<PAGE>
[LOGO] COLONIAL
MUTUAL FUNDS
[GRAPHIC]
COLONIAL
GROWTH SHARES
FUND
- ---------------------------
SEMIANNUAL REPORT
APRIL 30, 1995
[LOGO] COLONIAL
MUTUAL FUNDS
[LOGO] Printed on recycled paper.
GS-03/898A-0495
COLONIAL INVESTMENT SERVICES, INC. (C) 1995
<PAGE>
LETTER FROM THE PRESIDENT
Dear Shareholder:
Colonial Growth Shares Fund is designed to provide investors with long-term
investment growth. The Fund achieves its objective by investing in a diversified
portfolio of common stocks issued by companies within the United States and
throughout the developed world.
FUND PERFORMANCE (11/1/94 - 4/30/95)
<TABLE>
<CAPTION>
CLASS A CLASS B
- --------------------------------------------------------------------------------
<S> <C> <C>
Distributions declared
per share $ 1.285 $ 1.235
- --------------------------------------------------------------------------------
Six-month total return, assuming
reinvestment of all distributions
and no sales charge or CDSC 6.80% 6.33%
- --------------------------------------------------------------------------------
Net asset value per share
at 4/30/95 $ 13.51 $ 13.42
- --------------------------------------------------------------------------------
</TABLE>
ECONOMIC/MARKET OVERVIEW
Conditions in the stock market were quite favorable during the Fund's
semiannual period. In fact, through the end of April the United States had one
of the world's strongest stock markets, as demonstrated by the performance of
the Dow Jones Industrial Average. During the period the Dow continued to reach
record highs, and the market's strength was reflected in the Fund's total
return.
While investors remained concerned about inflation, by the beginning of the
fiscal year these concerns diminished. This reflected growing investor
confidence that the Federal Reserve Board's restrictive monetary policy was
having its desired affect. It now appears that the Fed has achieved its goal of
a "soft landing" for the economy. Inflation is under control, and the economy
continues to expand, although at a more subdued pace.
Your Fund especially benefited from a change in investor sentiment that
occured as the economic recovery matured. Investors became less interested in
value stocks, which typically perform well in the early stages of a recovery.
They instead began turning to non-cyclical growth sectors, such as tobacco and
pharmaceuticals. These sectors tend to include companies that have larger
capitalizations, which investors view as more reliable than small capitalization
companies during periods of economic uncertainty.
INVESTMENT STRATEGY
Portfolio Manager Daniel Rie continued to reduce the number of stocks owned
by the Fund. Most of this activity was focused on reducing the smaller positions
in the portfolio, to improve management efficiencies. Dan also reviews the
portfolio on a regular basis to identify and eliminate holdings that are not
meeting his growth expectations.
[PHOTO OF JOHN A. McNEICE, JR.]
The Fund remained fully invested in a diversified portfolio of common
stocks. Although the Fund invests primarily in U.S. equity securities (97.2% of
investments), there were also some foreign holdings, to increase the diversity
of the portfolio. On April 30, there were investments in five foreign countries,
accounting for 2.8% of investments.
For further information about this or any of the other mutual funds we
offer, please contact your financial adviser or call Colonial at 1-800-426-3750.
Sincerely,
/s/ JOHN A. McNEICE, JR.
- ------------------------
John A. McNeice, Jr.
President
June 10, 1995
Past performance cannot predict future results. Return and value of an
investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. Net asset value (NAV) return does not
include sales charges or contingent deferred sales charges (CDSC). Performance
for different share classes will vary based on differences in sales charges and
fees associated with each class.
