<PAGE>
[LOGO]
---------------
COLONIAL
INTERNATIONAL
FUND FOR GROWTH
---------------
ANNUAL REPORT
OCTOBER 31, 1995
<PAGE>
- ------------------------------------------------------------------------------
COLONIAL INTERNATIONAL FUND FOR GROWTH
HIGHLIGHTS
NOVEMBER 1, 1994 - OCTOBER 31, 1995
INVESTMENT OBJECTIVE: Colonial International Fund for Growth seeks long-term
growth by investing primarily in non U.S. equities.
THE FUND IS DESIGNED TO OFFER:
- Long-term growth potential
- Diversification
PORTFOLIO MANAGER COMMENTS: "Conditions for international stocks were mixed in
recent months. However, the real story is the potential for future growth - as
new capital flows into emerging economies, some attractive opportunities may be
created for investors."
<TABLE>
COLONIAL INTERNATIONAL FUND FOR GROWTH PERFORMANCE
<CAPTION>
CLASS A CLASS B CLASS D
<S> <C> <C> <C>
Inception date 12/1/93 12/1/93 7/1/94
Total returns, assuming
reinvestment of all distributions
and no sales charge or contingent
deferred sales charge (CDSC) -
12 months (5.88)% (6.50)% (6.57)%
Net asset value per share at 10/31/95 $9.76 $9.63 $9.67
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS* TOP FIVE COUNTRIES*
(as of 10/31/95) (as of 10/31/95)
<S> <C>
1.Thai Euro Fund 1.Japan.........................26.4%
2.BBC Brown Boveri 2.United Kingdom................19.5%
3.Zurich Versicherung 3.France.........................7.5%
4.Roche Holding 4.Germany........................6.2%
5.Polygram 5.Switzerland....................6.1%
<FN>
*There can be no guarantee the Fund will continue to hold these securities or
invest in these countries in the future. The top five countries are based on
total net assets.
Effective 1/1/96, Colonial Management Associates, Inc. will assume full
management responsibilities for the Fund.
- ------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[PHOTO] The performance of international stocks during the 12 months ended
October 31, 1995, was disappointing. This performance was not unexpected,
however, given the less than favorable economic environments in many of the
international stock markets in which the Fund invests.
Of the world's equity markets, the strongest returns were posted in the United
States during the Fund's most recent fiscal year. However, markets in most of
the rest of the world, including Japan, the United Kingdom, and emerging
markets such as Argentina and Malysia, did not fare as well. Of course, not
all of our markets were affected by the malaise that was characteristic of
international markets in general. Among the countries that were contending
with economic problems, there were individual stocks that produced attractive
returns.
Andrew Fleming, Portfolio Manager of Colonial International Fund for Growth,
believes that economic growth and inflation in the world's economies will
remain moderate in the months ahead. Mr. Fleming believes the most promising
opportunities may be in the world's emerging markets, which may benefit from an
inflow of cash from the more developed economies over the next 12 months.
Respectfully,
/s/ John A. McNeice, Jr.
- -----------------------
John A. McNeice, Jr.
President
December 11, 1995
- --------------------------------------------------------------------------
3
<PAGE>
- -------------------------------------------------------------------------
PORTFOLIO MANAGEMENT REPORT
ANDREW FLEMING is the Portfolio Manager of Colonial International Fund for
Growth. Mr. Fleming has been affiliated with Gartmore Capital Management,
Ltd., the Fund's adviser, since 1984.
QUESTIONS REMAIN ABOUT THE JAPANESE ECONOMY: Although there are some signs
Japan may be ready for a modest recovery, we believe that over the short term,
economic growth may remain relatively weak. The strength of the yen relative
to the U.S. dollar has had a negative impact on corporate profits, making
foreign products more attractively priced than their Japanese counterparts. To
stimulate the economy, the Bank of Japan, the nation's central bank, lowered
the official interest rate during the year, with rates reaching an all time low
of 0.5% in September.
IN CONTINENTAL EUROPE, CONSUMER, BUSINESS CONFIDENCE IS LOW: Western European
economies have been hurt by low levels of consumer confidence. It also appears
that business confidence has deteriorated as well - there has been a
significant decline in spending on capital improvements. The Bundesbank
(Germany's central bank), which generally sets the interest rate trend for
Europe, moved German rates lower in March, but since then has shown no
inclination to make further cuts. In France, the third largest country position
in the portfolio, interest rates have begun to decline. However, we believe
they are not low enough to provide the stimulus needed to produce the growth
required by President Chirac's budget plan.
