<PAGE>
COLONIAL
MUTUAL FUNDS
[LOGO]
COLONIAL
STRATEGIC
BALANCED FUND
------------------------------------------------
SEMIANNUAL REPORT
APRIL 30, 1995
COLONIAL
MUTUAL FUNDS
[RECYCLE LOGO] Printed on recycled paper
SB-03/974A-0495
COLONIAL INVESTMENT SERVICES, INC. (Copyright) 1995
<PAGE>
LETTER FROM THE PRESIDENT
Dear Shareholder:
I am pleased to present the first semiannual report for Colonial
Strategic Balanced Fund. The Fund seeks current income and long-term growth,
consistent with prudent risk, by diversifying investments in U.S. and foreign
equity and debt securities. Equity investments are focused in large
capitalization, small capitalization, and foreign stocks, while fixed-income
investments are in the U.S. government, U.S. corporate high yield, and foreign
sectors.
<TABLE>
FUND PERFORMANCE (11/1/94 - 4/30/95)
<CAPTION>
INCEPTION 9/19/94 CLASS A CLASS B CLASS D
- -----------------------------------------------------------------
<S> <C> <C> <C>
Distributions declared
per share $0.135 $0.116 $0.112
- -----------------------------------------------------------------
Six-month total return, assuming
reinvestment of all distributions
and no sales charge or CDSC[1] 5.79% 5.70% 5.66%
- -----------------------------------------------------------------
Net asset value per share
on 4/30/95 $10.34 $10.34 $10.34
- -----------------------------------------------------------------
</TABLE>
ECONOMIC/MARKET OVERVIEW
Through much of 1994, investors were concerned that the U.S. economy's
vigorous growth would reignite inflation. However, it appears that the Federal
Reserve Board's monetary policy has reduced growth and kept inflation under
control. As a result, U.S. stock and bond markets have continued to improve,
despite a decline in the value of the dollar. In fact, in recent months the
United States has had one of the world's strongest stock markets. Japan's
economy, however, has slowed, reflecting negative pressures from the unexpected
strength of the yen and the impact of the Kobe earthquake. Many foreign
markets, including those of Western Europe, have also improved.
During the semiannual period, activity in the world's equity markets
reflected a change in investor sentiment. Driven by concerns about the
short-term prospects for many of the world's economies and the weakness of the
U.S. dollar, investors have directed investments toward large capitalization,
blue chip stocks. Investors tend to prefer these stocks during periods of
economic uncer-tainty because they generally have more predictable earnings
patterns than their small capitalization and foreign counterparts.
[PICTURE]
John A. McNeice, Jr.
President
Like equity markets, fixed-income markets also were affected by
economic uncertainty during the first part of the semiannual period. Yields
for U.S. government securities, which are especially sensitive to inflation
concerns, moved higher. Higher rates also had a negative impact on corporate
high yield and foreign bonds. However, U.S. interest rates peaked in
mid-November, and were moving lower by the beginning of 1995. As a result,
U.S. bonds began to make up much of the ground that had been lost in preceding
months, and many foreign markets also rallied.
Colonial Management believes that interest rates will decline further
in 1995. Historically, declining interest rates have had a favorable impact on
stock and bond prices.
Sincerely,
/s/ 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>
REPORT FROM COLONIAL MANAGEMENT
The first four months of 1995 marked a turnaround in the performance of
the world's stock and bond markets. After reaching a high point in
mid-November 1994, U.S. interest rates moved lower, and rates in many other
countries followed suit. Although all economies did not perform equally well,
many securities markets improved.
James Haynie and Carl Ericson, your Fund's lead portfolio managers,
took advantage of favorable market conditions by maintaining a well diversified
portfolio of stocks and bonds. They avoid the risks of making large bets in
single sectors and individual securities. This should help the Fund maintain
relatively steady returns over time.
EQUITY UPDATE: In the United States, technology stocks have been one
of the best performing sectors, with diversified computer companies like
Hewlett-Packard and IBM doing especially well. Because these companies were
the Fund's top two holdings, the Fund participated fully when this sector
improved. In absolute terms, the performance of foreign stocks has not been as
attractive as that of U.S. stocks. However, the strength of foreign currencies
relative to the dollar, including the yen and the Deutsche Mark, has enhanced
returns. The Fund's exposure to emerging markets is limited, but there are
small investments in Singapore, Mexico, Hong Kong, the Philippines, and
Malaysia, allowing the Fund to maintain investments in a region that has
provided good long-term returns.
FIXED-INCOME UPDATE: Early in the period, interest rates moved higher,
reflecting the strength of the U.S. economy and the inflation fear this
generated. In that environment, U.S. government securities were maintained at
approximately ten percent of total assets. Invest- ments in corporate high
yield and foreign bonds were increased, since those securities are less
sensitive to inflation concerns.
