<PAGE>
[COLONIAL
MUTUAL FUNDS LOGO]
[GRAPHIC]
COLONIAL
INTERNATIONAL
FUND FOR GROWTH
SEMIANNUAL REPORT
APRIL 30, 1995
[COLONIAL MUTUAL FUNDS LOGO]
[LOGO] Printed on recycled paper.
IN-03/897A-0495
COLONIAL INVESTMENT SERVICES, INC. (C)1995
<PAGE>
LETTER FROM THE PRESIDENT
Dear Shareholder:
Following is Colonial International Fund for Growth's semiannual report for
the six months ended April 30, 1995. The Fund is designed to provide long-term
capital growth through investments in stocks from overseas companies.
<TABLE>
<CAPTION>
FUND PERFORMANCE (11/01/94 - 4/30/95)
CLASS A CLASS B CLASS D
INCEPTION 12/1/93 12/1/93 7/1/94
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Six-month total return,
assuming reinvestment of all
distributions and no sales
charge or CDSC(1) -10.90% -11.17% -11.21%
- --------------------------------------------------------------------------------
Net asset value per share
on 4/30/95 $9.24 $9.14 $9.19
- --------------------------------------------------------------------------------
</TABLE>
ECONOMIC/MARKET OVERVIEW
Global economic conditions were quite volatile during the Fund's semiannual
period, and had a negative impact on performance. In Japan, the Kobe earthquake
had a chilling effect on that country's economy, shutting down one of Japan's
main ports and eroding consumer confidence.
The devaluation of the Mexican peso did not have as profound an effect as
events in Japan. However, it was significant nonetheless. In Argentina and
Brazil, which have stronger economies than Mexico, peso related declines were
exaggerated. However, in general, economic weakness should continue across
Central and South America.
Although there are no direct economic links between Latin America and the
Far East, the problems encountered by Mexico reduced investor confidence in
other emerging markets. Unlike Latin America, however, these economies remain
fundamentally sound.
In continental Europe, the Deutsche Mark strengthened relative to the U.S.
dollar, hurting German exports. Because the European Rate Mechanism is keyed on
the Deutsche Mark, the performance of the German currency influenced most of the
other European economies.
The United Kingdom appears to be an exception to the prevailing European
trends. Britain is enjoying a sustained, broad-based recovery -- gross domestic
product for 1994 was 3.9%. Exports have been strong, and inflation has been kept
under control by low domestic consumption and weakness in the housing sector.
INVESTMENT STRATEGY
During the period, Gartmore Capital Management, the Fund's sub-adviser,
hedged a significant portion of the portfolio against anticipated weakness in
the yen. This decision had a negative impact on performance as the yen
strengthened versus the dollar from December through the end of April. Gartmore
remains confident that maintaining their hedging strategy may benefit the Fund
should the Japanese stock market rebound.
[PHOTO]
John A. McNeice, Jr.
President
Japanese investments were maintained at a relatively low level, reflecting
the weakness of Japan's economy. Investments in continental Europe were also
underweighted, a decision that may have had a negative influence on performance
as many local currencies strengthened in relation to the U.S. dollar. The Fund
benefited from the high profile given to investments in the United Kingdom, as
that country's economy continued to expand. Gartmore has also maintained a
position in emerging markets, including those of the Far East. These markets
should continue to be a source of significant growth over the long term.
For further information about this or any of the other mutual funds we
offer, please contact your financial adviser or call Colonial at 1-800-426-3750.
Sincerely,
John A. McNeice, Jr.
John A. McNeice, Jr.
