COLONIAL GLOBAL EQUITY FUND ANNUAL REPORT
OCTOBER 31, 1997
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Not FDIC May Lose Value
Insured No Bank Guarantee
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COLONIAL GLOBAL EQUITY FUND HIGHLIGHTS
NOVEMBER 1, 1996 - OCTOBER 31, 1997
INVESTMENT OBJECTIVE: Colonial Global Equity Fund seeks long-term growth by
investing primarily in global equities.
THE FUND IS DESIGNED TO OFFER:
* Opportunities for long-term growth of capital
* International investment exposure
* Global diversification to help reduce risk
* Experienced professional management
PORTFOLIO MANAGER COMMENTARY: "During the past year, generally favorable
economic conditions worldwide provided the Fund with numerous opportunities to
participate in strong earnings growth. We believe that these strong global
market conditions should persist over the next six to twelve months."
-- Gita Rao & Nicolas Ghajar
COLONIAL GLOBAL EQUITY FUND PERFORMANCE
CLASS A CLASS B CLASS C(1)
Inception date 6/8/92 6/8/92 8/1/97
12-month distributions declared per share $1.508 $1.443 -
12-month total returns, assuming 18.92% 18.02% (7.34)%
reinvestment of all distributions
and no sales charge or contingent
deferred sales charge (CDSC)
Net asset value per share on 10/31/97 $14.28 $14.13 $14.26
TOP FIVE HOLDINGS(2) TOP FIVE COUNTRIES(2)
(as of 10/31/97) (as of 10/31/97)
- ---------------- ----------------
1. Bass PLC.............. 1.6% 1. United States......... 25.0%
2. Rhone Poulenc......... 1.5% 2. United Kingdom........ 10.8%
3. Nokia Corp............ 1.5% 3. Germany............... 6.8%
4. Nestle AG............. 1.5% 4. Spain................. 5.2%
5. Bancaria de Espana.... 1.5% 5. Japan................. 4.7%
(1) Class C share total returns are cumulative since inception on August 1,
1997.
(2) 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 the annual report for Colonial
Global Equity Fund. This report reflects on the
investment environment for the 12 months ended October
31, 1997 and on the performance of your Fund.
Both international and domestic stock markets were [PHOTO]
generally strong during much of the period and the
Fund's investment in stocks of established international
and U.S. companies offered shareholders a way to
participate in the global economic revival. Many of the world's economies are
less mature than the U.S. economy and stronger growth prospects provide these
international stocks with considerable opportunities for price gains.
Investments in the U.S. market stand to benefit from attractive economic
fundamentals, including low inflation, low interest rates, a stable currency and
political stability. While many markets experienced price gains during the
period, a currency crisis in Southeast Asia during the final months had a
negative spillover effect on stock markets worldwide. During the "sorting out"
period, the Fund's emphasis on fundamentally strong stocks in well-established
markets served to stabilize returns and shield investors from much of this
volatility.
In addition to providing attractive growth prospects, a global fund offers an
opportunity to diversify your core portfolio by adding international
investments. World stock markets do not tend to move in step with the domestic
stock market, and many international markets have historically outperformed the
U.S. market. Looking ahead, economic growth prospects worldwide remain
attractive.
The following report will provide you with specific information on your Fund's
performance as well as an in-depth report from your portfolio manager. Thank you
for giving us the opportunity to serve your investment needs.
Respectfully,
/s/ Harold W. Cogger
Harold W. Cogger
President
December 10, 1997
Because market conditions change frequently, there can be no assurance that the
trends described will continue.
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3
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PORTFOLIO MANAGEMENT REPORT
GITA RAO is Portfolio Manager of Colonial Global Equity Fund and is vice
president of Colonial Management Associates, Inc. NICOLAS GHAJAR is Associate
Portfolio Manager of the Fund. What follows is a discussion of the Fund's
performance for the year ended October 31, 1997.
FAVORABLE ECONOMIC CONDITIONS RESULTED IN A STRONG GLOBAL MARKET CYCLE
Low inflation, stable interest rates worldwide and good economic growth,
particularly in the U.S., Europe and Latin America, combined to support
attractive levels of earnings growth. Certain countries had declining currencies
which benefited export-oriented companies. These companies were able to improve
their price competitiveness and maintain their earnings growth.
The currency crisis in Southeast Asia had a minimal impact on the Fund's
holdings. The majority of the Fund's assets are invested in the U.S. and Europe,
regions which derive only a small percentage of their Gross Domestic Product
(GDP) from trade with Southeast Asia. More significantly affected by the crisis
were Japanese companies who have invested heavily in developing Asian nations.
Because the Fund has a relatively small proportion of its assets invested in
Japan, the Fund's net asset value was protected during the recent crisis.
ATTRACTIVE OPPORTUNITIES IN EUROPE, SCANDINAVIA AND THE FAR EAST
Many European countries were experiencing an economic surge during the period.