Many European markets performed well, reflecting in large measure the
strength of their respective currencies versus the dollar. Of all foreign
fixed-income investments, the largest position was in Denmark (13.6% of total
fixed-income investments). There were also relatively large positions in
Germany and the United Kingdom.
Throughout the period, high yield corporate was the largest sector of
the bond market represented in the portfolio approximately 40% of all
fixed-income investments. These have recently been focused on such cyclical
industries as forest products, metals, and chemicals. The Fund also has good
representation in issues from the healthcare and cable television industries.
SECTOR WEIGHTINGS
As a percentage of total investments
4/30/95
[PIE CHART]
CSBF - PIE DATA
LABEL A B C D E
PERCENT OF TOTAL CSBF -
LABEL PORTFOLIO FIXED INCOME INVESTMENTS PIE DATA
- --------------------------------------------------------------------------------
1 Other 2.3 Foreign 31.0%
- --------------------------------------------------------------------------------
2 Fixed Income 37.1 U.S. Govt 28.6%
- --------------------------------------------------------------------------------
3 Equity 60.6 High Yield 40.4%
- --------------------------------------------------------------------------------
F G
PERCENT OF TOTAL
LABEL EQUITY INVESTMENTS
- ----------------------------------------
1 Foreign 21.2%
- ----------------------------------------
2 Small Cap 20.5%
- ----------------------------------------
3 Large Cap 58.3%
- ----------------------------------------
2
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO (unaudited, in thousands) APRIL 30, 1995
<CAPTION>
COUNTRY
COMMON STOCKS - 60.1% ABBREV. SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
CONSTRUCTION - 0.3%
HEAVY CONSTRUCTION-NON BUILDING CONSTRUCTION
Yondenko Corp. (a) Ja 9 $ 93
- ---------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 10.1%
DEPOSITORY INSTITUTIONS - 4.7%
Bank New York, Inc. 4 122
Bank of Boston Corp. 7 234
Bank of Montreal Ca 4 82
BayBanks, Inc. 2 125
Citicorp 5 223
First Interstate Bancorp 2 115
HSBC Holdings PLC HK 6 65
Kredietbank NV Be (b) 49
National Westminster Bank PLC UK 9 74
Peoples Bank of Bridgeport 6 88
TCF Financial Corp. 3 133
------
1,310
------
HOLDING & OTHER INVESTMENT COMPANIES - 0.2%
First Australia Fund, Inc. Au 3 22
First Phillipine Fund, Inc. Ph 2 31
------
53
------
INSURANCE AGENTS & BROKERS - 0.4%
US Facilities Corp. 8 108
------
INSURANCE CARRIERS - 2.3%
American Bankers Insurance Group, Inc. 3 95
Cigna Corp. 4 276
Fremont General Corp. 3 57
Life Re Corp. 3 58
Pacificare Health Systems, Inc. (a) 1 83
Protective Life Corp. (a) 2 73
Selective Insurance Group, Inc. (b) 9
------
651
------
NONDEPOSITORY CREDIT INSTITUTIONS - 2.2%
Foothill Group, Inc., Class A 4 87
Green Tree Financial Corp. 5 205
Loews Corp. 2 234
The Money Store, Inc. 3 70
------
596
------
SECURITY BROKERS & DEALERS - 0.3%
Alex Brown, Inc. 2 94
- ---------------------------------------------------------------------------
MANUFACTURING - 36.5%
APPAREL - 0.6%
Nautica Enterprises, Inc. (a) 3 77
Norton Mcaughton, Inc. (a) 5 86
------
163
------
CHEMICALS - 2.9%
BASF AG G 1 134
DSM N V Ne 1 59
E.I. DuPont De Nemours & Co. 1 92
Eli Lilly & Co. 1 75
Helene Curtis Industries, Inc. 2 52
Merck AG (a) Sz (b) 102
Norsk Hydro A.S. No 2 60
Union Carbide Corp. 8 243
------
817
------
ELECTRONIC & ELECTRICAL EQUIPMENT - 4.7%
Applied Materials, Inc. (a) 1 86
Aspect Communications (a) 2 84
Dovatron International, Inc. (a) 2 48
Duracraft Corp. (a) 2 63
HADCO Corp. (a) 7 123
Harman International Industries, 2 77
International Rectifier Corp. (a) 4 99
Lam Research Corp. (a) 2 76
Micron Technology, Inc. 2 189
Motorola, Inc. 2 125
Park Electrochemical Corp. 2 67
Philips Electronics NV Ne 3 122
Proteon, Inc. (a) 9 59
Sanmina Corp. (a) 2 82
------
1,300
------
FABRICATED METAL - 0.9%
Buderus Ag G (b) 106
GFI Industries SA Fr 1 87
Oriental Holdings Berhad Ma 5 24
Shelter Components Corp. 4 42
------
259
------
FOOD & KINDRED PRODUCTS - 3.3%
Archer Daniels Midland Co. 13 228
Hudson Foods, Inc. 9 147
IBP, Inc. 4 130
Phillip Morris Co., Inc. 3 183
Saint Louis Bouchon Fr (b) 96
Smithfield Foods, Inc. (a) 2 55
Superfos AS De 1 74
------
913
------
LEATHER - 0.4%
Wolverine World Wide, Inc. 4 117
------
LUMBER & WOOD PRODUCTS - 0.2%
Oakwood Homes Corp. 3 65
------
</TABLE>
See notes to investment portfolio.
