[LOGO]
[FRONT COVER CONTAINS GRAPHIC DISPLAYING NAVIGATIONAL GEAR:
MAP, COMPASS, STOPWATCH, SEXTANT, ETC.]
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COLONIAL STRATEGIC
BALANCED FUND
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SEMIANNUAL REPORT
APRIL 30, 1997
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NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
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COLONIAL STRATEGIC BALANCED FUND HIGHLIGHTS
NOVEMBER 1, 1996 - APRIL 30, 1997
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:
o Growth and income potential from a strategic blend of markets
o Favorable stock and bond opportunities worldwide
o Broad diversification to help reduce risk
o Expert management by stock and bond specialists
Portfolio Manager Commentary: "We made moves to protect shareholders from the
volatility in the stock and bond markets, and managed to provide a positive
total return for the Fund." --Carl Ericson and James Haynie
Colonial Strategic Balanced Fund Performance
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Class A Class B Class D*
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Inception date 9/19/94 9/19/94 9/19/94
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Six-month distributions declared $0.436 $0.408 $0.409
per share
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Six-month total returns, assuming 4.01% 3.79% 3.79%
reinvestment of all distributions and
no sales charge or contingent deferred
sales charge (CDSC)
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Net asset value per share on 4/30/97 $12.99 $12.97 $12.99
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Top Five Holdings - Equity**
(as of 4/30/97)
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1. Safeway, Inc. ........... 0.69%
2. USX-Marathon Group ...... 0.69%
3. Bristol-Myers Squibb .... 0.65%
4. Delta Airlines, Inc. .... 0.64%
5. Philips Ord. ............ 0.64%
Top Five Countries - Gov't Bonds**
(as of 4/30/97)
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1. United States ........... 8.96%
2. Australia ............... 2.02%
3. United Kingdom .......... 1.54%
4. Spain ................... 1.30%
5. Mexico .................. 1.18%
* On July 1, 1997, Class D shares will convert to Class C shares. If you own
Class D shares, you will receive a detailed letter explaining how this
conversion affects your account.
** Holding and country breakdowns are calculated as a percent of total net
assets. Because the Fund is actively managed, there can be no guarantee the Fund
will continue to hold these securities or invest in these countries in the
future.
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2
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PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
I am pleased to present Colonial Strategic Balanced Fund's semiannual report for
the six months ended April 30, 1997.
[PHOTO]
During this period, the U.S. economy continued to lead foreign markets in what
has been a long cycle of strong growth. The U.S. stock market outperformed
foreign markets for the 12th straight quarter -- the longest period in history.
Interest rates fluctuated, culminating in the Federal Reserve Board raising
rates in late March as a preemptive strike against inflation. The move triggered
the first slide in stock prices since the summer of 1996.
Within this environment, the Fund's managers provided a total return of 4.01%,
which was in line with their general goal of targeting performance between the
bond market average and the stock market average. Although this Fund is not
designed to match the performance of a fund more narrowly invested in a specific
market, its exposure to multiple fixed income and equity sectors -- both
domestic and foreign -- provides multiple diversification benefits. The
following pages will further detail the Fund's performance and investment
strategy over the past six months.
Looking forward, we are optimistic about both the U.S. and foreign markets. We
expect the Federal Reserve Board to raise interest rates at least one more time
in 1997 and, until then, volatility should continue in the markets. In the
second half of 1997, we believe U.S. economic growth will slow, and foreign
markets could outperform the U.S. We also expect additional opportunity in the
small-cap stocks, as their values catch up to large caps.
This outlook supports the philosophy of the Colonial Strategic Balanced Fund --
exposure to several stock and bond markets, so that shareholders are positioned
to capture positive performance and avoid portfolio pitfalls no matter how the
markets swing. The Fund's dual objectives of current income and long-term growth
consistent with prudent risk have provided steady performance for shareholders.
We look forward to updating you on the Fund's performance six months from now,
in the Fund's annual report.
Respectfully,
/s/ Harold W. Cogger
Harold W. Cogger
President
June 13, 1997
Because market conditions change frequently, there can be no assurance that the
trends described will continue, come to pass or affect Fund performance.
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3
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PORTFOLIO MANAGEMENT REPORT
Carl Ericson and James Haynie are portfolio co-managers of Colonial Strategic
Balanced Fund. Mr. Ericson, who manages the fixed-income portion of the
portfolio, is a Senior Vice President and Director of Colonial Management
Associates, Inc. and Manager of the Taxable Fixed Income Department. Mr. Haynie,
who manages the equity portion, is a Vice President of Colonial Management
Associates, Inc.
Managing Volatility, Maintaining a Diversified Course
The end of 1996 brought no end to the U.S. economy's continued long cycle of
growth and a rising stock market that was overvalued by many measures. This
caused us to take a more cautious stance heading into the new year.
Seeing the continuing strength of the economy and anticipating the Federal
Reserve Board raising interest rates in March, we shortened the average maturity
of bonds held to help reduce the Fund's risk. Indeed, interest rates were
increased in March, although the bond market's reaction was subdued and rates
did not rise excessively.
Given the market's apparent overvaluation, we believed a stock market correction
was imminent. Therefore, the cash portion of the overall portfolio was increased
to reduce the Fund's volatility. The market did head down in February. However,
it was not a drastic correction, and the Fund's extra cash cushion ultimately
hampered performance. We are now bringing the cash percentage down to a more
manageable level by purchasing additional stocks and bonds as we find value in
the marketplace.
The Fund's stock performance was also affected by the market's strong bias
toward large-cap blue chip stocks, which led mid caps by as much as 13%. When
one sector runs far ahead of the pack in performance, as large-cap stocks did
this past six months, the Fund's diversification inherently prevents it from
fully participating in that sector's upswing.
The Colonial Strategic Balanced Fund is designed to maintain meaningful
investments in six stock and bond sectors in order to increase the potential of
capturing positive returns and reducing risk to the portfolio. The Fund's
exposure to multiple fixed income and equity sectors, both domestic and foreign,
provides multiple diversification benefits.
The Fund's diversification strategy helps avoid the pitfalls when a market
shifts from one sector to another. We seek solid, steady returns without
subjecting shareholders to high levels of fluctuation in share price.
Performance in Line with Benchmarks
Given the portfolio's diversification, and despite the heavy cash weighting, the
Fund's performance was on track. As a balanced fund, we would expect for
performance that falls between the Lehman Brothers Government/Corporate Bond
Index and the S&P 500 Index. The Fund's Class A shares returned
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4
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4.01% for the six months ended April 30, outperforming the Lehman Bond Index
return of 1.30% and underperforming the S&P 500 Index return of 14.71%.
Heavy Weighting in High-Yield Bonds Paid Off
Although the Fund maintains significant exposure to all six markets in which it
invests, we do adjust the diversification within defined ranges to pursue value
and capitalize on opportunities. Within the bond portion of the portfolio, the
largest allocation was to high-yield corporate bonds, which benefited from the
strong economy.
An example was Santa Fe Industries, a high-yield bond issue in the energy sector
which increased in value from mid-year 1996 through early 1997. Then, when the
issue's yield dropped closer to that of investment-grade bonds, we felt
shareholders weren't being rewarded for the added potential risk of a high-yield
bond. Add to that our anticipation of a rate hike, and we chose to sell the
bonds and take the profit.
In addition to the energy industry, we found value in manufacturing, steel and
transportation. We also increased our weighting in foreign bonds. While the U.S.
led foreign markets in general, there were periods when bonds from Spain,
Finland and Denmark outperformed the U.S.
