<PAGE>
LETTER FROM THE PRESIDENT
- --------------------------------------------------------------------------------
Dear Shareholder:
I would like to take this opportunity to welcome all former
Liberty Financial Utilities Fund investors, as well as all
shareholders who have invested since the end of March. As you may
know, Colonial Global Utilities Fund, formerly the Liberty Financial
Utilities Fund, became part of the Colonial family of funds on
March 27, 1995.
<TABLE>
FUND PERFORMANCE (11/1/94 - 4/30/95)
<CAPTION>
CLASS A CLASS B CLASS D
INCEPTION 10/15/91 3/27/95 3/27/95
-----------------------------------------------------------
<S> <C> <C> <C>
Distributions declared
per share $0.328 $0.0364 $0.0364
-----------------------------------------------------------
Six-month total return,
assuming reinvestment
of all distributions and no
sales charge or CDSC 3.49% -- --
-----------------------------------------------------------
Net asset value per share
on 4/30/95 $10.64 $10.64 $10.64
-----------------------------------------------------------
</TABLE>
ECONOMIC/MARKET OVERVIEW
The Fund's performance during the semiannual period reflected
favorable conditions in the utility stock market. One feature that
makes utility stocks attractive is their relatively high yields' but
this also makes them sensitive to interest rates changes. During the
period, the Federal Reserve Board raised interest rates to slow the
economy and keep inflation under control. This put upward pressure on
interest rates in many foreign markets. U.S. rates peaked in
mid-November, and have moved lower during 1995. This has helped
utility stocks in the United States, and it seems likely that foreign
interest rates will also decline.
The possible introduction of competition to the electric and
telephone industries is another factor that influenced U.S. utility
stock prices. New York and California (among other states) are
considering proposals for deregulating their electric utilities.
Despite the fact that implementation has been delayed, deregulation
has negatively influenced prices. However, electric stocks were still
the best performing sector of the utilities market. Prices of
telephone stocks were negatively affected by uncertainty about
competition in local markets.
Although foreign utilities face many of the same concerns as
those in the United States, prevailing conditions overseas seem more
favorable. Many issuers are benefiting from cost cutting measures and
tariff reform. Also, demand for utility services is growing much
faster than in the United States. Foreign markets have become more
attractive as many utilities that were formerly state monopolies are
converted to publicly owned companies. The initial offering prices for
the stocks of these new companies often provide good value for
investors.
[PHOTO OF JOHN A. MCNEICE, JR., PRESIDENT]
INVESTMENT STRATEGY
U.S. stocks were favored by investors in the utility market for
many years. However, foreign utilities have recently taken a more
prominent role. While the United States will continue to be a
significant source of investments, foreign markets may provide
attractive alternatives to their domestic counterparts.
To take advantage of new opportunities, the Fund is shifting its
investment emphasis. Although it always had a foreign component, this
typically was limited to between 10% and 15% of investments. Management
plans to increase this to approximately 45% before the end of 1995.
While this may result in lower monthly dividends, it should also
enhance the Fund's long-term growth potential.
For a more detailed discussion of your Fund's investment strategy
and how it may perform in the months ahead, please refer to the
following interview with Portfolio Co-managers Robert Christensen and
Ophelia Barsketis.
Sincerely,
/s/ John A. McNeice, Jr.
John A. McNeice, Jr.
President
June 10, 1995
Past performance cannot predict future results. Return and value of an
investment will vary, resulting in a gain or loss on sale. All results
shown assume reinvestment of distributions. Net asset value (NAV)
return does not include sales charges or contingent deferred sales
charges (CDSC). Performance for different share classes will vary
based on differences in sales charges and fees associated with each
class.
<PAGE>
REPORT FROM FUND MANAGEMENT
- --------------------------------------------------------------------------------
INTERVIEW WITH PORTFOLIO CO-MANAGERS ROBERT CHRISTENSEN AND OPHELIA BARSKETIS,
OF STEIN ROE & FARNHAM
Bob Christensen, Senior Vice President, has managed the Fund since its
inception in 1991 and has been associated with the adviser since 1962. Ophelia
Barsketis, Senior Vice President, has co-managed the Fund since September 1993
and has been associated with the adviser since 1983.
In the following interview, Bob and Ophelia share their thoughts on how
economic conditions during the semiannual period influenced the performance of
the Fund. They provide insight on how the market and Fund may perform in the
months ahead.
- --------------------------------------------------------------------------------
Q: There were some big swings in interest rates during the semiannual period.
Did this volatility have an impact on the utilities market?
A: Yes. In fact, interest rate changes had the biggest impact on the
utilities market. After peaking in mid-November, U.S. interest rates
have started moving lower during 1995. This has sparked a rally in
utility stocks, as reflected in the six-month return of 9.9% posted by
the Standard & Poor's Utilities Index on April 30.
Q: What's your outlook for U.S. utilities?
A: As economic growth in the United States cools off, demand for
electricity will decline. The picture is a bit brighter for natural gas
stocks, however, which should continue to grow incrementally. Of all
U.S. utilities, telephone companies will likely be the strongest, with
growth driven primarily by the burgeoning cellular telephone industry.
Q: The Fund has provided investors with steady performance since its
inception. Why are you now placing more emphasis on global investments?
