December 1, 1998
COLONIAL VALUE FUND
CLASS Z SHARES
PROSPECTUS
BEFORE YOU INVEST
Colonial Management Associates, Inc. (Advisor) and your full-service financial
advisor 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 advisor to determine how investing in
this mutual fund may suit your unique needs, time horizon and risk tolerance.
Colonial Value Fund (Fund), a diversified portfolio of Colonial Trust VI
(Trust), an open-end management investment company, seeks long-term growth and
current income.
The Fund is managed by the Advisor, an investment advisor 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.
The following eligible institutional investors may purchase Class Z shares: (i)
any retirement plan with aggregate assets of at least $5 million at the time of
purchase of Class Z shares and which purchases shares directly from Liberty
Funds Distributor, Inc. (Distributor) or through a third party broker-dealer;
(ii) any insurance company, trust company or bank purchasing shares for its own
account; and (iii) any endowment, investment company or foundation. In addition,
Class Z shares may be purchased directly or by exchange by any (i) investors who
were Class I shareholders of the SoGen International Fund, SoGen Overseas Fund
or SoGen Gold Fund as of the reorganization of these funds into Colonial Trust
II and (ii) clients of investment advisory affiliates of the Distributor,
provided that these clients meet certain criteria established by the Distributor
and its affiliates.
More detailed information about the Fund is in the November 2, 1998 Statement of
Additional Information which has been filed with the Securities and Exchange
Commission (SEC) and is obtainable free of charge by calling the Advisor 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.
<TABLE>
<CAPTION>
Contents Page
<S> <C>
Summary of Expenses 2
The Fund's Financial History 3
The Fund's Investment Objective 4
How the Fund Pursues its Objective and
Certain Risk Factors 4
Management Discussion of Fund Performance 6
How the Fund Measures its Performance 8
How the Fund is Managed 8
Year 2000 9
How the Fund Values its Shares 9
Distributions and Taxes 9
How to Buy Shares 10
How to Sell Shares 10
How to Exchange Shares 11
Telephone Transactions 11
Organization and History 11
Appendix 12
</TABLE>
The SEC maintains a Web site (http://www.sec.gov) that contains the Statement of
Additional Information, materials that are incorporated by reference into this
Prospectus and the Statement of Additional Information, and other information
regarding the Fund.
- ------------------------------ ---------------------------
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.
CV-01/271G-1198
<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, adjusted to reflect current fees, 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 $500 sent via federal funds wire will be
subject to a $7.50 charge per transaction.
Annual Operating Expenses (as a % of average net assets)
<TABLE>
<S> <C>
Management fee 0.00%
12b-1 fee 0.00
Other expenses 0.75
----
Total operating expenses 0.75%
====
</TABLE>
The Advisor has agreed, until further notice, to waive fees and bear certain
Fund expenses to the extent that total operating expenses (exclusive of 12b-1
fees, brokerage commissions, interest, taxes and extraordinary expenses, if any)
will not exceed 0.75% annually of the Fund's average net assets. Absent such
agreement, the "Management fee" would be 0.80%, "Other expenses" would be 2.58%
and "Total operating expenses" would be 3.38%. Other expenses are estimated
based on Class A share expenses.
Example
The following Example shows the cumulative transaction and operating 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 $ 8
3 years $24
5 years $42
10 years $93
2
<PAGE>
THE FUND'S FINANCIAL HISTORY(j)
The following financial highlights for a share outstanding throughout the period
from March 31, 1996 (effective date of registration) through June 30, 1998 have
been audited by PricewaterhouseCoopers LLP, independent accountants. Their
unqualified report is in the Fund's 1998 Annual Report and is incorporated by
reference into the Statement of Additional Information. As of June 30, 1998, no
Class Z shares had been issued.