U.K., ECONOMY SLOWING, STILL SETS PACE FOR EUROPE: Economic growth in the
United Kingdom has slowed noticeably, but the economy does not appear to be
sliding into a recession. Two of the signs of slower growth were the recent
monthly decline in manufacturing output and retail sales. As a consequence,
the Bank of England is no longer advocating higher interest rates.
RETURNS MIXED IN EMERGING MARKETS: While some of the "tigers" of the Far East,
including Hong Kong, South Korea, and Taiwan, produced positive returns, other
countries in the region had to contend with difficult conditions. Inflation
has become a concern in Thailand, the Philippines, and Malaysia, where it is
being driven by strong economic growth and higher wages and food prices. In
general, corporate profits have continued to grow throughout the region.
LOOKING AHEAD: During the period, the Fund significantly underperformed the
Morgan Stanley Capital International EAFE (GDP) Index, primarily due to its
reliance on currency hedging. However, conditions may improve in the months
ahead. Over the near term some international economies may
- -------------------------------------------------------------------------
4
<PAGE>
- -------------------------------------------------------------------------------
experience volatility. Some of the world's emerging markets may be a source of
interesting investment opportunities. We believe that as investors gradually
refocus on emerging markets, stock prices should improve.
COLONIAL INTERNATIONAL FUND FOR GROWTH'S INVESTMENT PERFORMANCE VS.
THE MORGAN STANLEY CAPITAL INTERNATIONAL EAFE (GDP) INDEX
Change in Value of $10,000 from 12/93 - 10/95 Based on NAV, MOP and CDSC
</TABLE>
<TABLE>
CLASS A SHARES
<CAPTION>
11/93 12/93 1/94 2/94 3/94 4/94 5/94 6/94 7/94 8/94 9/94 10/94 11/94 12/94 1/95 2/95 3/95 4/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MOP 9425 9925 10358 10056 9463 9679 9679 9482 9755 10075 9755 9774 9331 9171 8577 8435 9492 8709
NAV 10000 10530 10990 10670 10040 10270 10270 10060 10350 10690 10350 10370 9900 9730 9100 8950 9010 9240
EAFE 10000 10722 11629 11596 11097 11568 11501 11664 11776 12055 11675 12064 11484 11556 11113 11080 11772 12215
<CAPTION>
5/95 6/95 7/95 8/95 9/95 10/95
<S> <C> <C> <C> <C> <C> <C>
MOP 8756 8690 9208 9218 9321 9199
NAV 9290 9220 9770 9780 9890 9760
EAFE 12069 11858 12597 12117 12353 12021
CLASS B SHARES
<CAPTION>
11/93 12/93 1/94 2/94 3/94 4/94 5/94 6/94 7/94 8/94 9/94 10/94 11/94 12/94 1/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CDSC 10000 10530 10980 10650 10020 10240 10230 10020 10290 10630 10280 10300 9830 9650 9020
NAV 10000 10530 10980 10650 10020 10240 10230 10020 10290 10630 10280 10300 9830 9650 9020
EAFE 10000 10722 11629 11596 11097 11568 11501 11664 11776 12055 11675 12064 11484 11556 11113
<CAPTION>
2/95 3/95 4/95 5/95 6/95 7/95 8/95 9/95 10/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CDSC 8860 8920 9140 9190 9120 9650 9650 9760 9245
NAV 8860 8920 9140 9190 9120 9650 9650 9760 9630
EAFE 11080 11772 12215 12069 11858 12597 12117 12353 12021
</TABLE>
A $10,000 investment in Class D shares made on July 1, 1994 (inception), at NAV
would have been valued at $9,612 at 10/31/95. The same investment after
deducting the applicable CDSC would have grown to $9,516 on 10/31/95.
<TABLE>
AVERAGE ANNUAL TOTAL RETURNS
As of 9/30/95 (Most Recent Quarter End)
- -------------------------------------------------------------------------------
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS D SHARES
INCEPTION 12/1/93 12/1/93 7/1/94
NAV MOP NAV W/CDSC NAV MOP w/CDSC
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 YEAR (4.44)% (9.94)% (5.06)% (9.81)% (5.03)% (6.92)%
- ----------------------------------------------------------------------------
SINCE INCEPTION (0.60)% (3.76)% (1.32)% (3.49)% (1.99)% (2.77)%
- ----------------------------------------------------------------------------
</TABLE>
The Morgan Stanley Capital International EAFE (GDP) Index is an unmanaged index
that tracks the performance of international stocks.