A: We believe this is an opportune time for the Fund to be increasing
its foreign investments. Overseas growth should be normal, but 'normal'
may mean growth significantly exceeding that of domestic utilities. For
example, electric stocks are growing at 10% or more, and natural gas
and telephone stocks are doubling the returns of corresponding U.S.
companies. Foreign markets are coming out of their recessions in much
better economic shape than did the United States, which means foreign
utilities will be adding new customers at a much faster rate. Foreign
utility stocks should provide an attractive alternative to their U.S.
counterparts.
Q: Will the Fund retain its strong income orientation?
A: We will continue to use income as one of our selection criteria.
However, foreign securities generally have lower dividend yields than
stocks of U.S. utilities. For example, U.S. electric utilities pay out
approximately 78% of earnings as dividends, while foreign companies pay
out only about 40% of earnings. We are therefore projecting that the
Fund's distribution may decline slightly.
Q: Will investors receive a tradeoff benefit to lower distributions?
A: The tradeoff should be an increase in long-term growth potential.
We can again use a comparison of foreign and U.S. electric stocks to
illustrate this. For domestic companies, combined annual growth of
revenues and dividends is projected at 2% to 3% over the next several
years. The numbers for foreign electrics appear to be much more
attractive. In developed countries, revenue growth alone is projected
at 8% to 9% per year, and in some emerging markets growth may be as
high as 15%.
Q: How do you select foreign securities for the portfolio?
A: In developed countries, we look for major utility providers, and
we typically invest in one of the top two providers. Investments in
emerging markets are also conservative. We often seek out companies in
developed countries that are willing to invest in emerging markets.
One example is Enron Global Power and Pipeline, a U.S. company that
typically undertakes projects in partnership with the government of
the host country, such as China and India. Enron often has an option
to own and manage the new company once the project is completed.
NOTE: Because market conditions change frequently, there can be no
assurance that the trends described here will come to pass or affect
Fund performance.
2
<PAGE>
<TABLE>
LFC UTILITIES TRUST INVESTMENT PORTFOLIO (UNAUDITED, IN THOUSANDS) APRIL 30, 1995
- -------------------------------------------------------------------------------------
<CAPTION>
COUNTRY
COMMON STOCKS - 49.2% ABBREV. SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C> <C>
FINANCE, INSURANCE & REAL ESTATE - 4.7%
HOLDING & OTHER INVESTMENT COMPANIES
Burnham Pacific Properties, Inc. 170 $ 2,019
Equity Residential Properties Trust 114 3,049
Mark Centers Trust 214 2,702
National Health Investors, Inc. 130 3,023
--------
10,793
- -----------------------------------------------------------------------
MANUFACTURING - 1.1%
ELECTRONIC & ELECTRICAL EQUIPMENT
Kenetech Corp. 180 2,565
- -----------------------------------------------------------------------
TRANSPORTATION, COMMUNICATIONS, ELECTRIC,
GAS & SANITARY SERVICES - 43.4%
COMMUNICATIONS - 10.6%
American Telephone & Telegraph Corp. 82 4,136
Ameritech Corp. 107 4,815
British
Telecommunications PLC, ADR UK 80 5,000
GTE Corp. 124 4,238
Pacific Telesis Group, Inc. 74 2,285
Tele Danmark A/S De 152 3,980
--------
24,454
--------
ELECTRIC SERVICES - 20.8%
Cinergy Corp. 172 4,321
Dominion Resources, Inc. 65 2,372
DPL, Inc. 185 3,862
Empresa Nacional
De Electricidad ADR Sp 99 4,653
Entergy Corp. 80 1,740
National Power PLC, ADR UK 133 1,507
NIPSCO Industries, Inc. 132 4,257
Northeast Utilities Co. 140 3,063
Pacific Gas & Electric Co. 68 1,827
PacifiCorp 253 4,807
Powergen PLC, ADR UK 178 5,636
Southern Co. 206 4,249
Texas Utilities Co. 42 1,370
Utilicorp United, Inc. 163 4,564
--------
48,228
--------
GAS SERVICES - 10.6%
MCN Corp. 240 4,620
Northwest Natural Gas Co. 131 4,053
Questar Corp. 144 4,266
UGI Corp. 217 4,204
Westcoast Energy, Inc. 273 4,334
Wicor, Inc. 112 3,080
--------
24,557
--------
PIPELINES - 1.4%
Enron Global Power & Pipeline 138 3,312
- -----------------------------------------------------------------------
Total common stocks (cost $116,766) 113,909
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
COUNTRY
PREFERRED STOCKS - 4.2% ABBREV. SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C> <C>
FINANCE, INSURANCE & REAL ESTATE - 0.8%
DEPOSITORY INSTITUTIONS
Nacional Financial, 11.250% Mx 61 $ 1,886
- -----------------------------------------------------------------------
MANUFACTURING - 2.1%
PAPER & PAPER MILLS
James River Corp., 9.000% 200 4,900
- -----------------------------------------------------------------------