<PAGE>
INVESTMENT PORTFOLIO (UNAUDITED, IN THOUSANDS) APRIL 30, 1995
<TABLE>
<CAPTION>
COUNTRY
COMMON STOCKS - 92.7% ABBREV. SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCE, INSURANCE & REAL ESTATE - 21.0%
DEPOSITORY INSTITUTIONS - 4.6%
Bell Bancorp, Inc. 34 $ 944
Citicorp 41 1,911
First Interstate Bancorp 54 4,174
Marshall And Ilsley Co. 20 411
MBNA Corp. 77 2,314
Roosevelt Financial Group, Inc. 17 278
-------
10,032
-------
INSURANCE CARRIERS - 6.4%
Ace Ltd 31 821
AFLAC, Inc. 73 3,007
American Bankers
Insurance Group, Inc 32 1,021
CMAC Investment Corp. 16 585
Equitable of Iowa Co. (a) 14 516
Geico Corp. 21 1,038
John Alden Financial Corp. 31 556
MGIC Investment Corp. 31 1,292
St. Paul Companies 41 1,949
Safeco Corp. 10 565
US Healthcare, Inc. 97 2,593
-------
13,943
-------
NONDEPOSITORY CREDIT INSTITUTIONS - 8.3%
Aames Financial Corp. 12 149
Federal National Mortgage Association 25 2,162
Finova Group Inc. 53 1,775
Foothill Group, Inc., Class A 76 1,651
Green Tree Financial Corp. 19 777
ITT Corp. 35 3,626
Loews Corp. 51 5,175
Sunamerica, Inc. 15 710
The Money Store, Inc. 93 2,163
-------
18,188
-------
SECURITY BROKERS & DEALERS - 1.7%
Lehman Brothers Holdings, Inc. 151 2,945
United Asset Management Corp. 18 690
-------
3,635
- --------------------------------------------------------------------------------
MANUFACTURING - 51.1%
APPAREL - 0.4%
Warnaco Group, Inc. (a) 59 1,004
-------
CHEMICALS - 10.3%
Avon Products, Inc. 21 1,322
B.F. Goodrich Co. 32 1,506
Cabot Corp. 181 7,108
Colgate-Palmolive Co. 26 1,848
E.I. DuPont De Nemours & Co. 42 2,773
Monsanto Co. 6 524
Morton International, Inc. 148 4,594
Pfizer, Inc. 26 2,226
Wellman, Inc. 20 540
-------
22,441
-------
ELECTRONIC & ELECTRICAL EQUIPMENT - 6.8%
Advanced Micro Devices, Inc. 14 508
Applied Materials, Inc. (a) 8 475
Integrated Circuits Systems, Inc. (a) 44 460
Intel Corp. 19 1,935
Methode Electronics, Inc., Class A 100 1,723
Micron Technology, Inc. 83 6,823
Park Electrochemical Corp. 12 465
Texas Instruments, Inc. 13 1,357
Western Digital Corp.(a) 70 1,122
-------
14,868
-------
FOOD & KINDRED PRODUCTS - 5.3%
Archer Daniels Midland Co. 45 825
Eridania Beghin-Say SA It 1 194
IBP, Inc. 95 3,511
Lancaster Colony Corp. 44 1,520
Phillip Morris Co., Inc. 77 5,183
Thorn Apple Valley, Inc. 16 298
-------
11,531
-------
FURNITURE & FIXTURES - 0.9%
Leggett & Platt, Inc. 51 1,960
-------
LEATHER - 0.2%
Stride Rite Corp. 31 370
-------
MACHINERY & COMPUTER EQUIPMENT - 8.3%
Briggs and Stratton Corp. 57 1,995
Caterpillar, Inc. 47 2,720
Creative Technology Ltd. (a) 43 430
Deere & Co. 80 6,535
Donaldson Co., Inc. 14 343
Gateway 2000, Inc. (a) 34 640
Kysor Industrial Corp. 41 881
Smith International, Inc. 161 2,779
Strattec Strategy Corp. (a) 11 132
Toro Co. 20 583
Tseng Laboratories, Inc. 75 536
Wynn's International, Inc. 26 607
-------
18,181
-------
</TABLE>
See notes to investment portfolio.