<TABLE>
<CAPTION>
Class A Class B
---------------------------------- -----------------------------------
Year ended Period ended Year ended Period ended
June 30 June 30 June 30 June 30
------------------ ------------ ------------------ -------------
1998 1997 1996(d) 1998 1997 1996(d)
---- ---- ------- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $12.690 $10.280 $9.940 $12.630 $10.260 $9.940
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(a)(b) 0.070 0.141 0.044 (0.031) 0.058 0.024
Net realized and unrealized gain 2.900 2.428 0.296 2.897 2.413 0.296
------- ------- ------- ------- ------- -------
Total from Investment Operations 2.970 2.569 0.340 2.866 2.471 0.320
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.150) (0.159) -- (0.036) (0.101) --
From net realized gains (1.550) -- -- (1.550) -- --
Total Distributions Declared to Shareholders (1.700) (0.159) -- (1.586) (0.101) --
------- ------- ------- ------- ------- -------
Net asset value - End of period $13.960 $12.690 $10.280 $13.910 $12.630 $10.260
======= ======= ======= ======= ======= =======
Total return (e)(f) 24.99% 25.23% 3.42%(g) 24.13% 24.23% 3.22%(g)
======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses (h) 1.52% 1.55% 1.55%(i) 2.27% 2.30% 2.30%(i)
Fees and expenses waived or borne
by the Advisor (h) 2.11% 2.64% 1.55%(i) 2.11% 2.64% 1.55%(i)
Net investment income (h) 0.52% 1.27% 1.77%(i) (0.23)% 0.52% 1.02%(i)
Portfolio turnover 79% 129% 16%(g) 79% 129% 16%(g)
Net assets at end of period (000) $4,029 $3,217 $2,570 $395 $319 $257
(a) Net of fees and expenses
waived or borne by the
Advisor which amounted to: $0.285 $0.292 $0.039 $0.285 $0.292 $0.039
<CAPTION>
Class C(c)
----------------------------------
Year ended Period ended
June 30 June 30
-------------------- ------------
1998 1997 1996(d)
---- ---- -------
<S> <C> <C> <C>
Net asset value - Beginning of period $12.630 $10.260 $9.940
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(a)(b) (0.031) 0.058 0.024
Net realized and unrealized gain 2.897 2.413 0.296
------- ------- -------
Total from Investment Operations 2.866 2.471 0.320
------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.036) (0.101) --
From net realized gains (1.550) -- --
Total Distributions Declared to Shareholders (1.586) (0.101) --
------- ------- -------
Net asset value - End of period $13.910 $12.630 $10.260
======= ======= =======
Total return (e)(f) 24.13% 24.23% 3.22%(g)
======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses (h) 2.27% 2.30% 2.30%(i)
Fees and expenses waived or borne
by the Advisor (h) 2.11% 2.64% 1.55%(i)
Net investment income (h) (0.23)% 0.52% 1.02%(i)
Portfolio turnover 79% 129% 16%(g)
Net assets at end of period (000) $396 $319 $257
(a) Net of fees and expenses
waived or borne by the
Advisor which amounted to: $0.292 $0.285 $0.039
</TABLE>
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Class D shares were redesignated Class C shares on July 1, 1997.
(d) 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.
(e) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(f) Had the Advisor not waived or reimbursed a portion of expenses, total
return would have been reduced.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(i) Annualized.
(j) The Fund was not publicly offered prior to November 2, 1998. Had the Fund
been publicly available, the Advisor may have managed the portfolio and
cash positions differently and therefore, total return may have been
affected.
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.
3
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks long-term growth and current income.
HOW THE FUND PURSUES ITS OBJECTIVE AND CERTAIN RISK FACTORS
The Fund seeks to achieve its objective by investing primarily in
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 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 (S&P) or below Baa by Moody's Investors
Service, Inc. (Moody's), or are unrated but considered by the Advisor to be of
comparable credit quality). For a description of S&P's and Moody's rating
systems, see "Appendix." 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 Advisor's own credit analysis.
Foreign Investments. The Fund's equity and debt investments may consist of
foreign securities, sponsored and unsponsored American Depositary Receipts and
Global Depositary Receipts which 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
4
<PAGE>
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. 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. Such
transactions will 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. 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 on a futures contract generally gives the option holder
the right, but not the obligation, to purchase or sell the futures contract
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
securities. In addition, if the Advisor's prediction on rates or stock market
movements is inaccurate, the Fund may be worse off than if it had not hedged.
