<PAGE>
[LOGO]
COLONIAL GROWTH
SHARES FUND
SEMIANNUAL REPORT
APRIL 30, 1996
<PAGE>
COLONIAL GROWTH SHARES FUND HIGHLIGHTS
NOVEMBER 1, 1995 - APRIL 30, 1996
INVESTMENT OBJECTIVE: Colonial Growth Shares Fund seeks long-term growth by
investing primarily in middle capitalization equities.
THE FUND IS DESIGNED TO OFFER:
x Opportunity for long-term growth
x A disciplined investment strategy
x Broad diversification
PORTFOLIO MANAGER COMMENTARY: "Colonial Growth Shares Fund continued to provide
investors with attractive returns during the period. A strong market, strong
earnings growth and good stock selection all contributed to its positive
performance."
COLONIAL GROWTH SHARES FUND PERFORMANCE
<TABLE>
<CAPTION>
CLASS A CLASS B
------- -------
<S> <C> <C>
Six-month distributions declared per share $ 1.305 $ 1.248
Total returns, assuming
reinvestment of all distributions
and no sales charge or contingent
deferred sales charge (CDSC)--
6 months 14.29% 13.84%
Net asset value per share at 4/30/96 $ 17.00 $ 16.88
</TABLE>
Top Five Holdings*
(as of 4/30/96)
1. Safeway, Inc. 3.01%
2. Loews Corp. 2.96%
3. Computer Associates 2.89%
4. Omnicom Group 2.79%
5. Nike, Inc. 2.72%
Top Five Sectors*
(as of 4/30/96)
1. Technology 21.00%
2. Consumer Cyclicals 18.01%
3. Financials 16.30%
4. Consumer Staples 9.46%
5. Health Care 8.90%
There can be no guarantee the Fund will continue to hold these securities or
invest in these sectors in the future. Percentages are based on total net
assets.
*Industry sectors in the following financial statements are based upon the
standard industrial classifications (SIC) published by the U.S. Office of
Management and Budget. The sector classifications used on this page are based
upon Colonial defined criteria as used in the investment process.
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.
[PHOTO]Harold W. Cogger
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 financial
investments. The stock market received additional impetus from strong growth of
corporate profits.
While there may be some current market volatility, we expect moderate growth and
low inflation to continue and believe that reductions in interest rates may take
place later in the year. Earnings should continue to make progress but at a
slower pace than in 1995. Opportunities are not confined to the U.S., as we
anticipate growth in certain foreign markets. 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 about 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
DANIEL RIE is senior vice president of Colonial Management Associates, Inc. and
lead portfolio manager of Colonial Growth Shares Fund. Dan also directs
Colonial's equity investment group. He has more than 21 years of financial
management experience. Peter Wiley is assistant vice president of Colonial
Management Associates, Inc. and associate portfolio manager of Colonial Growth
Shares Fund.
Q. PLEASE DESCRIBE THE ECONOMIC ENVIRONMENT DURING THE SIX-MONTH PERIOD.
D.R. In the U.S., low interest rates, low inflation and slow but steady economic
growth created a positive environment for stocks. In general, the market favored
small capitalization stocks over large stocks, and growth stocks over value
stocks. Many companies reported strong earnings growth during the period, and
both the Dow Jones Industrial Average and the Standard & Poor's 500 Index
continued to reach new all-time highs.
Q. HOW DID THE FUND'S RETURN COMPARE TO THE INDEX USED TO EVALUATE ITS
PERFORMANCE?
D.R. The Fund performed very well, surpassing the S & P Midcap 400 Index for the
six-month reporting period. The Fund's Class A shares returned 14.29% compared
to 13.89% for the Index. Strong returns weren't concentrated in any one sector,
although holdings in the basic industries, energy and consumer cyclicals sectors
performed well.
Q. WHICH STOCKS CONTRIBUTED MOST TO THE FUND'S PERFORMANCE?
P.W. Examples of favorable stock selection included Cincinnati Bell, a telephone
operating and services and equipment company, up 68%; Callaway Golf, the
dominant manufacturer of titanium golf clubs, which rose 64%; and Nike, Inc.,
the footwear and apparel company, which gained 54%.