Pockets of Value Found Across the Stock Spectrum
Within the stock portion of the Fund, we found areas of value in each of the
markets. Overseas, the opportunities included Europe and Scandinavian countries.
In the U.S., the motto was "the bigger the better," and pharmaceutical companies
and banks did well.
Strategically Positioned for a Bright Future
Looking ahead, we expect the Federal Reserve Board to raise interest rates at
least once more in the coming months. Until then, the volatility in the U.S.
Treasury market will continue. With Treasury rates at 7%, we don't believe
investors are paid enough to take that level of risk. Therefore, we will
continue to underweight the U.S. government bond sector, at least until the U.S.
economy slows as we believe it will in the second half of the year.
With that slowing growth, foreign markets could outperform the U.S. and our
extra weightings in foreign stocks and bonds stand to benefit investors. We also
believe that the value discrepancy between small stocks and large stocks will
decrease, so we will be quick to buy any small stock opportunities we find.
These expected shifts in the markets only underscore our strategy of
diversifying across six markets. In doing so, we feel the Fund and its
shareholders are well positioned for the future.
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5
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Colonial Strategic Balanced Fund's Investment Performance vs.
The Standard & Poor's 500 Index and the
Lehman Brothers Government/Corporate Bond Index
Change in Value of $10,000 from 9/30/94 - 4/30/97
Class A Shares based on NAV and MOP
[THE FOLLOWING TABLE WAS DEPICTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Average Annual Total Returns*
Inception 9/19/94 NAV MOP
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1 year 8.98% 3.80%
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Since inception 14.36 12.18
DATE NAV MOP LEHMAN S&P 500
Sep 30, 94 10,000 9,525 10,000 10,000
Oct 31, 94 10,030.36 9,553.922 9,989 10,224
Nov 30, 94 9,716.6 9,255.062 9,971 9,852
Dec 31, 94 9,800.595 9,335.066 10,037 9,998
Jan 31, 95 9,780.198 9,315.639 10,230 10,257
Feb 28, 95 10,126.94 9,645.912 10,467 10,657
Mar 31, 95 10,395.87 9,902.062 10,537 10,971
Apr 30, 95 10,611.38 10,107.34 10,684 11,294
May 31, 95 10,898.73 10,381.04 11,132 11,744
Jun 30, 95 11,252.88 10,718.37 11,221 12,017
Jul 31, 95 11,821.73 11,260.2 11,177 12,415
Aug 31, 95 11,935.5 11,368.56 11,320 12,446
Sep 30, 95 12,194.07 11,614.85 11,435 12,971
Oct 31, 95 12,183.61 11,604.89 11,603 12,924
Nov 30, 95 12,455.52 11,863.88 11,794 13,491
Dec 31, 95 12,485.76 11,892.69 11,968 13,751
Jan 31, 96 12,707.4 12,103.8 12,043 14,219
Feb 29, 96 13,013.48 12,395.34 11,787 14,351
Mar 31, 96 13,048.35 12,428.55 11,688 14,489
Apr 30, 96 13,377.75 12,742.3 11,608 14,702
May 31, 96 13,558.38 12,914.36 11,588 15,081
Jun 30, 96 13,276.4 12,645.77 11,743 15,138
Jul 31, 96 13,051.55 12,431.61 11,770 14,470
Aug 3l, 96 13,287.1 12,655.97 11,742 14,776
Sep 30, 96 13,810.54 13,154.54 11,950 15,607
Oct 31, 96 13,918.36 13,257.23 12,229 16,037
Nov 30, 96 14,489.75 13,801.49 12,454 17,248
Dec 31, 96 14,443.17 13,757.12 12,316 16,906
Jan 31, 97 14,631.32 13,936.33 12,330 17,962
Feb 28, 97 14,642.39 13,946.88 12,356 18,103
Mar 31, 97 14,219.61 13,544.18 12,209 17,361
Apr 30, 97 14,475.92 13,788.31 12,388 18,396
Class B Shares based on NAV and Maximum CDSC
[THE FOLLOWING TABLE WAS DEPICTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Average Annual Total Returns*
Inception 9/19/94 NAV w/CDSC
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1 year 8.52% 3.52%
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Since inception 13.87 12.89
NAV w/CDSC LEHMAN S&P 500
Sep 30, 94 10,000 10,000 10,000 10,000
Oct 31, 94 10,030.4 10,030.4 9,989 10,224
Nov 30, 94 9,716.313 9,716.313 9,971 9,852
Dec 31, 94 9,791.902 9,791.902 10,037 9,998
Jan 31, 95 9,771.503 9,771.503 10,230 10,257
Feb 28, 95 10,118.3 10,118.3 10,467 10,657
Mar 31, 95 10,376.09 10,376.09 10,537 10,971
Apr 30, 95 10,601.66 10,601.66 10,684 11,294
May 31, 95 10,878.49 10,878.49 11,132 11,744
Jun 30, 95 11,220.61 11,220.61 11,221 12,017
Jul 31, 95 11,798.68 11,798.68 11,177 12,415
Aug 31, 95 11,901.9 11,901.9 11,320 12,446
Sep 30, 95 12,147.06 12,147.06 11,435 12,971
Oct 31, 95 12,136.64 12,136.64 11,603 12,924
Nov 30, 95 12,407.73 12,407.73 11,794 13,491
Dec 31, 95 12,424.84 12,424.84 11,968 13,751
Jan 31, 96 12,645.59 12,645.59 12,043 14,219
Feb 29, 96 12,939.92 12,939.92 11,787 14,351
Mar 31, 96 12,974.41 12,974.41 11,688 14,489
Apr 30, 96 13,291.64 13,291.64 11,608 14,702
May 31, 96 13,471.4 13,471.4 11,588 15,081
Jun 30, 96 13,186.92 13,186.92 11,743 15,138
Jul 31, 96 12,952.77 12,952.77 11,770 14,470
Aug 31, 96 13,186.92 13,186.92 11,742 14,776
Sep 30, 96 13,703.85 13,703.85 11,950 15,607
Oct 31, 96 13,800.2 13,800.2 12,229 16,037
Nov 30, 96 14,367.63 14,367.63 12,454 17,248
Dec 31, 96 14,306.29 14,306.29 12,316 16,906
Jan 31, 97 14,492.94 14,492.94 12,330 17,962
Feb 28, 97 14,503.92 14,503.92 12,356 18,103
Mar 31, 97 14,080.45 14,080.45 12,209 17,361
Apr 30, 97 14,323.41 14,023.41 12,388 18,396
Class D Shares based on NAV and MOP w/CDSC
[THE FOLLOWING TABLE WAS DEPICTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Average Annual Total Returns*
Inception 9/19/94 NAV MOP w/CDSC
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1 year 8.53% 6.44%
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Since inception 13.84 13.39
MOP
NAV w/CDSC LEHMAN S&P 500
Sep 30, 94 10,000 9,900 10,000 10,000
Oct 31, 94 10,030.4 9,930.092 9,989 10,224
Nov 30, 94 9,716.313 9,619.149 9,971 9,852
Dec 3l, 94 9,798.918 9,700.929 10,037 9,998
Jan 31, 95 9,768.328 9,670.645 10,230 10,257
Feb 28, 95 10,115.01 10,013.86 10,467 10,657
Mar 31, 95 10,372.3 10,268.58 10,537 10,971
Apr 30, 95 10,597.79 10,491.81 10,684 11,294
May 31, 95 10,874.52 10,765.77 11,132 11,744
Jun 30, 95 11,226.11 11,113.85 11,221 12,017
Jul 31, 95 11,793.61 11,675.67 11,177 12,415
Aug 31, 95 11,896.79 11,777.82 11,320 12,446
Sep 30, 95 12,151.65 12,030.13 11,435 12,971
Oct 31, 95 12,141.23 12,019.81 11,603 12,924
Nov 30, 95 12,401.77 12,277.75 11,794 13,491
Dec 31, 95 12,428.56 12,304.28 11,968 13,751
Jan 31, 96 12,649.19 12,522.69 12,043 14,219
Feb 29, 96 12,943.35 12,813.92 11,787 14,351
Mar 31, 96 12,965.31 12,835.66 11,688 14,489
Apr 30, 96 13,292.88 13,159.95 11,608 14,702
May 31, 96 13,461.95 13,327.33 11,588 15,081
Jun 30, 96 13,179.45 13,047.65 11,743 15,138
Jul 31, 96 12,956.25 12,826.68 11,770 14,470
Aug 31, 96 13,179.45 13,047.65 11,742 14,776
Sep 30, 96 13,705.59 13,568.54 11,950 15,607
Oct 31, 96 13,801.81 13,663.79 12,229 16,037
Nov 30, 96 14,357.73 14,214.15 12,454 17,248
Dec 31, 96 14,307.28 14,164.21 12,316 16,906
Jan 31, 97 14,493.66 14,348.72 12,330 17,962
Feb 28, 97 14,493.66 14,348.72 12,356 18,103
Mar 31, 97 14,071.13 13,930.42 12,209 17,361
Apr 30, 97 14,324.77 14,181.52 12,388 18,396
*Average annual total returns are as of 3/31/97, the most recent quarter end.