3
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO - continued
<CAPTION>
COUNTRY
COMMON STOCKS - cont. ABBREV. SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
MACHINERY & COMPUTER EQUIPMENT - 9.7%
AGCO Corp. 2 $ 59
Apple Computer, Inc. 5 191
Bay Networks, Inc. (a) 3 91
Brunswick Corp. 4 75
Caterpillar, Inc. 3 146
Compaq Computer Corp. (a) 4 152
Deere & Co. 1 74
EMC Corp. (a) 7 131
Esterline Technologies Corp. (a) 2 25
Exabyte Corp. (a) 3 38
Fujitsu Ltd. Ja 4 41
Hewlett-Packard Co. 4 284
Hitachi Ltd Ja 14 142
International Business Machines
Corp. 3 322
JLG Industries, Inc. 5 100
Mylex Corp. (a) 8 89
NACCO Industries, Inc. 1 44
Oki Electric Industry Co. (a) Ja 14 99
Outboard Marine Corp. 1 26
Seagate Technology, Inc. (a) 8 239
Strattec Strategy Corp. (a) (b) 6
Sun Microsystems, Inc. (a) 6 243
Toro Co. 3 87
------
2,704
------
MEASURING & ANALYZING INSTRUMENTS - 3.0%
Amsco International, Inc. (a) 7 88
Bio-Rad Laboratories, Inc.,
Class A (a) 4 121
Cordis Corp. (a) 1 101
Eastman Chemical Co. 4 216
Fuji Photo Film Co. Ltd. Ja 5 123
Medtronic, Inc. 2 141
Quickturn Design Systems, Inc. (a) 5 39
------
829
------
MISCELLANEOUS MANUFACTURING - 0.4%
Callaway Golf, Inc. (a) 6 79
Haw Par Brothers International Si 20 41
------
120
------
PAPER & PAPER MILLS - 1.0%
Norske Skogindustrie No 2 68
Sca Lakkirchen AG As (b) 153
Shorewood Packaging Corp. (a) 3 49
------
270
------
PETROLEUM REFINING - 1.7%
British Petroleum Co. PLC UK 1 96
Exxon Corp. 1 70
Lyondell Petrochemical Co. 9 221
Phillips Petroleum Co. 3 87
------
474
------
PRIMARY METAL - 1.9%
Alcan Aluminum Ltd. 5 128
Aluminum Company of America 1 63
British Steel PLC UK 29 78
National Steel Corp. (a) 6 80
Texas Industries, Inc. 2 79
Titan Wheel International, Inc. 5 104
------
532
------
PRIMARY SMELTING - 0.2%
Phelps Dodge Corp. 1 68
------
RUBBER & PLASTIC - 0.8%
Applied Extrusion Technologies, I 7 119
Continental AG G 1 111
------
230
------
STONE, CLAY, GLASS & CONCRETE - 1.2%
Armstrong World Industries, Inc. 2 87
Desimpel Korte Be 2 109
Owens-Corning Fiberglas
Corp. (a) 3 110
Vitro Sa Mx 10 34
------
340
------
TEXTILE MILL PRODUCTS - 0.3%
Fieldcrest Cannon, Inc. 3 73
------
TOBACCO PRODUCTS - 0.4%
Imasco Ltd. Ca 4 123
------
TRANSPORTATION EQUIPMENT - 2.9%
Borg-Warner Automotive, Inc. 6 144
Chrysler Corp. 3 147
Coachmen Industries, Inc. 4 64
Fleetwood Enterprises, Inc. 3 78
Ford Motor Co. 6 162
Honda Motor Co. Ltd. Ja 2 32
Volvo AB ADR Sw 5 94
Varlen Corp. 3 71
------
792
- ---------------------------------------------------------------------------
MINING & ENERGY - 0.6%
METAL MINING - 0.4%
Magma Copper Co., Class B (a) 6 101
------
NONMETALLIC, EXCEPT FUELS - 0.2%
Potash Corp. of Saskatchewan,
Inc. Ca 1 64
- ---------------------------------------------------------------------------
RETAIL TRADE - 3.3%
APPAREL & ACCESSORY STORES - 0.2%
J. Baker, Inc. 4 50
------
</TABLE>
See notes to investment portfolio.
4
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO - continued
<CAPTION>
COUNTRY
COMMON STOCKS - cont. ABBREV. SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
RETAIL TRADE - CONT.