Q. HOW DO YOU SELECT STOCKS FOR COLONIAL GROWTH SHARES FUND?
D.R. We use several valuation measures, such as price-to-book and
price-to-earnings, in our stock selection process. We favor companies with
strong future earnings prospects and companies that we believe have the
potential to continue to outperform investor expectations. We also use broad
industry diversification to limit risk. In fact, at the end of the six-month
period, Colonial Growth Shares Fund owned more than 100 stocks representing 12
different industry sectors. Each of the Fund's holdings has to earn its position
in the portfolio on an ongoing basis. We don't develop emotional attachments to
our holdings -- if any holding fails to meet our performance criteria, it is
sold. In addition to limiting the potential for loss, this strategy allows us to
replace underperforming stocks with new candidates whose prospects may be
brighter.
Q. WHAT IS YOUR MARKET OUTLOOK?
P.W. Looking ahead, we believe that the U.S. economy will continue to
4
<PAGE>
accelerate at a steady but slower pace, which should continue to provide a
relatively favorable environment for growth stocks. We believe that inflation
will remain under control and stocks should continue to provide positive returns
for investors. While equity markets always entail a level of uncertainty, we'll
continue to maintain our diversified approach to investing for long-term growth,
and evaluate each stock on its own merits as well as its contribution to the
Fund as a whole.
COLONIAL GROWTH SHARES FUND'S INVESTMENT PERFORMANCE
VS. THE STANDARD & POOR'S MIDCAP 400 INDEX
Change in Value of $10,000 from 4/86 -- 4/96
Based on NAV and MOP for Class A Shares
<TABLE>
<CAPTION>
- ---------------------------------------------------------
S&P Midcap
CGSF a shares nav mop 400 Index
- ---------------------------------------------------------
<S> <C> <C> <C>
4/86 10,000 9,425 10,000
6/86 10,411 8,813 10,671.15
9/86 9,619 9,066 9,953.16
12/86 10,092 9,512 10,081.7
3/87 12,203 11,501 12,190.28
6/87 12,498 11,780 12,086.87
9/87 13,226 12,466 12,627.72
12/87 10,293 9,701 9,875.91
3/88 11,926 11,240 11,162.37
6/88 12,429 11,715 11,776.64
9/88 12,459 11,743 11,621.53
12/88 12,924 12,181 11,936.94
3/89 14,008 13,203 13,076.36
6/89 15,172 14,299 14,384.73
9/89 16,874 15,903 15,955.57
12/89 16,729 15,767 16,179.98
3/90 19,189 15,259 15,675.33
6/90 17,207 16,218 16,605.02
9/90 13,819 13,024 13,653.61
12/90 14,945 14,086 15,351.65
3/91 17,962 16,930 18,875.96
6/91 17,621 16,607 18,737.38
9/91 18,866 17,781 20,521.46
12/91 20,040 18,888 23,042.57
3/92 20,340 19,171 22,926.12
6/92 19,359 18,246 22,213.81
9/92 20,013 18,862 23,077.51
12/92 22,244 20,965 25,787.65
3/93 23,240 21,940 26,633.67
6/93 22,885 21,569 27,254.25
9/93 24,107 22,721 28,624.36
12/93 24,465 23,058 29,386.31
3/94 23,987 22,608 28,270.18
6/94 23,562 22,207 27,239.36
9/94 24,449 23,043 29,083.52
12/94 23,814 22,444 28,333.04
3/95 26,036 24,539 30,624.66
6/95 28,999 27,332 33,326.21
9/95 32,107 30,261 36,578.95
12/95 32,862 30,973 37,101.71
3/96 35,161 33,139 39,385.68
4/96 36,514 34,414 40,588.58
</TABLE>
A $10,000 investment in Class B shares made on June 8, 1992 (inception), at net
asset value (NAV) would have been valued at $17,609 on April 30, 1996. The same
investment after deducting the applicable CDSC would have grown to $17,309 on
April 30, 1996.
The Standard & Poor's Midcap 400 Index is an unmanaged index that tracks the
performance of middle capitalization U.S. stocks.