2
<PAGE>
INVESTMENT PORTFOLIO - CONTINUED
<TABLE>
<CAPTION>
COUNTRY
COMMON STOCKS - CONT. ABBREV. SHARES VALUE
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
MEASURING & ANALYZING INSTRUMENTS - 4.2%
Eastman Kodak Co. 72 $ 4,163
Mentor Corp. 15 354
St. Jude Medical, Inc. 27 1,148
Xerox Corp. 29 3,583
-------
9,248
-------
PAPER & PAPER MILLS - 0.1%
Weyerhaeuser Co. 5 210
-------
PETROLEUM REFINING - 2.7%
Amoco Corp. 44 2,914
Atlantic Richfield Co. (ARCO) 7 824
Repsol SA, ADS Sp 68 2,186
-------
5,924
-------
PRIMARY METAL - 0.7%
Carpenter Technology Corp. 13 779
Texas Industries, Inc. 22 843
-------
1,622
-------
PRINTING & PUBLISHING - 2.0%
Central Newspapers, Inc. 19 489
New England Business Services 27 481
Pittway Corp. 21 935
Reynolds & Reynolds Co. 92 2,438
-------
4,343
-------
STONE, CLAY, GLASS & CONCRETE - 0.7%
Corning, Inc. 43 1,448
-------
TEXTILE MILL PRODUCTS - 0.1%
Masland Corp. (a) 21 285
-------
TOBACCO PRODUCTS - 0.7%
UST, Inc. 53 1,491
-------
TRANSPORTATION EQUIPMENT - 7.7%
A.O. Smith Corp. 12 294
Dana Corp. 96 2,462
Echlin, Inc. 78 2,836
Ford Motor Co. 52 1,399
Harsco Corp. 20 933
Polaris Industries, Inc. (a) 47 2,109
Sundstrand Corp. 70 3,907
TRW, Inc. 17 1,272
Thor Industries, Inc. 23 478
Varien Corp. 49 1,149
-------
16,839
- ------------------------------------------------------------------------------
MINING & ENERGY - 1.1%
METAL MINING - 0.5%
Cleveland-Cliffs, Inc. 29 1,051
-------
NONMETALLIC, EXCEPT FUELS - 0.6%
Vigoro Corp. 35 1,396
- ------------------------------------------------------------------------------
RETAIL TRADE - 5.2%
APPAREL & ACCESSORY STORES - 0.6%
Claire's Stores, Inc. 28 387
The Limited, Inc. 41 878
-------
1,265
-------
FOOD STORES - 0.2%
Smiths Food & Drug
Centers, Inc., Class B 22 478
-------
GENERAL MERCHANDISE STORES - 1.1%
Dayton Hudson Corp. 26 1,765
MacFrugals Bargains
Close-Outs, Inc. (a) 39 572
-------
2,337
-------
HOME FURNISHINGS & EQUIPMENT - 0.9%
Circuit City Stores, Inc. 76 1,977
-------
MISCELLANEOUS RETAIL - 0.6%
Arbor Drugs, Inc. 37 948
CDW Computer Centers, Inc. (a) 4 131
Damark International, Inc. (a) 52 373
-------
1,452
-------
RESTAURANTS - 1.8%
Luby's Cafeterias, Inc. 14 266
Vicorp Restaurants, Inc. (a) 4 61
Wendy's International, Inc. 211 3,578
-------
3,905
- ------------------------------------------------------------------------------
SERVICES - 4.1%
BUSINESS SERVICES - 2.8%
Computer Associates International, Inc. 26 1,693
Franklin Electronic Publishers, Inc. (a) 16 484
News Corp. Ltd Au 6 25
National Data Corp. 29 542
Sterling Software, Inc. (a) 75 2,564
Structural Dynamics Research (a) 70 849
-------
6,157
-------
HEALTH SERVICES - 0.6%
Advanced Health Care (a) 2 56
Humana, Inc. 27 519
Regency Health Services (a) 63 770
-------
1,345
-------
PERSONAL SERVICES - 0.7%
Service Corp. International 54 1,528
- ------------------------------------------------------------------------------
</TABLE>
See notes to investment portfolio.