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 distribution. Net asset value (NAV) return does not
include sales charges or contingent deferred sales charges (CDSC). Maximum
offering price (MOP) return includes the maximum sales charge $5.75% for Class
A and 1% for Class D. The CDSC return reflects the maximum charge of 5.75% for
class A and 1% for Class D. The CDSC return reflects the maximum charge of $5%
for one year and 3% since inception for Class B shares and 1% for Class D
shares.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
- --------------------------------------------------------------------------------
5
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
OCTOBER 31, 1995 (IN THOUSANDS)
<CAPTION>
COMMON STOCKS - 96.6% COUNTRY SHARES VALUE
--------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSTRUCTION - 3.3%
BUILDING CONSTRUCTION - 2.0%
HongKong Land Co. HK 400 $ 720
Mitsui Fudosan Co. Ja 50 573
Shimizu Construction Corp. Ja 125 1,167
-------
2,460
-------
SPECIAL TRADE CONTRACTORS - 1.3%
Tele Danmark A/S, Series B (a) De 30 1,565
-------
--------------------------------------------------------------------------------
FINANCE INSURANCE & REAL ESTATE - 26.5%
DEPOSITORY INSTITUTIONS - 10.4%
Allied Irish Bank UK 100 506
Asahi Bank Ltd. Ja 70 699
Australia & New Zealand Banking
Group, Ltd. Au 100 418
Banco De Galicia Bueno ADR (a) Ar 15 287
Banco Popular Espanol SA Sp 10 1,589
Bank International Indonesia In 150 525
Barclays PLC UK 125 1,464
Credit Commercial de France Fr 15 747
Credit Local de France Fr 15 1,190
Dao Heng Bank Group, Ltd. HK 200 733
Deutsche Pfandbrief und
Hypothekenbank AG (a) G 12 469
Development Bank of Singapore, Ltd. Si 100 1,146
Shinhan Bank Ko 32 751
Shizuoka Bank Ja 62 735
Sumitomo Bank, Ltd. Ja 40 709
Sumitomo Trust Ja 50 578
-------
12,546
-------
HOLDING & OTHER INVESTMENT COMPANIES - 8.1%
Amev NV Ne 12 753
Elsevier NV Ne 140 1,810
Five Arrows Chile Investment Trust Ch 175 515
Hong Leong Credit Ma 100 425
Korea Liberalization Fund Ko 1 640
Smaller Companies UK 750 1,505
TR Smaller Companies UK 400 1,277
Taiwan Index Fund Tw 35 323
Thai Euro Fund IDR Th 75 2,456
-------
9,706
-------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO/OCTOBER 31, 1995
-----------------------------------------------------------------------------
<S> <C> <C> <C>
INSURANCE CARRIERS - 4.2%
General Accident Fire and Life
Assurance Corp. PLC UK 150 $ 1,527
Yasuda Fire & Marine Insurance Co. Ja 225 1,367
Zurich Versicherungsgesellschaft Sz 8 2,147
--------
5,041
--------
NONDEPOSITORY CREDIT INSTITUTIONS - 0.2%
Acom Co. Ltd. Ja 8 261
--------
REAL ESTATE - 2.7%
Cheung Kong Ltd. HK 100 564
Land & General Holdings Ma 350 813
Malaysian Resources Corp. Ma 450 655
Straits Steamship Land Ltd. Si 250 700
Sun Hung Kai Properties Ltd. HK 70 559
--------
3,291
SECURITY BROKERS & DEALERS - 0.9%
Yamaichi Securities Co. Ltd. Ja 200 1,050
--------
--------------------------------------------------------------------------------
MANUFACTURING - 37.2%
APPAREL - 1.4%
Onward Kasiyama Co. Ltd. Ja 125 1,727
--------
CHEMICALS - 8.2%
Allied Colloids Group PLC UK 400 837
Bayer AG G 7 1,849
L'Oreal Fr 3 612
Nippon Sanso Corp. Ja 300 1,352
Norsk Hydro AS ADR No 15 597
Reliance Industries GDR UK 12 180
Roche Holding AG Sz (b) 2,107
Schering AG (a) G 15 1,046
Smithkline Beecham Consumer
Brands PLC UK 125 1,303
--------
9,884
--------
Electronic & Electrical Equipment - 5.5%
Ericsson L.M. (a) Sw 60 1,276
Polygram NV Ne 33 2,060
ROHM Co. Ltd. Ja 24 1,453
Samsung Electronics GDS Ko 13 860
TDK Corp. Ja 18 929
--------
6,578
--------
Fabricated Metal - 1.3%
Tostem Corp. (a) Ja 50 1,538
--------
</TABLE>
7
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO/OCTOBER 31, 1995
-----------------------------------------------------------------------------
<CAPTION>
COMMON STOCKS - CONT. COUNTRY SHARES VALUE
------------------------------------------------------------------------------
<S> <C> <C> <C>
MANUFACTURING - CONT.