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
As of 3/31/96 (Most Recent Quarter End)
- ----------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
NAV MOP NAV W/CDSC
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR 35.05% 27.28% 33.99% 28.99%
- ----------------------------------------------------------------------
5 YEARS 14.38% 13.03% -- --
- ----------------------------------------------------------------------
10 YEARS 13.27% 12.60% -- --
- ----------------------------------------------------------------------
SINCE INCEPTION -- -- 14.85% 14.31%
- ----------------------------------------------------------------------
</TABLE>
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. NAV return does not include sales charges
or CDSC. Maximum offering price (MOP) return includes the maximum sales charge
of 5.75%. The CDSC returns reflect charges of: 5% for one year; 3% since
inception.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
5
<PAGE>
INVESTMENT PORTFOLIO
APRIL 30, 1996 (UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCKS - 96.4% SHARES VALUE
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
CONSTRUCTION - 1.3%
BUILDING CONSTRUCTION - 0.3%
Pulte Corp. 37 $ 970
---------
HEAVY CONSTRUCTION - NON BUILDING CONSTRUCTION - 1.0%
Flour Corp. 37 2,447
Halliburton Co. 16 907
---------
3,354
---------
..............................................................................................
FINANCE, INSURANCE & REAL ESTATE - 16.6%
INSURANCE CARRIERS - 9.8%
American Bankers Insurance Group, Inc. 22 861
Conseco, Inc. 30 1,095
ITT Corp. (a) 35 2,112
Loews Corp. 125 9,531
MGIC Investment Corp. 31 1,655
Old Republic International Corp. 167 5,521
Sunamerica, Inc. 53 2,910
Travelers Group, Inc. 104 6,414
Vesta Insurance Group, Inc. 43 1,369
---------
31,468
---------
NONDEPOSITORY CREDIT INSTITUTIONS - 4.6%
Countrywide Credit Industries, Inc. 94 2,039
Finova Group, Inc. 53 2,919
Green Tree Financial Corp. 83 2,798
ITT Hartford Group, Inc. 17 848
The Money Store, Inc. 248 6,272
---------
14,876
---------
SECURITY BROKERS & DEALERS - 2.2%
Bear Stearns Co., Inc. 177 4,445
Lehman Brothers Holdings, Inc. 108 2,748
---------
7,193
---------
..............................................................................................
MANUFACTURING - 44.8%
APPAREL - 2.3%
Tommy Hilfiger Corp. (a) 163 7,417
---------
CHEMICALS & ALLIED PRODUCTS - 7.2%
Amgen, Inc. (a) 67 3,864
Avon Products, Inc. 28 2,480
Colgate-Palmolive Co. 17 1,318
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/April 30, 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Goodrich (B.F.) Co. 193 $ 7,664
ICN Pharmaceuticals, Inc. (a) 119 2,682
Johnson & Johnson 8 703
Pfizer, Inc. 55 3,781
Smith International, Inc. 28 845
---------
23,337
---------
ELECTRONIC & ELECTRICAL EQUIPMENT - 2.2%
Harman International Industries, Inc. 59 2,792
Komag, Inc. (a) 59 1,963
Methode Electronics, Inc., Class A 90 1,513
Tellabs, Inc. (a) 16 890
---------
7,158
---------
FABRICATED METAL - 0.7%
Crane Co. 20 847
Harsco Corp. 20 1,350
---------
2,197
---------
FOOD & KINDRED PRODUCTS - 4.7%
Archer Daniels Midland Co. 47 896
IBP, Inc. 190 5,077
Pepsico, Inc. 14 889
Phillip Morris Co., Inc. 93 8,409
---------
15,271
---------
FURNITURE & FIXTURES - 0.8%
Leggett & Platt, Inc. 102 2,621
---------
MACHINERY & COMPUTER EQUIPMENT - 8.9%
Black & Decker Corp. 42 1,678
Cisco Systems, Inc. (a) 44 2,298
Gateway 2000, Inc. (a) 34 1,179
Harnischfeger Industries, Inc. 95 3,848
Hewlett-Packard Co. 61 6,458
JLG Industries, Inc. 1 65
Kysor Industrial Corp. 41 1,061
Seagate Technology, Inc. (a) 82 4,750
Sun Microsystems, Inc. (a) 124 6,732
Toro Co. 19 606
---------
28,675
---------
MEASURING & ANALYZING INSTRUMENTS - 6.7%
Boston Scientific Corp., (a) 43 1,841
Eastman Kodak Co. 57 4,368
Measurex Corp. 45 1,302
Medtronic, Inc. 161 8,537
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/April 30, 1996
- ----------------------------------------------------------------------------------------------
COMMON STOCKS - CONT. SHARES VALUE
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
MANUFACTURING - CONT.
