<PAGE>
[COLONIAL LOGO]
COLONIAL STRATEGIC
BALANCED FUND
SEMIANNUAL REPORT
APRIL 30, 1996
<PAGE>
COLONIAL STRATEGIC BALANCED FUND HIGHLIGHTS
NOVEMBER 1, 1995 - APRIL 30, 1996
INVESTMENT OBJECTIVE: Colonial Strategic Balanced Fund seeks current income and
long-term growth, consistent with prudent risk, by diversifying investments
primarily in U.S. and foreign equity and debt securities.
THE FUND IS DESIGNED TO OFFER:
- Long-term growth potential
- Attractive quarterly income
- Strategic diversification
PORTFOLIO MANAGER COMMENTARY: "It would have been logical to expect the volatile
interest rates of the last six months to have had a negative effect on a
traditional balanced fund, one composed of U.S. Government securities and large
capitalization stocks. But this Fund is not a traditional balanced fund, so our
diversification in the high yield and international bond markets, as well as in
small capitalization stocks, allowed us to improve our relative investment
performance."
COLONIAL STRATEGIC BALANCED FUND PERFORMANCE
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS D
<S> <C> <C> <C>
Inception date 9/19/94 9/19/94 9/19/94
Distributions declared per share* $ 0.191 $ 0.168 $ 0.165
Total return, assuming reinvestment
of all distributions and no sales charge
or contingent deferred sales charge
(CDSC) -- 6 months 9.80% 9.52% 9.49%
Net asset value per share at 4/30/96 $ 12.59 $ 12.57 $ 12.58
</TABLE>
* Distributions declared November 1995 - April 1996.
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS - EQUITY** COUNTRY BREAKDOWN - BONDS**
(as of 4/30/96) (as of 4/30/96)
................................... ...................................
<S> <C> <C> <C>
1. CompUSA, Inc. ........... 1.01% 1. United States ............ 7.5%
2. Sun Microsystems, Inc. .. 0.93% 2. Denmark .................. 4.3%
3. JLG Industries, Inc. .... 0.91% 3. Australia ................ 2.7%
4. CIGNA Corp. ............. 0.90% 4. Spain .................... 2.0%
5. Hewlett-Packard Co. ..... 0.84% 5. Norway ................... 0.9%
</TABLE>
** Since the Fund is actively managed, portfolio holdings and country breakdown
will change.
2
<PAGE>
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
I am pleased to present your Fund's semiannual report for the period ended April
30, 1996. First, however, I would like to extend my thanks to President John A.
McNeice, Jr., who has retired after a career with Colonial that spanned 40
years. We look forward to his continued involvement on the executive committee
of the board of directors at our parent company, Liberty Financial Companies,
Inc.
In my new position, I am directing Colonial's focus on the delivery of superior
investment performance over the long term. To achieve this mission, we will
continue to seek the optimal combination of talented people and effective
investment disciplines.
The receipt of your semiannual report is a good time to reflect on market
conditions and the performance of your Fund during the past 6 months. Falling
interest rates and minimal inflation helped the economy grow at a comfortable
pace throughout 1995 and created a positive environment for fixed income
investments. After a difficult 1994, investors who stayed the course during 1995
were amply rewarded.
While there may be some current market volatility, we expect slow growth and low
inflation to continue and believe that reductions in interest rates may take
place later in the year. In the following pages you'll find detailed information
on your Fund's performance as well as an in-depth discussion with the portfolio
manager.
With over 12 years of service at Colonial and more than 25 years in the
industry, I am enthusiastic about -- and dedicated to achieving -- Colonial's
mission of providing you with competitive investment returns. In my new role, I
look forward to communicating with you regarding your Colonial investment. We
appreciate the opportunity to help you meet your investment goals.
Respectfully,
/s/ Harold W. Cogger
Harold W. Cogger
President
June 14, 1996
Because market conditions change frequently, there can be no assurance that the
trends described here will continue, come to pass, or affect Fund performance.
3
<PAGE>
PORTFOLIO MANAGEMENT REPORT
CARL ERICSON AND JAMES HAYNIE are co-portfolio managers of Colonial Strategic
Balanced Fund. Mr. Ericson is a Senior Vice President and Mr. Haynie is a Vice
President of Colonial Management Associates, Inc.
Q. CARL, WOULD YOU PLEASE DESCRIBE THE GLOBAL ECONOMIC ENVIRONMENT DURING THIS
SIX-MONTH PERIOD?
C.E. The U.S. economy continues to perform favorably despite having entered a
period of increased volatility. It is our view that the most recent economic
indicators show a rebound from the softness of late 1995, rather than an
acceleration in the economy. Therefore, we expect stable economic growth without
any significant increase in inflation.
Europe's economic recovery continues to lag that of the United States. Further
interest rate cuts would continue to accelerate the European recovery and build
on the improving performance of many of Europe's fixed-income and equity
securities.
Q. JIM, HOW DID THE FUND'S SIX-MONTH PERFORMANCE COMPARE TO THE PERFORMANCE OF
INDEXES AGAINST WHICH THE FUND IS COMPARED?
J.H. We use two indexes that track the performance of U.S. securities -- the
Standard & Poor's 500 Index and the Lehman Brothers Government/ Corporate Index.
Both are unmanaged, and neither tracks the foreign or short-term securities in
which your Fund can invest. The Fund outperformed the Lehman Brothers Index and
underperformed the Standard & Poor's Index for the six month period ended April
30, 1996. Typically, a balanced fund would be expected to provide total returns
somewhat greater than a bond index and somewhat less than a stock index. The
Fund's strategy performed as it was designed, by shielding investors from the
downturn in U.S. government markets and successfully investing in the stronger
domestic equity market and other domestic and international sectors and markets.
Q. HOW DID THE EQUITY MARKETS IN THE U.S. AND OTHER COUNTRIES PERFORM?
J.H. Small capitalization stocks continued to drive the momentum in the U.S.
equity market, so we increased our exposure to small capitalization stocks
during the last quarter. In general, international equity markets continued to
offer good but not spectacular opportunities. Our largest exposure was in
Japanese stocks, which have demonstrated average performance.
Q. WERE THERE ANY SECTORS OF THE EQUITY MARKETS OR INDIVIDUAL STOCKS THAT WERE
ESPECIALLY VALUABLE TO THE FUND?
J.H. The Fund continued to benefit from technology stock investments, as high
growth, technology-related stocks dominated the stock market rally. We continued
to hold significant positions in this sector during the period.
4
<PAGE>
The Fund benefited from its large position in JLG Industries, a manufacturer of
portable hydraulic lifts, a product used primarily for gaining access to sites
in and around construction projects. We sold this position at a considerable
profit after the end of this reporting period.
Q. DID THE FACT THAT THE FUND INVESTS IN DIFFERENT SECTORS HELP ITS PERFORMANCE
DURING THIS PERIOD?