FOOD STORES - 0.6%
Safeway, Inc. (a) 5 $ 176
------
GENERAL MERCHANDISE STORES - 1.6%
Dayton Hudson Corp. 2 101
Dollar General Corp. 3 58
Federated Department Stores,
Inc. (a) 6 125
Jardine Strategic Holdings HK 22 75
Waban, Inc. (a) 6 96
------
455
------
HOME FURNISHINGS & EQUIPMENT - 0.4%
Circuit City Stores, Inc. 4 106
------
MISCELLANEOUS RETAIL - 0.5%
Blair Corp. 2 52
Office Depot, Inc. (a) 4 91
------
143
- ---------------------------------------------------------------------------
SERVICES - 3.9%
BUSINESS SERVICES - 2.1%
Computer Associates International, Inc. 3 193
Comverse Technology, Inc. (a) 4 63
Filenet Corp. (a) 3 84
Manpower, Inc. 3 90
Norrell Corp. 4 84
Software Spectrum, Inc. 4 56
------
570
------
ENGLISH, ACCOUNTING, RESEARCH
& MANAGEMENT - 0.2%
International-Muller NV Ne 1 54
------
HEALTH SERVICES - 1.3%
Humana, Inc. 6 117
Integrated Health Services 3 104
Maxicare Health Plan (a) 4 62
Rotech Medical Corp. (a) 3 81
------
364
------
HOTELS, CAMPS & LODGING - 0.3%
Hospitality Franchise Systems, Inc. (a) 3 91
- ---------------------------------------------------------------------------
TRANSPORATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 4.1%
AIR TRANSPORTATION - 0.8%
British Airways PLC UK 1 65
Comair Holdings, Inc. 4 101
Lufthansa (a) G 1 66
------
232
------
COMMUNICATIONS - 0.8%
Southwestern Bell Corp. 2 101
Sprint Corp. 2 76
Telefonos de Mexico SA Mx 1 33
------
210
------
ELECTRIC SERVICES - 1.2%
Duke Power Co. 2 79
Empresa Nacional de Electr Sp 1 52
Kyushu Electric Power Ja 4 121
Northeast Utilities 4 94
------
346
------
MOTOR FREIGHT & WAREHOUSING - 0.2%
Carolina Freight Corp. (a) 5 46
------
SANITARY SERVICES - 0.3%
Yorkshire Water PLC UK 8 70
------
TRANSPORTATION SERVICES - 0.5%
Air Express International Corp. 4 92
Pittston Services Group 2 54
------
146
------
WATER TRANSPORTATION - 0.3%
DFDS De (b) 75
- ---------------------------------------------------------------------------
WHOLESALE TRADE - 1.3%
DURABLE GOODS - 1.0%
Beers N V (a) Ne 1 64
Nordstrom, Inc. 2 58
Pioneer Standard Electronics, Inc. 5 98
Radiotechnique Fr (b) 45
------
265
------
NONDURABLE GOODS - 0.3%
Dalgety PLC UK 11 73
- ---------------------------------------------------------------------------
Total common stocks (cost $15,696) 16,731
- ---------------------------------------------------------------------------
BONDS & NOTES - 37.0% PAR
- ---------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - 14.6%
- ---------------------------------------------------------------------------
CONSTRUCTION - 0.4%
USG Corp.,
9.250% 09/15/01 $100 99
- ---------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 0.7%
FINANCIAL SERVICES - 0.4%
Comdata Network, Inc.,
13.250% 12/15/02 100 110
------
INSURANCE CARRIERS - 0.3%
Reliance Group Holdings,
9.000% 11/15/00 100 95
- ---------------------------------------------------------------------------
</TABLE>
See notes to investment portfolio.