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.
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, other affiliated
funds and other entities to the extent permitted by law for temporary or
emergency purposes up to 33-1/3% of its total 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. Additional information concerning certain of the
securities and investment techniques described above is contained in the
Statement of Additional Information.
5
<PAGE>
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
Colonial Value Fund Investment Performance vs. the S&P 500
Change in Value of $10,000 from 3/31/96 to 6/30/98
[MOUNTAIN CHART - COMPARING THE INITIAL ACCOUNT VALUE AND SUBSEQUENT ACCOUNT
VALUES AT THE END OF EACH FISCAL YEAR END ASSUMING A
$10,000 INVESTMENT]
- -------------------------------------------------------------------------------
Class A Class A Class B Class B Class C Class C
S&P 500 NAV POP NAV POP NAV POP
- -------------------------------------------------------------------------------
3/31/96 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
4/30/96 10147 10050 9472 10050 10050 10050 10050
5/31/96 10409 10171 9586 10161 10161 10161 10161
6/30/96 10448 10342 9747 10322 10322 10322 10322
7/31/96 9987 9865 9302 9849 9849 9849 9849
8/31/96 10198 10161 9577 10131 10131 10131 10131
9/30/96 10771 10533 9928 10493 10493 10493 10493
10/31/96 11068 10825 10203 10775 10775 10775 10775
11/30/96 11904 11419 10762 11358 11358 11358 11358
12/31/96 11668 11226 10581 11168 11168 11168 11168
1/31/97 12397 11645 10975 11574 11574 11574 11574
2/28/97 12494 11767 11091 11686 11686 11686 11686
3/31/97 11982 11400 10744 11320 11320 11320 11320
4/30/97 12697 11686 11014 11584 11584 11584 11584
5/31/97 13473 12339 11629 12234 12234 12234 12234
6/30/97 14072 12951 12206 12823 12823 12823 12823
7/31/97 15191 13768 12976 13635 13635 13635 13635
8/31/97 14341 13431 12658 13290 13290 13290 13290
9/30/97 15126 14217 13399 14051 14051 14051 14051
10/31/97 14621 13553 12774 13391 13391 13391 13391
11/30/97 15297 14023 13216 13848 13848 13848 13848
12/31/97 15560 14554 13717 14361 14361 14361 14361
1/31/98 15732 14485 13652 14281 14281 14281 14281
2/28/98 16866 15735 14830 15505 15505 15505 15505
3/31/98 17729 16441 15496 16192 16192 16192 16192
4/30/98 17910 16221 15289 15974 15974 15974 15974
5/31/98 17603 16140 15212 15883 15883 15883 15883
6/30/98 $18,317 $16,187 $15,257 $15,917 $15,617 $15,917 $15,917
- ---------------------------[END OF MOUNTAIN CHART]-----------------------------
Value of a $10,000 investment made on 3/31/96
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
- ----------------------------------------------------------------------------------------
NAV POP NAV W/CDSC NAV W/CDSC
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$16,187 $15,257 $15,917 $15,617 $15,917 $15,917
- ----------------------------------------------------------------------------------------
</TABLE>
Average Annual Total Returns as of 6/30/98
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
Inception (3/31/96) (3/31/96) (3/31/96)
- -----------------------------------------------------------------------------------------------
NAV POP NAV W/CDSC NAV W/CDSC
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year 24.99% 17.80% 24.13% 19.13% 24.13% 23.13%
- -----------------------------------------------------------------------------------------------
Life of Fund 23.88% 20.66% 22.95% 21.92% 22.95% 22.95%
- -----------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
Net asset value (NAV) returns do not include sales charges or contingent
deferred sales charges (CDSC). Public offering price (POP) returns include the
maximum sales charge of 5.75% for Class A shares. The CDSC returns reflect the
maximum charges of 5% for one year, 3% for life for Class B shares, and 1% for
one year for Class C shares.
