was a Project Manager at Massachusetts Institute of
Technology's Lincoln Laboratory.
The Adviser also provides pricing and bookkeeping services to the Fund
for a monthly fee of $2,250 plus a percentage of the Fund's average
net assets over $50 million.
The Transfer Agent provides transfer agency and shareholder services
to the Fund for a fee of 0.25% annually of average net assets plus
certain out-of-pocket expenses. Commencing in October 1997, the fee
for transfer and shareholder services will be reduced monthly through
September 1998 until the fee reaches 0.236%.
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 by such broker-dealers to
the Adviser and its affiliates. In recognition of the research and
brokerage services provided, the Adviser may cause the Fund to pay the
selected broker-dealer a higher commission than would have been
charged by another broker-dealer not providing such services. 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.
Fund expenses consist of management, bookkeeping, shareholder service
and transfer agent fees discussed above, 12b-1 service and
distribution fees discussed under the caption "12b-1 Plan," and all
other expenses, fees, charges, taxes, organization costs and
liabilities incurred or arising in connection with the Fund or Trust
or in connection with the management thereof, including but not
limited to, trustees' compensation and expenses and auditing, counsel,
custodian and other expenses deemed necessary and proper by the
Trustees.
The Adviser may use the services of AlphaTrade Inc., its registered
broker-dealer subsidiary, when buying or selling equity securities for
the Fund's portfolio, pursuant to procedures adopted by the Trustees
and Investment Company Act Rule 17e-1.
HOW THE FUND VALUES ITS SHARES
Per share net asset value is calculated by dividing the total value of
each Class's net assets by its number of outstanding shares. Shares
of the Fund are valued as of the close (normally 4:00 p.m. Eastern
time) 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 current market value. Short-term investments
maturing in 60 days or less are valued at amortized cost when the
Adviser determines, 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 net
income at least quarterly and any net realized gain, at least
annually.
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.
If a shareholder has elected to receive dividends and/or capital gain
distributions in cash and the postal or other delivery service
selected by the Transfer Agent is unable to deliver checks to the
shareholder's address of record, such shareholder's distribution
option will automatically be converted to having all dividend and
other distributions reinvested in additional shares. No interest will
accrue on amounts represented by uncashed distribution or redemption
checks. To change your election, call the Transfer Agent for
information.
Whether you receive distributions in cash or in additional Fund
shares, you must report them as taxable income unless you are a tax-
exempt institution. If you buy shares shortly before a distribution
is declared, the distribution will be taxable although it is, in
effect, a partial return of the amount invested. Each January,
information on the amount and nature of distributions for the prior
year is sent to shareholders.
HOW TO BUY SHARES
Shares of the Fund are offered continuously. Orders received in good
form prior to the time at which the Fund values its shares (or placed
with a financial service firm before such time and transmitted by the
financial service firm before the Fund processes that day's share
transactions) will be processed based on that day's closing net asset
value, plus any applicable initial sales charge.
The minimum initial investment is $1,000; subsequent investments may
be as small as $50. The minimum initial investment for the Colonial
Fundamatic program is $50; and the minimum initial investment for a
Colonial retirement account is $25. Certificates will not be issued
for Class B or Class C shares and there are some limitations on the
issuance of Class A share certificates. The Fund may refuse any
purchase order for its shares. See the Statement of Additional
Information for more information.
Class A Shares. Class A shares are offered at net asset value plus an
initial sales charge as follows:
Retained
by
Financial
Service
as % of Firm
------------------- as % of
Amount Offering Offering
Amount Purchased Purchased 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.
In determining the sales charge and commission applicable to a new
purchase under the above schedules, the amount of the current purchase
is added to the current value of shares previously purchased and still
held. If a purchase results in an account having a value from $1
million to $5 million then the shares purchased will be subject to a
1.00% contingent deferred sales charge payable to the Distributor, if
redeemed within 18 months from the first day of the month following
the purchase. If the purchase results in an account having a value in
excess of $5 million, the contingent deferred sales charge will not
apply to the portion of the purchased shares comprising such excess
amount.
Class B Shares. Class B shares are offered at net asset value,
without an initial sales charge, subject to a 0.75% annual
distribution fee for approximately eight years (at which time they
automatically convert to Class A shares not bearing a distribution
fee) and a declining contingent deferred sales charge if redeemed
within six years after purchase. As shown below, the amount of the
contingent deferred sales charge depends on the number of years after
purchase that the redemption occurs:
Years Contingent
After Deferred
Purchase Sales Charge
-------- ------------
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
More than 6 0.00%
Year one ends one year after the end of the month in which the
purchase was accepted and so on. The Distributor pays financial
service firms a commission of 4.00% on Class B share purchases.
Class C Shares. Class C shares are offered at net asset value and are
subject to a 0.75% annual distribution fee and a 1.00% contingent
deferred sales charge on redemptions made within one year after the
end of the month in which the purchase was accepted.
The Distributor pays financial service firms an initial commission of
1.00% on Class C share purchases and an ongoing commission of 0.75%
annually, commencing after the shares purchased have been outstanding
for one year. Payment of the ongoing commission is conditioned on
receipt by the Distributor of the 0.75% annual distribution fee
referred to above. The commission may be reduced or eliminated by the
Distributor at any time.
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). When a redemption
subject to a contingent deferred sales charge is made, generally,
older shares will be redeemed first, unless the shareholder instructs
otherwise. See the Statement of Additional Information for more
information.
Which Class is more beneficial to an investor depends on the amount
and intended length of the investment. Large investments, qualifying
for a reduced Class A sales charge, avoid the distribution fee.
Investments in Class B shares have 100% of the purchase invested
immediately. Investors investing for a relatively short period of
time might consider Class C shares. Purchases of $250,000 or more
must be for Class A or Class C shares. Purchases of $1,000,000 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. See the Statement of Additional
Information for more information.
Special Purchase Programs. The Fund allows certain investors or
groups of investors to purchase shares with reduced or without initial
or contingent deferred sales charges. The programs are described in
the Statement of Additional Information under "Programs for Reducing
or Eliminating Sales Charges."
Shareholder Services and Account Fees. 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.
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. The Fund may
also deduct annual maintenance and processing fees (payable to the
Transfer Agent) in connection with certain retirement plan accounts.
See "Special Purchase Programs/Investor Services" in 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 as
soon as the check has cleared (which may take up to 15 days).
Selling Shares Directly To The Fund. Send a signed letter of
instruction or stock power form to the Transfer Agent, along with any
certificates for shares to be sold. The sale price is the net asset
value (less any applicable contingent deferred sales charge) next
calculated after the Fund receives the request in proper form.
Signatures must be guaranteed by a bank, a member firm of a national
stock exchange or another eligible guarantor institution. Stock power
forms are available from financial service firms, the Transfer Agent
and many banks. Additional documentation is required for sales by
corporations, agents, fiduciaries, surviving joint owners and
individual retirement account holders. For details contact:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Selling Shares Through Financial Service Firms. Financial service
firms must receive requests prior to the time at which the Fund values
its shares to receive that day's price, are responsible for furnishing
all necessary documentation to the Transfer Agent and may charge for
this service.
General. The sale of shares is a taxable transaction for income tax
purposes and may be subject to a contingent deferred sales charge.
The contingent deferred sales charge may be waived under certain
circumstances. See the Statement of Additional Information for more
information. Under unusual circumstances, the Fund may suspend
repurchases or postpone payment for up to seven days or longer, as
permitted by federal securities law.
HOW TO EXCHANGE SHARES
Except as described below with respect to money market funds, Fund
shares may be exchanged at net asset value for shares of other mutual
funds distributed by the Distributor, including funds advised by the
Adviser, Stein Roe & Farnham Incorporated and Newport Fund Management,
Inc. Generally, such exchanges must be between the same classes of
shares. Consult your financial service firm or the transfer agent for
information regarding what funds are available. 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 1-800-426-3750
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. The Fund will
terminate the exchange privilege as to a particular shareholder if the
Adviser determines, in its sole and absolute discretion, that the
shareholder's exchange activity is likely to adversely impact the
Adviser's ability to manage the Fund's investments in accordance with
its investment objective or otherwise harm the Fund or its remaining
shareholders.
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 C Shares. Exchanges of Class C shares are not 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. Only one "round-trip"
exchange of the Fund's Class C shares may be made per three-month
period, measured from the date of the initial purchase. For example,
an exchange from Fund A to Fund B and back to Fund A would be
permitted only once during each three-month period.
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 time at which the Fund values its shares. Telephone
redemption privileges for larger amounts may be elected on the account
application. The Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine and
may be liable for losses related to unauthorized or fraudulent
transactions in the event reasonable procedures are not employed.
Such procedures include restrictions on where proceeds of telephone
redemptions may be sent, limitations on the ability to redeem by
telephone shortly after an address change, recording of telephone
lines and requirements that the redeeming shareholder and/or his or
her financial adviser provide certain identifying information.
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
and/or their financial advisers are not obligated to transact by
telephone.
12B-1 PLAN
Under a 12b-1 Plan, the Fund pays the Distributor monthly a service
fee at an annual rate of 0.25% of the Fund's net assets attributed to
each Class of shares. The 12b-1 Plan also requires the Fund to pay
the Distributor monthly a distribution fee at the annual rate of 0.75%
of the average daily net assets attributed to its Class B and Class C
shares. Because the Class B and Class C 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 C 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 Plan also authorizes 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 commenced operations in 1996 as a separate portfolio of the
Trust.
As of the date of this Prospectus, Keyport Life Insurance Company
owned 100% of each Class of shares of the Fund and, therefore, may be
deemed to "control" the Fund.
The Trust is not required to hold annual shareholder meetings, but
special meetings may be called for certain purposes. Shareholders
receive one vote for each Fund share. Shares of the Trust vote
together except when required by law to vote separately by fund or by
class. Shareholders owning in the aggregate ten percent of Trust
shares may call meetings to consider removal of Trustees. Under
certain circumstances, the Trust will provide information to assist
shareholders in calling such a meeting. See the Statement of
Additional Information for more information.
APPENDIX
DESCRIPTION OF BOND RATINGS
S&P
APPENDIX
DESCRIPTION OF BOND RATINGS
S&P
AAA bonds have the highest rating assigned by S&P. The obligor's
capacity to meet its financial commitment on the obligation is
extremely strong.
AA bonds differ from the highest rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on
the obligation is very strong.
A bonds are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
BBB bonds exhibit adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead
to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
BB, B, CCC and CC bonds are regarded, as having significant
speculative characteristics. BB indicates the least degree of
speculation and C the highest. While such obligations will likely
have some quality and protective characteristics, these may be
outweighed by large uncertainties or major exposures to adverse
conditions.
BB bonds are less vulnerable to non-payment than other speculative
issues. However, they face major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead
to the obligor's inadequate capacity to meet its financial commitment
on the obligation.
B bonds are more vulnerable to nonpayment than obligations rated BB,
but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial, or
economic conditions will likely impair the obligor's capacity or
willingness to meet its financial commitment on the obligation.
CCC bonds are currently vulnerable to nonpayment, and are dependent
upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the
event of adverse business, financial, or economic conditions, the
obligor is not likely to have the capacity to meet its financial
commitment on the obligation.
CC bonds are currently highly vulnerable to nonpayment.
C ratings may be used to cover a situation where a bankruptcy petition
has been filed or similar action has been taken, but payments on the
obligation are being continued.
D bonds are in payment default. The D rating category is used when
payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also
will be used upon the filing of a bankruptcy petition or the taking of
a similar action if payments on an obligation are jeopardized.
Plus (+) or minus(-): The ratings from AA to CCC may be modified by
the addition of a plus or minus sign to show relative standing within
the major rating categories.
r This symbol is attached to the rating of instruments with
significant noncredit risks. It highlights risks to principal or
volatility of expected returns which are not addressed in the credit
rating. Examples include: obligations linked or indexed to equities,
currencies, or commodities; obligations exposed to severe prepayment
risk, such as interest-only or principal-only mortgage securities; and
obligations with unusually risky interest terms, such as inverse
floaters.
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 the 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
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger
than in Aaa securities.
A bonds possess many 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 which suggest a susceptibility to impairment some time in the
future.
Baa bonds are considered as medium grade obligations (i.e., they are
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 bonds in this class.
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. Such issues may be in default or
there may be present elements of danger with respect to principal or
interest.
Ca bonds represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings.
C bonds are the lowest rated class of bonds and issues so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.
Investment Adviser
Colonial Management Associates, Inc.
One Financial Center
Boston, MA 02111-2621
Distributor
Liberty Financial Investments, Inc.
One Financial Center
Boston, MA 02111-2621
Custodian
Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02108-2624
Custodian
(Effective Early December 1997)
The Chase Manhattan Bank
4 Chase MetroTech Center
Brooklyn, NY 11245
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 27, 1997
COLONIAL EQUITY INCOME FUND
PROSPECTUS
Colonial Equity Income Fund seeks current income and long-term growth.
For more detailed information about the Fund, call the Adviser at
1-800-426-3750 for the October 27, 1997 Statement of Additional
Information.
NOT FDIC-INSURED MAY LOSE VALUE
NO BANK GUARANTEE
COLONIAL TRUST VI
Cross Reference Sheet (Colonial Aggressive Growth 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 and
Certain Risk Factors; 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
<PAGE>
October 27, 1997 AG-01/325ZE-1097
COLONIAL AGGRESSIVE GROWTH 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 Aggressive Growth Fund (Fund), a diversified portfolio of Colonial
Trust VI (Trust), an open-end management investment company, seeks capital
appreciation. The Fund is managed by the Adviser, an investment adviser since
1931.
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 27, 1997 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 1-800-426-3750. The
Statement of 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 are subject to an annual distribution fee and a
declining contingent deferred sales charge on redemptions made within six years
after purchase; and Class C shares are offered at net asset value and are
subject to an annual distribution fee and a contingent deferred sales charge on
redemptions made within one year 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 2
The Fund's Financial History 4
The Fund's Investment Objective 5
How the Fund Pursues its
Objective and Certain Risk Factors 5
How the Fund Measures its
Performance 7
How the Fund is Managed 8
How the Fund Values its Shares 9
Distributions and Taxes 9
How to Buy Shares 9
How to Sell Shares 11
How to Exchange Shares 12
Telephone Transactions 12
12b-1 Plan 13
Organization and History 13
NOT FDIC-INSURED MAY LOSE VALUE
NO BANK GUARANTEE
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
2
<PAGE>
SUMMARY OF EXPENSES
Expenses are one of several factors to consider when investing in the Fund. The
following tables summarize your maximum transaction costs and your annual
expenses for an investment in each Class of the Fund's shares. See "How the Fund
is Managed" and "12b-1 Plan" for more complete descriptions of the Fund's
various costs and expenses.
Shareholder Transaction Expenses (1)(2)
Class A Class B Class C
Maximum Initial Sales Charge Imposed on
a Purchase (as a % of offering price)(3) 5.75% 0.00%(5) 0.00%(5)
Maximum Contingent Deferred Sales Charge
(as a % of offering price)(3) 1.00%(4) 5.00% 1.00%
(1) For accounts less than $1,000 an annual fee of $10 may be deducted.
See "How to Buy Shares."
(2) Redemption proceeds exceeding $1,000 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 C
shares, long-term Class B and Class C shareholders may pay more in
aggregate sales charges than the maximum initial sales charge permitted by
the National Association of Securities Dealers, Inc. However, because the
Fund's Class B shares automatically convert to Class A shares after
approximately 8 years, this is less likely for Class B shares than for a
class without a conversion feature.
Annual Operating Expenses (as a % of average net assets)
Class A Class B Class C
Management fee (after fee waiver) 0.00% 0.00% 0.00%
12b-1 fees 0.25 1.00 1.00
Other expenses (after fee waiver) 1.30 1.30 1.30
---- ----- ------
Total operating expenses 1.55% 2.30% 2.30%
===== ===== ======
The Adviser has agreed, until further notice, to waive fees and bear certain
Fund expenses to the extent that "Total operating expenses" (exclusive of
service fees, distribution fees, brokerage commissions, interest, taxes and
extraordinary expenses, if any) will not exceed 1.30% annually of the Fund's
average net assets. Absent such agreement, the "Management fee" would be 0.85%
for each Class of shares, "Other expenses" would be 3.02% for each
Class of shares and "Total operating expenses" would be 4.12% for Class A
shares and 4.87% for each of Class B and Class C shares.
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 C
Period: (6) (7) (6) (7)
1 year $ 72 $ 73 $ 23 $33 $ 23
3 years 104 102 72 72(9) 72
5 years 137 143 123 123 123
3
<PAGE>
10 years 231 245(8) 245(8) 264 264
If the Adviser did not continue to waive or bear certain Fund expenses,
the amounts in the Example would be:
Class A Class B Class C
Period: (6) (7) (6) (7)
1 year $ 97 $ 99 $ 49 $ 59 $ 49
3 years 176 176 146 146(9) 146
5 years 256 264 244 244 244
10 years 463 476(8) 476(8) 490 490
(6) Assumes redemption at period end.
(7) Assumes no redemption.
(8) Class B shares automatically convert to Class A shares after approximately 8
years; therefore, years 9 and 10 reflect Class A share expenses.
(9) Class C shares do not incur a contingent deferred sales charge on
redemptions made after one year.
4
<PAGE>
THE FUND'S FINANCIAL HISTORY
The following financial highlights for a share outstanding throughout the period
from March 31, 1996 (effective date of registration) through June 30, 1997 have
been audited by Price Waterhouse LLP, independent accountants. Their unqualified
report is included in the Fund's 1997 Annual Report and is incorporated by
reference into the Statement of Additional Information.
<TABLE>
<CAPTION>
Class A Class B
------------------------------ ----------------------------
Year ended Period ended Year ended Period ended
June 30 June 30, June 30 June 30,
1997 1996 (c) 1997 1996 (c)
------------------------------ ----------------------------
<S> <C> <C> <C> <C>
Net asset value - Beginning of period $11.300 $10.110 $11.280 $10.110
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (a)(b) (0.114) (0.016) (0.200) (0.036)
Net realized and unrealized gain (b) 1.484 1.206 1.475 1.206
------- ------- ------- -------
Total from Investment Operations 1.370 1.190 1.275 1.170
------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.005) --- --- ---
From net realized gains (0.015) --- (0.015) ---
------- ------- ------- -------
Total Distributions Declared to Shareholders (0.020) --- (0.015) ---
------- ------- ------- -------
Net asset value - End of period $12.650 $11.300 $12.540 $11.280
------- ------- ------- -------
Total return (d)(e) 12.14% 11.77%(f) 11.31% 11.57%(f)
------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses(h) 1.55% 1.55%(g) 2.30% 2.30%(g)
Fees and expenses waived or borne by the Adviser (h) 2.57% 1.38%(g) 2.57% 1.38%(g)
Net investment loss (h) (0.99)% (0.58)%(g) (1.74)% (1.33)%(g)
Portfolio turnover 54% 0%(f) 54% 0%(f)
Average commission rate $0.0392 $0.000 $0.0392 $0.000
Net assets at end of period (000) $3,185 $2,826 $314 $282
- ---------------------
(a) Net of fees and expenses waived or borne by the Adviser
which amounted to: $0.297 $0.038 $0.297 $0.038
</TABLE>
<TABLE>
<CAPTION>
Class C
--------------------------------
Year ended Period ended
June 30 June 30,
1997 1996 (c)
--------------------------------
<S> <C> <C>
Net asset value - Beginning of period $11.280 $10.110
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (a)(b) (0.200) (0.036)
Net realized and unrealized gain (b) 1.475 1.206
------- -------
Total from Investment Operations 1.275 1.170
------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income --- ---
From net realized gains (0.015) ---
------- -------
Total Distributions Declared to Shareholders (0.015) ---
------- -------
Net asset value - End of period $12.540 $11.280
------- -------
Total return (d)(e) 11.31% 11.57%(f)
------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses(h) 2.30% 2.30%(g)
Fees and expenses waived or borne by the Adviser (h) 2.57% 1.38%(g)
Net investment loss (h) (1.74)% (1.33)%(g)
Portfolio turnover 54% 0%(f)
Average commission rate $0.0392 $0.000
Net assets at end of period (000) $314 $282
- ---------------------
(a) Net of fees and expenses waived or borne by the Adviser
which amounted to: $0.297 $0.038
</TABLE>
(b) Per share data was calculated using average shares outstanding during the
period.
(c) The Fund commenced investment operations on March 25, 1996. The activity
shown is from the effective date of registration (March 31, 1996) with the
Securities and Exchange Commission.
(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.
(f) Not annualized.
(g) Annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
5
<PAGE>
Further performance information is contained in the Fund's Annual Report
to shareholders, which is obtainable free of charge by calling
1-800-426-3750.
6
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks capital appreciation.
HOW THE FUND PURSUES ITS
OBJECTIVE AND CERTAIN RISK
FACTORS
The Fund seeks to achieve its objective by investing principally in common
stocks and convertible preferred stocks. The Fund may also purchase bonds,
including convertible bonds, and other types of securities, as explained below.
In selecting investments, the Adviser uses a disciplined process intended to
create a diversified portfolio whose performance (before expenses) will exceed
that of the universe of capital appreciation funds while maintaining risk
characteristics that are generally consistent with that universe. However, there
is no assurance that the portfolio's performance will exceed (or its risk
characteristics will match) that of the capital appreciation fund universe, or
that the Fund will achieve its objective.
Equity Securities Generally. Equity securities generally include common and
preferred stock, warrants (rights) to purchase such stock, debt securities
convertible into stock, sponsored and unsponsored American Depositary Receipts
(receipts issued in the U.S. by banks or trust companies evidencing ownership of
underlying foreign securities) and Global Depositary Receipts (receipts issued
by foreign banks or trust companies). Equity securities also include shares
issued by investment companies that invest primarily in the foregoing
securities. Stocks represent shares of ownership in a company. Generally,
preferred stock has a specified dividend and ranks after debt securities and
before common stocks in its claim on income for dividend payments and on assets
should the issuer be liquidated. Debt or preferred equity securities convertible
into or exchangeable for equity securities traditionally pay dividends or
interest at rates higher than common stock but lower than non-convertible
securities. Warrants are options to buy a stated number of shares of common
stock at a specified price anytime during the life of the warrants. A reason for
investing in warrants is to permit the Fund to participate in an anticipated
increase in the market value of a security without having to purchase the
security to which the warrants relate. Warrants convey no rights to dividends or
voting rights, but only an option to purchase equity securities of the issuer at
a fixed price. If such securities appreciate, the warrants may be exercised and
the underlying security sold at a gain. A loss will be incurred if such
securities decrease in value and the warrant is sold. If the term of the warrant
expires before it is exercised, the Fund will loose its entire investment in the
warrant. The Fund may invest in equity securities on a "when-issued" or forward
basis. This means that the Fund will enter into a contract to purchase the
underlying security for a fixed price on a date beyond the customary settlement
date. No interest accrues until settlement.
Small and New Issuers. The Fund generally invests a significant portion of its
assets in the securities of smaller and newer issues. Small and medium-sized
companies (having stock market values between $20 million and $1 billion for
smaller-sized companies and $1 billion and $8 billion for medium-sized
companies) with a market niche or proprietary products have the potential to
grow rapidly. Securities of such companies may offer greater opportunities for
capital appreciation than the securities of larger, better established
companies, but may also involve certain special risks. Such companies often have
limited product lines, operating histories, markets or financial resources and
depend heavily on a small management group. Their securities may trade less
frequently, in smaller volumes, and fluctuate more sharply in value, than
exchange listed securities of larger companies.
Other Investment Companies. Up to 10% of the Fund's total assets may be invested
in other investment companies. Such investments will involve the payment of
duplicative fees through the indirect payment of a portion of the expenses,
including advisory fees, of such other investment companies.
7
<PAGE>
Foreign Investments. Investments in foreign securities, sponsored and
unsponsored American Depositary Receipts and Global Depositary Receipts have
special risks related to political, economic and legal conditions outside of the
U.S. As a result, the prices of foreign securities may fluctuate substantially
more than the prices of securities of issuers based in the U.S. Special risks
associated with foreign securities include the possibility of unfavorable
movements in currency exchange rates, 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. In addition,
transactions in foreign securities may be more costly due to currency conversion
costs and higher brokerage and custodial costs. See "Foreign Securities" and
"Foreign Currency Transactions" in the Statement of Additional Information for
more information about foreign investments.
Private Placements. The Fund may purchase securities in private placements.
These are offerings directly to a small number of investors, usually
institutions. Unlike public offerings, such securities are not registered with
the Securities and Exchange Commission and although certain of these securities
may be readily sold to other institutional investors, others may be illiquid and
their sale may involve delays and additional costs. The Fund will not invest
more than 15% of its net assets in illiquid securities.
Foreign Currency Transactions. In connection with its investments in foreign
securities, the Fund may purchase and sell (i) foreign currencies on a spot or
forward basis, (ii) foreign currency futures contracts, and (iii) options on
foreign currencies and foreign currency futures. Such transactions will be
entered into (i) to lock in a particular foreign exchange rate pending
settlement of a purchase or sale of a foreign security or pending the receipt of
interest, principal or dividend payments on a foreign security held by the Fund,
or (ii) to hedge against a decline in the value, in U.S. dollars or in another
currency, of a foreign currency in which securities held by the Fund are
denominated. The Fund will not attempt, nor would it be able, to eliminate all
foreign currency risk. Further, although hedging may lessen the risk of loss if
the hedged currency's value declines, it limits the potential gain from currency
value increases. See the Statement of Additional Information for information
relating to the Fund's obligations in entering into such transactions.
Index and Interest Rate Futures; Options. The Fund may purchase and sell (i)
U.S. and foreign stock and bond index futures contracts, (ii) U.S. and foreign
interest rate futures contracts and (iii) options on any of the foregoing, all
of which may be considered to be derivative securities. Such transactions may be
entered into (i) to gain exposure to a particular market pending investment in
individual securities, or (ii) to hedge against increases in interest rates. The
Fund also may purchase and write options on individual securities. 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. 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. An option generally gives
the option holder the right, but not the obligation, to purchase or sell the
underlying instrument prior to the option's specified expiration date. If the
option expires unexercised, the holder will lose any amount it paid to acquire
the option. Transactions in futures and related options may not precisely
achieve the goals of hedging or gaining market exposure to the extent there is
an imperfect correlation between the price movements of the contracts and of the
underlying index or securities. In addition, if the Adviser's prediction of
rates or stock market movements is inaccurate, the Fund may be worse off than if
it had not purchased or sold the futures contract or option. The total market
value of
8
<PAGE>
securities to be acquired or delivered pursuant to options contracts, entered
into by the Fund, will not exceed 5% of the Fund's total assets. In addition,
the Fund may not purchase or sell futures contracts or purchase related options
if immediately thereafter the sum of the amount of deposits for initial margin
or premiums on existing futures and related options positions would exceed 5% of
the Fund's total assets.
Temporary/Defensive Investments. Temporarily available cash may be invested in
U.S. or foreign currency denominated cash equivalents and short-term debt
obligations, including certificates of deposit, time deposits, bankers'
acceptances, commercial paper, Treasury bills and repurchase agreements. Some or
all of the Fund's assets also may be invested in such investments 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 rights to the collateral in a bankruptcy proceeding. Not more
than 15% of the Fund's net assets will be invested in repurchase agreements
maturing in more than seven days and other illiquid assets.
Borrowing of Money. The Fund may borrow money from banks for temporary or
emergency purposes up to 10% of its net assets. However, the Fund will not
purchase additional portfolio securities (other than short-term securities)
while borrowings exceed 5% of net assets.
Leverage. The purchase of securities on a "when-issued" basis, the entering into
of forward commitments, the purchase and sale of futures and forward currency
contracts and the purchase and sale of certain options may present additional
risks associated with the use of leverage. Leverage may magnify the effect on
Fund share values of fluctuations in the values of the securities underlying
these transactions. In accordance with Securities and Exchange Commission
pronouncements, to reduce (but not necessarily eliminate) leverage, the Fund
will either "cover" its obligations under such transactions by holding the
securities (or rights to acquire the securities) it is obligated to deliver
under such transactions, or deposit and maintain in a segregated account with
its custodian cash or high quality liquid debt securities equal in value to the
Fund's obligations under such transactions.
Other. The Fund may not always achieve its investment objective. The Fund's
investment objective and non-fundamental investment policies may be changed
without shareholder approval. The Fund will notify investors in connection with
any material change in the Fund's investment objective or investment policies.
If there is a change in the investment objective or investment policies,
shareholders should consider whether the Fund remains an appropriate investment
in light of their financial position and needs. Shareholders may incur a
contingent deferred sales charge if shares are redeemed in response to a change
in investment objective or investment policies. 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,
9
and the contingent deferred sales charge applicable to the time period quoted on
Class B and Class C 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.
Liberty Financial Investments, Inc. (Distributor), a subsidiary of the Adviser,
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. Each of the Adviser, the
Distributor and the Transfer Agent is an indirect 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 workers' 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
0.85% of the Fund's average daily net assets in the fiscal year 1997.
Mark Stoeckle, Vice President of the Adviser, has managed or co-managed the Fund
since January, 1997. Prior to joining the Adviser in 1996, Mr. Stoeckle was a
portfolio manager at Massachusetts Financial Services Company and an investment
banker at Bear, Stearns & Co. Inc.
The Adviser also provides pricing and bookkeeping services to the Fund for a
monthly fee of $2,250 plus a percentage of the Fund's average net assets over
$50 million.
The Transfer Agent provides transfer agency and shareholder services to the Fund
for a fee of 0.25% annually of average net assets plus certain out-of-pocket
expenses. Commencing in October, 1997, the fee for such transfer agency and
shareholder services will be reduced monthly through September, 1998 until the
fee reaches 0.236%.
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 by such broker-dealers to the Adviser and its affiliates. In
recognition of the research and
10
brokerage services provided, the Adviser may cause the Fund to pay the selected
broker-dealer a higher commission than would have been charged by another
broker-dealer not providing such services. The Adviser may use the services of
AlphaTrade Inc., its registered broker-dealer subsidiary, when buying or selling
equity securities for the Fund's portfolio, pursuant to procedures adopted by
the Trustees and Investment Company Act Rule 17e-1. 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.
Fund expenses consist of management, bookkeeping, shareholder service and
transfer agent fees discussed above, 12b-1 service and distribution fees
discussed under the caption "12b-1 Plan," and all other expenses, fees,
charges, taxes, organization costs and liabilities incurred or arising in
connection with the Fund or Trust or in connection with the management thereof,
including but not limited to Trustees' compensation and expenses and auditing,
counsel, custodian and other expenses deemed necessary and proper by the
Trustees.
HOW THE FUND VALUES ITS SHARES
Per share net asset value is calculated by dividing the total value of each
Class's net assets by its number of outstanding shares. Shares of the Fund are
valued as of the close of the New York Stock Exchange (Exchange) (normally 4:00
p.m. Eastern time) each day the Exchange is open. Portfolio securities for which
market quotations are readily available are valued at current market value.
Short-term investments maturing in 60 days or less are valued at amortized cost
when the Adviser determines, pursuant to procedures adopted by the Trustees,
that such cost approximates current 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 net income and any net
realized gain, at least annually.
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. If a shareholder has elected to receive dividends
and/or capital gain distributions in cash and the postal or other delivery
service selected by the Transfer Agent is unable to deliver checks to the
shareholder's address of record, such shareholder's distribution option will
automatically be converted to having all dividend and other distributions
reinvested in additional shares. No interest will accrue on amounts represented
by uncashed distribution or redemption checks. 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.
11
HOW TO BUY SHARES
Shares of the Fund are offered continuously. Orders received in good form prior
to the time at which the Fund values its shares (or placed with a financial
service firm before such time and transmitted by the financial service firm
before the Fund processes that day's share transactions) will be processed based
on that day's closing net asset value, plus any applicable initial sales charge.
The minimum initial investment is $1,000; subsequent investments may be as small
as $50. The minimum initial investment for the Colonial Fundamatic program is
$50; and the minimum initial investment for a Colonial retirement account is
$25. Certificates will not be issued for Class B or Class C shares and there are
some limitations on the issuance of Class A share certificates. The Fund may
refuse any purchase order for its shares. See the Statement of Additional
Information for more information.
Class A Shares. Class A shares are offered at net asset value plus an initial
sales charge as follows:
Initial Sales Charge
-----------------------------------------
Retained
by
Financial
Service
as % of Firm
------------------------- 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.
In determining the sales charge and commission applicable to a new purchase
under the above schedules, the amount of the current purchase is added to the
current value of shares previously purchased and still held by an investor. If a
purchase results in an account having a value from $1 million to $5 million then
the shares purchased will be subject to a 1.00% contingent deferred sales charge
payable to the Distributor, if redeemed within 18 months from the first day of
the month following the purchase. If the purchase results in an account having a
value in excess of $5 million, the contingent deferred sales charge will not
apply to the portion of the purchased shares comprising such excess
amount.
Class B Shares. Class B shares are offered at net asset value, without an
initial sales charge, subject to a 0.75% annual distribution fee for
approximately eight years (at which time they automatically convert to Class A
shares not bearing a distribution fee) and a declining contingent deferred sales
charge if redeemed within six years after purchase. As shown below, the amount
of the contingent deferred sales charge depends on the number of years after
purchase that the redemption occurs:
Years Contingent 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
12
firms a commission of 4.00% on Class B share purchases.
Class C Shares. Class C shares are offered at net asset value and are subject to
a 0.75% annual distribution fee and a 1.00% contingent deferred sales charge on
redemptions made within one year after the end of the month in which the
purchase was accepted.
The Distributor pays financial service firms an initial commission of 1.00% on
purchases of Class C shares and an ongoing commission of 0.75% annually,
commencing after the shares purchased have been outstanding for one year.
Payment of the ongoing commission is conditioned on receipt by the Distributor
of the 0.75% annual distribution fee referred to above. The commission may be
reduced or eliminated by the Distributor at any time.
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). When a
redemption subject to a contingent deferred sales charge is made, generally,
older shares will be redeemed first unless the shareholder instructs otherwise.
See the Statement of Additional Information for more information.
Which Class is more beneficial to an investor depends on the amount and intended
length of the investment. Large investments, qualifying for a reduced Class A
sales charge, avoid the distribution fee. Investments in Class B shares have
100% of the purchase invested immediately. Investors investing for a relatively
short period of time might consider Class C shares. Purchases of $250,000 or
more must be for Class A or Class C shares. Purchases of $1,000,000 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. See the
Statement of Additional Information for more information.
Special Purchase Programs. The Fund allows certain investors or groups of
investors to purchase shares with reduced or without initial or contingent
deferred sales charges. The programs are described in the Statement of
Additional Information under "Programs for Reducing or Eliminating Sales
Charges."
Shareholder Services and Account Fees. 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.
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. The Fund may also deduct annual maintenance and processing fees
(payable to the Transfer Agent) in connection with certain retirement plan
accounts. See "Special Purchase Programs/Investor Services" in the
Statement of Additional Information for more information.
13
<PAGE>
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 as soon as the check has cleared (which may take up to
15 days).
Selling Shares Directly To The Fund. Send a signed letter of instruction or
stock power form to the Transfer Agent, along with any certificates for shares
to be sold. The sale price is the net asset value (less any applicable
contingent deferred sales charge) next calculated after the Fund receives the
request in proper form. Signatures must be guaranteed by a bank, a member firm
of a national stock exchange or another eligible guarantor institution. Stock
power forms are available from financial service firms, the Transfer Agent and
many banks. Additional documentation is required for sales by corporations,
agents, fiduciaries, surviving joint owners and individual retirement account
holders. For details contact:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Selling Shares Through Financial Service Firms. Financial service firms must
receive requests prior to the time at which the Fund values its shares to
receive that day's price, are responsible for furnishing all necessary
documentation to the Transfer Agent and may charge for this service.
General. The sale of shares is a taxable transaction for income tax purposes and
may be subject to a contingent deferred sales charge. The contingent deferred
sales charge may be waived under certain circumstances. See the Statement of
Additional Information for more information. Under unusual circumstances, the
Fund may suspend repurchases or postpone payment for up to seven days or longer,
as permitted by federal securities law.
HOW TO EXCHANGE SHARES
Except as described below with respect to money market funds, Fund shares may be
exchanged at net asset value for shares of other mutual funds distributed by the
Distributor, including funds advised by the Adviser, Stein Roe & Farnham
Incorporated and Newport Fund Management, Inc. Generally, such exchanges must be
between the same classes of shares. Consult your financial service firm or
Transfer Agent for information regarding what funds are available. 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 1-800-426-3750 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. The Fund
will terminate the
14
<PAGE>
exchange privilege as to a particular shareholder if the Adviser determines, in
its sole and absolute discretion, that the shareholder's exchange activity is
likely to adversely impact the Adviser's ability to manage the Fund's
investments in accordance with its investment objective or otherwise harm the
Fund or its remaining shareholders.
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 time 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 C Shares. Exchanges of Class C shares are not 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.
Only one "round-trip" exchange of the Fund's Class C shares may be made per
three-month period, measured from the date of the initial purchase. For example,
an exchange from Fund A to Fund B and back to Fund A would be permitted only
once during each three-month period.
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 time at
which the Fund values its shares. Telephone redemption privileges for larger
amounts may be elected on the account application. The Transfer Agent will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine and may be liable for losses related to unauthorized or
fraudulent transactions in the event reasonable procedures are not employed.
Such procedures include restrictions on where proceeds of telephone redemptions
may be sent, limitations on the ability to redeem by telephone shortly after an
address change, recording of telephone lines and requirements that the redeeming
shareholder and/or his or her financial adviser provide certain identifying
information. 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
and/or their financial advisers are not obligated to transact by telephone.
12B-1 PLAN
Under a 12b-1 Plan, the Fund pays the Distributor monthly a service fee at an
annual rate of 0.25% of the Fund's net assets attributed to
each Class of shares. The 12b-1 Plan also requires the Fund to
15
pay the Distributor monthly a distribution fee at the annual rate of 0.75% of
the average daily net assets attributed to its Class B and Class C shares.
Because the Class B and Class C 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 C 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 Plan also authorizes 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
commenced operations in 1996 as a separate portfolio of the Trust.
As of the date of this Prospectus, Keyport Life Insurance Company owned 100% of
each Class of shares of the Fund and, therefore, may be deemed to "control" the
Fund.
The Trust is not required to hold annual shareholder meetings, but special
meetings may be called for certain purposes. Shareholders receive one vote for
each Fund share. Shares of the Trust vote together except when required by law
to vote separately by fund or by class. Shareholders owning in the aggregate ten
percent of Trust shares may call meetings to consider removal of Trustees. Under
certain circumstances, the Trust will provide information to assist shareholders
in calling such a meeting. See the Statement of Additional Information for more
information.
16
<PAGE>
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17
<PAGE>
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18
<PAGE>
Investment Adviser
Colonial Management Associates, Inc
One Financial Center
Boston, MA 02111-2621
Distributor
Colonial Investment Services, Inc.
One Financial Center
Boston, MA 02111-2621
Custodian
Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02108-2624
Custodian
(effective early December 1997)
The Chase Manhattan Bank
4 Chase MetroTech Center
Brooklyn, NY 11245
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:
October 27, 1997
COLONIAL AGGRESSIVE
GROWTH FUND
PROSPECTUS
Colonial Aggressive Growth Fund seeks capital appreciation.
For more detailed information about the Fund, call the Adviser at 1-800-426-3750
for the October 27, 1997 Statement of Additional Information.
NOT FDIC-INSURED MAY LOSE VALUE
NO BANK GUARANTEE
Printed in U.S.A.
<PAGE>
COLONIAL TRUST VI
Cross Reference Sheet
(Colonial U.S. Stock Fund, formerly 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; Shareholder
Liability
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
<PAGE>
COLONIAL U.S. STOCK FUND
Statement of Additional Information
October 27, 1997
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.
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 27, 1997. This SAI should be read together with a Prospectus and the
Fund's most recent Annual Report dated June 30, 1997. Investors may obtain a
free copy of the Prospectus and the Annual Report from Liberty Financial
Investments, 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
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 Liability
Shareholder Meetings
Performance Measures
Appendix I
Appendix II
SF-16/301E-1097
a
<PAGE>
Part 1
COLONIAL U.S. STOCK FUND
Statement of Additional Information
October 27, 1997
DEFINITIONS
"Trust" Colonial Trust VI
"Fund" Colonial U.S. Stock Fund
"Adviser" Colonial Management Associates, Inc., the Fund's investment adviser
"LFII" Liberty Financial Investments, 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 Prospectus describes the Fund's investment objective and investment
policies. Part 1 of this SAI includes additional information concerning, among
other things, the fundamental investment policies of the Fund. Part 2 contains
additional information about the following securities and investment techniques
that are described or referred to in the Prospectus:
Repurchase Agreements
Money Market Instruments
Securities Loans
Short-Term Trading
Foreign Securities
Except as indicated below under "Fundamental Investment Policies," the Fund's
investment policies are not fundamental, and the Trustees may change the
policies without shareholder approval. Effective February 28, 1997, the Fund
changed its name from Colonial U.S. Fund for Growth to its current name.
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 cannot 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. Purchase or sell commodity contracts if the total initial margin and
premiums on the contracts exceeds 5% of its total assets; and
b
<PAGE>
4. 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).
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.
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%, subject to any
voluntary reduction that the Adviser may agree to from time to time.
Effective November 18, 1996, a sub-advisory agreement among State Street Bank
and Trust Company (State Street), the Adviser and the Trust terminated. During
the fiscal years ended June 30, 1997, 1996 and 1995, State Street received from
the Adviser $------, $1,467 and $1,141 and $854 (dollars in thousands),
respectively.