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 Bond Index is an unmanaged index that tracks the
performance of U.S. Government and U.S. Corporate bonds. Unlike mutual funds,
indexes do not incur fees or charges, and it is not possible to invest in an
index.
Past performance cannot predict future results. Returns 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) returns do not
include sales charges or contingent deferred sales charges (CDSC). Maximum
offering price (MOP) returns include the maximum sales charges of 4.75% for
Class A, and 1% for Class D. The CDSC returns reflect charges of: 5% for one
year and 3% 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.
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6
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INVESTMENT PORTFOLIO
APRIL 30, 1997 (UNAUDITED, IN THOUSANDS)
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COMMON STOCKS - 50.6% COUNTRY SHARES VALUE
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AGRICULTURE, FORESTRY & FISHING - 0.1%
Forestry
Deltic Timber Corp. 2 $ 51
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CONSTRUCTION - 0.5%
Building Construction - 0.4%
Continental Homes Holding Corp. 7 111
Pulte Corp. 11 311
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422
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Heavy Construction - Non Building Construction - 0.1%
Yondenko Corp. Ja 9 62
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FINANCE, INSURANCE & REAL ESTATE - 8.2%
Depository Institutions - 4.4%
BankAmerica Corp. 4 409
Bank of Boston Corp. 3 247
Bank of Montreal Ca 4 145
Bank of New York Co., Inc. 7 292
Citicorp 5 541
Comerica, Inc. 1 70
Corporacion Bancaria de Espana SA Sp 5 223
Firstar Corp. 14 413
Greenpoint Financial Corp. 9 482
HSBC Holdings PLC HK 6 142
J.P. Morgan & Co., Inc. 4 407
Kredietbank NV Be (a) 78
Lloyds Bank PLC UK 19 173
National Westminster Bank PLC UK 9 101
Norwest Corp. 4 184
ONBANCorp., Inc. 10 489
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4,396
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Insurance Carriers - 2.5%
Allstate Corp. 3 182
American Bankers Insurance Group, Inc. 3 159
Cigna Corp. 4 571
Fremont General Corp. 4 121
Life Re Corp. 3 120
Loews Corp. 5 423
Maxicare Health Plans, Inc. (b) 4 93
Pacificare Health Systems, Inc. (b) 1 104
7
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Investment Portfolio/April 30, 1997
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COMMON STOCKS - CONT. COUNTRY SHARES VALUE
==========================================================================
FINANCE, INSURANCE & REAL ESTATE - CONT.
Insurance Carriers - Cont.
Progressive Corp. 6 $ 472
Protective Life Corp. (b) 3 142
US Facilities Corp. 8 146
---------
2,533
---------
Investment Companies - 0.0%
First Australia Fund, Inc. Au 3 21
First Philippine Fund, Inc. Ph 2 27
---------
48
---------
Nondepository Credit Institutions - 0.7%
Aplus Co., Ltd. Ja 42 68
Green Tree Financial Corp. 10 296
The Money Store, Inc. 13 289
---------
653
---------
Security Brokers & Dealers - 0.6%
Alex Brown, Inc. 3 222
Paine Webber Group, Inc. 10 340
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562
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MANUFACTURING - 24.7%
Apparel - 0.2%
Nautica Enterprises, Inc. (b) 8 186
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Chemicals & Allied Products - 4.6%
American Home Products Corp. 7 464
BASF AG G 6 232
Bayer AG G 10 398
Bristol-Myers Squibb Co. 10 655
DSM NV Ne 1 70
E.I. DuPont de Nemours & Co. 1 149
Eli Lilly & Co. 7 571
International Specialty Products, Inc. (b) 35 455
Johnson & Johnson 7 439
Merck & Co., Inc. 5 407
Merck KGAA G 4 161
NCH Corp. 3 189
Norsk Hydro A.S. No 2 73
Union Carbide Corp. 8 379
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4,642
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8
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Investment Portfolio/April 30, 1997
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Electronic & Electrical Equipment - 2.3%
Aspect Telecommunications Corp. (b) 8 $ 142
Comverse Technology, Inc. (b) 4 165
HADCO Corp. (b) 7 299
Harman International Industries, Inc. 2 84
Haw Par Brothers International Ltd. Si 20 44
Hitachi Maxwell Ja 10 210
International Rectifier Corp. (b) 8 90
Komag, Inc. (b) 6 169
Motorola, Inc. 2 126
Park Electrochemical Corp. 4 79
Philips Electronics NV Ne 12 637
Sanmina Corp. (b) Fr 5 240
---------
2,285
---------
Fabricated Metal - 0.8%
Buderus AG G (a) 94
Bunka Shutter Co. Ltd. Ja 20 103
GFI Industries SA Fr 1 206
Oriental Holdings Bhd Ma 7 53
SCHMALBACH LUBECA AG G 2 329
---------
785
---------
Food & Kindred Products - 2.4%
Archer Daniels Midland Co. 14 253
Hudson Foods, Inc. 9 133
IBP, Inc. 7 166
Nestle Ag (Reg) Sz (a) 425
PepsiCo, Inc. 4 139
Philip Morris Co., Inc. 13 496
Sara Lee Corp. 14 567
Smithfield Foods, Inc. (b) 2 111
Superfos AS De 5 113
---------
2,403
---------
Furniture & Fixtures - 0.3%
Hillenbrand Industries, Inc. 7 301
---------
Leather - 0.3%
Wolverine World Wide, Inc. 8 317
---------
Lumber & Wood Products - 0.1%
Oakwood Homes Corp. 5 105
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9
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Investment Portfolio/April 30, 1997
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COMMON STOCKS - CONT. COUNTRY SHARES VALUE
==========================================================================
MANUFACTURING - CONT.