President
June 10, 1995
(1) Had the adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
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>
INVESTMENT PORTFOLIO (UNAUDITED, IN THOUSANDS) APRIL 30, 1995
<TABLE>
<CAPTION>
COUNTRY
COMMON STOCKS - 96.3% ABBREV. SHARES VALUE
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
CONSTRUCTION - 5.3%
BUILDING CONSTRUCTION - 3.5%
HongKong Land Co. HK 400 $ 752
Mitsui Fudosan Co. Ja 50 581
Shimizu Construction Ja 175 1,876
Toyo Wharf &
Warehouse Co. Ja 300 1,515
-------
4,724
-------
HEAVY CONSTRUCTION-NON
BUILDING CONSTRUCTION - 0.6%
United Engineers, Ltd. Ma 150 862
-------
SPECIAL TRADE CONTRACTORS - 1.2%
Tele Danmark A/S, Series B(a) De 30 1,564
- -----------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 24.4%
DEPOSITORY INSTITUTIONS - 9.3%
Australia & New Zealand
Banking Group, Ltd. Au 200 739
Bank International Indonesia (a) In 150 309
Banco De Galicia Y
Bueno ADR (a) Sp 23 371
Banco Popular Espanol SA Sp 10 1,362
Banque Nationale de Paris (a) Fr 28 1,361
Barclays PLC UK 125 1,309
Credit Local de France Fr 20 1,704
Dao Heng Bank Group Ltd. (a) HK 350 895
Development Bank of
Singapore, Ltd. Si 100 1,069
Shinhan Bank Ko 32 645
Sumitomo Trust & Banking Ja 140 2,113
Turkiye Garanti Bankasi ADR (a) Tu 20 50
Turkiye Garanti Bankasi ADS (a) Tu 180 450
-------
12,377
-------
HOLDING & OTHER INVESTMENT
COMPANIES - 5.9%
Desc S.A. ADR (a) Mx 20 225
Five Arrows Chile Investment
Trust (a) Ch 400 1,052
Korea Liberalization Fund (a) Ko 1 560
Sedgwick Group PLC UK 230 582
Smaller Companies
Investment Trust PLC UK 850 1,658
Taiwan Index Fund Tw 35 403
TR Smaller Companies
Investment Trust PLC UK 400 1,193
Thai Europe Fund (a) Th (b) 2,177
-------
7,850
-------
INSURANCE CARRIERS - 3.8%
General Accident Fire and Life
Assurance Corp. PLC UK 150 1,400
Yasuda Fire & Marine
Insurance Co. Ja 225 1,599
Zurich Versicherungsgesellschaft Sz 2 2,135
-------
5,134
-------
NONDEPOSITORY CREDIT INSTITUTION - 0.5%
Hong Leong Credit BHD Ma 200 729
-------
REAL ESTATE - 2.9%
Cheung Kong Holdings, Ltd. HK 250 1,053
Hopewell Holdings HK 800 568
Malaysian Resources Corp. Ma 700 1,190
Sun Hung Kai Properties, Ltd. HK 170 1,085
-------
3,896
-------
SECURITY BROKERS & DEALERS - 2.0%
New Japan Securities Ja 200 1,226
Yamaichi Securities Co., Ltd. Ja 200 1,381
-------
2,607
- -----------------------------------------------------------------------------
MANUFACTURING - 30.8%
APPAREL - 1.4%
Onward Kasiyama Co., Ltd Ja 125 1,857
-------
CHEMICALS - 5.1%
Akzo Nobel NV Ne 10 1,160
Bayer AG G 10 2,461
Reliance Industries GDS UK 20 315
Roche Holding AG Sz (b) 1,384
Schering AG G 1 556
Smithkline Beecham Consumer
Brands PLC UK 125 988
-------
6,864
-------
ELECTRONIC & ELECTRICAL EQUIPMENT - 4.1%
Mitsubishi Heavy Industries, Ltd. Ja 250 1,812
Nippon Electric Glass Co., Ltd. Ja 66 1,169
Polygram NV Ne 33 1,863
Samsung Electronics
GDS ADR (a) Ja 13 639
-------
5,483
-------
FOOD & KINDRED PRODUCTS - 2.2%
Cadbury Schweppes PLC UK 150 1,083
LVMH Fr 10 1,902
-------
2,985
-------
FURNITURE & FIXTURES - 1.0%
BTR PLC UK 250 1,314
-------
</TABLE>
See notes to investment portfolio.
2
<PAGE>
INVESTMENT PORTFOLIO - CONTINUED
<TABLE>
<CAPTION>
COUNTRY
COMMON STOCKS - CONT. ABBREV. SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
MANUFACTURING - CONT.