Recent Fees paid to the Adviser, LFII and CISC (dollars in thousands)
Year ended June 30
1997 1996 1995
---- ---- ----
Management fee $4,271 $3,342 $2,266
Bookkeeping fee 196 156 109
Shareholder service and transfer agent fee 1,620 1,262 864
12b-1 fees:
Service fee (Classes A , B and C) 1,343 1,045 707
Distribution fee (Class B) 2,564 1,978 1,319
Distribution fee (Class C) 72 42 11
Brokerage Commissions (dollars in thousands)
Year ended June 30
1997 1996 1995
---- ---- ----
Total commissions $ 715 $ 803 $ 576
Directed transactions (a) 44,183 18,970 16,594
Commissions on directed transactions 43 24 29
(a) 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, 1997 and the calendar year ended December 31,
1996 the Trustees received the following compensation for serving as Trustees
(b):
Total Compensation
Aggregate From Trust and Fund
Compensation Complex Paid To The
From Fund For The Trustees For The
Fiscal Year Ended Calendar Year Ended
Trustee June 30, 1997 December 31, 1996(c)
- ------- ------------- --------------------
Robert J. Birnbaum $2,639 $ 92,000
Tom Bleasdale $2,952(d) $104,500(e)
Lora S. Collins 2,637 92,000
James E. Grinnell 2,642(f) 93,000
William D. Ireland, Jr. 2,951 109,000
Richard W. Lowry 2,696 95,000
William E. Mayer 2,637 91,000
James L. Moody, Jr. 3,008(g) 106,500(h)
John J. Neuhauser 2,726 94,500
George L. Shinn 2,800 105,500
Robert L. Sullivan 2,866 102,000
Sinclair Weeks, Jr. 2,951 110,000
(b) The Fund also does not currently provide pension or retirement plan
benefits to the Trustees.
(c) At December 31, 1996, the Colonial Funds complex consisted of 38 open-end
and 5 closed-end management investment company portfolios.
(d) Includes $1,530 payable in later years as deferred compensation.
(e) Includes $51,500 payable in later years as deferred compensation.
(f) Includes $67 payable in later years as deferred compensation.
(g) Total compensation of $3,008 for the fiscal year ended June 30, 1997 will
be payable in later years as deferred compensation.
(h) Total compensation of $106,500 for the calendar year ended December 31,
1996 will be 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 or Directors of the
Liberty All-Star Equity Fund and of the Liberty All-Star Growth Fund, Inc.
(formerly known as The Charles Allmon Trust, Inc.) (together, Liberty Funds) for
service during the calendar year ended December 31, 1996:
Total Compensation
From Liberty Funds For
The Calendar Year Ended
Trustee December 31, 1996(i)
- ------- -----------------------
Robert J. Birnbaum $25,000
James E. Grinnell 25,000
Richard W. Lowry 25,000
(i) The Liberty Funds are advised by Liberty Asset Management Company (LAMCO).
LAMCO is an indirect wholly-owned subsidiary of Liberty Financial
Companies, Inc. (an intermediate parent of the Adviser).
Ownership of the Fund
At September 30, 1997, the Trustees and officers of the Fund as a group owned
less than 1% of the Class A, Class B and Class C shares of the Fund. The
Colonial Group, Inc. Profit Sharing Plan of which certain officers of the
Adviser serve as Trustees, held 282,921 Class A shares or 2.33% of such Class.
At October 3, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Mutual Funds
Operations, 4800 Deer Lake Drive, East, Jacksonville, FL 32216 owned 76,133
Class B shares and 2,320,622 Class C shares representing 11.77% and 9.51%,
respectively, of the total outstanding Class B and Class C shares of the Fund.
At September 30, 1997, there were 15,029 Class A, 36,356 Class B and 898
Class C record holders of the Fund.
Sales Charges (dollars in thousands)
d
<PAGE>
Class A Shares
Year ended June 30
------------------------
1997 1996 1995
---- ---- ----
Aggregate initial sales charges on Fund
share sales $563 $940 $601
Initial sales charges retained by LFII 80 139 75
Class B Shares
Year ended June 30
------------------------
1997 1996 1995
---- ---- ----
Aggregate contingent deferred sales
charges (CDSC) on Fund redemptions $655 $138 $501
Class C Shares
Year ended June 30
------------------------
1997 1996 1995
---- ---- ----
Aggregate contingent deferred sales
charges (CDSC) on Fund redemptions $5 (l) $3
(l) Rounds to less than one.
12b-1 Plan, CDSC and Conversion of Shares
The Fund offers four classes of shares - Class A, Class B, Class C and Class Z.
The Fund may in the future offer other classes of shares. The Trustees have
approved a 12b-1 Plan (Plan) pursuant to Rule 12b-1 under the Act. Under the
Plan, the Fund pays LFII monthly a service fee at an annual rate of 0.25% of the
net assets attributed to Classes A, B, and C shares. The Fund also pays LFII
monthly a distribution fee at an annual rate of 0.75% of the average daily net
assets attributed to Class B and Class C shares. LFII 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 LFII's
expenses, LFII may realize a profit from the fees.
The Plan authorizes any other payments by the Fund to LFII and its affiliates
(including 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 Plan 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 Plan 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 Plan or in any
agreements related to the Plan (Independent Trustees), cast in person at a
meeting called for the purpose of voting on the Plan. The Plan 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 Plan must be approved by the Trustees in the manner
provided in the foregoing sentence. The Plan may be terminated at any time by
vote of a majority of the Independent Trustees or by vote of a majority of the
outstanding
e
voting securities of the relevant class of shares. The continuance of the Plan
will only be effective if the selection and nomination of the Trustees of the
Trust who are not-interested persons of the Trust is effected by such
disinterested 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 C shares are offered at
net asset value and are subject to a 1.00% CDSC on redemptions within one year
after purchase. Class Z shares are offered at net asset value and are not
subject to a CDSC. The CDSCs are described in the Prospectus.
No CDSC will be imposed on shares derived from reinvestment of distributions or
amounts representing capital appreciation. In determining the applicability and
rate of any CDSC, it will be assumed that a redemption is made first of shares
representing capital appreciation, next of shares representing reinvestment of
distributions and finally of other shares held by the shareholder for the
longest period of time.
Eight years after the end of the month in which a Class B share is purchased,
such share and a pro rata portion of any shares issued on the reinvestment of
distributions will be automatically converted into Class A shares having an
equal value, which are not subject to the distribution fee.
Sales-related expenses (dollars in thousands) of LFII relating to the Fund were:
<TABLE>
<CAPTION>
Year ended June 30, 1997
------------------------
Class A Shares Class B Shares Class C Shares
<S> <C> <C> <C>
Fees to FSFs 428 2,385 44
Cost of sales material relating to the
Fund (including printing and mailing expenses) 71 195 12
Allocated travel, entertainment and other
promotional expenses (including advertising) 66 184 13
</TABLE>
INVESTMENT PERFORMANCE
The Fund's Class A, Class B and Class C yields were:
Month ended June 30, 1997
-------------------------
Class A Shares Class B Shares Class C Shares
0.43% (0.30)% (0.45)%
f
<PAGE>
The Fund's average annual total returns at June 30, 1997 were (K):
Class A Shares
Period July 1, 1992
(commencement of
investment operations)
1 Year 5 Years through June 30, 1997
------ ------- ----------------------
With sales charge of 5.75% 24.53% 17.06% 17.05%
Without sales charge 32.13% 18.46% 18.44%
<TABLE>
<CAPTION>
Class B Shares
Period July 1, 1992
(commencement of
investment operations)
1 Year 5 Years through June 30, 1997
------ ------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
With applicable CDSC 26.21% (5.00% CDSC) 17.33% (2.00% CDSC) 17.32% (2.00% CDSC)
Without CDSC 31.21% 17.54% 17.53%
</TABLE>
<TABLE>
<CAPTION>
Class C Shares
Period July 1, 1994
(Class C shares initially offered)
1 Year through June 30, 1997
------ -------------------------------------
<S> <C> <C>
With applicable CDSC 30.24% (1.00% CDSC) 24.22%
Without CDSC 31.24% 24.22%
</TABLE>
(k) The data presented in the foregoing tables reflect performance of the Fund,
in part, while its portfolio was being managed by a former sub-adviser,
using different investment policies than are now in effect.
The Fund's Class A, Class B and Class C distribution rates at June 30, 1997,
which are based on distributions for the twelve months then ended and the
maximum offering price, were 0.44%, 0% and 0%, 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. Effective
December 1997, the Fund's custodian will be The Chase Manhattan Bank. The
custodian is responsible for safeguarding the Fund's cash and securities,
receiveing and delivering securities and collecting the Fund's interest and
dividends.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP are the Trust's independent accountant providing audit and
tax return preparation services and assistance and consultation in connection
with the review of various Securities and Exchange Commission filings. The
financial statements incorporated by reference in this SAI have been so
incorporated and the financial highlights included in the Prospectuses have been
so included in reliance upon the report of Price Waterhouse LLP given on the
authority of said firm as experts in accounting and auditing.
The financial statements and Report of Independent Accountants appearing in the
June 30, 1997 report of the Fund are incorporated in this SAI by reference.
<PAGE>
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. If an investment practice is not listed in
Part 1 of this SAI, it is not applicable to your Fund.
Short-Term Trading
In seeking the fund's investment objective, the Adviser will buy or sell
portfolio securities whenever it believes it is appropriate. The Adviser's
decision will not generally be influenced by how long the fund may have owned
the security. From time to time the fund will buy securities intending to seek
short-term trading profits. A change in the securities held by the fund is known
as "portfolio turnover" and generally involves some expense to the fund. These
expenses may include brokerage commissions or dealer mark-ups and other
transaction costs on both the sale of securities and the reinvestment of the
proceeds in other securities. If sales of portfolio securities cause the fund to
realize net short-term capital gains, such gains will be taxable as ordinary
income. As a result of the fund's investment policies, under certain market
conditions the fund's portfolio turnover rate may be higher than that of other
mutual funds. The fund's portfolio turnover rate for a fiscal year is the ratio
of the lesser of purchases or sales of portfolio securities to the monthly
average of the value of portfolio securities, excluding securities whose
maturities at acquisition were one year or less. The fund's portfolio turnover
rate is not a limiting factor when the Adviser considers a change in the fund's
portfolio.
Lower Rated Bonds
Lower rated bonds are those rated lower than Baa by Moody's, BBB by S&P, or
comparable unrated debt securities. Relative to debt securities of higher
quality,
1. an economic downturn or increased interest rates may have a more
significant effect on the yield, price and potential for default for lower
rated bonds;
2. the secondary market for lower rated bonds may at times become less liquid
or respond to adverse publicity or investor perceptions, increasing the
difficulty in valuing or disposing of the bonds;
3. the Adviser's credit analysis of lower rated bonds may have a greater
impact on the fund's achievement of its investment objective and
4. lower rated bonds are less sensitive to interest rate changes, but are more
sensitive to adverse economic developments.
In addition, 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.
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.
1
<PAGE>
Foreign Securities
The fund may invest in securities traded in markets outside the United States.
Foreign investments can be affected favorably or unfavorably by changes in
currency rates and in exchange control regulations. There may be less publicly
available information about a foreign company than about a U.S. company, and
foreign companies may not be subject to accounting, auditing and financial
reporting standards comparable to those applicable to U.S. companies. Securities
of some foreign companies are less liquid or more volatile than securities of
U.S. companies, and foreign brokerage commissions and custodian fees may be
higher than in the United States. Investments in foreign securities can involve
other risks different from those affecting U.S. investments, including local
political or economic developments, expropriation or nationalization of assets
and imposition of withholding taxes on dividend or interest payments. Foreign
securities, like other assets of the fund, will be held by the fund's custodian
or by a subcustodian or depository. See also "Foreign Currency Transactions"
below.
The fund may invest in certain Passive Foreign Investment Companies (PFICs)
which may be subject to U.S. federal income tax on a portion of any "excess
distribution" or gain (PFIC tax) related to the investment. The PFIC tax is the
highest ordinary income rate, and it could be increased by an interest charge on
the deemed tax deferral.
The fund may possibly elect to include in its income its pro rata share of the
ordinary earnings and net capital gain of PFICs. This election requires certain
annual information from the PFICs which in many cases may be difficult to
obtain. An alternative election would permit the fund to recognize as income any
appreciation (but not depreciation) on its holdings of PFICs as of the end of
its fiscal year.
Zero Coupon Securities (Zeros)
The fund may invest in debt securities which do not pay interest, but instead
are issued at a deep discount from par. The value of the security increases over
time to reflect the interest accrued. The value of these securities may
fluctuate more than similar securities which are issued at par and pay interest
periodically. Although these securities pay no interest to holders prior to
maturity, interest on these securities is reported as income to the fund and
distributed to its shareholders. These distributions must be made from the
fund's cash assets or, if necessary, from the proceeds of sales of portfolio
securities. The fund will not be able to purchase additional income producing
securities with cash used to make such distributions and its current income
ultimately may be reduced as a result.
Step Coupon Bonds (Steps)
The fund may invest in debt securities which do not pay interest for a stated
period of time and then pay interest at a series of different rates for a series
of periods. In addition to the risks associated with the credit rating of the
issuers, these securities are subject to the volatility risk of zero coupon
bonds for the period when no interest is paid.
Tender Option Bonds
A tender option bond is a municipal security (generally held pursuant to a
custodial arrangement) having a relatively long maturity and bearing interest at
a fixed rate substantially higher than prevailing short-term tax-exempt rates,
that has been coupled with the agreement of a third party, such as a bank,
broker-dealer or other financial institution, pursuant to which such institution
grants the security holders the option, at periodic intervals, to tender their
securities to the institution and receive the face value thereof. As
consideration for providing the option, the financial institution receives
periodic fees equal to the difference between the Municipal Security's fixed
coupon rate and the rate, as determined by a remarketing or similar agent at or
near the commencement of such period, that would cause the securities, coupled
with the tender option, to trade at par on the date of such determination. Thus,
after payment of this fee, the security holder effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt rate. The
Adviser will consider on an ongoing basis the creditworthiness of the issuer of
the underlying Municipal Securities, of any custodian, and of the third-party
provider of the tender option. In certain instances and for certain tender
option bonds, the option may be terminable in the event of a default in payment
of principal or interest on the underlying Municipal Securities and for other
reasons.
Pay-In-Kind (PIK) Securities
The fund may invest in securities which pay interest either in cash or
additional securities at the issuer's option. These securities are generally
high yield securities and in addition to the other risks associated with
investing in high yield securities are subject to the risks that the interest
payments which consist of additional securities are also subject to the risks of
high yield securities.
Money Market Instruments
Government obligations are issued by the U.S. or foreign governments, their
subdivisions, agencies and instrumentalities. Supranational obligations are
issued by supranational entities and are generally designed to promote economic
improvements. Certificates of deposits are issued against deposits in a
commercial bank with a defined return and maturity. Banker's acceptances are
used to finance the import, export or storage of goods and are "accepted" when
guaranteed at maturity by a bank. Commercial paper is promissory notes issued by
businesses to finance short-term needs (including those with floating or
variable interest rates, or including a frequent interval put feature).
Short-term corporate obligations are bonds and notes (with one year or less to
maturity at the time of purchase) issued by businesses to finance long-term
needs. Participation Interests include the underlying securities and any related
guaranty, letter of credit, or collateralization arrangement which the fund
would be allowed to invest in directly.
2
<PAGE>
Securities Loans
The fund may make secured loans of its portfolio securities amounting to not
more than the percentage of its total assets specified in Part 1 of this SAI,
thereby realizing additional income. The risks in lending portfolio securities,
as with other extensions of credit, consist of possible delay in recovery of the
securities or possible loss of rights in the collateral should the borrower fail
financially. As a matter of policy, securities loans are made to banks and
broker-dealers pursuant to agreements requiring that loans be continuously
secured by collateral in cash or short-term debt obligations at least equal at
all times to the value of the securities on loan. The borrower pays to the fund
an amount equal to any dividends or interest received on securities lent. The
fund retains all or a portion of the interest received on investment of the cash
collateral or receives a fee from the borrower. Although voting rights, or
rights to consent, with respect to the loaned securities pass to the borrower,
the fund retains the right to call the loans at any time on reasonable notice,
and it will do so in order that the securities may be voted by the fund if the
holders of such securities are asked to vote upon or consent to matters
materially affecting the investment. The fund may also call such loans in order
to sell the securities involved.
Forward Commitments ("When-Issued" and "Delayed Delivery" Securities)
The fund may enter into contracts to purchase securities for a fixed price at a
future date beyond customary settlement time ("forward commitments" and "when
issued securities") if the fund holds until the settlement date, in a segregated
account, cash or liquid securities in an amount sufficient to meet the purchase
price, or if the fund enters into offsetting contracts for the forward sale of
other securities it owns. Forward commitments may be considered securities in
themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date. Where such purchases are made
through dealers, the fund relies on the dealer to consummate the sale. The
dealer's failure to do so may result in the loss to the fund of an advantageous
yield or price. Although the fund will generally enter into forward commitments
with the intention of acquiring securities for its portfolio or for delivery
pursuant to options contracts it has entered into, the fund may dispose of a
commitment prior to settlement if the Adviser deems it appropriate to do so. The
fund may realize short-term profits or losses upon the sale of forward
commitments.
Mortgage Dollar Rolls
In a mortgage dollar roll, the fund sells a mortgage-backed security and
simultaneously enters into a commitment to purchase a similar security at a
later date. The fund either will be paid a fee by the counterparty upon entering
into the transaction or will be entitled to purchase the similar security at a
discount. As with any forward commitment, mortgage dollar rolls involve the risk
that the counterparty will fail to deliver the new security on the settlement
date, which may deprive the fund of obtaining a beneficial investment. In
addition, the security to be delivered in the future may turn out to be inferior
to the security sold upon entering into the transaction. Also, the transaction
costs may exceed the return earned by the fund from the transaction.
Repurchase Agreements
The fund may enter into repurchase agreements. A repurchase agreement is a
contract under which the fund acquires a security for a relatively short period
(usually not more than one week) subject to the obligation of the seller to
repurchase and the fund to resell such security at a fixed time and price
(representing the fund's cost plus interest). It is the fund's present intention
to enter into repurchase agreements only with commercial banks and registered
broker-dealers and only with respect to obligations of the U.S. government or
its agencies or instrumentalities. Repurchase agreements may also be viewed as
loans made by the fund which are collateralized by the securities subject to
repurchase. The Adviser will monitor such transactions to determine that the
value of the underlying securities is at least equal at all times to the total
amount of the repurchase obligation, including the interest factor. If the
seller defaults, the fund could realize a loss on the sale of the underlying
security to the extent that the proceeds of sale including accrued interest are
less than the resale price provided in the agreement including interest. In
addition, if the seller should be involved in bankruptcy or insolvency
proceedings, the fund may incur delay and costs in selling the underlying
security or may suffer a loss of principal and interest if the fund is treated
as an unsecured creditor and required to return the underlying collateral to the
seller's estate.
Reverse Repurchase Agreements
In a reverse repurchase agreement, the fund sells a security and agrees to
repurchase the same security at a mutually agreed upon date and price. A reverse
repurchase agreement may also be viewed as the borrowing of money by the fund
and, therefore, as a form of leverage. The fund will invest the proceeds of
borrowings under reverse repurchase agreements. In addition, the fund will enter
into a reverse repurchase agreement only when the interest income expected to be
earned from the investment of the proceeds is greater than the interest expense
of the transaction. The fund will not invest the proceeds of a reverse
repurchase agreement for a period which exceeds the duration of the reverse
repurchase agreement. The fund may not enter into reverse repurchase agreements
exceeding in the aggregate one-third of the market value of its total assets,
less liabilities other than the obligations created by reverse repurchase
agreements. Each fund will establish and maintain with its custodian a separate
account with a segregated portfolio of securities in an amount at least equal to
its purchase obligations under its reverse repurchase agreements. If interest
rates rise during the term of a reverse repurchase agreement, entering into the
reverse repurchase agreement may have a negative impact on a money market fund's
ability to maintain a net asset value of $1.00 per share.
3
<PAGE>
Options on Securities
Writing covered options. The fund may write covered call options and covered put
options on securities held in its portfolio when, in the opinion of the Adviser,
such transactions are consistent with the fund's investment objective and
policies. Call options written by the fund give the purchaser the right to buy
the underlying securities from the fund at a stated exercise price; put options
give the purchaser the right to sell the underlying securities to the fund at a
stated price.
The fund may write only covered options, which means that, so long as the fund
is obligated as the writer of a call option, it will own the underlying
securities subject to the option (or comparable securities satisfying the cover
requirements of securities exchanges). In the case of put options, the fund will
hold cash and/or high-grade short-term debt obligations equal to the price to be
paid if the option is exercised. In addition, the fund will be considered to
have covered a put or call option if and to the extent that it holds an option
that offsets some or all of the risk of the option it has written. The fund may
write combinations of covered puts and calls on the same underlying security.
The fund will receive a premium from writing a put or call option, which
increases the fund's return on the underlying security if the option expires
unexercised or is closed out at a profit. The amount of the premium reflects,
among other things, the relationship between the exercise price and the current
market value of the underlying security, the volatility of the underlying
security, the amount of time remaining until expiration, current interest rates,
and the effect of supply and demand in the options market and in the market for
the underlying security. By writing a call option, the fund limits its
opportunity to profit from any increase in the market value of the underlying
security above the exercise price of the option but continues to bear the risk
of a decline in the value of the underlying security. By writing a put option,
the fund assumes the risk that it may be required to purchase the underlying
security for an exercise price higher than its then-current market value,
resulting in a potential capital loss unless the security subsequently
appreciates in value.
The fund may terminate an option that it has written prior to its expiration by
entering into a closing purchase transaction in which it purchases an offsetting
option. The fund realizes a profit or loss from a closing transaction if the
cost of the transaction (option premium plus transaction costs) is less or more
than the premium received from writing the option. Because increases in the
market price of a call option generally reflect increases in the market price of
the security underlying the option, any loss resulting from a closing purchase
transaction may be offset in whole or in part by unrealized appreciation of the
underlying security.
If the fund writes a call option but does not own the underlying security, and
when it writes a put option, the fund may be required to deposit cash or
securities with its broker as "margin" or collateral for its obligation to buy
or sell the underlying security. As the value of the underlying security varies,
the fund may have to deposit additional margin with the broker. Margin
requirements are complex and are fixed by individual brokers, subject to minimum
requirements currently imposed by the Federal Reserve Board and by stock
exchanges and other self-regulatory organizations.
Purchasing put options. The fund may purchase put options to protect its
portfolio holdings in an underlying security against a decline in market value.
Such hedge protection is provided during the life of the put option since the
fund, as holder of the put option, is able to sell the underlying security at
the put exercise price regardless of any decline in the underlying security's
market price. For a put option to be profitable, the market price of the
underlying security must decline sufficiently below the exercise price to cover
the premium and transaction costs. By using put options in this manner, the fund
will reduce any profit it might otherwise have realized from appreciation of the
underlying security by the premium paid for the put option and by transaction
costs.
Purchasing call options. The fund may purchase call options to hedge against an
increase in the price of securities that the fund wants ultimately to buy. Such
hedge protection is provided during the life of the call option since the fund,
as holder of the call option, is able to buy the underlying security at the
exercise price regardless of any increase in the underlying security's market
price. In order for a call option to be profitable, the market price of the
underlying security must rise sufficiently above the exercise price to cover the
premium and transaction costs. These costs will reduce any profit the fund might
have realized had it bought the underlying security at the time it purchased the
call option.
Over-the-Counter (OTC) options. The Staff of the Division of Investment
Management of the Securities and Exchange Commission has taken the position that
OTC options purchased by the fund and assets held to cover OTC options written
by the fund are illiquid securities. Although the Staff has indicated that it is
continuing to evaluate this issue, pending further developments, the fund
intends to enter into OTC options transactions only with primary dealers in U.S.
Government Securities and, in the case of OTC options written by the fund, only
pursuant to agreements that will assure that the fund will at all times have the
right to repurchase the option written by it from the dealer at a specified
formula price. The fund will treat the amount by which such formula price
exceeds the amount, if any, by which the option may be "in-the-money" as an
illiquid investment. It is the present policy of the fund not to enter into any
OTC option transaction if, as a result, more than 15% (10% in some cases, refer
to your fund's Prospectus) of the fund's net assets would be invested in (i)
illiquid investments (determined under the foregoing formula) relating to OTC
options written by the fund, (ii) OTC options purchased by the fund, (iii)
securities which are not readily marketable, and (iv) repurchase agreements
maturing in more than seven days.
4
<PAGE>
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
Upon entering into futures contracts, in compliance with the Securities and
Exchange Commission's requirements, cash or liquid securities, equal in value to
the amount of the fund's obligation under the contract (less any applicable
margin deposits and any assets that constitute "cover" for such obligation),
will be segregated with the fund's custodian.
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
5
<PAGE>
offsetting sale price exceeds the purchase price, the purchaser realizes a gain,
and if the purchase price exceeds the offsetting sale price, the purchaser
realizes a loss.
Unlike when the fund purchases or sells a security, no price is paid or received
by the fund upon the purchase or sale of a futures contract, although the fund
is required to deposit with its custodian in a segregated account in the name of
the futures broker an amount of cash and/or U.S. government securities. This
amount is known as "initial margin." The nature of initial margin in futures
transactions is different from that of margin in security transactions in that
futures contract margin does not involve the borrowing of funds by the fund to
finance the transactions. Rather, initial margin is in the nature of a
performance bond or good faith deposit on the contract that is returned to the
fund upon termination of the futures contract, assuming all contractual
obligations have been satisfied. Futures contracts also involve brokerage costs.
Subsequent payments, called "variation margin," to and from the broker (or the
custodian) are made on a daily basis as the price of the underlying security or
commodity fluctuates, making the long and short positions in the futures
contract more or less valuable, a process known as "marking to market."
The fund may elect to close some or all of its futures positions at any time
prior to their expiration. The purpose of making such a move would be to reduce
or eliminate the hedge position then currently held by the fund. The fund may
close its positions by taking opposite positions which will operate to terminate
the fund's position in the futures contracts. Final determinations of variation
margin are then made, additional cash is required to be paid by or released to
the fund, and the fund realizes a loss or a gain. Such closing transactions
involve additional commission costs.
Options on futures contracts. The fund will enter into written options on
futures contracts only when, in compliance with the SEC's requirements, cash or
liquid 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. The fund may purchase and write call and put options on futures
contracts it may buy or sell and enter into closing transactions with respect to
such options to terminate existing positions. The fund may use such options on
futures contracts in lieu of writing options directly on the underlying
securities or purchasing and selling the underlying futures contracts. Such
options generally operate in the same manner as options purchased or written
directly on the underlying investments.
As with options on securities, the holder or writer of an option may terminate
his position by selling or purchasing an offsetting option. There is no
guarantee that such closing transactions can be effected.
The fund will be required to deposit initial margin and maintenance margin with
respect to put and call options on futures contracts written by it pursuant to
brokers' requirements similar to those described above.
Risks of transactions in futures contracts and related options. Successful use
of futures contracts by the fund is subject to the Adviser`s ability to predict
correctly movements in the direction of interest rates and other factors
affecting securities markets.
Compared to the purchase or sale of futures contracts, the purchase of call or
put options on futures contracts involves less potential risk to the fund
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when the purchase of a
call or put option on a futures contract would result in a loss to the fund when
the purchase or sale of a futures contract would not, such as when there is no
movement in the prices of the hedged investments. The writing of an option on a
futures contract involves risks similar to those risks relating to the sale of
futures contracts.
There is no assurance that higher than anticipated trading activity or other
unforeseen events might not, at times, render certain market clearing facilities
inadequate, and thereby result in the institution, by exchanges, of special
procedures which may interfere with the timely execution of customer orders.
To reduce or eliminate a hedge position held by the fund, the fund may seek to
close out a position. The ability to establish and close out positions will be
subject to the development and maintenance of a liquid secondary market. It is
not certain that this market will develop or continue to exist for a particular
futures contract. Reasons for the absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading interest
in certain contracts or options; (ii) restrictions may be imposed by an exchange
on opening transactions or closing transactions or both; (iii) trading halts,
suspensions or other restrictions may be imposed with respect to particular
classes or series of contracts or options, or underlying securities; (iv)
unusual or unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or a clearing corporation may not at
all times be adequate to handle current trading volume; or (vi) one or more
exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of contracts or options (or a particular
class or series of contracts or options), in which event the secondary market on
that exchange (or in the class or series of contracts or options) would cease to
exist, although outstanding contracts or options on the exchange that had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms.
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Use by tax-exempt funds of U.S. Treasury security futures contracts and options.
The funds investing in tax-exempt securities issued by a governmental entity may
purchase and sell futures contracts and related options on U.S. Treasury
securities when, in the opinion of the Adviser, price movements in Treasury
security futures and related options will correlate closely with price movements
in the tax-exempt securities which are the subject of the hedge. U.S. Treasury
securities futures contracts require the seller to deliver, or the purchaser to
take delivery of, the type of U.S. Treasury security called for in the contract
at a specified date and price. Options on U.S. Treasury security futures
contracts give the purchaser the right in return for the premium paid to assume
a position in a U.S. Treasury futures contract at the specified option exercise
price at any time during the period of the option.
In addition to the risks generally involved in using futures contracts, there is
also a risk that price movements in U.S. Treasury security futures contracts and
related options will not correlate closely with price movements in markets for
tax-exempt securities.
Index futures contracts. An index futures contract is a contract to buy or sell
units of an index at a specified future date at a price agreed upon when the
contract is made. Entering into a contract to buy units of an index is commonly
referred to as buying or purchasing a contract or holding a long position in the
index. Entering into a contract to sell units of an index is commonly referred
to as selling a contract or holding a short position. A unit is the current
value of the index. The fund may enter into stock index futures contracts, debt
index futures contracts, or other index futures contracts appropriate to its
objective(s). The fund may also purchase and sell options on index futures
contracts.
There are several risks in connection with the use by the fund of index futures
as a hedging device. One risk arises because of the imperfect correlation
between movements in the prices of the index futures and movements in the prices
of securities which are the subject of the hedge. The Adviser will attempt to
reduce this risk by selling, to the extent possible, futures on indices the
movements of which will, in its judgment, have a significant correlation with
movements in the prices of the fund's portfolio securities sought to be hedged.
Successful use of 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 values
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.
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Foreign Currency Transactions
The fund may engage in currency exchange transactions to protect against
uncertainty in the level of future currency exchange rates.
The fund may engage in both "transaction hedging" and "position hedging." When
it engages in transaction hedging, the fund enters into foreign currency
transactions with respect to specific receivables or payables of the fund
generally arising in connection with the purchase or sale of its portfolio
securities. The fund will engage in transaction hedging when it desires to "lock
in" the U.S. dollar price of a security it has agreed to purchase or sell, or
the U.S. dollar equivalent of a dividend or interest payment in a foreign
currency. By transaction hedging the fund attempts to protect itself against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the applicable foreign currency during the period between the
date on which the security is purchased or sold, or on which the dividend or
interest payment is declared, and the date on which such payments are made or
received.
The fund may purchase or sell a foreign currency on a spot (or cash) basis at
the prevailing spot rate in connection with the settlement of transactions in
portfolio securities denominated in that foreign currency. The fund may also
enter into contracts to purchase or sell foreign currencies at a future date
("forward contracts") and purchase and sell foreign currency futures contracts.
For transaction hedging purposes the fund may also purchase exchange-listed and
over-the-counter call and put options on foreign currency futures contracts and
on foreign currencies. Over-the-counter options are considered to be illiquid by
the SEC staff. A put option on a futures contract gives the fund the right to
assume a short position in the futures contract until expiration of the option.
A put option on currency gives the fund the right to sell a currency at an
exercise price until the expiration of the option. A call option on a futures
contract gives the fund the right to assume a long position in the futures
contract until the expiration of the option. A call option on currency gives the
fund the right to purchase a currency at the exercise price until the expiration
of the option.
When it engages in position hedging, the fund enters into foreign currency
exchange transactions to protect against a decline in the values of the foreign
currencies in which its portfolio securities are denominated (or an increase in
the value of currency for securities which the fund expects to purchase, when
the fund holds cash or short-term investments). In connection with position
hedging, the fund may purchase put or call options on foreign currency and
foreign currency futures contracts and buy or sell forward contracts and foreign
currency futures contracts. The fund may also purchase or sell foreign currency
on a spot basis.
The precise matching of the amounts of foreign currency exchange transactions
and the value of the portfolio securities involved will not generally be
possible since the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of those securities
between the dates the currency exchange transactions are entered into and the
dates they mature.
It is impossible to forecast with precision the market value of portfolio
securities at the expiration or maturity of a forward or futures contract.
Accordingly, it may be necessary for the fund to purchase additional foreign
currency on the spot market (and bear the expense of such purchase) if the
market value of the security or securities being hedged is less than the amount
of foreign currency the fund is obligated to deliver and if a decision is made
to sell the security or securities and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of the foreign
currency received upon the sale of the portfolio security or securities if the
market value of such security or securities exceeds the amount of foreign
currency the fund is obligated to deliver.
Transaction and position hedging do not eliminate fluctuations in the underlying
prices of the securities which the 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. Upon entering into such contracts, in
compliance with the SEC's requirements, cash or liquid securities, equal in
value to the amount of the fund's obligation under the contract (less any
applicable margin deposits and any assets that constitute "cover" for such
obligation), will be segregated with the fund's custodian.
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
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contract. Currency futures contracts traded in the United States are designed
and traded on exchanges regulated by the CFTC, such as the New York Mercantile
Exchange.
Forward currency contracts differ from currency futures contracts in certain
respects. For example, the maturity date of a forward contract may be any fixed
number of days from the date of the contract agreed upon by the parties, rather
than a predetermined date in a given month. Forward contracts may be in any
amounts agreed upon by the parties rather than predetermined amounts. Also,
forward contracts are traded directly between currency traders so that no
intermediary is required. A forward contract generally requires no margin or
other deposit.
At the maturity of a forward or futures contract, the fund may either accept or
make delivery of the currency specified in the contract, or at or prior to
maturity enter into a closing transaction involving the purchase or sale of an
offsetting contract. Closing transactions with respect to forward contracts are
usually effected with the currency trader who is a party to the original forward
contract. Closing transactions with respect to futures contracts are effected on
a commodities exchange; a clearing corporation associated with the exchange
assumes responsibility for closing out such contracts.
Positions in currency futures contracts may be closed out only on an exchange or
board of trade which provides a secondary market in such contracts. Although the
fund intends to purchase or sell currency futures contracts only on exchanges or
boards of trade where there appears to be an active secondary market, there is
no assurance that a secondary market on an exchange or board of trade will exist
for any particular contract or at any particular time. In such event, it may not
be possible to close a futures position and, in the event of adverse price
movements, the fund would continue to be required to make daily cash payments of
variation margin.
Currency options. In general, options on currencies operate similarly to options
on securities and are subject to many similar risks. Currency options are traded
primarily in the over-the-counter market, although options on currencies have
recently been listed on several exchanges. Options are traded not only on the
currencies of individual nations, but also on the European Currency Unit
("ECU"). The ECU is composed of amounts of a number of currencies, and is the
official medium of exchange of the European Economic Community's European
Monetary System.
The fund will only purchase or write currency options when the Adviser believes
that a liquid secondary market exists for such options. There can be no
assurance that a liquid secondary market will exist for a particular option at
any specified time. Currency options are affected by all of those factors which
influence exchange rates and investments generally. To the extent that these
options are traded over the counter, they are considered to be illiquid by the
SEC staff.
The value of any currency, including the U.S. dollars, may be affected by
complex political and economic factors applicable to the issuing country. In
addition, the exchange rates of currencies (and therefore the values of currency
options) may be significantly affected, fixed, or supported directly or
indirectly by government actions. Government intervention may increase risks
involved in purchasing or selling currency options, since exchange rates may not
be free to fluctuate in respect to other market forces.
The value of a currency option reflects the value of an exchange rate, which in
turn reflects relative values of two currencies, the U.S. dollar and the foreign
currency in question. Because currency transactions occurring in the interbank
market involve substantially larger amounts than those that may be involved in
the exercise of currency options, investors may be disadvantaged by having to
deal in an odd lot market for the underlying currencies in connection with
options at prices that are less favorable than for round lots. Foreign
governmental restrictions or taxes could result in adverse changes in the cost
of acquiring or disposing of currencies.
There is no systematic reporting of last sale information for currencies and
there is no regulatory requirement that quotations available through dealers or
other market sources be firm or revised on a timely basis. Available quotation
information is generally representative of very large round-lot transactions in
the interbank market and thus may not reflect exchange rates for smaller odd-lot
transactions (less than $1 million) where rates may be less favorable. The
interbank market in currencies is a global, around-the-clock market. To the
extent that options markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that cannot be reflected in the options markets.
Settlement procedures. Settlement procedures relating to the fund's investments
in foreign securities and to the fund's foreign currency exchange transactions
may be more complex than settlements with respect to investments in debt or
equity securities of U.S. issuers, and may involve certain risks not present in
the fund's domestic investments, including foreign currency risks and local
custom and usage. Foreign currency transactions may also involve the risk that
an entity involved in the settlement may not meet its obligations.
Foreign currency conversion. Although foreign exchange dealers do not charge a
fee for currency conversion, they do realize a profit based on the difference
(spread) between prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the fund at one rate,
while offering a lesser rate of exchange should the fund desire to resell that
currency to the dealer. Foreign currency transactions may also involve the risk
that an entity involved in the settlement may not meet its obligation.
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Municipal Lease Obligations
Although a municipal lease obligation does not constitute a general obligation
of the municipality for which the municipality's taxing power is pledged, a
municipal lease obligation is ordinarily backed by the municipality's covenant
to budget for, appropriate and make the payments due under the municipal lease
obligation. However, certain lease obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose on a yearly basis. Although "non-appropriation" lease obligations
are secured by the leased property, disposition of the property in the event of
foreclosure might prove difficult. In addition, the tax treatment of such
obligations in the event of non-appropriation is unclear.
Determinations concerning the liquidity and appropriate valuation of a municipal
lease obligation, as with any other municipal security, are made based on all
relevant factors. These factors include, among others: (1) the frequency of
trades and quotes for the obligation; (2) the number of dealers willing to
purchase or sell the security and the number of other potential buyers; (3) the
willingness of dealers to undertake to make a market in the security; and (4)
the nature of the marketplace trades, including the time needed to dispose of
the security, the method of soliciting offers, and the mechanics of the
transfer.
Participation Interests
The fund may invest in municipal obligations either by purchasing them directly
or by purchasing certificates of accrual or similar instruments evidencing
direct ownership of interest payments or principal payments, or both, on
municipal obligations, provided that, in the opinion of counsel to the initial
seller of each such certificate or instrument, any discount accruing on such
certificate or instrument that is purchased at a yield not greater than the
coupon rate of interest on the related municipal obligations will be exempt from
federal income tax to the same extent as interest on such municipal obligations.
The fund may also invest in tax-exempt obligations by purchasing from banks
participation interests in all or part of specific holdings of municipal
obligations. Such participations may be backed in whole or part by an
irrevocable letter of credit or guarantee of the selling bank. The selling bank
may receive a fee from the fund in connection with the arrangement. The fund
will not purchase such participation interests unless it receives an opinion of
counsel or a ruling of the Internal Revenue Service that interest earned by it
on municipal obligations in which it holds such participation interests is
exempt from federal income tax.
Stand-by Commitments
When the fund purchases municipal obligations it may also acquire stand-by
commitments from banks and broker-dealers with respect to such municipal
obligations. A stand-by commitment is the equivalent of a put option acquired by
the fund with respect to a particular municipal obligation held in its
portfolio. A stand-by commitment is a security independent of the municipal
obligation to which it relates. The amount payable by a bank or dealer during
the time a stand-by commitment is exercisable, absent unusual circumstances
relating to a change in market value, would be substantially the same as the
value of the underlying municipal obligation. A stand-by commitment might not be
transferable by the fund, although it could sell the underlying municipal
obligation to a third party at any time.
The fund expects that stand-by commitments generally will be available without
the payment of direct or indirect consideration. However, if necessary and
advisable, the fund may pay for stand-by commitments either separately in cash
or by paying a higher price for portfolio securities which are acquired subject
to such a commitment (thus reducing the yield to maturity otherwise available
for the same securities.) The total amount paid in either manner for outstanding
stand-by commitments held in the fund portfolio will not exceed 10% of the value
of the fund's total assets calculated immediately after each stand-by commitment
is acquired. The fund will enter into stand-by commitments only with banks and
broker-dealers that, in the judgment of the Trust's Board of Trustees, present
minimal credit risks.
Inverse Floaters
Inverse floaters are derivative securities whose interest rates vary inversely
to changes in short-term interest rates and whose values fluctuate inversely to
changes in long-term interest rates. The value of certain inverse floaters will
fluctuate substantially more in response to a given change in long-term rates
than would a traditional debt security. These securities have investment
characteristics similar to leverage, in that interest rate changes have a
magnified effect on the value of inverse floaters.
Rule 144A Securities
The fund may purchase securities that have been privately placed but that are
eligible for purchase and sale under Rule 144A under the Securities Act of 1933
(1933 Act). That Rule permits certain qualified institutional buyers, such as
the fund, to trade in privately placed securities that have not been registered
for sale under the 1933 Act. The Adviser, under the supervision of the Board of
Trustees, will consider whether securities purchased under Rule 144A are
illiquid and thus subject to the fund's investment restriction on illiquid
securities. A determination of whether a Rule 144A security is liquid or not is
a question of fact. In making this determination, the
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Adviser will consider the trading markets for the specific security, taking into
account the unregistered nature of a Rule 144A security. In addition, the
Adviser could consider the (1) frequency of trades and quotes, (2) number of
dealers and potential purchasers, (3) dealer undertakings to make a market, and
(4) nature of the security and of marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers, and the mechanics of
transfer). The liquidity of Rule 144A securities will be monitored and, if as a
result of changed conditions, it is determined by the Adviser that a Rule 144A
security is no longer liquid, the fund's holdings of illiquid securities would
be reviewed to determine what, if any, steps are required to assure that the
fund does not invest more than its investment restriction on illiquid securities
allows. Investing in Rule 144A securities could have the effect of increasing
the amount of the fund's assets invested in illiquid securities if qualified
institutional buyers are unwilling to purchase such securities.
TAXES
In this section, 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.