Auto manufacturers, specialty chemical producers and industrial equipment
manufacturers enjoyed strong local and export demand for their products. For
example, Stork N.V., a Dutch manufacturer of specialty chemicals and industrial
textile machinery, performed very well. The company benefited from the German
economic recovery as well as from strong export demand from the U.S. We bought
our holding in June 1996 and then sold it in October 1997 as the stock became
more expensive relative to other stocks in its industry. However, over the
holding period the stock outperformed the Amsterdam mid-cap index by 6%.
In Scandinavia, the telecommunications sector was robust and offered a number of
attractively valued stocks. We purchased a significant position in Nokia, a
Finnish manufacturer of cellular phones, in mid January 1997. We believed this
stock would generate attractive earnings growth based on its well-recognized
name, good product strategy, strong European market share and aggressive entry
into high growth emerging markets. To date, Nokia has outperformed the local
Finnish stock index by over 16%.
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4
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In Japan, defensive stocks such as pharmaceuticals and non-export oriented
manufacturers held up well. While the performance of many Japanese stocks has
been hampered by the Asian currency crisis, we believe the fundamentals of many
of these companies remain strong.
FUND PERFORMANCE REFLECTS OVERALL GLOBAL STRENGTH
For the 12-month period, the Fund generated a total return of 18.92% for Class A
shares, based on net asset value, comparing favorably to the Morgan Stanley
Capital International World (GDP) Index with a price return of 14.76%.
Shareholders benefited from the Fund's large exposure to a strong U.S. stock
market, a lack of exposure to Southeast Asian companies, a smaller position in
Japanese stocks than the Index and significant holdings of export-oriented
stocks in countries with weaker currencies.
GLOBAL MARKETS SHOULD CONTINUE TO OFFER ATTRACTIVE VALUES
We expect that many countries will participate in the global economic revival,
generating strong earnings growth over the next six to twelve months. However,
some economies, including the U.S., are in the late stages of their economic
cycle. The European economies are converging at the same stage in their cycles.
This places greater importance on identifying attractively valued industries and
stocks once countries are selected. In the months ahead, we are confident that
we will have many opportunities to find attractively priced stocks offering good
long-term earnings growth potential.
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5
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COLONIAL GLOBAL EQUITY FUND'S INVESTMENT PERFORMANCE VS.
THE MORGAN STANLEY CAPITAL INTERNATIONAL WORLD (GDP) INDEX
Change in Value of $10,000 from 6/30/92 - 10/31/97
CLASS A SHARES
Based on NAV and POP
CEGF CLASS A SHARES
MSCI WORLD
AS OF DATE NAV POP (GDP WEIGHTED) INDEX
6/30/92 10000 9425 $10,000
7/31/92 10080.81 9501.161 $9,888
8/31/92 9868.687 9301.237 $10,095
9/30/92 9747.475 9186.995 $9,845
10/31/92 9434.344 8891.869 $9,596
11/30/92 9505.051 8958.511 $9,700
12/31/92 9690.426 9133.227 $9,725
1/31/93 9946.245 9374.336 $9,802
2/28/93 10069.04 9490.068 $10,060
3/31/93 10539.75 9933.71 $10,555
4/30/93 10754.63 10136.24 $11,097
5/31/93 11010.45 10377.35 $11,286
6/30/93 10733.58 10116.4 $11,147
7/31/93 10960.86 10330.61 $11,335
8/31/93 11745.99 11070.59 $11,988
9/30/93 11756.32 11080.33 $11,751
10/31/93 12145.88 11450.32 $12,040
11/30/93 11973.26 11284.8 $11,359
12/31/93 13101.27 12347.94 $11,913
1/31/94 13685.4 12898.49 $12,649
2/28/94 13257.73 12495.41 $12,455
3/31/94 12704.89 11974.36 $12,137
4/30/94 12861.35 12121.83 $12,572
5/31/94 12746.61 12013.68 $12,429
6/30/94 12567.44 11844.81 $12,274
7/31/94 13008.77 12260.77 $12,593
8/31/94 13418.58 12647.01 $12,901