C.E. Yes. For example, two sectors of the bond market in which the Fund invests
contributed to the Fund's performance. High yield corporate bonds continued to
represent the majority position in our domestic fixed-income mix. Relatively
higher coupons and lower credit quality help insulate these securities from many
of the gyrations of the government market. We have been focusing on certain
noncyclical industries within this sector, including telecommunications, paging
and cellular.
On the international front, European bond markets continued to exhibit positive
characteristics. And, we continued to favor investments in these countries.
During the six month period, we increased our holdings in Spain and Norway while
reducing our exposure to the United Kingdom and Finland. After closely
monitoring our position in South African debt, we eliminated our South African
bond holdings in April. While South Africa had been making steady progress,
significant uncertainty regarding the new government's strategy for managing
political and other risks during democratization has led to wariness on the part
of overseas investors.
Q. HOW DID U.S. GOVERNMENT BONDS PERFORM DURING THIS PERIOD?
C.E. While these securities enjoyed strong price increases through the end of
1995, the sector significantly underperformed in the first quarter of 1996,
producing a negative total return. This volatility demonstrated investors'
increased sensitivity to every economic indicator, particularly those that
seemed to signal accelerating inflation. We expect continuing fluctuation in
this sector and are dealing with it by minimizing exposure to U.S. Treasury
securities relative to our fixed-income allocation.
Q. WHAT'S YOUR OUTLOOK AND STRATEGY FOR DEALING WITH THE MARKETS IN THE FUTURE?
J.H. We believe the U.S. stock market is close to fully valued, and that
remaining market momentum will be fueled by the small capitalization sector,
albeit at a slower pace. Our equity strategy is based on finding attractive
investment opportunities in this market sector and a belief that a bias towards
this sector will yield strong relative performance. Our fixed-income strategy is
based on an optimistic outlook for continuing low inflation as well as on an
expectation for continuing volatility in the U.S. Government sector. As a
result, we will continue to prefer "alternative" sectors --high yield and
international investments.
5
<PAGE>
COLONIAL STRATEGIC BALANCED FUND'S INVESTMENT PERFORMANCE VS.
THE STANDARD & POOR'S 500 INDEX AND THE
LEHMAN BROTHERS GOVERNMENT/CORPORATE INDEX
Change in Value of $10,000 from 9/94 - 4/96
CLASS A SHARES BASED ON NAV AND MOP
Average Annual Total Returns*
Inception 9/19/94 NAV MOP
1 year 25.51% 19.55%
Since Inception 18.00% 14.32%
S&P 500 $14,702
$13,378
MOP $12,742
LEHMAN $11,861
<TABLE>
<CAPTION>
NAV MOP S&P 500 LEHMAN
<S> <C> <C> <C> <C>
SEP 30, 94 10000 9525 10000 10000
OCT 31, 94 10030.36 9553.92 10224.34 9977.06
NOV 30, 94 9716.6 9255.06 9852.45 9960.68
DEC 31, 94 9800.59 9335.07 9998.32 10043.05
JAN 31, 95 9780.2 9315.64 10257.43 10256.05
FEB 28, 95 10126.94 9645.91 10656.79 10551.72
MAR 31, 95 10395.87 9902.06 10970.75 10637.82
APR 30, 95 10611.38 10107.34 11293.56 10817.31
MAY 31, 95 10898.73 10381.04 11744.26 11327.18
JUN 30, 95 11252.88 10718.37 12016.57 11429.21
JUL 31, 95 11821.73 11260.2 12414.89 11378.71
AUG 31, 95 11935.5 11368.56 12445.88 11562.07
SEP 30, 95 12194.07 11614.85 12970.82 11699.11
OCT 31, 95 12183.61 11604.89 12924.48 11851.34
NOV 30, 95 12455.52 11863.88 13491.2 12078.2
DEC 31, 95 12485.76 11892.69 13751.08 12277.2
JAN 31, 96 12707.4 12103.8 14218.56 12356.44
FEB 29, 96 13013.48 12395.34 14350.84 12062.85
MAR 31, 96 13048.35 12428.55 14489.01 11960.07
APR 30, 96 13377.75 12742.3 14702.43 11860.87
</TABLE>
CLASS B SHARES BASED ON NAV AND MAXIMUM CDSC
Average Annual Total Returns*
Inception 9/19/94 NAV MOP
1 year 25.04% 20.04%
Since Inception 17.49% 15.09%
S&P 500 $14,702
$13,222
W/CDSC $12,892
LEHMAN $11,861
<TABLE>
<CAPTION>
NAV MOP S&P 500 LEHMAN
<S> <C> <C> <C> <C>
SEP 30, 94 10000 10000 10000 10000
OCT 31, 94 10030.4 10030.4 10224.34 9977.06
NOV 30, 94 9716.31 9716.31 9852.45 9960.68
DEC 31, 94 9791.9 9791.9 9998.32 10043.05
JAN 31, 95 9771.5 9771.5 10257.43 10256.05
FEB 28, 95 10118.3 10118.3 10656.79 10551.72
MAR 31, 95 10376.09 10376.09 10970.75 10637.82
APR 30, 95 10601.66 10601.66 11293.56 10817.31
MAY 31, 95 10878.49 10878.49 11744.26 11327.18
JUN 30, 95 11220.61 11220.61 12016.57 11429.21
JUL 31, 95 11798.68 11798.68 12414.89 11378.71
AUG 31, 95 11901.9 11901.9 12445.88 11562.07
SEP 30, 95 12147.06 12147.06 12970.82 11699.11
OCT 31, 95 12136.64 12136.64 12924.48 11851.34
NOV 30, 95 12407.73 12407.73 13491.2 12078.2
DEC 31, 95 12424.84 12424.84 13751.08 12277.2
JAN 31, 96 12645.59 12645.59 14218.56 12356.44
FEB 29, 96 12939.92 12939.92 14350.84 12062.85
MAR 31, 96 12974.41 12974.41 14489.01 11960.07
APR 30, 96 13291.64 12891.64 14702.43 11860.87
</TABLE>
CLASS D SHARES BASED ON NAV AND MOP W/CDSC
Average Annual Total Returns*
Inception 9/19/94 NAV MOP
1 year 25.00% 22.75%
Since Inception 17.44% 16.67%
S&P 500 $14,702
$13,293
MOP w/CDSC $13,160
LEHMAN $11,861
<TABLE>
<CAPTION>
NAV MOP S&P 500 LEHMAN
<S> <C> <C> <C> <C>
SEP 30, 94 10000 9900 10000 10000
OCT 31, 94 10030.4 9930.09 10224.34 9977.06
NOV 30, 94 9716.31 9019.15 9852.45 9960.68
DEC 31, 94 9798.92 9700.93 9998.32 10043.05
JAN 31, 95 9768.33 9670.64 10257.43 10256.05
FEB 28, 95 10115.01 10013.86 10656.79 10551.72
MAR 31, 95 10372.3 10268.58 10970.75 10607.82
APR 30, 95 10597.79 10491.81 11293.56 10817.31
MAY 31, 95 10874.52 10765.77 11744.26 11327.18
JUN 30, 95 11226.11 11113.85 12016.57 11429.21
JUL 31, 95 11793.61 11675.67 12414.89 11378.71
AUG 31, 95 11896.79 11777.82 12445.88 11562.07
SEP 30, 95 12151.65 12030.13 12970.82 11699.11
OCT 31, 95 12141.23 12019.81 12924.48 11851.34
NOV 30, 95 12401.77 12277.75 13491.2 12078.2
DEC 31, 95 12428.56 12304.28 13751.08 12277.2
JAN 31, 96 12649.19 12522.69 14218.56 12356.44
FEB 29, 96 12943.35 12813.92 14350.84 12062.85
MAR 31, 96 12965.31 12835.66 14489.01 11960.07
APR 30, 96 13292.88 13159.95 14702.43 11860.87
</TABLE>
The Standard & Poor's 500 Index is an unmanaged index that tracks the
performance of U.S. stock market securities. The Lehman Brothers
Government/Corporate Index is an unmanaged index that tracks the performance of
U.S. Government and U.S. Corporate bonds.