Alternative Minimum Tax. Distributions derived from interest which is exempt
from regular federal income tax may subject corporate shareholders to or
increase their liability under the corporate alternative minimum tax (AMT). A
portion of such distributions may constitute a tax preference item for
individual shareholders and may subject them to or increase their liability
under the AMT.
Dividends Received Deductions. Distributions will qualify for the corporate
dividends received deduction only to the extent that dividends earned by the
fund qualify. Any such dividends are, however, includable in adjusted current
earnings for purposes of computing corporate AMT.
Return of Capital Distributions. To the extent that a distribution is a return
of capital for federal tax purposes, it reduces the cost basis of the shares on
the record date and is similar to a partial return of the original investment
(on which a sales charge may have been paid). There is no recognition of a gain
or loss, however, unless the return of capital reduces the cost basis in the
shares to below zero.
Funds that invest in U.S. Government Securities. Many states grant tax-free
status to dividends paid to shareholders of mutual funds from interest income
earned by the fund from direct obligations of the U.S. government. Investments
in mortgage-backed securities (including GNMA, FNMA and FHLMC Securities) and
repurchase agreements collateralized by U.S. government securities do not
qualify as direct federal obligations in most states. Shareholders should
consult with their own tax advisers about the applicability of state and local
intangible property, income or other taxes to their fund shares and
distributions and redemption proceeds received from the fund.
Distributions from Tax-Exempt Funds. Each tax-exempt fund will have at least 50%
of its total assets invested in tax-exempt bonds at the end of each quarter so
that dividends from net interest income on tax-exempt bonds will be exempt from
Federal income tax when received by a shareholder. The tax-exempt portion of
dividends paid will be designated within 60 days after year-end based upon the
ratio of net tax-exempt income to total net investment income earned during the
year. That ratio may be substantially different from 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 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.
A tax-exempt fund may at times purchase tax-exempt securities at a discount and
some or all of this discount may be included in the fund's ordinary income which
will be taxable when distributed.
The Revenue Reconciliation Act of 1993 requires that any market discount
recognized on a tax-exempt bond is taxable as ordinary income. This rule applies
only for disposals of bonds purchased after April 30, 1993. A market discount
bond is a bond acquired in the secondary market at a price below its redemption
value. Under prior law, the treatment of market discount as ordinary income did
not apply to tax-exempt obligations. Instead, realized market discount on
tax-exempt obligations was treated as capital gain. Under the new
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law, gain on the disposition of a tax-exempt obligation or any other market
discount bond that is acquired for a price less than its principal amount will
be treated as ordinary income (instead of capital gain) to the extent of accrued
market discount. This rule is effective only for bonds purchased after April 30,
1993.
Shareholders receiving social security and certain retirement benefits may be
taxed on a portion of those benefits as a result of receiving tax-exempt income,
including tax-exempt dividends from the fund.
Special Tax Rules Applicable to Tax-Exempt Funds. Income distributions to
shareholders who are substantial users or related persons of substantial users
of facilities financed by industrial revenue bonds may not be excludable from
their gross income if such income is derived from such bonds. Income derived
from the fund's investments other than tax-exempt instruments may give rise to
taxable income. The fund's shares must be held for more than six months in order
to avoid the disallowance of a capital loss on the sale of fund shares to the
extent of tax-exempt dividends paid during that period. A shareholder who
borrows money to purchase the fund's shares will not be able to deduct the
interest paid with respect to such borrowed money.
Sales of Shares. In general, any gain or loss realized upon a taxable
disposition of shares by a shareholder will be treated as long-term capital gain
or loss if the shares have been held for more than twelve months, and otherwise
as short-term capital gain or loss assuming such shares are held as a capital
asset. However, any loss realized upon a taxable disposition of shares held for
six months or less will be treated as long-term, rather than short-term, capital
loss to the extent of any long-term capital gain distributions received by the
shareholder with respect to those shares. All or a portion of any loss realized
upon a taxable disposition of shares will be disallowed if other shares are
purchased within 30 days before or after the disposition. In such a case, the
basis of the newly purchased shares will be adjusted to reflect the disallowed
loss.
Backup Withholding. Certain distributions and redemptions may be subject to a
31% backup withholding unless a taxpayer identification number and certification
that the shareholder is not subject to the withholding is provided to the 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 for funds with tax years beginning on
or before August 5, 1997; (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.
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<PAGE>
Foreign Currency-Denominated Securities and Related Hedging Transactions. The
fund's transactions in foreign currency-denominated debt securities, certain
foreign currency options, futures contracts and forward contracts may give rise
to ordinary income or loss to the extent such income or loss results from
fluctuations in the value of the foreign currency concerned.
If more than 50% of the fund's total assets at the end of its fiscal year are
invested in securities of foreign corporate issuers, the fund may make an
election permitting its shareholders to take a deduction or credit for federal
tax purposes for their portion of certain foreign taxes paid by the fund. The
Adviser will consider the value of the benefit to a typical shareholder, the
cost to the fund of compliance with the election, and incidental costs to
shareholders in deciding whether to make the election. A shareholder's ability
to claim such a foreign tax credit will be subject to certain limitations
imposed by the Code, as a result of which a shareholder may not get a full
credit for the amount of foreign taxes so paid by the fund. Shareholders who do
not itemize on their federal income tax returns may claim a credit (but no
deduction) for such foreign taxes.
Certain securities are considered to be Passive Foreign Investment Companies
(PFICS) under the Code, and the fund is liable for any PFIC-related taxes.
MANAGEMENT OF THE COLONIAL FUNDS (in this section, and the following sections
entitled "Trustees and Officers," "The Management Agreement," "Administration
Agreement," "The Pricing and Bookkeeping Agreement," "Portfolio Transactions,"
"Investment decisions," and "Brokerage and research services," the "Adviser"
refers to Colonial Management Associates, Inc.)
The Adviser is the investment adviser to each of the Colonial funds (except for
Colonial Municipal Money Market Fund, Colonial Global Utilities Fund, Colonial
Newport Tiger Fund, Colonial Newport Tiger Cub Fund, Colonial Newport Japan Fund
and Newport Greater China Fund - see Part I of each Fund's respective SAI for a
description of the investment adviser). The Adviser is a subsidiary of The
Colonial Group, Inc. (TCG), One Financial Center, Boston, MA 02111. TCG is a
direct subsidiary of Liberty Financial Companies, Inc. (Liberty Financial),
which in turn is a direct subsidiary of LFC Holdings, Inc., which in turn is a
direct subsidiary of Liberty Mutual Equity Corporation, which in turn is a
wholly-owned subsidiary of Liberty Mutual Insurance Company (Liberty Mutual).
Liberty Mutual is an underwriter of workers' compensation insurance and a
property and casualty insurer in the U.S. Liberty Financial's address is 600
Atlantic Avenue, Boston, MA 02210. Liberty Mutual's address is 175 Berkeley
Street, Boston, MA 02117.
Trustees and Officers (this section applies to all of the Colonial funds)
<TABLE>
<CAPTION>
Name and Address Age Position with Fund Principal Occupation
<S> <C> <C> <C>
Robert J. Birnbaum 69 Trustee Retired (formerly Special Counsel, Dechert Price &
313 Bedford Road Rhoads from September, 1988 to December, 1993).
Ridgewood, NJ 07450
Tom Bleasdale 66 Trustee Retired (formerly Chairman of the Board and Chief
102 Clubhouse Drive #275 Executive Officer, Shore Bank & Trust Company from
Naples, FL 34105 1992-1993), is a Director of The Empire Company since
June, 1995.
Lora S. Collins 61 Trustee Attorney (formerly Attorney, Kramer, Levin, Naftalis,
1175 Hill Road Nessen, Kamin & Frankel from September, 1986 to
Southold, NY 11971 November, 1996).
James E. Grinnell 67 Trustee Private Investor since November, 1988.
22 Harbor Avenue
Marblehead, MA 01945
William D. Ireland, Jr. 73 Trustee Retired, is a Trustee of certain charitable and
103 Springline Drive non-charitable organizations since February, 1990.
Vero Beach, FL 32963
Richard W. Lowry 61 Trustee Private Investor since August, 1987.
10701 Charleston Drive
Vero Beach, FL 32963
</TABLE>
13
<PAGE>
<TABLE>
<S> <C> <C> <C>
William E. Mayer* 56 Trustee Partner, Development Capital, LLC (formerly Dean,
500 Park Avenue, 5th Floor College of Business and Management, University of
New York, NY 10022 Maryland from October, 1992 to November, 1996, Dean,
Simon Graduate School of Business, University of
Rochester from October, 1991 to July, 1992).
James L. Moody, Jr. 65 Trustee Retired (formerly Chairman of the Board, Hannaford Bros.
P.O. Box 1000 Co. from May, 1984 to May, 1997, and Chief Executive
Portland, ME 04104 Officer, Hannaford Bros. Co. from May, 1973 to May,
1992).
John J. Neuhauser 53 Trustee Dean, Boston College School of Management since 1978.
140 Commonwealth Avenue
Chestnut Hill, MA 02167
George L. Shinn 74 Trustee Financial Consultant since 1989.
Credit Suisse First Boston
Corp.
Eleven Madison Avenue,
25th Floor
New York, NY 10010-3629
Robert L. Sullivan 69 Trustee Retired Partner, Peat Marwick Main & Co.
7121 Natelli Woods Lane
Bethesda, MD 20817
Sinclair Weeks, Jr. 73 Trustee Chairman of the Board, Reed & Barton Corporation
Bay Colony Corporate Ctr. since 1987.
Suite 4550
1000 Winter Street
Waltham, MA 02154
Harold W. Cogger 61 President President of Colonial funds since March, 1996 (formerly
(formerly Vice Vice President from July, 1993 to March, 1996); is
President) Director, since March, 1984 and Chairman of the Board
since March, 1996 of the Adviser (formerly President
from July, 1993 to December, 1996, Chief Executive Officer
from March, 1995 to December, 1996 and Executive
Vice President from October, 1989 to July, 1993); Director
since October, 1991 and Chairman of the Board since
March, 1996 of TCG (formerly President from October, 1994
to December, 1996 and Chief Executive Officer from March, 1995
to December, 1996); Executive Vice President and Director
since March, 1995, Liberty Financial; Director since
November, 1996 of Stein Roe & Farnham Incorporated.
Timothy J. Jacoby 44 Treasurer and Treasurer and Chief Financial Officer of Colonial funds
Chief Financial since October, 1996, is Senior Vice President of the
Officer Adviser since September, 1996 (formerly Senior Vice
President, Fidelity Accounting and Custody Services
from September, 1993 to September, 1996 and Assistant
Treasurer to the Fidelity Group of Funds from August,
1990 to September, 1993).
14
<PAGE>
Michael H. Koonce 37 Secretary Secretary of Colonial funds since 1997 (formerly
Assistant Secretary from June, 1992 to July, 1997), is
Senior Vice President, General Counsel, Clerk and
Secretary of the Adviser (formerly Vice President,
Counsel, Assistant Secretary and Assistant Clerk from
June, 1992 to July, 1997), Vice President - Legal and
Clerk of TCG (formerly Assistant Clerk from April, 1993
to July, 1997).
Davey S. Scoon 50 Vice President Vice President of Colonial funds since June, 1993, is
Executive Vice President since July, 1993 and Director
since March, 1985 of the Adviser (formerly Senior Vice
President and Treasurer of the Adviser from March,
1985 to July, 1993); Executive Vice President and Chief
Operating Officer, TCG since March, 1995 (formerly
Vice President - Finance and Administration of TCG
from November, 1985 to March, 1995).
</TABLE>
* A Trustee who is an "interested person" (as defined in the Investment
Company Act of 1940) of the fund or the Adviser.
The address of the officers of each Colonial Fund is One Financial Center,
Boston, MA 02111.
The Trustees serve as trustees of all Colonial funds for which each Trustee will
receive an annual retainer of $45,000 and attendance fees of $7,500 for each
regular joint meeting and $1,000 for each special joint meeting. Committee
chairs receive an annual retainer of $5,000. Committee members receive an annual
retainer of $1,000 and $1,000 for each special meeting attended. Two-thirds of
the
15
<PAGE>
Trustee fees are allocated among the Colonial funds based on each fund's
relative net assets and one-third of the fees are divided equally among the
Colonial funds.
The Adviser and/or its affiliate, Colonial Advisory Services, Inc. (CASI), has
rendered investment advisory services to investment company, institutional and
other clients since 1931. The Adviser currently serves as investment adviser and
administrator for 38 open-end and 5 closed-end management investment company
portfolios, and is the administrator for 5 open-end management investment
company portfolios (collectively, Colonial funds). Trustees and officers of the
Trust, who are also officers of the Adviser or its affiliates, will benefit from
the advisory fees, sales commissions and agency fees paid or allowed by the
Trust. More than 30,000 financial advisers have recommended Colonial funds to
over 800,000 clients worldwide, representing more than $16.3 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, Colonial Newport Tiger Fund,
Colonial Newport Japan Fund, Colonial Newport Tiger Cub Fund or Newport Greater
China Fund)
Under a Management Agreement (Agreement), the Adviser has contracted to furnish
each fund with investment research and recommendations or fund management,
respectively, and accounting and administrative personnel and services, and with
office space, equipment and other facilities. For these services and facilities,
each Colonial fund pays a monthly fee based on the average of the daily closing
value of the total net assets of each fund for such month. Under the Agreement,
any liability of the Adviser to the Trust, a fund and/or its shareholders is
limited to situations involving the Adviser's own willful misfeasance, bad
faith, gross negligence or reckless disregard of its 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 printing and mailing any Prospectuses sent to
shareholders. LFII pays the cost of printing and distributing all other
Prospectuses.
Administration Agreement (this section applies only to the Colonial Municipal
Money Market Fund, Colonial Global Utilities Fund, Colonial Newport Tiger Fund,
Colonial Newport Japan Fund, Colonial Newport Tiger Cub Fund and Newport Greater
China Fund and their respective Trusts).
Under an Administration Agreement with each Fund named above, the Adviser, in
its capacity as the Administrator to each Fund, has contracted to perform the
following administrative services:
(a) providing office space, equipment and clerical personnel;
16
<PAGE>
(b) arranging, if desired by the respective Trust, for its Directors, officers
and employees to serve as Trustees, officers or agents of each Fund;
(c) preparing and, if applicable, filing all documents required for compliance
by each Fund with applicable laws and regulations;
(d) preparation of agendas and supporting documents for and minutes of meetings
of Trustees, committees of Trustees and shareholders;
(e) coordinating and overseeing the activities of each Fund's other third-party
service providers; and
(f) maintaining certain books and records of each Fund.
With respect to the Colonial Municipal Money Market Fund, the Administration
Agreement for this Fund provides for the following services in addition to the
services referenced above:
(g) monitoring compliance by the Fund with Rule 2a-7 under the Investment
Company Act of 1940 (the "1940 Act") and reporting to the Trustees from
time to time with respect thereto; and
(h) monitoring the investments and operations of the SR&F Municipal Money
Market Portfolio (Municipal Money Market Portfolio) in which Colonial
Municipal Money Market Fund is invested and the LFC Utilities Trust (LFC
Portfolio) in which Colonial Global Utilities Fund is invested and
reporting to the Trustees from time to time with respect thereto.
The Adviser is paid a monthly fee at the annual rate of average daily net assets
set forth in Part 1 of this Statement of Additional Information.
The Pricing and Bookkeeping Agreement
The Adviser provides pricing and bookkeeping services to each Colonial fund
pursuant to a Pricing and Bookkeeping Agreement. The Adviser, in its capacity as
the Administrator to each of Colonial Municipal Money Market Fund and Colonial
Global Utilities Fund, is paid an annual fee of $18,000, plus 0.0233% of average
daily net assets in excess of $50 million. For each of the other Colonial funds
(except for Colonial Newport Tiger Fund, Colonial Newport Japan Fund, Colonial
Newport Tiger Cub Fund and Newport Greater China Fund), the Adviser is paid
monthly a fee of $2,250 by each fund, plus a monthly percentage fee based on net
assets of the fund equal to the following:
1/12 of 0.000% of the first $50 million;
1/12 of 0.035% of the next $950 million;
1/12 of 0.025% of the next $1 billion;
1/12 of 0.015% of the next $1 billion;
and 1/12 of 0.001% on the excess over $3
billion
The Adviser provides pricing and bookkeeping services to Colonial Newport Tiger
Fund, Colonial Newport Japan Fund, Colonial Newport Tiger Cub Fund and Newport
Greater China Fund for an annual fee of $27,000, plus 0.035% of each Fund's
average daily net assets over $50 million.
Stein Roe & Farnham Incorporated, the investment adviser of each of the
Municipal Money Market Portfolio and LFC Portfolio, provides pricing and
bookkeeping services to each Portfolio for a fee of $25,000 plus 0.0025%
annually of average daily net assets of each Portfolio over $50 million.
Portfolio Transactions
The following sections entitled "Investment decisions" and "Brokerage and
research services" do not apply to Colonial Municipal Money Market Fund, and
Colonial Global Utilities Fund. For each of these funds, see Part 1 of its
respective SAI. The Adviser of Colonial Newport Tiger Fund, Colonial Newport
Japan Fund, Colonial Newport Tiger Cub Fund and Newport Greater China Fund
follows the same procedures as those set forth under "Brokerage and research
services."
Investment decisions. The Adviser acts as investment adviser to each of the
Colonial funds (except for the Colonial Municipal Money Market Fund, Colonial
Global Utilities Fund, Colonial Newport Tiger Fund, Colonial Newport Japan Fund,
17
<PAGE>
Colonial Newport Tiger Cub Fund and Newport Greater China Fund, each of which is
administered by the Adviser. The Adviser's affiliate, CASI, advises other
institutional, corporate, fiduciary and individual clients for which CASI
performs various services. Various officers and Trustees of the Trust also serve
as officers or Trustees of other Colonial funds and the other corporate or
fiduciary clients of the Adviser. The Colonial funds and clients advised by the
Adviser or the funds administered by the Adviser sometimes invest in securities
in which the Fund also invests and sometimes engage in covered option writing
programs and enter into transactions utilizing stock index options and stock
index and financial futures and related options ("other instruments"). If the
Fund, such other Colonial funds and such other clients desire to buy or sell the
same portfolio securities, options or other instruments at about the same time,
the purchases and sales are normally made as nearly as practicable on a pro rata
basis in proportion to the amounts desired to be purchased or sold by each.
Although in some cases these practices could have a detrimental effect on the
price or volume of the securities, options or other instruments as far as the
Fund is concerned, in most cases it is believed that these practices should
produce better executions. It is the opinion of the Trustees that the
desirability of retaining the Adviser as investment adviser to the Colonial
funds outweighs the disadvantages, if any, which might result from these
practices.
The portfolio managers of Colonial International Fund for Growth, a series of
Colonial Trust III, will use the trading facilities of Stein Roe & Farnham
Incorporated, an affiliate of the Adviser, to place all orders for the purchase
and sale of this fund's portfolio securities, futures contracts and foreign
currencies.
Brokerage and research services. Consistent with the Rules of Fair Practice of
the National Association of Securities Dealers, Inc., and subject to seeking
"best execution" (as defined below) and such other policies as the Trustees may
determine, the Adviser may consider sales of shares of the Colonial funds as a
factor in the selection of broker-dealers to execute securities transactions for
a Colonial fund.
The Adviser places the transactions of the Colonial funds with broker-dealers
selected by the Adviser and, if applicable, negotiates commissions.
Broker-dealers may receive brokerage commissions on portfolio transactions,
including the purchase and writing of options, the effecting of closing purchase
and sale transactions, and the purchase and sale of underlying securities upon
the exercise of options and the purchase or sale of other instruments. The
Colonial funds from time to time also execute portfolio transactions with such
broker-dealers acting as principals. The Colonial funds do not intend to deal
exclusively with any particular broker-dealer or group of broker-dealers.
It is the Adviser's policy generally 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.
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.
The Trustees have authorized the Adviser to 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
18
<PAGE>
the underlying security upon the exercise of an option written by a fund.
The Adviser may use the services of AlphaTrade Inc. (ATI), its registered
broker-dealer subsidiary, when buying or selling equity securities for a Fund's
portfolio, pursuant to procedures adopted by the Trustees and Investment Company
Act Rule 17e-1. Under the Rule, the Adviser must ensure that commissions a Fund
pays ATI on portfolio transactions are reasonable and fair compared to
commissions received by other broker-dealers in connection with comparable
transactions involving similar securities being bought or sold at about the same
time. The Adviser will report quarterly to the Trustees on all securities
transactions placed through ATI so that the Trustees may consider whether such
trades complied with these procedures and the Rule. ATI employs electronic
trading methods by which it seeks to obtain best price and execution for the
Fund, and will use a clearing broker to settle trades.
Principal Underwriter
LFII is the principal underwriter of the Trust's shares. LFII has no obligation
to buy the Colonial funds' shares, and purchases the Colonial funds' shares only
upon receipt of orders from authorized FSFs or investors.
Investor Servicing and Transfer Agent
CISC is the Trust's investor servicing agent (transfer, plan and dividend
disbursing agent), for which it receives fees which are paid monthly by the
Trust. The fee paid to CISC is based on the average daily net assets of each
Colonial fund plus reimbursement for certain out-of-pocket expenses. See "Fund
Charges and Expenses" in Part 1 of this SAI for information on fees received by
CISC. The agreement continues indefinitely but may be terminated by 90 days'
notice by the Fund to CISC or generally by 6 months' notice by CISC to the Fund.
The agreement limits the liability of CISC to the Fund for loss or damage
incurred by the Fund 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 will indemnify CISC against, among other things,
loss or damage incurred by CISC on account of any claim, demand, action or suit
made on or against CISC not resulting from CISC's bad faith or negligence and
arising out of, or in connection with, its duties under the agreement.
DETERMINATION OF NET ASSET VALUE
Each Colonial fund determines net asset value (NAV) per share for each Class as
of the close of the New York Stock Exchange (Exchange) (generally 4:00 p.m.
Eastern time, 3:00 p.m. Chicago time) each day the Exchange is open. Currently,
the Exchange is closed Saturdays, Sundays and the following holidays: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, the Fourth of July, Labor Day,
Thanksgiving and Christmas. Funds with portfolio securities which are primarily
listed on foreign exchanges may experience trading and changes in NAV on days on
which such Fund does not determine NAV due to differences in closing policies
among exchanges. This may significantly affect the NAV of the Fund's redeemable
securities on days when an investor cannot redeem such securities. The net asset
value of the Municipal Money Market Portfolio will not be determined on days
when the Exchange is closed unless, in the judgment of the Municipal Money
Market Portfolio's Board of Trustees, the net asset value of the Municipal Money
Market Portfolio should be determined on any such day, in which case the
determination will be made at 3:00 p.m., Chicago time. Debt securities generally
are valued by a pricing service which determines valuations based upon market
transactions for normal, institutional-size trading units of similar securities.
However, in circumstances where such prices are not available or where the
Adviser deems it appropriate to do so, an over-the-counter or exchange bid
quotation is used. Securities listed on an exchange or on NASDAQ are valued at
the last sale price. Listed securities for which there were no sales during the
day and unlisted securities are valued at the last quoted bid price. Options are
valued at the last sale price or in the absence of a sale, the mean between the
last quoted bid and offering prices. Short-term obligations with a maturity of
60 days or less are valued at amortized cost pursuant to procedures adopted by
the Trustees. The values of foreign securities quoted in foreign currencies are
translated into U.S. dollars at the exchange rate for that day. Portfolio
positions for which there are no such valuations and other assets are valued at
fair value as determined by the Adviser in good faith under the direction of the
Trust's Trustees.
Generally, trading in certain securities (such as foreign securities) is
substantially completed each day at various times prior to the close of the
Exchange. Trading on certain foreign securities markets may not take place on
all business days in New York, and trading on some foreign securities markets
takes place on days which are not business days in New York and on which the
Fund's NAV is not calculated. The values of these securities used in determining
the NAV are computed as of such times. Also, because of the amount of time
required to collect and process trading information as to large numbers of
securities issues, the values of certain securities (such as convertible bonds,
U.S. government securities, and tax-exempt securities) are determined based on
market quotations collected earlier in the day at the latest practicable time
prior to the close of the Exchange. Occasionally, events affecting the value of
such securities may occur between such times and the close of the Exchange which
will not be reflected in the computation of each Colonial fund's NAV. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value following procedures
approved by the Trust's Trustees.
19
<PAGE>
(The following two paragraphs are applicable only to Colonial Newport Tiger
Fund, Colonial Newport Japan Fund, Colonial Newport Tiger Cub Fund and Newport
Greater China Fund - "Adviser" in these two paragraphs refers to each fund's
Adviser, Newport Fund Management, Inc.)
Trading in securities on stock exchanges and over-the-counter markets in the Far
East is normally completed well before the close of the business day in New
York. Trading on Far Eastern securities markets may not take place on all
business days in New York, and trading on some Far Eastern securities markets
does take place on days which are not business days in New York and on which the
Fund's NAV is not calculated.
The calculation of the Fund's NAV accordingly may not take place
contemporaneously with the determination of the prices of the Fund's portfolio
securities used in such calculations. Events affecting the values of portfolio
securities that occur between the time their prices are determined and the close
of the Exchange (when the Fund's NAV is calculated) will not be reflected in the
Fund's calculation of NAV unless the Adviser, acting under procedures
established by the Board of Trustees of the Trust, deems that the particular
event would materially affect the Fund's NAV, in which case an adjustment will
be made. Assets or liabilities initially expressed in terms of foreign
currencies are translated prior to the next determination of the NAV of the
Fund's shares into U.S. dollars at prevailing market rates.
Amortized Cost for Money Market Funds (this section currently applies only to
Colonial Government Money Market Fund, a series of Colonial Trust II - see
"Amortized Cost for Money Market Funds" under "Other Information Concerning the
Portfolio" in Part 1 of the SAI of Colonial Municipal Money Market Fund for
information relating to the Municipal Money Market Portfolio)
Money market funds generally value their portfolio securities at amortized cost
according to Rule 2a-7 under the 1940 Act.
Portfolio instruments are valued under the amortized cost method, whereby the
instrument is recorded at cost and thereafter amortized to maturity. This method
assures a constant NAV but may result in a yield different from that of the same
portfolio under the market value method. The Trust's Trustees have adopted
procedures intended to stabilize a money market fund's NAV per share at $1.00.
When a money market fund's market value deviates from the amortized cost of
$1.00, and results in a material dilution to existing shareholders, the Trust's
Trustees will take corrective action that may include: realizing gains or
losses; shortening the portfolio's maturity; withholding distributions;
redeeming shares in kind; or converting to the market value method (in which
case the NAV per share may differ from $1.00). All investments will be
determined pursuant to procedures approved by the Trust's Trustees to present
minimal credit risk.
See the Statement of Assets and Liabilities in the shareholder report of the
Colonial Government Money Market Fund for a specimen price sheet showing the
computation of maximum offering price per share of Class A shares.
HOW TO BUY SHARES
The Prospectus contains a general description of how investors may buy shares of
the Fund and tables of charges. This SAI contains additional information which
may be of interest to investors.
The Fund will accept unconditional orders for shares to be executed at the
public offering price based on the NAV per share next determined after the order
is placed in good order. The public offering price is the NAV plus the
applicable sales charge, if any. In the case of orders for purchase of shares
placed through FSFs, the public offering price will be determined on the day the
order is placed in good order, but only if the FSF receives the order prior to
the time at which shares are valued and transmits it to the Fund before the Fund
processes that day's transactions. If the FSF fails to transmit before the Fund
processes that day's transactions, the customer's entitlement to that day's
closing price must be settled between the customer and the FSF. If the FSF
receives the order after the time at which the Fund values its shares, the price
will be based on the NAV determined as of the close of the Exchange on the next
day it is open. If funds for the purchase of shares are sent directly to CISC,
they will be invested at the public offering price next determined after receipt
in good order. Payment for shares of the Fund must be in U.S. dollars; if made
by check, the check must be drawn on a U.S. bank.
The Fund receives the entire NAV of shares sold. For shares subject to an
initial sales charge, LFII'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 LFII retains the entire sales charge on any sales made to
a shareholder who does not specify a FSF on the Investment Account Application
("Application"). LFII generally retains 100% of any asset-based sales charge
(distribution fee) or contingent deferred sales charge. Such charges generally
reimburse LFII for any up-front and/or ongoing commissions paid to FSFs.
Checks presented for the purchase of shares of the Fund which are returned by
the purchaser's bank or checkwriting privilege checks for which there are
insufficient funds in a shareholder's account to cover redemption will subject
such purchaser or shareholder to a $15 service fee for each check returned.
Checks must be drawn on a U.S. bank and must be payable in U.S. dollars.
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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 LFII.
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, T or Z
shares. The Colonial money market funds will not issue certificates.
Shareholders may send any certificates which have been previously acquired to
CISC for deposit to their account.
SPECIAL PURCHASE PROGRAMS/INVESTOR SERVICES
The following special purchase programs/investor services may be changed or
eliminated at any time.
Fundamatic Program. As a convenience to investors, shares of most Colonial funds
may be purchased through the Colonial Fundamatic Program. Preauthorized monthly
bank drafts or electronic funds transfer for a fixed amount of at least $50 are
used to purchase a Colonial fund's shares at the public offering price next
determined after LFII receives the proceeds from the draft (normally the 5th or
the 20th of each month, or the next business day thereafter). If your Fundamatic
purchase is by electronic funds transfer, you may request the Fundamatic
purchase for any day. Further information and application forms are available
from FSFs or from LFII.
Automated Dollar Cost Averaging (Classes A, B and C). Colonial's Automated
Dollar Cost Averaging program allows you to exchange $100 or more on a monthly
basis from any Colonial fund in which you have a current balance of at least
$5,000 into the same class of shares of up to four other Colonial funds.
Complete the Automated Dollar Cost Averaging section of the Application. The
designated amount will be exchanged on the third Tuesday of each month. There is
no charge for exchanges made pursuant to the Automated Dollar Cost Averaging
program. Exchanges will continue so long as your Colonial fund balance is
sufficient to complete the transfers. Your normal rights and privileges as a
shareholder remain in full force and effect. Thus you can buy any fund, exchange
between the same Class of shares of funds by written instruction or by telephone
exchange if you have so elected and withdraw amounts from any fund, subject to
the imposition of any applicable CDSC.
Any additional payments or exchanges into your Colonial fund will extend the
time of the Automated Dollar Cost Averaging program.
An exchange is a capital sale transaction for federal income tax purposes.
You may terminate your program, change the amount of the exchange (subject to
the $100 minimum), or change your selection of funds, by telephone or in
writing; if in writing by mailing your instructions to Colonial Investors
Service Center, Inc. P.O. Box 1722, Boston, MA 02105-1722.
You should consult your FSF or investment adviser to determine whether or not
the Automated Dollar Cost Averaging program is appropriate for you.
LFII offers several plans by which an investor may obtain reduced initial or
contingent deferred sales charges . These plans may be altered or discontinued
at any time. See "Programs For Reducing or Eliminating Sales Charges" for more
information.
Tax-Sheltered Retirement Plans. LFII offers prototype tax-qualified plans,
including Individual Retirement Accounts (IRAs), and Pension and Profit-Sharing
Plans for individuals, corporations, employees and the self-employed. The
minimum initial Retirement Plan investment is $25. The First National Bank of
Boston is the Trustee of LFII prototype plans and charges a $10 annual fee.
Detailed information concerning these Retirement Plans and copies of the
Retirement Plans are available from LFII.
Participants in non-Colonial prototype Retirement Plans (other than IRAs) also
are charged a $10 annual fee unless the plan maintains an omnibus account with
CISC. Participants in Colonial prototype Plans (other than IRAs) who liquidate
the total value of their account will also be charged a $15 close-out processing
fee payable to CISC. The fee is in addition to any applicable CDSC. The fee will
not apply if the participant uses the proceeds to open a Colonial IRA Rollover
account in any fund, or if the Plan maintains an omnibus account.
Consultation with a competent financial and tax adviser regarding these Plans
and consideration of the suitability of fund shares as an investment under the
Employee Retirement Income Security Act of 1974 or otherwise is recommended.
Telephone Address Change Services. By calling CISC, shareholders or their FSF of
record may change an address on a recorded telephone line. Confirmations of
address change will be sent to both the old and the new addresses. Telephone
redemption privileges are suspended for 30 days after an address change is
effected.
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Colonial Cash Connection. Dividends and any other distributions, including
Systematic Withdrawal Plan (SWP) payments, may be automatically deposited to a
shareholder's bank account via electronic funds transfer. Shareholders wishing
to avail themselves of this electronic transfer procedure should complete the
appropriate sections of the Application.
Automatic Dividend Diversification. The automatic dividend diversification
reinvestment program (ADD) generally allows shareholders to have all
distributions from a fund automatically invested in the same class of shares of
another Colonial fund. An ADD account must be in the same name as the
shareholder's existing open account with the particular fund. Call CISC for more
information at 1-800-422-3737.
PROGRAMS FOR REDUCING OR ELIMINATING SALES CHARGES
Right of Accumulation and Statement of Intent (Class A and Class T shares only)
(Class T shares can only be purchased by the shareholders of Colonial Newport
Tiger Fund who already own Class T shares). Reduced sales charges on Class A and
T shares can be effected by combining a current purchase with prior purchases of
Class A, B, C, 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, T and Z shares).
LFII 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, 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 LFII the excess commission previously paid
during the thirteen-month period.
If the amount of the Statement is not purchased, the shareholder shall remit to
LFII 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:
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Systematic Withdrawal Plan Share Certificates
Sponsored Arrangements Exchange Privilege
$50,000 Fast Cash Colonial Cash Connection
Right of Accumulation Automatic Dividend Diversification
Telephone Redemption Reduced Sales Charges for any "person"
Statement of Intent
*Exchanges may be made to other Colonial funds offering the Program.
Because of the unavailability of certain services, this Program may not be
suitable for all investors.
The FSF receives 3% of the investor's intended purchases under a Program at the
time of initial investment and 1% after the 24th monthly payment. LFII 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, C or T shares
may, upon request, reinstate within one year a portion or all of the proceeds of
such sale in shares of the same Class of any Colonial fund at the NAV next
determined after CISC receives a written reinstatement request and payment. Any
CDSC paid at the time of the redemption will be credited to the shareholder upon
reinstatement. The period between the redemption and the reinstatement will not
be counted in aging the reinstated shares for purposes of calculating any CDSC
or conversion date. Investors who desire to exercise this privilege should
contact their FSF or CISC. Shareholders may exercise this Privilege an unlimited
number of times. Exercise of this privilege does not alter the Federal income
tax treatment of any capital gains realized on the prior sale of fund shares,
but to the extent any such shares were sold at a loss, some or all of the loss
may be disallowed for tax purposes. Consult your tax adviser.
Privileges of Colonial Employees or Financial Service Firms (in this section,
the "Adviser" refers to Colonial Management Associates, Inc. in its capacity as
the Adviser or Administrator to the Colonial Funds). Class A shares of certain
funds may be sold at NAV to the following individuals whether currently employed
or retired: Trustees of funds advised or administered by the Adviser; directors,
officers and employees of the Adviser, LFII and other companies affiliated with
the Adviser; registered representatives and employees of FSFs (including their
affiliates) that are parties to dealer agreements or other sales arrangements
with LFII; and such persons' families and their beneficial accounts.
Sponsored Arrangements. Class A and Class T shares (Class T shares can only be
purchased by the shareholders of Colonial Newport Tiger Fund who already own
Class T shares) of certain funds may be purchased at reduced or no sales charge
pursuant to sponsored arrangements, which include programs under which an
organization makes recommendations to, or permits group solicitation of, its
employees, members or participants in connection with the purchase of shares of
the fund on an individual basis. The amount of the sales charge reduction will
reflect the anticipated reduction in sales expense associated with sponsored
arrangements. The reduction in sales expense, and therefore the reduction in
sales charge, will vary depending on factors such as the size and stability of
the organization's group, the term of the organization's existence and certain
characteristics of the members of its group. The Colonial funds reserve the
right to revise the terms of or to suspend or discontinue sales pursuant to
sponsored plans at any time.
Class A and Class T shares (Class T shares can only be purchased by the
shareholders of Colonial Newport Tiger Fund who already own Class T shares) of
certain funds may also be purchased at reduced or no sales charge by clients of
dealers, brokers or registered investment advisers that have entered into
agreements with LFII pursuant to which the Colonial funds are included as
investment options in programs involving fee-based compensation arrangements,
and by participants in certain retirement plans.
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Waiver of Contingent Deferred Sales Charges (CDSCs) (in this section, the
"Adviser" refers to Colonial Management Associates, Inc. in its capacity as the
Adviser or Administrator to the Colonial Funds) (Classes A, B, and C) 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 CISC, 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 "Investor Services -
Systematic Withdrawal Plan."
3. Disability. CDSCs may be waived on redemptions occurring within one year
after the sole shareholder on an individual account or a joint tenant on a
spousal joint tenant account becomes disabled (as defined in Section
72(m)(7) of the Internal Revenue Code). To be eligible for such waiver, (i)
the disability must arise after the purchase of shares and (ii) the
disabled shareholder must have been under age 65 at the time of the initial
determination of disability. If the account is transferred to a new
registration and then a redemption is requested, the applicable CDSC will
be charged.
4. Death of a trustee. CDSCs may be waived on redemptions occurring upon
dissolution of a revocable living or grantor trust following the death of
the sole trustee where (i) the grantor of the trust is the sole trustee and
the sole life beneficiary, (ii) death occurs following the purchase and
(iii) the trust document provides for dissolution of the trust upon the
trustee's death. If the account is transferred to a new registration
(including that of a successor trustee), the applicable CDSC will be
charged upon any subsequent redemption.
5. Returns of excess contributions. CDSCs may be waived on redemptions
required to return excess contributions made to retirement plans or
individual retirement accounts, so long as the FSF agrees to return the
applicable portion of any commission paid by Colonial.
6. Qualified Retirement Plans. CDSCs may be waived on redemptions required to
make distributions from qualified retirement plans following (i) normal
retirement (as stated in the Plan document) or (ii) separation from
service. CDSCs also will be waived on SWP redemptions made to make required
minimum distributions from qualified retirement plans that have invested in
Colonial funds for at least two years.
The CDSC also may be waived where the FSF agrees to return all or an agreed upon
portion of the commission earned on the sale of the shares being redeemed.
HOW TO SELL SHARES
Shares may also be sold on any day the Exchange is open, either directly to the
Fund or through the shareholder's FSF. Sale proceeds generally are sent within
seven days (usually on the next business day after your request is received in
good form). However, for shares recently purchased by check, the Fund will send
proceeds only after the check has cleared (which may take up to 15 days).
To sell shares directly to the Fund, send a signed letter of instruction or
stock power form to CISC, along with any certificates for shares to be sold. The
sale price is the net asset value (less any applicable contingent deferred sales
charge) next calculated after the Fund receives the request in proper form.
Signatures must be guaranteed by a bank, a member firm of a national stock
exchange or another eligible guarantor institution. Stock power forms are
available from FSFs, CISC, and many banks. Additional documentation is required
for sales by corporations, agents, fiduciaries, surviving joint owners and
individual retirement account holders. Call CISC for more information
1-800-345-6611.
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FSFs must receive requests before the time at which the Fund's shares are valued
to receive that day's price, are responsible for furnishing all necessary
documentation to CISC and may charge for this service.
Systematic Withdrawal Plan
If a shareholder's account balance is at least $5,000, the shareholder may
establish a SWP. A specified dollar amount or percentage of the then current net
asset value of the shareholder's investment in any Colonial fund designated by
the shareholder will be paid monthly, quarterly or semi-annually to a designated
payee. The amount or percentage the shareholder specifies generally may not, on
an annualized basis, exceed 12% of the value, as of the time the shareholder
makes the election, of the shareholder's investment. Withdrawals from Class B
and Class C 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 Service regulation to withdraw
more than 12%, on an annual basis, of the value of their Class B and Class C
share account may do so but will be subject to a CDSC ranging from 1% to 5% of
the amount withdrawn. If a shareholder wishes to participate in a SWP, the
shareholder must elect to have all of the shareholder's income dividends and
other fund distributions payable in shares of the fund rather than in cash.
A shareholder or a shareholder's FSF of record may establish a SWP account by
telephone on a recorded line. However, SWP checks will be payable only to the
shareholder and sent to the address of record. SWPs from retirement accounts
cannot be established by telephone.
A shareholder may not establish a SWP if the shareholder holds shares in
certificate form. Purchasing additional shares (other than through dividend and
distribution reinvestment) while receiving SWP payments is ordinarily
disadvantageous because of duplicative sales charges. For this reason, a
shareholder may not maintain a plan for the accumulation of shares of the fund
(other than through the reinvestment of dividends) and a SWP at the same time.
SWP payments are made through share redemptions, which may result in a gain or
loss for tax purposes, may involve the use of principal and may eventually use
up all of the shares in a shareholder's account.
A fund may terminate a shareholder's SWP if the shareholder's account balance
falls below $5,000 due to any transfer or liquidation of shares other than
pursuant to the SWP. SWP payments will be terminated on receiving satisfactory
evidence of the death or incapacity of a shareholder. Until this evidence is
received, CISC will not be liable for any payment made in accordance with the
provisions of a SWP.
The cost of administering SWPs for the benefit of shareholders who participate
in them is borne by the fund as an expense of all shareholders.
Shareholders whose positions are held in "street name" by certain FSFs may not
be able to participate in a SWP. If a shareholder's Fund shares are held in
"street name," the shareholder should consult his or her FSF to determine
whether he or she may participate in a SWP.
Telephone Redemptions. All Colonial fund shareholders and/or their FSFs (except
for Colonial Newport Tiger Cub Fund, Colonial Newport Japan Fund and Newport
Greater China Fund) 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).
Transactions received after 4:00 p.m. Eastern time will receive the next
business day's closing price. Telephone redemption privileges for larger amounts
and for the Colonial Newport Tiger Cub Fund, Colonial Newport Japan Fund and the
Newport Greater China Fund 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 unless the redemption proceeds are being
sent to a pre-designated bank account. Shareholders and/or their FSFs will be
required to provide their name, address and account number. FSFs will also be
required to provide their broker number. All telephone transactions are
recorded. A loss to a shareholder may result from an unauthorized transaction
reasonably believed to have been authorized. No shareholder is obligated to
execute the telephone authorization form or to use the telephone to execute
transactions.