5
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO - continued
<CAPTION>
CURRENCY
BONDS & NOTES - CONT. ABBREV. PAR VALUE
- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MANUFACTURING - 6.8%
CHEMICALS - 1.5%
Agricultural Minerals Co., LP,
10.750% 09/30/03 $100 $104
Huntsman Corp.,
11.000% 04/15/04 100 108
N.L. Industries, Inc.,
11.750% 10/15/03 100 106
Revlon Worldwide,
(c) 03/15/98 150 95
----
413
----
ELECTRONIC & ELECTRICAL EQUIPMENT - 0.8%
Amphenol Corp.,
12.750% 12/15/02 100 113
Exide Corp.,
10.750% 12/15/02 100 104
----
217
----
LUMBER & WOOD PRODUCTS - 0.4%
Triangle Pacific Corp.,
10.500% 08/01/03 100 100
----
MACHINERY & COMPUTER EQUIPMENT - 0.4%
SPX, Inc.,
11.750% 06/01/02 100 107
----
MISCELLANEOUS MANUFACTURING - 0.8%
American Standard Co.,
9.875% 06/01/01 100 102
Coleman Holdings Co., Series B,
(c) 05/27/98 150 108
----
210
----
PAPER PRODUCTS - 1.1%
Repap Wisconsin Inc.,
9.250% 02/01/02 100 97
SD Warren Co.,
12.000% 12/15/04 100 108
Stone Container Corp.,
9.875% 02/01/01 100 99
----
304
----
PRIMARY METAL - 0.8%
A.K. Steel Corp.,
10.750% 04/01/04 100 104
Magma Copper Co.,
12.000% 12/15/01 100 110
----
214
----
PRINTING & PUBLISHING - 0.4%
American Media Operations,
11.625% 11/15/04 100 107
----
STONE, CLAY, GLASS & CONCRETE - 0.4%
Owens-Illinois, Inc.,
10.500% 06/15/02 100 103
----
TRANSPORTATION EQUIPMENT - 0.4%
Aftermarket Technology Corp.,
12.000% 08/01/04 100 106
- --------------------------------------------------------------------
MINING & ENERGY - 1.4%
CRUDE PETROLEUM & NATURAL GAS - 0.7%
Ferrellgas L.P./Finance Corp.,
10.000% 08/01/01 100 103
Triton Energy Corp.,
(c) 11/01/97 100 80
----
183
----
OIL & GAS EXTRACTION - 0.7%
Gulf Canada Resources Ltd.,
9.250% 01/15/04 Ca 100 96
Santa Fe Energy Resources, Inc.,
11.000% 05/15/04 100 105
----
201
- --------------------------------------------------------------------
RETAIL TRADE - 0.7%
FOOD STORES - 0.3%
Pathmark Stores, Inc.,
9.625% 05/01/03 100 96
----
MISCELLANEOUS RETAIL - 0.4%
Thrifty Payless Holdings, Inc.,
11.750% 04/15/03 100 106
- --------------------------------------------------------------------
SERVICES - 2.4%
Amusement & recreation - 0.4%
Boyd Gaming Corp.,
10.750% 09/01/03 100 101
----
HEALTH SERVICES - 1.5%
Healthtrust, Inc.,
10.750% 05/01/02 100 110
Hillhaven Corp.,
10.125% 09/01/01 100 104
Integrated Health Services, Inc.,
10.750% 07/15/04 100 105
National Medical Enterprises,
10.125% 03/01/05 100 104
----
423
----
HOTELS, CAMPS & LODGING - 0.5%
Host Marriott Hospitality, Inc.,
11.000% 05/01/07 150 152
- --------------------------------------------------------------------
</TABLE>
See notes to investment portfolio.
6
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO - continued
<CAPTION>
CORPORATE FIXED-INCOME CURRENCY
BONDS & NOTES - CONT. ABBREV. PAR VALUE
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TRANSPORATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 2.2%
COMMUNICATIONS - 1.9%
Allbritton Communications Co.,
11.500% 08/15/04 $ 100 $ 103
Cablevision Systems Corp.,
10.750% 04/01/04 100 104
Continental Cablevision, Inc.,
11.000% 06/01/07 100 109
SCI Television, Inc.,
11.000% 06/30/05 100 104
Young Broadcasting,
11.750% 11/15/04 100 108
-------
528
-------
MOTOR FREIGHT & WAREHOUSING - 0.3%
Trism, Inc.,
10.750% 12/15/00 100 96
- -----------------------------------------------------------------------
Total corporate fixed-income
bond & notes (cost $3,972) 4,071
- -----------------------------------------------------------------------
FOREIGN GOVERNMENT & AGENCY OBLIGATIONS - 11.5%
- -----------------------------------------------------------------------
Deutschland Republic,
9.000% 01/22/01 DM 740 593
Kingdom of Denmark,
9.000% 11/15/00 DK 7,325 1,387
Treasury Corp. of Victoria,
12.000% 09/22/01 A$ 530 425
United Kingdom Treasury,
9.750% 08/27/02 BP 455 785
- -----------------------------------------------------------------------
Total foreign government
& agency obligations (cost $3,010) 3,190
- -----------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS - 10.6%
U.S. Treasury Notes,
11.875% 11/15/03 (cost $2,848) $2,265 $ 2,952
- -----------------------------------------------------------------------
CORPORATE CONVERTIBLE BONDS - 0.3%
- -----------------------------------------------------------------------
COMMUNICATIONS - 0.3%
Bell Cablemedia PLC, stepped
coupon, (11.95% 07/15/99)
07/15/04 (cost of $86) (d) BP 150 95
- -----------------------------------------------------------------------
Total bonds & notes (cost $9,916) 10,308
- -----------------------------------------------------------------------
Total investments - 97.1% (cost $25,612) (e) 27,039
- -----------------------------------------------------------------------
SHORT TERM OBLIGATIONS - 3.3%
- -----------------------------------------------------------------------
Repurchase agreement with Bankers
Trust Securities Corp., dated 4/28/95
due 05/01/95 at 5.92%, collateralized
by U.S. Treasury notes with
various maturities to 1998, market
value $1,010 (repurchase
proceeds $919) $ 919 919
- -----------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - (0.4)% (116)
- -----------------------------------------------------------------------
NET ASSETS - 100.0% $27,842
- -----------------------------------------------------------------------
<FN>
Notes to investment portfolio:
(a) Non-income producing.