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). Maximum
offering price (MOP) return includes the maximum sales charge of 4.75% for
Class A, 5% for Class B, and 1% for Class D. The CDSC returns reflect charges
of: 5% for one year, and 4% since inception for Class B and 1% for one year for
Class D shares.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
* Average annual total returns are as of 3/31/96, the most recent quarter end.
6
<PAGE>
INVESTMENT PORTFOLIO
APRIL 30, 1996 (UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCKS - 57.1% COUNTRY SHARES VALUE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSTRUCTION - 1.1%
BUILDING CONSTRUCTION - 0.9%
Continental Homes Holding Corp. 7 $ 160
Pulte Corp. 11 289
-------
449
-------
HEAVY CONSTRUCTION - NON BUILDING CONSTRUCTION - 0.2%
Yondenko Corp. Ja 9 88
-------
- -------------------------------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 10.0%
DEPOSITORY INSTITUTIONS - 3.6%
Bank of Boston Corp. 5 242
Bank of Montreal Ca 4 96
Bank of New York Co., Inc. 4 179
BayBanks, Inc. 2 210
Citicorp 5 378
Comerica, Inc. 1 52
HSBC Holdings PLC HK 6 84
Kredietbank NV Be (a) 57
National Westminster Bank PLC UK 9 78
Norwest Corp. 4 133
TCF Financial Corp. 6 219
-------
1,728
-------
HOLDING & OTHER INVESTMENT COMPANIES - 0.1%
First Australia Fund, Inc. Au 3 24
First Phillipine Fund, Inc. Ph 2 32
-------
56
-------
INSURANCE CARRIERS - 3.5%
Allstate Corp. 3 108
American Bankers Insurance Group, Inc. 3 119
CIGNA Corp. 4 431
Fremont General Corp. 4 107
Life Re Corp. 3 93
Loews Corp. 5 351
Maxicare Health Plans, Inc. (b) 4 82
Pacificare Health Systems, Inc. (b) 1 109
Protective Life Corp. (b) 3 111
US Facilities Corp. 8 147
-------
1,658
-------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/April 30, 1996
- ---------------------------------------------------------------------------------------------------------
COMMON STOCKS - CONT. COUNTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCE, INSURANCE & REAL ESTATE - CONT.
NONDEPOSITORY CREDIT INSTITUTIONS - 1.9%
Aplus Co. Ltd. Ja 42 $ 255
Green Tree Financial Corp. 10 338
The Money Store, Inc. 13 337
-------
930
-------
SECURITY BROKERS & DEALERS - 0.9%
Alex Brown, Inc. 2 124
Morgan Stanley Group, Inc. 6 302
-------
426
-------
- ---------------------------------------------------------------------------------------------------------
MANUFACTURING - 31.5%
APPAREL - 0.5%
Nautica Enterprises, Inc. (b) 4 195
Norton McNaughton, Inc. (b) 5 49
-------
244
-------
CHEMICALS & ALLIED PRODUCTS - 3.2%
BASF AG G 1 163
Bristol-Myers Squibb Co. 2 165
DSM NV Ne 1 71
E.I. DuPont De Nemours & Co. 1 113
Eli Lilly & Co. 2 118
Johnson & Johnson 4 331
Merck KGAA (b) G 4 151
Norsk Hydro A.S. ADR No 2 69
Union Carbide Corp. 8 346
-------
1,527
-------
ELECTRONIC & ELECTRICAL EQUIPMENT - 3.9%
Aspect Telecommunications Corp. (b) 4 230
Comverse Technology, Inc. (b) 4 98
Dovatron International, Inc. (b) 2 76
HADCO Corp. (b) 7 213
Harman International Industries, Inc. 2 104
Haw Par Brothers International Ltd. Si 20 51
Hitachi Maxell Ja 10 215
International Rectifier Corp. (b) 8 176
Komag, Inc. (b) 6 201
Motorola, Inc. 2 135
Park Electrochemical Corp. 4 90
Philips Electronics NV Ne 3 113
Sanmina Corp. (b) 5 170
-------
1,872
-------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/April 30, 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FABRICATED METAL - 0.9%
Buderus AG G (a) $ 73
Bunka Shutter Co. Ltd. Ja 20 152
GFI Industries SA Fr 1 180
Oriental Holdings Berhad Ma 5 30
-------
435
-------
FOOD & KINDRED PRODUCTS - 2.3%
Archer Daniels Midland Co. 13 248
Hudson Foods, Inc. 9 113
IBP, Inc. 7 187
PepsiCo, Inc. 2 127
Phillip Morris Co., Inc. 3 243
Smithfield Foods, Inc. (b) 2 71
Superfos AS De 1 93
-------
1,082
-------
FURNITURE & FIXTURES - 0.5%
Hillenbrand Industries, Inc. 7 266
-------
LEATHER - 0.3%
Wolverine World Wide, Inc. 5 162
-------
LUMBER & WOOD PRODUCTS - 0.2%
Oakwood Homes Corp. 3 116
-------
MACHINERY & COMPUTER EQUIPMENT - 8.9%
Amatsuji Steel Ball Manufacturing Ja 14 267
Applied Materials, Inc. (b) 5 200
Bay Networks, Inc. (b) 4 118
Brunswick Corp. 4 77
Caterpillar, Inc. 3 160
Deere & Co. 3 105
Electroglas, Inc. (b) 4 78
EMC Corp. (b) 7 135
Exabyte Corp. (b) 3 53
Fujitsu Ltd. Ja 4 41
Gateway 2000, Inc. (b) 5 174
Hewlett-Packard Co. 4 402
Hitachi Ltd. Ja 14 151
International Business Machines Corp. 3 366
JLG Industries, Inc. 8 436
Lam Research Corp. (b) 3 101
Mylex Corp. (b) 8 195
NACCO Industries, Inc. 1 51
Proteon, Inc. (b) 9 52
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/April 30, 1996
- ---------------------------------------------------------------------------------------------------------
COMMON STOCKS - CONT. COUNTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MANUFACTURING - CONT.