Management Discussion
The following is a discussion of the Fund's performance for the 12-month period
ended June 30, 1998. During this period, John Lennon, Michael Rega, Vice
Presidents, and Richard Petrino, Assistant Vice President of Colonial Management
Associates, Inc. served as the Fund's portfolio managers.
Despite the slowdown in Asia and its negative impact on worldwide markets in
late 1997 and the first half of 1998, U.S. stock prices, as measured by the S&P
500 Index, posted an impressive 30.17% return over the 12-month period.
For the 12-month period, the Fund generated a return of 24.99% for Class A
shares, based on net asset value. This compares favorably with the performance
of the Lipper Equity Income category, which averaged 20.98% during the period.*
The Fund's strong performance can be attributed mainly to two factors - asset
allocation and good stock selection. The Fund remained committed to investing in
equity securities for the period with no exposure to bonds.
We continue to believe that over the long-term a portfolio that focuses on
income producing equity securities will continue to provide an attractive
vehicle for investors interested in seeking current income and long-term growth.
(1)Please note that the Fund has the ability to invest up to 35% in bonds.
Past performance cannot guarantee future results. Returns and value of an
investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. Performance for different share classes
will vary based on differences in sales charges and fees associated with each
class. Performance results reflect any/ voluntary waivers or reimbursement of
Fund expenses by the Advisor. Absent these waivers or reimbursement
arrangements, performance results would have been lower. The Standard & Poor's
500 Index is an unmanaged index that tracks the performance of widely held,
large-capitalization U.S. stocks. Unlike mutual funds, indexes are not
investments, do not incur fees or expenses and are not professionally managed.
It is not possible to invest directly in an index.
* Lipper Analytical Services, Inc., a widely respected data provider in the
industry, calculates an average total return for mutual funds with similar
investment objectives as the Fund.
7
<PAGE>
HOW THE FUND MEASURES ITS PERFORMANCE
Performance may be quoted in sales literature and advertisements. Class Z
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.
Performance results reflect any voluntary fee waivers or reimbursement of Fund
expenses by the Advisor or its affiliates. Absent these fee waivers or expense
reimbursements, performance results would have been lower.
The Fund's classes of shares were first offered for sale on different dates. The
total return for a newer class of shares (Class Z) includes the performance of
the newer class of shares since it was offered for sale and the performance for
the oldest existing class of shares from the date it was offered for sale up to
the date the newer class was offered for sale. See "Performance Measures" in the
Statement of Additional Information for information on how the calculations are
made.
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 Advisor.
The Distributor, a subsidiary of the Advisor, serves as the distributor for the
Fund's shares. Liberty Funds Services, Inc. (Transfer Agent), an affiliate of
the Advisor, serves as the shareholder services and transfer agent for the Fund.
Each of the Advisor, the Distributor and the Transfer Agent is an indirect
wholly-owned subsidiary of Liberty Financial Companies, Inc., which in turn is
an indirect majority-owned subsidiary of Liberty Mutual Insurance Company
(Liberty Mutual). Liberty Mutual is considered to be the controlling entity of
the Advisor and its affiliates. Liberty Mutual is an underwriter of workers'
compensation insurance and is a property and casualty insurer in the U.S.
The Advisor furnishes the Fund with investment management, accounting and
administrative personnel and services, office space and other equipment and
services at the Advisor's expense. For these services, the Fund pays the Advisor
an annual rate of 0.80% of the Fund's average daily net assets.
Scott Schermerhorn, Senior Vice President of the Advisor, joined the Advisor in
October, 1998 and has managed the Fund since that time. Prior to joining the
Advisor, Mr. Schermerhorn was the head of the value team at Federated Investors
from 1996 to 1998 where he managed the American Leader Fund, Federated Stock
Trust, Federated Stock and Bond Fund as well as other institutional accounts.
Prior to 1996, Mr. Schermerhorn was a member of the growth and income team at
J&W Seligman.
The Advisor 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 0.236% annually of average net assets plus
certain out-of-pocket expenses.
Each of the foregoing fees is subject to any reimbursement or fee waiver to
which the Advisor may agree.
The Advisor places all orders for the purchase and sale of portfolio securities.