Machinery & Computer Equipment - 3.8%
Amatsuji Steel Ball Manufacturing Ja 14 $ 134
Applied Materials, Inc. (b) 5 274
Brunswick Corp. 4 99
Caterpillar, Inc. 3 223
Deere & Co. 3 124
EMC Corp. (b) 7 240
Fujitsu Ltd. Ja 4 42
Gateway 2000, Inc. (b) 5 274
Hewlett-Packard Co. 8 399
Hitachi Ltd. Ja 14 127
International Business Machines Corp. 3 547
Lam Research Corp. (b) 3 72
S3, Inc. (b) 5 48
Seagate Technology, Inc. (b) 14 624
Sun Microsystems, Inc. (b) 16 473
Swedish Match AB, ADR Sw 1 16
Toro Co. 3 105
---------
3,821
---------
Measuring & Analyzing Instruments - 1.2%
Bio-Rad Laboratories, Inc.,
Class A (b) 6 150
Credence Systems Corp. (b) 12 191
Esterline Technologies Corp. (b) 6 155
Fuji Photo Film Co., Ltd. Ja 5 191
Medtronic, Inc. 8 533
---------
1,220
---------
Miscellaneous Manufacturing - 0.4%
Callaway Golf Co. 12 370
---------
Paper Products - 1.1%
ACX Technologies, Inc. (b) 8 153
Longview Fibre Co. 10 161
Paragon Trade Brands, Inc. (b) 12 189
Potlatch Corp. 10 398
Saint Louis Bouchon Fr (a) 71
SCA Laakirchen AG Au (a) 171
---------
1,143
---------
Petroleum Refining - 2.7%
Amerada Hess Corp. 8 370
British Petroleum Co., PLC UK 3 358
10
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Investment Portfolio/April 30, 1997
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Exxon Corp. 6 $ 340
Kerr-McGee Corp. 7 392
Lyondell Petrochemical Co. 9 180
Murphy Oil Corp. 7 304
Phillips Petroleum Co. 3 98
USX-Marathon Group 25 691
---------
2,733
---------
Primary Metal - 0.8%
Acerinox SA Sp 3 439
Alcan Aluminum Ltd. 5 152
British Steel PLC UK 29 66
Texas Industries, Inc. 4 97
---------
754
---------
Primary Smelting - 0.4%
Phelps Dodge Corp. 5 399
---------
Printing & Publishing - 0.4%
Gannett Co., Inc. 5 436
---------
Rubber & Plastic - 0.5%
Continental AG G 8 165
Nike, Inc., Class B 6 337
---------
502
---------
Stone, Clay, Glass & Concrete - 0.3%
Global Industrial Technologies, Inc. (b) 8 146
Owens Corning Fiberglass Corp. (b) 3 121
Vitro S.A. Mx 12 32
---------
299
---------
Tobacco Products - 0.5%
B.A.T. Industries PLC UK 54 457
---------
Transportation Equipment - 1.6%
Alvis PLC UK 30 69
Arvin Industries, Inc. 17 429
Borg-Warner Automotive, Inc. 10 403
Coachmen Industries, Inc. 11 182
Ford Motor Co. 6 208
Honda Motor Co. Ltd. Ja 2 62
Strattec Security Corp. (b) (a) 8
Varlen Corp. 4 75
Volvo AB ADR Sw 5 126
---------
1,562
---------
11
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Investment Portfolio/April 30, 1997
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COMMON STOCKS - CONT. COUNTRY SHARES VALUE
==========================================================================
MINING & ENERGY - 0.9%
Crude Petroleum & Natural Gas - 0.5%
Burlington Resources, Inc. 8 $ 352
Occidental Petroleum Corp. 9 188
---------
540
---------
Metal Mining - 0.3%
Cleveland-Cliffs, Inc. 6 267
---------
Nonmetallic, Except Fuels - 0.1%
Potash Corp. of Saskatchewan, Inc. Ca 1 93
---------
------------------------------------------------------------------------
RETAIL TRADE - 4.5%
Apparel & Accessory Stores - 0.3%
Ross Stores, Inc. 10 281
---------
Auto Dealers & Gas Stations - 0.0%
Aichi Toyota Motor Ja 4 47
---------
Food Stores - 1.9%
American Stores Co. 13 569
General Nutrition Companies, Inc. (b) 14 301
Giant Food, Inc. 12 377
Safeway, Inc. (b) 16 696
---------
1,943
---------
General Merchandise Stores - 1.8%
Daiwa Co. Ja 47 213
Dollar General Corp. 13 400
Federated Department Stores, Inc. (b) 6 201
Jardine Strategic Holdings Ltd. Si 22 75
Meyer (Fred), Inc. (b) 11 452
Sears, Roebuck & Co. 7 336
Waban, Inc. (b) 6 155
---------
1,832
---------
Home Furnishings & Equipment - 0.3%
Circuit City Stores, Inc. 4 162
CompUSA, Inc. (b) 8 154
---------
316
---------
Miscellaneous Retail - 0.2%
Blair Corp. 2 23
Imasco Ltd. Ca 7 191
---------
214
---------
12
<PAGE>
Investment Portfolio/April 30, 1997
- --------------------------------------------------------------------------
SERVICES - 3.5%
Business Services - 0.5%
Logicon, Inc. 8 $ 318
Norrell Corp. 7 185
---------
503
---------
Computer Related Services - 1.1%
Cadence Design Systems, Inc. (b) 18 573
Computer Associates International, Inc. 3 175
HBO & Co. 7 364
---------
1,112
---------
Computer Software - 0.4%
McAfee Associates, Inc. (b) 5 279
Oracle Systems Corp. (b) 4 159
---------
438
---------
Engineering, Accounting, Research & Management - 0.1%
International-Muller NV Ne 3 99
---------
Health Services - 1.0%
Lincare Holdings, Inc. (b) 9 353
Rotech Medical Corp. (b) 12 189
Tenet Healthcare Corp. (b) 18 471
---------
1,013
---------
Hotels, Camps & Lodging - 0.4%
Hospitality Franchise Systems, Inc. (b) 6 355
---------
------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS & SANITARY SERVICES - 6.8%
Air Transportation - 1.1%
British Airways PLC UK 1 115
Comair Holdings, Inc. 9 190
Delta Air Lines, Inc. 7 645
Lufthansa AG G 5 70
Mesa Airlines, Inc. (b) 8 44
---------
1,064
---------
Communications - 1.2%
Southwestern Bell Corp. 2 128
Telecom Italia S.p.A It 150 397
Telefonica de Espana Sp 18 461
Telefonos de Mexico SA Mx 1 45
WorldCom, Inc. 7 168
360 Communications Co. (b) 1 13
---------
1,212
---------
13
<PAGE>
Investment Portfolio/April 30, 1997
- --------------------------------------------------------------------------
COMMON STOCKS - CONT. COUNTRY SHARES VALUE
==========================================================================
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS & SANITARY SERVICES - CONT.