MACHINERY & COMPUTER EQUIPMENT - cont.
S3, Inc. (b) 5 $ 71
Seagate Technology, Inc. (b) 7 394
Silicon Graphics, Inc. (b) 3 89
Sun Microsystems, Inc. (b) 8 445
Toro Co. 3 96
-------
4,257
-------
MEASURING & ANALYZING INSTRUMENTS - 2.2%
Bio-Rad Laboratories, Inc., Class A (b) 4 195
Credence Systems Corp. (b) 12 260
Esterline Technologies Corp. (b) 6 127
Fuji Photo Film Co. Ltd. Ja 5 155
Medtronic, Inc. 5 250
Quickturn Design Systems, Inc. (b) 5 68
-------
1,055
-------
MISCELLANEOUS MANUFACTURING - 0.5%
Callaway Golf Co. 9 251
-------
PAPER PRODUCTS - 1.7%
ACX Technologies, Inc. (b) 8 155
Longview Fibre Co. 10 176
Paragon Trade Brands, Inc. (b) 12 276
SCA Laakirchen AG Au (a) 141
Saint Louis Bouchon Fr (a) 87
-------
835
-------
PETROLEUM REFINING - 1.5%
British Petroleum Co. PLC ADR UK 1 120
Exxon Corp. 3 255
Lyondell Petrochemical Co. 9 261
Phillips Petroleum Co. 3 104
-------
740
-------
PRIMARY METAL - 1.7%
Acerinox SA Sp 3 339
Alcan Aluminum Ltd. 5 143
British Steel PLC UK 29 85
Texas Industries, Inc. 2 134
Titan Wheel International, Inc. 8 133
-------
834
-------
PRIMARY SMELTING - 0.3%
Phelps Dodge Corp. 2 125
-------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/April 30, 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RUBBER & PLASTIC - 0.3%
Continental AG G 8 $ 128
-------
STONE, CLAY, GLASS & CONCRETE - 0.6%
Global Industrial Technologies, Inc. (b) 8 147
Owens-Corning Fiberglas Corp. (b) 3 121
Vitro S.A. (c) Mx 12 27
-------
295
-------
TRANSPORTATION EQUIPMENT - 2.0%
Alvis PLC UK 30 76
Borg-Warner Automotive, Inc. 6 214
Coachmen Industries, Inc. 4 106
Fleetwood Enterprises, Inc. 3 89
Ford Motor Co. 6 215
Honda Motor Co. Ltd. Ja 2 46
Strattec Security Corp. (b) (a) 9
Varlen Corp. 3 83
Volvo AB ADR Sw 5 114
-------
952
-------
- ---------------------------------------------------------------------------------------------------------
MINING & ENERGY - 0.7%
CRUDE PETROLEUM & NATURAL GAS - 0.5%
Occidental Petroleum Corp. 9 219
-------
NONMETALLIC, EXCEPT FUELS - 0.2%
Potash Corp. of Saskatchewan, Inc. 1 85
-------
- ---------------------------------------------------------------------------------------------------------
RETAIL TRADE - 4.7%
APPAREL & ACCESSORY STORES - 0.4%
Ross Stores, Inc. 5 173
-------
AUTO DEALERS & GAS STATIONS - 0.1%
Aichi Toyota Motor, Inc. Ja 4 67
-------
FOOD STORES - 1.2%
General Nutrition Companies, Inc. (b) 14 273
Safeway, Inc. (b) 9 317
-------
590
-------
GENERAL MERCHANDISE STORES - 1.3%
Dollar General Corp. 3 82
Federated Department Stores, Inc. (b) 6 197
Jardine Strategic Holdings Ltd. Si 22 72
Sears Roebuck & Co. 3 150
Waban, Inc. (b) 6 142
-------
643
-------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/April 30, 1996
- ---------------------------------------------------------------------------------------------------------
COMMON STOCKS - CONT. COUNTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RETAIL TRADE _ CONT.
HOME FURNISHINGS & EQUIPMENT - 1.3%
Circuit City Stores, Inc. 4 $ 130
CompUSA, Inc. (b) 14 485
--------
615
--------
MISCELLANEOUS RETAIL - 0.4%
Blair Corp. 2 39
Imasco Ltd. Ca 7 134
--------
173
--------
- ---------------------------------------------------------------------------------------------------------
SERVICES - 3.5%
AMUSEMENT & RECREATION - 0.3%
Grand Casinos, Inc. (b) 4 121
--------
BUSINESS SERVICES - 1.3%
Computer Associates International, Inc. 2 165
HBO & Co. 2 226
Manpower, Inc. 3 100
Norrell Corp. 4 136
--------
627
--------
ENGINEERING, ACCOUNTING, RESEARCH & MANAGEMENT - 0.2%
International-Muller NV Ne 1 74
--------
HEALTH SERVICES - 1.1%
Integrated Health Services, Inc. 3 83
Lincare Holdings, Inc. (b) 5 194
OrNda HealthCorp. (b) 6 165
Rotech Medical Corp. (b) 3 104
--------
546
--------
HOTELS, CAMPS & LODGING - 0.6%
Hospitality Franchise Systems, Inc. (b) 6 308
--------
- ---------------------------------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 3.4%
AIR TRANSPORTATION - 1.0%
British Airways PLC ADR 1 78
Comair Holdings, Inc. 6 222
Lufthansa AG G 1 79
Mesa Airlines, Inc. (b) 8 102
--------
481
--------
COMMUNICATIONS - 0.4%
360 Communications Co. (b) 1 18
Southwestern Bell Corp. 2 115
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/April 30, 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Telefonos de Mexico SA ADR 1 $ 37
---------
170
---------
ELECTRIC SERVICES - 1.0%
Allegheny Power Systems, Inc. 4 102
Duke Power Co. 2 94
Unicom Corp. 10 275
---------
471
---------
GAS SERVICES - 0.7%
MCN Corp. 10 246
NICOR, Inc. 3 78
---------
324
---------
SANITARY SERVICES - 0.2%
Yorkshire Water PLC UK 8 81
---------
WATER TRANSPORTATION - 0.1%
DFDS AS De (a) 55
---------
- --------------------------------------------------------------------------------------------------------------
WHOLESALE TRADE - 2.2%
DURABLE GOODS - 2.1%
Arrow Electronics, Inc. (b) 2 100
Beers NV Ne 1 85
Commercial Metals Co. 9 282
Pioneer Standard Electronics, Inc. 8 122
Shelter Components Corp. 2 23
Software Spectrum, Inc. (b) 4 82
Wyle Electronics Co. 7 293
---------
987
---------
NONDURABLE GOODS - 0.1%
Dalgety PLC UK 11 61
---------
TOTAL COMMON STOCKS (cost of $19,956) 27,382
---------
PREFERRED STOCK - 1.0%
- --------------------------------------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 1.0%
COMMUNICATIONS
Cablevision Systems Corp.,
11.125% PIK, Series L (c) 5 496
---------
TOTAL PREFERRED STOCK (cost of $507) 496
---------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/April 30, 1996
- -------------------------------------------------------------------------------------------------------
BONDS & NOTES - 32.2% PAR VALUE
- -------------------------------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - 13.8%
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONSTRUCTION - 0.2%
BUILDING CONSTRUCTION
USG Corp.,
9.250% 09/15/01 $ 100 $ 105
--------
- -------------------------------------------------------------------------------------------------------
MANUFACTURING - 3.3%
CHEMICALS - 0.9%
Agricultural Minerals Co., L.P.,
10.750% 09/30/03 100 107
N.L. Industries, Inc.,