MEASURING & ANALYZING INSTRUMENTS - CONT.
Mentor Corp. 30 $ 709
Sybron Corp. (a) 29 740
Xerox Corp. 27 3,977
---------
21,474
---------
MISCELLANEOUS MANUFACTURING - 1.0%
Callaway Golf Co. 120 3,215
---------
PAPER PRODUCTS - 0.3%
Avery Dennison Corp. 17 980
---------
PETROLEUM REFINING - 1.4%
Kerr-McGee Corp. 55 3,488
Valero Energy Corp. 34 976
---------
4,464
---------
PRIMARY METAL - 1.7%
Carpenter Technology Corp. 29 1,102
Texas Industries, Inc. 67 4,275
---------
5,377
---------
PRINTING & PUBLISHING - 1.2%
Central Newspapers, Inc. 19 684
Franklin Quest Co. (a) 46 1,239
Reynolds & Reynolds Co. 39 1,795
---------
3,718
---------
RUBBER & PLASTIC - 3.1%
Nike, Inc., Class B 100 8,759
Wynn's International, Inc. 43 1,156
---------
9,915
---------
TOBACCO PRODUCTS - 0.5%
UST, Inc. 53 1,696
---------
TRANSPORTATION EQUIPMENT - 2.1%
Polaris Industries, Inc. 70 2,438
Sundstrand Corp. 87 3,205
Varlen Corp. 43 1,088
---------
6,731
---------
..............................................................................................
MINING & ENERGY - 0.7%
CRUDE PETROLEUM & NATURAL GAS - 0.3%
Apache Corp. 32 934
---------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/April 30, 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
METAL MINING - 0.4%
Cleveland-Cliffs, Inc. 29 $ 1,198
---------
..............................................................................................
RETAIL TRADE - 8.5%
FOOD STORES - 3.0%
Safeway, Inc. (a) 288 9,707
---------
GENERAL MERCHANDISE STORES - 2.0%
Federated Department Stores, Inc. (a) 11 380
Sears, Roebuck & Co. 103 5,147
Staples, Inc. (a) 43 821
---------
6,348
---------
HOME FURNISHINGS & EQUIPMENT - 1.2%
Circuit City Stores, Inc. 95 3,016
CompUSA, Inc. (a) 21 741
---------
3,757
---------
MISCELLANEOUS RETAIL - 0.2%
Arbor Drugs, Inc. 34 689
---------
RESTAURANTS - 2.1%
Marriott International, Inc. 46 2,228
McDonald's Corp. 97 4,630
---------
6,858
---------
..............................................................................................
SERVICES - 17.5%
AMUSEMENT & RECREATION - 1.1%
Grand Casinos, Inc. (a) 113 3,658
---------
BUSINESS SERVICES - 13.3%
Cadence Design Systems, Inc. (a) 150 7,811
Computer Associates International, Inc. 127 9,315
HBO & Co. 13 1,579
Microsoft Corp. (a) 69 7,857
Omnicom Group, Inc. 207 8,987
Oracle Systems Corp. (a) 128 4,328
Peoplesoft, Inc. (a) 31 1,966
Synopsys, Inc. (a) 24 978
---------
42,821
---------
HEALTH SERVICES - 1.8%
Healthsouth Rehabilitation Corp. (a) 30 1,132
OrNda Health Corp. (a) 116 3,179
Universal Health Services, Inc., Class B (a) 27 1,515
---------
5,826
---------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/April 30, 1996
- ----------------------------------------------------------------------------------------------
COMMON STOCKS - CONT. SHARES VALUE
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES - CONT.