TRANSPORTATION, COMMUNICATIONS, ELECTRIC,
GAS & SANITARY SERVICES - 1.3%
TRANSPORTATION SERVICES
GATX Corp., 3.875% 54 2,903
- -----------------------------------------------------------------------
Total preferred stocks (cost $10,312) 9,689
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CURRENCY
BONDS & NOTES - 39.3% ABBREV. PAR
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CORPORATE FIXED-INCOME BONDS & NOTES - 27.9%
- -----------------------------------------------------------------------
FINANCE, INSURANCE, & REAL ESTATE - 1.0%
NONDEPOSITORY CREDIT INSTITUTIONS
Prime Credit Card Master Trust Series 1992,
7.550% 01/15/98 $ 2,250 2,275
- -----------------------------------------------------------------------
RETAIL TRADE - 1.5%
GENERAL MERCHANDISE STORES
Sears, Roebuck & Co.,
10.000% 02/03/12 3,000 3,516
- -----------------------------------------------------------------------
TRANSPORTATION, COMMUNICATIONS, ELECTRIC,
GAS & SANITARY SERVICES - 25.4%
COMMUNICATIONS - 1.3%
New York Telephone Co.,
8.625% 11/15/10 2,800 3,004
------
ELECTRIC SERVICES - 21.2%
Arizona Public Service Co.,
8.000% 02/01/25 2,500 2,382
Cincinnati Gas & Electric Co.,
5.875% 07/01/97 1,500 1,463
Duke Power Co.,
8.625% 03/01/22 1,000 1,024
Duquense II Funding Corp.,
8.700% 06/01/16 3,471 3,445
Houston Light & Power Co.,
7.500% 07/01/23 5,000 4,626
Kansas Gas & Electric Co.,
8.290% 03/29/16 2,000 1,955
Long Island Lighting Co.,
8.500% 05/15/06 2,000 1,930
National Rural Utilities Corp.,
9.000% 03/15/16 868 891
New York State Electric & Gas Corp.,
9.875% 02/01/20 1,540 1,644
Niagra Mohawk Power Co.,
7.375% 08/01/03 4,250 4,036
Old Dominion Electric Coop.,
8.760% 12/01/22 2,000 2,103
</TABLE>
See notes to investment portfolio.
3
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO - CONTINUED
- -----------------------------------------------------------------------
<CAPTION>
CORPORATE FIXED-INCOME CURRENCY
BONDS & NOTES - CONT. ABBREV. PAR VALUE
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
TRANSPORTATION, COMMUNICATIONS, ELECTRIC,
GAS & SANITARY SERVICES - CONT.
ELECTRIC SERVICES - CONT.
PacifiCorp,
6.750% 04/01/05 $ 2,000 $ 1,878
Pennsylvania Power & Light Co.,
9.250% 10/01/19 2,000 2,114
Public Service Co.:
6.375% 11/01/05 5,000 4,510
8.750% 03/01/22 1,000 1,028
Public Service Electric & Gas Co.,
8.750% 02/01/22 2,356 2,409
Puget Sound Power & Light Co.,
7.750% 02/01/07 5,000 4,963
RGS I+M Funding,
9.810% 12/07/22 1,749 1,974
Washington Water & Power Co.,
6.150% 05/08/00 5,000 4,716
--------
49,091
--------
PIPELINES - 2.9%
Texas Eastern Transmission Corp.:
7.960% 12/22/99 5,000 5,078
10.000% 08/15/01 1,500 1,669
--------
6,747
- -----------------------------------------------------------------------
Total corporate fixed-income
bonds & notes (cost $67,897) 64,633
- -----------------------------------------------------------------------
CORPORATE CONVERTIBLE BONDS - 11.4%
- -----------------------------------------------------------------------
MANUFACTURING - 2.0%
STONE, CLAY, GLASS & CONCRETE
Freeport McMoRan,
6.550% 01/15/01 5,000 4,531
- -----------------------------------------------------------------------
TRANSPORTATION, COMMUNICATIONS, ELECTRIC,
GAS & SANITARY SERVICES - 9.4%
COMMUNICATIONS - 1.7%
Compania De Telefonos De Chile,
4.500% 01/15/03 Ch 4,000 3,990
--------
ELECTRIC SERVICES - 3.2%
AES Corp.,
6.500% 03/15/02 4,000 3,775
Potomac Electric Power Co.,
5.000% 09/01/02 4,500 3,763
--------
7,538
--------
GAS SERVICES - 4.5%
Consolidated Natural Gas Co.,
7.250% 12/15/15 5,000 5,100
SFP Pipeline Holdings, Inc.,
10.410% 08/15/10 4,100 5,248
--------
10,348
- -----------------------------------------------------------------------
Total convertible bonds (cost $26,885) 26,407
- -----------------------------------------------------------------------
Total bonds & notes (cost $94,782) 91,040
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
COMMERCIAL PAPER - 6.3% PAR VALUE
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCE, INSURANCE, & REAL ESTATE - 6.3%
INSURANCE CARRIERS - 2.9%
ITT Corp.,
0.000% 05/02/95 $ 6,680 $ 6,677
--------
NONDEPOSITORY CREDIT INSTITUTIONS - 3.4%
Countrywide Credit Industries, Inc.,
0.000% 05/01/95 7,795 7,792
- -----------------------------------------------------------------------
Total commercial paper (cost $14,469) 14,469
- -----------------------------------------------------------------------
Total investments - 99.0% (cost $236,329)(a) 229,107
- -----------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - 1.0% 2,308
- -----------------------------------------------------------------------
NET ASSETS - 100.0% $231,415
- -----------------------------------------------------------------------
<FN>
Notes to investment portfolio:
(a) Cost for federal income tax purposes is the same.