FOOD & KINDRED PRODUCTS - 4.0%
Bass PLC UK 50 $ 525
Cadbury Schweppes PLC UK 150 1,237
Guinness PLC UK 65 521
LVMH Moet Hennessy Louis Fr 10 1,993
Nestle SA Sz 1 524
--------
4,801
--------
MACHINERY & COMPUTER EQUIPMENT - 7.6%
Atlas Copco AB, Series A Sw 80 1,212
BTR PLC UK 200 1,059
Mannesmann AG G 5 1,477
Mitsubishi Heavy Industries Ltd. Ja 250 1,932
NTN Corp. Ja 275 1,684
Toshiba Corp. Ja 250 1,815
--------
9,179
--------
PAPER & PAPER MILLS - 0.4%
Aracruz Celulose SA, Series B Br 25 231
Inti Indorayon Utama (a) In 150 185
--------
416
--------
PETROLEUM REFINING - 1.2%
British Petroleum Ltd. UK 200 1,472
--------
PRIMARY METAL - 0.6%
Nippon Steel Co. Ja 200 664
--------
PRINTING & PUBLISHING - 1.8%
Singapore Press Holdings Ltd. (a) Si 48 750
Wolters Kluwer Ne 15 1,365
--------
2,115
--------
STONE, CLAY, GLASS & CONCRETE - 3.6%
BPB Industries PLC UK 200 876
Compagnie de Saint Gobain Fr 10 1,194
Nippon Electric Glass Co. Ltd. Ja 66 1,222
Semen Cibinong In 150 393
UBE Industries Ltd. (a) Ja 200 662
--------
4,347
--------
TEXTILE MILL PRODUCTS - 1.2%
Teijin Ltd. Ja 320 1,470
--------
TOBACCO PRODUCTS - 0.4%
B.A.T. Industries PLC UK 60 492
--------
</TABLE>
8
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO/OCTOBER 31, 1995
<CAPTION>
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
MINING & ENERGY - 2.4%
CRUDE PETROLEUM & NATURAL GAS - 1.3%
Compagnie Francaise de Petroleum
Total B Fr 25 $ 1,548
--------
METAL ORES - 0.6%
CRA Ltd. Au 50 769
--------
OIL & GAS EXTRACTION - 0.5%
Hong Kong & China Gas Co. Ltd. HK 400 649
--------
- ------------------------------------------------------------------------------------
RETAIL TRADE - 4.6%
AUTO DEALERS & GAS STATIONS - 0.9%
Inchcape PLC UK 225 1,117
--------
FOOD STORES - 1.6%
Carrefour FR 2 1,471
Centros Comerciales Continente (a) Sp 20 501
--------
1,972
--------
GENERAL MERCHANDISE STORES - 2.1%
Argos PLC UK 150 1,209
La Rinascente SPA It 75 446
Marui Co. Ltd. Ja 50 867
--------
2,522
--------
- -----------------------------------------------------------------------------------
SERVICES - 3.7%
BUSINESS SERVICES - 1.4%
Reuters Holdings PLC Uk 175 1,624
ENERGY SERVICES - 1.5%
Veba Agency G 45 1,842
--------
ENGINEERING, ACCOUNTING,
RESEARCH & MANAGEMENT - 0.8%
United Engineers Ltd. Ma 150 933
--------
- -----------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 17.5%
AIR TRANSPORTATION - 3.2%
British Airport Authority PLC UK 200 1,552
Lufthansa AG G 4 548
Quantas Airways Ltd. (a) Au 2 41
Singapore Airlines Ltd. Si 100 926
Swire Pacific Ltd., Series A HK 100 750
--------
3,817
--------
</TABLE>
9
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO/OCTOBER 31, 1995
<CAPTION>
COMMON STOCKS - CONT. COUNTRY SHARES VALUE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
TRANSPORTATION, COMMUNICATION, ELECTRIC
GAS & SANTIARY SERVICES - CONT.