(b) Rounds to less than one.
(c) Zero coupon bond.
(d) Currently zero coupon. Shown
parenthetically is the interest rate
to be paid and the date the Fund will
begin accruing this rate.
(e) Cost for federal income tax purposes
is the same.
</TABLE>
<TABLE>
SUMMARY OF SECURITIES BY COUNTRY/CURRENCY
<CAPTION>
% of total
Currency Country securities
Country abbrev. abbrev. Value at value
- ------- -------- ------- ----- -----------
<S> <C> <C> <C> <C>
United States........ $ $20,177 74.6
Denmark.............. DK De 1,536 5.7
United Kingdom....... BP UK 1,336 5.0
Germany.............. DM G 1,010 3.7
Japan................ Ja 651 2.4
Australia............ A$ Au 447 1.7
Canada............... Ca 365 1.3
Netherlands.......... Ne 299 1.1
France............... Fr 228 0.8
Belgium.............. Be 158 0.6
Austria.............. As 153 0.6
Hong Kong............ HK 140 0.5
Norway............... No 128 0.5
Switzerland.......... Sz 102 0.4
Sweden............... Sw 94 0.3
Mexico............... Mx 67 0.2
Spain................ Sp 52 0.2
Singapore............ Si 41 0.2
Philippines.......... Ph 31 0.1
Malaysia............. Ma 24 0.1
------- -----
$27,039 100.0
------- -----
<FN>
Certain securities are listed by country of
underlying exposure but may trade
predominantly on other exchanges.
</TABLE>
<TABLE>
<CAPTION>
Acronym Name
- ------- ----
<S> <C>
ADR American Depository Receipt
</TABLE>
See notes to financial statements.
7
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
STATEMENT OF ASSETS & LIABILITIES (UNAUDITED)
April 30, 1995
(in thousands except for per share amounts and footnote)
- ---------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments at value (cost $25,612)................... $27,039
Short-term obligations ............................... 919
-------
27,958
Cash held in foreign banks
(cost $271)........................... $ 271
Receivable for:
Investments sold........................ 489
Interest................................ 333
Fund shares sold........................ 267
Dividends............................... 26
Foreign tax reclaims.................... 2
Expense reimbursement
due from adviser....................... 3
Deferred organization expenses............. 63
Other...................................... 16 1,470
------ -------
Total assets................................. 29,428
Liabilities
Payable for:
Investments purchased................... 1,568
Fund shares repurchased................. 18
------
Total liabilities............................ 1,586
-------
Net assets............................................ $27,842
=======
Net asset value & redemption price per share -
Class A ($11,935/1,154)........................... $ 10.34
=======
Maximum offering price per share - Class A
($10.34/0.9525).................................... $ 10.86*
=======
Net asset value & offering price per share -
Class B ($12,586/1,218)........................... $ 10.34
=======
Net asset value & redemption price per share -
Class D ($3,321/321).............................. $ 10.34
=======
Maximum offering price per share - Class D
($10.34/0.9900).................................... $ 10.44
=======
<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
Interest................................................... $ 449
Dividends.................................................. 92
------
Total investment income (net of nonrebatable
foreign taxes withheld at source which
amounted to $4)..................................... 541
Expenses
Management fee................................ $ 78
Service fee................................... 28
Distribution fee - Class A.................... 14
Distribution fee - Class B.................... 37
Distribution fee - Class D.................... 11
Transfer agent................................ 36
Bookkeeping fee............................... 13
Custodian fee................................. 11
Audit fee..................................... 5
Trustees fee.................................. 3
Registration fee.............................. 7
Reports to shareholders ...................... 3
Legal fee..................................... 7
Amortization of deferred
organization expenses........................ 7
Other......................................... 4
-----
264
Fees waived by the adviser.................... (52) 212
----- ------
Net investment income....................... 329
------
Net realized and unrealized gain (loss)
on portfolio positions
Net realized loss on:
Investments.............................. (184)
Foreign currency transactions............ (4)
-----
Net realized loss................................ (188)
Net unrealized appreciation
during the period on:
Investments.............................. 1,505
Foreign currency transactions............ 5
-----
Net unrealized appreciation...................... 1,510
------
Net gain.................................... 1,322
------
Net increase in net assets from
operations............................................... $1,651
======
</TABLE>
See notes to financial statements.