3
<PAGE>
INVESTMENT PORTFOLIO - CONTINUED
<TABLE>
<CAPTION>
COUNTRY
COMMON STOCKS - CONT. ABBREV. SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 6.0%
Communications - 2.4%
Century Telephone Enterprises, Inc. 26 $ 782
Cincinnati Bell, Inc. 29 701
Citicasters, Inc. (a) 15 511
Hong Kong
Telecommunications, Ltd HK 46 897
Telefonica de Espana ADR (a) Sp 65 2,378
--------
5,269
--------
ELECTRIC SERVICES - 1.6%
Unicom Corp. 133 3,502
--------
GAS SERVICES - 0.2%
Enron Corp. 14 490
--------
TRANSPORTATION SERVICES - 1.0%
GATX Corp. 49 2,219
--------
Water transportation - 0.8%
Alexander & Baldwin, Inc. 34 748
American Presidents Companies 38 872
--------
1,620
- --------------------------------------------------------------------------------
WHOLESALE TRADE - 4.2%
DURABLE GOODS - 2.1%
Focus Surgery, Inc. (a) 16 6
Marshall Industries (a) 31 865
Pioneer Standard Electronics, Inc. 181 3,530
Ultramed (a)(b) 450 83
--------
4,484
--------
NONDURABLE GOODS - 2.1%
Bergen Brunswig Corp., Class A 95 2,254
Bindley Western Industries, Inc. 66 988
Foxmeyer Corp. (a) 77 1,454
--------
4,696
- --------------------------------------------------------------------------------
Total common stocks (cost $176,151) 202,734
- --------------------------------------------------------------------------------
PREFERRED STOCKS - 0.0%
MANUFACTURING - 0.0%
PAPER & PAPER MILLS
NV Koninklijke KNP BT (a) Ne (c) 1
- --------------------------------------------------------------------------------
Total preferred stocks (cost $1) 1
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CURRENCY
CORPORATE BONDS(d) - 0.0% ABBREV. PAR
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCE, INSURANCE & REAL ESTATE - 0.0%
INSURANCE CARRIERS
International Nederlanden Groep
10.000% 3/15/01
(cost $17) NG 28 21
- --------------------------------------------------------------------------------
Total investments - 92.7% (cost $176,169) (e) 202,756
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS - 7.2%
- --------------------------------------------------------------------------------
Repurchase agreement with Bankers Trust
Securities Corp.,dated 04/28/95 due
05/01/95 at 5.92%, collateralized by
U.S. Treasury notes with
various maturities to 1998, market
value $15,681 (repurchase proceeds
$15,689) $15,681 $ 15,681
- --------------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET- 0.1% 299
- --------------------------------------------------------------------------------
NET ASSETS - 100.0% $218,736
- --------------------------------------------------------------------------------
<FN>
Notes to investment portfolio:
(a) Non-income producing.
(b) Ultramed, Inc. is a restricted security which was acquired on August 14,
1987, at a cost of $450. The fair value is determined under the direction
of the Board of Trustees. This security represents 0.04% of the Fund's net
assets at April 30, 1995.
(c) Rounds to less than one.
(d) Par of each bond is shown in its issued currency, according to the
abbreviations shown below. Value of all securities is shown in U.S.
dollars.
(e) Cost for federal income tax purposes is $176,314.
</TABLE>
<TABLE>
<CAPTION>
Acronym Name
------- ---------------------------
<S> <C>
ADS American Depository Share
ADR American Depository Receipt
</TABLE>
SUMMARY OF SECURITIES BY COUNTRY
<TABLE>
<CAPTION>
Country/ % of total
Currency securities
Country abbrev. Value at value
- ------- -------- -------- ----------
<S> <C> <C> <C>
United States $197,054 97.2
Spain Sp 4,564 2.3
Hong Kong HK 897 0.4
Italy It 194 0.1
Australia Au 25 0.0
Netherlands Ne/NG 22 0.0
-------- -----
$202,756 100.0
-------- -----
</TABLE>
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
See notes to financial statements.