LUMBER & WOOD PRODUCTS - 1.0%
Land & General Holdings BHD Ma 450 $1,303
------
MACHINERY & COMPUTER EQUIPMENT - 1.5%
NEC Corp. Ja 175 1,934
------
MEASURING & ANALYZING INSTRUMENTS - 1.0%
Fanuc, Ltd. Ja 30 1,355
------
MISCELLANEOUS MANUFACTURING - 0.8%
Atlas Copco AB, Series A Sw 80 1,100
------
PAPER & PAPER MILLS - 0.6%
Aracruz Celulose SA, Series B Br 50 481
Indorayon (a) In 150 275
------
756
------
PETROLEUM REFINING - 1.1%
British Petroleum, Ltd. UK 200 1,461
------
PRIMARY METAL - 1.2%
Dowa Mining Ja 150 768
Nippon Steel Company Ja 200 794
------
1,562
------
PRINTING & PUBLISHING - 1.7%
Elsevier NV Ne 140 1,534
Singapore Press Si 40 689
------
2,223
------
STONE, CLAY, GLASS & CONCRETE - 4.1%
BPB Industries PLC UK 350 1,512
Compagnie de Saint Gobain Fr 10 1,293
Semen Cibinong In 250 672
UBE Industries, Ltd. (a) Ja 490 2,015
------
5,492
------
TOBACCO PRODUCTS - 0.9%
Hanson PLC UK 300 1,146
------
TRANSPORTATION EQUIPMENT - 3.1%
Honda Motor Company, Ltd. Ja 75 1,212
NTN Corp. Ja 275 1,817
Volvo AB, Series B Sw 60 1,126
------
4,155
- --------------------------------------------------------------------------------
MINING & ENERGY - 2.8%
CRUDE PETROLEUM & NATURAL GAS - 1.2%
Compagnie Francaise
de Petroleum Fr 25 1,562
------
MISCELLANEOUS METAL ORES - 0.8%
CRA, Ltd. Au 70 1,006
------
OIL & GAS EXTRACTION - 0.8%
Repsol SA Sp 35 1,111
- --------------------------------------------------------------------------------
RETAIL TRADE - 4.3%
AUTO DEALERS & GAS STATIONS - 0.9%
Inchcape PLC UK 225 1,169
------
BUILDING, HARDWARE & GARDEN SUPPLY - 1.4%
Tostem Corp. Ja 50 1,812
------
FOOD STORES - 0.5%
UNY Company, Ltd Ja 40 722
------
GENERAL MERCHANDISE STORES - 1.5%
La Rinascente SPA It 75 415
Marks & Spencer PLC UK 230 1,561
------
1,976
- --------------------------------------------------------------------------------
SERVICES - 4.0%
BUSINESS SERVICES - 1.4%
Reuters Holdings UK 175 1,352
SAP AG G 1 564
------
1,916
------
MEMBERSHIP ORGANIZATIONS - 1.1%
Straits Steamship Land, Ltd Si 450 1,498
------
OTHER SERVICES - 1.5%
VEBA Agency G 6 2,047
- --------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATIONS, ELECTRIC,
GAS & SANITARY SERVICES - 15.2%
AIR TRANSPORTATION - 2.6%
British Airport Authority PLC UK 200 1,538
Singapore Airlines, Ltd. Si 100 961
Swire Pacific, Ltd., Series A HK 150 1,003
------
3,502
------
COMMUNICATIONS - 6.8%
British Telecommunications PLC UK 200 1,257
DDI Corp. Ja (b) 1,759
Hong Kong Telecommunications HK 500 978
PT Indosatelite ADR (a) In 25 903
Telecomunicacoes Brasileiras (a) Br 18 648
Telecom Italia SPA It 550 1,464
Tokyo Broadcasting System Ja 130 2,086
------
9,095
------
</TABLE>
See notes to investment portfolio.
3
<PAGE>
INVESTMENT PORTFOLIO - CONTINUED
<TABLE>
<CAPTION>
COUNTRY
COMMON STOCKS - CONT. ABBREV. SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
TRANSPORTATION, COMMUNICATIONS, ELECTRIC,
GAS & SANITARY SERVICES - CONT.