COMMUNICATIONS - 6.3%
British Telecommunications PLC UK 200 $ 1,190
Hong Kong Telecommunications, Ltd. HK 500 873
Indonesian Satellite ADR (a) In 15 497
Nippon Telegraph & Telephone Corp. (a) Ja (b) 755
Telecom Italia Mobile SPA (a) It 1,000 1,685
Telecom Italia SPA It 550 844
Telecomunicacoes Brasileiras (a) Br 6 237
Tokyo Broadcasting System Ja 100 1,470
========
7,551
ELECTRIC SERVICES - 5.8% ========
BBC Brown Boveri AG Sz 2 2,320
Compania Naviera Perez Companc,
SA ADR Ar 30 263
Empresa Nacional De Electricidad Sp 20 995
Korea Electric Power Corp. (a) Ko 30 1,347
Powergen PLC UK 150 1,346
Tokyo Electric Power Ja 27 716
--------
6,987
--------
MOTOR FREIGHT & WAREHOUSING - 1.2%
Nippon Express Co. Ltd. Ja 180 1,464
--------
WATER TRANSPORTATION - 1.0%
Nippon Yusen Kabushiki Kaish Ja 235 1,259
--------
- --------------------------------------------------------------------------------------
WHOLEALE TRADE - 1.4%
DURABLE GOODS
Canon Sales Ja 32 759
China Steel Corp. (a) Tw 40 740
Samsung Electronics GDR (a) Ko 1 175
--------
1,674
--------
TOTAL COMMON STOCKS (cost of $110,032) 116,331
--------
CORPORATE FIXED-INCOME BONDS - 0.5% CURRENCY PAR
- ----------------------------------------------------------------------------------------
MANUFACTURING - 0.5%
ELECTRONIC & ELECTRICAL EQUIPMENT
Daewoo Electronics Co.,
(cost of $836 3.500% 12/31/07 Ko $ 500 641
--------
</TABLE>
10
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO/OCTOBER 31, 1995
<CAPTION>
WARRANTS (A) -0.1% COUNTRY SHARES VALUE
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCE, INSURANCE & REAL ESTATE - 0.1%
HOLDING & OTHER INVESTMENT COMPANIES
Five Arrows Chile Investment Trust,
expires 01/01/96 Ch 10 $ 7
Thai Euro Fund IDR,
expires 03/31/98 Th 15 45
--------
TOTAL WARRANTS (cost of $52) 52
--------
TOTAL INVESTMENTS - 97.2% (cost of $111,820) (c) 117,024
--------
SHORT-TERM OBLIGATIONS - 2.6% PAR
- ------------------------------------------------------------------------------
Repurchase agreement with Bankers Trust
Securities Corp., dated 10/31/95, due 11/01/95
at 5.875%, collateralized by U.S. Treasury
notes with various maturities to 1997, market
value $3,256 (repurchase proceeds $3,190) $ 3,189 3,189
--------
FORWARD CURRENCY CONTRACTS - 0.3% (d) 333
- ------------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - (0.1%) (132)
- ------------------------------------------------------------------------------
NET ASSETS - 100% $ 120,414
--------
<FN>
NOTES TO INVESTMENT PORTFOLIO
- ------------------------------------------------------------------------------
(a) Non-income producing.
(b) Rounds to less than one.
(c) Cost for federal income tax purpose is the same.
(d) As of October 31, 1995, the Fund had entered into the following forward
currency exchange contracts:
</TABLE>
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
Contracts In Exchange Settlement (Depreciation)
to Deliver For Date (U.S. $)
---------- ----------- ---------- --------------
<S> <C> <C> <C>
FF 20,000 USD 4,060 12/15/95 $ (35)
JP 1,500,000 USD 15,164 12/15/95 363
SZ 3,100 USD 2,749 12/15/95 5
-------
$ 333
</TABLE> ---
11
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO/OCTOBER 31, 1995
- -----------------------------------------------------------------------------------------
NOTES TO INVESTMENT PORTFOLIO - CONT.