4
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
STATEMENT OF ASSETS & LIABILITIES (UNAUDITED)
April 30, 1995
(in thousands except for per share amounts and footnote)
- -------------------------------------------------------------------------------------------
<S> <C>
Assets
Investments at value (cost $176,169)......................................... $ 202,756
Short-term obligations ...................................................... 15,681
-----------
218,437
Receivable for:
Investments sold............................................. $ 384
Dividends.................................................... 265
Fund shares sold............................................. 170
Interest..................................................... 8
Foreign tax reclaims......................................... 6
Other........................................................... 36 869
------ -----------
Total assets......................................................... 219,306
Liabilities
Payable for Fund shares repurchased............................. 566
Accrued deferred Trustees fees.................................. 4
------
Total liabilities.................................................... 570
-----------
Net assets .................................................................. $ 218,736
===========
Net asset value & redemption price per share -
Class A ($161,253/11,937)................................................ $13.51
===========
Maximum offering price per share - Class A
($13.51/0.9425)........................................................... $14.33*
===========
Net asset value & offering price per share -
Class B ($57,483/4,282).................................................. $13.42
===========
Composition of net assets
Capital paid in........................................................... $ 188,495
Undistributed net investment income....................................... 795
Accumulated net realized gain............................................. 2,865
Net unrealized appreciation (depreciation) on:
Investments............................................................ 26,587
Foreign currency transactions.......................................... (6)
-----------
$ 218,736
===========
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS (UNAUDITED)
Six months ended April 30, 1995
(in thousands)
- -------------------------------------------------------------------------------------------
<S> <C>
Investment income
Dividends.................................................................... $ 2,242
Interest..................................................................... 354
-----------
Total investment income (net of nonrebatable
foreign taxes withheld at source which
amounted to $12)..................................................... 2,596
Expenses
Management fee.................................................. $ 502
Service fee..................................................... 234
Distribution fee - Class B...................................... 197
Transfer agent.................................................. 300
Bookkeeping fee................................................. 41
Trustees fees................................................... 9
Custodian fee................................................... 8
Audit fee....................................................... 21
Legal fee....................................................... 4
Registration fees............................................... 12
Reports to shareholders......................................... 4
Other........................................................... 10 1,342
------ -----------
Net investment income................................................ 1,254
-----------
Net realized and unrealized gain (loss)
on portfolio positions
Net realized gain (loss) on:
Investments................................................... 2,897
Foreign currency transactions................................. (4)
------
Net realized gain....................................................... 2,893
Net unrealized appreciation (depreciation)
during the period on:
Investments................................................... 9,388
Foreign currency transactions................................. (1)
------
Net unrealized gain..................................................... 9,387
-----------
Net gain............................................................. 12,280
-----------
Net increase in net assets from
operations................................................................. $ 13,534
===========
<FN>
* On sales of $50,000 or more the offering price is reduced.
</TABLE>
See notes to financial statements.
5
<PAGE>
FINANCIAL STATEMENTS - CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(unaudited)
Six months Year ended
ended April 30 October 31
-------------- ----------
1995 1994
-------------- ----------
<S> <C> <C>
Increase (decrease) in net assets
Operations
Net investment income........................................ $ 1,254 $ 1,094
Net realized gain............................................ 2,893 18,261
Net unrealized appreciation (depreciation)................... 9,387 (13,720)
-------- --------
Net increase from operations.......................... 13,534 5,635
-------- --------
Distributions
From net investment income - Class A......................... (790) (811)
From net realized gains - Class A............................ (13,715) (16,747)
From net investment income - Class B......................... (77) --
From net realized gains - Class B............................ (4,637) (4,174)
-------- --------
(5,685) (16,097)
-------- --------
Fund share transactions
Receipts for shares sold - Class A........................... 32,982 67,549
Value of distributions reinvested - Class A.................. 12,751 15,244
Cost of shares repurchased - Class A......................... (40,653) (79,333)
-------- --------
5,080 3,460
-------- --------
Receipts for shares sold - Class B........................... 13,436 37,440
Value of distributions reinvested - Class B.................. 4,517 3,963
Cost of shares repurchased - Class B......................... (12,325) (26,955)
-------- --------
5,628 14,448
-------- --------
Net increase from Fund share transactions............. 10,708 17,908
-------- --------
Total increase.............................. 5,023 1,811
Net assets
Beginning of period.......................................... 213,713 211,902
-------- --------
End of period (including undistributed net investment
income of $795 and $413, respectively)..................... $218,736 $213,713
======== ========
Number of Fund shares
Sold - Class A............................................... 2,583 4,866
Issued for distributions reinvested - Class A................ 1,075 1,120
Repurchased - Class A........................................ (3,170) (5,688)
-------- --------
488 298
-------- --------
Sold - Class B............................................... 1,057 2,708
Issued for distributions reinvested - Class B................ 382 292
Repurchased - Class B........................................ (975) (1,947)
-------- --------
464 1,053
-------- --------
Net increase in shares outstanding.................... 952 1,351
Outstanding at
Beginning of year........................................ 15,267 13,916
-------- --------
End of year.............................................. 16,219 15,267
-------- --------
</TABLE>
See notes to financial statements.