8
<PAGE>
FINANCIAL STATEMENTS - CONTINUED
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
(unaudited)
Six months
ended Period ended
April 30 October 31
========== ============
1995 1994 (a)
========== ============
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income.................................................. $ 329 $ 37
Net realized loss...................................................... (188) (2)
Net unrealized appreciation (depreciation)............................. 1,510 (80)
------- -------
Net increase (decrease) from operations......................... 1,651 (45)
------- -------
Distributions from
Net investment income - Class A........................................ (132)
Net investment income - Class B........................................ (116)
Net investment income - Class D........................................ (33)
------- -------
1,370 (45)
------- -------
Fund share transactions
Receipts for shares sold - Class A..................................... 5,266 6,427
Value of distributions reinvested - Class A............................ 122
Cost of shares repurchased - Class A................................... (441) (5)
------- -------
4,947 6,422
------- -------
Receipts for shares sold - Class B..................................... 6,162 6,364
Value of distributions reinvested - Class B............................ 109
Cost of shares repurchased - Class B................................... (630) (33)
------- -------
5,641 6,331
------- -------
Receipts for shares sold - Class D..................................... 950 2,249
Value of distributions reinvested - Class D............................ 32
Cost of shares repurchased - Class D................................... (55)
------- -------
927 2,249
------- -------
Net increase from Fund share transactions....................... 11,515 15,002
------- -------
Total increase............................................ 12,885 14,957
NET ASSETS
Beginning of period.................................................... 14,957
------- -------
End of period (including undistributed net investment income of $51 and
$35 respectively..................................................... $27,842 $14,957
======= =======
<FN>
(a) The Fund commenced investment operations on September 19, 1994.
</TABLE>
See notes to financial statements.
9
<PAGE>
FINANCIAL STATEMENTS - CONTINUED
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS - CONTINUED
(in thousands)
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
(unaudited)
Six months
ended Period ended
April 30 October 31
========== ============
1995 1994 (a)
========== ============
<S> <C> <C>
NUMBER OF FUND SHARES
Sold - Class A......................................................... 540 646
Issued for distributions reinvested - Class A.......................... 13
Repurchased - Class A.................................................. (44) (1)
----- -----
509 645
----- -----
Sold - Class B......................................................... 631 643
Issued for distributions reinvested - Class B.......................... 11
Repurchased - Class B.................................................. (64) (3)
----- -----
578 640
----- -----
Sold - Class D......................................................... 98 225
Issued for distributions reinvested - Class D.......................... 3
Repurchased - Class D.................................................. (5)
----- -----
96 225
----- -----
Net increase in shares outstanding.............................. 1,183 1,510
Outstanding at
Beginning of period.................................................... 1,510
----- -----
End of period.......................................................... 2,693 1,510
===== =====
<FN>
(a) The Fund commenced investment operations on September 19, 1994.
</TABLE>
See notes to financial statements.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1. INTERIM FINANCIAL STATEMENTS
In the opinion of management of Colonial Strategic Balanced 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 a 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 a continuing
distribution fee; Class B shares are offered at net asset value plus a
distribution fee and a declining contingent deferred sales charge on
redemptions made within six years after purchase; and Class D shares are
offered at net asset value plus a reduced front-end sales charge, a contingent
deferred sales charge on redemptions made within one year after purchase and a
continuing distribution fee. Class B shares will convert to Class A shares when
they have been outstanding approximately eight years. The following significant
accounting policies are consistently followed by the Fund in the prepara- tion
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 A, 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 A, Class B and Class D net investment
income per share data reflect the distribution fee applicable to each class.
Class A, 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 A, Class B and Class D shares.
- --------------------------------------------------------------------------------
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
INTEREST INCOME, DEBT DISCOUNT AND PREMIUM
Interest income is recorded on the accrual basis. Original issue
discount is accreted to interest income over the life of a security with a
corresponding increase in the cost basis; premium and market discount are not
amortized or accreted.
- --------------------------------------------------------------------------------
DEFERRED ORGANIZATION EXPENSES
The Fund incurred $69,500 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 CONTRACTS
The Fund has adopted Statement of Position 93-4, Foreign Currency
Accounting and Finan-cial Statement Presentation for InvestmentCompanies.
Accordingly, net realized and un-realized gain (loss) on foreign currency
trans-actions includes the fluctuation in exchangerates on gains and losses
between trade andsettlement dates on securities transactions,gains and losses
arising from the dispositionof foreign currency, and currency gains andlosses
between the accrual and payment dateson dividend and interest income and foreign
withholding taxes.
The Fund does not distinguish that portion of gains and losses on
investments which isdue to changes in foreign exchange rates fromthat which is
due to changes in market pricesof the investments. Such fluctuations
areincluded with the net realized and unrealizedgains and losses from
investments.