- -----------------------------------------------------------------------------------------
<CAPTION>
Summary of Securities by Country/
Country / Currency Currency Value % of Total
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Japan Ja/JP $30,877 26.4
United Kingdom UK 22,823 19.5
France Fr/FF 8,755 7.5
Germany G 7,231 6.2
Switzerland Sz/SZ 7,098 6.1
Netherlands Ne 5,988 5.1
Hong Kong HK 4,848 4.2
Korea Ko 4,413 3.8
Singapore Si 3,522 3.0
Spain Sp 3,085 2.6
Italy It 2,975 2.5
Malaysia Ma 2,826 2.4
Thailand Th 2,501 2.2
Sweden Sw 2,488 2.1
Indonesia In 1,600 1.4
Denmark De 1,565 1.3
Australia Au 1,228 1.0
Taiwan Tw 1,064 0.9
Norway No 597 0.5
Argentina Ar 550 0.5
Chile Ch 522 0.4
Brazil Br 468 0.4
-------- -----
$117,024 100.0
-------- -----
</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
GDR Global Depository Receipt
GDS Global Depository Shares
IDR International Depository Receipt
See notes to financial statements.
</TABLE>
12
<PAGE>
<TABLE>
STATEMENT OF ASSETS & LIABILITIES
OCTOBER 31, 1995
<CAPTION>
(in thousands except for per share amounts and footnotes)
<S> <C> <C>
ASSETS
Investments at value (cost $111,820) $117,024
Short-term obligations 3,189
-------
120,213
Cash held in foreign banks (cost $65) $ 65
Unrealized appreciation on forward
currency contracts 333
Receivable for:
Fund shares sold 343
Dividends 192
Foreign tax reclaims 83
Interest 15
Deferred organization expenses 47
Other 2 1,080
Total Assets ------- -------
121,293
LIABILITIES
Payable for:
Fund shares repurchased 832
Accrued:
Deferred Trustees fees 1
Other 46
-------
Total Liabilities 879
-------
NET ASSETS $120,414
=======
Net asset value & redemption price per share -
Class A ($43,354/4,442) $ 9.76
=======
Maximum offering price per share - Class A
($9.76/0.9425) $ 10.36 (a)
=======
Net asset value & offering price per share -
Class B ($76,376/7,938) $ 9.62 (b)
=======
Net asset value price per share - Class D
($684/71) $ 9.67 (b)
=======
Maximum offering price per share - Class D
($9.67/0.9900) $ 9.77
=======
<FN>
(a) On sales of $50,000 or more the offering price is reduced.
(b) Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
</TABLE>
See notes to financial statements.
13
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1995
<CAPTION>
<S> <C>
(in thousands)
INVESTMENT INCOME
Dividends $ 2,510
Interest 150
--------
Total investment income (net of nonrebatable foreign
taxes withheld at source which amounted to $407) 2,660
EXPENSES
Management fee $ 1,232
Service fee 341
Distribution fee - Class B 646
Distribution fee - Class D 5
Transfer agent 453
Bookkeeping fee 57
Trustees fee 16
Custodian fee 124
Audit fee 26
Legal fee 6
Registration fee 58
Reports to shareholders 11
Amortization of deferred
organization expenses 16
Other 42
-------
3,033
--------
Net Investment Loss (373)
--------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized loss on:
Investments (8,077)
Foreign currency transactions (2,115)
-------
Net Realized Loss (10,192)
Net unrealized appreciation (depreciation) during
the period on:
Investments (1,371)
Foreign currency transactions 360
-------
Net Unrealized Depreciation (1,011)
--------
Net Loss (11,203)
--------
Net Decrease in Net Assets From Operations $ (11,576)
========
</TABLE>
See notes to financial statements.
14
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
(in thousands) Year ended October 31
---------------------
INCREASE (DECREASE) IN NET ASSETS 1995 1994(a)
<S> <C> <C>
Operations:
Net investment loss $ (373) $ (348)
Net realized loss (10,192) (8,053)
Net unrealized appreciation (depreciation) (1,011) 6,540
-------- --------
Net Decrease from Operations (11,576) (1,861)
Fund Share Transactions (b):
Receipts for shares sold - Class A 11,416 82,748
Cost of shares repurchased - Class A (26,238) (20,156)
-------- --------
(14,822) 62,592
-------- --------
Receipts for shares sold - Class B 16,067 116,698
Cost of shares repurchased - Class B (35,674) (11,722)
-------- --------
(19,607) 104,976
-------- --------
Receipts for shares sold - Class D 229 564
Cost of shares repurchased - Class D (81) -
-------- --------
148 564
-------- --------
Net Increase (Decrease) from Fund Share Transactions (34,281) 168,132
-------- --------
Total Increase (Decrease) (45,857) 166,271
NET ASSETS
Beginning of period 166,271 -
-------- --------
End of period (including accumulated net investment
loss of $582 and $8,780, respectively) $ 120,414 $ 166,271
-------- --------
NUMBER OF FUND SHARES (b)
Sold - Class A 1,208 7,941
Repurchased - Class A (2,769) (1,938)
-------- --------
(1,561) 6,003
-------- --------
Sold - Class B 1,711 11,182
Repurchased - Class B (3,817) (1,138)
-------- --------
(2,106) 10,044
-------- --------
Sold - Class D 24 55
Repurchased - Class D (8) -
-------- --------
16 55
-------- --------
<FN>
(a) The Fund commenced investment operations on December 1, 1993.