Electric, Gas & Sanitary Services - 0.3%
USA Waste Services, Inc. (b) 10 $ 328
---------
Electric Services - 2.4%
Allegheny Power System, Inc. 4 92
American Electric Power Co., Inc. 14 547
Central Hudson Gas & Electric Corp. 10 307
Duke Power Co. 2 88
FPL Group, Inc. 13 558
Public Service Enterprise Group, Inc. 16 386
Unicom Corp. 10 217
Union Electric Co. 5 178
---------
2,373
---------
Gas Services - 0.9%
Consolidated Natural Gas Co. 4 201
MCN Corp., 8.750%, PRIDES 10 286
NICOR, Inc. 3 95
Pacific Enterprises 11 337
---------
919
---------
Railroad - 0.4%
Canadian Pacific Ltd. 15 366
---------
Sanitary Services - 0.1%
Yorkshire Water PLC UK 14 84
---------
Water Transportation - 0.4%
DFDS AS De (a) 74
Koninklijke Nedlloyd Groep NV (b) Ne 17 379
---------
453
---------
------------------------------------------------------------------------
WHOLESALE TRADE - 1.4%
Durable Goods - 1.3%
Arrow Electronics, Inc. (b) 2 111
Beers NV Ne 3 81
Commercial Metals Co. 12 344
Hughes Supply, Inc. 4 133
Patterson Dental Co. (b) 11 382
Shelter Components Corp. 2 22
Software Spectrum, Inc. (b) 4 48
Wyle Electronics Co. 7 237
---------
1,358
---------
14
<PAGE>
Investment Portfolio/April 30, 1997
- --------------------------------------------------------------------------
Nondurable Goods - 0.1%
Dalgety PLC UK 11 $ 53
---------
TOTAL COMMON STOCKS (cost of $40,838) 50,710
---------
PREFERRED STOCKS - 0.5%
==========================================================================
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS & SANITARY SERVICES - 0.5%
Communications
Cablevision Systems Corp.,
11.125%, PIK, Series L 1 122
Time Warner, 10.250%, Series M (a) 331
---------
TOTAL PREFERRED STOCKS (cost of $465) 453
---------
RIGHTS - 0.0%
==========================================================================
PUBLIC ADMINISTRATION - 0.0%
General Government
Mexican Government Rights W/ Series A&B 300 (a)
Venezuela Government Rights W/ Series A&B 2 (a)
---------
TOTAL RIGHTS (cost of $0) (a)
---------
BONDS & NOTES - 31.8% PAR
==========================================================================
CORPORATE FIXED-INCOME BONDS & NOTES - 12.1%
==========================================================================
MANUFACTURING - 5.0%
Chemicals & Allied Products - 0.6%
Agricultural Minerals Co., L.P.,
10.750% 09/30/03 $ 100 105
Revlon Consumer Products Corp.,
10.500% 02/15/03 250 261
Revlon Worldwide Corp.,
(c) 03/15/98 250 236
----------
602
----------
Electronic & Electrical Equipment - 0.7%
Amphenol Corp.,
12.750% 12/15/02 100 108
K&F Industries, Inc.,
10.375% 09/01/04 300 314
Unisys Corp., Senior Notes,
11.750% 10/15/04 250 262
----------
684
----------
Fabricated Metal - 0.5%
Euramax International, PLC,
11.250% 10/01/06 (d) 250 261
15
<PAGE>
Investment Portfolio/April 30, 1997
- --------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - CONT. PAR VALUE
==========================================================================
MANUFACTURING - CONT.
Fabricated Metal - cont.
Renco Metals, Inc.,
11.500% 07/01/03 $ 250 $ 260
----------
521
----------
Food & Kindred Products - 0.4%
FoodBrands America, Inc.,
10.750% 05/15/06 200 230
Van De Kamps, Inc.,
12.000% 09/15/05 150 163
----------
393
----------
Lumber & Wood Products - 0.1%
Triangle Pacific Corp.,
10.500% 08/01/03 100 106
----------
Machinery & Computer Equipment - 0.5%
IMO Industries,
11.750% 05/01/06 250 249
Shop Vac Corp.,
10.625% 09/01/03 250 264
----------
513
----------
Measuring & Analyzing Instruments - 0.2%
Intertek Finance, PLC,
10.250% 11/01/06 (e) 250 256
----------
Miscellaneous Manufacturing - 0.4%
American Standard Co.,
stepped coupon, (10.500% 06/01/98)
(f) 06/01/05 250 241
Coleman Holdings Co.,
(c) 05/27/98 150 134
----------
375
----------
Paper Products - 0.4%
Florida Coast Paper,
12.750% 06/01/03 200 194
Stone Container Corp.,
10.750% 10/01/02 250 252
----------
446
----------
Primary Metal - 0.8%
Algoma Steel, Inc.,
12.375% 07/15/05 250 276
16
<PAGE>
Investment Portfolio/April 30, 1997
- --------------------------------------------------------------------------
Kaiser Aluminum & Chemicals,
10.875% 10/15/06 $ 300 $ 315
U.S. Can Corp.,
10.125% 10/15/06 200 209
----------
800
----------
Stone, Clay, Glass & Concrete - 0.1%
Owens-Illinois, Inc.,
10.500% 06/15/02 100 105
----------
Transportation Equipment - 0.3%
Aftermarket Technology Corp.,
12.000% 08/01/04 86 94
Collins & Aikman Products Co.,
11.500% 04/15/06 200 220
----------
314
----------
------------------------------------------------------------------------
MINING & ENERGY - 0.8%
Crude Petroleum & Natural Gas - 0.2%
Ferrellgas Finance Corp., L.P.,
10.000% 08/01/01 200 206
----------
Oil & Gas Extraction - 0.6%
Falcon Drilling Co., Inc.,
9.750% 01/15/01 200 204
Gulf Canada Resources Ltd.:
9.250% 01/15/04 100 103
9.625% 07/01/05 100 105
Nuevo Energy Co.,
9.500% 04/15/06 200 205
----------
617
----------
------------------------------------------------------------------------
RETAIL TRADE - 1.1%
Building, Hardware & Garden Supply - 0.3%
ISP Holdings, Inc.,
9.750% 02/15/02 250 260
----------
Food Stores - 0.7%
Pathmark Stores, Inc.,
9.625% 05/01/03 200 186
Ralphs Grocery Co.,
10.450% 06/15/04 250 265
Smiths Food & Drug,
11.250% 05/15/07 200 223
----------
674
----------
17
<PAGE>
Investment Portfolio/April 30, 1997
- --------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - CONT. PAR VALUE
==========================================================================
RETAIL TRADE - CONT.
Miscellaneous Retail - 0.1%
Finlay Fine Jewelry Corp.,
10.625% 05/01/03 $ 100 $ 104
----------
------------------------------------------------------------------------
SERVICES - 1.6%
Amusement & Recreation - 0.2%
E & S Holdings,
10.375% 10/01/06 250 258
----------
Business Services - 0.3%
Pierce Leahy Corp.,
11.125% 07/15/06 250 271
----------
Hotels, Camps & Lodging - 0.8%
Eldorado Resorts Corp.,
10.500% 08/15/06 250 263
HMH Properties, Inc.,
9.500% 05/15/05 150 152
Station Casinos, Inc.,
10.125% 03/15/06 150 147
Wyndham Hotel Corp.,
10.500% 05/15/06 200 216
----------
778
----------
Private Households - 0.3%
Allied Waste North America,
10.250% 12/(e)06 250 263
----------
------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS & SANITARY SERVICES - 3.6%
Air Transportation - 0.5%
Greenwich Air Services, Inc.,
10.500% 06/01/06 250 285
U.S. Air, Inc.,
10.375% 03/01/13 200 210
----------
495
----------
Broadcasting - 0.4%
Allbritton Communications Co.,
11.500% 08/15/04 100 105
NWCG Holding Corp.,
(c) 06/15/99 175 150
Young Broadcasting Corp.,
11.750% 11/15/04 100 108
----------
363
----------
18
<PAGE>
Investment Portfolio/April 30, 1997
- --------------------------------------------------------------------------
Cable - 0.6%
Bell Cablemedia, PLC,
stepped coupon, (11.950% 07/15/99)
(f) 07/15/04 (d) $ 150 $ 133
Cablevision Systems Corp.,
10.750% 04/01/04 100 103
Marcus Cable Co., L.P.,
11.875% 10/01/05 250 261
Videotron Holding, PLC,
stepped coupon, (11.000% 08/15/00)
(f) 08/15/05 (d) 100 81
----------
578
----------
Communications - 0.7%
Sprint Spectrum, L.P.,
stepped coupon, (12.500% 08/15/99)
(f) 08/15/06 250 174
Teleport Communications,
stepped coupon, (11.125% 07/01/99)
(f) 07/01/07 250 172
UNC, Inc.,
11.000% 06/01/06 300 345
----------
691
----------
Electric, Gas & Sanitary Services - 0.2%
Mesa Operating Co.,
10.625% 07/01/06 200 218
----------
Electric Services - 0.1%
California Energy Co., Inc.,
9.500% 09/15/06 100 104
----------
Gas Services - 0.5%
California Energy Co., Inc.,
9.875% 06/30/03 250 262
HS Resources, Inc.,
9.250% 11/15/06 250 245
----------
507
----------
Telecommunication - 0.6%
Brooks Fiber Properties, Inc.,
stepped coupon, (10.875% 03/01/01)
(f) 03/01/06 350 227
MFS Communications Co., Inc.,
stepped coupon, (9.375% 01/15/99)
(f) 01/15/04 200 183
19
<PAGE>
Investment Portfolio/April 30, 1997
- --------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - CONT. PAR VALUE
==========================================================================
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS & SANITARY SERVICES - CONT.