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF SECURITIES BY COUNTRY
% of total
Currency Country securities
Country abbrev. abbrev. Value at value
- ------- -------- ------- -------- ----------
<S> <C> <C> <C> <C>
United States...... $ $202,455 88.4
United Kingdom..... UK 12,143 5.3
Spain.............. Sp 4,653 2.0
Chile.............. Ch Ch 3,990 1.8
Denmark............ De 3,980 1.7
Mexico............. Mx 1,886 0.8
-------- -----
$229,107 100.0
======== =====
</TABLE>
Certain securities are listed by country of
underlying exposure but may trade
predominantly on other exchanges.
<TABLE>
<CAPTION>
Acronym Name
- ------- ----
<S> <C>
ADR American Depository Receipt
</TABLE>
See notes to financial statements.
4
<PAGE>
FINANCIAL STATEMENTS LFC UTILITIES TRUST
- ---------------------------------------------------------
<TABLE>
STATEMENT OF ASSETS & LIABILITIES (UNAUDITED)
April 30, 1995
(in thousands)
- ---------------------------------------------------------
<S> <C> <C>
ASSETS
Investments at value (cost $236,329)........... $229,107
Receivable for:
Interest.......................... $1,954
Dividends......................... 770
Investments sold.................. 307
Deferred organization expenses....... 14
Other................................ 71 3,116
------ --------
Total assets.......................... 232,223
LIABILITIES
Payable for:
Investments purchased.............. 573
Management fee..................... 207
Accrued:
Accounting expenses................ 7
Other expenses..................... 21
------
Total liabilities..................... 808
--------
Net assets applicable to
investors' beneficial interest.............. $231,415
========
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS (UNAUDITED)
Six months ended April 30, 1995
(in thousands)
- ---------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest........................................ $ 4,372
Dividends....................................... 4,142
-------
Total investment income.................... 8,514
EXPENSES
Management fee....................... $659
Custodian & accounting fees.......... 55
Audit & legal fees................... 6
Insurance expense.................... 5
Transfer agent....................... (a)
Trustees fees........................ 2
Amortization of deferred
organization expenses............. 5
Other................................ (a)
----
732
Fees waived by the adviser........... 26 706
---- -------
Net investment income............ 7,808
-------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON PORTFOLIO POSITIONS:
Net realized loss............................... (2,446)
Net unrealized appreciation
during the period............................. 3,177
-------
Net gain......................... 731
-------
Net increase in net assets from
operations.................................... $ 8,539
=======
<FN>
(a) Rounds to less than one.
</TABLE>
See notes to financial statements.
5
<PAGE>
FINANCIAL STATEMENTS - CONTINUED LFC UTILITIES TRUST
- --------------------------------------------------------------------------------
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
- -----------------------------------------------------------------------------------------------------
<CAPTION>
(unaudited)
Six months
ended Year ended
April 30 October 31
--------- ----------
1995 1994
--------- ----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income..................................................... $ 7,808 $ 15,803
Net realized gain (loss).................................................. (2,446) 1,054
Net unrealized appreciation (depreciation)................................ 3,177 (38,421)
-------- --------
Net increase (decrease) from operations............................ 8,539 (21,564)
-------- --------
Transactions in investors' beneficial interests
Contributions............................................................. 4,329 46,602
Withdrawals............................................................... (42,111) (69,379)
-------- --------
Net transactions in investors' beneficial interests................ (37,782) (22,777)
-------- --------
Total decrease............................................... (29,243) (44,341)
Net assets
Beginning of period....................................................... 260,658 304,999
-------- --------
End of period............................................................. $231,415 $260,658
======== ========
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are as follows:
- -------------------------------------------------------------------------------------------------------
<CAPTION>
(UNAUDITED)
SIX MONTHS PERIOD
ENDED YEAR ENDED ENDED
APRIL 30 OCTOBER 31 OCTOBER 31
---------- --------------------------- ----------
1995 1994 1993 1992 1991(a)
---------- ----- ------ ----- ----------
<S> <C> <C> <C> <C> <C>
Ratios to average net assets
Expenses............................ 0.58% (b)(c) 0.61% 0.64% 0.72% (c) 0.58% (b)(c)
Net investment income............... 7.02% (b) 5.48% 5.29% 6.36% (c) 6.46% (b)(d)
Portfolio turnover...................... 38% (b) 34% 41% 31% 0%
<FN>
(a) The Fund commenced investment operations on August 23, 1991.
(b) Annualized.
(c) If the Fund had paid all of its expenses and there had been no reimbursement from the
Investment Adviser, as described in Note 3, these ratios would have been 0.60%, 0.86%
and 4.54% (annualized), respectively.
(d) Computed giving effect to the Investment Adviser's expense limitation undertaking.
</TABLE>
See notes to financial statements.
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) LFC UTILITIES TRUST
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
Liberty Financial Utilities Trust (the Portfolio) was organized on
August 14, 1991 as a trust under Massachusetts law and is registered under the
Investment Company Act of 1940 as an open-end investment company. The
Declaration of Trust permits the Trustees to issue non-transferable interests in
the Portfolio. The Portfolio commenced operations on August 23, 1991.