11.750% 10/15/03 100 103
Revlon Worldwide Corp.,
(d) 03/15/98 250 203
--------
413
--------
ELECTRONIC & ELECTRICAL EQUIPMENT - 0.3%
Amphenol Corp.,
12.750% 12/15/02 100 111
--------
FOOD & KINDRED PRODUCTS - 0.6%
Doskocil Companies, Inc.,
9.750% 07/15/00 100 104
Van De Kamps, Inc.,
12.000% 09/15/05 150 160
--------
264
--------
LUMBER & WOOD PRODUCTS - 0.2%
Triangle Pacific Corp.,
10.500% 08/01/03 100 103
--------
MISCELLANEOUS MANUFACTURING - 0.5%
American Standard Co., (e)
(10.500% 06/01/98) 06/01/05 150 128
Coleman Holdings Co.,
Series B,
(d) 05/27/98 150 125
--------
253
--------
PAPER PRODUCTS - 0.2%
Repap Wisconsin, Inc.,
9.250% 02/01/02 100 96
--------
PRIMARY METAL - 0.2%
A.K. Steel Corp.,
10.750% 04/01/04 100 109
--------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/April 30, 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STONE, CLAY, GLASS & CONCRETE - 0.2%
Owens-Illinois, Inc.,
10.500% 06/15/02 $ 100 $ 104
---------
TRANSPORTATION EQUIPMENT - 0.2%
Aftermarket Technology Corp.,
Series B,
12.000% 08/01/04 100 107
---------
- --------------------------------------------------------------------------------------------------
MINING & ENERGY - 1.7%
CRUDE PETROLEUM & NATURAL GAS - 0.4%
Ferrellgas Finance Corp., L.P.,
10.000% 08/01/01 100 104
Triton Energy Corp.,
(d) 11/01/97 100 89
---------
193
---------
OIL & GAS EXTRACTION - 1.3%
Falcon Drilling Co., Inc.,
Series B,
9.750% 01/15/01 200 207
Gulf Canada Resources Ltd:
9.250% 01/15/04 100 100
9.625% 07/01/05 100 102
Rowan Companies, Inc.,
11.875% 12/01/01 100 108
Santa Fe Energy Resources, Inc.,
11.000% 05/15/04 100 107
---------
624
---------
- ---------------------------------------------------------------------------------------------
RETAIL TRADE - 0.7%
FOOD STORES - 0.5%
Dominick's Finer Foods, Inc.,
10.875% 05/01/05 150 157
Pathmark Stores, Inc.,
9.625% 05/01/03 100 96
---------
253
---------
MISCELLANEOUS RETAIL - 0.2%
Finlay Fine Jewelry Corp.,
10.625% 05/01/03 100 98
---------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/April 30, 1996
- ---------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - CONT. PAR VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
SERVICES - 2.6%
AMUSEMENT & RECREATION - 1.5%
Bally's Grand, Inc.,
Series B,
10.375% 12/15/03 $200 $207
Boyd Gaming Corp.,
10.750% 09/01/03 200 211
Falcon Holdings PLC,
11.000% 09/15/03 111 107
GNF Corp.,
10.625% 04/01/03 200 206
----
731
----
HEALTH SERVICES - 0.8%
GranCare, Inc.,
9.375% 09/15/05 150 146
OrNda Health Corp.,
11.375% 08/15/04 100 112
Tenet Healthcare Corp.,
10.125% 03/01/05 100 107
----
365
----
HOTELS, CAMPS & LODGING - 0.3%
HMH Properties, Inc.
9.500% 05/15/05 150 145
----
- ---------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 5.1%
AIR TRANSPORTATION - 0.4%
U.S. Air, Inc.,
10.375% 03/01/13 200 196
----
BROADCASTING - 1.2%
Allbritton Communications Co.,
11.500% 08/15/04 100 104
NWCG Holding Corp.,
(d) 06/15/99 175 128
SCI Television, Inc.,
11.000% 06/30/05 100 105
Sullivan Broadcasting, Inc.,
10.250% 12/15/05 100 97
Young Broadcasting Corp.,
11.750% 11/15/04 100 108
----
542
----
</TABLE>
18
<PAGE>
<TABLE>
Investment Portfolio/April 30, 1996
------------------------------------------------------------------------------------------------
<S> <C> <C>
CABLE - 1.5%
Bell Cablemedia PLC, (e)(f)
(11.950% 7/15/99) 07/15/04 $ 150 $ 110
Cablevision Systems Corp.,
10.750% 04/01/04 100 105
Comcast Corp.,
9.125% 10/15/06 250 246
Continental Cablevision, Inc.,
11.000% 06/01/07 100 112
Lenfest Communications, Inc.,
8.375% 11/01/05 100 94
Videotron Holding PLC,
(d) 08/15/05 100 66
--------
733
--------
COMMUNICATIONS - 0.2%
Brooks Fiber Properties (c)
(d) 03/01/06 200 110
--------
GAS SERVICES - 0.3%
California Energy Co., Inc.,
9.875% 06/30/03 150 151
--------
TELECOMMUNICATION - 1.5%
CAI Wireless Systems, Inc.,
12.250% 09/15/02 100 104
Cellular Communications Units, (g)
(d) 08/15/00 100 63
MFS Communications Company, Inc.,
stepped coupon, (e)
(9.375% 01/15/99) 01/15/04 200 152
Paging Network, Inc.,
10.125% 08/01/07 200 206
PanAmSat Corp.,
(d) 08/01/03 200 172
--------
697
--------
------------------------------------------------------------------------------------------------
WHOLESALE TRADE - 0.2%
NONDURABLE GOODS
S.D. Warren Co.,
12.000% 12/15/04 100 105
--------
TOTAL CORPORATE FIXED-INCOME
BONDS & NOTES (cost of $6,622) 6,608
--------
</TABLE>
17
<PAGE>
Investment Portfolio/April 30, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT &
AGENCY OBLIGATIONS - 10.9% CURRENCY PAR VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Argentina Par Brady,
5.250% 03/31/23 AR 250 $ 135
Kingdom of Denmark,
8.000% 05/15/03 DK 11,296 2,045
New South Wales Treasury,
12.000% 12/01/01 A$ 566 511
Norwegian Government Bond,
9.500% 10/31/02 NO 2,400 430
Republic of Poland (Brady),
Past Due Interest, PL
3.750% 10/27/14 500 386
Spanish Government Bond,
10.000% 02/28/05 SP 114,960 949
Western Australia Treasury,
12.000% 08/01/01 A$ 873 784
-------
TOTAL FOREIGN GOVERNMENT & AGENCY
OBLIGATIONS (cost of $5,045) 5,240
-------
U.S. GOVERNMENT OBLIGATIONS - 7.5%
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds,
8.000% 08/15/99 $ 2,610 2,741
U.S. Treasury Notes,
11.875% 11/15/03 660 862
-------
TOTAL U.S. GOVERNMENT OBLIGATIONS (cost of $3,638) 3,603
-------
TOTAL BONDS & NOTES (cost of $15,305) 15,451
-------
TOTAL INVESTMENTS - 90.3% (cost of $35,768) (h) 43,329
-------
SHORT-TERM OBLIGATIONS - 7.9%
Repurchase agreement with Bankers Trust Securities,
Corp. dated 4/30/96, due 5/01/96 at 5.320% collateralized
by U.S. Treasury notes with various maturities to 2001,
market value $3,871 (repurchase proceeds $3,789) 3,788 3,788
-------
FORWARD CURRENCY CONTRACTS - 0.1% (i) 35
- ------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - 1.7% 811
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $47,963
-------
</TABLE>
<PAGE>
Investment Portfolio/April 30, 1996
- --------------------------------------------------------------------------------
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) Rounds to less than one.