Checkwriting (in this section, the "Adviser" refers to Colonial Management
Associates, Inc. in its capacity as the Adviser or Administrator of the Colonial
Funds) (Available only on the Class A shares of certain Colonial funds) Shares
may be redeemed by check if a shareholder has previously completed an
Application and Signature Card. CISC 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
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a check is presented to the Bank for payment. At such time a sufficient number
of full and fractional shares will be redeemed at the next determined net asset
value to cover the amount of the check. Certificate shares may not be redeemed
in this manner.
Shareholders utilizing checkwriting drafts will be subject to the Bank's rules
governing checking accounts. There is currently no charge to the shareholder for
the use of checks. The shareholder should make sure that there are sufficient
shares in his or her open account to cover the amount of any check drawn since
the net asset value of shares will fluctuate. If insufficient shares are in the
shareholder's open account, the check will be returned marked "insufficient
funds" and no shares will be redeemed; the shareholder will be charged a $15
service fee for each check returned. It is not possible to determine in advance
the total value of an open account because prior redemptions and possible
changes in net asset value may cause the value of an open account to change.
Accordingly, a check redemption should not be used to close an open account. In
addition, a check redemption, like any other redemption, may give rise to
taxable capital gains.
Non Cash Redemptions. For redemptions of any single shareholder within any
90-day period exceeding the lesser of $250,000 or 1% of a Colonial fund's net
asset value, a Colonial fund may make the payment or a portion of the payment
with portfolio securities held by that Colonial fund instead of cash, in which
case the redeeming shareholder may incur brokerage and other costs in selling
the securities received.
DISTRIBUTIONS
Distributions are invested in additional shares of the same Class of the fund at
net asset value unless the shareholder elects to receive cash. Regardless of the
shareholder's election, distributions of $10 or less will not be paid in cash,
but will be invested in additional shares of the same Class of the Fund at net
asset value. Undelivered distribution checks returned by the post office will be
reinvested in your account. If a shareholder has elected to receive dividends
and/or capital gain distributions in cash and the postal or other delivery
service selected by the Transfer Agent is unable to deliver checks to the
shareholder's address of record, such shareholder's distribution option will
automatically be converted to having all dividend and other distributions
reinvested in additional shares. No interest will accrue on amounts represented
by uncashed distribution or redemption checks.
Shareholders may reinvest all or a portion of a recent cash distribution without
a sales charge. A shareholder request must be received within 30 calendar days
of the distribution. A shareholder may exercise this privilege only once. No
charge is currently made for reinvestment.
Shares of most funds that pay daily dividends will normally earn dividends
starting with the date the fund receives payment for the shares and will
continue through the day before the shares are redeemed, transferred or
exchanged. The daily dividends for Colonial Municipal Money Market Fund will be
earned starting with the day after that fund receives payments for the shares.
HOW TO EXCHANGE SHARES
Shares of the Fund may be exchanged for the same class of shares of the other
continuously offered Colonial funds (with certain exceptions) on the basis of
the NAVs per share at the time of exchange. Class T and Z shares may be
exchanged for Class A shares of the other Colonial funds. The prospectus of each
Colonial fund describes its investment objective and policies, and shareholders
should obtain a prospectus and consider these objectives and policies carefully
before requesting an exchange. Shares of certain Colonial funds are not
available to residents of all states. Consult CISC before requesting an
exchange.
By calling CISC, shareholders or their FSF of record may exchange among accounts
with identical registrations, provided that the shares are held on deposit.
During periods of unusual market changes or 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 1-800-426-3750.
A loss to a shareholder may result from an unauthorized transaction reasonably
believed to have been authorized. No shareholder is obligated to use the
telephone to execute transactions.
You need to hold your Class A and Class T shares for five months before
exchanging to certain funds having a higher maximum sales charge. Consult your
FSF or CISC. In all cases, the shares to be exchanged must be registered on the
records of the fund in the name of the shareholder desiring to exchange.
Shareholders of the other Colonial open-end funds generally may exchange their
shares at NAV for the same class of shares of the fund.
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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 the protection of investors.
SHAREHOLDER LIABILITY
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the
Declaration disclaims shareholder liability for acts or obligations of the fund
and the Trust and requires that notice of such disclaimer be given in each
agreement, obligation, or instrument entered into or executed by the fund or the
Trust's Trustees. The Declaration provides for indemnification out of fund
property for all loss and expense of any shareholder held personally liable for
the obligations of the fund. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances (which are
considered remote) in which the fund would be unable to meet its obligations and
the disclaimer was inoperative.
The risk of a particular fund incurring financial loss on account of another
fund of the Trust is also believed to be remote, because it would be limited to
circumstances in which the disclaimer was inoperative and the other fund was
unable to meet its obligations.
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 shareholders'
meeting to consider removal of a Trustee, request information regarding the
Trust's shareholders, the Trust will provide appropriate materials (at the
expense of the requesting shareholders). Except as otherwise disclosed in the
Prospectus and this SAI, the Trustees shall continue to hold office and may
appoint their successors.
At any shareholders' meetings that may be held, shareholders of all series would
vote together, irrespective of series, on the election of Trustees or the
selection of independent accountants, but each series would vote separately from
the others on other matters, such as changes in the investment policies of that
series or the approval of the management agreement for that series.
PERFORMANCE MEASURES
Total Return
Standardized average annual total return. Average annual total return is the
actual return on a $1,000 investment in a particular class of shares of the
fund, made at the beginning of a stated period, adjusted for the maximum sales
charge or applicable CDSC for the class of shares of the fund and assuming that
all distributions were reinvested at NAV, converted to an average annual return
assuming annual compounding.
Nonstandardized total return. Nonstandardized total returns may differ from
standardized average annual total returns in that they may relate to
nonstandardized periods, represent aggregate rather than average annual total
returns or may not reflect the sales charge or CDSC.
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 of a fund 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 fund that were entitled to dividends
during 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
27
<PAGE>
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 of a fund is
calculated by annualizing the most current period's distributions and dividing
by the maximum offering price on the last day of the period. Generally, the
fund's distribution rate reflects total amounts actually paid to shareholders,
while yield reflects the current earning power of the fund's portfolio
securities (net of the fund's expenses). The fund's yield for any period may be
more or less than the amount actually distributed in respect of such period.
The fund may compare its performance to various unmanaged indices published by
such sources as are listed in Appendix II.
The 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 are based on past performance and do not predict future results.
28
<PAGE>
APPENDIX I
DESCRIPTION OF BOND RATINGS
STANDARD & POOR'S CORPORATION (S&P)
The following descriptions are applicable to municipal bond funds:
AAA bonds have the highest rating assigned by S&P. Capacity to pay interest and
repay principal is extremely strong.
AA bonds have a very strong capacity to pay interest and repay principal, and
they differ from AAA only in small degree.
A bonds have a strong capacity to pay interest and repay principal, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB bonds are regarded as having an adequate capacity to pay interest and repay
principal. Whereas they normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal than for bonds in the A
category.
BB, B, CCC, CC and C bonds are regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or large exposures to adverse conditions.
BB bonds have less near-term vulnerability to default than other speculative
issues. However, they face major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to inadequate
capacity to meet timely interest and principal payments. The BB rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied BBB- rating.
B bonds have a greater vulnerability to default but currently have the capacity
to meet interest payments and principal repayments. Adverse business, financial,
or economic conditions will likely impair capacity or willingness to pay
interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC bonds have a currently identifiable vulnerability to default, and are
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, the bonds are not likely to have
the capacity to pay interest and repay principal. The CCC rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC rating typically is applied to debt subordinated to senior debt that is
assigned an actual or implied CCC rating.
C rating typically is applied to debt subordinated to senior debt which assigned
an actual or implied CCC- debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt service payments
are continued.
CI rating is reserved for income bonds on which no interest is being paid.
D bonds are in payment default. The D rating category is used when interest
payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
Plus(+) or minus(-) ratings from AA to CCC may be modified by the addition of a
plus or minus sign to show relative standing within the major rating categories.
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<PAGE>
Provisional Ratings. The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, although addressing credit
quality subsequent to completion of the project, makes no comments on the
likelihood of, or the risk of default upon failure of, such completion. The
investor should exercise his own judgment with respect to such likelihood and
risk.
Municipal Notes:
SP-1. Notes rated SP-1 have very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety characteristics
are designated as SP-1+.
SP-2. Notes rated SP-2 have satisfactory capacity to pay principal and interest.
Notes due in three years or less normally receive a note rating. Notes maturing
beyond three years normally receive a bond rating, although the following
criteria are used in making that assessment:
Amortization schedule (the larger the final maturity relative to other
maturities, the more likely the issue will be rated as a note).
Source of payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be rated as a note).
Demand Feature of Variable Rate Demand Securities:
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a demand feature. The first rating addresses the likelihood of
repayment of principal and interest as due, and the second rating addresses only
the demand feature. The long-term debt rating symbols are used for bonds to
denote the long-term maturity, and the commercial paper rating symbols are
usually used to denote the put (demand) option (for example, AAA/A-1+).
Normally, demand notes receive note rating symbols combined with commercial
paper symbols (for example, SP-1+/A-1+).
Commercial Paper:
A. Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
the designations 1, 2, and 3 to indicate the relative degree to safety.
A-1. This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are designed A-1+.
Corporate Bonds:
The description of the applicable rating symbols and their meanings is
substantially the same as the Municipal Bond ratings set forth above.
The following descriptions are applicable to equity and taxable bond funds:
AAA bonds have the highest rating assigned by S&P. The obligor's capacity to
meet its financial commitment on the obligation is extremely strong.
AA bonds differ from the highest rated obligations only in small degree. The
obligor's capacity to meet its financial commitment on the obligation is very
strong.
A bonds are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher rated
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is still strong.
BBB bonds exhibit adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity of the obligor to meet its financial commitment on the obligation.
BB, B, CCC and CC bonds are regarded, as having significant speculative
characteristics. BB indicates the least degree of speculation and C the highest.
While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB bonds are less vulnerable to non-payment than other speculative issues.
However, they face major ongoing uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B bonds are more vulnerable to nonpayment than obligations rated BB, but the
obligor currently has the capacity to meet its financial commitment on the
obligation. Adverse business, financial, or economic conditions will likely
impair the obligor's capacity or willingness to meet its financial commitment on
the obligation.
30
<PAGE>
CCC bonds are currently vulnerable to nonpayment, and are dependent upon
favorable business, financial, and economic conditions for the obligor to meet
its financial commitment on the obligation. In the event of adverse business,
financial, or economic conditions, the obligor is not likely to have the
capacity to meet its financial commitment on the obligation.
CC bonds are currently highly vulnerable to nonpayment.
C ratings may be used to cover a situation where a bankruptcy petition has been
filed or similar action has been taken, but payments on the obligation are being
continued.
D bonds are in payment default. The D rating category is used when payments on
an obligation are not made on the date due even if the applicable grace period
has not expired, unless S&P believes that such payments will be made during such
grace period. The D rating also will be used upon the filing of a bankruptcy
petition or the taking of a similar action if payments on an obligation are
jeopardized.
Plus (+) or minus(-): The ratings from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
r This symbol is attached to the rating of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk, such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
MOODY'S INVESTORS SERVICES, INC. (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 protection may not be as large in
Aaa securities or fluctuation of protective elements may be of greater amplitude
or there may be other elements present which make the long-term risks 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 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 obligations, i.e., they are 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 bonds in
this class.
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. Such issues may be in default or there may be
present elements of danger with respect to principal or interest.
Ca bonds represent obligations which are speculative in a high degree. Such
issues are often in default or have other marked shortcomings.
C bonds are the lowest rated class of bonds and issues so rated 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,
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<PAGE>
(c) rentals which begin when facilities are completed, or (d) payments to which
some other limiting conditions attach. Parenthetical rating denotes probable
credit stature upon completion of construction or elimination of basis of
condition.
Note: Those bonds in the Aa, A, Baa, Ba, and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols Aa 1,
A 1, Baa 1, Ba 1, and B 1.
Municipal Notes:
MIG 1. This designation denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG 2. This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
MIG 3. This designation denotes favorable quality. All security elements are
accounted for, but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
Demand Feature of Variable Rate Demand Securities:
Moody's may assign a separate rating to the demand feature of a variable rate
demand security. Such a rating may include:
VMIG 1. This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
VMIG 2. This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
VMIG 3. This designation denotes favorable quality. All security elements are
accounted for, but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
Commercial Paper:
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment capacity of rated issuers:
Prime-1 Highest Quality
Prime-2 Higher Quality
Prime-3 High Quality
If an issuer represents to Moody's that its Commercial Paper obligations are
supported by the credit of another entity or entities, Moody's, in assigning
ratings to such issuers, evaluates the financial strength of the indicated
affiliated corporations, commercial banks, insurance companies, foreign
governments, or other entities, but only as one factor in the total rating
assessment.
Corporate Bonds:
The description of the applicable rating symbols (Aaa, Aa, A) and their meanings
is identical to that of the Municipal Bond ratings as set forth above, except
for the numerical modifiers. Moody's applies numerical modifiers 1, 2, and 3 in
the Aa and A classifications of its corporate bond rating system. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a midrange ranking; and the modifier 3
indicates that the issuer ranks in the lower end of its generic rating category.
FITCH INVESTORS SERVICES
Investment Grade Bond Ratings
AAA bonds are considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and/or
dividends and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA bonds are considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated `AAA'. Because bonds rated in the
`AAA' and `AA' categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated `F-1+'.
A bonds are considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than debt securities with higher ratings.
BBB bonds are considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest or dividends and repay principal
is considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse
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<PAGE>
impact on these securities and, therefore, impair timely payment. The likelihood
that the ratings of these bonds will fall below investment grade is higher than
for securities with higher ratings.
Conditional
A conditional rating is premised on the successful completion of a project or
the occurrence of a specific event.
Speculative-Grade Bond Ratings
BB bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified, which could assist the
obligor in satisfying its debt service requirements.
B bonds are considered highly speculative. While securities in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC bonds have certain identifiable characteristics that, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C bonds are in imminent default in payment of interest or principal.
DDD, DD, and D bonds are in default on interest and/or principal payments. Such
securities are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. `DDD'
represents the highest potential for recovery on these securities, and `D'
represents the lowest potential for recovery.
DUFF & PHELPS CREDIT RATING CO.
AAA - Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA - High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A+, A, A - Protection factors are average but adequate. However, risk factors
are more available and greater in periods of economic stress.
BBB+, BBB, BBB - Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
BB+, BB, BB - Below investment grade but deemed likely to meet obligations when
due. Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or down
frequently within this category.
B+, B, B - Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher or
lower rating grade.
CCC - Well below investment grade securities. Considerable uncertainty exists as
to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD - Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
33
<PAGE>
<TABLE>
<CAPTION>
APPENDIX II
1996
SOURCE CATEGORY RETURN (%)
<S> <C> <C>
Donoghue Tax-Free Funds 4.95
Donoghue U.S. Treasury Funds 4.71
Dow Jones & Company Industrial Index 28.91
Morgan Stanley Capital International EAFE Index 6.05
Morgan Stanley Capital International EAFE GDP Index 7.63
Libor Six-month Libor N/A
Lipper Short U.S. Government Funds 4.36
Lipper California Municipal Bond Funds 3.65
Lipper Connecticut Municipal Bond Funds 3.48
Lipper Closed End Bond Funds 8.13
Lipper Florida Municipal Bond Funds 3.00
Lipper General Bond Fund 6.16
Lipper General Municipal Bonds 3.30
Lipper Global Funds 16.51
Lipper Growth Funds 19.24
Lipper Growth & Income Funds 20.78
Lipper High Current Yield Bond Funds 13.67
Lipper High Yield Municipal Bond Debt 4.17
Lipper Fixed Income Funds 10.24
Lipper Insured Municipal Bond Average 2.83
Lipper Intermediate Muni Bonds 3.70
Lipper Intermediate (5-10) U.S. Government Funds 2.68
Lipper Massachusetts Municipal Bond Funds 3.39
Lipper Michigan Municipal Bond Funds 3.17
Lipper Mid Cap Funds 18.10
Lipper Minnesota Municipal Bond Funds 3.11
Lipper U.S. Government Money Market Funds 4.75
Lipper New York Municipal Bond Funds 3.15
Lipper North Carolina Municipal Bond Funds 2.78
Lipper Ohio Municipal Bond Funds 3.35
Lipper Small Company Growth Funds 20.20
Lipper U.S. Government Funds 1.72
Lipper Pacific Region Funds-Ex-Japan 11.11
Lipper Pacific Region (4.45)
Lipper International Funds 11.78
Lipper Balanced Funds 13.76
Lipper Tax-Exempt Money Market 2.93
Shearson Lehman Composite Government Index 2.77
Shearson Lehman Government/Corporate Index 2.90
Shearson Lehman Long-term Government Index (0.84)
S&P S&P 500 Index 22.95
S&P Utility Index 3.12
S&P Barra Growth 23.98
S&P Barra Value 21.99
S&P Midcap 400 19.20
First Boston High Yield Index 12.40
Swiss Bank 10 Year U.S. Government (Corporate Bond) 0.30
Swiss Bank 10 Year United Kingdom (Corporate Bond) 19.10
Swiss Bank 10 Year France (Corporate Bond) 7.80
Swiss Bank 10 Year Germany (Corporate Bond) 1.00
Swiss Bank 10 Year Japan (Corporate Bond) (3.40)
Swiss Bank 10 Year Canada (Corporate Bond) 10.5
Swiss Bank 10 Year Australia (Corporate Bond) 20.6
Morgan Stanley Capital International 10 Year Hong Kong (Equity) 21.87
Morgan Stanley Capital International 10 Year Belgium (Equity) 15.16
SOURCE CATEGORY RETURN (%)
Morgan Stanley Capital International 10 Year Austria (Equity) 7.65
Morgan Stanley Capital International 10 Year France (Equity) 10.35
Morgan Stanley Capital International 10 Year Netherlands (Equity) 16.90
Morgan Stanley Capital International 10 Year Japan (Equity) 3.39
Morgan Stanley Capital International 10 Year Switzerland (Equity) 13.14
Morgan Stanley Capital International 10 Year United Kingdom (Equity) 15.06
Morgan Stanley Capital International 10 Year Germany (Equity) 8.16
Morgan Stanley Capital International 10 Year Italy (Equity) 0.53
Morgan Stanley Capital International 10 Year Sweden (Equity) 16.42
Morgan Stanley Capital International 10 Year United States (Equity) 14.39
Morgan Stanley Capital International 10 Year Australia (Equity) 11.44
Morgan Stanley Capital International 10 Year Norway (Equity) 13.23
Morgan Stanley Capital International 10 Year Spain (Equity) 11.55
Morgan Stanley Capital International World GDP Index 11.50
Morgan Stanley Capital International Pacific Region Funds Ex-Japan 20.54
Bureau of Labor Statistics Consumer Price Index (Inflation) 3.32
FHLB-San Francisco 11th District Cost-of-Funds Index N/A
Federal Reserve Six-Month Treasury Bill N/A
Federal Reserve One-Year Constant-Maturity Treasury Rate N/A
Federal Reserve Five-Year Constant-Maturity Treasury Rate N/A
Frank Russell & Co. Russell 2000 16.50
Frank Russell & Co. Russell 1000 Value 21.64
Frank Russell & Co. Russell 1000 Growth 11.26
Bloomberg NA NA
Credit Lyonnais NA NA
Statistical Abstract of the U.S. NA NA
World Economic Outlook NA NA
*in U.S. currency
</TABLE>
34
COLONIAL TRUST VI
Cross Reference Sheet
(Colonial Small Cap Value Fund, formerly 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; Shareholder
Liability
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
<PAGE>
COLONIAL SMALL CAP VALUE FUND
Statement of Additional Information
October 27, 1997
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 Cap Value 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 27 1997. The SAI should be read together with a Prospectus and the
Fund's most recent annual report dated June 30, 1997. Investors may obtain a
free copy of a Prospectus and the annual report from Liberty Financial
Investments, 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
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 Liability
Shareholder Meetings
Performance Measures
Appendix I
Appendix II
SC-16/330E-1097
<PAGE>
PART 1
COLONIAL SMALL CAP VALUE FUND
Statement of Additional Information
October 27, 1997
DEFINITIONS
"Trust" Colonial Trust VI
"Fund" Colonial Small Cap Value Fund
"Adviser" Colonial Management Associates, Inc., the Fund's
investment adviser
"LFII" Liberty Financial Investments, 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. Part 1 of this SAI includes additional information concerning, among
other things, the fundamental investment policies of the Fund. Part 2 contains
additional information about the following securities and investment techniques
that are described or referred to in the Prospectuses:
Small Companies
Short-Term Debt Instruments
Repurchase Agreements
Futures Contracts and Related Options
Except as indicated below under "Fundamental Investment Policies," the Fund's
investment policies are not fundamental, and the Trustees may change the
policies without shareholder approval. Effective February 28, 1997, the Fund
changed its name from "Colonial Small Stock Fund" to its current name.
FUNDAMENTAL INVESTMENT POLICIES
The Investment Company Act of 1940 (Act) provides that a "vote of a majority of
the outstanding voting securities" means the affirmative vote of the lesser of
(1) more than 50% of the outstanding shares of the Fund, or (2) 67% or more of
the shares present at a meeting if more than 50% of the outstanding shares are
represented at the meeting in person or by proxy. The following fundamental
investment policies can not be changed without such a vote.
The Fund may:
1. Issue senior securities only through borrowing money from banks for
temporary or emergency purposes up to 10% of its net assets; however, it
will not purchase additional portfolio securities while borrowings exceed
5% of net assets;
2. Only own real estate acquired as the result of owning securities and not
more than 5% of total assets;
3. Purchase and sell futures contracts and related options so long as the
total initial margin and premiums on the contracts does not exceed 5% of
its total assets;
4. Underwrite securities issued by others only when disposing of portfolio
securities;
5. Make loans through lending of securities not exceeding 30% of total assets,
through the purchase of debt instruments or similar evidences of
indebtedness typically sold privately to financial institutions and through
repurchase agreements; and
6. Not concentrate more than 25% of its total assets in any one industry or
with respect to 75% of total assets purchase any security (other than
obligations of the U.S. government and cash items including receivables) if
as a result more than 5% of its total assets would then be invested in
securities of a single issuer, or purchase voting securities of an issuer
if, as a result of purchase, the Fund would own more than 10% of the
outstanding voting shares of such issuer.
OTHER INVESTMENT POLICIES
As non-fundamental investment policies which may be changed without a
shareholder vote, the Fund may not:
1. Purchase securities on margin, but it may receive short-term credit to
clear securities transactions and may make initial or maintenance margin
deposits in connection with futures transactions;
2. Have a short securities position, unless the Fund owns, or owns rights
(exercisable without payment) to acquire, an equal amount of such
securities;
3. Purchase or sell commodity contracts if the total initial margin and
premiums on the contracts would exceed 5% of its total assets; and
4. Invest more than 15% of its net assets in illiquid assets.
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.
FUND CHARGES AND EXPENSES
Under the Fund's management agreement, the Fund pays the Adviser a monthly fee
based on the average daily net assets of the Fund, at the annual rate of 0.80%
(subject to any voluntary reductions the Adviser may agree to periodically).
Recent Fees paid to the Adviser, LFII and CISC (dollars in thousands)
Year ended June 30
1997 1996 1995
---- ---- ----
Management fee $1,428 $734 $279
Bookkeeping fee 93 52 28
Shareholder service and transfer
agent fee 785 409 154
12b-1 fees:
Service fee (Classes A,B,C) 589 300 118
Distribution fee (Class B) 957 436 128
Distribution fee (Class C*) 35 3 N/A
* Class C shares were initially offered on January 15, 1996.
Brokerage Commissions (dollars in thousands)
1997 1996 1995
---- ---- ----
Total commissions $414 $192 $ 94
Directed transactions** $51,077 --- $6,217
Commissions on directed transactions $104 --- $ 17
** See "Management of the Colonial Funds-Portfolio Transactions-Brokerage and
Research Services" in Part 2 of this SAI.
<PAGE>
Trustees and Trustees Fees
For the fiscal year ended June 30, 1997, and the calendar year ended December
31, 1996, the Trustees received the following compensation for serving as
Trustees:
<TABLE>
<CAPTION>
Total Compensation From Trust And Fund Complex Paid
Aggregate Compensation To The Trustees For The
Trustee From Fund For Fiscal Year Calendar Year Ended December 31, 1996 (c)
------- ------------------------- -----------------------------------------
<S> <C> <C>
Robert J. Birnbaum $1,552 $ 92,000
Tom Bleasdale 1,768(b) 104,500(d)
Lora S. Collins 1,554 92,000
James E. Grinnell 1,551(e) 93,000
William D. Ireland, Jr. 1,733 109,000
Richard W. Lowry 1,583 95,000
William E. Mayer 1,552 91,000
James L. Moody, Jr. 1,766(f) 106,500(g)
John J. Neuhauser 1,599 94,500
George L. Shinn 1,646 105,500
Robert L. Sullivan 1,682 102,000
Sinclair Weeks, Jr. 1,736 110,000
</TABLE>
(a) The Fund does not currently provide pension or retirement plan benefits to
the Trustees.
(b) Includes $899 payable in later years as deferred compensation.
(c) At December 31, 1996, the Colonial Funds Complex consisted of 38 open-end
and 5 closed-end management investment company portfolios.
(d) Includes $49,000 payable in later years as deferred compensation.
(e) Includes $40 payable in later years as deferred compensation.
(f) Total compensation of $1,766 for the fiscal year ended June 30, 1997 will
be payable in later years as deferred compensation.
(g) Total compensation of $106,500 for the calendar year ended December 31,
1996, will be 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 or Directors of the
Liberty All-Star Equity Fund and of the Liberty All-Star Growth Fund, Inc.
(formerly known as The Charles Allmon Trust, Inc.) (together, Liberty Funds) for
service during the calendar year ended December 31, 1996:
Total Compensation
From Liberty Funds For
The Calendar Year Ended
Trustee December 31, 1996(h)
- ------- --------------------
Robert J. Birnbaum $25,000
James E. Grinnell 25,000
Richard W. Lowry 25,000
(h) The Liberty Funds are advised by Liberty Asset Management Company (LAMCO).
LAMCO is an indirect wholly-owned subsidiary of Liberty Financial
Companies, Inc. (an intermediate parent of the Adviser).
Ownership of the Fund
The following information is as of September 30, 1997:
The officers and Trustees as a group beneficially owned less than 1% of the
Class A, Class B and Class C shares of the Fund. The Colonial Group, Inc. Profit
Sharing Plan, of which certain officers of the Adviser serve as Trustees, held
153,011 Class Z shares or 99.85% of such Class.
Merrill Lynch Pierce Fenner & Smith For the Sole Benefit of its Customers, Attn.
Fund Administration, 4800 Deer Lake Drive East, Jacksonville, FL 32216, owned of
record 2,411,152 Class A shares or 33.71% of such Class, 1,289,468 Class B
shares or 17.31% of such Class, and 157,953 Class C shares or 33.97% of such
Class.
There were 13,533 Class A, 31,198 Class B, 1,000 Class C and 4 Class Z
shareholders of record of the Fund.
Sales Charges (dollars in thousands) Class A Shares
Year ended June 30
1997 1996 1995
---- ---- ----
Aggregate charges on Fund share sales $888 $755 $169
Sales charges retained by LFII $120 $110 $23
Class B Shares
Year ended June 30
1997 1996 1995
---- ---- ----
Aggregate contingent deferred sales
charges (CDSC) on Fund redemptions
retained by LFII $310 $138 $78
Class C Shares
January 15, 1996
Year ended (Class C shares initially offered)
June 30, 1997 through June 30, 1996
------------- ----------------------
Aggregate (CDSCs) on Fund
redemptions retained by
LFII $10 $ (rounds to less than 1)
12b-1 Plan, CDSC and Conversion of Shares
The Fund offers four classes of shares - Class A, Class B, Class C and Class Z.
The Fund may in the future offer other classes of shares. The Trustees have
approved a 12b-1 plan (Plan) pursuant to Rule 12b-1 under the Act for each of
Classes A, B and C. Under the Plan, the Fund pays LFII monthly a service fee at
an annual rate of 0.25% of the net assets attributed to Classes A, B and C. The
Fund also pays LFII monthly a distribution fee at an annual rate of 0.75% of the
average daily net assets attributed to Classes B and C. LFII 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 LFII's
expenses, LFII may realize a profit from the fees.
The Plan authorizes any other payments by the Fund to LFII and its affiliates
(including the Adviser) to the extent that such payments might be construed to
be indirectly financing the distribution of Fund shares.
The Trustees believe the Plan 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 Plan 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 Plan or in any
agreements related to the Plan (Independent Trustees), cast in person at a
meeting called for the purpose of voting on the Plan. The Plan 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 Plan must be approved by the Trustees in the manner
provided in the foregoing sentence. The Plan 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 Plan will only be effective if the selection and nomination of the
Trustees who are not interested persons of the Trust is effected by such
disinterested 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 C shares are offered at
net asset value and are subject to 1.00% CDSC on redemptions within one year
after purchase. Class Z shares are offered at net asset value and are not
subject to a CDSC. The CDSCs are described in the Prospectus.
No CDSC will be imposed on shares derived from reinvestment of distributions or
amounts representing capital appreciation. In determining the applicability and
rate of any CDSC, it will be assumed that a redemption is made first of shares
representing capital appreciation, next of shares representing reinvestment of
distributions and finally of other shares held by the shareholder for the
longest period of time.
Eight years after the end of the month in which a Class B share is purchased,
such share and a pro rata portion of any shares issued on the reinvestment of
distributions will be automatically converted into Class A shares having an
equal value which are not subject to the CDSC.
Sales-related expenses for the fiscal year ended June 30, 1997, (dollars in
thousands) of LFII relating to the Fund were as follows:
Class A Shares Class B Shares Class C Shares
-------------- -------------- --------------
Fees to FSFs $252 $2,524 $55
Cost of sales material
relating to the Fund
(including printing and
mailing expenses) $203 $ 379 $36
Allocated travel,
entertainment and other
promotional expenses
(including advertising) $143 $ 262 $26
INVESTMENT PERFORMANCE
The Fund's Classes A, B, C and Z yields for the month ended June 30, 1997 were
- -0.24%, -0.98% -0.26% and -0.26%, respectively.
The Fund's Class A average annual total returns at June 30, 1997 were as
follows:
1 year 5 years 10 Years
------ ------- --------
With sales charge of 5.75% 12.67% 20.58% 9.47%
Without sales charge 19.54% 22.01% 10.12%
Returns for 5 and 10 years were achieved in part under different objectives and
policies in effect before November 2, 1992, also the date when the Fund changed
its name from "Colonial Small Stock Index Trust".
The Fund's Class B average annual total returns at June 30, 1997 were as
follows:
November 9, 1992
(Class B shares initially
offered)
1 Year through June 30, 1997
------ ---------------------
With applicable CDSC 13.63%(5.00% CDSC) 21.37%(2.00% CDSC)
Without CDSC 18.63% 21.58%
The Fund's Class C total returns at June 30, 1997 were as follows:
January 15, 1996
(Class C shares initially offered)
1 Year through June 30, 1997
------ ---------------------
With applicable CDSC 17.64%(1.00% CDSC) 25.23%
Without CDSC 18.64% 25.23%
<PAGE>
The Fund's Class Z total return at June 30, 1997 was as follows:
July 31, 1995
Class C shares initially offered
1 Year through June 30, 1997
------ ---------------------
19.87% 16.94%
The Fund's Classes A, B, C and Z distribution rates at June 30, 1997, based on
the last twelve months' distributions, were 0.00% for each Class, respectively.
See "Performance Measures" in Part 2 of this SAI for how calculations are made.
CUSTODIAN
Boston Safe Deposit and Trust Company is the Fund's custodian. Effective in late
November, 1997, the Fund's Custodian will be The Chase Manhattan Bank. 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 Securities and Exchange Commission filings. The
financial statements incorporated by reference in this SAI have been so
incorporated, and the financial highlights included in the Prospectuses have
been so included, in reliance upon the report of Price Waterhouse LLP given on
the authority of said firm as experts in accounting and auditing.
The financial statements and Report of Independent Accountants appearing in the
June 30, 1997 Annual Report are incorporated in this SAI by reference.
COLONIAL TRUST VI
Cross Reference Sheet (Colonial International Equity 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; Shareholder
Liability
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
<PAGE>
COLONIAL INTERNATIONAL EQUITY FUND
Statement of Additional Information
October 27, 1997
This Statement of Additional Information (SAI) contains information which may be
useful to investors but which is not included in the Prospectus of Colonial
International Equity Fund (Fund). This SAI is not a prospectus and is authorized
for distribution only when accompanied or preceded by the Prospectus of the Fund
dated October 27, 1997. This SAI should be read together with the Prospectus and
the Fund's most recent Annual Report dated June 30, 1997. Investors may obtain a
free copy of the Prospectus and Annual Report from Liberty Financial
Investments, 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
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 Liability
Shareholder Meetings
Performance Measures
Appendix I
Appendix II
IE-16/396E-10/97
<PAGE>
COLONIAL INTERNATIONAL EQUITY FUND
Statement of Additional Information
October 27, 1997
DEFINITIONS
"Fund" Colonial International Equity Fund
"Trust" Colonial Trust VI
"Adviser" Colonial Management Associates, Inc., the Fund's investment adviser
"LFII" Liberty Financial Investments, Inc., the Fund's distributor
"CISC" Colonial Investors Service Center, Inc., the Fund's shareholder
services and transfer agent
INVESTMENT OBJECTIVES AND POLICIES
The Fund's Prospectus describes its investment objective and investment
policies. Part 1 of this SAI includes additional information concerning, among
other things, the fundamental investment policies of the Fund. Part 2 contains
additional information about the following securities and investment techniques
that are described or referred to in the Prospectus:
Small Companies
Foreign Securities
Money Market Instruments
Repurchase Agreements
Futures Contracts and Related Options
Foreign Currency Transactions
Except as indicated 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.
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's
diversification requirement, an issuer is the entity whose revenues support the
security.
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 (other than
short-term 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 do 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 the voting securities of an
issuer if, as a result of such purchases, the Fund would own more than 10%
of the outstanding voting shares of such issuer.
OTHER INVESTMENT POLICIES
As non-fundamental investment policies which may be changed without a
shareholder vote, the Fund may not:
1. Purchase securities on margin, but it may receive short-term credit to
clear securities transactions and may make initial or maintenance margin
deposits in connection with futures transactions;
2. Have a short securities position, unless the Fund owns, or owns rights
(exercisable without payment) to acquire, an equal amount of such
securities; and
3. Invest more than 15% of its net assets in illiquid assets.
b
<PAGE>
FUND CHARGES AND EXPENSES
Under the Fund's management agreement, the Fund pays the Adviser a monthly fee
based on the average daily net assets of the Fund at the annual rate of 0.95%
subject to any voluntary reduction that the Adviser may agree to from time to
time.
Recent Fees paid to the Adviser, LFII and CISC (dollars in thousands) (before
voluntary reductions)
Period March 31, 1996
Year ended (effective date of registration)
June 30,1997 through June 30, 1996
Management fee $149 $36
Bookkeeping fee 27 7
Shareholder service and transfe
agent fee 40 10
12b-1 fees:
Service fee 39 10
Distribution Fee (Class B) 2 (a)
Distribution Fee (Class C) 2 (a)
(a) Rounds to less than one.
Brokerage Commissions (dollars in thousands)
Period March 31, 1996
Year ended (effective date of registration)
June 30, 1997 through June 30, 1996
Total commissions $24 $26
Directed transactions (b) 0 0
Commissions on directed
transactions 0 0
(b) See "Management of the Colonial Funds - Portfolio Transactions - Brokerage
and research services" in Part 2 of this SAI.
c
<PAGE>
Trustees Fees
For the fiscal year ended June 30, 1997, and the calendar year ended December
31, 1996, the Trustees received the following compensation for serving as
Trustees(d):
<TABLE>
<CAPTION>
Total Compensation From Trust and
Aggregate Compensation From Fund Complex Paid To The Trustees
Fund For The Fiscal Year For The Calendar Year Ended
Trustee Ended June 30, 1997 December 31, 1996 (e)
<S> <C> <C>
Robert J. Birnbaum $514 $ 92,000
Tom Bleasdale 582(f) 104,500 (g)
Lora S. Collins 514 92,000
James E. Grinnell 531(h) 93,000
William D. Ireland, Jr. 572 109,000
Richard W. Lowry 521 95,000
William E. Mayer 514 91,000
James L. Moody, Jr. 579(i) 106,500 (j)
John J. Neuhauser 527 94,500
George L. Shinn 549 105,500
Robert L. Sullivan 552 102,000
Sinclair Weeks, Jr. 572 110,000
</TABLE>
(d) The Fund does not currently provide pension or retirement plan
benefits to the Trustees.
(e) At December 31, 1996, the Colonial Funds complex consisted of 38
open-end and 5 closed-end management investment company portfolios.
(f) Includes $292 payable in later years as deferred compensation.
(g) Includes $51,500 payable in later years as deferred compensation.
(h) Includes $17 payable in later years as deferred compensation.
(i) Includes $579 payable in later years as deferred compensation.
(j) Total compensation of $106,500 for the calendar year ended December
31, 1996 will be 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 or Directors of the
Liberty All-Star Equity Fund and of the Liberty All-Star Growth Fund, Inc.
(formerly known as The Charles Allmon Trust, Inc.) (together, Liberty Funds) for
service during the calendar year ended December 31, 1996:
Total Compensation
From Liberty Funds For The
Calendar Year Ended
Trustee December 31, 1996(k)
Robert J. Birnbaum $25,000
James E. Grinnell 25,000
Richard W. Lowry 25,000
(k) The Liberty Funds are advised by Liberty Asset Management Company
(LAMCO). LAMCO is an indirect wholly-owned subsidiary of Liberty
Financial Companies, Inc. (an intermediate parent of the Adviser).
d
<PAGE>
Ownership of the Fund
At October 27, 1997, the Adviser owned 100% of each Class of shares of the Fund
and, therefore, may be deemed to "control" the Fund.
Sales Charges (dollars in thousands)
<TABLE>
<CAPTION>
Class A Shares
Period March 31, 1996
Year Ended (effective date of registration)
June 30, 1997 through June 30, 1996
<S> <C> <C>
Aggregate initial sales charges on Fund share sales $0 $0
Initial sales charges retained by LFII 0 0
Class B Shares
Period March 31, 1996
Year Ended (effective date of registration)
June 30, 1997 through June 30, 1996
Aggregate contingent deferred sales charges (CDSC)
on Fund redemptions retained by LFII $0 $0
Class C Shares
Period March 31, 1996
Year Ended (effective date of registration)
June 30, 1997 through June 30, 1996
Aggregate CDSC on Fund redemptions retained by LFII $0 $0
</TABLE>
12b-1 Plan, CDSC and Conversion of Shares
The Fund offers three classes of shares - Class A, Class B and Class C. The Fund
may in the future offer other classes of shares. The Trustees have approved a
12b-1 Plan (Plan) pursuant to Rule 12b-1 under the Act. Under the Plan, the Fund
pays LFII monthly a service fee at an annual rate of 0.25% of the net assets
attributed to each Class of shares. The Fund also pays LFII monthly a
distribution fee at an annual rate of 0.75% of average daily net assets
attributed to Class B and Class C shares . LFII 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 LFII's expenses, LFII may
realize a profit from the fees.
The Plan authorizes any other payments by the Fund to LFII and its affiliates
(including 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 Plan 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 Plan will continue in effect from year to year so long as
continuance is specifically approved at least annually by a vote of the
Trustees, including the Trustees who are not interested persons of the Trust and
have no direct or indirect financial interest in the operation of the Plan or in
any agreements related to the Plan (Independent Trustees), cast in person at a
meeting called for the purpose of voting on the Plan. The Plan 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 Plan must be approved by the Trustees in the manner
provided in the foregoing sentence. The Plan 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 Plan will only be effective if the selection and nomination of the
Trustees of the Trust who are not interested persons of the Trust is effected by
such disinterested 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 and are
subject to a CDSC if redeemed within six years after purchase. Class C shares
are offered at net asset value and are subject to a 1.00% CDSC on redemptions
within one year after purchase. The CDSCs are described in the Prospectus.
e
<PAGE>
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 (dollars in thousands) of LFII relating to the Fund were:
<TABLE>
<CAPTION>
Year ended June 30, 1997
Class A Shares Class B Shares Class C Shares
<S> <C> <C> <C>
Fees to FSFs $0 $0 $0
Cost of sales material relating to the Fund
(including printing and mailing expenses) 0 0 0
Allocated travel, entertainment and other
promotional expenses (including advertising) 0 0 0
</TABLE>
INVESTMENT PERFORMANCE
The Fund's yields for the month ended June 30, 1997 were:
Yield Adjusted Yield
Class A: 1.03% 0.53%
Class B: 0.36% (0.18)%
Class C: 0.36% (0.17)%
The Fund's average annual total returns at June 30, 1997 were:
Class A Shares
Period March 31, 1996
(effective date of registration)
1 Year through June 30, 1997
With sales charge of 5.75% 8.58% 12.62%
Without sales charge 15.20% 19.50%
Class B Shares
Period March 31, 1996
(effective date of registration)
1 Year through June 30, 1997
With applicable CDSC 9.34%(5.00% CDSC) 14.37%(4.00% CDSC)
Without CDSC 14.34% 18.37%
Class C Shares
Period March 31, 1996
(effective date of registration)
1 Year through June 30, 1997
---------------------
With applicable CDSC 13.34% (1.00% CDSC) 18.37%
Without CDSC 14.34% 18.37%
f
<PAGE>
The Fund's Class A, Class B and Class C distribution rates at June 30, 1997,
based on the most recent twelve months' distributions, and the maximum offering
price at the end of the twelve month period, were 0.44%, 0% and 0%,
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. Effective in
early December 1997, the Fund's custodian is The Chase Manhattan Bank. 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 Securities and Exchange Commission filings. The
financial statements incorporated by reference in this SAI have been so
incorporated and the financial highlights included in the Prospectus have been
so included, in reliance upon the report of Price Waterhouse LLP given on the
authority of said firm as experts in accounting and auditing.