HOTELS, CAMPS & LODGING - 0.3%
Hospitality Franchise Systems, Inc., (a) 22 $ 1,109
---------
PERSONAL SERVICES - 1.0%
Service Corporation International 60 3,198
---------
..............................................................................................
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 4.1%
COMMUNICATIONS - 3.0%
Century Telephone Enterprises, Inc. 26 861
Cincinnati Bell, Inc. 155 7,644
Clear Channel Communications, Inc. (a) 17 1,138
---------
9,643
---------
ELECTRIC SERVICES - 0.6%
Unicom Corp. 67 1,834
---------
TRANSPORTATION SERVICES - 0.5%
GATX Corp. 36 1,629
---------
..............................................................................................
WHOLESALE TRADE - 2.9%
DURABLE GOODS
Kent Electronics Corp. (a) 206 8,695
Marshall Industries (a) 19 590
Ultramed, Inc. (a)(b) 450 35
---------
9,320
---------
TOTAL INVESTMENTS (cost of $241,861)(c) 310,636
---------
SHORT TERM OBLIGATIONS - 2.5% PAR
---------------------------------------------------------------------------------------------
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
$11,644 (repurchase proceeds $11,395) $ 11,393 11,393
---------
OTHER ASSETS & LIABILITIES, NET- 0.1% 316
---------------------------------------------------------------------------------------------
NET ASSETS - 100% $322,345
---------
</TABLE>
10
<PAGE>
Investment Portfolio/April 30, 1996
- --------------------------------------------------------------------------------
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 Trustees. This security represents 0.0% of the Fund's
net assets at April 30, 1996.
(c) Cost for federal income tax purposes is $241,997.
See notes to financial statements.
11
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
APRIL 30, 1996 (UNAUDITED)
(in thousands except for per share amounts and footnotes)
<TABLE>
ASSETS
<S> <C> <C>
Investments at value (cost $241,861) $310,636
Short-term obligations 11,393
----------
322,029
Receivable for:
Fund shares sold $ 577
Dividends 125
Investments sold 34
Foreign Tax reclaims 4
Interest 2
Other 11 753
----------- -----------
Total Assets 322,782
LIABILITIES
Payable for:
Fund shares repurchased 384
Accrued:
Deferred Trustees fees 2
Other 51
-----------
Total Liabilities 437
-----------
NET ASSETS $322,345
-----------
Net asset value & redemption price per share -
Class A ($224,966/13,232) $17.00
-----------
Maximum offering price per share - Class A
($17.00/0.9425) $18.04(a)
-----------
Net asset value & offering price per share -
Class B ($97,379/5,770) $16.88(b)
-----------
COMPOSITION OF NET ASSETS
Capital paid in $231,703
Overdistributed net investment income (75)
Accumulated net realized gain 21,945
Net unrealized appreciation (depreciation) on:
Investments 68,775
Foreign currency transactions (3)
-----------
$322,345
-----------
</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.
12
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED)
(in thousands)
INVESTMENT INCOME
<TABLE>
<S> <C> <C>
Dividends $ 1,663
Interest 587
-----------
2,250
EXPENSES
Management fee $ 834
Service fee - Class A 233
Service fee - Class B 105
Distribution fee - Class B 315
Transfer agent 428
Bookkeeping fee 55
Registration fee 17
Custodian fee 7
Audit fee 18
Trustees fee 9
Reports to shareholders 6
Legal fee 5
Other 12 2,044
---------- -----------
Net Investment Income 206
-----------
NET REALIZED & UNREALIZED GAIN ON PORTFOLIO POSITIONS
Net realized gain 21,950
Net unrealized appreciation during
the period 16,747
----------
Net Gain 38,697
-----------
Net Increase in Net Assets from Operations $ 38,903
-----------
</TABLE>
See notes to financial statements.
