October 27, 1997
Revised July 20, 1998
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.
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.
See "How the Fund is Managed" for additional information.
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 Funds Distributor, 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. Effective June 19, 1998, the
contractual management fee became 0.80% of the first $1 billion of the average
daily net assets of the Fund and 0.75% in excess of $1 billion.
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
5.00% 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 Funds Distributor, Inc.
One Financial Center
Boston, MA 02111-2621
- -----------------------------------------------------
Custodian
The Chase Manhattan Bank
270 Park Avenue
New York, NY 10017-2070
- -----------------------------------------------------
Shareholder Services and Transfer Agent
Colonial Investors Service Center, Inc.
One Financial Center
Boston, MA 02111-2621
800-345-6611
- -----------------------------------------------------
Independent Accountants
PricewaterhouseCoopers 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
Revised July 20, 1998
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
- ----------------------------- --------------------------