(b) Non-income producing.
(c) Security is exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At April 30,
1996, the value of these securities amounted to $606 or 1.3% of net
assets.
(d) Zero coupon bond.
(e) Currently zero coupon. Shown parenthetically is the interest rate to be
paid and the date the Fund will begin accruing this rate.
(f) This is a British security. Par amount is stated in U.S. dollars.
(g) Each unit consists of one bond and one warrant to purchase shares of
common stock.
(h) Cost for federal income tax purposes is the same.
(i) As of April 30, 1996, the Fund had entered into the following forward
currency exchange contracts:
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
Contracts In Exchange Settlement (Depreciation)
to Deliver For Date (U.S. $)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DK 4,217,144 USD 738,037 05/09/1996 $23
DK 3,005,730 USD 514,697 06/06/1996 4
DK 2,493,568 USD 424,600 06/11/1996 1
FF 1,569,158 USD 306,323 06/06/1996 3
FF 2,203,176 USD 429,469 06/07/1996 3
NK 1,426,736 USD 218,824 06/06/1996 1
NK 778,068 USD 118,608 06/11/1996 (a)
---
$35
---
</TABLE>
19
<PAGE>
Investment Portfolio/April 30, 1996
- --------------------------------------------------------------------------------
NOTES TO INVESTMENT PORTFOLIO - CONT.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Summary of Securities
by Country/Currency Country/Currency Value % of Total
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
United States $33,529 77.4
Denmark De/DK 2,193 5.1
Australia Au/A$ 1,460 3.3
Japan Ja 1,437 3.3
Spain Sp 1,288 3.0
Germany G 594 1.4
United Kingdom UK 501 1.1
Norway No 499 1.1
Poland PL 386 0.9
Netherlands Ne 343 0.8
France Fr 267 0.6
Canada Ca 230 0.5
Argentina AR 135 0.3
Singapore Si 123 0.3
Sweden Sw 114 0.3
Hong Kong HK 84 0.2
Belgium Be 57 0.1
Phillipines Ph 32 0.1
Malaysia Ma 30 0.1
Mexico Mx 27 0.1
------- -----
$43,329 100.0
------- -----
</TABLE>
Certain securities are listed by country of underlying exposure but may
trade predominantly on other exchanges.
Acronym Name
------- ----
ADR American Depository Receipt
PIK Payment-In-Kind
See notes to financial statements.
20
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
APRIL 30, 1996 (UNAUDITED)
(in thousands except for per share amounts and footnotes)
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
Investments at value (cost $35,768) $43,329
Short-term obligations 3,788
-------
47,117
Cash held in foreign banks (cost $2) $ 2
Unrealized appreciation on forward
currency contracts 35
Receivable for:
Interest 451
Fund shares sold 321
Dividends 34
Expense reimbursement due from Adviser 19
Foreign tax reclaims 3
Deferred organization expenses 49
Other 1 915
------- -------
Total Assets 48,032
LIABILITIES
Payable for:
Fund shares repurchased 58
Accrued:
Deferred Trustees fees 1
Other 10
-------
Total Liabilities 69
-------
NET ASSETS $47,963
-------
Net asset value & redemption price per share -
Class A ($17,318/1,376) $ 12.59
-------
Maximum offering price per share - Class A
($12.59/0.9525) $ 13.22(a)
-------
Net asset value & offering price per share -
Class B ($26,350/2,096) $ 12.57(b)
-------
Net asset value & redemption price per share -
Class D ($4,295/341) $ 12.58(b)
-------
Maximum offering price per share - Class D
($12.58/0.9900) $ 12.71
-------
</TABLE>
(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.
See notes to financial statements.
21
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED)
(in thousands)
<TABLE>
INVESTMENT INCOME
<S> <C> <C>
Dividends $ 854
Interest 164
-------
Total investment income (net of nonrebatable
foreign taxes withheld at source which
amounted to $6) 1,018
EXPENSES
Management fee $ 157
Service fee 56
Distribution fee - Class A 25
Distribution fee - Class B 87
Distribution fee - Class D 18
Transfer agent 71
Bookkeeping fee 13
Registration fee 14
Custodian fee 5
Audit fee 8
Trustees fee 4
Reports to shareholders 3
Legal fee 4
Amortization of deferred
organization expenses 7
Other 4
-------
476
Fees waived by the Adviser (44) 432
------- -------
Net Investment Income 586
-------
NET REALIZED & UNREALIZED GAIN ON PORTFOLIO POSITIONS
Net realized gain on:
Investments 881
Foreign currency transactions 67
-------
Net Realized Gain 948
Net unrealized appreciation during
the period on:
Investments 2,570
Foreign currency transactions 27
-------
Net Unrealized Appreciation 2,597
-------
Net Gain 3,545
-------
Net Increase in Net Assets from Operations $ 4,131
-------
</TABLE>
See notes to financial statements.