13
<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
<S> <C> <C>
Operations:
Net investment income $ 206 $ 2,372
Net realized gain 21,950 20,783
Net unrealized appreciation 16,747 34,831
--------- ---------
Net Increase from Operations 38,903 57,986
Distributions:
From net investment income - Class A (782) (1,927)
From net realized gains - Class A (14,913) (13,715)
From net investment income - Class B (40) (276)
From net realized gains - Class B (5,988) (4,637)
--------- ---------
17,180 37,431
--------- ---------
Fund Share Transactions:
Receipts for shares sold - Class A 50,752 83,053
Value of distributions reinvested - Class A 13,988 13,678
Cost of shares repurchased - Class A (46,308) (90,175)
--------- ---------
18,432 6,556
--------- ---------
Receipts for shares sold - Class B 29,235 27,663
Value of distributions reinvested - Class B 5,706 4,705
Cost of shares repurchased - Class B (17,884) (20,392)
--------- ---------
17,057 11,976
--------- ---------
Net Increase from Fund Share
Transactions 35,489 18,532
--------- ---------
Total Increase 52,669 55,963
NET ASSETS
Beginning of period 269,676 213,713
--------- ---------
End of period (net of overdistributed
and including undistributed net
investment income of $75 and $582, $ 322,345 $ 269,676
respectively.) --------- ---------
NUMBER OF FUND SHARES
Sold - Class A 3,164 5,863
Issued for distributions reinvested - Class A 912 1,139
Repurchased - Class A (2,885) (6,410)
--------- ---------
1,191 592
--------- ---------
Sold - Class B 1,830 1,988
Issued for distributions reinvested - Class B 874 895
Repurchased - Class B (1,128) (1,507)
--------- ---------
1,076 876
--------- ---------
</TABLE>
See notes to financial statements.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996 (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, 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
long-term growth. 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 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 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.
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, 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.
15
<PAGE>
Notes to Financial Statements/April 30, 1996
NOTE 2. ACCOUNTING POLICIES - CONT.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: All income,
expenses, (other than the Class A and Class B service fee and 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, net investment income per share data reflects the
service fee applicable to both Class A and Class B shares and the
distribution fee applicable to Class B shares only.
Class A and Class B ratios are calculated by adjusting the expense and net
investment income ratios for the Fund for the entire period by the service
fee applicable to both Class A and Class B and 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.
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.
FOREIGN CURRENCY TRANSACTIONS: 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 dividend 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.
16
<PAGE>
Notes to Financial Statements/April 30, 1996
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 foreign 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.
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 and Poor's
Index of 500 common stocks during the preceding twelve months. For the six
months ended April 30, 1996, the total fee included a downward performance
adjustment of $43,395.
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.
17
<PAGE>
Notes to Financial Statements/April 30, 1996
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES - CONT.
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
$49,152 on sales of the Fund's Class A shares and received contingent
deferred sales charges (CDSC) of $74,078 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:
Value of shares outstanding on the
20th of each month which were Annual Fee Rate
----------------------------- ---------------
Prior to April 1, 1989 0.15%
On or after April 1, 1989 0.25%
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
INVESTMENT ACTIVITY: During the six months ended April 30, 1996, purchases
and sales of investments, other than short-term obligations, were
$140,266,744 and $113,920,427, respectively.
Unrealized appreciation (depreciation) at April 30, 1996, based on cost of
investments for federal income tax purposes was approximately:
<TABLE>
<S> <C>
Gross unrealized appreciation $70,629,000
Gross unrealized depreciation (1,990,000)
-----------
Net unrealized $68,639,000
===========
</TABLE>
18
<PAGE>
Notes to Financial Statements/April 30, 1996
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 off-shore
loan rate plus 1/2 of 1%. There were no borrowings under the line of credit
during the six month ended April 30, 1996.