The financial statements and Report of Independent Accountants appearing in the
June 30, 1997 Annual Report of the Fund are incorporated in this SAI by
reference.
g
COLONIAL TRUST VI
Cross Reference Sheet (Colonial Equity Income 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; Shareholder
Liability
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
<PAGE>
COLONIAL EQUITY INCOME FUND
Statement of Additional Information
October 27, 1997
This Statement of Additional Information (SAI) contains
information which may be useful to investors but which is not
included in the Prospectus of Colonial Equity Income Fund (Fund).
This SAI is not a prospectus and is authorized for distribution
only when accompanied or preceded by the Prospectus of the Fund
dated October 27, 1997. This SAI should be read together with
the Prospectus and the Fund's most recent Annual Report dated
June 30, 1997. Investors may obtain a free copy of the
Prospectus and Annual Report from Liberty Financial Investments,
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 Liability
Shareholder Meetings
Performance Measures
Appendix I
Appendix II
COLONIAL EQUITY INCOME FUND
Statement of Additional Information
October 27, 1997
DEFINITIONS
"Trust" Colonial Trust VI
"Fund" Colonial Equity Income Fund
"Adviser" Colonial Management Associates, Inc., the Fund's
investment adviser
"LFII" Liberty Financial Investments, 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 Prospectus describes its investment objective and
investment policies. Part 1 of this SAI includes additional
information concerning, among other things, the fundamental
investment policies of the Fund. Part 2 contains additional
information about the following securities and investment
techniques that are described or referred to in the Prospectus:
Foreign Securities
Money Market Instruments
Forward Commitments
Repurchase Agreements
Futures Contracts and Related Options
Foreign Currency Transactions
Except as indicated 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.
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, an issuer is the entity whose
revenues support the security.
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 (other than short-term 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 do 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 the voting
securities of an issuer if, as a result of such purchases,
the Fund would own more than 10% of the outstanding voting
shares of such issuer.
OTHER INVESTMENT POLICIES
As non-fundamental investment policies which may be changed
without a shareholder vote, the Fund may not:
1. Purchase securities on margin, but it may receive short-term
credit to clear securities transactions and may make initial
or maintenance margin deposits in connection with futures
transactions;
2. Have a short securities position, unless the Fund owns, or
owns rights (exercisable without payment) to acquire, an
equal amount of such securities; and
3. Invest more than 15% of its net assets in illiquid assets.
4. Purchase or sell real estate (including limited partnership
interests) although it may purchase and sell (a) securities
which are secured by real estate and (b) securities of
companies which invest or deal in real estate; provided,
however, that nothing in this restriction shall limit the
Fund's ability to acquire or take possession of or sell real
estate which it has obtained as a result of enforcement of
its rights and remedies in connection with securities it is
otherwise permitted to acquire; and
5. Invest in warrants if, immediately after giving effect to
any such investment, the Fund's aggregate investment in
warrants, valued at the lower of cost or market, would
exceed 5% of the value of the Fund's net assets. Included
within that amount, but not to exceed 2% of the value of the
Fund's net assets, may be warrants which are not listed on
the New York Stock Exchange or the American Stock Exchange.
Warrants acquired by the Fund in units or attached to
securities will be deemed to be without value.
PORTFOLIO TURNOVER
Portfolio turnover for the last two fiscal years is included in
the Prospectus under "The Funds' Financial History." High
portfolio turnover may cause a Fund to realize capital gains
which, if realized and distributed by that Fund, may be taxable
to shareholders as ordinary income. High portfolio turnover in a
Fund's portfolio may result in correspondingly greater brokerage
commissions and other transaction costs, which would be borne
directly by that Fund.
FUND CHARGES AND EXPENSES
Under the Fund's management agreement, the Fund pays the Adviser
a monthly fee based on the average daily net assets of the Fund
at the annual rate of 0.80%, subject to any voluntary reduction
that the Adviser may agree to from time to time.
Recent Fees paid to the Adviser, LFII and CISC (dollars in
thousands) (before voluntary reductions)(a)
Period March 31, 1996
(effective date
Year ended of registration)
June 30, 1997 through June 30, 1996
-------------- ---------------------
Management fee $27 $6
Bookkeeping fee 27 7
Shareholder service
and transfer agent fee 8 2
12b-1 fees:
Service fee (Classes A,
B and C) 8 2
Distribution fee (Class B) 2 1
Distribution fee (Class C) 2 1
(a) The Fund commenced investment operations on March 25, 1996.
The activity shown is from the effective date of
registration (March 31, 1996) with the Securities and
Exchange Commission.
Brokerage Commissions (dollars in thousands)
Period March 31, 1996
(effective date
Year ended of registration)
June 30, 1997 through June 30, 1996
------------- ---------------------
Total commissions $ 6 $ 2
Directed
transactions(b) 332 0
Commissions on
directed transactions (c) 0
(b) See "Management of the Colonial Funds - Portfolio
Transactions - Brokerage and research services" in Part 2 of this
SAI.
(c) Rounds to less than one.
Trustees Fees
For the period ended June 30, 1997 and the calendar year ended
December 31, 1996, the Trustees received the following
compensation for serving as Trustees (d):
Aggregate Total Compensation
Compensation From From Trust And Fund Complex
Fund For The Fiscal Paid To The Trustees For The
Year Ended Calendar Year Ended
Trustee June 30, 1997 December 31, 1996(e)
- ---------- ------------------- -----------------------------
Robert J. Birnbaum $484 $ 92,000
Tom Bleasdale 547(f) 104,500(g)
Lora S. Collins 484 92,000
James E. Grinnell 484(h) 93,000
William D. Ireland, Jr. 538 109,000
Richard W. Lowry 491 95,000
William E. Mayer 484 91,000
James L. Moody, Jr. 545(i) 106,500(j)
John J. Neuhauser 496 94,500
George L. Shinn 517 105,500
Robert L. Sullivan 520 102,000
Sinclair Weeks, Jr. 538 110,000
(d) The Fund does not currently provide pension or retirement plan benefits
to the Trustees.
(e) At December 31, 1996, the Colonial Funds complex consisted of 38 open-end
and 5 closed-end management investment company portfolios.
(f) Includes $274 payable in later years as deferred compensation.
(g) Includes $51,500 payable in later years as deferred compensation.
(h) Includes $16 payable in later years as deferred compensation.
(i) Total compensation of $545 for the fiscal year ended June 30, 1997 will
be payable in later years as deferred compensation.
(j) Total compensation of $106,500 for the calendar year ended December 31,
1996 will be 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 or Directors of the Liberty All-Star Equity Fund and of
the Liberty All-Star Growth Fund, Inc. (formerly known as The
Charles Allmon Trust, Inc.) (together, Liberty Funds) for service
during the calendar year ended December 31, 1996:
Total Compensation
From Liberty
Funds For The
Calendar Year
Trustee Ended December 31, 1996 (k)
- ----------- ----------------------------
Robert J. Birnbaum $ 25,000
James E. Grinnell 25,000
Richard W. Lowry 25,000
(k) The Liberty Funds are advised by Liberty Asset
Management Company (LAMCO). LAMCO is an indirect
wholly-owned subsidiary of Liberty Financial Companies,
Inc. (an intermediate parent of the Adviser).
Ownership of the Fund
As of the date of this SAI, Keyport Life Insurance Company
(Keyport), a Rhode Island corporation, owned 100% of the
outstanding shares of each Class of the Fund and, therefore, may
be deemed to "control" the Fund. Keyport is located at 125 High
Street, Boston, MA 02110-2712.
Sales Charge (dollars in thousands)
Class A Shares
Period
March 31, 1996
(effective date of
Year ended registration) through
June 30, 1997 June 30, 1996
-------------- ---------------------
Aggregate initial sales charges on
Fund share sales $0 $0
Initial sales charges retained
by LFII 0 0
Class B Shares
Period
March 31, 1996
(effective date of
Year ended registration) through
June 30, 1997 June 30, 1996
-------------- ---------------------
Aggregate contingent
deferred sales
charge (CDSC)
on Fund redemptions $0 $0
Class C Shares
Period
March 31, 1996
(effective date of
Year ended registration) through
June 30, 1997 June 30, 1996
-------------- ---------------------
Aggregate contingent
deferred sales
charge (CDSC)
on Fund redemptions $0 $0
12b-1 Plan, CDSC and Conversion of Shares
The Fund offers three classes of shares - Class A, Class B and
Class C. The Fund may in the future offer other classes of
shares. The Trustees have approved a 12b-1 Plan (Plan) pursuant
to Rule 12b-1 under the Act. Under the Plan, the Fund pays LFII
monthly a service fee at an annual rate of 0.25% of the Fund's
net assets attributed to each Class of shares. The Fund also
pays LFII monthly a distribution fee at an annual rate of 0.75%
of the average daily net assets attributed to Class B and Class C
shares. LFII may use the entire amount of such fees to defray
the cost 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 LFII's expenses, LFII may realize a profit from the
fees.
The Plan authorizes any other payments by the Fund to LFII and
its affiliates (including 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 Plan 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 Plan
will continue in effect from year to year so long as continuance
is specifically approved at least annually by a vote of the
Trustees, including the Trustees who are not interested persons
of the Trust and have no direct or indirect financial interest in
the operation of the Plan or in any agreements related to the
Plan (Independent Trustees), cast in person at a meeting called
for the purpose of voting on the Plan. The Plan 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 Plan
must be approved by the Trustees in the manner provided in the
foregoing sentence. The Plan 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 Plan will only be
effective if the selection and nomination of the Trustees of the
Trust who are not interested persons of the Trust is effected by
such disinterested 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 and are
subject to a CDSC if redeemed within six years after purchase.
Class C shares are offered at net asset value and are subject to
a 1.00% 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 (dollars in thousands) of LFII relating to
the Fund were:
Year ended June 30, 1997
------------------------
Class A Class B Class C
Shares Shares Shares
-------- ------- -------
Fees to FSFs $2 $0(l) $0(l)
Cost of sales material
relating to the Fund
(including printing and
mailing expenses) 0(l) 0 0
Allocated travel,
entertainment and other
promotional expenses
(including advertising) 0(l) 0 0
(l) Rounds to more than one.
INVESTMENT PERFORMANCE
The Fund's Class A, Class B and Class C yields were:
Month ended June 30, 1997
-------------------------
Class A Shares Class B Shares Class C Shares
--------------- --------------- ---------------
Adjusted Adjusted Adjusted
Yield Yield Yield Yield Yield Yield
----- -------- ------ -------- ------ ---------
0.54% (7.55)% (0.17)% (8.73)% (0.16)% (8.63)%
The Fund's average annual total returns were:
Class A Shares
Period March 31,1996
Year Ended (effective date of
June 30, 1997 registration) through
1 year June 30, 1997
------------- ---------------------
With sales charge
of 5.75% 18.03% 17.30%
Without sales
charge 25.23% 23.00%
Class B Shares
Period March 31,1996
Year Ended (effective date of
June 30, 1997 registration) through
1 year June 30, 1997
------------- ---------------------
With CDSC 19.23% (5.00% CDSC) 18.96% (4.00% CDSC)
Without CDSC 24.23% 22.02%
Class C Shares
Period March 31,1996
Year Ended (effective date of
June 30, 1997 registration) through
1 year June 30, 1997
------------- ---------------------
With CDSC 23.23% (1.00% CDSC) 22.02% (0.00% CDSC)
Without CDSC 24.23% 22.02%
The Fund's Class A, Class B and Class C distribution rates at
June 30, 1997, based on the most recent quarter's distributions
and the maximum offering price at the end of the quarter, were 0,
0 and 0, 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.
Effective early December 1997, the Fund's custodian is The Chase
Manhattan Bank. The custodian is responsible for safeguarding
the Fund's cash and securities, receiving and delivering
securities and collecting the Fund's interest and dividends.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP are the Fund's independent accountants,
providing audit and tax return preparation services and
assistance and consultation in connection with the review of
various SEC filings. The financial statements incorporated by
reference in this SAI and the financial highlights included in
the Prospectus have been so included, in reliance upon the report
of Price Waterhouse LLP given on the authority of said firm as
experts in accounting and auditing.
The financial statements and Report of Independent Accountants
appearing in the June 30, 1997 Annual Report of the Fund are
incorporated in this SAI by reference.
COLONIAL TRUST VI
Cross Reference Sheet (Colonial Aggressive Growth 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; Shareholder
Liability
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
<PAGE>
COLONIAL AGGRESSIVE GROWTH FUND
Statement of Additional Information
October 27, 1997
This Statement of Additional Information (SAI) contains information which may be
useful to investors but which is not included in the Prospectus of Colonial
Aggressive Growth Fund (Fund). This SAI is not a prospectus and is authorized
for distribution only when accompanied or preceded by the Prospectus of the Fund
dated October 27, 1997. This SAI should be read together with the Prospectus
and the Fund's most recent Annual Report dated June 30, 1997. Investors may
obtain a free copy of the Prospectus and Annual Report from Liberty Financial
Investments, 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 b
Investment Objective and Policies b
Fundamental Investment Policies b
Other Investment Policies c
Fund Charges and Expenses c
Investment Performance e
Custodian f
Independent Accountants f
Part 2
Miscellaneous Investment Practices 1
Taxes 10
Management of the Colonial Funds 12
Determination of Net Asset Value 18
How to Buy Shares 19
Special Purchase Programs/Investor Services 19
Programs for Reducing or Eliminating Sales Charges 20
How to Sell Shares 23
Distributions 24
How to Exchange Shares 25
Suspension of Redemptions 25
Shareholder Liability 25
Shareholder Meetings 25
Performance Measures 26
Appendix I 27
Appendix II 32
AG-16/332E-1097
<PAGE>
COLONIAL AGGRESSIVE GROWTH FUND
Statement of Additional Information
October 27, 1997
DEFINITIONS
"Trust" Colonial Trust VI
"Fund" Colonial Aggressive Growth Fund
"Adviser" Colonial Management Associates, Inc., the Fund's investment adviser
"LFII" Liberty Financial Investments, 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 Prospectus describes its investment objective and investment
policies. Part 1 of this SAI includes additional information concerning, among
other things, the fundamental investment policies of the Fund. Part 2 contains
additional information about the following securities and investment techniques
that are described or referred to in the Prospectus:
Small Companies
Foreign Securities
Forward Commitments
Repurchase Agreements
Options on Securities
Futures Contracts and Related Options
Foreign Currency Transactions
Except as indicated 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.
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's
diversification requirement, an issuer is the entity whose revenues support the
security.
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 (other than short-term
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 do 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 the voting securities of an issuer
if, as a result of such purchases, the Fund would own more than 10% of the
outstanding voting shares of such issuer.
b
<PAGE>
OTHER INVESTMENT POLICIES
As non-fundamental investment policies which may be changed without a
shareholder vote, the Fund may not:
1. Purchase securities on margin, but it may receive short-term credit to clear
securities transactions and may make initial or maintenance margin deposits
in connection with futures transactions;
2. Have a short securities position, unless the Fund owns, or owns rights
(exercisable without payment) to acquire, an equal amount of such securities;
and
3. Invest more than 15% of its net assets in illiquid assets.
FUND CHARGES AND EXPENSES
Under the Fund's management agreement, the Fund pays the Adviser a monthly fee
based on the average daily net assets of the Fund at the annual rate of 0.85%,
subject to any voluntary reduction that the Adviser may agree to from time to
time.
Recent Fees paid to the Adviser, LFII and CISC (dollars in thousands) (before
voluntary reductions)
Period March 31, 1996
Year ended (effective date of registration)
June 30, 1997 through June 30, 1996
Management fee $30 $7
Bookkeeping fee 27 7
Shareholder service and
transfer agent fee 9 2
12b-1 fees:
Service fee 9 2
Distribution fee (Class B) 2 1
Distribution fee (Class C) 2 1
c
<PAGE>
Brokerage Commissions (dollars in thousands)
Period March 31, 1996
Year ended (effective date of
June 30, 1997 registration)
through June 30, 1996
Total commissions $ 5 $1
Directed transactions (a) 41 0
Commissions on directed (b) 0
transactions
(a) See "Management of the Colonial Funds - Portfolio Transactions - Brokerage
and research services" in Part 2 of this SAI.
(b) Rounds to less than one.
Trustees Fees
For the period ended June 30, 1997 and the calendar year ended December 31,
1996, the Trustees received the following compensation for serving as Trustees
(c):
<TABLE>
<CAPTION>
Total Compensation
Aggregate Compensation From From Trust And Fund Complex Paid
Fund For The Fiscal Year To The Trustees For The Calendar
Trustee Ended June 30, 1997 Year Ended December 31, 1996(d)
- ------- --------------------------- --------------------------------
<S> <C> <C>
Robert J. Birnbaum $486 $ 92,000
Tom Bleasdale 797(e) 104,500(f)
Lora S. Collins 486 92,000
James E. Grinnell 486(g) 93,000
William D. Ireland, Jr. 539 109,000
Richard W. Lowry 492 95,000
William E. Mayer 486 91,000
James L. Moody, Jr. 546(h) 106,500(i)
John J. Neuhauser 498 94,500
George L. Shinn 518 105,500
Robert L. Sullivan 521 102,000
Sinclair Weeks, Jr. 539 110,000
</TABLE>
(c) The Fund does not currently provide pension or retirement plan benefits to
the Trustees.
(d) At December 31, 1996, the Colonial Funds complex consisted of 38 open-end
and 5 closed-end management investment company portfolios.
(e) Includes $523 payable in later years as deferred compensation.
(f) Includes $51,500 payable in later years as deferred compensation.
(g) Includes $41 payable in later years as deferred compensation.
(h) Includes $546 payable in later years as deferred compensation.
(i) Total compensation of $106,500 for the calendar year ended December 31,
1996, will be 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 or Directors of the
Liberty All-Star Equity Fund and of the Liberty All-Star Growth Fund, Inc.
(formerly known as The Charles Allmon Trust, Inc.) (together, Liberty Funds) for
service during the calendar year ended December 31, 1996:
Total Compensation From Liberty
Funds For The Calendar Year
Trustee Ended December 31, 1996 (j)
- ------- -------------------------------
Robert J. Birnbaum $25,000
James E. Grinnell 25,000
Richard W. Lowry 25,000
d
<PAGE>
(j) The Liberty Funds are advised by Liberty Asset Management Company (LAMCO).
LAMCO is an indirect wholly-owned subsidiary of Liberty Financial
Companies, Inc. (an intermediate parent of the Adviser).
Ownership of the Fund
At September 30, 1997, Keyport Life Insurance Company (Keyport), a Rhode Island
corporation, owned 100% of the outstanding shares of each Class of the Fund and,
therefore, may be deemed to "control" the Fund. Keyport is located at 125 High
Street, Boston, MA 02110-2712.
Sales Charges (dollars in thousands)
<TABLE>
<CAPTION>
Class A Shares
--------------
Period March 31, 1996
(effective date of
Year ended registration)
June 30, 1997 through June 30, 1996
------------- ---------------------
<S> <C> <C>
Aggregate initial sales charges on Fund
share sales $0 $0
Initial sales charges retained by LFII 0 0
</TABLE>
<TABLE>
<CAPTION>
Class B Shares
--------------
Period March 31, 1996
(effective date of
Year ended registration)
June 30, 1997 through June 30, 1996
------------- ---------------------
<S> <C> <C>
Aggregate contingent deferred sales charges
(CDSC) on Fund redemptions retained by $0 $0
LFII
</TABLE>
<TABLE>
<CAPTION>
Class C Shares
--------------
Period March 31, 1996
(effective date of
Year ended registration)
June 30, 1997 through June 30, 1996
------------- ---------------------
<S> <C> <C>
Aggregate CDSC on Fund redemptions
retained by LFII $0 $0
</TABLE>
12b-1 Plan, CDSC and Conversion of Shares
The Fund offers three classes of shares - Class A, Class B and Class C. The Fund
may in the future offer other classes of shares. The Trustees have approved a
12b-1 Plan (Plan) pursuant to Rule 12b-1 under the Act. Under the Plan, the Fund
pays LFII monthly a service fee at an annual rate of 0.25% of the Fund's net
assets attributed to each Class of shares. The Fund also pays LFII monthly a
distribution fee at an annual rate of 0.75% of the average daily net assets
attributed to Class B and Class C shares. LFII 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 LFII's expenses, LFII may
realize a profit from the fees.
e
<PAGE>
The Plan authorizes any other payments by the Fund to LFII and its affiliates
(including 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 Plan 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 Plan will continue in effect from year to year so long as
continuance is specifically approved at least annually by a vote of the
Trustees, including the Trustees who are not interested persons of the Trust and
have no direct or indirect financial interest in the operation of the Plan or in
any agreements related to the Plan (Independent Trustees), cast in person at a
meeting called for the purpose of voting on the Plan. The Plan 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 Plan must be approved by the Trustees in the manner
provided in the foregoing sentence. The Plan 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 Plan will only be effective if the selection and nomination of the
Trustees of the Trust who are not interested persons of the Trust is effected by
such disinterested 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 and are
subject to a CDSC if redeemed within six years after purchase. Class C shares
are offered at net asset value and are subject to a 1.00% 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 (dollars in thousands) of LFII relating to the Fund were:
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
-------------- -------------- --------------
<S> <C> <C> <C>
Fees to FSFs $2 (k) (k)
Cost of sales material relating to the Fund
(including printing and mailing expenses) (k) $0 $0
Allocated travel, entertainment and other
promotional expenses (including advertising) (k) $0 $0
</TABLE>
(k) Rounds to less than one.
INVESTMENT PERFORMANCE
The Fund's yields for the month ended June 30, 1997 were:
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
-------------- -------------- --------------
Adjusted Adjusted Adjusted
Yield Yield Yield Yield Yield Yield
----- -------- ----- -------- ----- --------
<S> <C> <C> <C> <C> <C>
(0.63)% (8.23)% (1.40)% (9.43)% (1.38)% (9.33)%
</TABLE>
The Fund's average annual total returns at June 30, 1997 were:
Class A Shares
--------------
Period April 1, 1996
(date of inception)
1 Year through June 30, 1997
------ ---------------------
With sales charge of 5.75% 5.69% 14.26%
f
Without sales charge 12.14% 19.81%
g
<PAGE>
Class B Shares
--------------
Period April 1, 1997
(date of inception)
1 Year through June 30, 1997
------ ---------------------
With applicable CDSC 6.31%(5.00% CDSC) 15.86%(4.00% CDSC)
Without CDSC 11.31% 18.94%
Class C Shares
--------------
Period April 1, 1996
(date of inception)
1 Year through June 30, 1997
------ ---------------------
With applicable CDSC 10.31%(1.00% 18.94%(0.00% CDSC)
CDSC)
Without CDSC 11.31% 18.94%
The Fund's Class A, Class B and Class C distribution rates at June 30, 1997,
based on the most recent twelve months' distributions and the maximum offering
price at the end of the twelve month period, were: 0%.
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. Effective
December, 1997, the Fund's custodian will be The Chase Manhattan Bank. 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 Securities and Exchange Commission filings. The
financial statements incorporated by reference in this SAI have been so
incorporated and the financial highlights included in the Prospectus have been
so included, in reliance upon the report of Price Waterhouse LLP given on the
authority of said firm as experts in accounting and auditing.
The financial statements and Report of Independent Accountants appearing in the
June 30, 1997 Annual Report, are incorporated in this SAI by reference.
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A
Summary of Expenses (for Colonial Aggressive Growth Fund, Colonial
Equity Income Fund, Colonial International Equity Fund, Colonial
U.S. Stock Fund and Colonial Small Cap Value Fund)
The Fund's Financial History (for Colonial Aggressive Growth Fund,
Colonial Equity Income Fund, Colonial International Equity Fund,
Colonial U.S. Stock Fund and Colonial Small Cap Value Fund)
Incorporated by reference into Part B are the financial statements
contained in the Annual Reports for the Registrant's series, each
dated June 30, 1997 (which were previously filed electronically
pursuant to Section 30(b)(2) of the Investment Company Act of
1940):
Fund Accession Number
---- ----------------
Colonial U.S. Stock Fund 0000021847-97-000109
Colonial Small Cap Value Fund 0000021847-97-000119
Colonial Equity Income Fund 0000021847-97-000107
Colonial Aggressive Growth Fund 0000021847-97-000106
Colonial International Equity Fund 0000021847-97-000108
The Financial Statements contained in each series' Annual Report
are as follows:
Investment Portfolio
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
Financial Highlights
Report of Independent Accountants
<PAGE>
(b) Exhibits (each exhibit is applicable to all series' of the Trust
unless otherwise referenced):
1. Agreement and Declaration of Trust(m)
2. By-Laws as amended (2/16/96)(l)
3. Not Applicable
4. Form of Share Certificate(l)
5.(a) Form of Management Agreement (CUSSF)(i)
5.(b) Form of Management Agreement (CSCVF)
5.(c) Management Agreement (CAGF)(l)
5.(d) Management Agreement (CEIF)(l)
5.(e) Management Agreement (CIEF)(l)
6.(a) Distributor's Contract with Colonial Investment Services, Inc.
(incorporated herein by reference to Exhibit 6(a) to
Post-Effective Amendment No. 44 to the Registration Statement of
Colonial Trust I, Registration Nos. 2-41251 and 811-2214, filed
with the Commission on or about July 24, 1997)
6.(b) Form of Selling Agreement with Colonial Investment
Services(incorporated herein by reference to Exhibit 6(b) to
Post-Effective Amendment No. 10 to the Registration Statement of
Colonial Trust VI, Registration Nos. 33-45117 and 811-6529, filed
with the Commission on September 27, 1996)
6.(c) Form of Bank and Bank Affiliated Selling Agreement (incorporated
herein by reference to Exhibit 6(c) to Post-Effective Amendment
No. 10 to the Registration Statement of Colonial Trust VI,
Registration Nos. 33-45117 and 811-6529, filed with the
Commission on September 27, 1996)
6.(d) Form of Asset Retention Agreement (incorporated herein by
reference to Exhibit 6(d) to Post-Effective Amendment No. 10 to
the Registration Statement of Colonial Trust VI, Registration Nos.
33-45117 and 811-6529, filed with the Commission on September 27,
1996)
7. Not Applicable
8. Custody Agreement with Chase Manhattan Bank
<PAGE>
9(a)(i) Amended and Restated Shareholders' Servicing and Transfer Agent
Agreement as amended (incorporated by reference to Exhibit 9.(b)
of Post-Effective Amendment No. 10 to the Registration Statement
of Colonial Trust VII filed with the Commission on April 24, 1996)
9.(a)(ii) Amendment No. 10 to Schedule A of Amended and Restated
Shareholders' Servicing and Transfer Agent Agreement, dated
October 1, 1997
9.(a)(iii) Amendment No. 15 to Appendix I of Amended and Restated
Shareholders' Servicing and Transfer Agent Agreement as amended
9.(b) Pricing and Bookkeeping Agreement with Colonial Management
Associates, Inc.(l)
9.(c) Credit Agreement (incorporated by reference to Exhibit 9.(f) of
Post-Effective Amendment No. 19 to the Registration Statement of
Colonial Trust V filed with the Commission on May 20, 1996)
10.(a) Opinion and Consent of Counsel (CUSSF)(b)
10.(b) Opinion and Consent of Counsel (incorporated by reference to
Exhibit 10 of Pre-Effective Amendment No. 1 to the Registration
Statement of Colonial Small Stock Index Trust filed with the
Commission on June 20, 1986) (CSCVF)
11. Consent of Independent Accountants
12. Not Applicable
13.(a) Investment Letter of Colonial Management Associates,
Inc.(CUSSF)(b)
13.(b) Investment Letter of Colonial Management Associates, Inc.
(incorporated by reference to Exhibit 13 of Pre-Effective
Amendment No. 1 to the Registration Statement of Colonial Small
Stock Index Trust filed with the Commission on June 20,
1986)(CSCVF)
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)
<PAGE>
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 (CUSSF)(m)
16.(a)(i) Calculation of Yield Information (CUSSF)(m)
16.(b) Calculation of Performance Information (CSCVF)(m)
16.(b)(i) Calculation of Yield Information (CSCVF)(m)
16.(c) Calculation of Performance Information (CAGF)(l)
16.(c)(i) Calculation of Yield Information (CAGF)(l)
16.(d) Calculation of Performance Information (CEIF)(l)
16.(d)(i) Calculation of Yield Information (CEIF)(l)
16.(e) Calculation of Performance Information (CIEF)(l)
16.(e)(i) Calculation of Yield Information (CIEF)(l)
17.(a) Financial Data Schedule (Class A) (CUSSF)
17.(b) Financial Data Schedule (Class B) (CUSSF)
17.(c) Financial Data Schedule (Class C) (CUSSF)
17.(d) Financial Data Schedule (Class A) (CSCVF)
17.(e) Financial Data Schedule (Class B) (CSCVF)
17.(f) Financial Data Schedule (Class C) (CSCVF)
17.(g) Financial Data Schedule (Class Z) (CSCVF)
17.(h) Financial Data Schedule (Class A) (CAGF)
17.(i) Financial Data Schedule (Class B) (CAGF)
17.(j) Financial Data Schedule (Class C) (CAGF)
17.(k) Financial Data Schedule (Class A) (CEIF)
17.(l) Financial Data Schedule (Class B) (CEIF)
17.(m) Financial Data Schedule (Class C) (CEIF)
17.(n) Financial Data Schedule (Class A) (CIEF)
17.(o) Financial Data Schedule (Class B) (CIEF)
17.(p) Financial Data Schedule (Class C) (CIEF)
<PAGE>
18.(a) Power of Attorney for: Robert J. Birnbaum, Tom Bleasdale, Lora S.
Collins, James E. Grinnell, William D. Ireland, Jr., Richard W.
Lowry, William E. Mayer, James L. Moody, Jr., John J. Neuhauser,
George L. Shinn, Robert L. Sullivan and Sinclair Weeks, Jr.
(incorporated herein by reference to Exhibit 18(a) to
Post-Effective Amendment No. 97 to the Registration Statement of
Colonial Trust III, Registration Nos. 2-15184 and 811-881, filed
with the Commission on February 14, 1997)
18(b) Plan pursuant to Rule 18f-3(d) under the Investment Company Act of
1940(incorporated herein by reference to Exhibit 18(b) to
Post-Effective Amendment No. 44 to the Registration Statement of
Colonial Trust I, Registration Nos. 2-41251 and 811-2214, filed
with the Commission on or about July 24, 1997)
Not all footnotes will be applicable to this filing.
(a) Incorporated by reference to the Registrant's initial Registration
Statement on Form N-1A, filed with the Securities and Exchange Commission
on January 15, 1992.
(b) Incorporated by reference to the Registrant's Pre-Effective Amendment No.
1 on Form N-1A, filed with the Securities and Exchange Commission on May
8, 1992.
(c) Incorporated by reference to the Registrant's Pre-Effective Amendment No.
2 on Form N-1A, filed with the Securities and Exchange Commission on June
12, 1992.
(d) Incorporated by reference to the Registrant's Post-Effective Amendment No.
1 on Form N-1A, filed with the Securities and Exchange Commission on
September 1, 1992.
(e) Incorporated by reference to the Registrant's Post-Effective Amendment No.
2 on Form N-1A, filed with the Securities and Exchange Commission on
November 19, 1992.
(f) Incorporated by reference to the Registrant's Post-Effective Amendment No.
3 on Form N-1A, filed with the Securities and Exchange Commission on
September 21, 1993.
(g) Incorporated by reference to the Registrant's Post-Effective Amendment No.
5 on Form N-1A, filed with the Securities and Exchange Commission on
October 11, 1994.
(h) Incorporated by reference to the Registrant's Post-Effective Amendment No.
6 on Form N-1A, filed with the Securities and Exchange Commission on July
28, 1995.
(i) Incorporated by reference to the Registrant's Post-Effective Amendment No.
7 on Form N-1A, filed with the Securities and Exchange Commission on
October 11, 1995.
(j) Incorporated by reference to the Registrant's Post-Effective Amendment No.
8 on Form N-1A, filed with the Securities and Exchange Commission on
November 3, 1995.
<PAGE>
(k) Incorporated by reference to the Registrant's Post-Effective Amendment No.
9 on Form N-1A, filed with the Securities and Exchange Commission on
January 16, 1996.
(l) Incorporated by reference to the Registrant's Post-Effective Amendment No.
10 on Form N-1A, filed with the Securities and Exchange Commission on
September 27, 1996.
(m) Incorporated by reference to the Registrant's Post-Effective Amendment No.
11 on Form N-1A, filed with the Securities and Exchange Commission on or
about October 28, 1996.
Item 25. Persons Controlled by or Under Common Group Control with Registrant
Not Applicable (CUSSF, CSCVF)
All of the outstanding shares of CIEF, representing all of the interests in each
of those series on the date the Registrant's Registration Statement becomes
effective, will be held by Colonial Management Associates, Inc., One Financial
Center, Boston, MA 02110.
All of the outstanding shares of CEIF and CAGF, representing all of the
interests in each of those series on the date the Registrant's Registration
Statement becomes effective, will be held by Keyport Life Insurance Company, 125
High Street, Boston, MA 02110.
Item 26. Number of Holders of Securities
(1) (2)
Title of Class Number of Record Holders as of 9/30/97
Shares of beneficial interest 15029 Class A record holders (CUSSF)
36356 Class B record holders (CUSSF)
898 Class C record holders (CUSSF)
13533 Class A record holders (CSCVF)
31198 Class B record holders (CSCVF)
1000 Class C record holders (CSCVF)
4 Class Z record holders (CSCVF)
1 Class A record holders (CIEF)
1 Class B record holders (CIEF)
1 Class C record holders (CIEF)
6 Class A record holders (CEIF)
1 Class B record holders (CEIF)
1 Class C record holders (CEIF)
20 Class A record holders (CAGF)
1 Class B record holders (CAGF)
1 Class C record holders (CAGF)
<PAGE>
Item 27. Indemnification
See Article VIII of the Agreement and Declaration of Trust filed as
Exhibit 1 hereto.
Item 28. Business and Other Connections of Investment Adviser
The following sets forth business and other connections of each
director and officer of Colonial Management Associates, Inc. (see next
page):
<PAGE>
ITEM 28.
- --------
Registrant's investment adviser/administrator, Colonial Management
Associates, Inc. ("Colonial"), is registered as an investment adviser under
the Investment Advisers Act of 1940 (1940 Act). Colonial Advisory Services,
Inc. (CASI), an affiliate of Colonial, is also registered as an investment
adviser under the 1940 Act. As of the end of its fiscal year, December
31, 1996, CASI had one institutional, corporate or other account under
management or supervision, the market value of which was approximately $42.0
million. As of the end of its fiscal year, December 31, 1996, Colonial
was the investment adviser, sub-adviser and/or administrator to 49 Colonial
mutual funds (including funds sub-advised by Colonial, the market value of which
investment companies was approximately $17,165.0 million. Liberty Financial
Investments, Inc., a subsidiary of Colonial Management Associates, Inc., is
the principal underwriter and the national distributor of all of the funds
in the Colonial Mutual Funds complex, including the Registrant.
The following sets forth the business and other connections of each
director and officer of Colonial Management Associates, Inc.:
(1) (2) (3) (4)
Name and principal
business
addresses* Affiliation
of officers and with Period is through 08/01/97. Other
directors of investment business, profession, vocation or
investment adviser adviser employment connection Affiliation
- ------------------ ---------- -------------------------------- -----------
Allard, Laurie V.P.
Archer, Joseph A. V.P.
Berliant, Allan V.P.
Bertocci, Bruno V.P. Stein Roe Global Capital Mngmt. Principal
Boatman, Bonny E. Sr.V.P.; Colonial Advisory Services, Inc. Exec. V.P.
IPC Mbr.
Bunten, Walter V.P.
Campbell, Kimberly V.P.
Carnabucci,
Dominick V.P.
Carroll, Sheila A. Sr.V.P.;
Citrone, Frank V.P.
Cogger, Harold W. Dir.; The Colonial Group, Inc. Dir.;
Chairman; Chrm.
IPC Mbr.; Colonial Trusts I through VII Pres.
Colonial High Income
Municipal Trust Pres.
Colonial InterMarket Income
Trust I Pres.
Colonial Intermediate High
Income Fund Pres.
Colonial Investment Grade
Municipal Trust Pres.
Colonial Municipal Income
Trust Pres.
LFC Utilities Trust Pres.
Liberty Financial Exec V.P.;
Companies, Inc. Dir.
Stein Roe & Farnham Dir.
Incorporated
Conlin, Nancy V.P.; Colonial Investors Service
Asst. Center, Inc. Asst. Clerk
Sec.; The Colonial Group, Inc. Asst. Clerk
Asst Colonial Advisory Services,
Clerk and Inc. Asst. Clerk
Counsel Liberty Financial Investments,
Inc. Asst. Clerk
AlphaTrade Inc. Asst. Clerk
Colonial Trusts I through VII Asst. Sec.
Colonial High Income
Municipal Trust Asst. Sec.
Colonial InterMarket Income
Trust I Asst. Sec.
Colonial Intermediate High
Income Fund Asst. Sec.
Colonial Investment Grade
Municipal Trust Asst. Sec.
Colonial Municipal Income
Trust Asst. Sec.
LFC Utilities Trust Asst. Sec.
Daniszewski, V.P.
Joseph J.
Desilets, Marian V.P. Liberty Financial Investments,
Inc. V.P.
DiSilva, Linda V.P. Colonial Advisory Services, Compliance
IPC Mbr. Inc. Officer
Ericson, Carl C. V.P. Colonial Intermediate High
IPC Mbr. Income Fund V.P.
Colonial Advisory Services,
Inc. Exec. V.P.
Evans, C. Frazier Sr.V.P. Liberty Financial Investments,
Inc. Mng. Director
Feingold, Andrea S. V.P. Colonial Intermediate High
Income Fund V.P.
Colonial Advisory Services,
Inc. Sr. V.P.
Feloney, Joseph L. V.P.
Asst. Treasurer
Finnemore, V.P. Colonial Advisory Services,
Leslie W. Inc. Sr. V.P.
Franklin, Sr. V.P.
Fred J.
Gibson, Stephen E. Dir.; Pres.; The Colonial Group, Inc. Dir.;
CEO; Pres.; CEO;
Exec. Cmte.
Mbr.
Liberty Financial Investments, Dir.; Chm.
Inc.
Colonial Advisory Services, Dir.; Chm.
Inc.
Colonial Investors Service Dir.; Chm.
Center, Inc.
AlphaTrade Inc. Dir.
Harasimowicz, V.P.
Stephen
Harris, David V.P. Stein Roe Global Capital Mngmt Principal
Hartford, Brian V.P.
Haynie, James P. V.P. Colonial Advisory Services,
Inc. Sr. V.P.
Hill, William V.P.
Iudice, Jr. Philip V.P.; The Colonial Group, Inc. Controller,
Controller CAO, Asst.
Asst. Treas.
Treasurer Liberty Financial Investments, CFO,
Inc. Treasurer
Colonial Advisory Services,
Inc. Controller;
Asst. Treas.
AlphaTrade Inc. CFO, Treas.
Jacoby, Timothy J. Sr. V.P.; The Colonial Group, Inc. V.P., Treasr.,
CFO; CFO
Treasurer Colonial Trusts I through VII Treasr.,CFO
Colonial High Income
Municipal Trust Treasr.,CFO
Colonial InterMarket Income
Trust I Treasr.,CFO
Colonial Intermediate High
Income Fund Treasr.,CFO
Colonial Investment Grade
Municipal Trust Treasr.,CFO
Colonial Municipal Income
Trust Treasr.,CFO
LFC Utilities Trust Treasr.,CFO
Colonial Advisory Services,
Inc. CFO, Treasr.
Johnson, Gordon V.P.
Knudsen, Gail V.P.
Koonce, Michael H. Sr. V.P.; Colonial Trusts I through VII Secretary
Sec.; Clerk Colonial High Income
Mbr. IPC; Municipal Trust Secretary
Dir; Gen. Colonial InterMarket Income
Counsel Trust I Secretary
Colonial Intermediate High
Income Fund Secretary
Colonial Investment Grade
Municipal Trust Secretary
Colonial Municipal Income
Trust Secretary
LFC Utilities Trust Secretary
Liberty Financial Investments,
Inc. Dir., Clerk
Colonial Investors Service
Center, Inc. Clerk, Dir.
The Colonial Group, Inc. V.P., Gen.
Counsel and
Clerk
Colonial Advisory Services,
Inc. Dir., Clerk
AlphaTrade Inc. Dir., Clerk
Lennon, John E. V.P. Colonial Advisory Services,
Inc. V.P.
Lenzi, Sharon V.P.
Lessard, Kristen V.P.
Loring, William C. V.P.
MacKinnon,
Donald S. Sr.V.P.
Newman, Maureen V.P.
Ostrander, Laura V.P.
Peters, Helen F. Sr.V.P.; Colonial Advisory Services, Pres.,
IPC Mbr. Inc. CEO
Peterson, Ann T. V.P. Colonial Advisory Services,
Inc. V.P.
Rao, Gita V.P.
Reading, John V.P.; Colonial Investors Service
Asst. Center, Inc. Asst. Clerk
Sec.; The Colonial Group, Inc. Asst. Clerk
Asst Colonial Advisory Services,
Clerk and Inc. Asst. Clerk
Counsel Liberty Financial Investments,
Inc. Asst. Clerk
AlphaTrade Inc. Asst. Clerk
Colonial Trusts I through VII Asst. Sec.
Colonial High Income
Municipal Trust Asst. Sec.
Colonial InterMarket Income
Trust I Asst. Sec.
Colonial Intermediate High
Income Fund Asst. Sec.
Colonial Investment Grade
Municipal Trust Asst. Sec.