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
In the opinion of management of Colonial Growth Shares 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 Class A shares sold with a front-end sales charge and Class B shares
which 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. The following significant accounting
policies are consistently followed by the Fund in the preparation of its
financial statements and conform to generally accepted accounting principles.
- --------------------------------------------------------------------------------
SECURITY VALUATION AND TRANSACTIONS
Equity securities are valued at the last sale price or, in the case of
unlisted or listed securities, for which there were no sales during the day, at
current quoted bid prices.
Debt securities generally are valued by a pricing service based upon market
transactions for normal, institutional-size trading units of similar securities.
When management deems it appropriate, an over-the-counter or exchange bid
quotation is used.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Portfolio positions which cannot be valued as set forth above are valued at
fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased or sold.
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
- --------------------------------------------------------------------------------
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS
All income, expenses (other than the Class B distribution fee), realized
and unrealized gains (losses) are allocated to each class proportionately on a
daily basis for purposes of determining the net asset value of each class.
The per share data was calculated using the average shares outstanding
during the period. In addition, Class B net investment income per share data
reflects the distribution fee per share applicable to Class B shares only.
Class B 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 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 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.
- --------------------------------------------------------------------------------
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FOREIGN CURRENCY TRANSACTIONS
The Fund has adopted Statement of Position 93-4, Foreign Currency
Accounting and Financial Statement Presentation for Investment Companies.
Accordingly, net realized and unrealized gain (loss) on foreign currency
transactions includes the fluctuation in exchange rates on gains and losses
between trade and settlement dates on securities transactions, gains and losses
arising from the disposition of foreign currency, and currency gains and losses
between the accrual and payment dates on dividend and interest income and
foreign withholding taxes.
The Fund does not distinguish that portion of gains and losses on
investments which is due to changes in foreign exchange rates from that which is
due to changes in market prices of the investments. Such fluctuations are
included with the net realized and unrealized gains and losses from investments.
- --------------------------------------------------------------------------------
FORWARD CURRENCY CONTRACTS
The Fund may enter into forward currency contracts to purchase or sell
foreign currencies at predetermined exchange rates in connection with the
settlement of purchases and sales of securities. The Fund may also enter into
forward currency contracts to hedge certain other foreign currency denominated
assets. The contracts are used to minimize the exposure to foreign exchange
rate fluctuations during the period between trade and settlement date of the
contracts. All contracts are marked-to-market daily, resulting in unrealized
gains or losses which become realized at the time the forward currency contracts
are closed or mature. Realized and unrealized gains (losses) arising from such
transactions are included in net realized and unrealized gains (losses) on
foreign currency transactions. Forward currency contracts do not eliminate
fluctuations in the prices of the Fund's portfolio securities. While the
maximum potential loss from such contracts is the aggregate face value in U.S.
dollars at the time the contract was opened, the actual exposure is typically
limited to the change in value of the contract (in U.S. dollars) over the period
it remains open. Risks may also arise if counterparties fail to perform their
obligations under the contracts.
- --------------------------------------------------------------------------------
OTHER
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 the ex-date as the Fund becomes
aware of such) net of non-rebatable 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 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 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 0.60% annually of the Fund's average net
assets during the preceding twelve months. The fee is subject to a maximum
performance adjustment, determined monthly, of +/- 1/12 of 0.20% based on the
comparative experience of the Fund and the Standard & Poor's Index of 500 common
stocks during the preceding twelve months. For the six months ended April 30,
1995, the total fee included a downward performance adjustment of $120,889.