22
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(Unaudited)
Six months ended Year ended
(in thousands) April 30 October 31
-------- --------
INCREASE (DECREASE) IN NET ASSETS 1996 1995
Operations:
<S> <C> <C>
Net investment income $ 586 $ 784
Net realized gain 948 183
Net unrealized appreciation 2,597 5,072
-------- --------
Net Increase from Operations 4,131 6,039
Distributions:
From net investment income - Class A (202) (409)
From net realized gains - Class A (59) --
From net investment income - Class B (257) (382)
From net realized gains - Class B (69) --
From net investment income - Class D (49) (97)
From net realized gains - Class D (14) --
-------- --------
3,481 5,151
-------- --------
Fund Share Transactions:
Receipts for shares sold - Class A 5,343 8,580
Value of distributions reinvested - Class A 244 381
Cost of shares repurchased - Class A (5,975) (1,218)
-------- --------
(388) 7,743
-------- --------
Receipts for shares sold - Class B 11,314 10,846
Value of distributions reinvested - Class B 300 351
Cost of shares repurchased - Class B (5,300) (1,588)
-------- --------
6,314 9,609
-------- --------
Receipts for shares sold - Class D 1,089 1,359
Value of distributions reinvested - Class D 62 95
Cost of shares repurchased - Class D (1,389) (120)
-------- --------
(238) 1,334
-------- --------
Net Increase from Fund
Share Transactions 5,688 18,686
-------- --------
Total Increase 9,169 23,837
NET ASSETS
Beginning of period 38,794 14,957
-------- --------
End of period (including undistributed
net investment income of $178 and $27,
respectively) $ 47,963 $ 38,794
-------- --------
</TABLE>
Statement of Changes in Net Assets continued on following page.
See notes to financial statements.
23
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS - CONT.
<TABLE>
<CAPTION>
(Unaudited)
Six months ended Year ended
(in thousands) April 30 October 31
------ ------
NUMBER OF FUND SHARES 1996 1995
<S> <C> <C>
Sold - Class A 441 836
Issued for distributions reinvested - Class A 20 36
Repurchased - Class A (488) (114)
------ ------
(27) 758
------ ------
Sold - Class B 934 1,047
Issued for distributions reinvested - Class B 25 32
Repurchased - Class B (433) (149)
------ ------
526 930
------ ------
Sold - Class D 90 135
Issued for distributions reinvested - Class D 5 9
Repurchased - Class D (112) (11)
------ ------
(17) 133
------ ------
</TABLE>
See notes to financial statements.
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996 (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, 1996,
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
--------------------------------------------------------------------------
ORGANIZATION: The Fund is a 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's
objective is to seek current income and long term growth. 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 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 a
reduced front-end sales charge, a contingent deferred sales charge on
redemptions made within one year after purchase and a continuing
distribution fee.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. The following is a summary of significant accounting policies
that are consistently followed by the Fund in the preparation of its
financial statements.
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.
25
<PAGE>
Notes to Financial Statements/April 30, 1996
--------------------------------------------------------------------------
NOTE 2. ACCOUNTING POLICIES - CONT.
--------------------------------------------------------------------------
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, 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.
The Fund may trade securities on other than normal settlement terms. This
may increase the risk if the other party to the transaction fails to
deliver and causes the Fund to subsequently invest at less advantageous
prices.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: All
income, expenses (other than the Class A, Class B and Class D 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.
Class A, Class B and Class D per share data was calculated using the
average shares outstanding during the period. In addition, net investment
income per share data reflects 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.
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.
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. Reclassifications are made to
the Fund's capital accounts to reflect income and gains available for
distribution (or available capital loss carryforwards) under income tax
regulations.
26
<PAGE>
Notes to Financial Statements/April 30, 1996
--------------------------------------------------------------------------
FOREIGN CURRENCY CONTRACTS: 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
(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,
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 ex-date as the Fund
becomes aware of such), net of nonrebatable tax withholdings. Where a high
level of uncertainty as to collection exists, income on securities is
recorded net of all tax withholdings with any rebates recorded when
received.
The Fund's custodian takes possession through the federal book-entry
system of securities 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.
27
<PAGE>
Notes to Financial Statements/April 30, 1996
--------------------------------------------------------------------------
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 and
receives 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: Colonial Investment
Services, Inc. (the Distributor), an affiliate of the Adviser, is the
Fund's principal underwriter. For the six months ended April 30, 1996, the
Fund has been advised that the Distributor retained net underwriting
discounts of $15,278 on the sales of the Fund's Class A shares and
received contingent deferred sales charges (CDSC) of $16,457 and $209, 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, annually, 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 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 1.10% annually
of the Fund's average net assets.
OTHER: The Fund pays no compensation to its officers, all of whom are
employees of the Adviser.
The Fund's Trustees may participate in a deferred compensation plan which
may be terminated at any time. Obligations of the plan will be paid solely
out of the Fund's assets.
28
<PAGE>
Notes to Financial Statements/April 30, 1996
--------------------------------------------------------------------------
NOTE 4. PORTFOLIO INFORMATION
--------------------------------------------------------------------------
INVESTMENT ACTIVITY: During the six months ended April 30, 1996, purchases
and sales of investments, other than short-term obligations, were
$15,184,443 and $11,683,034, respectively, of which $2,812,683 and
$3,224,550, respectively, were U.S. government securities.
Unrealized appreciation (depreciation) at April 30, 1996, based on cost of
investments for both financial statement and federal income tax purposes
was:
<TABLE>
<S> <C>
Gross unrealized appreciation $8,231,236
Gross unrealized depreciation (669,908)
----------
Net unrealized appreciation $7,561,328
----------
</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 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 5. LINE OF CREDIT
--------------------------------------------------------------------------
The Fund may borrow up to 10% of its net assets under a line of credit for
temporary or emergency purposes. Any borrowings bear interest at one of
the following options determined at the inception of the loan: (1) federal
funds rate plus 1/2 of 1%, (2) the lending bank's base rate or (3) IBOR
offshore loan rate plus 1/2 of 1%. There were no borrowings under the line
of credit during the six months ended April 30, 1996.
NOTE 6. COMPOSITION OF NET ASSETS
--------------------------------------------------------------------------
At April 30, 1996, net assets consisted of:
<TABLE>
<S> <C>
Capital paid in $ 39,318
Undistributed net investment income 178
Accumulated net realized gain 878
Net unrealized appreciation on:
Investments 7,561
Foreign currency transactions 28
--------
$ 47,963
--------
</TABLE>
29
<PAGE>
FINANCIAL HIGHLIGHTS (b)
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
(Unaudited)
Six months ended
April 30
-----------------------------------------------------------
1996
Class A Class B Class D
-----------------------------------------------------------
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 11.650 $ 11.640 $ 11.650
----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income (a) 0.176 0.149 0.149
Net realized and
unrealized gain (loss) 0.955 0.949 0.946
----------- ----------- -----------
Total from Investment
Operations 1.131 1.098 1.095
----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment
income (0.151) (0.128) (0.125)
From net
realized gains (0.040) (0.040) (0.040)
----------- ----------- -----------
Total distributions declared
to shareholders (0.191) (0.168) (0.165)
----------- ----------- -----------
Net asset value -
End of period $ 12.590 $ 12.570 $ 12.580
----------- ----------- -----------
Total return (d)(e) 9.80%(f) 9.52%(f) 9.49%(f)
----------- ----------- -----------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.65%(g)(h) 2.10%(g)(h) 2.10%(g)(h)
Net investment income 2.91%(g)(h) 2.46%(g)(h) 2.46%(g)(h)
Fees waived or borne
by the Adviser 0.20%(h) 0.20%(h) 0.20%(h)
Portfolio turnover 59%(h) 59%(h) 59%(h)
Average commission rate (i) $ 0.030 $ 0.030 $ 0.030
Net assets at end
of period (000) $ 17,318 $ 26,350 $ 4,295
(a) Net of fees and expenses waived or borne by
the Adviser which amounted to: $ 0.012 $ 0.012 $ 0.012
</TABLE>
(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 no initial sales charge or
contingent deferred sales charge.