Colonial Municipal Income
Trust Asst. Sec.
LFC Utilities Trust Asst. Sec.V.P.
Rega, Michael V.P. Colonial Advisory Services
Inc. Vice President
Rie, Daniel Sr.V.P.; Colonial Advisory Services,
IPC Mbr.; Inc. Exec. V.P.
AlphaTrade Inc. President
Scoon, Davey S. Dir.; Colonial Advisory Services,
Exe.V.P.; Inc. Dir.
IPC Mbr.; Colonial High Income
Municipal Trust V.P.
Colonial InterMarket Income
Trust I V.P.
Colonial Intermediate High
Income Fund V.P.
Colonial Investment Grade
Municipal Trust V.P.
Colonial Municipal Income
Trust V.P.
Colonial Trusts I through VII V.P.
LFC Utilities Trust V.P.
Colonial Investors Service Dir; Pres.
Center, Inc.
The Colonial Group, Inc. COO; Ex. V.P.
Liberty Financial Investments,
Inc. Director
AlphaTrade Inc. Director
Seibel, Sandra L. V.P.
Spanos, Gregory Sr. V.P.
Stern, Arthur O. Exe.V.P.; The Colonial Group, Inc. Exec. V.P.
Steck, Nicholas V.P.
Stevens, Richard V.P.
Stoeckle, Mark V.P. Colonial Advisory Services,
Inc. V.P.
Swayze, Gary V.P.
Wallace, John V.P.
- ------------------------------------------------
*The Principal address of all of the officers and directors of the investment
adviser is One Financial Center, Boston, MA 02111.
Item 29 Principal Underwriter
- ------- ---------------------
(a) Liberty Financial Investments, Inc. (LFII), a subsidiary of Colonial
Management Associates, Inc., is the Registrant's principal
underwriter. LFII acts in such capacity for Colonial Trust I,
Colonial Trust II, Colonial Trust III, Colonial Trust IV,
Colonial Trust V, Colonial Trust VI and Colonial Trust VII. LFII
is the 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)
Position and Offices Positions and
Name and Principal with Principal Offices with
Business Address* Underwriter Registrant
- ------------------ ------------------- --------------
Anderson, Judith V.P. None
Babbitt, Debra V.P. and None
Comp. Officer
Ballou, Rich Regional V.P. None
Balzano, Christine R. V.P. None
Bartlett, John Managing Director None
Brown, Beth V.P. None
Burtman, Tracy V.P. None
Campbell, Patrick V.P. None
Carroll, Greg Regional V.P. None
Chrzanowski, Regional V.P. None
Daniel
Clapp, Elizabeth A. Sr. V.P. None
Crossfield, Andrew Regional V.P. None
Daniszewski, V.P. None
Joseph J.
Davey, Cynthia Regional Sr. V.P. None
Desilets, Marian V.P. None
Devaney, James Regional V.P. None
DiMaio, Steve V.P. None
Donovan, John Regional V.P. None
Downey, Christopher V.P. None
Eckelman, Bryan Sr. V.P. None
Emerson, Kim P. Regional V.P. None
Erickson, Cynthia G. Sr. V.P. None
Evans, C. Frazier Managing Director None
Feldman, David Sr. V.P. None
Fifield, Robert Regional V.P. None
Gerokoulis, Sr. V.P. None
Stephen A.
Gibson, Stephen E. Director; Chairman None
of the Board
Goldberg, Matthew Regional V.P. None
Guenard, Brian Regional V.P. None
Harrington, Tom Sr. Regional V.P. None
Hodgkins, Joseph Sr. Regional V.P. None
Iudice, Jr., Philip Treasurer and CFO None
Jones, Cynthia V.P. None
Karagiannis, Managing Director None
Marilyn
Kelley, Terry M. Regional V.P. None
Kelson, David W. Sr. V.P. None
Koonce, Michael H. Dir.; Clerk Secretary
McCombs, Gregory Regional Sr. V.P. None
McKenzie, Mary V.P. None
Menchin, Catherine V.P. None
Moberly, Ann R. Regional Sr. V.P. None
Morner, Patrick V.P. None
Nerney, Andrew Regional V.P. None
Nolin, Kevin V.P. None
O'Shea, Kevin Managing Director None
Predmore, Tracy Regional V.P. None
Quirk, Frank V.P. None
Reed, Christopher B. Sr. Regional V.P. None
Scarlott, Rebecca V.P. None
Schulman, David Regional V.P. None
Scoon, Davey Director V.P.
Scott, Michael W. Sr. V.P. None
Sideropoulos, Lou V.P. None
Smith, Darren Regional V.P. None
Spanos, Gregory J. Sr. V.P. None
Studer, Eric Regional V.P. None
Sutton, R. Andrew Regional V.P. None
Tambone, James CEO None
Tasiopoulos, Lou President None
VanEtten, Keith H. Sr. V.P. None
Villanova, Paul Regional V.P. None
Wallace, John V.P. None
Welsh, Stephen Treasurer Asst. Treasurer
Wess, Valerie Regional V.P. None
Young, Deborah V.P. None
- --------------------------
* The address for each individual is One Financial Center, Boston, MA
02111.
Item 30. Location of Accounts and Records
Person maintaining physical possession of accounts, books and other
documents required to be maintained by Section 31(a) of the Investment
Company Act of 1940 and the Rules thereunder include Registrant's
Secretary; Registrant's investment adviser and/or administrator,
Colonial Management Associates, Inc.; Registrant's principal
underwriter, Liberty Financial Investments, Inc.; Registrant's transfer
and dividend disbursing agent, Colonial Investors Service Center, Inc.;
and the Registrant's custodians, UMB, n.a. and Boston Safe Deposit and
Trust Company. The address for each person except the Registrant's
custodians is One Financial Center, Boston, MA 02111. The address for
UMB, n.a. is 928 Grand Avenue, Kansas City, MO 64106. The address for
Boston Safe Deposit and Trust Company is One Boston Place, Boston, MA
02108. Registrant's custodian is scheduled to change to Chase Manhattan
Bank, located at 4 Chase MetroTech Center, Brooklyn, NY 11245, in
December, 1997.
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.
(2) The Registrant 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.
(3) [Deleted]
<PAGE>
************
NOTICE
------
A copy of the Agreement and Declaration of Trust of Colonial Trust VI (the
"Trust") is on file with the Secretary of The Commonwealth of Massachusetts and
notice is hereby given that the instrument has been executed on behalf of the
Trust by an officer of the Trust as an officer and by the Trust's Trustees as
trustees and not individually and the obligations of or arising out of the
instrument are not binding upon any of the Trustees, officers or shareholders
individually but are binding only upon the assets and property of the Trust.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, Colonial Trust VI, certifies that it meets
all the requirements for effectiveness of the Registration Statement pursuant to
Rule 485(b) and has duly caused this Post-Effective Amendment No. 13 to its
Registration Statement under the Securities Act of 1933 and Amendment No. 15 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
21st day of October, 1997.
COLONIAL TRUST VI
By: HAROLD W. COGGER
----------------
Harold W. Cogger
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment has been signed below by the following persons in their
capacities and on the date indicated.
SIGNATURES TITLE DATE
/s/ HAROLD W. COGGER President October 21, 1997
- --------------------
Harold W. Cogger
/s/ TIMOTHY J. JACOBY Treasurer and Chief October 21, 1997
- --------------------- Financial Officer
Timothy J. Jacoby
/s/ PETER L. LYDECKER Controller and October 21, 1997
- --------------------- Chief Accounting Officer
Peter L. Lydecker
<PAGE>
/s/ ROBERT J. BIRNBAUM* Trustee
- -------------------------
Robert J. Birnbaum
/s/ TOM BLEASDALE* Trustee
- --------------------------
Tom Bleasdale
/s/ LORA S. COLLINS* Trustee
- --------------------------
Lora S. Collins
/s/ JAMES E. GRINNELL* Trustee
- --------------------------
James E. Grinnell
/s/ WILLIAM D. IRELAND, JR.* Trustee
- ---------------------------
William D. Ireland, Jr.
/s/ RICHARD W. LOWRY* Trustee
- ---------------------------
Richard W. Lowry
/s/ WILLIAM E. MAYER* Trustee
- ---------------------------
William E. Mayer
/s/ JAMES L MOODY, JR*. Trustee
- ---------------------------
James L. Moody, Jr.
*MICHAEL H. KOONCE
-----------------
Michael H. Koonce
Attorney-in-fact
October 21, 1997
/s/ JOHN J. NEUHAUSER* Trustee
- ---------------------------
John J. Neuhauser
/s/ GEORGE L. SHINN* Trustee
- ---------------------------
George L. Shinn
/s/ ROBERT L. SULLIVAN* Trustee
- ---------------------------
Robert L. Sullivan
/s/ SINCLAIR WEEKS, JR.* Trustee
- ---------------------------
Sinclair Weeks, Jr.
<PAGE>
EXHIBIT INDEX
EXHIBIT
5.(b) Form of Management Agreement dated October 1, 1997 (CSCVF)
8. Global Custody Agreement with Chase Manhattan Bank
9.(a) (ii) Amendment No. 10 to Schedule A of Amended and
Restated Shareholders' Servicing and Transfer
Agent Agreement dated October 1, 1997.
9.(a)(iii) Amendment No.15 to Appendix I of Amended and
Restated Shareholders' Servicing and Transfer
Agent Agreement as amended
11. Consent of Independent Accountants
17.(a) Financial Data Schedule (Class A) (CUSSF)
17.(b) Financial Data Schedule (Class B) (CUSSF)
17.(c) Financial Data Schedule (Class C) (CUSSF)
17.(d) Financial Data Schedule (Class A) (CSCVF)
17.(e) Financial Data Schedule (Class B) (CSCVF)
17.(f) Financial Data Schedule (Class C) (CSCVF)
17.(g) Financial Data Schedule (Class Z) (CSCVF)
17.(h) Financial Data Schedule (Class A) (CAGF)
17.(i) Financial Data Schedule (Class B) (CAGF)
17.(j) Financial Data Schedule (Class C) (CAGF)
17.(k) Financial Data Schedule (Class A) (CEIF)
17.(l) Financial Data Schedule (Class B) (CEIF)
17.(m) Financial Data Schedule (Class C) (CEIF)
17.(n) Financial Data Schedule (Class A) (CIEF)
17.(o) Financial Data Schedule (Class B) (CIEF)
17.(p) Financial Data Schedule (Class C) (CIEF)
MANAGEMENT AGREEMENT
AGREEMENT dated as of October 1, 1997, between COLONIAL TRUST VI, a
Massachusetts business trust (Trust), with respect to COLONIAL SMALL CAP VALUE
FUND (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
<PAGE>
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 SMALL CAP VALUE FUND
By: _________________________________
Peter Lydecker
Chief Accounting Officer
& Controller
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: _________________________________
Michael H. Koonce
Senior 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.
2
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 STOCK FUND, CLASS A YEAR END JUN-30-1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF COLONIAL
US STOCK FUND, CLASS A YEAR END JUN-30-1997
</LEGEND>
<CIK> 0000883163
<NAME> COLONIAL TRUST VI
<SERIES>
<NUMBER> 1
<NAME> COLONIAL US STOCK FUND, CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 474564
<INVESTMENTS-AT-VALUE> 648219
<RECEIVABLES> 9438
<ASSETS-OTHER> 15
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 657672
<PAYABLE-FOR-SECURITIES> 17798
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 971
<TOTAL-LIABILITIES> 18769
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 434159
<SHARES-COMMON-STOCK> 12288
<SHARES-COMMON-PRIOR> 11653
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 130
<ACCUMULATED-NET-GAINS> 31219
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 173655
<NET-ASSETS> 638903
<DIVIDEND-INCOME> 9890
<INTEREST-INCOME> 1280
<OTHER-INCOME> 0
<EXPENSES-NET> (10341)
<NET-INVESTMENT-INCOME> 829
<REALIZED-GAINS-CURRENT> 51644
<APPREC-INCREASE-CURRENT> 98331
<NET-CHANGE-FROM-OPS> 150804
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (829)
<DISTRIBUTIONS-OF-GAINS> (14099)
<DISTRIBUTIONS-OTHER> (133)
<NUMBER-OF-SHARES-SOLD> 3447
<NUMBER-OF-SHARES-REDEEMED> (3757)
<SHARES-REINVESTED> 945
<NET-CHANGE-IN-ASSETS> 155173
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 20924
<OVERDISTRIB-NII-PRIOR> 3
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4271
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10341
<AVERAGE-NET-ASSETS> 533040
<PER-SHARE-NAV-BEGIN> 14.470
<PER-SHARE-NII> 0.099
<PER-SHARE-GAIN-APPREC> 4.314
<PER-SHARE-DIVIDEND> (0.072)
<PER-SHARE-DISTRIBUTIONS> (1.250)
<RETURNS-OF-CAPITAL> (0.011)
<PER-SHARE-NAV-END> 17.550
<EXPENSE-RATIO> 1.45
<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 STOCK FUND, CLASS B YEAR END JUN-30-1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF COLONIAL
US STOCK FUND, CLASS B YEAR END JUN-30-1997
</LEGEND>
<CIK> 0000883163
<NAME> COLONIAL TRUST VI
<SERIES>
<NUMBER> 1
<NAME> COLONIAL US STOCK FUND, CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 474564
<INVESTMENTS-AT-VALUE> 648219
<RECEIVABLES> 9438
<ASSETS-OTHER> 15
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 657672
<PAYABLE-FOR-SECURITIES> 17798
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 971
<TOTAL-LIABILITIES> 18769
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 434159
<SHARES-COMMON-STOCK> 23705
<SHARES-COMMON-PRIOR> 21363
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 130
<ACCUMULATED-NET-GAINS> 31219
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 173655
<NET-ASSETS> 638903
<DIVIDEND-INCOME> 9890
<INTEREST-INCOME> 1280
<OTHER-INCOME> 0
<EXPENSES-NET> (10341)
<NET-INVESTMENT-INCOME> 829
<REALIZED-GAINS-CURRENT> 51644
<APPREC-INCREASE-CURRENT> 98331
<NET-CHANGE-FROM-OPS> 150804
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (26520)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5207
<NUMBER-OF-SHARES-REDEEMED> (4589)
<SHARES-REINVESTED> 1724
<NET-CHANGE-IN-ASSETS> 155173
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 20924
<OVERDISTRIB-NII-PRIOR> 3
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4271
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10341
<AVERAGE-NET-ASSETS> 533040
<PER-SHARE-NAV-BEGIN> 14.360
<PER-SHARE-NII> (0.015)
<PER-SHARE-GAIN-APPREC> 4.275
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (1.250)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.370
<EXPENSE-RATIO> 2.20
<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 US STOCK FUND, CLASS D YEAR END JUN-30-1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF COLONIAL
US STOCK FUND, CLASS D YEAR END JUN-30-1997
</LEGEND>
<CIK> 0000883163
<NAME> COLONIAL TRUST VI
<SERIES>
<NUMBER> 1
<NAME> COLONIAL US STOCK FUND, CLASS D
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 474564
<INVESTMENTS-AT-VALUE> 648219
<RECEIVABLES> 9438
<ASSETS-OTHER> 15
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 657672
<PAYABLE-FOR-SECURITIES> 17798
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 971
<TOTAL-LIABILITIES> 18769
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 434159
<SHARES-COMMON-STOCK> 663
<SHARES-COMMON-PRIOR> 587
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 130
<ACCUMULATED-NET-GAINS> 31219
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 173655
<NET-ASSETS> 638903
<DIVIDEND-INCOME> 9890
<INTEREST-INCOME> 1280
<OTHER-INCOME> 0
<EXPENSES-NET> (10341)
<NET-INVESTMENT-INCOME> 829
<REALIZED-GAINS-CURRENT> 51644
<APPREC-INCREASE-CURRENT> 98331
<NET-CHANGE-FROM-OPS> 150804
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (730)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 534
<NUMBER-OF-SHARES-REDEEMED> (505)
<SHARES-REINVESTED> 47
<NET-CHANGE-IN-ASSETS> 155173
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 20924
<OVERDISTRIB-NII-PRIOR> 3
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4271
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10341
<AVERAGE-NET-ASSETS> 533040
<PER-SHARE-NAV-BEGIN> 14.410
<PER-SHARE-NII> (0.015)
<PER-SHARE-GAIN-APPREC> 4.295
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (1.250)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.440
<EXPENSE-RATIO> 2.20
<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 CAP VALUE FUND, CLASS A YEAR END JUN-30-1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF COLONIAL
SMALL CAP VALUE FUND, CLASS A YEAR END JUN-30-1997
</LEGEND>
<CIK> 0000883163
<NAME> COLONIAL TRUST VI
<SERIES>
<NUMBER> 2
<NAME> COLONIAL SMALL CAP VALUE FUND, CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 254981
<INVESTMENTS-AT-VALUE> 324955
<RECEIVABLES> 4598
<ASSETS-OTHER> 12
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 329565
<PAYABLE-FOR-SECURITIES> 6631
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 530
<TOTAL-LIABILITIES> 7161
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 245248
<SHARES-COMMON-STOCK> 4291
<SHARES-COMMON-PRIOR> 3395
<ACCUMULATED-NII-CURRENT> 27
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7155
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 69974
<NET-ASSETS> 322404
<DIVIDEND-INCOME> 1743
<INTEREST-INCOME> 1368
<OTHER-INCOME> 0
<EXPENSES-NET> (4110)
<NET-INVESTMENT-INCOME> (999)
<REALIZED-GAINS-CURRENT> 12663
<APPREC-INCREASE-CURRENT> 37333
<NET-CHANGE-FROM-OPS> 48997
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (3482)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13304
<NUMBER-OF-SHARES-REDEEMED> (12520)
<SHARES-REINVESTED> 112
<NET-CHANGE-IN-ASSETS> 130121
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3017
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1428
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4110
<AVERAGE-NET-ASSETS> 237539
<PER-SHARE-NAV-BEGIN> 26.480
<PER-SHARE-NII> (0.003)
<PER-SHARE-GAIN-APPREC> 5.073
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.980)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 30.570
<EXPENSE-RATIO> 1.32
<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 CAP VALUE FUND, CLASS B YEAR END JUN-30-1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF COLONIAL
SMALL CAP VALUE FUND, CLASS B YEAR END JUN-30-1997
</LEGEND>
<CIK> 0000883163
<NAME> COLONIAL TRUST VI
<SERIES>
<NUMBER> 2
<NAME> COLONIAL SMALL CAP VALUE FUND, CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 254981
<INVESTMENTS-AT-VALUE> 324955
<RECEIVABLES> 4598
<ASSETS-OTHER> 12
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 329565
<PAYABLE-FOR-SECURITIES> 6631
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 530
<TOTAL-LIABILITIES> 7161
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 245248
<SHARES-COMMON-STOCK> 6044
<SHARES-COMMON-PRIOR> 3732
<ACCUMULATED-NII-CURRENT> 27
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7155
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 69974
<NET-ASSETS> 322404
<DIVIDEND-INCOME> 1743
<INTEREST-INCOME> 1368
<OTHER-INCOME> 0
<EXPENSES-NET> (4110)
<NET-INVESTMENT-INCOME> (999)
<REALIZED-GAINS-CURRENT> 12663
<APPREC-INCREASE-CURRENT> 37333
<NET-CHANGE-FROM-OPS> 48997
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (4515)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3812
<NUMBER-OF-SHARES-REDEEMED> (1659)
<SHARES-REINVESTED> 159
<NET-CHANGE-IN-ASSETS> 130121
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3017
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1428
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4110
<AVERAGE-NET-ASSETS> 237539
<PER-SHARE-NAV-BEGIN> 25.770
<PER-SHARE-NII> (0.199)
<PER-SHARE-GAIN-APPREC> 4.899
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.980)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 29.490
<EXPENSE-RATIO> 2.07
<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 CAP VALUE FUND, CLASS D YEAR END JUN-30-1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF COLONIAL
SMALL CAP VALUE FUND, CLASS D YEAR END JUN-30-1997
</LEGEND>
<CIK> 0000883163
<NAME> COLONIAL TRUST VI
<SERIES>
<NUMBER> 2
<NAME> COLONIAL SMALL CAP VALUE FUND, CLASS D
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 254981
<INVESTMENTS-AT-VALUE> 324955
<RECEIVABLES> 4598
<ASSETS-OTHER> 12
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 329565
<PAYABLE-FOR-SECURITIES> 6631
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 530
<TOTAL-LIABILITIES> 7161
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 245248
<SHARES-COMMON-STOCK> 271
<SHARES-COMMON-PRIOR> 98
<ACCUMULATED-NII-CURRENT> 27
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7155
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 69974
<NET-ASSETS> 322404
<DIVIDEND-INCOME> 1743
<INTEREST-INCOME> 1368
<OTHER-INCOME> 0
<EXPENSES-NET> (4110)
<NET-INVESTMENT-INCOME> (999)
<REALIZED-GAINS-CURRENT> 12663
<APPREC-INCREASE-CURRENT> 37333
<NET-CHANGE-FROM-OPS> 48997
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (160)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 337
<NUMBER-OF-SHARES-REDEEMED> (169)
<SHARES-REINVESTED> 5
<NET-CHANGE-IN-ASSETS> 130121
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3017
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1428
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4110
<AVERAGE-NET-ASSETS> 237539
<PER-SHARE-NAV-BEGIN> 26.400
<PER-SHARE-NII> (0.208)
<PER-SHARE-GAIN-APPREC> 5.028
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.980)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 30.240
<EXPENSE-RATIO> 2.07
<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 CAP VALUE FUND, CLASS Z YEAR END JUN-30-1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF COLONIAL
SMALL CAP VALUE FUND, CLASS Z YEAR END JUN-30-1997
</LEGEND>
<CIK> 0000883163
<NAME> COLONIAL TRUST VI
<SERIES>
<NUMBER> 2
<NAME> COLONIAL SMALL CAP VALUE FUND, CLASS Z
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 254981
<INVESTMENTS-AT-VALUE> 324955
<RECEIVABLES> 4598
<ASSETS-OTHER> 12
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 329565
<PAYABLE-FOR-SECURITIES> 6631
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 530
<TOTAL-LIABILITIES> 7161
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 245248
<SHARES-COMMON-STOCK> 157
<SHARES-COMMON-PRIOR> 136
<ACCUMULATED-NII-CURRENT> 27
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7155
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 69974
<NET-ASSETS> 322404
<DIVIDEND-INCOME> 1743
<INTEREST-INCOME> 1368
<OTHER-INCOME> 0
<EXPENSES-NET> (4110)
<NET-INVESTMENT-INCOME> (999)
<REALIZED-GAINS-CURRENT> 12663
<APPREC-INCREASE-CURRENT> 37333
<NET-CHANGE-FROM-OPS> 48997
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (133)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 44
<NUMBER-OF-SHARES-REDEEMED> (28)
<SHARES-REINVESTED> 5
<NET-CHANGE-IN-ASSETS> 130121
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3017
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1428
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4110
<AVERAGE-NET-ASSETS> 237539
<PER-SHARE-NAV-BEGIN> 26.550
<PER-SHARE-NII> 0.065
<PER-SHARE-GAIN-APPREC> 5.105
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.980)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 30.740
<EXPENSE-RATIO> 1.07
<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 AGGRESSIVE GROWTH FUND, CLASS A YEAR END JUN-30-1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF
COLONIAL AGGRESSIVE GROWTH, CLASS A YEAR END JUN-30-1997
</LEGEND>
<CIK> 0000883163
<NAME> COLONIAL TRUST VI
<SERIES>
<NUMBER> 5
<NAME> COLONIAL AGGRESSIVE GROWTH FUND, CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 3134
<INVESTMENTS-AT-VALUE> 3778
<RECEIVABLES> 0
<ASSETS-OTHER> 40
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3818
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5
<TOTAL-LIABILITIES> 5
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3006
<SHARES-COMMON-STOCK> 252
<SHARES-COMMON-PRIOR> 250
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (1)
<ACCUMULATED-NET-GAINS> 164
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 644
<NET-ASSETS> 3813
<DIVIDEND-INCOME> 6
<INTEREST-INCOME> 14
<OTHER-INCOME> 0
<EXPENSES-NET> (59)
<NET-INVESTMENT-INCOME> (39)
<REALIZED-GAINS-CURRENT> 194
<APPREC-INCREASE-CURRENT> 250
<NET-CHANGE-FROM-OPS> 405
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1)
<DISTRIBUTIONS-OF-GAINS> (4)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 27
<NUMBER-OF-SHARES-REDEEMED> (9)
<SHARES-REINVESTED> 5
<NET-CHANGE-IN-ASSETS> 423
<ACCUMULATED-NII-PRIOR> 2
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 30
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 148
<AVERAGE-NET-ASSETS> 3472
<PER-SHARE-NAV-BEGIN> 11.300
<PER-SHARE-NII> (0.114)
<PER-SHARE-GAIN-APPREC> 1.484
<PER-SHARE-DIVIDEND> (0.005)
<PER-SHARE-DISTRIBUTIONS> (0.015)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.650
<EXPENSE-RATIO> 1.55
<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 AGGRESSIVE GROWTH FUND, CLASS B YEAR END JUN-30-1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF
COLONIAL AGGRESSIVE GROWTH, CLASS B YEAR END JUN-30-1997
</LEGEND>
<CIK> 0000883163
<NAME> COLONIAL TRUST VI
<SERIES>
<NUMBER> 5
<NAME> COLONIAL AGGRESSIVE GROWTH FUND, CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 3134
<INVESTMENTS-AT-VALUE> 3778
<RECEIVABLES> 0
<ASSETS-OTHER> 40
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3818
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5
<TOTAL-LIABILITIES> 5
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3006
<SHARES-COMMON-STOCK> 25
<SHARES-COMMON-PRIOR> 25
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (1)
<ACCUMULATED-NET-GAINS> 164
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 644
<NET-ASSETS> 3813
<DIVIDEND-INCOME> 6
<INTEREST-INCOME> 14
<OTHER-INCOME> 0
<EXPENSES-NET> (59)
<NET-INVESTMENT-INCOME> (39)
<REALIZED-GAINS-CURRENT> 194
<APPREC-INCREASE-CURRENT> 250
<NET-CHANGE-FROM-OPS> 405
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 423
<ACCUMULATED-NII-PRIOR> 2
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 30
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 148
<AVERAGE-NET-ASSETS> 3472
<PER-SHARE-NAV-BEGIN> 11.280
<PER-SHARE-NII> (0.200)
<PER-SHARE-GAIN-APPREC> 1.475
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.015)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.540
<EXPENSE-RATIO> 2.30
<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 AGGRESSIVE GROWTH FUND, CLASS D YEAR END JUN-30-1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF
COLONIAL AGGRESSIVE GROWTH, CLASS D YEAR END JUN-30-1997
</LEGEND>
<CIK> 0000883163
<NAME> COLONIAL TRUST VI
<SERIES>
<NUMBER> 5
<NAME> COLONIAL AGGRESSIVE GROWTH FUND, CLASS D
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 3134
<INVESTMENTS-AT-VALUE> 3778
<RECEIVABLES> 0
<ASSETS-OTHER> 40
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3818
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5
<TOTAL-LIABILITIES> 5
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3006
<SHARES-COMMON-STOCK> 25
<SHARES-COMMON-PRIOR> 25
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (1)
<ACCUMULATED-NET-GAINS> 164
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 644
<NET-ASSETS> 3813
<DIVIDEND-INCOME> 6
<INTEREST-INCOME> 14
<OTHER-INCOME> 0
<EXPENSES-NET> (59)
<NET-INVESTMENT-INCOME> (39)
<REALIZED-GAINS-CURRENT> 194
<APPREC-INCREASE-CURRENT> 250
<NET-CHANGE-FROM-OPS> 405
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 423
<ACCUMULATED-NII-PRIOR> 2
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 30
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 148
<AVERAGE-NET-ASSETS> 3472
<PER-SHARE-NAV-BEGIN> 11.280
<PER-SHARE-NII> (0.200)
<PER-SHARE-GAIN-APPREC> 1.475
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.015)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.540
<EXPENSE-RATIO> 2.30
<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 EQUITY INCOME FUND, CLASS A YEAR END JUN-30-1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF COLONIAL
EQUITY INCOME FUND, CLASS A YEAR END JUN-30-1997
</LEGEND>
<CIK> 0000883163
<NAME> COLONIAL TRUST VI
<SERIES>
<NUMBER> 4
<NAME> COLONIAL EQUITY INCOME FUND, CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 3342
<INVESTMENTS-AT-VALUE> 3868
<RECEIVABLES> 10
<ASSETS-OTHER> 40
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3918
<PAYABLE-FOR-SECURITIES> 61
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2
<TOTAL-LIABILITIES> 63
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3030
<SHARES-COMMON-STOCK> 254
<SHARES-COMMON-PRIOR> 250
<ACCUMULATED-NII-CURRENT> 24
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 275
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 526
<NET-ASSETS> 3855
<DIVIDEND-INCOME> 80
<INTEREST-INCOME> 15
<OTHER-INCOME> 0
<EXPENSES-NET> (56)
<NET-INVESTMENT-INCOME> 39
<REALIZED-GAINS-CURRENT> 295
<APPREC-INCREASE-CURRENT> 437
<NET-CHANGE-FROM-OPS> 771
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (40)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5
<NUMBER-OF-SHARES-REDEEMED> (5)
<SHARES-REINVESTED> 40
<NET-CHANGE-IN-ASSETS> 771
<ACCUMULATED-NII-PRIOR> 20
<ACCUMULATED-GAINS-PRIOR> (20)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 27
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 144
<AVERAGE-NET-ASSETS> 3352
<PER-SHARE-NAV-BEGIN> 10.280
<PER-SHARE-NII> 0.141
<PER-SHARE-GAIN-APPREC> 2.428
<PER-SHARE-DIVIDEND> (0.159)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.690
<EXPENSE-RATIO> 1.55
<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 EQUITY INCOME FUND, CLASS B YEAR END JUN-30-1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF COLONIAL
EQUITY INCOME FUND, CLASS B YEAR END JUN-30-1997
</LEGEND>
<CIK> 0000883163
<NAME> COLONIAL TRUST VI
<SERIES>
<NUMBER> 4
<NAME> COLONIAL EQUITY INCOME FUND, CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 3342
<INVESTMENTS-AT-VALUE> 3868
<RECEIVABLES> 10
<ASSETS-OTHER> 40
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3918
<PAYABLE-FOR-SECURITIES> 61
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2
<TOTAL-LIABILITIES> 63
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3030
<SHARES-COMMON-STOCK> 25
<SHARES-COMMON-PRIOR> 25
<ACCUMULATED-NII-CURRENT> 24
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 275
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 526
<NET-ASSETS> 3855
<DIVIDEND-INCOME> 80
<INTEREST-INCOME> 15
<OTHER-INCOME> 0
<EXPENSES-NET> (56)
<NET-INVESTMENT-INCOME> 39
<REALIZED-GAINS-CURRENT> 295
<APPREC-INCREASE-CURRENT> 437
<NET-CHANGE-FROM-OPS> 771
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> 771
<ACCUMULATED-NII-PRIOR> 20
<ACCUMULATED-GAINS-PRIOR> (20)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 27
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 144
<AVERAGE-NET-ASSETS> 3352
<PER-SHARE-NAV-BEGIN> 10.260
<PER-SHARE-NII> 0.058
<PER-SHARE-GAIN-APPREC> 2.413
<PER-SHARE-DIVIDEND> (0.101)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.630
<EXPENSE-RATIO> 2.30
<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 EQUITY INCOME FUND, CLASS D YEAR END JUN-30-1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF COLONIAL
EQUITY INCOME FUND, CLASS D YEAR END JUN-30-1997
</LEGEND>
<CIK> 0000883163
<NAME> COLONIAL TRUST VI
<SERIES>
<NUMBER> 4
<NAME> COLONIAL EQUITY INCOME FUND, CLASS D
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 3342
<INVESTMENTS-AT-VALUE> 3868
<RECEIVABLES> 10
<ASSETS-OTHER> 40
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3918
<PAYABLE-FOR-SECURITIES> 61
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2
<TOTAL-LIABILITIES> 63
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3030
<SHARES-COMMON-STOCK> 25
<SHARES-COMMON-PRIOR> 25
<ACCUMULATED-NII-CURRENT> 24
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 275
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 526
<NET-ASSETS> 3855
<DIVIDEND-INCOME> 80
<INTEREST-INCOME> 15
<OTHER-INCOME> 0
<EXPENSES-NET> (56)
<NET-INVESTMENT-INCOME> 39
<REALIZED-GAINS-CURRENT> 295
<APPREC-INCREASE-CURRENT> 437
<NET-CHANGE-FROM-OPS> 771
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> 771
<ACCUMULATED-NII-PRIOR> 20
<ACCUMULATED-GAINS-PRIOR> (20)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 27
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 144
<AVERAGE-NET-ASSETS> 3352
<PER-SHARE-NAV-BEGIN> 10.260
<PER-SHARE-NII> 0.058
<PER-SHARE-GAIN-APPREC> 2.413
<PER-SHARE-DIVIDEND> (0.101)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.630
<EXPENSE-RATIO> 2.30
<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 INTERNATIONAL EQUITY FUND, CLASS A YEAR END JUN-30-1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF
COLONIAL INTERNATIONAL EQUITY FUND, CLASS A YEAR END JUN-30-1997
</LEGEND>
<CIK> 0000883163
<NAME> COLONIAL TRUST VI
<SERIES>
<NUMBER> 3
<NAME> COLONIAL INTERNATIONAL EQUITY FUND, CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 13213
<INVESTMENTS-AT-VALUE> 15549
<RECEIVABLES> 97
<ASSETS-OTHER> 40
<OTHER-ITEMS-ASSETS> 14
<TOTAL-ASSETS> 15700
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4
<TOTAL-LIABILITIES> 4
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13183
<SHARES-COMMON-STOCK> 1290
<SHARES-COMMON-PRIOR> 1450
<ACCUMULATED-NII-CURRENT> 112
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 66
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2335
<NET-ASSETS> 15696
<DIVIDEND-INCOME> 347
<INTEREST-INCOME> 66
<OTHER-INCOME> 0
<EXPENSES-NET> 279
<NET-INVESTMENT-INCOME> 134
<REALIZED-GAINS-CURRENT> 161
<APPREC-INCREASE-CURRENT> 1958
<NET-CHANGE-FROM-OPS> 2253
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (80)
<DISTRIBUTIONS-OF-GAINS> (122)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> (179)
<SHARES-REINVESTED> 19
<NET-CHANGE-IN-ASSETS> 253
<ACCUMULATED-NII-PRIOR> 39
<ACCUMULATED-GAINS-PRIOR> 39
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 149
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 353
<AVERAGE-NET-ASSETS> 15985
<PER-SHARE-NAV-BEGIN> 10.300
<PER-SHARE-NII> 0.093
<PER-SHARE-GAIN-APPREC> 1.456
<PER-SHARE-DIVIDEND> (0.055)
<PER-SHARE-DISTRIBUTIONS> (0.084)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.710
<EXPENSE-RATIO> 1.75
<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 INTERNATIONAL EQUITY FUND, CLASS B YEAR END JUN-30-1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF
COLONIAL INTERNATIONAL EQUITY FUND, CLASS B YEAR END JUN-30-1997
</LEGEND>
<CIK> 0000883163
<NAME> COLONIAL TRUST VI
<SERIES>
<NUMBER> 3
<NAME> COLONIAL INTERNATIONAL EQUITY FUND, CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 13213
<INVESTMENTS-AT-VALUE> 15549
<RECEIVABLES> 97
<ASSETS-OTHER> 40
<OTHER-ITEMS-ASSETS> 14
<TOTAL-ASSETS> 15700
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4
<TOTAL-LIABILITIES> 4
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13183
<SHARES-COMMON-STOCK> 25
<SHARES-COMMON-PRIOR> 25
<ACCUMULATED-NII-CURRENT> 112
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 66
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2335
<NET-ASSETS> 15696
<DIVIDEND-INCOME> 347
<INTEREST-INCOME> 66
<OTHER-INCOME> 0
<EXPENSES-NET> 279
<NET-INVESTMENT-INCOME> 134
<REALIZED-GAINS-CURRENT> 161
<APPREC-INCREASE-CURRENT> 1958
<NET-CHANGE-FROM-OPS> 2253
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (2)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 19
<NET-CHANGE-IN-ASSETS> 253
<ACCUMULATED-NII-PRIOR> 39
<ACCUMULATED-GAINS-PRIOR> 39
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 149
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 353
<AVERAGE-NET-ASSETS> 15985
<PER-SHARE-NAV-BEGIN> 10.280
<PER-SHARE-NII> 0.014
<PER-SHARE-GAIN-APPREC> 1.450
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.084)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.660
<EXPENSE-RATIO> 2.50
<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 INTERNATIONAL EQUITY FUND, CLASS D YEAR END JUN-30-1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF
COLONIAL INTERNATIONAL EQUITY FUND, CLASS D YEAR END JUN-30-1997
</LEGEND>
<CIK> 0000883163
<NAME> COLONIAL TRUST VI
<SERIES>
<NUMBER> 3
<NAME> COLONIAL INTERNATIONAL EQUITY FUND, CLASS D
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 13213
<INVESTMENTS-AT-VALUE> 15549
<RECEIVABLES> 97
<ASSETS-OTHER> 40
<OTHER-ITEMS-ASSETS> 14
<TOTAL-ASSETS> 15700
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4
<TOTAL-LIABILITIES> 4
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13183
<SHARES-COMMON-STOCK> 25
<SHARES-COMMON-PRIOR> 25
<ACCUMULATED-NII-CURRENT> 112
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 66
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2335
<NET-ASSETS> 15696
<DIVIDEND-INCOME> 347
<INTEREST-INCOME> 66
<OTHER-INCOME> 0
<EXPENSES-NET> 279
<NET-INVESTMENT-INCOME> 134
<REALIZED-GAINS-CURRENT> 161
<APPREC-INCREASE-CURRENT> 1958
<NET-CHANGE-FROM-OPS> 2253
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (2)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 19
<NET-CHANGE-IN-ASSETS> 253
<ACCUMULATED-NII-PRIOR> 39
<ACCUMULATED-GAINS-PRIOR> 39
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 149
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 353
<AVERAGE-NET-ASSETS> 15985
<PER-SHARE-NAV-BEGIN> 10.280
<PER-SHARE-NII> 0.014
<PER-SHARE-GAIN-APPREC> 1.450
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.084)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.660
<EXPENSE-RATIO> 2.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
[Chase logo]
GLOBAL CUSTODY AGREEMENT
This AGREEMENT is effective August 17, 1997, and is between THE CHASE
MANHATTAN BANK ("Bank") and each of the trusts on behalf of each of the funds
set forth in Schedule A hereto (with each fund a "Customer").
It is hereby agreed as follows:
1. Customer Accounts.
Bank shall establish and maintain the following accounts ("Accounts"):
(a) A custody account in the name of Customer ("Custody Account") for
any and all stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money, bullion, coin and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same or evidencing or representing any other rights or
interests therein and other similar property whether certificated or
uncertificated as may be received by Bank or its Subcustodian (as defined in
Section 3) for the account of Customer ("Securities"); and
(b) A deposit account in the name of Customer ("Deposit Account") for
any and all cash in any currency received by Bank or its Subcustodian for the
account of Customer, which cash shall not be subject to withdrawal by draft or
check.
Customer warrants its authority to: 1) deposit the cash and Securities
("Assets") received in the Accounts and 2) give Instructions (as defined in
Section 11) concerning the Accounts. Bank may deliver securities of the same
class in place of those deposited in the Custody Account.
Upon written agreement between Bank and Customer, additional Accounts
may be established and separately accounted for as additional Accounts
hereunder.
2. Maintenance of Securities and Cash at Bank and Subcustodian
Locations.
Unless Instructions specifically require another location acceptable to
Bank:
(a) Securities shall be held in the country or other jurisdiction in
which the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired; and
(b) Cash shall be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or
non-interest bearing accounts as may be available for the particular currency.
To the extent Instructions are issued and Bank can comply with such
<PAGE>
Instructions, Bank is authorized to maintain cash balances on deposit for
Customer with itself or one of its "Affiliates" at such reasonable rates of
interest as may from time to time be paid on such accounts, or in non-interest
bearing accounts as Customer may direct, if acceptable to Bank. For purposes
hereof, the term "Affiliate" shall mean an entity controlling, controlled by, or
under common control with, Bank.
If Customer wishes to have any of its Assets held in the custody of an
institution other than the established Subcustodians as defined in Section 3 (or
their securities depositories), such arrangement must be authorized by a written
agreement, signed by Bank and Customer.
3. Subcustodians and Securities Depositories.
Bank may act hereunder through the subcustodians listed in Schedule B
hereof with which Bank has entered into subcustodial agreements
("Subcustodians"). Customer authorizes Bank to hold Assets in the Accounts in
accounts which Bank has established with one or more of its branches or
Subcustodians. Bank and Subcustodians are authorized to hold any of the
Securities in their account with any securities depository in which they
participate.
Bank reserves the right to add new, replace or remove Subcustodians.
Customer shall be given reasonable notice by Bank of any amendment to Schedule
B. Upon request by Customer, Bank shall identify the name, address and principal
place of business of any Subcustodian of Customer's Assets and the name and
address of the governmental agency or other regulatory authority that supervises
or regulates such Subcustodian.
4. Use of Subcustodian.
(a) Bank shall identify the Assets on its books as belonging to
Customer.
(b) A Subcustodian shall hold such Assets together with assets
belonging to other customers of Bank in accounts identified on such
Subcustodian's books as custody accounts for the exclusive benefit of customers
of Bank.
(c) Any Assets in the Accounts held by a Subcustodian shall be subject
only to the instructions of Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian shall be subject only to
the instructions of such Subcustodian.