The following is a summary of significant accounting policies followed
by the Portfolio in the preparation of its financial statements. The policies
are in conformity with generally accepted accounting principles.
- --------------------------------------------------------------------------------
VALUATION OF INVESTMENTS
Equity securities listed on an exchange and over-the-counter equity
securities quoted on the NASDAQ system are valued on the basis of the last sale
on the date as of which the valuation is made, or, lacking any sales, at the
current bid prices. Over-the-counter equity securities not quoted on the NASDAQ
system are valued at the latest bid quotations. Long-term debt securities are
valued primarily on the basis of valuations furnished by an independent pricing
service which utilizes both dealer-supplied quotations and electronic data
processing techniques which take into account various factors. Securities for
which there are no such reliable quotations or valuations are valued at fair
value, as determined in good faith by, or under the direction of, the Trustees
of the Portfolio.
Short-term securities with less than sixty days remaining to maturity
are valued on the amortized cost basis.
- --------------------------------------------------------------------------------
ORGANIZATION EXPENSES
Expenses incurred in connection with the organization of the Portfolio
have been deferred and are being amortized on a straight line basis over five
years.
- --------------------------------------------------------------------------------
FEDERAL INCOME TAXES
The Portfolio has complied and intends to comply with the applicable
provisions of the Internal Revenue Service Code. Accordingly, no provision for
Federal income taxes is considered necessary.
- --------------------------------------------------------------------------------
OTHER
Investment transactions are accounted for on the trade date. Interest
income and expenses are recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date. Discounts are amortized on a yield to maturity
basis.
- --------------------------------------------------------------------------------
NOTE 2. INVESTMENT TRANSACTIONS
Realized gains and losses are computed on the identified cost basis for
both financial reporting and Federal income tax purposes.
The cost of investments purchased and proceeds from investments sold,
excluding short-term investments, for the six months ended April 30, 1995 were
$17,047,928 and $46,456,343, respectively.
Unrealized appreciation (depreciation) at April 30, 1995, based on cost
of investments for federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation.............. $ 8,200,468
Gross unrealized depreciation.............. (15,422,206)
------------
Net unrealized depreciation............. $ (7,221,738)
============
</TABLE>
- --------------------------------------------------------------------------------
NOTE 3. TRANSACTIONS WITH AFFILIATES
INVESTMENT MANAGEMENT
The Portfolio has a management agreement with Stein Roe & Farnham, Inc.
(Stein Roe), an indirect wholly-owned subsidiary of Liberty Financial Services,
Inc. (Liberty Financial) under which Stein Roe provides investment management
services. The investment management fee paid to Stein Roe is accrued daily and
paid monthly at an annual rate of 0.55% of the Portfolio's average daily net
assets up to $400 million and 0.50% of its average daily net assets over that
amount. Stein Roe had delegated the performance of its administrative duties to
Liberty Investment Services, Inc. (Liberty Services), also a wholly-owned
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED LFC UTILITIES TRUST
- --------------------------------------------------------------------------------
subsidiary of Liberty Financial through March 24, 1995. Stein Roe has assumed
those duties since March 24, 1995.
- --------------------------------------------------------------------------------
EXPENSE LIMITATIONS
Stein Roe and Liberty Services had voluntarily agreed, until March 24,
1995, not to impose their fees under their management and admini- stration
agreements with the Colonial Global Utilities Fund (the Fund) (formerly Liberty
Financial Utilities Fund), which invests all its assets in the Portfolio, and
the Portfolio, to the extent those fees would cause the aggregate expenses, as
defined, of the Fund and the Portfolio to exceed the rate of 1.25% per annum of
the Fund's average daily net assets and to guarantee payment of expenses in
excess of that rate.
- --------------------------------------------------------------------------------
NOTE 4. INVESTMENT IN REPURCHASE AGREEMENTS
The Portfolio may enter into repurchase agreements with banks,
broker-dealer firms and other recognized financial institutions whereby such
institutions sell an instrument in which the Portfolio may invest to the
Portfolio, and the seller agrees, at the time of the sale, to repurchase that
instrument at a specified time and price. The Portfolio requires the seller of
the instrument to maintain on deposit with the Portfolio's Custodian Bank or in
the Federal Reserve Book-Entry System securities in an amount at all times equal
to or in excess of the value of the repurchase agreement plus accrued interest.
In the event that the seller of the instrument defaults on the repurchase
obligation, the Portfolio could receive less than the repurchase price on the
sale of the securities to another party or could be subject to delays in selling
the securities.