(e) Had the Adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
30
<PAGE>
<TABLE>
<CAPTION>
Year ended October 31 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>
$ 9.910 $ 9.900 $ 9.900 $ 10.000 $ 10.000 $ 10.000
- ----------- ----------- ----------- ----------- ----------- -----------
0.325 0.277 0.277 0.035 0.029 0.029
1.764 1.769 1.774 (0.125) (0.129) (0.129)
- ----------- ----------- ----------- ----------- ----------- -----------
2.089 2.046 2.051 (0.090) (0.100) (0.100)
- ----------- ----------- ----------- ----------- ----------- -----------
(0.349) (0.306) (0.301) -- -- --
-- -- -- -- -- --
- ----------- ----------- ----------- ----------- ----------- -----------
(0.349) (0.306) (0.301) -- -- --
- ----------- ----------- ----------- ----------- ----------- -----------
$ 11.650 $ 11.640 $ 11.650 $ 9.910 $ 9.900 $ 9.900
- ----------- ----------- ----------- ----------- ----------- -----------
21.47% 21.00% 21.04% (0.90)%(f) (1.00)%(f) (1.00)%(f)
- ----------- ----------- ----------- ----------- ----------- -----------
1.65%(g) 2.10%(g) 2.10%(g) 1.65% (h) 2.10%(h) 2.10%(h)
3.05%(g) 2.60%(g) 2.60%(g) 3.01% (h) 2.56%(h) 2.56%(h)
0.43% 0.43% 0.43% 0.35% (h) 0.35%(h) 0.35%(h)
49% 49% 49% 0% (h) 0%(h) 0%(h)
$ 16,346 $ 18,284 $ 4,164 $ 6,394 $ 6,332 $ 2,231
$ 0.042 $ 0.042 $ 0.042 $ 0.004 $ 0.004 $ 0.004
</TABLE>
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(h) Annualized.
(i) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
31
<PAGE>
SHAREHOLDER SERVICES
TO MAKE INVESTING EASIER
Colonial has one of the most extensive selections of shareholder services
available. Your financial adviser can help you arrange for any of these
services, or you can call Colonial directly at 1-800-345-6611.
AFFORDABLE ADDITIONAL INVESTMENTS: Add to your account with as little as $50;
$25 for an IRA account.
FREE EXCHANGES*: Exchange all or part of your account into the same share class
of another Colonial fund, by phone or mail, as your needs change over time.
EASY ACCESS TO YOUR MONEY*: Make withdrawals from your account by phone, by mail
or, for certain funds, by check.
ONE-YEAR REINSTATEMENT PRIVILEGE: If you need access to your money, but then
choose to return it to Colonial within one year, you can reinvest in any
Colonial fund of the same share class without any penalty or sales charge.
FUNDAMATIC: Make periodic investments as low as $50 from your checking account
to your Colonial account.
SYSTEMATIC WITHDRAWAL PLAN (SWP): Receive monthly, quarterly, or semiannual
payments via check or bank transmission. There is a $5,000 account value
required, but no minimum for the payment amount. The maximum annual withdrawal
is 12% of account balance at time SWP is established. SWPs by check are
processed on the 10th of each month.
AUTOMATED DOLLAR COST AVERAGING: Transfer money on a monthly basis from any
Colonial fund with a balance of $5,000 into the same share class of up to four
other Colonial funds. Minimum for each transfer is $100.
LOW COST IRAs: Choose from a broad range of retirement plans, including IRAs.
* Redemptions and exchanges are made at the next determined net asset value
after the request is received by Colonial. Proceeds may be more or less than
your original cost. The exchange privilege may be terminated at any time.
Investors who purchase Class B or Class D shares (for applicable funds), or $1
million or more of Class A shares, may be subject to a contingent deferred sales
charge.
32
<PAGE>
HOW TO REACH COLONIAL
BY PHONE OR BY MAIL
BY TELEPHONE
COLONIAL CUSTOMER CONNECTION - 1-800-345-6611
For 24-hour account information, call from your touch-tone phone. (Rotary
callers will be automatically connected to a representative during business
hours.) A recorded message will guide you through the menu:
For fund prices, dividends, and capital gains information ............press 1
For account information ..............................................press 2
To speak to a Colonial representative ................................press 3
For yield and total return information ...............................press 4
For duplicate statements or new supply of checks .....................press 5
To order duplicate tax forms and year-end statements .................press 6
(February through May)
To review your options at any time during your call ..................press *
To speak with a shareholder services representative about your account, call
Monday to Friday, 8:00 am to 8:00 pm ET, and Saturdays from February through
mid-April, 10:00 am to 2:00 pm ET.
COLONIAL TELEPHONE TRANSACTION DEPARTMENT - 1-800-422-3737
To purchase, exchange, or sell shares by telephone, call Monday to Friday, 9:00
am to 8:00 pm ET. Transactions received after the close of the New York Stock
Exchange will receive the next business day's closing price.
COLONIAL LITERATURE DEPARTMENT - 1-800-248-2828
To request literature on any Colonial fund, call Monday to Friday, 8:30 am to
6:30 pm ET.
BY MAIL
COLONIAL INVESTORS SERVICE CENTER, INC.
P.O. BOX 1722
BOSTON, MA 02105-1722
33
<PAGE>
SHAREHOLDER COMMUNICATIONS
TO KEEP YOU INFORMED
To make recordkeeping easy and keep you up-to-date on the performance of your
investments, you can expect to receive the following information about your
Colonial account:
TRANSACTION CONFIRMATIONS: Each time you make a purchase, sale, or exchange, you
receive a confirmation statement within just a few days.
QUARTERLY STATEMENTS: Every three months, if any transactions are made that
affect your share balance, this statement reports on your account activity
during the quarter (including any reinvestment of dividends). This statement
also provides year-to-date information.
COLONIAL SHAREHOLDER NEWS: Mailed with your quarterly account statements, this
newsletter highlights timely investment strategies, portfolio manager
commentary, and shareholder service updates.
TAX FORMS AND YEAR-END TAX GUIDE: Easy-to-use forms and timely information are
designed to make tax reporting simpler. (Usually mailed in January.)
AVERAGE COST BASIS STATEMENTS: If you sold or exchanged shares during the year,
this statement may help you calculate your gain/loss for tax purposes. (Usually
mailed in February.)
34
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Strategic Balanced Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
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.
This report has been prepared for shareholders of Colonial Strategic Balanced
Fund. 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.
35
<PAGE>
[COLONIAL LOGO]
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)
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 (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
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
COLONIAL INVESTMENT SERVICES, INC., Distributor (C) 1996
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
SB-03/226C-0496 M (6/96)
Printed on recycled paper