ELECTRIC SERVICES - 4.5%
BBC Brown Boveri AG Sz 2 $ 1,976
Korea Electric Power Corp. (a) Ko 40 1,464
Perez Companc SA ADR Ar 68 543
Powergen PLC UK 150 1,170
Seeboard PLC UK 135 814
--------
5,967
--------
MOTOR FREIGHT & WAREHOUSING - 1.3%
Nippon Express Co. Ltd. Ja 180 1,778
- -------------------------------------------------------------------------------------
WHOLESALE TRADE - 9.5%
DURABLE GOODS - 6.4%
Amersham International PLC UK 50 727
C. Itoh & Co., Ltd Ja 250 1,693
Canon Sales Co. Ja 75 1,979
China Steel Corp. GDR (a) Tw 40 780
Mabuchi Motor Co. Ja 25 1,649
Samsung Electronics
Co. GDS (a) Ja 1 51
Toshiba Corp. Ja 250 1,661
--------
8,540
--------
NONDURABLE GOODS - 3.1%
Allied Colloids Group PLC UK 400 835
Nippon Sanso Corp. Ja 300 1,586
Rothmans International PLC (c) UK 175 1,724
--------
4,145
- -------------------------------------------------------------------------------------
Total common stocks (cost $127,223) 128,579
- -------------------------------------------------------------------------------------
CORPORATE FIXED- CURRENCY
INCOME BONDS - 0.9% ABBREV. PAR
- -------------------------------------------------------------------------------------
MANUFACTURING - 0.9%
ELECTRONIC & ELECTRICAL EQUIPMENT - 0.9%
Daewoo Electron Convertible (cost $1,676)
3.500% 12/31/07 Ko 1,000 1,160
- -------------------------------------------------------------------------------------
COUNTRY
WARRANTS (A) - 0.0% ABBREV. SHARES
- -------------------------------------------------------------------------------------
Five Arrows Chile Investment Trust,
expires 06/01/95 (cost $4) Ch 10 5
- -------------------------------------------------------------------------------------
Total investments - 97.2% (cost $128,903) (d) 129,744
- -------------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 1.4% PAR
- -------------------------------------------------------------------------------------
Repurchase agreement with Bankers Trust
Securities Corp., dated 04/28/95, due
05/01/95 at 5.92% collateralized by U.S.
Treasury notes with various
maturities to 1998, market value $2,161
(repurchase proceeds $1,968) $1,967 1,967
- -------------------------------------------------------------------------------------
FORWARD CURRENCY CONTRACTS (E) - 0.2% 255
- -------------------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - 1.2% 1,558
- -------------------------------------------------------------------------------------
NET ASSETS - 100% $ 133,524
- -------------------------------------------------------------------------------------
</TABLE>
Notes to investment portfolio:
(a) Non-income producing.
(b) Rounds to less than one.
(c) Each unit consists of 1 share of United Kingdom Rothmans International and 1
share of Netherlands Rothmans International.
(d) Cost for federal income tax purposes is the same.
Notes to investment portfolio continued on following page.
4
<PAGE>
(e) As of April 30, 1995, the Fund had entered into the following forward
currency exchange contracts resulting in net unrealized appreciation
of $255.
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION
SETTLEMENT (DEPRECIATION)
CONTRACTS TO DELIVER IN EXCHANGE FOR DATE (U.S.$)
-------------------- --------------- ---------- ------------
<S> <C> <C> <C>
DEM 3,400 USD 2,460 07/27/95 $ (25)
FRF 19,500 USD 3,947 07/27/95 29
JPY 2,300,000 USD 27,665 07/27/95 334
NG 3,800 USD 2,459 07/27/95 (44)
SF 3,100 USD 2,727 07/27/95 (39)
------
$ 255
------
</TABLE>
SUMMARY OF SECURITIES BY COUNTRY/CURRENCY
<TABLE>
<CAPTION>
% of total
Currency Country securities
Country abbrev. abbrev. Value at value
------------------------------------------------------ ----------
<S> <C> <C> <C> <C>
Japan JPY Ja $42,439 32.7
United Kingdom KB UK 26,108 20.1
France FRF Fr 7,822 6.0
Hong Kong HK 6,334 4.9
Germany DEM G 5,628 4.3
Switzerland SF Sz 5,495 4.2
Netherlands NG Ne 4,557 3.5
Singapore SD Si 4,217 3.3
Malaysia Ma 4,084 3.2
Korea Ko 3,829 3.0
Spain Sp 2,844 2.2
Sweden SK Sw 2,226 1.7
Thailand Th 2,177 1.7
Indonesia IR In 2,159 1.7
Italy IL It 1,879 1.4
Australia Au 1,745 1.3
Denmark DK De 1,564 1.2
Taiwan Tw 1,183 0.9
Brazil Br 1,129 0.9
Chile Ch 1,057 0.8
Argentina Ar 543 0.4
Turkey Tu 500 0.4
Mexico Mx 225 0.2
--------- ------
$ 129,744 100.0
--------- ------
</TABLE>
Acronym Name
- ------- ----
ADR American Depository Receipt
ADS American Depository Shares
GDR Global Depository Receipt
GDS Global Depository Shares
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
See notes to financial statements.