- --------------------------------------------------------------------------------
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
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 $24,141 on sales of the
Fund's Class A shares and received contingent deferred sales charges (CDSC) of
$76,911 on Class B share redemptions.
The Fund has adopted a 12b-1 plan which requires the payment of a
distribution fee to the Distributor equal to 0.75% annually of the average net
assets attributable to Class B shares. The plan also requires the payment of a
service fee to the Distributor as follows:
<TABLE>
<CAPTION>
Value of shares Annual
outstanding on the 20th of Fee
each month which were issued Rate
---------------------------- ------
<S> <C>
Prior to April 1, 1989....................... 0.15%
On or after April 1, 1989.................... 0.25%
</TABLE>
The CDSC and the fees received from the 12b-1 plan are used principally as
repayment to the Distributor for amounts paid by the Distributor to dealers who
sold such shares.
- --------------------------------------------------------------------------------
OTHER
The Fund pays no compensation to its officers, all of whom are employees of
the 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 $86,699,451 and
$101,663,284, respectively.
Unrealized appreciation (depreciation) at April 30, 1995, based on cost of
investments for federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation.................. $ 30,875,429
Gross unrealized depreciation.................. (4,433,742)
--------------
Net unrealized appreciation................. $ 26,441,687
==============
</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, 10,028,057 voted for the new
Management Agreement, 195,949 voted against and 400,223 abstained. Of the shares
of beneficial interest outstanding that abstained, 67,948 represented broker
non-votes.
- --------------------------------------------------------------------------------
9
<PAGE>
FINANCIAL HIGHLIGHTS (b)
<TABLE>
Selected data for a share of each class outstanding throughout each period are
as follows:
- --------------------------------------------------------------------------------
<CAPTION>
(UNAUDITED)
SIX MONTHS PERIOD ENDED
ENDED APRIL 30 YEAR ENDED OCTOBER 31 OCTOBER 31
------------------- --------------------------------------- ---------------------
1995 1994 1993 1992 (A)
------------------- ------------------ ------------------ ---------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B(C)
-------- -------- -------- ------- -------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning
of period............................... $ 14.020 $ 13.940 $ 15.240 $15.180 $ 13.830 $13.780 $ 14.240 $13.570
-------- -------- -------- ------- -------- ------- -------- -------
Income from investment
operations:
Net investment income (loss)............ 0.090 0.042 0.096 (0.008) 0.110 0.001 0.066 (0.002)
Net realized and
unrealized gain on investments.. 0.685 0.673 0.275 0.288 2.240 2.244 0.074 0.212
-------- -------- -------- ------- -------- ------- -------- -------
Total from investment
operations...................... 0.775 0.715 0.371 0.280 2.350 2.245 0.140 0.210
-------- -------- -------- ------- -------- ------- -------- -------
Less distributions declared
to shareholders:
From net investment income.............. (0.070) (0.020) (0.071) ---- (0.095) ---- (0.093) ----
From net realized gains................. (1.215) (1.215) (1.520) (1.520) (0.845) (0.845) (0.457) ----
-------- -------- -------- ------- -------- ------- -------- -------
Total distributions
declared to shareholders........ (1.285) (1.235) (1.591) (1.520) (0.940) (0.845) (0.550) ----
-------- -------- -------- ------- -------- ------- -------- -------
Net asset value - End of period.......... $ 13.510 $ 13.420 $ 14.020 $13.940 $ 15.240 $15.180 $ 13.830 $13.780
======== ======== ======== ======= ======== ======= ======== =======
Total return(d).......................... 6.80% (e) 6.33% (e) 2.78% 2.12% 17.79% 16.99% 1.02% (e) 1.55% (e)
======== ======== ======== ======= ======== ======= ======== =======
Ratios to average net assets
Expenses................................ 1.11% (f) 1.86% (f) 1.22% 1.97% 1.19% 1.94% 1.19% (f) 1.94% (f)
Net investment income................... 1.40% (f) 0.65% (f) 0.69% (0.06)% 0.64% (0.11)% 0.83% (f) 0.08% (f)
Portfolio turnover....................... 89% (f) 89% (f) 121% 121% 66% 66% 68% (f) 68% (f)
Net assets at end of period
(000)................................... $161,253 $ 57,483 $160,495 $53,218 $169,913 $41,989 $150,260 $26,364
<FN>
(a) The Fund changed its fiscal year end from March 31 to October 31 in
1992.