(d) Any agreement Bank enters into with a Subcustodian for holding
Bank's customers' assets shall provide that such assets shall not be subject to
any right, charge, security interest, lien or claim of any kind in favor of such
Subcustodian except for safe custody or administration, and that the beneficial
ownership of such assets shall be freely transferable without the payment of
money or value other than for safe custody or administration or, in the case of
cash deposits, except for liens or rights in favor of creditors of the
Subcustodian arising under bankruptcy, insolvency or similar laws. Where
Securities are deposited by a Subcustodian with a securities depository, Bank
shall cause the Subcustodian to identify on its books as belonging to Bank, as
agent, the Securities shown on the Subcustodian's account on the books of such
securities depository. The foregoing shall not apply to the extent of any
special agreement or arrangement made by Customer with any particular
Subcustodian.
5. Deposit Account Transactions.
(a) Bank or its Subcustodians shall make payments from the Deposit
Account upon receipt of Instructions which include all information required by
Bank.
2
<PAGE>
(b) In the event that any payment to be made under this Section 5
exceeds the funds available in the Deposit Account, Bank, in its discretion, may
advance Customer such excess amount which shall be deemed a loan payable on
demand, bearing interest at the rate customarily charged by Bank on similar
loans.
(c) If Bank credits the Deposit Account on a payable date, or at any
time prior to actual collection and reconciliation to the Deposit Account, with
interest, dividends, redemptions or any other amount due, Customer shall
promptly return any such amount upon oral or written notification: (i) that such
amount has not been received in the ordinary course of business or (ii) that
such amount was incorrectly credited. If Customer does not promptly return any
amount upon such notification, Bank shall be entitled, upon oral or written
notification to Customer, to reverse such credit by debiting the Deposit Account
for the amount previously credited. Bank or its Subcustodian shall have no duty
or obligation to institute legal proceedings, file a claim or a proof of claim
in any insolvency proceeding or take any other action with respect to the
collection of such amount, but may act for Customer upon Instructions after
consultation with Customer.
6. Custody Account Transactions.
(a) Securities shall be transferred, exchanged or delivered by Bank or
its Subcustodian upon receipt by Bank of Instructions which include all
information required by Bank. Settlement and payment for Securities received
for, and delivery of Securities out of, the Custody Account may be made in
accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of Securities to a
purchaser, dealer or their agents against a receipt with the expectation of
receiving later payment and free delivery. Delivery of Securities out of the
Custody Account may also be made in any manner specifically required by
Instructions acceptable to Bank.
(b) Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Securities with respect to any sale,
exchange or purchase of Securities. Otherwise, such transactions shall be
credited or debited to the Accounts on the date cash or Securities are actually
received by Bank and reconciled to the Account.
(i) Bank, upon oral or written notice to Customer, may reverse
credits or debits made to the Accounts in its discretion if the related
transaction fails to settle within a reasonable period, determined by
Bank in its discretion, after the contractual settlement date for the
related transaction.
(ii) If any Securities delivered pursuant to this Section 6
are returned by the recipient thereof, Bank may reverse the credits and
debits of the particular transaction at any time.
7. Actions of Bank.
Bank shall follow Instructions received regarding Assets held in the
Accounts. However, until it receives Instructions to the contrary, Bank shall:
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items which
call for payment upon presentation, to the extent that Bank or Subcustodian is
actually aware of such opportunities.
(b) Execute in the name of Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for
definitive Securities.
3
<PAGE>
(d) Appoint brokers and agents for any transaction for which Bank has
received Instructions involving the Securities, including, without limitation,
Affiliates of Bank or any Subcustodian.
(e) Issue statements to Customer, at times mutually agreed
upon, identifying the Assets in the Accounts.
Bank shall send Customer an advice or notification of any transfers of
Assets to or from the Accounts. Such statements, advices or notifications shall
indicate the identity of the entity having custody of the Assets. Unless
Customer sends Bank a written exception or objection to any Bank statement
within sixty (60) days of receipt, Customer shall be deemed to have approved
such statement. In such event, or where Customer has otherwise approved any such
statement, Bank shall, to the extent permitted by law, be released, relieved and
discharged with respect to all matters set forth in such statement or reasonably
implied therefrom and based on information which Customer knew or reasonably
should have known as though it had been settled by the decree of a court of
competent jurisdiction in an action where Customer and all persons having or
claiming an interest in Customer or Customer's Accounts were parties.
Provided that Bank has acted in accordance with the standard of care in
Section 12(a) hereof, all collections of funds or other property paid or
distributed in respect of Securities in the Custody Account shall be made at the
risk of Customer. Provided that Bank has acted in accordance with the standard
of care in Section 12(a) hereof, Bank shall have no liability for any loss
occasioned by delay in the actual receipt of notice by Bank or by its
Subcustodians of any payment, redemption or other transaction regarding
Securities in the Custody Account in respect of which Bank has agreed to take
any action hereunder.
8. Corporate Actions; Proxies; Tax Reclaims.
(a) Corporate Actions. Whenever Bank receives information concerning
the Securities which requires discretionary action by the beneficial owner of
the Securities (other than a proxy), such as subscription rights, bonus issues,
stock repurchase plans and rights offerings, or legal notices or other material
intended to be transmitted to securities holders ("Corporate Actions"), Bank
shall give Customer prompt notice of such Corporate Actions to the extent that
Bank has received actual notice of the Corporate Action from the relevant issuer
or issuer's agent or as to which notice is published in publications routinely
utilized by Bank for this purpose.
When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split is received which bears an expiration
date, Bank shall endeavor to obtain Instructions from Customer or its Authorized
Person (as defined in Section 10 hereof), but if Instructions are not received
in time for Bank to take timely action, or actual notice of such Corporate
Action was received too late to seek Instructions, Bank is authorized but need
not sell such rights entitlement or fractional interest and to credit the
Deposit Account with the proceeds, if Bank, in good faith, deems such action to
be appropriate in which case it shall be held harmless
for any such action.
(b) Proxy Voting. Bank shall provide proxy voting services, if elected
by Customer, in accordance with the terms of the proxy voting services rider
hereto. Proxy voting services may be provided by Bank or, in whole or in part,
by one or more third parties appointed by Bank (which may be Affiliates of
Bank).
(c) Tax Reclaims.
(i) Subject to the provisions hereof, Bank shall apply for a
reduction of withholding tax and any refund of any tax paid or tax
credits which apply in each applicable market in respect of income
payments on Securities for the benefit of Customer which Bank believes
may be available to such Customer.
4
<PAGE>
(ii) The provision of tax reclaim services by Bank is
conditional upon Bank receiving from the beneficial owner of Securities
(A) a declaration of its identity and place of residence and (B)
certain other documentation (pro forma copies of which are available
from Bank). Customer acknowledges that, if Bank does not receive such
declarations, documentation and information, additional United Kingdom
taxation shall be deducted from all income received in respect of
Securities issued outside the United Kingdom and that U.S. non-resident
alien tax or U.S. backup withholding tax shall be deducted from U.S.
source income. Customer shall provide to Bank such documentation and
information as it may require in connection with taxation, and warrants
that, when given, this information shall be true and correct in every
respect, not misleading in any way, and contain all material
information. Customer undertakes to notify Bank immediately if any such
information requires updating or amendment.
(iii) Provided that Bank has acted in accordance with the
standard of care in Section 12(a) hereof, Bank shall not be liable to
Customer or any third party for any taxes, fines or penalties payable
by Bank or Customer, and shall be indemnified accordingly, whether
these result from the inaccurate completion of documents by Customer or
any third party acting as agent for Customer, or as a result of the
provision to Bank or any third party of inaccurate or misleading
information or the withholding of material information by Customer or
any other third party, or as a result of any delay of any revenue
authority or any other matter beyond the control of Bank.
(iv) Customer confirms that Bank is authorized to deduct from
any cash received or credited to the Deposit Account any taxes or
levies required by any revenue or governmental authority for whatever
reason in respect of the Securities or Cash Accounts.
(v) Bank shall perform tax reclaim services only with respect
to taxation levied by the revenue authorities of the countries notified
to Customer from time to time and Bank may, by notifi cation in
writing, at its absolute discretion, supplement or amend the markets in
which the tax reclaim services are offered. Other than as expressly
provided in this sub-clause, Bank shall have no responsibility with
regard to Customer's tax position or status in any jurisdiction.
(vi) Customer confirms that Bank is authorized to disclose any
information requested by any revenue authority or any governmental body
in relation to Customer or the Securities and/or Cash held for
Customer.
(vii) Tax reclaim services may be provided by Bank or, in
whole or in part, by one or more third parties appointed by Bank (which
may be Affiliates of Bank); provided that Bank shall be liable for the
performance of any such third party to the same extent as Bank would
have been if it performed such services itself.
9. Nominees.
Securities which are ordinarily held in registered form may be
registered in a nominee name of Bank, Subcustodian or securities depository, as
the case may be. Bank may without notice to Customer cause any such Securities
to cease to be registered in the name of any such nominee and to be registered
in the name of Customer. In the event that any Securities registered in a
nominee name are called for partial redemption by the issuer, Bank may allot the
called portion to the respective beneficial holders of such class of security in
any manner Bank deems to be fair and equitable. Customer shall hold Bank,
Subcustodians, and their respective nominees harmless from any liability arising
directly or indirectly from their status as a mere record holder of Securities
in the Custody Account.
5
<PAGE>
10. Authorized Persons.
As used herein, the term "Authorized Person" means employees or agents
including investment managers as have been designated by written notice from
Customer or its designated agent to act on behalf of Customer hereunder. Such
persons shall continue to be Authorized Persons until such time as Bank receives
Instructions from Customer or its designated agent that any such employee or
agent is no longer an Authorized Person.
11. Instructions.
The term "Instructions" means instructions of any Authorized Person
received by Bank, via telephone, telex, facsimile transmission, bank wire or
other teleprocess or electronic instruction or trade information system
acceptable to Bank which Bank believes in good faith to have been given by
Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which Bank may specify. Unless
otherwise expressly provided, all Instructions shall continue in full force and
effect until canceled or superseded.
Any Instructions delivered to Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Person), but Customer shall hold Bank
harmless for the failure of an Authorized Person to send such confirmation in
writing, the failure of such confirmation to conform to the telephone
instructions received or Bank's failure to produce such confirmation at any
subsequent time. Bank may electronically record any Instructions given by
telephone, and any other telephone discussions with respect to the Custody
Account. Customer shall be responsible for safeguarding any testkeys,
identification codes or other security devices which Bank shall make available
to Customer or its Authorized Persons.
12. Standard of Care; Liabilities.
(a) Bank shall be responsible for the performance of only such duties
as are set forth herein or expressly contained in Instructions which are
consistent with the provisions hereof as follows:
(i) Bank shall use reasonable care with respect to its
obligations hereunder and the safekeeping of Assets. Bank shall be
liable to Customer for any loss which shall occur as the result of the
failure of a Subcustodian to exercise reasonable care with respect to
the safekeeping of such Assets to the same extent that Bank would be
liable to Customer if Bank were holding such Assets in New York. In the
event of any loss to Customer by reason of the failure of Bank or its
Subcustodian to utilize reasonable care (including, but not limited to,
as respects corporate actions), Bank shall be liable to Customer only
to the extent of Customer's direct damages, to be determined based on
the market value of the property which is the subject of the loss at
the date of discovery of such loss and without reference to any special
conditions or circumstances. Bank shall have no liability whatsoever
for any consequential, special, indirect or speculative loss or damages
(including, but not limited to, lost profits) suffered by Customer in
connection with the transactions contemplated hereby and the
relationship established hereby even if Bank has been advised as to the
possibility of the same and regardless of the form of the action.
(ii) Bank shall not be responsible for the insolvency of any
Subcustodian which is not a branch or Affiliate of Bank. Bank shall not
be responsible for any act, omission, default or the solvency of any
broker or agent which it or a Subcustodian appoints unless such
appointment was made negligently or in bad faith.
6
<PAGE>
(iii) Bank shall be indemnified by, and without liability to
Customer for any action taken or omitted by Bank whether pursuant to
Instructions or otherwise within the scope hereof if such act or
omission was in good faith, without negligence. In performing its
obligations hereunder, Bank may rely on the genuineness of any document
which it believes in good faith to have been validly executed.
(iv) Customer shall pay for and hold Bank harmless from any
liability or loss resulting from the imposition or assessment of any
taxes or other governmental charges, and any related expenses with
respect to income from or Assets in the Accounts.
(v) Bank shall be entitled to rely, and may act, upon the
advice of counsel (who may be counsel for Customer) on all matters and
shall be without liability for any action reasonably taken or omitted
pursuant to such advice.
(vi) Bank need not maintain any insurance for the benefit of
Customer.
(vii) Without limiting the foregoing, Bank shall not be liable
for any loss which results from: 1) the general risk of investing, or
2) investing or holding Assets in a particular country including, but
not limited to, losses resulting from malfunction, interruption of or
error in the transmission of information caused by any machines or
system or interruption of communication facilities, abnormal operating
conditions, nationalization, expropriation or other governmental
actions; regulation of the banking or securities industry; currency
restrictions, devaluations or fluctuations; and market conditions which
prevent the orderly execution of securities transactions or affect the
value of Assets; except that, with respect to the failure of machines,
systems, interruption of communication facilities or abnormal operating
conditions on Bank or a Subcustodian's premises or otherwise within the
control of Bank or a Subcustodian, Bank shall not be so excused to the
extent that such failure was on account of Bank's or the Subcustodian's
(as the case may be) negligence (such as a failure to have had routine
maintenance performed or to have selected equipment reasonably suitable
for the purposes contemplated hereby given, in the case of
Subcustodians, local market practices with respect to such matters).
Bank confirms that it has in place back-up procedures, periodically
tested by it, that would permit continued operation of its Brooklyn,
New York and Bournemouth, England data centers in the event of a
failure of its systems or equipment.
(viii) Neither party shall be liable to the other for any loss
due to forces beyond their control including, but not limited to
strikes or work stoppages, acts of war (whether declared or undeclared)
or terrorism, insurrection, revolution, nuclear fusion, fission or
radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that Bank shall have no duty or
responsibility to:
(i) question Instructions or make any suggestions to
Customer or an Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to
investments or the retention of Securities;
(iii) advise Customer or an Authorized Person regarding any
default in the payment of principal or income of any security other
than as provided in Section 5(c) hereof;
(iv) evaluate or report to Customer or an Authorized Person
regarding the financial condition of any broker, agent or other party
to which Securities are delivered or payments are made pursuant hereto;
and
7
<PAGE>
(v) review or reconcile trade confirmations received from
brokers. Customer or its Authorized Persons issuing Instructions shall
bear any responsibility to review such confirmations against
Instructions issued to and statements issued by Bank.
(c) Customer authorizes Bank to act hereunder notwithstanding that Bank
or any of its divisions or Affiliates may have a material interest in a
transaction, or circumstances are such that Bank may have a potential conflict
of duty or interest including the fact that Bank or any of its Affiliates may
provide brokerage services to other customers, act as financial advisor to the
issuer of Securities, act as a lender to the issuer of Securities, act in the
same transaction as agent for more than one customer, have a material interest
in the issue of Securities, or earn profits from any of the activities listed
herein.
13. Fees and Expenses.
Customer shall pay Bank for its services hereunder the fees set forth
in Schedule C hereto or such other amounts as may be agreed upon in writing,
together with Bank's reasonable out-of-pocket or incidental expenses, such as,
but not limited to, scrip and stamp fees, legal fees registration fees, and
other costs that Bank pays on behalf of Customer. Bank shall have a lien on and
is authorized to charge any Accounts of Customer for any amount owing to Bank
under any provision hereof upon oral or written notice to Customer.
14. Miscellaneous.
(a) Foreign Exchange Transactions. To facilitate the administration of
Customer's trading and investment activity, subject to Instructions (which may
be standing Instructions) Bank is authorized to enter into spot or forward
foreign exchange contracts with Customer and may also provide foreign exchange
through its subsidiaries, Affiliates or Subcustodians. Instructions, including
standing instructions, may be issued with respect to such contracts but Bank may
establish rules or limitations concerning any foreign exchange facility made
available. In all cases where Bank, its subsidiaries, Affiliates or
Subcustodians enter into a foreign exchange contract related to Accounts, the
terms and conditions of the then current foreign exchange contract of Bank, its
subsidiary, Affiliate or Subcustodian and, to the extent not inconsistent, this
Agreement shall apply to such transaction.
(b) Certification of Residency, etc. Customer certifies that it is a
resident of the United States and shall notify Bank of any changes in residency.
Bank may rely upon this certification or the certification of such other facts
as may be required to administer Bank's obligations hereunder. Customer shall
indemnify Bank against all losses, liability, claims or demands arising directly
or indirectly from any such certifications.
(c) Access to Records. Bank shall allow Customer's independent public
accountant reasonable access to the records of Bank relating to the Assets as is
required in connection with their examination of books and records pertaining to
Customer's affairs. Subject to restrictions under applicable law, Bank shall
also obtain an undertaking to permit Customer's independent public accountants
reasonable access to the records of any Subcustodian which has physical
possession of any Assets as may be required in connection with the examination
of Customer's books and records.
(d) Governing Law; Successors and Assigns, Captions THIS AGREEMENT
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED IN NEW YORK and shall not be assignable by either
party, but shall bind the successors in interest of Customer and Bank. The
captions given to the sections and subsections of this Agreement are for
convenience of reference only and are not to be used to interpret this
Agreement.
8
<PAGE>
(e) Entire Agreement; Applicable Riders. Customer
represents that the Assets deposited in the Accounts are (Check
one):
____ Employee Benefit Plan or other assets subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA");
X Investment Company assets subject to certain U.S.
Securities and Exchange Commission rules and regulations;
____ Neither of the above.
This Agreement consists exclusively of this document together with
Schedules A-C, and the following Rider(s) [Check applicable rider(s)]:
____ ERISA
X INVESTMENT COMPANY
____ PROXY VOTING
X SPECIAL TERMS AND CONDITIONS
There are no other provisions hereof and this Agreement supersedes any
other agreements, whether written or oral, between the parties. Any amendment
hereto must be in writing, executed by both parties.
(f) Severability. In the event that one or more provisions hereof are
held invalid, illegal or unenforceable in any respect on the basis of any
particular circumstances or in any jurisdiction, the validity, legality and
enforceability of such provision or provisions under other circumstances or in
other jurisdictions and of the remaining provisions shall not in any way be
affected or impaired.
(g) Waiver. Except as otherwise provided herein, no failure or delay on
the part of either party in exercising any power or right hereunder operates as
a waiver, nor does any single or partial exercise of any power or right preclude
any other or further exercise, or the exercise of any other power or right. No
waiver by a party of any provision hereof, or waiver of any breach or default,
is effective unless in writing and signed by the party against whom the waiver
is to be enforced.
(h) Representations and Warranties. (i) Customer hereby represents and
warrants to Bank that: (A) it has full authority and power to deposit and
control the Securities and cash deposited in the Accounts; (B) it has all
necessary authority to use Bank as its custodian; (C) this Agreement constitutes
its legal, valid and binding obligation, enforceable in accordance with its
terms; (D) it shall have full authority and power to borrow moneys and enter
into foreign exchange transactions; and (E) it has not relied on any oral or
written representation made by Bank or any person on its behalf, and
acknowledges that this Agreement sets out to the fullest extent the duties of
Bank. (ii) Bank hereby represents and warrants to Customer that: (A) it has the
full power and authority to perform its obligations hereunder, (B) this
Agreement constitutes its legal, valid and binding obligation; enforceable in
accordance with its terms; and (C) that it has taken all necessary action to
authorize the execution and delivery hereof.
(i) Notices. All notices hereunder shall be effective when actually
received. Any notices or other communications which may be required hereunder
are to be sent to the parties at the following addresses or such other addresses
as may subsequently be given to the other party in writing: (a) Bank: The Chase
Manhattan Bank, 4 Chase MetroTech Center, Brooklyn, N.Y. 11245, Attention:
Global Investor Services, Investment
9
<PAGE>
Management Group (Colonial Relationship Manager) and to The Chase Manhattan
Bank, 3 Chase MetroTech Center, 8th floor, Brooklyn, N.Y. 11245, Attention:
Colonial Service Manager; and (b) Customer: [Fund name} c/o Colonial Management
Associates, Inc., One Financial Center, Boston, MA 02111. Att; Fund Accounting.
(j) Termination. This Agreement may be terminated by Customer or Bank
by giving ninety (90) days written notice to the other, provided that such
notice to Bank shall specify the names of the persons to whom Bank shall deliver
the Assets in the Accounts. If notice of termination is given by Bank, Customer
shall, within ninety (90) days following receipt of the notice, deliver to Bank
Instructions specifying the names of the persons to whom Bank shall deliver the
Assets. In either case Bank shall deliver the Assets to the persons so
specified, after deducting any amounts which Bank determines in good faith to be
owed to it under Section 13, an explanation for any such deductions shall be
furnished to Customer. If within ninety (90) days following receipt of a notice
of termination by Bank, Bank does not receive Instructions from Customer
specifying the names of the persons to whom Bank shall deliver the Assets, Bank,
at its election, may deliver the Assets to a bank or trust company doing
business in the State of New York to be held and disposed of pursuant to the
provisions hereof, or to Authorized Persons, or may continue to hold the Assets
until Instructions are provided to Bank.
(k) Imputation of certain information. Bank shall not be held
responsible for and shall not be required to have regard to information held by
any person by imputation or information of which Bank is not aware by virtue of
a "Chinese Wall" arrangement. If Bank becomes aware of confidential information
which in good faith it feels inhibits it from effecting a transaction hereunder
Bank may refrain from effecting it.
(l) Year 2000. Bank confirms that it is aware of the problem that may
be presented for certain computer systems by use of date fields and the like on
and after January 1, 2000 and that Bank has developed and is implementing a plan
to help assure that Bank's systems as the same relate to services provided
hereunder will be unaffected by such problems.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first-above written.
CUSTOMER
- --------
Trust Series
- ----- ------
Colonial Trust I Colonial High Yield Securities Fund
Colonial Income Fund
Colonial Strategic Income Fund
Colonial Tax-Managed Growth Fund
Colonial Trust II Colonial Government Money Market Fund
Colonial U.S. Government Fund
Colonial Short Duration U.S. Government Fund
Colonial Newport Tiger Cub Fund
Colonial Newport Japan Fund
Newport Greater China Fund
Colonial Trust III Colonial Select Value Fund
The Colonial Fund
Colonial Federal Securities Fund
Colonial Global Equity Fund
Colonial International Horizons Fund
Colonial International Fund for Growth
Colonial Strategic Balanced Fund
Colonial Trust IV Colonial Tax-Exempt Fund
Colonial Tax-Exempt Insured Fund
Colonial Municipal Money Market Fund
Colonial High Yield Municipal Fund
Colonial Utilities Fund
Colonial Intermediate Tax-Exempt Fund
Colonial Trust V Colonial Massachusetts Tax-Exempt Fund
Colonial Minnesota Tax-Exempt Fund
Colonial Michigan Tax-Exempt Fund
Colonial New York Tax-Exempt Fund
Colonial Ohio Tax-Exempt Fund
Colonial California Tax-Exempt Fund
Colonial Connecticut Tax-Exempt Fund
Colonial Florida Tax-Exempt Fund
Colonial North Carolina Tax-Exempt Fund
11
<PAGE>
Colonial Trust VI Colonial U.S. Stock Fund
Colonial Small Cap Value Fund
Colonial Aggressive Growth Fund
Colonial Equity Income Fund
Colonial International Equity Fund
Colonial Trust VII Colonial Newport Tiger Fund
Colonial Intermediate High Income Fund
Colonial InterMarket Income Trust I
Colonial Municipal Income Trust
Colonial High Income Municipal Trust
Colonial Investment Grade Municipal Trust
Keyport Variable
Investment Trust Colonial-Keyport Growth and Income Fund
Colonial-Keyport Utilities Fund
Colonial-Keyport International Fund for Growth
Colonial-Keyport U.S. Stock Fund
Colonial-Keyport Strategic Income Fund
Newport-Keyport Tiger Fund
Liberty All-Star Equity Fund, Variable Series
By:
--------------------------------------
Michael H. Koonce
Date:
--------------------------------------
Liberty All-Star Growth Fund, Inc.
Liberty All-Star Equity Fund
By:
--------------------------------------
Timothy J. Jacoby
Date:
-------------------------------------
THE CHASE MANHATTAN BANK
By:
--------------------------------------
Date:
-------------------------------------
12
<PAGE>
13
<PAGE>
Schedule A
August 17, 1997
Trust Series
Colonial Trust I Colonial High Yield Securities Fund
Colonial Income Fund
Colonial Strategic Income Fund
Colonial Tax-Managed Growth Fund
Colonial Trust II Colonial Government Money Market Fund
Colonial U.S. Government Fund
Colonial Short Duration U.S. Government Fund
Colonial Newport Tiger Cub Fund
Colonial Newport Japan Fund
Newport Greater China Fund
Colonial Trust III Colonial Select Value Fund
The Colonial Fund
Colonial Federal Securities Fund
Colonial Global Equity Fund
Colonial International Horizons Fund
Colonial International Fund for Growth
Colonial Strategic Balanced Fund
Colonial Trust IV Colonial Tax-Exempt Fund
Colonial Tax-Exempt Insured Fund
Colonial Municipal Money Market Fund
Colonial High Yield Municipal Fund
Colonial Utilities Fund
Colonial Intermediate Tax-Exempt Fund
Colonial Trust V Colonial Massachusetts Tax-Exempt Fund
Colonial Minnesota Tax-Exempt Fund
Colonial Michigan Tax-Exempt Fund
Colonial New York Tax-Exempt Fund
Colonial Ohio Tax-Exempt Fund
Colonial California Tax-Exempt Fund
Colonial Connecticut Tax-Exempt Fund
Colonial Florida Tax-Exempt Fund
Colonial North Carolina Tax-Exempt Fund
14
<PAGE>
Colonial Trust VI Colonial U.S. Stock Fund
Colonial Small Cap Value Fund
Colonial Aggressive Growth Fund
Colonial Equity Income Fund
Colonial International Equity Fund
Colonial Trust VII Colonial Newport Tiger Fund
Colonial Intermediate High Income Fund
Colonial InterMarket Income Trust I
Colonial Municipal Income Trust
Colonial High Income Municipal Trust
Colonial Investment Grade Municipal Trust
Liberty All-Star Growth Fund, Inc.
Liberty All-Star Equity Fund
Keyport Variable
Investment Trust Colonial-Keyport Growth and Income Fund
Colonial-Keyport Utilities Fund
Colonial-Keyport International Fund for Growth
Colonial-Keyport U.S. Stock Fund
Colonial-Keyport Strategic Income Fund
Newport-Keyport Tiger Fund
Liberty All-Star Equity Fund, Variable Series
15
<PAGE>
Schedule C
Colonial Funds
Global Custody Fee Schedule
April 17, 1997
Domestic Custody Services
Asset Based Fees Waived
Domestic Custody Transaction Fees
$ 5.00 per DTC or Fed Book Entry transaction
$ 7.00 per PTC transaction
$12.00 per Physical transaction
$25.00 per Future or Option Wire
$ 5.00 per Money Transfer
$ 4.00 per P&I - MBS
$ 7.00 per deliver and receive of block traded Repurchase Agreement
Note:
[bullet] Private placements that settle in physical form are priced
separately from those issues that settle in DTC or Cedel. The latter,
which are 144A eligible issues, are priced as any other DTC or Cedel
eligible issue.
[bullet] With respect to our global custody fees, you could also incur
out-or-pocket expenses which are charged at cost. these expenses can
include but are not limited to scrip and stamp fees, registration fees,
and legal fees. Photocopying an courier charges will not be charged to
Colonial.
[bullet] All out-of-pocket expenses are itemized and billed on a monthly basis,
as and when received.
[bullet] Within our global fee schedule, basis point charges are annualized and
based on month end market values
16
<PAGE>
STATE OF MASSACUSETTS)
: ss.
COUNTY OF UNITED STATES OF AMERICA)
On this 3rd day of October, 1997, before me personally came Michael H.
Koonce, to me known, who being by me duly sworn, did depose and say that he
resides in Hingham, Massachusetts at 36 Brewster Road, that he is Secretary of
Colonial Trust I through VII and Vice President of Keyport Variable Investment
Trust, two of the entities described in and which executed the foregoing
instrument; that he knows the seal of said entities, that the seal affixed to
said instrument is such seal, that it was so affixed by order of said entity,
and that he signed his name thereto by like order.
Sworn to before me this 3rd
day of October, 1997.
Notary
<PAGE>
STATE OF MASSACUSETTS)
: ss.
COUNTY OF UNITED STATES OF AMERICA)
On this 3rd day of October, 1997, before me personally came Timothy J.
Jacoby, to me known, who being by me duly sworn, did depose and say that he
resides in Concord, Massachusetts at 67 Authors Road, that he is Treasurer of
Liberty All-Star Growth Fund, Inc. and Liberty All-Star Equity Fund, two of the
entities described in and which executed the foregoing instrument; that he knows
the seal of said entities, that the seal affixed to said instrument is such
seal, that it was so affixed by order of said entity, and that he signed his
name thereto by like order.
Sworn to before me this 3rd
day of October, 1997.
Notary
2
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this day of , 199 , before me personally came ,
to me known, who being by me duly sworn, did depose and say that he/she resides
in at ; that he/she is a Vice President of THE CHASE MANHATTAN BANK,
the corporation described in and which executed the foregoing instrument; that
he/she knows the seal of said corporation, that the seal affixed to said
instrument is such corporate seal, that it was so affixed by order of the Board
of Directors of said corporation, and that he/she signed his/her name thereto by
like order.
Sworn to before me this
day of , 199 .
Notary
<PAGE>
Investment Company Rider to Global Custody Agreement
Between The Chase Manhattan Bank and
Each of the Trusts on behalf of each of the Funds set
forth in Schedule A to the Global Custody Agreement
effective August 17, 1997
The following modifications are made to the Agreement:
A. Add a new Section 15 to the Agreement as follows:
"15. Compliance with SEC rule 17f-5.
(a) Customer's board of directors (or equivalent body) (hereinafter
'Board') hereby delegates to Bank, and, except as to the country or countries as
to which Bank may, from time to time, advise Customer that it does not accept
such delegation, Bank hereby accepts the delegation to it, of the obligation to
perform as Customer's 'Foreign Custody Manager' (as that term is defined in SEC
rule 17f-5(a)(2)), both for the purpose of selecting Eligible Foreign Custodians
(as that term is defined in SEC rule 17f-5(a)(1), and as the same may be amended
from time to time, or that have otherwise been made exempt pursuant to an SEC
exemptive order) to hold Assets and of evaluating the contractual arrangements
with such Eligible Foreign Custodians (as set forth in SEC rule 17f-5(c)(2));
provided that, the term Eligible Foreign Custodian shall not include any
'Compulsory Depository.' A Compulsory Depository shall mean a securities
depository or clearing agency the use of which is compulsory because: (1) its
use is required by law or regulation, (2) securities cannot be withdrawn from
the depository, or (3) maintaining securities outside the depository is not
consistent with prevailing custodial practices in the country which the
depository serves. Compulsory Depositories used by Chase as of the date hereof
are set forth in Appendix 1-A hereto, and as the same may be amended on notice
to Customer from time to time.
(b) In connection with the foregoing, Bank shall:
(i) provide written reports notifying Customer's Board of the placement
of Assets with particular Eligible Foreign Custodians and of any
material change in the arrangements with such Eligible Foreign
Custodians, with such reports to be provided to Customer's Board at
such times as the Board deems reasonable and appropriate based on the
circumstances of Customer's foreign custody arrangements (and until
further notice from Customer such reports shall be provided not less
than quarterly with respect to the placement of Assets with particular
Eligible Foreign Custodians and with reasonable promptness upon the
occurrence of any material change in the arrangements with such
Eligible Foreign Custodians);
(ii) exercise such reasonable care, prudence and diligence in
performing as Customer's Foreign Custody Manager as a person having
responsibility for the safekeeping of Assets would exercise;
(iii) in selecting an Eligible Foreign Custodian, first have determined
that Assets placed and maintained in the safekeeping of such Eligible
Foreign Custodian shall be subject to reasonable care, based on the
standards applicable to custodians in the relevant market, after having
considered all factors relevant to the safekeeping of such Assets,
including, without limitation, those factors set forth in SEC rule 17f-
5(c)(1)(i)-(iv);
<PAGE>
(iv) determine that the written contract with the Eligible Foreign
Custodian (or, in the case of an Eligible Foreign Custodians that is a
securities depository or clearing agency, such contract, the rules or
established practices or procedures of the depository, or any
combination of the foregoing) requires that the Eligible Foreign
Custodian will provide reasonable care for Assets based on the
standards applicable to custodians in the relevant market. In making
this determination, Bank shall consider the provisions of Rule
17f-5(c)(2), together with whether Bank shall be liable to Customer for
any loss which shall occur as the result of the failure of the Eligible
Foreign Custodian to exercise reasonable care with respect to the
safekeeping of such Assets to the same extent that Bank would be liable
to Customer if Bank were holding such Assets in New York; and
(v) have established a system to monitor the continued appropriateness
of maintaining Assets with particular Eligible Foreign Custodians and
of the governing contractual arrangements; it being understood,
however, that in the event that Bank shall have determined that the
existing Eligible Foreign Custodian in a given country would no longer
afford Assets reasonable care and that no other Eligible Foreign
Custodian in that country would afford reasonable care, Bank shall
promptly so advise Customer and shall then act in accordance with the
Instructions of Customer with respect to the disposition of the
affected Assets.
Subject to (b)(i)-(v) above, Bank is hereby authorized to place and maintain
Assets on behalf of Customer with Eligible Foreign Custodians pursuant to a
written contract deemed appropriate by Bank.
(c) Except as expressly provided herein, Customer shall be solely
responsible to assure that the maintenance of Assets hereunder complies with the
rules, regulations, interpretations and exemptive orders promulgated by or under
the authority of the SEC.
(d) Bank represents to Customer that it is a U.S. Bank as defined in
Rule 17f-5(a)(7). Customer represents to Bank that: (1) the Assets being placed
and maintained in Bank's custody are subject to the Investment Company Act of
1940, as amended (the '1940 Act'), as the same may be amended from time to time;
(2) its Board: (i) has determined that it is reasonable to rely on Bank to
perform as Customer's Foreign Custody Manager (ii) or its investment advisor
shall have determined that Customer may maintain Assets in each country in which
Customer's Assets shall be held hereunder and determined to accept the risks
arising therefrom (including, but not limited to, a country's financial
infrastructure (and including any Compulsory Depository operating in such
country), prevailing custody and settlement practices, laws applicable to the
safekeeping and recovery of Assets held in custody, and the likelihood of
nationalization, currency controls and the like)."
B. Add the following after the first sentence of Section 3 of the
Agreement: "At the request of Customer, Bank may, but need not, add to Schedule
B an Eligible Foreign Custodian that is either a bank or a non-Compulsory
Depository where Bank has not acted as Foreign Custody Manager with respect to
the selection thereof. Bank shall notify Customer in the event that it elects
not to add any such entity."
C. Add the following language to the end of Section 3 of
the Agreement:
"The term Subcustodian as used herein shall mean the following:
(a) a 'U.S. Bank,' which shall mean a U.S. bank as defined
in SEC rule 17f-5(a)(7);
(b) an 'Eligible Foreign Custodian,' which shall mean (i) a banking
institution or trust company, incorporated or organized under the laws
of a country other than the United States, that is regulated as such by
that country's government or an agency thereof, (ii) a majority-owned
direct or indirect subsidiary of a U.S. bank or bank holding company
which subsidiary is incorporated or organized under the laws of a
country other than the United States; (iii) a securities depository or
clearing agency,
2
<PAGE>
incorporated or organized under the laws of a country other than the
United States, that acts as a system for the central handling of
securities or equivalent book-entries in that country and that is
regulated by a foreign financial regulatory authority as defined under
section 2(a)(5) of the 1940 Act, (iv) a securities depository or
clearing agency organized under the laws of a country other than the
United States to the extent acting as a transnational system for the
central handling of securities or equivalent book-entries, and (v) any
other entity that shall have been so qualified by exemptive order, rule
or other appropriate action of the SEC.
For purposes of clarity, it is agreed that as used in Section 12(a)(i), the term
Subcustodian shall include neither any Eligible Foreign Custodian as to which
Bank has not acted as Foreign Custody Manager nor any Compulsory Depository."
D. Insert the following language at the beginning of the second
sentence of Section 12(a)(i):
"Except with respect to those countries as to which the parties may
from time to time agree in writing otherwise,".
E. In recognition of the fact that compliance with amended Rule 17f-5
is in an early stage of development and of the importance to Bank of the
relationship between Bank and Customer, Bank hereby agrees that, if prior to
June 15, 1998, Bank makes any material change to this rider for its mutual fund
customers, Customer shall be given the option of continuing to operate under
this rider or pursuant to the changed rider. Customer shall promptly notify Bank
of whether or not it elects to operate pursuant to the changed rider, and if it
does so elect, such election shall be effective on and after the date that Bank
receives such notice.
3
<PAGE>
Appendix 1-A
COMPULSORY DEPOSITORIES
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
Argentina Caja de Valores Equity, Corporate & Government Debt
- ----------------------------------------------------------------------------------------------------------------------------------
Australia Austraclear Ltd. Corporate Debt, Money Market & Semi-Government Debt
- ----------------------------------------------------------------------------------------------------------------------------------
CHESS Equity
(Clearing House Electronic Sub-register System)
- ----------------------------------------------------------------------------------------------------------------------------------
RITS Government Debt
(Reserve Bank Information and Transfer System)
- ----------------------------------------------------------------------------------------------------------------------------------
Austria Oesterreichische Knotrolbank AG Equity, Corporate + Government Debt
- ----------------------------------------------------------------------------------------------------------------------------------
Belgium CIK Equity + Corporate Debt
(Caisse Interprofessionnelle de
Depots et de Virements de Titres)
- ----------------------------------------------------------------------------------------------------------------------------------
Banque Nationale de Belgique Treasury Bills + Government Debt
- ----------------------------------------------------------------------------------------------------------------------------------
Brazil BOVESPA Equity
(Bolsa de Valores de Sao Paolo)
- ----------------------------------------------------------------------------------------------------------------------------------
BVRJ Equity
(Bolsa de Valores de Rio de Janeiro)
- ----------------------------------------------------------------------------------------------------------------------------------
Canada CDS Equity, Corporate + Government Debt
(Canadian Depository for Securities)
- ----------------------------------------------------------------------------------------------------------------------------------
China, SSCCRC Equity
Shanghai (Shanghai Securities Central Clearing and
Registration Corp.)
- ----------------------------------------------------------------------------------------------------------------------------------
China, SSCC Equity
Shenzhen (Shenzhen Securities Registration Co., Ltd.)
- ----------------------------------------------------------------------------------------------------------------------------------
Czech SCP Equity + Long-Term Government Debt
Republic (Securities Center)
- ----------------------------------------------------------------------------------------------------------------------------------
TKD Treasury Bills + Money Market
(Trh Kratkododich Dlluhopisu or Short-Term
Bond Market)
- ----------------------------------------------------------------------------------------------------------------------------------
Denmark VP Equity, Corporate + Government Debt
(Vaerdipapircentralen)
- ----------------------------------------------------------------------------------------------------------------------------------
Egypt Misr Clearing & Sec. Dep. Equity
- ----------------------------------------------------------------------------------------------------------------------------------
Estonia EVK Equity
(Estonian Central Depository for Securities Ltd.)
- ----------------------------------------------------------------------------------------------------------------------------------
Euromarket Cedel & Euroclear Euro-Debt
- ----------------------------------------------------------------------------------------------------------------------------------
Finland CSR Equity + Government Debt
(Central Share Registry Finland)
- ----------------------------------------------------------------------------------------------------------------------------------
Helsinki Money Market Center Ltd. Money Market
- ----------------------------------------------------------------------------------------------------------------------------------
France SICOVAM Equity + Corporate Debt.
(Banque de France)
- ----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------------------------------------------------------------------
France SATURNE Government Debt.
(Banque de France)
- ----------------------------------------------------------------------------------------------------------------------------------
Germany DKV Equity, Corporate + Government Debt
(Deutscher Kassenverein)
- ----------------------------------------------------------------------------------------------------------------------------------
Greece Apothetirio Titlon A.E. Equity
- ----------------------------------------------------------------------------------------------------------------------------------
Bank of Greece Government Debt
- ----------------------------------------------------------------------------------------------------------------------------------
Hong Kong CCASS Equity
(Central Clearing and Settlement System)
- ----------------------------------------------------------------------------------------------------------------------------------
CMU Corporate + Government Debt
(Central Moneymarkets Unit)
- ----------------------------------------------------------------------------------------------------------------------------------
Hungary Keler Ltd. Equity + Government Debt
- ----------------------------------------------------------------------------------------------------------------------------------
Ireland CREST Equity
- ----------------------------------------------------------------------------------------------------------------------------------
GSO Government Debt
(Gilt Settlement Office)
- ----------------------------------------------------------------------------------------------------------------------------------
Israel TASE Clearing House Equity, Corporate + Government Debt
(Tel Aviv Stock Exchange Clearing House)
- ----------------------------------------------------------------------------------------------------------------------------------
Italy Monte Titoli Equity + Corporate Debt
- ----------------------------------------------------------------------------------------------------------------------------------
Bank of Italy Government Debt
- ----------------------------------------------------------------------------------------------------------------------------------
Japan Bank of Japan Registered Government Debt
- ----------------------------------------------------------------------------------------------------------------------------------
Latvia LCD Equity + Government Debt
(Latvian Central Depository)
- ----------------------------------------------------------------------------------------------------------------------------------
Lebanon Midclear Equity
(Custodian and Clearing Center of Lebanon and the
Middle East)
- ----------------------------------------------------------------------------------------------------------------------------------
Luxembourg Cedel Equity
- ----------------------------------------------------------------------------------------------------------------------------------
Malaysia MCD Equity
(Malaysian Central Depository Snd Bhd)
- ----------------------------------------------------------------------------------------------------------------------------------
Mauritius CDS Equity
(Central Depository System)
- ----------------------------------------------------------------------------------------------------------------------------------
Mexico Indeval Equity, Corporate + Government Debt
(Institucion para el Deposito de Valores)
- ----------------------------------------------------------------------------------------------------------------------------------
Morocco Maroclear Equity + Corporate Debt
- ----------------------------------------------------------------------------------------------------------------------------------
Bank Al'Maghrib Government Debt
- ----------------------------------------------------------------------------------------------------------------------------------
Netherlands NECIGEF/KAS Associate NV Equity, Corp. + Govt. D
- ----------------------------------------------------------------------------------------------------------------------------------
De Nederlandsche Bank N.V. Money Market
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Netherlands NIEC Premium Bonds
(Nederlands Interpforessioneel
Effectencentrum B.V.)