Telecommunication - cont.
PanAmSat Corp.,
stepped coupon, (11.375% 08/01/98)
(f) 08/01/03 $ 200 $ 190
----------
600
----------
TOTAL CORPORATE FIXED-INCOME
BONDS & NOTES (cost of $11,809) 12,102
----------
FOREIGN GOVERNMENT &
AGENCY OBLIGATIONS - 10.7% CURRENCY PAR VALUE
==========================================================================
Argentina Global Bonds:
9.250% 02/23/01 (g) 455 471
11.000% 10/09/06 (g) 600 645
Government of Finland Bonds,
7.250% 04/18/06 FM 5,000 1,029
Government of Sweden,
10.250% 05/05/03 SK 5,500 826
Kingdom of Denmark,
8.000% 05/15/03 (h) DK 6,620 1,118
Mexican Brady Bonds,
6.250% 12/31/19 (i) 300 218
Mexican Global Bonds:
9.750% 02/06/01 (i) 170 177
11.375% 09/15/16 (i) 750 790
Republic of Poland (Brady),
Past Due Interest, stepped coupon,
(5.000% 10/27/98) 4.000% 10/27/14 (j) 500 406
Republic of Venezuela Par Brady,
6.750% 03/31/20 (k) 300 218
Spanish Government Bonds,
11.300% 01/15/02 SP 157,380 1,305
United Kingdom,
10.000% 09/08/03 KB 835 1,538
Victoria Treasury Corp.,
12.500% 10/15/03 A$ 675 655
Western Australia Treasury Corp.,
12.000% 08/01/01 A$ 1,500 1,372
----------
TOTAL FOREIGN GOVERNMENT & AGENCY
OBLIGATIONS (cost of $11,095) 10,768
----------
20
<PAGE>
Investment Portfolio/April 30, 1997
- --------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS - 9.0%
==========================================================================
U.S. Treasury Bonds:
8.750% 05/15/17 (h) $ 4,663 $ 5,512
11.625% 11/15/04 (h) 450 579
----------
6,091
----------
U.S. Treasury Note,
11.875% 11/15/03 (h) 2,266 2,884
----------
TOTAL U.S. GOVERNMENT OBLIGATIONS (cost of $9,192) 8,975
----------
TOTAL BONDS & NOTES (cost of $32,096) 31,845
----------
TOTAL INVESTMENTS - 82.9% (cost of $73,399) (l) 83,008
----------
SHORT-TERM OBLIGATIONS - 16.0%
==========================================================================
Repurchase agreement with Chase Securities, Inc., dated
04/30/97, due 05/01/97 at 5.340%, collateralized by U.S.
Treasury notes with various maturities to 2016, market
value $16,518 (repurchase proceeds $16,059) 16,057 16,057
----------
FORWARD CURRENCY CONTRACTS - 0.0% (m) 3
==========================================================================
OTHER ASSETS & LIABILITIES, NET - 1.1% 1,109
==========================================================================
NET ASSETS - 100.0% $100,177
==========
NOTES TO INVESTMENT PORTFOLIO:
==========================================================================
(a) Rounds to less than one.
(b) Non-income producing.
(c) Zero coupon bond.
(d) This is a British security. Par amount is stated in U.S. dollars.
(e) 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,
1997, the value of these securities amounted to $519 or 0.5% of net assets.
(f) Currently zero coupon. Shown parenthetically is the interest rate to be
paid and the date the Fund will begin accruing this rate.
(g) These are Argentinean securities. Par amount is stated in U.S. dollars.
(h) These securities, or a portion thereof, with a total market value of $6,025
are being used to collateralize the forward currency exchange contracts
shown below.
(i) These are Mexican securities. Par amount is stated in U.S. dollars.
(j) This is a Polish security. Par amount is shown in U.S. dollars. Shown
parenthetically is the interest rate to be paid and the date the Fund will
begin accruing this rate.
(k) This is a Venezuelan security. Par amount is stated in U.S. dollars.
(l) Cost for federal income tax purposes is the same.
21
<PAGE>
Investment Portfolio/April 30, 1997
- -------------------------------------------------------------------------------
(m) As of April 30, 1997, the Fund had entered into the following
forward currency exchange contracts:
Net Unrealized
Appreciation
Contracts In Exchange Settlement (Depreciation)
to Deliver For Date (U.S. $)
- -------------------------------------------------------------------------------
A$ 4 US$ 3 05/01/1997 $ (a)
KB 725 US$ 1,175 05/12/1997 (3)
DK 6,000 US$ 916 05/20/1997 5
FF 6,000 US$ 1,032 05/20/1997 2
SK 5,200 US$ 674 05/21/1997 11
FM 4,030 US$ 781 05/22/1997 4
A$ 5,350 US$ 4,161 05/27/1997 (16)
-----------
$ 3
===========
Summary of Securities
by Country/Currency Country/Currency Value % of Total
- -------------------------------------------------------------------------------
United States $ 62,334 75.1
United Kingdom UK/KB 3,489 4.2
Spain Sp/SP 2,428 2.9
Australia Au/A$ 2,219 2.7
Germany G 1,449 1.8
Denmark De/DK 1,305 1.6
Netherlands Ne 1,266 1.5
Mexico Mx 1,262 1.5
Japan Ja 1,259 1.5
Argentina 1,116 1.3
Finland FM 1,029 1.2
Sweden Sw/SK 968 1.2
France Fr 517 0.6
Canada Ca 429 0.5
Switzerland Sz 425 0.5
Poland 406 0.5
Italy It 397 0.5
Venezuela 218 0.3
Hong Kong HK 142 0.2
Singapore Si 119 0.1
Belgium Be 78 0.1
Norway No 73 0.1
Malaysia Ma 53 0.1
Philippines Ph 27 0.0
------------- -----------
$ 83,008 100.0
============= ===========
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
PRIDES Preferred Redeemable Increased Dividend Equity Securities
See notes to financial statements.