(b) Per share data was calculated using average shares outstanding during
the period.
(c) Class B shares were initially offered on June 8, 1992. Per share
amounts reflect activity from that date.
(d) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or CDSC.
(e) Not annualized.
(f) Annualized.
</TABLE>
10
<PAGE>
FINANCIAL HIGHLIGHTS (A) - CONTINUED
<TABLE>
Selected data for a share of each class outstanding throughout each period are
as follows:
- --------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED MARCH 31
----------------------------------
1992 1991 1990
-------- ------- --------
CLASS A CLASS A CLASS A
-------- ------- --------
<S> <C> <C> <C>
Net asset value - Beginning of period.............. $ 12.800 $ 12.010 $ 12.410
-------- -------- --------
Income from investment operations:
Net investment income ............................ 0.168 0.221 0.192
Net realized and unrealized gain on investments... 1.502 1.059 1.718
-------- -------- --------
Total from investment operations.................. 1.670 1.280 1.910
-------- -------- --------
Less distributions declared to shareholders:
From net investment income........................ (0.183) (0.210) (0.220)
From net realized gains........................... (0.047) (0.280) (2.090)
-------- -------- --------
Total distributions declared to shareholders...... (0.230) (0.490) (2.310)
-------- -------- --------
Net asset value - End of period.................... $ 14.240 $ 12.800 $ 12.010
======== ======== ========
Total return(b).................................... 13.24% 10.95% 15.57%
======== ======== ========
Ratios to average net assets
Expenses.......................................... 1.18% 1.03% 1.07%
Net investment income............................. 1.24% 1.94% 1.45%
Portfolio turnover................................. 38% 37% 88%
Net assets at end of period (000).................. $149,341 $134,055 $129,244
<FN>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or CDSC.
</TABLE>
11
<PAGE>
TRUSTEES
ROBERT J. BIRNBAUM
Trustee (formerly Special Counsel, Dechert, Price & Rhoads;
President and Chief Operating Officer, New York Stock
Exchange, Inc.)
TOM BLEASDALE
Trustee (formerly Chairman of the Board and Chief Executive
Officer, Shore Bank & Trust Company)
LORA S. COLLINS
Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
JAMES E. GRINNELL
Private Investor
WILLIAM D. IRELAND, JR.
Trustee
RICHARD W. LOWRY
Private Investor
WILLIAM E. MAYER
Dean, College of Business and Management, University of Maryland
(formerly Dean, Simon Graduate School of Business, University of
Rochester; Chairman and Chief Executive Officer, C.S. First
Boston Merchant Bank; and President and Chief Executive Officer,
The First Boston Corporation)
JOHN A. MCNEICE, JR.
Chairman of the Board and Director, The Colonial Group, Inc. and
Colonial Management Associates, Inc. (formerly Chief Executive
Officer, The Colonial Group, Inc. and Colonial Management
Associates, Inc.)
JAMES L. MOODY, JR.
Chairman of the Board, Hannaford Bros. Co. (formerly Chief
Executive Officer, Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
GEORGE L. SHINN
Financial Consultant (formerly Chairman, Chief Executive Officer
and Consultant, The First Boston Corporation)
ROBERT L. SULLIVAN
Management Consultant
SINCLAIR WEEKS, JR.
Chairman of the Board, Reed & Barton Corporation
12
<PAGE>
- ---------------------------------------------------
[GRAPHIC] ABOUT OUR COVER...
The symbol on the cover of this Report represents the Fund's primary
investment focus on common stocks.
- ---------------------------------------------------
Colonial Growth Shares 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.
13
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