- ----------------------------------------------------------------------------------------------------------------------------------
2
<PAGE>
- ----------------------------------------------------------------------------------------------------------------------------------
New Zealand Austraclear New Zealand Equity, Corporate + Government Debt
- ----------------------------------------------------------------------------------------------------------------------------------
Norway VPS Equity, Corporate + Government Debt
(Verdipapirsentralen)
- ----------------------------------------------------------------------------------------------------------------------------------
Oman NONE
- ----------------------------------------------------------------------------------------------------------------------------------
Pakistan CDC Equity
(Central Depository Company of Pakistan Ltd.)
- ----------------------------------------------------------------------------------------------------------------------------------
Peru CAVALI Equity
(Caja de Valores)
- ----------------------------------------------------------------------------------------------------------------------------------
Philippines PCD Equity
(Philippine Central Depository)
- ----------------------------------------------------------------------------------------------------------------------------------
Poland NDS Equity, Long-Term Government Debt + Vouchers
(National Securities Depository)
- ----------------------------------------------------------------------------------------------------------------------------------
CRT Treasury-Bills
(Central Registry of Treasury-Bills)
- ----------------------------------------------------------------------------------------------------------------------------------
Portugal Interbolsa Equity, Corporate + Government Debt
- ----------------------------------------------------------------------------------------------------------------------------------
Romania SNCDD - RASDAQ Equity
(National Company for Clearing, Settlement
and Depository for Securities)
- ----------------------------------------------------------------------------------------------------------------------------------
Budapest Stock Exchange Registry Equity
- ----------------------------------------------------------------------------------------------------------------------------------
National Bank of Romania Treasury-Bills
- ----------------------------------------------------------------------------------------------------------------------------------
Russia MICEX GKO's
(Moscow Interbank Currency Exchange) (Gosudarstvennye Kratkosrochnye Obyazatelstva
[T-Bills])
OFZ's
(Obligatsyi Federalnogo Zaima [Federal Loan Bonds])s
- ----------------------------------------------------------------------------------------------------------------------------------
Singapore CDP Equity + Corporate Debt and Malaysian equities
(Central Depository Pte. Ltd.) traded on CLOB
- ----------------------------------------------------------------------------------------------------------------------------------
Monetary Authority of Government Debt
Singapore
- ----------------------------------------------------------------------------------------------------------------------------------
Slovak SCP Equity + Government Debt
Republic (Stredisko Cennych Papiru)
- ----------------------------------------------------------------------------------------------------------------------------------
National Bank of Slovakia Treasury-Bills
- ----------------------------------------------------------------------------------------------------------------------------------
So. Africa CD Corporate + Government Debt
(Central Depository)
- ----------------------------------------------------------------------------------------------------------------------------------
So. Korea KSD Equity, Corporate + Government Debt
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Spain SCLV Equity + Corporate Debt.
(Servicio de Compensacion y Liquidacion de Valores)
- ----------------------------------------------------------------------------------------------------------------------------------
CBEO Government Debt
(Central Book Entry Office)
- ----------------------------------------------------------------------------------------------------------------------------------
Sri Lanka CDS Equity
(Central Depository System (Private) Ltd.)
- ----------------------------------------------------------------------------------------------------------------------------------
3
<PAGE>
- ----------------------------------------------------------------------------------------------------------------------------------
Sweden VPC Equity, Corporate + Government Debt
(Vardepapperscentralen AB)
- ----------------------------------------------------------------------------------------------------------------------------------
Switzerland SEGA Equity, Corporate + Government Debt
(Schweizerische Effekten-Giro AG)
- ----------------------------------------------------------------------------------------------------------------------------------
Taiwan TSCD Equity + Government Debt
(Taiwan Securities Central Depository Co., Ltd.)
- ----------------------------------------------------------------------------------------------------------------------------------
Thailand TSDC Equity, Corporate + Government Debt
(Thailand Securities Depository Company Ltd.)
- ----------------------------------------------------------------------------------------------------------------------------------
Tunisia STICODEVAM Equity
(Societe Tunisienne Interprofessionnelle pour la
Compensation et le Depot des Valeurs Mobilieres)
- ----------------------------------------------------------------------------------------------------------------------------------
Ministry of Finance Government Debt tradable on the stock exchange (BTNBs)
- ----------------------------------------------------------------------------------------------------------------------------------
Central Bank of Tunisia Government Debt not tradable on the stock exchange
(BTCs)
- ----------------------------------------------------------------------------------------------------------------------------------
Turkey Takas Bank Equity + Corporate Debt
- ----------------------------------------------------------------------------------------------------------------------------------
Central Bank of Turkey Government Debt
- ----------------------------------------------------------------------------------------------------------------------------------
United CREST Equity + Corp. Debt
Kingdom
- ----------------------------------------------------------------------------------------------------------------------------------
CMO Sterling CDs & CP
(Central Moneymarket Office)
- ----------------------------------------------------------------------------------------------------------------------------------
CGO Gilts
(Central Gilts Office)
- ----------------------------------------------------------------------------------------------------------------------------------
United States DTC Equity + Corporate Debt
(Depository Trust Company)
- ----------------------------------------------------------------------------------------------------------------------------------
PTC Mortgage Back Debt
(Participants Trust Company)
- ----------------------------------------------------------------------------------------------------------------------------------
Fed Book-Entry Government Debt.
- ----------------------------------------------------------------------------------------------------------------------------------
Zambia LuSE Equity + Government Debt
(LuSE Central Shares Depository Ltd.)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
GLOBAL PROXY SERVICE RIDER
To Global Custody Agreement
Between
THE CHASE MANHATTAN BANK
And
EACH OF THE TRUSTS ON BEHALF OF EACH OF THE FUNDS SET
FORTH IN SCHEDULE A TO THE GLOBAL CUSTODY AGREEMENT
dated August 17, 1997
1. Global Proxy Services ("Proxy Services") shall be provided for the
countries listed in the procedures and guidelines ("Procedures")
furnished to Customer, as the same may be amended by Bank from time to
time on prior notice to Customer. The Procedures are incorporated by
reference herein and form a part of this Rider.
2. Proxy Services shall consist of those elements as set forth in the
Procedures, and shall include (a) notifications ("Notifications") by
Bank to Customer of the dates of pending shareholder meetings,
resolutions to be voted upon and the return dates as may be received by
Bank or provided to Bank by its Subcustodians or third parties, and (b)
voting by Bank of proxies based on Customer directions. Original proxy
materials or copies thereof shall not be provided. Notifications shall
generally be in English and, where necessary, shall be summarized and
translated from such non-English materials as have been made available
to Bank or its Subcustodian. In this respect Bank's only obligation is
to provide information from sources it believes to be reliable and/or
to provide materials summarized and/or translated in good faith. Bank
reserves the right to provide Notifications, or parts thereof, in the
language received. Upon reasonable advance request by Customer, backup
information relative to Notifications, such as annual reports,
explanatory material concerning resolutions, management recommendations
or other material relevant to the exercise of proxy voting rights shall
be provided as available, but without translation.
3. While Bank shall attempt to provide accurate and complete
Notifications, whether or not translated, Bank shall not be liable for
any losses or other consequences that may result from reliance by
Customer upon Notifications where Bank prepared the same in good faith.
4 Notwithstanding the fact that Bank may act in a fiduciary capacity with
respect to Customer under other agreements or otherwise under the
Agreement, in performing Proxy Services Bank shall be acting solely as
the agent of Customer, and shall not exercise any discretion with
regard to such Proxy Services.
5. Proxy voting may be precluded or restricted in a variety of
circumstances, including, without limitation, where the relevant
Securities are: (i) on loan; (ii) at registrar for registration or
reregistration; (iii) the subject of a conversion or other corporate
action; (iv) not held in a name subject to the control of Bank or its
Subcustodian or are otherwise held in a manner which precludes voting;
(v) not capable of being voted on account of local market regulations
or practices or restrictions by the issuer; or (vi) held in a margin or
collateral account.
<PAGE>
6. Customer acknowledges that in certain countries Bank may be unable to
vote individual proxies but shall only be able to vote proxies on a net
basis (e.g., a net yes or no vote given the voting instructions
received from all customers).
7. Customer shall not make any use of the information provided hereunder,
except in connection with the funds or plans covered hereby, and shall
in no event sell, license, give or otherwise make the information
provided hereunder available, to any third party, and shall not
directly or indirectly compete with Bank or diminish the market for
Proxy Services by provision of such information, in whole or in part,
for compensation or otherwise, to any third party.
8. The names of Authorized Persons for Proxy Services shall be furnished
to Bank in accordance with ss.10 of the Agreement. Proxy Services fees
shall be as set forth in ss.13 of the Agreement or as separately
agreed.
2
<PAGE>
SPECIAL TERMS AND CONDITIONS RIDER
GLOBAL CUSTODY AGREEMENT
WITH EACH OF THE TRUSTS ON BEHALF OF
EACH OF THE FUNDS SET FORTH IN SCHEDULE A
TO THE GLOBAL CUSTODY AGREEMENT
DATED AUGUST 17, 1997
<PAGE>
DOMESTIC AND GLOBAL
SPECIAL TERMS AND CONDITIONS RIDER
Domestic Corporate Actions and Proxies
With respect to domestic U.S. and Canadian Securities (the latter if held in
DTC), the following provisions shall apply rather than the pertinent provisions
of Section 8 of the Agreement and the Global Proxy Service rider:
Bank shall send to Customer or the Authorized Person for a Custody
Account, such proxies (signed in blank, if issued in the name of Bank's
nominee or the nominee of a central depository) and communications with
respect to Securities in the Custody Account as call for voting or
relate to legal proceedings within a reasonable time after sufficient
copies are received by Bank for forwarding to its customers. In
addition, Bank shall follow coupon payments, redemptions, exchanges or
similar matters with respect to Securities in the Custody Account and
advise Customer or the Authorized Person for such Account of rights
issued, tender offers or any other discretionary rights with respect to
such Securities, in each case, of which Bank has received notice from
the issuer of the Securities, or as to which notice is published in
publications routinely utilized by Bank for this purpose.
<PAGE>
Schedule B
August, 1997
SUB-CUSTODIANS EMPLOYED BY
THE CHASE MANHATTAN BANK, LONDON, GLOBAL CUSTODY
<TABLE>
<CAPTION>
COUNTRY SUB-CUSTODIAN CORRESPONDENT BANK
- ------- ------------- ------------------
<S> <C> <C>
ARGENTINA The Chase Manhattan Bank The Chase Manhattan Bank
Arenales 707, 5th Floor Buenos Aires
De Mayo 130/140
1061Buenos Aires
ARGENTINA
AUSTRALIA The Chase Manhattan Bank The Chase Manhattan Bank
36th Floor Sydney
World Trade Centre
Jamison Street
Sydney
New South Wales 2000
AUSTRALIA
AUSTRIA Creditanstalt - Bankverein Credit Lyonnais Bank
Julius Tandler Platz - 3 Vienna
A - 1011, Vienna
AUSTRIA
BAHRAIN The British Bank of the Middle East National Bank of Bahrain
PO Box 57 Manama
Manama
BAHRAIN
BANGLADESH Standard Chartered Bank Standard Chartered Bank
18-20 Motijheel C.A. Dhaka
Box 536,
Dhaka-1000
BANGLADESH
<PAGE>
BELGIUM Generale Bank Credit Lyonnais Bank
3 Montagne Du Parc Brussels
1000 Bruxelles
BELGIUM
BERMUDA The Bank of Bermuda Ltd The Bank of Bermuda Ltd
6 Front Street Hamilton
Hamilton
BERMUDA
BOTSWANA Barclays Bank of Botswana Limited Barclays Bank of Botswana
Barclays House Gaborone
Khama Crescent
Gaborone
BOTSWANA
BRAZIL Banco Chase Manhattan, S.A. Banco Chase Manhattan S.A.
Chase Manhattan Center Sao Paulo
Rua Verbo Divino, 1400
Sao Paulo, SP 04719-002
BRAZIL
CANADA The Royal Bank of Canada Royal Bank of Canada
Royal Bank Plaza Toronto
Toronto
Ontario M5J 2J5
CANADA
Canada Trust Royal Bank of Canada
Canada Trust Tower Toronto
BCE Place
161 Bay at Front
Toronto
Ontario M5J 2T2
CANADA
CHILE The Chase Manhattan Bank, The Chase Manhattan Bank,
Agustinas 1235 Santiago
Casilla 9192
Santiago
CHILE
<PAGE>
COLOMBIA Cititrust Colombia S.A. Cititrust Colombia S.A.
Sociedad Fiduciaria Sociedad Fiduciaria
Carrera 9a No 99-02 Santafe de Bogota
Santafe de Bogota, DC
COLOMBIA
CYPRUS Barclays Bank plc Barclays Bank plc,
Cyprus Offshore Banking Unit Nicosia
2nd & 3rd Floor
88 Dighenis Akritas Avenue
PO Box 7320
1644 Nicosia
CYPRUS
CZECH REPUBLIC Ceskoslovenska Obchodni Banka, A.S. Komercni Banka, A.S.,
Na Prikope 14 Praha
115 20 Praha 1
CZECH REPUBLIC
DENMARK Den Danske Bank Den Danske Bank
2 Holmens Kanala DK 1091 Copenhagen
Copenhagen
DENMARK
ECUADOR Citibank, N.A. Citibank N.A.,
Juan Leon Mera Quito
130 y Patria
Quito
ECUADOR
EGYPT National Bank of Egypt National Bank of Egypt
1187, Corniche El-Nile Plaza Cairo
Cairo
EGYPT
ESTONIA HansaBank Tallinna Bank
Not 17f-5 eligible Liivalaia 8 Tallinn
EE0100 Tallinn
ESTONIA
<PAGE>
EUROBONDS Cedel Bank S.A. ECU:Lloyds Bank PLC
67 Boulevard Grande Duchesse Charlotte International Banking
LUXEMBOURG Division London
A/c The Chase Manhattan Bank, N.A. For all other currencies: see
London relevant country
A/c No. 17817
EURO CDS First Chicago Clearing Centre ECU:Lloyds Bank PLC
27 Leadenhall Street Banking Division London
London EC3A 1AA For all other currencies: see
UNITED KINGDOM relevant country
FINLAND Merita Bank Ltd Merita Bank Ltd
2598 Custody Services Helsinki
Fabianinkatu 29B
Helsinki
FINLAND
FRANCE Banque Paribas Societe Generale
Ref 256 Paris
BP 141
3, Rue D'Antin
75078 Paris
Cedex 02
FRANCE
GERMANY Chase Manhattan Bank A.G. Chase Bank A.G.
60284 Frankfurt am Main Frankfurt
GERMANY
GHANA Barclays Bank of Ghana Ltd Barclays Bank
Barclays House Accra
High Street
Accra
GHANA
GREECE Barclays Bank Plc National Bank of Greece S.A.
1 Kolokotroni Street Athens
10562 Athens A/c Chase Manhattan Bank,
GREECE London A/c No. 040/7/921578-68
<PAGE>
HONG KONG The Chase Manhattan Bank, The Chase Manhattan Bank,
40/F One Exchange Square Hong Kong
8, Connaught Place
Central, Hong Kong
HONG KONG
HUNGARY Citibank Budapest Rt. Citibank Budapest Rt.
Szabadsag ter 7-9 Budapest
Budapest V
H-1051
HUNGARY
INDIA The Hongkong and Shanghai The Hongkong and Shanghai
Banking Corporation Limited Banking Corporation Limited
52/60 Mahatma Gandhi Road Bombay
Bombay 400 001
INDIA
Deutsche Bank AG Deutsche Bank
Securities & Custody Services Bombay
Kodak House
222 D.N. Road, Fort
Bombay 400 001
INDIA
INDONESIA The Hongkong and Shanghai The Chase Manhattan Bank
Banking Corporation Limited Jakarta
World Trade Center
J1. Jend Sudirman Kav. 29-31
Jakarta 10023
INDONESIA
IRELAND Bank of Ireland Allied Irish Bank
International Financial Services Centre Dublin
1 Harbourmaster Place
Dublin 1
IRELAND
ISRAEL Bank Leumi Le-Israel B.M. Bank Leumi Le-Israel B.M.
19 Herzl Street Tel Aviv
61000 Tel Aviv
ISRAEL
<PAGE>
ITALY Banque Paribas, The Chase Manhattan Bank,
2 Piazza San Fedele Milan
20121 Milan
ITALY
JAPAN The Fuji Bank Ltd The Chase Manhattan Bank
6-7 Nihonbashi-Kabutocho Tokyo
Chuo-Ku
Tokyo
JAPAN
JORDAN Arab Bank Limited Arab Bank Limited
P O Box 950544-5 Amman
Amman
Shmeisani
JORDAN
KENYA Barclays Bank of Kenya Barclays Bank of Kenya
Third Floor Nairobi
Queensway House
Nairobi
Kenya
LATVIA Hansabank - Latvija Hansabank - Latvija
Not 17f-5 Kalku iela 26 Latvia
Riga, LV 1050
Latvia
LEBANON The British Bank of the Middle East The Chase Manhattan Bank
Ras-Beirut Branch New York
PO Box 11-1380
Abdel Aziz,
Ras-Beirut
Lebanon
LUXEMBOURG Banque Generale du Luxembourg S.A. Banque Generale du Luxembourg
50 Avenue J.F. Kennedy S.A.
L-2951 LUXEMBOURG Luxembourg
<PAGE>
MALAYSIA The Chase Manhattan Bank, The Chase Manhattan Bank,
Pernas International Kuala Lumpur
Jalan Sultan Ismail
50250, Kuala Lumpur
MALAYSIA
MAURITIUS Hongkong and Shanghai Banking Corporation Ltd Hongkong and
Curepipe Road Shanghai Banking
Curepipe Corporation Ltd.
MAURITIUS Curepipe
MEXICO The Chase Manhattan Bank, S.A. No correspondent Bank
Prolongacion Paseo de la Reforma no. 600,
PB Colonia Santa Fe Pena Blanca
01210 Mexico D.F.
MOROCCO Banque Commerciale du Maroc Banque Commerciale du Maroc
2 Boulevard Moulay Youssef Casablanca
Casablanca 20000
MOROCCO
NAMIBIA Standard Bank Namibia Ltd Standard Corporate &
Mutual Platz - 3rd Floor Merchant Bank
P.O.Box 3327 South Africa
Windhoek
NAMIBIA
NETHERLANDS ABN AMRO N.V. Generale Bank
Securities Centre Nederland N.V.
P O Box 3200 Rotterdam
4800 De Breda
NETHERLANDS
NEW ZEALAND National Nominees Limited National Bank of New Zealand
Level 2 BNZ Tower Wellington
125 Queen Street
Auckland
NEW ZEALAND
<PAGE>
NORWAY Den Norske Bank Den Norske Bank
Stranden 21 Oslo
PO Box 1171 Sentrum
N-0107 Oslo
NORWAY
OMAN The British Bank of the Middle East Oman Arab Bank
Bait Al Falaj Ruwi, Muscat
Main Office
Ruwi, Muscat
SULTANATE OF OMAN
PAKISTAN Citibank N.A. Citibank N.A.
AWT Plaza Karachi
11 Chundrigar Road
Karachi 74200
PAKISTAN
Deutsche Bank A.G. Deutsche Bank A.G.
Unitowers Karachi
I.I. Chundrigar Road
Karachi
PAKISTAN
PERU Citibank, N.A. Citibank N.A.
Camino Real 457 Lima
CC Torre Real - 5th Floor
San Isidro, Lima 27
PERU
PHILIPPINES The Hongkong and Shanghai The Hongkong and Shanghai
Banking Corporation Limited Banking Corporation Limited
33/F Tektite Tower B Manila
Exchange Road
Ortigas Center
Pasig City
PHILIPPINES
POLAND Bank Handlowy W. Warszawie. S.A. Bank Handlowy W. Warszawie S.A..
Custody Dept. Warsaw
Capital Markets Centre
Ul, Nowy Swiat 6/12
00-920 Warsaw
POLAND
<PAGE>
PORTUGAL Banco Espirito Santo e Comercial de Lisboa Banco Nacional Ultra
Servico de Gestaode Titulos Marino
R. Mouzinho da Silveira, 36 r/c Lisbon
1200 Lisbon
PORTUGAL
ROMANIA ING Bank ING Bank
World Trade Centre Bucharest
Bld. Expozitiei Nr. 2
78334 Bucharest
Romania
RUSSIA Chase Manhattan Bank International ("CMBI") The Chase Manhattan Bank
1st Tverskaya - Yamskaya, 23 New York
125047 Moscow A/C The Chase Manhattan
Russia London
(US$ Nostro Account)
SHANGHAI (CHINA) The Hongkong and Shanghai Citibank
Banking Corporation Limited New York
5/F. Marine Tower
1 Pudong Avenue
Shanghai 200120
THE PEOPLE'S REPUBLIC OF CHINA
SHENZHEN (CHINA) The Hongkong and Shanghai The Chase Manhattan Bank
Banking Corporation Limited Hong Kong
1st Floor
Century Plaza Hotel
No.1 Chun Feng Lu
Shenzhen
THE PEOPLE'S REPUBLIC OF CHINA
SINGAPORE The Chase Manhattan Bank, The Chase Manhattan Bank,
Custody Services Dept Singapore
150 Beach Road
34th Floor, Gateway West
SINGAPORE 189720
SLOVAK REPUBLIC Ceskoslovenska Obchodni Banka, A.S. Ceskoslovenska Obchodni Banka
Michalska 18 Slovak Republic
815 63 Bratislava
SLOVAK REPUBLIC
<PAGE>
SOUTH AFRICA The Standard Bank of South Africa Limited The Standard Bank of
Standard Corporate and Merchant Bank Division South Africa Ltd
46 Marshall Street Standard Corporate and
Johannesburg 2001 Merchant Bank
SOUTH AFRICA South Africa
SOUTH KOREA The Hongkong & Shanghai The Hongkong & Shanghai
Banking Corporation Limited Banking Corporation Limited
6/F Kyobo Building Seoul
#1 Chongro, 1-ka Chongro-Ku,
Seoul
SOUTH KOREA
SPAIN The Chase Manhattan Bank Chase Manhattan Bank,
Paseo de la Castellana, 51 Madrid
28046 Madrid
SPAIN
SRI LANKA The Hongkong & Shanghai The Hongkong & Shanghai
Banking Corporation Limited Banking Corporation Limited
Unit #02-02 West Block, Colombo
World Trade Center
Colombo 1,
SRI LANKA
SWAZILAND Stanbic Bank Swaziland Ltd Standard Corporate and
Stanbic House Merchant Bank
P.O. Box A294, Swazi Plaza South Africa
Mbabane
Swaziland
SWEDEN Skandinaviska Enskilda Banken Svenska Handelsbanken
Sergels Torg 2 Stockholm
S-106 40
Stockholm
SWEDEN
SWITZERLAND Union Bank of Switzerland Union Bank of Switzerland
45 Bahnhofstrasse Zurich
8021 Zurich
SWITZERLAND
<PAGE>
TAIWAN The Chase Manhattan Bank, No correspondent Bank
14th Floor,
2, Tun Hwa S. Road Sec. 1
Taipei
TAIWAN
Republic of China
THAILAND The Chase Manhattan Bank, The Chase Manhattan Bank,
Bubhajit Building Bangkok
20 North Sathorn Road
Silom, Bangrak
Bangkok 10500
THAILAND
TUNISIA Banque Internationale Arabe de Tunisie Banque Internationale Arabe de
Not 17f-5 70-72 Avenue Habib Bourguiba Tunisie, Tunisia
P.O. Box 520
1080 Tunis Cedex
TUNISIA
TURKEY The Chase Manhattan Bank, The Chase Manhattan Bank,
Emirhan Cad. No: 145 Istanbul
Atakule, A Blok Kat:11
80700-Dikilitas/Besiktas
Istanbul
TURKEY
U.K. The Chase Manhattan Bank, The Chase Manhattan Bank,
Woolgate House London
Coleman Street
London EC2P 2HD
UNITED KINGDOM
URUGUAY The First National Bank of Boston The First National Bank of Boston
Zabala 1463 Montevideo
Montevideo
URUGUAY
U.S.A. The Chase Manhattan Bank, The Chase Manhattan Bank,
1 Chase Manhattan Plaza New York
New York
NY 10081
U.S.A.
<PAGE>
VENEZUELA Citibank N.A. Citibank N.A.
Carmelitas a Altagracia Caracas
Edificio Citibank
Caracas 1010
VENEZUELA
ZAMBIA Barclays Bank of Zambia Barclays Bank of Zambia
Kafue House Lusaka
Cairo Road
P.O.Box 31936
Lusaka
ZAMBIA
ZIMBABWE Barclays Bank of Zimbabwe Barclays Bank of Zimbabwe
2nd Floor Harare
3 Anchor House
Jason Mayo Avenue
Harare
ZIMBABWE
</TABLE>
<PAGE>
COLONIAL FUNDS
GLOBAL CUSTODY FEE SCHEDULE
APRIL 17, 1997
- ------------------------------------------------------------------------------
COUNTRY BASIS POINTS TRANSACTION FEES
- ------------------------------------------------------------------------------
ARGENTINA 35 1st 100mm $100.00
- ------------------------------------------------------------------------------
30 next 200mm
- ------------------------------------------------------------------------------
25 over 300mm
- ------------------------------------------------------------------------------
AUSTRALIA 5 $30.00
- ------------------------------------------------------------------------------
AUSTRIA 10 $50.00
- ------------------------------------------------------------------------------
BANGLADESH 35 $100.00
- ------------------------------------------------------------------------------
BELGIUM 10 $50.00
- ------------------------------------------------------------------------------
BOTSWANA 35 $100.00
- ------------------------------------------------------------------------------
BRAZIL 35 1st 100mm $100.00
- ------------------------------------------------------------------------------
30 next 200mm
- ------------------------------------------------------------------------------
25 over 300mm
- ------------------------------------------------------------------------------
CANADA 6 $35.00
- ------------------------------------------------------------------------------
CEDEL 3 $25.00
- ------------------------------------------------------------------------------
CHILE 35 $100.00
- ------------------------------------------------------------------------------
CHINA(SHANGHAI) 35 $100.00
- ------------------------------------------------------------------------------
CHINA(SHENZHEN) 35 $100.00
- ------------------------------------------------------------------------------
COLOMBIA 35 $100.00
- ------------------------------------------------------------------------------
CYPRUS 50 1st 100mm $150.00
- ------------------------------------------------------------------------------
45 next 200mm
- ------------------------------------------------------------------------------
40 over 300mm
- ------------------------------------------------------------------------------
CZECH REPUBLIC 35 $100.00
- ------------------------------------------------------------------------------
DENMARK 7 $50.00
- ------------------------------------------------------------------------------
ECUADOR 50 1st 100mm $150.00
- ------------------------------------------------------------------------------
45 next 200mm
- ------------------------------------------------------------------------------
40 over 300mm
- ------------------------------------------------------------------------------
EGYPT 50 1st 100mm $150.00
- ------------------------------------------------------------------------------
45 next 200mm
- ------------------------------------------------------------------------------
40 over 300mm
- ------------------------------------------------------------------------------
FINLAND 10 $50.00
- ------------------------------------------------------------------------------
EURO CD'S 3 $25.00
- ------------------------------------------------------------------------------
FRANCE 6 $30.00
- ------------------------------------------------------------------------------
GHANA 50 1st 100mm $150.00
- ------------------------------------------------------------------------------
45 next 200mm
- ------------------------------------------------------------------------------
40 over 300mm
- ------------------------------------------------------------------------------
GERMANY 6 $30.00
- ------------------------------------------------------------------------------
GREECE 35 $100.00
- ------------------------------------------------------------------------------
HONG KONG 6 $50.00
- ------------------------------------------------------------------------------
Page 1
<PAGE>
COLONIAL FUNDS
GLOBAL CUSTODY FEE SCHEDULE
APRIL 17, 1997
- ------------------------------------------------------------------------------
HUNGARY 35 $100.00
- ------------------------------------------------------------------------------
INDIA 35 $100.00
- ------------------------------------------------------------------------------
INDONESIA 25 1st 200mm $100.00
- ------------------------------------------------------------------------------
20 over 200mm
- ------------------------------------------------------------------------------
IRELAND 8 $35.00
- ------------------------------------------------------------------------------
ISRAEL 35 $100.00
- ------------------------------------------------------------------------------
ITALY 10 $50.00
- ------------------------------------------------------------------------------
JAMACIA/T&T 50 1st 100mm $150.00
- ------------------------------------------------------------------------------
45 next 200mm
- ------------------------------------------------------------------------------
40 over 300mm
- ------------------------------------------------------------------------------
JAPAN 4 $35.00
- ------------------------------------------------------------------------------
JORDAN 35 $100.00
- ------------------------------------------------------------------------------
KENYA 50 1st 100mm $150.00
- ------------------------------------------------------------------------------
45 next 200mm
- ------------------------------------------------------------------------------
40 over 300mm
- ------------------------------------------------------------------------------
KOREA 11 $75.00
- ------------------------------------------------------------------------------
LUXEMBOURG 8 $35.00
- ------------------------------------------------------------------------------
MALAYSIA 6 $50.00
- ------------------------------------------------------------------------------
MAURITIUS 50 1st 100mm $150.00
- ------------------------------------------------------------------------------
45 next 200mm
- ------------------------------------------------------------------------------
40 over 300mm
- ------------------------------------------------------------------------------
MEXICO 12 $75.00
- ------------------------------------------------------------------------------
MOROCCO 35 $100.00
- ------------------------------------------------------------------------------
NEPAL 50 1st 100mm $150.00
- ------------------------------------------------------------------------------
45 next 200mm
- ------------------------------------------------------------------------------
40 over 300mm
- ------------------------------------------------------------------------------
NETHERLANDS 6 $30.00
- ------------------------------------------------------------------------------
NEW ZEALAND 10 $50.00
- ------------------------------------------------------------------------------
NORWAY 10 $50.00
- ------------------------------------------------------------------------------
PAKISTAN 35 $100.00
- ------------------------------------------------------------------------------
PERU 35 $100.00
- ------------------------------------------------------------------------------
PHILIPPINES 25 1st 200mm $100.00
- ------------------------------------------------------------------------------
20 over 200mm
- ------------------------------------------------------------------------------
POLAND 35 $100.00
- ------------------------------------------------------------------------------
PORTUGAL 35 $100.00
- ------------------------------------------------------------------------------
SINGAPORE 5 $50.00
- ------------------------------------------------------------------------------
SLOVAKIA 50 1st 100mm $150.00
- ------------------------------------------------------------------------------
45 next 200mm
- ------------------------------------------------------------------------------
40 over 300mm
- ------------------------------------------------------------------------------
SLOVENIA 50 1st 100mm $150.00
- ------------------------------------------------------------------------------
Page 2
<PAGE>
COLONIAL FUNDS
GLOBAL CUSTODY FEE SCHEDULE
APRIL 17, 1997
- ------------------------------------------------------------------------------
45 next 200mm
- ------------------------------------------------------------------------------
40 over 300mm
- ------------------------------------------------------------------------------
SOUTH AFRICA 13 $75.00
- ------------------------------------------------------------------------------
SPAIN 11 $75.00
- ------------------------------------------------------------------------------
SRI LANKA 35 $100.00
- ------------------------------------------------------------------------------
SWEDEN 10 $50.00
- ------------------------------------------------------------------------------
SWITZERLAND 6 $30.00
- ------------------------------------------------------------------------------
TAIWAN 35 $100.00
- ------------------------------------------------------------------------------
THAILAND 8 $75.00
- ------------------------------------------------------------------------------
TUNISIA 35 $100.00
- ------------------------------------------------------------------------------
TURKEY 35 $100.00
- ------------------------------------------------------------------------------
UK 6 $35.00
- ------------------------------------------------------------------------------
URUGUAY 35 $100.00
- ------------------------------------------------------------------------------
VENEZUELA 35 $100.00
- ------------------------------------------------------------------------------
VIETNAM 50 1st 100mm $150.00
- ------------------------------------------------------------------------------
45 next 200mm
- ------------------------------------------------------------------------------
40 over 300mm
- ------------------------------------------------------------------------------
ZAMBIA 50 1st 100mm $150.00
- ------------------------------------------------------------------------------
45 next 200mm
- ------------------------------------------------------------------------------
40 over 300mm
- ------------------------------------------------------------------------------
ZIMBABWE 35 $100.00
- ------------------------------------------------------------------------------
Note: In countries where tiered pricing applies, the calculation is based on
daily net assets in aggregate of the Colonial/Newport and Stein Roe Funds.
Page 3
AMENDMENT NO. 10 TO SCHEDULE A
Terms used in the Schedule and not defined herein shall have the
meaning specified in the AMENDED AND RESTATED SHAREHOLDERS' SERVICING AND
TRANSFER AGENT AGREEMENT dated July 1, 1991, and as amended from time to time
(the "Agreement"). Payments under the Agreement to CSC shall be made in the
first two weeks of the month following the month in which a service is rendered
or an expense incurred. This Amendment No. 10 to Schedule A shall be effective
as of October 1, 1997, and supersedes the original Schedule A and Amendment Nos.
1, 2, 3, 4, 5, 6, 7,8 and 9 to Schedule A.
1. Each Fund that is a series of the Trust shall pay CSC for the
services to be provided by CSC under the Agreement an amount equal to the sum
of the following:
(a) The Fund's Share of CSC Compensation
PLUS
(b) The Fund's Allocated Share of CSC Reimbursable
Out-of-Pocket Expenses.
In addition, CSC shall be entitled to retain as additional compensation for its
services all CSC revenues for Distributor Fees, fees for wire, telephone,
redemption and exchange orders, IRA trustee agent fees and account transcripts
due CSC from shareholders of any Fund and interest (net of bank charges) earned
with respect to balances in the accounts referred to in paragraph 2 of the
Agreement.
2. All determinations hereunder shall be in accordance with
generally accepted accounting principles and subject to audit by the Fund's
independent accountants.
3. Definitions
"Allocated Share" for any month means that percentage of CSC
Reimbursable Out-of-Pocket Expenses which would be allocated
to the Fund for such month in accordance with the methodology
described in Exhibit 1 hereto.
"CSC Reimbursable Out-of-Pocket Expenses" means (i)
out-of-pocket expenses incurred on behalf of the Fund by CSC
for stationery, forms, postage and similar items, (ii)
networking account fees paid to dealer firms by CSC on
shareholder accounts established or maintained pursuant to the
National Securities Clearing Corporation's networking system,
which fees are approved by the Trustees from time to time and
(iii) fees paid by CSC or its affiliates to third-party dealer
firms or transfer agents that maintain omnibus accounts with a
Fund in respect of expenses similar to those referred to in
clause (i) above, to the extent the Trustees have approved the
reimbursement by the Fund of such fees.
"Distributor Fees" means the amount due CSC pursuant to any
agreement with the Fund's principal underwriter for
processing, accounting and reporting services in connection
with the sale of shares of the Fund.
"Fund" means each of the open-end investment companies advised
by CMA that are series of the Trusts which are parties to the
Agreement.
"Fund's Share of CSC Compensation" for any month means 1/12 of
the following applicable percentage of the average daily
closing value of the total net assets of such Fund for such
month:
Fund Percent
Equity Funds: 0.25(1)
The Colonial Fund
Colonial Growth Shares Fund
Colonial U.S. Fund for Growth
Colonial Global Equity Fund
Colonial Global Natural Resources Fund
Colonial Small Stock Fund
Colonial International Fund for Growth
Colonial Aggressive Growth Fund
Colonial Equity Income Fund
Colonial International Equity Fund
Colonial Tax-Managed Growth Fund
Taxable Bond Funds: 0.18(2)
Colonial U.S. Government Fund
Colonial Short Duration U.S. Government Fund
Colonial Federal Securities Fund
Colonial Income Fund
<PAGE>
Fund Percent
Tax-Exempt Funds 0.14(3)
Colonial Tax-Exempt Insured Fund
Colonial Tax-Exempt Fund
Colonial High Yield Municipal Fund
Colonial California Tax-Exempt Fund
Colonial Connecticut Tax-Exempt Fund
Colonial Florida Tax-Exempt Fund
Colonial Intermediate Tax-Exempt Fund
Colonial Massachusetts Tax-Exempt Fund
Colonial Michigan Tax-Exempt Fund
Colonial Minnesota Tax-Exempt Fund
Colonial New York Tax-Exempt Fund
Colonial North Carolina Tax-Exempt Fund
Colonial Ohio Tax-Exempt Fund
Money Market Funds: 0.20
Colonial Government Money Market Fund
Colonial Municipal Money Market Fund
Others:
Colonial High Yield Securities Fund 0.25
Colonial Strategic Income Fund 0.20
Colonial Utilities Fund 0.20
Colonial Strategic Balanced Fund 0.25(1)
Colonial Global Utilities Fund 0.20
Colonial Newport Tiger Fund 0.25(1)
Colonial Newport Tiger Cub Fund 0.25(1)
Colonial Newport Japan Fund 0.25(1)
Newport Greater China Fund 0.25(1)
1 The applicable percentage shall be reduced from 0.25% to 0.236% commencing
October 1997, through successive, cumulative quarterly reductions of 0.014%/4.
Thereafter the applicable percentage shall remain at 0.236%.
2 The applicable percentage shall be reduced from 0.18% to 0.17% during 1997
through successive, cumulative monthly reductions of 0.01%/12. Thereafter the
applicable percentage shall remain at 0.17%.
3 The applicable percentage shall be reduced from 0.14% to 0.13% during 1997
through successive, cumulative monthly reductions of 0.01%/12. Thereafter the
applicable percentage shall remain at 0.13%.
<PAGE>
Agreed:
EACH TRUST ON BEHALF OF EACH FUND DESIGNATED
IN APPENDIX I FROM TIME TO TIME
By: __________________________________________
Michael H. Koonce, Secretary
COLONIAL INVESTORS SERVICE CENTER, INC.
By: ________________________________________
Davey S. Scoon, President
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: ________________________________________
Michael H. Koonce, Senior Vice President
<PAGE>
EXHIBIT 1
METHODOLOGY OF ALLOCATING CSC
REIMBURSABLE OUT-OF-POCKET EXPENSES
1. CSC Reimbursable Out-of-Pocket Expenses are allocated to the Colonial
Funds as follows:
A. Identifiable Based on actual services performed and invoiced to a Fund.
B. Unidentifiable Allocation will be based on three evenly weighted factors.
- number of shareholder accounts
- number of transactions
- average assets
AMENDMENT NO. 15 TO APPENDIX I
Funds Custodian
Colonial Trust I
Colonial High Yield Securities Fund BSD&T
Colonial Income Fund BSD&T
Colonial Strategic Income Fund BSD&T
Colonial Tax-Managed Growth Fund BSD&T
Colonial Trust II
Colonial Government Money Market Fund BSD&T
Colonial Intermediate U.S. Government Fund BSD&T
Colonial Short Duration U.S. Government Fund BSD&T
Colonial Newport Tiger Cub Fund BSD&T
Colonial Newport Japan Fund BSD&T
Newport Greater China Fund BSD&T
Colonial Trust III
Colonial Select Value Fund BSD&T
The Colonial Fund BSD&T
Colonial Federal Securities Fund BSD&T
Colonial Global Equity Fund BSD&T
Colonial International Horizons Fund BSD&T
Colonial International Fund for Growth BSD&T
Colonial Strategic Balanced Fund BSD&T
Colonial Global Utilities Fund SSB&TC
Colonial Trust IV
Colonial High Yield Municipal Fund UMB
Colonial Intermediate Tax-Exempt Fund UMB
Colonial Tax-Exempt Fund UMB
Colonial Tax-Exempt Insured Fund UMB
Colonial Municipal Money Market Fund UMB
Colonial Utilities Fund BSD&T
Colonial Trust V
Colonial Massachusetts Tax-Exempt Fund UMB
Colonial Connecticut Tax-Exempt Fund UMB
Colonial California Tax-Exempt Fund UMB
Colonial Michigan Tax-Exempt Fund UMB
Colonial Minnesota Tax-Exempt Fund UMB
Colonial New York Tax-Exempt Fund UMB
Colonial North Carolina Tax-Exempt Fund UMB
Colonial Ohio Tax-Exempt Fund UMB
Colonial Florida Tax-Exempt Fund UMB
<PAGE>
Colonial Trust VI
Colonial U.S. Stock Fund BSD&T
Colonial Small Cap Value Fund BSD&T
Colonial Aggressive Growth Fund BSD&T
Colonial Equity Income Fund BSD&T
Colonial International Equity Fund BSD&T
Colonial Trust VII
Colonial Newport Tiger Fund Brown Brothers
Harriman & Co.
Effective Date: July 1, 1997
By: ____________________________________
Arthur O. Stern, Secretary for Each Fund
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: ____________________________________
Arthur O. Stern, Executive Vice President
COLONIAL INVESTORS SERVICE CENTER, INC.
By: ____________________________________
Davey S. Scoon, President
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statements of
Additional Information constituting parts of this Post-Effective Amendment No.13
to the registration statement on Form N-1A (the "Registration Statement") of our
report dated August 12, 1997, relating to the financial statements and financial
highlights appearing in the June 30, 1997 Annual Reports to Shareholders of
Colonial Aggressive Growth Fund, Colonial Equity Income Fund, Colonial
International Equity Fund, Colonial Small Cap Value Fund and Colonial U.S. Stock
Fund, 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 headings "The Fund's Financial History" in the Prospectuses and
"Independent Accountants" in the Statements of Additional Information."
Price Waterhouse LLP
Boston, Massachusetts
October 23, 1997