In selecting broker-dealers, the Advisor may consider research and brokerage
services furnished by such broker-dealers to the Advisor and its affiliates. In
recognition of the research and brokerage services provided, the Advisor 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 Advisor may consider sales of shares of the Fund
(and of certain
8
<PAGE>
other mutual funds advised by the Advisor and its affiliates) 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 Advisor 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 under
Investment Company Act Rule 17e-1.
YEAR 2000
The Fund's Advisor, Distributor and Transfer Agent (Liberty Companies) are
actively managing Year 2000 readiness for the Fund. The Liberty Companies are
taking steps that they believe are reasonably designed to address the Year 2000
problem and are communicating with vendors who provide services, software and
systems to the Fund to provide that date-related information and data can be
properly processed and calculated on and after January 1, 2000. Many Fund
service providers and vendors, including the Liberty Companies, are in the
process of making Year 2000 modifications to their software and systems and
believe that such modifications will be completed on a timely basis prior to
January 1, 2000. The Fund will not pay the cost of these modifications. However,
no assurances can be given that all modifications required to ensure proper data
processing and calculation on and after January 1, 2000 will be timely made or
that services to the Fund will not be adversely affected.
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 generally valued as of the close of regular trading
(normally 4:00 p.m. Eastern time) on 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 Advisor
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. In addition, if
the values of foreign securities have been materially affected by events
occurring after the closing of a foreign market, the foreign securities may be
valued at their fair value.
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 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.
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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 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, investors 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 delay sending proceeds for up to 15 days in order to protect the Fund
against financial losses and dilution in net asset value caused by dishonored
purchase payment checks. To avoid delay in payment, investors are advised to
purchase shares unconditionally, such as by federal fund wire or other
immediately available funds.
Selling Shares Directly To The Fund. Send a signed letter of instruction or
stock power form to the Transfer Agent. 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:
Liberty Funds Services, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-661
Selling Shares Through Financial Service Firms. Financial service firms must
receive requests prior to the time the Fund values its shares to receive that
day's price, are responsible for furnishing all necessary documentation to the
Transfer Agent, and may charge for this service.
General. The sale of shares is a taxable transaction for income tax purposes.
See the Statement of Additional Information for more information. Under unusual
circumstances, the Fund may suspend repurchases or postpone payment for up
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to seven days or longer, as permitted by federal securities law. No interest
will accrue on amounts represented by uncashed distribution or redemption
checks.
HOW TO EXCHANGE SHARES
Class Z shares may be exchanged at net asset value into the Class A or Class Z
shares of any other mutual funds distributed by the Distributor, including the
mutual funds advised by the Advisor and its affiliates. 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. 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 Advisor determines, in its sole and absolute discretion, that
the shareholder's exchange activity is likely to adversely impact the Advisor'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 advisors are automatically eligible to
exchange Fund shares and to redeem up to $100,000 of Fund shares by calling
1-800-422-3737 toll-free any business day between 9:00 a.m. Eastern Time and the
time at which the Fund values its shares. Telephone redemptions are limited to a
total of $100,000 in a 30-day period. Redemptions that exceed $100,000 may be
done by placing a wire order trade through a broker or furnishing a signature
guaranteed request. Telephone redemption privileges 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 advisor provide certain identifying information. Shareholders
and/or their financial advisors 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 advisors should follow the procedures
for redemption or exchange by mail as described above under "How to Sell
Shares." The Advisor, 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.
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.
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 Fund and of any other series of the Trust that
may be in existence from time to time generally 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.
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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
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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.
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Investment Advisor
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
Liberty Funds Services, Inc.
One Financial Center
Boston, MA 02111-2621
1-800-345-6611
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.
<PAGE>
December 1, 1998
COLONIAL VALUE FUND
CLASS Z SHARES
PROSPECTUS
Colonial Value Fund seeks long-term growth and current income.
For more detailed information about the Fund, call the Advisor at 1-800-426-3750
for the November 2, 1998 Statement of Additional Information.
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Not FDIC-Insured May lose value
No bank guarantee
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