5
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS & LIABILITIES (UNAUDITED)
April 30, 1995
(in thousands except for per share amounts and footnote)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS
Investments at value (cost $128,903) ............ $ 129,744
Short-term obligations .......................... 1,967
---------
................................................ 131,711
Cash held in foreign
banks (cost $1,507) ........................... $ 1,512
Receivable for:
Investments sold ............................. 3,832
Dividends .................................... 628
Forward currency contracts ................... 255
Fund shares sold ............................. 255
Foreign tax reclaims ......................... 71
Interest ..................................... 13
Expense reimbursement due
from adviser ................................. 9
Deferred organization expenses .................. 56 6,631
--------- ---------
Total assets ........................................ 138,342
LIABILITIES
Payable for:
Investments purchased ........................ 4,140
Fund shares repurchased ...................... 616
Accrued:
Deferred Trustees fees ....................... 1
Other ........................................ 61
---------
Total liabilities ................................... 4,818
---------
NET ASSETS ................................................... $ 133,524
---------
Net asset value & redemption price per
share -
Class A ($49,298/5,335)................................... $ 9.24
---------
Maximum offering price per share - Class A
($9.24/0.9425)............................................. $ 9.80*
---------
Net asset value & offering price per
share -
Class B ($83,595/9,143)................................... $ 9.14
---------
Net asset value & redemption price per
share -
Class D ($631/69)......................................... $ 9.19
---------
Maximum offering price per share - Class D
($9.19/0.9900).............................................. $ 9.28*
---------
STATEMENT OF OPERATIONS (UNAUDITED)
Six months ended April 30, 1995
(in thousands)
- ------------------------------------------------------------------------------
Investment income
Dividends ...................................................... $ 1,293
Interest ....................................................... 86
---------
Total investment income (net of nonrebatable
foreign taxes withheld at source which
amounted to $219) ....................................... 1,379
Expenses
Management fee .................................. $ 649
Service fee ..................................... 180
Distribution fee - Class B ...................... 340
Distribution fee - Class D ...................... 2
Transfer agent .................................. 235
Bookkeeping fee ................................. 30
Trustees fees ................................... 6
Audit fee ....................................... 17
Custodian fee ................................... 73
Legal fee ....................................... 3
Registration fees ............................... 57
Reports to shareholders ......................... 3
Amortization of deferred
organization expenses ......................... 8
Other ........................................... 10
---------
1,613
Fees waived by the adviser ...................... (9) 1,604
--------- ---------
Net investment loss..................................... (225)
---------
Net realized and unrealized gain (loss)
on portfolio positions
Net realized loss on:
Investments.................................... (6,219)
Foreign currency transactions ................. (6,694)
---------
Net realized loss .......................................... (12,913)
Net unrealized appreciation (depreciation)
during the period on:
Investments ................................... (5,734)
Foreign currency transactions ................. 319
---------
Net unrealized depreciation ................................ (5,415)
---------
Net loss ............................................... (18,328)
---------
Net decrease in net assets from
operations ................................................... $ (18,553)
---------
</TABLE>
* On sales of $50,000 or more the offering price is reduced.
See notes to financial statements.