22
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
APRIL 30, 1997 (UNAUDITED)
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $73,399) $ 83,008
Short-term obligations 16,057
-------------
99,065
Cash held in foreign banks (cost $2) $ 2
Receivable for:
Interest 915
Investments sold 652
Fund shares sold 429
Dividends 81
Expense reimbursement due from Adviser 13
Foreign tax reclaims 7
Deferred organization expenses 35
Unrealized appreciation on forward
currency exchange contracts 3
Other 1 2,138
------------ -------------
Total Assets 101,203
LIABILITIES
Payable for:
Investments purchased 654
Fund shares repurchased 370
Accrued:
Deferred Trustees fees 1
Other 1
------------
Total Liabilities 1,026
-------------
NET ASSETS $ 100,177
=============
Net asset value & redemption price per share -
Class A ($36,321/2,796) $ 12.99
=============
Maximum offering price per share - Class A
($12.99/0.9525) $ 13.64(a)
=============
Net asset value & offering price per share -
Class B ($58,935/4,542) $ 12.97(b)
=============
Net asset value & redemption price per share -
Class D ($4,921/379) $ 12.99(b)
=============
Maximum offering price per share - Class D
($12.99/0.9900) $ 13.12
=============
(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.
23
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1997
(UNAUDITED)
(in thousands)
INVESTMENT INCOME
Interest $ 1,621
Dividends 345
-------------
Total investment income (net of nonrebatable
foreign taxes withheld at source which
amounted to $15) 1,966
EXPENSES
Management fee $ 297
Service fee 106
Distribution fee - Class A 46
Distribution fee - Class B 185
Distribution fee - Class D 17
Transfer agent 137
Bookkeeping fee 20
Registration fee 21
Custodian fee 8
Audit fee 9
Trustees fee 3
Reports to shareholders 4
Legal fee 3
Amortization of deferred
organization expenses 7
Other 4
------------
867
Fees waived by the Adviser (46) 821
------------ -------------
Net Investment Income 1,145
-------------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain on:
Investments 262
Foreign currency transactions 461
------------
Net Realized Gain 723
Net unrealized appreciation (depreciation) during
the period on:
Investments 766
Foreign currency transactions (8)
------------
Net Unrealized Appreciation 758
-------------
Net Gain 1,481
-------------
Net Increase in Net Assets from Operations $ 2,626
=============
See notes to financial statements.
24
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
Six months ended Year ended
(in thousands) April 30 October 31
------------ -------------
INCREASE (DECREASE) IN NET ASSETS 1997 1996
Operations:
Net investment income $ 1,145 $ 1,374
Net realized gain 723 1,399
Net unrealized appreciation 758 3,841
------------ -------------
Net Increase from Operations 2,626 6,614
Distributions:
From net investment income - Class A (471) (508)
From net realized gains - Class A (485) (59)
From net investment income - Class B (650) (650)
From net realized gains - Class B (783) (69)
From net investment income - Class D (59) (85)
From net realized gains - Class D (70) (14)
------------ -------------
108 5,229
------------ -------------
Fund Share Transactions:
Receipts for shares sold - Class A 11,776 13,772
Value of distributions reinvested - Class A 900 523
Cost of shares repurchased - Class A (1,974) (7,076)
------------ -------------
10,702 7,219
------------ -------------
Receipts for shares sold - Class B 20,593 25,817
Value of distributions reinvested - Class B 1,343 659
Cost of shares repurchased - Class B (3,141) (7,446)
------------ -------------
18,795 19,030
------------ -------------
Receipts for shares sold - Class D 1,859 1,940
Value of distributions reinvested - Class D 115 94
Cost of shares repurchased - Class D (601) (3,107)
------------ -------------
1,373 (1,073)
------------ -------------
Net Increase from Fund
Share Transactions 30,870 25,176
------------ -------------
Total Increase 30,978 30,405
NET ASSETS
Beginning of period 69,199 38,794
------------ -------------
End of period (including undistributed
net investment income of $588 and $242,
respectively) $ 100,177 $ 69,199
============ =============
Statement of Changes in Net Assets continued on following page.
See notes to financial statements.
25
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS - CONT.
(Unaudited)
Six months ended Year ended
(in thousands) April 30 October 31
------------ -------------
NUMBER OF FUND SHARES 1997 1996
Sold - Class A 896 1,111
Issued for distributions reinvested - Class A 69 42
Repurchased - Class A (150) (575)
------------ -------------
815 578
------------ -------------
Sold - Class B 1,572 2,088
Issued for distributions reinvested - Class B 103 54
Repurchased - Class B (240) (605)
------------ -------------
1,435 1,537
------------ -------------
Sold - Class D 141 157
Issued for distributions reinvested - Class D 9 8
Repurchased - Class D (46) (248)
------------ -------------
104 (83)
------------ -------------
See notes to financial statements.
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997 (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, 1997, 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 investment objective is to
seek 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 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 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.
27
<PAGE>
Notes to Financial Statements/April 30, 1997
- --------------------------------------------------------------------------------
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 fees),
realized and unrealized gains (losses), are allocated to each class
proportionately on a daily basis for purposes of determining the net asset value
of each class.
The per share data was calculated using 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.
The value of additional securities received as an interest payment is recorded
as income and as the cost basis of such securities.
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.
28
<PAGE>
Notes to Financial Statements/April 30, 1997
- --------------------------------------------------------------------------------
Deferred organization expenses: The Fund incurred expenses of $69,500 in
connection with its organization, initial registration with the Securities and
Exchange Commission and with various states, and the initial public offering of
its shares. These expenses were deferred and are being amortized on a
straight-line basis over five years.
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 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.
29
<PAGE>
Notes to Financial Statements/April 30, 1997
- --------------------------------------------------------------------------------
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
- --------------------------------------------------------------------------------
Management fee: Colonial Management Associates, Inc. (the Adviser) is the
investment Adviser of the Fund and furnishes accounting and other services and
office facilities for a monthly fee equal to 0.70% annually of the Fund's
average net assets.
Bookkeeping fee: The Adviser provides bookkeeping and pricing services for
$27,000 per year plus 0.035% of the Fund's average net assets over $50 million.
Transfer agent: Colonial Investors Service Center, Inc. (the Transfer Agent), an
affiliate of the Adviser, provides shareholder services for a monthly fee equal
to 0.25% annually of the Fund's average net assets and receives 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. During the six months ended April 30, 1997, the Fund has
been advised that the Distributor retained net underwriting discounts of $17,362
on sales of the Fund's Class A shares and received contingent deferred sales
charges (CDSC) of $42,948 and $2,485, 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 for amounts paid by the Distributor to dealers who
sold such shares.
Expense limits: The Adviser has agreed, until further notice, to waive fees and
bear certain Fund expenses to the extent that total expenses (exclusive of
service and distribution fees, brokerage commissions, interest, taxes and
extraordinary expenses, if any) exceed 1.10% 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.
30
<PAGE>
Notes to Financial Statements/April 30, 1997
- --------------------------------------------------------------------------------
NOTE 4. PORTFOLIO INFORMATION
- --------------------------------------------------------------------------------
Investment activity: During the six months ended April 30, 1997, purchases and
sales of investments, other than short-term obligations, were $38,919,470 and
$13,532,756, respectively, of which $2,696,320 and none, respectively, were U.S.
government securities.
Unrealized appreciation (depreciation) at April 30, 1997, based on cost of
investments for both financial statement and federal income tax purposes was:
Gross unrealized appreciation $ 12,294,873
Gross unrealized depreciation (2,685,723)
--------------
Net unrealized appreciation $ 9,609,150
==============
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, 1997.