8
<PAGE>
FINANCIAL STATEMENTS COLONIAL GLOBAL UTILITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
STATEMENT OF ASSETS & LIABILITIES (UNAUDITED)
April 30, 1995
(in thousands except for per share amounts and footnote)
- -------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments in LFC Utilities Trust, at value................... $231,361
Receivable for Fund shares sold.......................... $ 58
Deferred organization expenses........................... 33
Other.................................................... 14 105
---- --------
Total assets.......................................... 231,466
LIABILITIES
Payable for:
Fund shares repurchased................................ 157
Distributions.......................................... 125
Accrued:
Administration fee..................................... 20
Service fee............................................ 8
Transfer agent fee..................................... 74
Other.................................................. 42
----
Total liabilities..................................... 426
--------
NET ASSETS..................................................... $231,040
========
Net asset value & redemption price per share -
Class A ($230,519/21,671).................................. $ 10.64 *
========
Maximum offering price per share - Class A
($10.64/0.9425)............................................. $ 11.29
========
Net asset value & offering price per share -
Class B ($263/25).......................................... $ 10.64
========
Net asset value per share -
Class D ($258/24).......................................... $ 10.64
========
Maximum offering price per share - Class D
($10.64/0.9900)............................................. $ 10.75
========
COMPOSITION OF NET ASSETS
Capital paid in............................................. $239,998
Undistributed net investment income......................... 722
Accumulated net realized loss............................... (2,405)
Net unrealized depreciation................................. (7,275)
--------
$231,040
========
<FN>
* On sales of $50,000 or more the offering price is reduced.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS (UNAUDITED)
Six months ended April 30, 1995
(in thousands)
- ----------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Net investment income from LFC Utilities Trust....... $ 8,492
EXPENSES
Management fee.......................... $ 706
Administration fee...................... 120
Service fee............................. 299
Distribution fee - Class B.............. (a)
Distribution fee - Class D.............. (a)
Transfer agent.......................... 304
Bookkeeping fee......................... 15
Trustees fees........................... 2
Custodian fee........................... 3
Audit fee............................... 5
Legal fee............................... 1
Registration fees....................... 14
Reports to shareholders................. 19
Amortization of deferred
organization expenses................ 15
Other................................... 9
------
1,512
Fees waived by the adviser.............. 33 1,479
------ -------
Net investment income................. 7,013
-------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON PORTFOLIO POSITIONS:
Net realized loss.................................... (2,445)
Net unrealized appreciation
during the period.................................. 3,123
-------
Net gain.............................. 678
-------
Net increase in net assets from
operations......................................... $ 7,691
=======
<FN>
(a) Rounds to less than one.
</TABLE>
See notes to financial statements.
9
<PAGE>
FINANCIAL STATEMENTS - CONTINUED COLONIAL GLOBAL UTILITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
(unaudited)
Six months
ended Year ended
April 30 October 31
-------- ----------
1995(a) 1994
-------- ----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income.............................................................................. $ 7,013 $ 14,120
Net realized gain (loss)........................................................................... (2,445) 1,054
Net unrealized appreciation (depreciation)......................................................... 3,123 (38,421)
-------- --------
Net increase (decrease) from operations..................................................... 7,691 (23,247)
-------- --------
Distributions
From net investment income - Class A............................................................... (6,568) (12,796)
From net investment income - Class B............................................................... (1)
From net investment income - Class D............................................................... (1)
From net realized gains - Class A.................................................................. (1,042) (3,377)
In excess of net realized gains - Class A.......................................................... (802)
-------- --------
79 (40,222)
-------- --------
Fund share transactions
Receipts for shares sold - Class A................................................................. 3,807 45,864
Value of distributions reinvested - Class A........................................................ 6,749 15,294
Cost of shares repurchased - Class A............................................................... (40,556) (64,986)
-------- --------
(30,000) (3,828)
-------- --------
Receipts for shares sold - Class B................................................................. 257
Value of distributions reinvested - Class B........................................................ 1
-------- --------
258
-------- --------
Receipts for shares sold - Class D................................................................. 252
Value of distributions reinvested - Class D........................................................ 1
-------- --------
253
-------- --------
Net decrease from Fund share transactions................................................... (29,489) (3,828)
-------- --------
Total decrease........................................................................ (29,410) (44,050)
Net assets
Beginning of period................................................................................ 260,450 304,500
-------- --------
End of period (including undistributed net investment income of $722 and $279, respectively)....... $231,040 $260,450
======== ========
<FN>
(a) Class B and Class D shares were initially offered on March 27, 1995.
</TABLE>
See notes to financial statements.
10
<PAGE>
FINANCIAL STATEMENTS - CONTINUED COLONIAL GLOBAL UTILITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS - CONTINUED
(in thousands)
- ------------------------------------------------------------------------------------------------------
<CAPTION>
(unaudited)
Six months
ended Year ended
April 30 October 31
----------- ----------
1995(a) 1994
----------- ----------
<S> <C> <C>
NUMBER OF FUND SHARES
Sold - Class A................................................... 364 4,028
Issued for distributions reinvested - Class A.................... 650 1,370
Repurchased - Class A............................................ (3,894) (5,908)
------ ------
(2,880) (510)
------ ------
Sold - Class B................................................... 25
Issued for distributions reinvested - Class B.................... (b)
------ ------
25
------ ------
Sold - Class D................................................... 24
Issued for distributions reinvested - Class D.................... (b)
------ ------
24
------ ------
Net decrease in shares outstanding........................ (2,831) (510)
Outstanding at
Beginning of period.............................................. 24,551 25,061
------ ------
End of period.................................................... 21,720 24,551
====== ======
<FN>
(a) Class B and Class D shares were initially offered on March 27, 1995.
(b) Rounds to less than one.