6
<PAGE>
FINANCIAL STATEMENTS - CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(unaudited)
Six months Year
ended ended
April 30 October 31
---------- ----------
1995 1994(a)
---------- ----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment loss .......................... $ (225) $ (348)
Net realized loss ............................ (12,913) (8,053)
Net unrealized appreciation (depreciation) ... (5,415) 6,540
--------- ---------
Net decrease from operations .......... (18,553) (1,861)
--------- ---------
Fund share transactions (b)
Receipts for shares sold - Class A ........... 6,710 82,748
Cost of shares repurchased - Class A ......... (12,923) (20,156)
--------- ---------
(6,213) 62,592
--------- ---------
Receipts for shares sold - Class B ........... 9,375 116,698
Cost of shares repurchased - Class B ......... (17,485) (11,722)
--------- ---------
(8,110) 104,976
--------- ---------
Receipts for shares sold - Class D ........... 167 564
Cost of shares repurchased - Class D ......... (38)
--------- ---------
129 564
--------- ---------
Net increase (decrease) from Fund share
transactions ........................ (14,194) 168,132
--------- ---------
Total increase (decrease) ....... (32,747) 166,271
NET ASSETS
Beginning of period .......................... 166,271
--------- ---------
End of period (net of investment loss
of $9,141 and $8,780, respectively) ........ $ 133,524 $ 166,271
--------- ---------
NUMBER OF FUND SHARES
Sold - Class A ............................... 711 7,941
Repurchased - Class A ........................ (1,379) (1,938)
--------- ---------
(668) 6,003
--------- ---------
Sold - Class B ............................... 1,005 11,182
Repurchased - Class B ........................ (1,906) (1,138)
--------- ---------
(901) 10,044
--------- ---------
Sold - Class D ............................... 18 55
Repurchased - Class D ........................ (4)
--------- ---------
14 55
--------- ---------
Net increase (decrease) in shares
outstanding .......................... (1,555) 16,102
Outstanding at
Beginning of period ...................... 16,102
--------- ---------
End of period ............................ 14,547 16,102
--------- ---------
</TABLE>
(a) The Fund commenced investment operations on December 1, 1993.
(b) Class D shares were initially offered on July 1, 1994.
See notes to financial statements.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
In the opinion of managment of Colonial International Fund for Growth (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 a non-diversified, open-end,
management investment company. 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
Equity securities are valued at the last sale price or, in the case of
unlisted or listed securities, for which there were no sales during the day, at
current quoted bid prices.
Debt securities generally are valued by a pricing service based upon
market transactions for normal, institutional-size trading units of similar
securities. When management deems it appropriate, an over-the-counter or
exchange bid quotation is used.
Forward currency contracts are valued based on the weighted value of the
exchange traded contracts with similar durations.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Portfolio positions which cannot be valued as set forth above are valued
at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased or sold.
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
- -------------------------------------------------------------------------------
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 reflects the distribution fee applicable to Class B and Class D
shares only.
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 only.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DEFERRED ORGANIZATION EXPENSES
The Fund incurred $77,162 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.
- -------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSACTIONS
The Fund has adopted Statement of Position 93-4, Foreign Currency
Accounting and Financial Statement Presentation for Investment Companies.
Accordingly, net realized and unrealized gain (loss) on foreign currency
transactions includes the fluctuation in exchange rates on gains and losses
between trade and settlement dates on securities transactions, gains and losses
arising from the disposition of foreign currency, and currency gains and losses
between the accrual and payment dates on dividend and interest income and
foreign withholding taxes.
The Fund does not distinguish that portion of gains and losses on
investments which is due to changes in foreign exchange rates from that which is
due to changes in market prices of the investments. Such fluctuations are
included with the net realized and unrealized gains and losses from investments.
- --------------------------------------------------------------------------------
FORWARD CURRENCY CONTRACTS
The Fund may enter into forward currency contracts to purchase or sell
foreign currencies at predetermined exchange rates in connection with the
settlement of purchases and sales of securities. The Fund may also enter into
forward currency contracts to hedge certain other foreign currency denominated
assets. The contracts are used to minimize the exposure to foreign exchange
rate fluctuations during the period between trade and settlement date of the
contracts. All contracts are marked-to-market daily, resulting in unrealized
gains or losses which become realized at the time the forward currency contracts
are closed or mature. Realized and unrealized gains (losses) arising from such
transactions are included in net realized and unrealized gains (losses) on
foreign currency transactions. Forward currency contracts do not eliminate
fluctuations in the prices of the Fund's portfolio securities. While the maximum
potential loss from such contracts is the aggregate face value in U.S. dollars
at the time the contract was opened, the actual exposure is typically limited to
the change in value of the contract (in U.S. dollars) over the period it remains
open. Risks may also arise if counterparties fail to perform their obligations
under the contracts.
