COLONIAL U.S. STOCK FUND
CLASS Z SHARES
Supplement to Prospectus dated May 30, 1997
The first paragraph under the caption HOW THE FUND PURSUES ITS OBJECTIVE AND
CERTAIN RISK FACTORS is revised in its entirety as follows:
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. The Fund will not concentrate more than 25% of its total assets in any
one industry.
The following paragraphs are added after the first paragraph under the caption
HOW THE FUND PURSUES ITS OBJECTIVE AND CERTAIN RISK FACTORS:
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 the 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
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.
The fifth paragraph under the caption HOW TO BUY SHARES is revised in its
entirety as follows:
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.
SF-36/020E-0897 August 21, 1997