</TABLE>
See notes to financial statements.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) COLONIAL GLOBAL UTILITIES FUND
- --------------------------------------------------------------------------------
NOTE 1. INTERIM FINANCIAL STATEMENTS
In the opinion of the Administrator of Colonial Global Utilities Fund
(the Fund), a series of Colonial Trust III, the accompanying financial
statements contain all normal and recurring adjustments necessary for the fair
presentation of the financial position of the Fund at April 30, 1995, and the
results of its operations, the changes in its net assets and the financial
highlights for the six months then ended.
- --------------------------------------------------------------------------------
NOTE 2. ACCOUNTING POLICIES
The Fund is a Massachusetts business trust, registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company. The Fund invests all of its investable assets in interests in the LFC
Utilities Trust (the Portfolio), a Massachusetts Trust, having the same
investment objective as the Fund. The value of the Fund's investment in the
Portfolio reflects the Fund's proportionate interest in the net assets of the
Portfolio (99.8% at April 30, 1995). The performance of the Fund is directly
affected by the performance of the Portfolio.
The financial statements of the Portfolio, including the portfolio of
investments, are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements. The Fund may issue an
unlimited number of shares. The Fund offers three classes of shares; Class A,
Class B and Class D. Class A shares are sold with a front-end sales charge and
Class B shares are subject to an annual distribution fee and a contingent
deferred sales charge. Class B shares will convert to Class A shares when they
have been outstanding approximately eight years. Class D shares are subject to
a reduced front-end sales charge, a contingent deferred sales charge on
redemptions made within one year after purchase and a continuing distribution
fee. The following significant accounting policies are consistently followed by
the Fund in the preparation of its financial statements and conform to generally
accepted accounting principles.
- --------------------------------------------------------------------------------
SECURITY VALUATION AND TRANSACTIONS
Valuations of securities by the Portfolio is discussed in Note 1 of the
Portfolio's Notes to Financial Statements which are included elsewhere in this
report.
- --------------------------------------------------------------------------------
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS
All income, expenses (other than the Class B and Class D distribution
fees), realized and unrealized gains (losses) are allocated to each class
proportionately on a daily basis for purposes of determining the net asset value
of each class.
The per share data was calculated using the average shares outstanding
during the period. In addition, Class B and Class D net investment income per
share data reflect the distribution fee applicable to each class.
Class B and Class D ratios are calculated by adjusting the expense and
net investment income ratios for the Fund for the entire period by the
distribution fee applicable to Class B and Class D shares.
- --------------------------------------------------------------------------------
FEDERAL INCOME TAXES
Consistent with the Fund's policy to qualify as a regulated investment
company and to distribute all of its taxable income, no federal income tax has
been accrued.
- --------------------------------------------------------------------------------
DEFERRED ORGANIZATION EXPENSES
The Fund incurred $99,000 of expenses in connection with its
organization, initial registration with the Securities and Exchange Commission
and with various states, and the initial public offering of its shares. These
expenses were deferred and are being amortized on a straight-line basis over
five years.
- --------------------------------------------------------------------------------
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED COLONIAL GLOBAL UTILITIES FUND
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-date.
The amount and character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles.
- --------------------------------------------------------------------------------
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
ADMINISTRATION FEE
Colonial Management Associates, Inc. (the Administrator) is the
administrator of the Fund and furnishes accounting and other services and office
facilities for a monthly fee equal to 0.10% annually of the Fund's average net
assets.
- --------------------------------------------------------------------------------
BOOKKEEPING FEE
The Administrator provides bookkeeping and pricing services for $18,000
per year plus 0.0233% of the Fund's average net assets over $50 million.
- --------------------------------------------------------------------------------
TRANSFER AGENT
Colonial Investors Service Center, Inc. (the Transfer Agent), an
affiliate of the Administrator, provides shareholder services and receives a
monthly fee equal to 0.20% annually of the Fund's average net assets, and
receives a reimbursement for certain out of pocket expenses.
- --------------------------------------------------------------------------------
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES
The Administrator, through its Colonial Investment Services (the
Distributor) division, is the Fund's principal underwriter. During the period
ended April 30, 1995, the Distributor retained net underwriting discounts of
$4,624 on sales of the Fund's Class A shares and received no contingent deferred
sales charges (CDSC) on Class B or Class D share redemptions.
The Fund has adopted a 12b-1 plan which requires it to pay the
Distributor a service fee equal to 0.25% annually of the Fund's net assets as of
the 20th of each month. The plan to the Distributor equal to 0.75% for Class B
and Class D of the average net assets attributable to Class B and Class D
shares, respectively.
The CDSC and the fees received from the 12b-1 plan are used principally
as repayment to the Distributor for amounts paid by the Distributor to dealers
who sold such shares.
- --------------------------------------------------------------------------------
OTHER
The Fund pays no compensation to its officers, all of whom are employees
of the Administrator.
The Fund's Trustees may participate in a deferred compensation plan
which may be terminated at any time. Obligations of the plan will be paid solely
out of the Fund's assets.