- --------------------------------------------------------------------------------
OTHER
Corporate actions are recorded on the ex-date (except for certain foreign
securities which are recorded as soon after the ex-date as the Fund becomes
aware of such) net of nonrebatable tax withholdings. Where a high level of
uncertainty as to collection exists, income on securities is recorded net of all
tax withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry
system of securities collaterizing repurchase agreements. Collateral is
marked-to-market daily to ensure that the market value of the underlying assets
remains sufficient to protect the Fund. The Fund may experience costs and delays
in liquidating the collateral if the issuer defaults or enters bankruptcy.
- --------------------------------------------------------------------------------
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT FEE
Colonial Management Associates, Inc. (the Adviser) oversees the Fund's
management and furnishes accounting and other services and office facilities for
a monthly fee equal to 0.90% annually of the Fund's average net assets. Gartmore
Capital Management Ltd. (the Sub-Adviser) furnishes the Fund with investment
management.
- --------------------------------------------------------------------------------
BOOKKEEPING FEE
The Adviser provides bookkeeping and pricing services for $27,000 per year
plus 0.035% of the Fund's average net assets over $50 million.
- --------------------------------------------------------------------------------
TRANSFER AGENT
Colonial Investors Service Center, Inc. (the Transfer Agent) an affiliate
of the Adviser, provides shareholder services for a monthly fee equal to 0.25%
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 Adviser, through Colonial Investment Services, Inc. (the Distributor),
is the Fund's principal underwriter. During the six months ended April 30, 1995,
the Distributor retained net underwriting discounts of $16,787 on sales of the
Fund's Class A shares and received contingent deferred sales charges (CDSC) of
$290,286 on Class B redemptions, and $133 on Class D 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 also requires the payment of a distribution fee to the
Distributor equal to 0.75% of the average net assets attributable to Class B
shares 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.
- --------------------------------------------------------------------------------
EXPENSE LIMITS
The Adviser has agreed, until further notice, to waive fees and bear
certain Fund expenses to the extent that total expenses (exclusive of service
fees, distribution fees, brokerage commissions, interest, taxes, and
extraordinary expenses, if any) exceed 1.50% annually of the Fund's average net
assets.
- -------------------------------------------------------------------------------
OTHER
The Fund pays no compensation to its officers, all of whom are employees
of the Adviser.
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. PORTFOLIO INFORMATION
During the six months ended April 30, 1995, purchases and sales of
investments, other than short-term obligations, were $18,661,754 and
$39,581,989, respectively.
Unrealized appreciation (depreciation) at April 30, 1995, based on cost of
investments for both financial statement and federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation.................. $ 9,723,345
Gross unrealized depreciation.................. (8,882,154)
------------
Net unrealized appreciation................. $ 841,191
------------
</TABLE>
- --------------------------------------------------------------------------------
OTHER
There are certain additional risks involved when investing in foreign
securities that are not inherent with investments in domestic securities. These
risks may involve foreign currency exchange rate fluctuations, adverse political
and economic developments and the possible prevention of currency exchange or
other foreign governmental laws or restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
- --------------------------------------------------------------------------------
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 5. RESULTS OF SPECIAL SHAREHOLDERS MEETING
On February 15, 1995, a special meeting of shareholders was held and a new
Management Agreement between the Trust and Colonial Management Associates, Inc
was approved that became effective upon the completion of the merger of The
Colonial Group, Inc and Apple Merger Corporation, a subsidiary of Liberty
Financial Companies, Inc on March 24, 1995. Out of the shares of beneficial
interest outstanding on December 9, 1994, 10,725,039 voted for the new
Management Agreement, 149,506 voted against and 407,262 abstained. Of the shares
of beneficial interest outstanding that abstained 138,106 represented broker
non-votes
Also, a new Sub-Advisory Agreement was approved between Colonial
Management Associates, Inc, and Gartmore Capital Management Ltd, that became
effective upon completion of the merger. Out of the shares outstanding on
December 9, 1994, 10,673,388 voted for the new Sub-Advisory Agreement, 168,278
voted against and 440,141 abstained. Of the shares of beneficial interest
outstanding that abstained 157,098 represented broker non-votes.