- --------------------------------------------------------------------------------
FORWARD CURRENCY CONTRACTS
The Fund may enter into forward currencycontracts to purchase or sell
foreign currenciesat predetermined exchange rates in connectionwith the
settlement of purchases and sales ofsecurities. 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 theperiod between trade and settlement date ofthe
contracts. All contracts are marked-to-market daily, resulting in unrealized
gains or losses which become realized at the timethe forward currency contracts
are closed ormature. Realized and unrealized gains (losses)arising from such
transactions are included in net realized and unrealized gains (losses)on
foreign currency transactions. Forwardcurrency 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
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
NOTE 3. 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 0.70% annually of the Fund's average net
assets.
- --------------------------------------------------------------------------------
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 $4,616
on sales of the Fund's Class A shares and received contingent deferred sales
charges (CDSC) of $10,377 and $477 on Class B and Class D share redemptions,
respectively.
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 0.30% for Class A and 0.75% for Class B and
Class D , of the average net assets attributable to Class A, 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.
- --------------------------------------------------------------------------------
EXPENSE LIMITS
The Adviser has agreed, until further notice,to waive fees and bear
certain Fund expenses tothe extent that total expenses (exclusive ofservice
fees, distribution fees, brokeragecommissions, interest, taxes, and
extraordinaryexpenses, if any) exceed 1.10% annually of theFund'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 $17,498,401 and
$6,034,106, respectively, of which $ 3,174,705 and $1,768,413, respectively,
were U.S. government securities.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
Unrealized appreciation (depreciation) at April 30, 1995, based on cost
of investments for both financial statement and federal income tax purposes
was:
<S> <C>
Gross unrealized appreciation.......... $2,033,381
Gross unrealized depreciation.......... (606,573)
----------
Net unrealized appreciation......... $1,426,808
==========
</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.
- --------------------------------------------------------------------------------
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, 1,546,639 voted for the new
Management Agreement, 7,252 voted against and 43,771 abstained. Of the shares of
beneficial interest outstanding that abstained 4,936, represented broker
non-votes.
- --------------------------------------------------------------------------------
<TABLE>
NOTE 6. COMPOSITION OF NET ASSETS
At April 30 1995, net assets consisted of:
<S> <C>
Capital paid in.................................. $26,517
Undistributed net investment income.............. 51
Accumulated net realized loss.................... (156)
Net unrealized appreciation on:
Investments................................... 1,427
Foreign currency transactions................. 3
-------
$27,842
- -------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
ABOUT OUR COVER...
The symbol on the cover of this Report
[GRAPHIC] represent the Fund's primary investment
focus on common stocks and bonds.
- --------------------------------------------------------------------------------
Colonial Strategic Balanced 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.
14
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS (B)
Selected data for a share of each class outstanding throughout each period are as follows:
- -----------------------------------------------------------------------------------------------------------------------
<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
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period......... $ 9.910 $ 9.900 $ 9.900 $10.000 $10.000 $10.000
------- ------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income (a).................... 0.159 0.137 0.137 0.035 0.029 0.029
Net realized and unrealized
gain (loss) on investments................. 0.406 0.419 0.415 (0.125) (0.129) (0.129)
------- ------- ------- ------- ------- -------
Total from investment operations............. 0.565 0.556 0.552 (0.090) (0.100) (0.100)
------- ------- ------- ------- ------- -------
Less distributions declared to shareholders:
From net investment income................... (0.135) (0.116) (0.112) ----- ----- -----
------- ------- ------- ------- ------- -------
Net asset value - End of period............... $10.340 $10.340 $10.340 $ 9.910 $ 9.900 $ 9.900
======= ======= ======= ======= ======= =======
Total return (d)(e)........................... 5.79%(f) 5.70%(f) 5.66%(f) (0.90)%(f) (1.00)%(f) (1.00)%(f)
======= ======= ======= ======= ======= =======
Ratios to average net assets
Expenses..................................... 1.65%(g) 2.10%(g) 2.10%(g) 1.65%(g) 2.10%(g) 2.10%(g)
Fees waived by the adviser................... 0.47%(g) 0.47%(g) 0.47%(g) 0.35%(g) 0.35%(g) 0.35%(g)
Net investment income........................ 3.24%(g) 2.79%(g) 2.79%(g) 3.01%(g) 2.56%(g) 2.56%(g)
Portfolio turnover............................ 59%(g) 59%(g) 59%(g) 0%(g) 0%(g) 0%(g)
Net assets at end of period (000)............. $11,935 $12,586 $ 3,321 $ 6,394 $ 6,332 $ 2,231
<FN>
(a) Net of fees waived or
borne by the adviser which
amounted to.............................. $ 0.021 $ 0.021 $ 0.021 $ 0.004 $ 0.004 $ 0.004
(b) Per share data was calculated using average shares outstanding during the period.
(c) The Fund commenced investment operations on September 19, 1994.
(d) Total return at net asset value assuming all distributions reinvested and no initial
sales charge or CDSC.
(e) Had the adviser not waived or reimbursed a portion of expenses total return would
have been reduced.
(f) Not annualized.
(g) Annualized.
</TABLE>
15