- --------------------------------------------------------------------------------
NOTE 4. RESULTS OF SPECIAL SHAREHOLDERS MEETING
On March 17, 1995, a special meeting of shareholders was held and the
Agreement and Plan of Reorganization dated as of December 29, 1994 between
Liberty Financial Trust on behalf of the Liberty Financial Utilities Fund and
Colonial Trust III on behalf of the Colonial Global Utilities Fund, including
the termination of the Liberty Financial Utilities Fund as provided therein, was
approved and became effective March 27, 1995. Also approved and effective March
27, 1995, was a temporary amendment to the investment restriction of the Liberty
Financial Utilities Fund concerning its ownership of more than 10% of the voting
securities of any one issuer. Out of the 24,247,355 shares of beneficial
interest outstanding, 14,118,488 shares were voted for, and 464,689 shares were
voted against the Fund's Agreement and Plan of Reorganization and the temporary
amendment, and 1,231,882 shares abstained. Of the shares of beneficial interest
outstanding that abstained, 18,254 represented broker non-votes.
13
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS - COLONIAL GLOBAL UTILITIES FUND
Selected data for a share of each class outstanding throughout each period are as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
(UNAUDITED) PERIOD
SIX MONTHS ENDED YEAR ENDED ENDED
APRIL 30 OCTOBER 31 OCTOBER 31
------------------------------------ ---------------------------- ----------
1995 1994 1993 1992 1991(C)
------------------------------------ ---------------------------- ----------
CLASS A CLASS B(B) CLASS D(B) CLASS A CLASS A CLASS A CLASS A
-------- ---------- ---------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period.... $ 10.610 $10.420 $10.420 $ 12.150 $ 10.430 $ 9.990 $10.000
-------- ------- ------- -------- -------- -------- -------
Income from investment operations:
Net investment income (a)............ 0.319 0.048 0.048 0.550 0.570 0.590 0.020
Net realized and unrealized
gain (loss) on investments...... (0.617) 0.136 0.136 (1.430) 1.790 0.460 (0.030)
-------- ------- ------- -------- -------- -------- -------
Total from investment operations..... (0.298) 0.184 0.184 (0.880) 2.360 1.050 (0.010)
-------- ------- ------- -------- -------- -------- -------
Less distributions declared
to shareholders:
From net investment income........... 0.259 0.036 0.036 (0.500) (0.610) (0.610) 0.000
From realized gains ................. 0.069 0.000 0.000 (0.160) (0.030) 0.000 0.000
-------- ------- ------- -------- -------- -------- -------
Total distributions
declared to shareholders........ 0.328 0.036 0.036 (0.660) (0.640) (0.610) 0.000
-------- ------- ------- -------- -------- -------- -------
Net asset value - End of period.......... $ 10.640 $10.640 $10.640 $ 10.610 $ 12.150 $ 10.430 $ 9.990
======== ======= ======= ======== ======== ======== =======
Total return(d).......................... 3.49%(e) N/A N/A (7.40)% 23.30% 10.80% (2.10)% (f)
======== ======= ======= ======== ======== ======== =======
Ratios to average net assets
Expenses(a).......................... 1.25%(f) 2.00%(f) 2.00%(f) 1.20% 1.13% 1.25%(g) 1.25%(f)(g)
Net investment income................ 6.05%(f) 5.30%(f) 5.30%(f) 4.90% 4.80% 5.81%(h) 5.75%(f)(h)
Net assets at end of period (000)........ $230,519 $ 263 $ 258 $260,450 $304,500 $118,977 $ 6,617
<FN>
(a) The per share amounts and ratios reflect income and expenses assuming inclusion
of the Fund's proportionate share of the income and expenses of LFC Utilities Trust.
(b) Class B and Class D shares were initially offered on March 27, 1995. Per share
amounts reflect activity from that date.
(c) The Fund commenced investment operations on August 23, 1991.
(d) Total return based on net asset value with all distributions reinvested.
(e) Not annualized.
(f) Annualized.
(g) If the Fund had paid all of its expenses excluding distribution fees waived and there had
been no reimbursement from the Investment Adviser and the Administrator, these ratios
would have been 1.61% and 9.81% for the periods ended October 31, 1992 and 1991,
respectively.
(h) Computed giving effect to Investment Adviser's and Administrator's expense
limitation undertaking.
</TABLE>
14
<PAGE>
- ---------------------------------------------------------
ABOUT OUR COVER...
[GRAPHIC] The symbol on the cover of this Report
represents the Fund's primary investment
focus on common stocks.
- ---------------------------------------------------------
Colonial Global Utilities Fund mails one shareholder report to each shareholder
address. If you would like more than one report, please call our Literature
Department at 1-800-248-2828 and additional reports will be sent to you.
SHAREHOLDER SERVICES AND TRANSFER AGENT
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
This material may be used with potential investors if it is preceded or
accompanied by a current Fund prospectus containing more complete information
including fees, risks and expenses.
15
<PAGE>
[LOGO] COLONIAL
MUTUAL FUNDS
[GRAPHIC]
COLONIAL
GLOBAL UTILITIES
FUND
-----------------------
SEMIANNUAL REPORT
APRIL 30, 1995
- ------------------------------------------------------------
[LOGO] COLONIAL
MUTUAL FUNDS
[RECYCLE LOGO] Printed on recycled paper.
GU-03/988A-0495
COLONIAL INVESTMENT SERVICES, INC. [COPYRIGHT] 1995