- -------------------------------------------------------------------------------
NOTE 6. COMPOSITION OF NET ASSETS
At April 30, 1995, net assets consisted of:
<TABLE>
<S> <C>
Capital paid in ............................. $ 153,921
Net investment loss ......................... (9,141)
Accumulated net realized loss ............... (12,381)
Net unrealized appreciation on:
Investments ............................... 841
Foreign currency transactions ............. 284
----------
$ 133,524
----------
- --------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
FINANCIAL HIGHLIGHTS (b)
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
SIX MONTHS ENDED APRIL 30 PERIOD ENDED OCTOBER 31
------------------------------- ------------------------------
1995 1994 (c)
------------------------------- ------------------------------
CLASS A CLASS B CLASS D CLASS A CLASS B CLASS D(d)
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period ........................ $ 10.370 $ 10.300 $ 10.350 $ 10.000 $ 10.000 $ 10.060
--------- --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income (loss)(a) ........................... 0.007 (0.028) (0.028) 0.013 (0.058) (0.037)
Net realized and unrealized gain (loss)
on investments .......................................... (1.137) (1.132) (1.132) 0.357 0.358 0.327
--------- --------- --------- --------- --------- ---------
Total from investment operations .......................... (1.130) (1.160) (1.160) 0.370 0.300 0.290
--------- --------- --------- --------- --------- ---------
Net asset value - End of period .............................. $ 9.240 $ 9.140 $ 9.190 $ 10.370 $ 10.300 $ 10.350
--------- --------- --------- --------- --------- ---------
Total return (e)(f)(g) ....................................... (10.90)% (11.17)% (11.21)% 3.70% 3.00% 2.88%
--------- --------- --------- --------- --------- ---------
Ratios to average net assets
Expenses (h) .............................................. 1.75% 2.50% 2.50% 1.71% 2.46% 2.46%
Net investment income (loss) (h) .......................... 0.15% (0.60)% (0.60)% 0.14% (0.61)% (0.61)%
Fees waived or borne by the adviser (h) ...................... 0.01% 0.01% 0.01% -- -- --
Portfolio turnover (h) ....................................... 26% 26% 26% 51% 51% 51%
Net assets at end of period (000) ............................ $49,298 $83,595 $ 631 $62,251 $103,450 $ 570
(a) Net of fees and expenses waived or borne
by the adviser which amounted to ....................... $ 0.001 $ 0.001 $ 0.001 -- -- --
</TABLE>
(b) Per share data was calculated using average shares outstanding during the
period.
(c) The Fund commenced investment operations on December 1, 1993.
(d) Class D shares were initially offered on July 1, 1994. Per share amounts
reflect activity from that date.
(e) Had the adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
(f) Total return at net asset value assuming no initial salses charge or CDSC.
(g) Not annualized.
(h) Annualized.
12
<PAGE>
TRUSTEES
ROBERT J. BIRNBAUM
Trustee (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief
Operating Officer, New York Stock Exchange, Inc.)
TOM BLEASDALE
Trustee (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
LORA S. COLLINS
Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
JAMES E. GRINNELL
Private Investor
WILLIAM D. IRELAND, JR.
Trustee
RICHARD W. LOWRY
Private Investor
WILLIAM E. MAYER
Dean, College of Business and Management, University of Maryland (formerly Dean,
Simon Graduate School of Business, University of Rochester; Chairman and Chief
Executive Officer, C.S. First Boston Merchant Bank; and President and Chief
Executive Officer, The First Boston Corporation)
JOHN A. MCNEICE, JR.
Chairman of the Board and Director, The Colonial Group, Inc. and Colonial
Management Associates, Inc. (formerly Chief Executive Officer, The Colonial
Group, Inc. and Colonial Management Associates, Inc.)
JAMES L. MOODY, JR.
Chairman of the Board, Hannaford Bros. Co. (formerly Chief Executive Officer,
Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
GEORGE L. SHINN
Financial Consultant (formerly Chairman, Chief Executive Officer and Consultant,
The First Boston Corporation)
ROBERT L. SULLIVAN
Management Consultant
SINCLAIR WEEKS, JR.
Chairman of the Board, Reed & Barton Corporation
13
<PAGE>
ABOUT OUR COVER...
[GRAPHIC]
The symbol on the cover of this Report represents the Fund's primary investment
focus on common stocks.
SHAREHOLDER SERVICES AND TRANSFER AGENT
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial International Fund for Growth 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.
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.
14
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