19
<PAGE>
FINANCIAL HIGHLIGHTS (a)
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
(Unaudited)
Six
months ended
April 30 Year ended October 31
------------------- ---------------------
1996 1995
Class A Class B Class A Class B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $16.140 $16.040 $14.020 $13.940
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.029 (0.033) 0.174 0.065
Net realized and
unrealized gain 2.136 2.121 3.326 3.317
------- ------- ------ ------
Total from Investment
Operations 2.165 2.088 3.500 3.317
------- ------- ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment
income (0.065) (0.008) (0.165) (0.067)
From net realized gains (1.240) (1.240) (1.215) (1.215)
-------- -------- ------ ------
Total Distributions
Declared to Shareholders (1.305) (1.248) (1.380) (1.282)
-------- -------- ------ ------
Net asset value -
End of period $17.000 $16.880 $16.140 $16.040
-------- ------- ------- -------
Total return(b) 14.29%(c) 18.84%(c) 28.44% 27.50%
-------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.19%(d)(e) 1.96%(d)(e) 1.12%(d) 1.90%(d)
net investment income 0.86%(d)(e) (0.41%)(d)(e) 1.24%(d) 0.46%(d)
Portfolio turnover 84%(e) 84%(e) 92% 92%
Average commission rate(f) $ 0.048 $0.048 -- --
Net assets at end
of period(000) $224,966 $97,379 $194,393 $75,283
</TABLE>
(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 contingent deferred sales charge.
(c) Not annualized.
(d) The benefit derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are not of benefits
received, if any.
(e) Annualized.
(f) 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.
20
<PAGE>
FINANCIAL HIGHLIGHTS (A) - CONTINUED
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended October 31
---------------------------------------------------------
1994 1993
Class A Class B Class A Class B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $15.240 $15.180 $13.830 $13.780
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.096 (0.008) 0.110 0.001
Net realized and
unrealized gain 0.275 0.288 2.240 2.244
------- ------- ------ -------
Total from Investment
Operations 0.371 0.280 2.350 2.245
------- ------- ------ -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment
income (0.071) -- (0.095) --
From net realized gains (1.520) (1.520) (0.845) (0.845)
------- ------- ------ -------
Total Distributions
Declared to Shareholders (1.591) (1.520) (0.940) (0.845)
------- ------- ------ -------
Net asset value -
End of period $14.020 $13.940 $15.240 $15.180
------- ------- ------ -------
Total return(b) 2.78% 2.12% 17.79% 16.99%
------- ------- ------ ------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.22% 1.97% 1.19% 1.94%
net investment income 0.69% (0.06%) 0.64% (0.11)%
Portfolio turnover 121% 121% 66% 66%
Average commission rate(f) -- -- -- --
Net assets at end
of period(000) $160,495 $53,218 169,913 $41,989
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS (a)
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Period ended October 31 Year ended March 31
------------------------------------ ---------------------------------
1992 (b) 1992 1991
Class A Class B(c) Class A Class A
------------ ------------ ------------ ------------
Net asset value -
<S> <C> <C> <C> <C>
Beginning of period $ 14.240 $ 13.570 $ 12.800 $ 12.100
------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.066 (0.002) 0.168 0.221
Net realized and
unrealized gain 0.074 0.212 1.502 1.059
------------ ------------ ------------ ------------
Total from Investment
Operations 0.140 0.210 1.670 1.280
------------ ------------ ------------ ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.093) -- (0.183) (0.210)
From net realized gains (0.457) -- (0.047) (0.280)
------------ ------------ ------------ ------------
Total Distributions
Declared to Shareholders (0.550) -- (0.230) (0.490)
------------ ------------ ------------ ------------
Net asset value -
End of period $ 13.830 $ 13.780 $ 14.240 $ 12.890
------------ ------------ ------------ ------------
Total return (d) 1.02%(e) 1.55%(e) 13.24% 10.95%
------------ ------------ ------------ ------------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.19%(f) 1.94%(f) 1.18% 1.03%
Net investment income 0.83%(f) 0.08%(f) 1.24% 1.94%
Portfolio turnover 68%(f) 68%(f) 38% 37%
Net assets at end
of period (000) $ 150,260 $ 26,364 $ 149,341 $ 134,055
</TABLE>
(a) Per share data was calculated using average shares outstanding during
the period. For the years ended 1992 and 1991 per share data was
calculated using the SEC method.
(b) The Fund changed its fiscal year end from March 31 to October 31 in
1992.
(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 contingent deferred sales charge.
(e) Not annualized.
(f) Annualized.
22
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Growth Shares Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
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.
This report has been prepared for shareholders of Colonial Growth Shares 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.
23
<PAGE>
[LOGO]
COLONIAL
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
GS-03/246C-0496 M (6/96)
[LOGO]Printed on recycled paper