NOTE 6. COMPOSITION OF NET ASSETS
- --------------------------------------------------------------------------------
At April 30, 1997, net assets consisted of:
Capital paid in $ 89,639
Undistributed net investment income 588
Accumulated net realized gain 359
Net unrealized appreciation (depreciation) on:
Investments 9,609
Foreign currency transactions (18)
--------------
$ 100,177
==============
31
<PAGE>
FINANCIAL HIGHLIGHT
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
(Unaudited)
Six months ended April 30
===============================================
1997
Class A Class B Class D
--------- ---------- ---------
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 12.910 $ 12.890 $ 12.910
--------- ---------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a)(b) 0.196 0.166 0.166
Net realized and
unrealized gain (b) 0.320 0.322 0.323
--------- ---------- ---------
Total from Investment
Operations 0.516 0.488 0.489
--------- ---------- ---------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS:
From net investment income (0.203) (0.175) (0.176)
From net realized gains (0.233) (0.233) (0.233)
--------- ---------- ---------
Total Distributions Declared
to Shareholders (0.436) (0.408) (0.409)
--------- ---------- ---------
Net asset value -
End of period $ 12.990 $ 12.970 $ 12.990
========= ========= =========
Total return (c)(d) 4.01%(e) 3.79%(e) 3.79%(e)
========= ========= =========
RATIOS TO AVERAGE NET ASSETS
Expenses 1.65%(f)(g) 2.10%(f)(g) 2.10%(f)(g)
Net investment income 2.99%(f)(g) 2.54%(f)(g) 2.54%(f)(g)
Fees and expenses waived
or borne by the Adviser 0.11%(f)(g) 0.11%(f)(g) 0.11%(f)(g)
Portfolio turnover 18%(e) 18%(e) 18%(e)
Average commission rate (h) $ 0.0242 $ 0.0242 $ 0.0242
Net assets at end
of period (000) $ 36,321 $ 58,935 $ 4,921
(a) Net of fees and expenses waived or
borne by the Adviser which
amounted to: $0.007 $0.007 $0.007
<CAPTION>
Year ended October 31
===============================================
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)(b) 0.369 0.314 0.314
Net realized and
unrealized gain (b) 1.264 1.260 1.258
--------- --------- ---------
Total from Investment
Operations 1.633 1.574 1.572
--------- --------- ---------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.333) (0.284) (0.272)
From net realized gains (0.040) (0.040) (0.040)
--------- --------- ---------
Total Distributions Declared
to Shareholders (0.373) (0.324) (0.312)
--------- --------- ---------
Net asset value -
End of period $ 12.910 $ 12.890 $ 12.910
========= ========= =========
Total return (c)(d) 14.24% 13.71% 13.68%
========= ========= =========
RATIOS TO AVERAGE NET ASSETS
Expenses 1.65%(g) 2.10%(g) 2.10%(g)
Net investment income 2.99%(g) 2.54%(g) 2.54%(g)
Fees and expenses waived
or borne by the Adviser 0.19%(g) 0.19%(g) 0.19%(g)
Portfolio turnover 59% 59% 59%
Average commission rate (h) $ 0.0299 $ 0.0299 $ 0.0299
Net assets at end
of period (000) $ 25,580 $ 40,065 $ 3,554
(a) Net of fees and expenses waived
or borne by the Adviser which
amounted to: $ 0.023 $ 0.023 $ 0.023
</TABLE>
(b) Per share data was calculated using average shares outstanding
during the period.
(c) Total return at net asset value assuming no initial sales charge or
contingent deferred sales charge.
(d) Had the Adviser not waived or reimbursed a portion of expenses,
total return would have been reduced.
(e) Not annualized.
(f) 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) 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.
32 & 33
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each
period are as follows:
<TABLE>
<CAPTION>
Year ended October 31
=========================================
1995
Class A Class B Class D
---------- --------- ---------
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 9.910 $ 9.900 $ 9.900
--------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income(a)(b) 0.325 0.277 0.277
Net realized and
unrealized gain(loss)(b) 1.764 1.769 1.774
--------- --------- ---------
Total from Investment
Operations 2.089 2.046 2.051
--------- --------- ---------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment
income (0.349) (0.306) (0.301)
--------- --------- ---------
Net asset value -
End of period $ 11.650 $ 11.640 $ 11.650
========= ========= =========
Total return(d)(e) 21.47% 21.00% 21.04%
========= ========= =========
RATIOS TO AVERAGE NET ASSETS
Expenses 1.65%(g) 2.10%(g) 2.10%(g)
Net investment income 3.05%(g) 2.60%(g) 2.60%(g)
Fees waived or borne
by the Adviser 0.43%(g) 0.43%(g) 0.43%(g)
Portfolio turnover 49% 49% 49%
Net assets at end
of period(000) $ 16,346 $ 18,284 $ 4,164
(a) Net of fees and expenses waived
or borne by the Adviser which
amounted to: $ 0.042 $ 0.042 $ 0.042
<CAPTION>
Year ended October 31
=========================================
1994(c)
Class A Class B Class D
---------- --------- ---------
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 10.000 $ 10.000 $ 10.000
--------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income(a)(b) 0.035 0.029 0.029
Net realized and
unrealized gain(loss)(b) (0.125) (0.129) (0.129)
--------- --------- ---------
Total from Investment
Operations (0.090) (0.100) (0.100)
--------- --------- ---------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment
income -- -- --
--------- --------- ---------
Net asset value -
End of period $ 9.910 $ 9.900 $ 9.900
========= ========= =========
Total return(d)(e) (0.90)%(f) (1.00)%(f) (1.00)%(f)
========= ========= =========
RATIOS TO AVERAGE NET ASSETS
Expenses 1.65%(h) 2.10%(h) 2.10%(h)
Net investment income 3.01%(h) 2.56%(h) 2.56%(h)
Fees waived or borne
by the Adviser 0.35%(h) 0.35%(h) 0.35%(h)
Portfolio turnover 0%(h) 0%(h) 0%(h)
Net assets at end
of period(000) $ 6,394 $ 6,332 $ 2,231
(a) Net of fees and expenses waived
or borne by the Adviser which
amounted to: $ 0.004 $ 0.004 $ 0.004
</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.
(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.
34 & 35
<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 on
most funds; $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.
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 calendar day of each month unless the 10th falls on a
non-business day or the first business day of the week. If this occurs, the
payable date will be the previous business day. Dividends and capital gains must
be reinvested.
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.
Colonial Retirement Plans: 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.
Exchanges are not available on all funds. 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.
36
<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 7:00 pm ET. Transactions received after the close of the New York Stock
Exchange will receive the next business day's closing price.
Literature - 1-800-426-3750
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
37
<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.)
38
<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
Colonial at 1-800-426-3750 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.
39
<PAGE>
[LOGO] Colonial
Mutual Funds
Mutual Funds for
Planned Portfolios
- --------------------------------------------------------------------------------
TRUSTEES
Robert J. Birnbaum
Retired (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief
Operating Officer, New York Stock Exchange, Inc.)
Tom Bleasdale
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
Lora S. Collins
Attorney (formerly Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel)
James E. Grinnell
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
William D. Ireland, Jr.
Retired (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
Partner, Development Capital, L.L.C. (formerly Dean, College of Business and
Management, University of Maryland; 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.
Retired (formerly Chairman of the Board and 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
Retired Partner, Peat Marwick Main & Co. (formerly Management Consultant,
Saatchi and Saatchi Consulting Ltd. and Principal and International Practice
Director, Management Consulting, Peat Marwick Main & Co.)
Sinclair Weeks, Jr.
Chairman of the Board, Reed & Barton Corporation
Colonial Investment Services, Inc., Distributor (C) 1997
A Liberty Financial Company (NYSE: L)
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
SB-03/663D-0497 M (6/97)
- --------------------------------------------------------------------------------