(b) Class D shares were initially offered on July 1, 1994.
</TABLE>
See notes to financial statements.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1995
NOTE 1. ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
ORGANIZATION: Colonial International Fund for Growth (the Fund), a series of
Colonial Trust III, is a non-diversified portfolio of a Massachusetts business
trust, registered under the Investment Company Act of 1940, as amended, as an
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 annual 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 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. Korean equity
securities that have reached the limit for aggregate foreign ownership and
for which premiums to the local exchange prices may be paid by foreign investors
are valued by applying a broker quoted premium to the local share price.
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, sold or mature.
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.
16
<PAGE>
Notes to Financial Statements/October 31, 1995
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.
DISTRIBUTIONS TO SHAREHOLDERS: Distributions to shareholders are recorded on
the ex-date.
The character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryovers) under income tax regulations.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses of $77,162 in
connection with it's 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.
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 gains (losses) on foreign
currency transactions includes the fluctuation in exchange rates on gains
(losses) between trade and settlement dates on securities transactions, gains
(losses) arising from the disposition of foreign currency and currency gains
(losses) between the accrual and payment dates on dividends and interest income
and foreign withholding taxes.
The Fund does not distinguish that portion of gains (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 (losses) on 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
17
<PAGE>
Notes to Financial Statements/October 31, 1995
NOTE 1. ACCOUNTING POLICIES - CONT.
- --------------------------------------------------------------------------------
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,
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: Interest income is recorded on the accrual basis. Corporate actions
are recorded on the ex-date (except for certain foreign securities which are
recorded as soon after 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 may be subject to foreign
taxes on income, gains on investments, or foreign currency repatriation. The
Fund accrues foreign taxes as applicable based upon its current interpretation
of the tax rules and regulations that exist in the markets in which it invests.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing 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.
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES
- --------------------------------------------------------------------------------
MANAGEMENT FEE: Colonial Management Associates, Inc. (the Adviser) is the
investment Adviser of the Fund 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)
furnished the Fund with investment management. Effective January 1, 1996,
Colonial Management Associates, Inc. will assume full management
responsibilities for the Fund.
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 and receives a
monthly fee equal to 0.25% annually of the Fund's average net assets and
receives a reimburse- ment for certain out of pocket expenses.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Colonial Investment
Services, Inc. (the Distributor), an affiliate of the Adviser, is the Fund's
principal underwriter. For the year ended October 31, 1995, the Fund has been
advised that the Distributor retained net underwriting discounts of $23,792 on
sales of the Fund's Class A shares and received contingent deferred sales
charges (CDSC) of $569,410 and $214, on Class B and Class D share redemptions,
respectively.
18
<PAGE>
Notes to Financial Statements/October 31, 1995
- --------------------------------------------------------------------------------
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 and
Class D shares.
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 and distribution fees, brokerage commissions, interest, taxes and
extraordinary expenses, if any) exceed 1.50% annually of the Fund's average
net assets.
For the year ended October 31, 1995, the Fund's operating expenses did not
exceed the 1.50% expense limit.
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 the Fund's assets.
NOTE 3. PORTFOLIO INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT ACTIVITY: During the year ended October 31, 1995, purchases and
sales of investments, other than short-term obligations, were $46,250,132 and
$82,395,043, respectively.
Unrealized appreciation (depreciation) at October 31, 1995, based on cost of
investments for both financial statement and federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $12,293,908
Gross unrealized depreciation (7,089,791)
-----------
Net unrealized appreciation $ 5,204,117
===========
</TABLE>
CAPITAL LOSS CARRYFORWARDS: At October 31, 1995, capital loss
carryforwards available (to the extent provided in regulations) to
offset future realized gains were approximately as follows:
<TABLE>
<CAPTION>
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
---------- ------------
<S> <C>
2003 $9,862,000
</TABLE>
Expired capital loss carryforwards, if any, are recorded as a reduction of
capital paid in.
To the extent loss carryforwards are used to offset any future realized gains,
it is unlikely that such gains would be distributed since they may be taxable
to shareholders as ordinary income.
19
<PAGE>
Notes to Financial Statements/October 31, 1995
- --------------------------------------------------------------------------------
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 foreign
currency exchange or the imposition of 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.
NOTE 4. COMPOSITION OF NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
At October 31, 1995, net assets consisted of:
Capital paid in $125,273
Accumulated net investment loss (582)
Accumulated net realized loss (9,806)
Net unrealized appreciation on:
Investments 5,204
Foreign currency transactions 325
--------
$120,414
========
</TABLE>
20
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS (a)
Selected data for a share of each class outstanding throughout each period are as follows:
<CAPTION>
Year ended October 31 Period ended October 31
------------------------------- -------------------------------------
1995 1994 (b)
Class A Class B Class D Class A Class B Class D (c)
------- ------- ------- ------- ------- ------------
<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 0.019 (0.052) (0.052) 0.013 (0.058) (0.037)
Net realized and
unrealized gain (loss) (0.629) (0.628) (0.628) 0.357 0.358 0.327
------- ------- ------- ------- ------- -------
Total from Investment
Operations (0.610) (0.680) (0.680) 0.370 0.300 0.290
------- ------- ------- ------- ------- -------
Net asset value -
End of period $9.760 $9.620 $9.670 $10.370 $10.300 $10.350
======= ======= ======= ======= ======= =======
Total return (d) (5.88)% (6.60)% (6.57)% 3.70%(f) 3.00%(f) 2.88%(f)
======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses 1.74%(e) 2.49%(e 2.49%(e) 1.71%(g) 2.46%(g) 2.46%(g)
Net investment income 0.20%(e) (0.55)%(e) (0.55)%(e) 0.14%(g) (0.61)%(g) (0.61)%(g)
Portfolio turnover 35% 35% 35% 51%(g) 51%(g) 51%(g)
Net assets at end
of period (000) $43,354 $76,376 $684 $62,251 $103,450 $570
<FN>
(a) Per share data was calculated using average shares outstanding during the period.
(b) The Fund commenced investment operations on December 1, 1993.
(c) Class D shares were initially offered on July 1, 1994. Per share amounts reflect activity
from that date.
(d) Total return at net asset value assuming no initial sales charge or contingent deferred
sales charge.
(e) The benefits derived from custody credits and directed brokerage arrangements, if any,
had no impact on the Fund's gross expense ratio.
(f) Not annualized.
(g) Annualized.
</TABLE>
21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES OF COLONIAL TRUST III AND THE SHAREHOLDERS OF
COLONIAL INTERNATIONAL FUND FOR GROWTH
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations and
of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial International Fund for
Growth (a series of Colonial Trust III) at October 31, 1995, the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated in conformity with generally accepted accounting principles.
These financial statements and the financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of portfolio positions at October 31, 1995 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
December 11, 1995
22
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial International Fund for Growth is:
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 report has been prepared for shareholders of Colonial International Fund
for Growth. This report may also be used as sales literature when preceded or
accompanied by the current prospectus which provides details of sales charges,
investment objectives and operating policies of the Fund.
<PAGE>
[LOGO] COLONIAL
MUTUAL FUNDS
Mutual Funds for
Planned Portfolios
- --------------------------------------------------------------------------------
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 (formerly Senior Vice President-Operations, The Rockport
Company)
WILLIAM D. IRELAND, JR.
Trustee (formerly Chairman of the Board, Bank of New England-Worcester)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
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. NEUAUSER
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 (formerly Management Consultant, Saatchi and Saatchi
Consulting Ltd. and Principal and International Practice Director, Management
Consulting, Peat Marwick Main & Co.)
SINCLAIR WEEKS, JR.
Chairman of the Board, Reed & Barton Corporation
COLONIAL INVESTMENT SERVICES, INC. [COPYRIGHT] 1995
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
IN-02/419B-1095 (12/95)
- --------------------------------------------------------------------------------
[LOGO] Printed on recycled paper