9/30/94 13124.36 12369.71 $12,514
10/31/94 13334.52 12567.78 $12,824
11/30/94 12767.09 12032.98 $12,276
12/31/94 12889.25 12148.11 $12,384
1/31/95 12509.81 11790.5 $12,273
2/28/95 12923.74 12180.62 $12,443
3/31/95 13211.19 12451.54 $12,898
4/30/95 13613.62 12830.83 $13,379
5/31/95 13878.07 13080.08 $13,489
6/30/95 14095.25 13284.77 $13,512
7/31/95 15045.75 14180.62 $14,221
8/31/95 14767.55 13918.42 $13,811
9/30/95 14767.55 13918.42 $14,097
10/31/95 14431.4 13601.6 $13,808
11/30/95 14663.23 13820.1 $14,191
12/31/95 15009.89 14146.82 $14,633
1/31/96 15502.02 14610.65 $14,925
2/29/96 15649.66 14749.8 $14,983
3/31/96 15883.42 14970.12 $15,147
4/30/96 16350.94 15410.76 $15,518
5/31/96 16486.28 15538.31 $15,495
6/30/96 16388.07 15445.76 $15,572
7/31/96 15819.56 14909.93 $15,026
8/31/96 16116.17 15189.5 $15,124
9/30/96 16536.38 15585.54 $15,663
10/31/96 16610.54 15655.43 $15,697
11/30/96 17525.1 16517.41 $16,534
12/31/96 17865.7 16838.42 $16,315
1/31/97 18044.91 17007.32 $16,496
2/28/97 18155.19 17111.26 $16,583
3/31/97 17934.62 16903.38 $16,469
4/30/97 18279.25 17228.2 $16,800
5/31/97 19258.01 18150.67 $17,696
6/30/97 20237.48 19073.82 $18,618
7/31/97 21288.77 20064.67 $19,384
8/31/97 19711.83 18578.4 $18,065
9/31/97 21025.95 19816.96 $19,126
10/31/97 19753.33 18617.51 $18,014
CLASS B SHARES
Based on NAV and Maximum CDSC
CEGF CLASS B SHARES
MSCI WORLD
AS OF DATE NAV POP (GDP WEIGHTED) INDEX
6/30/92 10000 10000 $10,000
7/31/92 10080.89 10080.89 $9,888
8/31/92 9868.554 9868.554 $10,095
9/30/92 9726.997 9726.997 $9,845
10/31/92 9413.549 9413.549 $9,596
11/30/92 9484.327 9484.327 $9,700
12/31/92 9646.364 9646.364 $9,725
1/31/93 9891.093 9891.093 $9,802
2/28/93 10013.46 10013.46 $10,060
3/31/93 10472.32 10472.32 $10,555
4/30/93 10676.26 10676.26 $11,097
5/31/93 10920.99 10920.99 $11,286
6/30/93 10646.48 10646.48 $11,147
7/31/93 10872.12 10872.12 $11,335
8/31/93 11641.38 11641.38 $11,988
9/30/93 11641.38 11641.38 $11,751
10/31/93 12020.88 12020.88 $12,040
11/30/93 11846.51 11846.51 $11,359
12/31/93 12956.45 12956.45 $11,913
1/31/94 13513.94 13513.94 $12,649
2/28/94 13080.34 13080.34 $12,455
3/31/94 12522.85 12522.85 $12,137
4/30/94 12677.71 12677.71 $12,572
5/31/94 12543.5 12543.5 $12,429
6/30/94 12363.13 12363.13 $12,274
7/31/94 12788.01 12788.01 $12,593
8/31/94 13192.17 13192.17 $12,901
9/30/94 12891.64 12891.64 $12,514
10/31/94 13088.54 13088.54 $12,824
11/30/94 12528.94 12528.94 $12,276
12/31/94 12631.88 12631.88 $12,384
1/31/95 12259.02 12259.02 $12,273
2/28/95 12665.77 12665.77 $12,443
3/31/95 12936.94 12936.94 $12,898
4/30/95 13321.09 13321.09 $13,379
5/31/95 13558.36 13558.36 $13,489
6/30/95 13765.7 13765.7 $13,512
7/31/95 14684.93 14684.93 $14,221
8/31/95 14401.21 14401.21 $13,811
9/30/95 14401.21 14401.21 $14,097
10/31/95 14060.76 14060.76 $13,808
11/30/95 14276.38 14276.38 $14,191
12/31/95 14604.74 14604.74 $14,633
1/31/96 15072.77 15072.77 $14,925
2/29/96 15216.77 15216.77 $14,983
3/31/96 15420.78 15420.78 $15,147
4/30/96 15840.81 15840.81 $15,518
5/31/96 15972.81 15972.81 $15,495
6/30/96 15855.36 15855.36 $15,572
7/31/96 15302.82 15302.82 $15,026
8/31/96 15579.09 15579.09 $15,124
9/30/96 15975.48 15975.48 $15,663
10/31/96 16035.53 16035.53 $15,697
11/30/96 16912.38 16912.38 $16,534
12/31/96 17237.25 17237.25 $16,315
1/31/97 17384.58 17384.58 $16,496
2/28/97 17478.33 17478.33 $16,583
3/31/97 17264.04 17264.04 $16,469
4/30/97 17572.08 17572.08 $16,800
5/31/97 18509.62 18509.62 $17,696
6/30/97 19433.76 19433.76 $18,618
7/31/97 20424.87 20424.87 $19,384
8/31/97 18898.03 18898.03 $18,065
9/30/97 20157 20157 $19,126
10/31/97 18924.81 18824.81 $18,014
The Morgan Stanley Capital International World (GDP) Index is an unmanaged index
that tracks the performance of global stocks. Unlike mutual funds, an index does
not incur fees or charges, and it is not possible to invest in an index.
AVERAGE ANNUAL TOTAL RETURNS
As of 9/30/97 (Most Recent Quarter End)
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CLASS A SHARES CLASS B SHARES CLASS C SHARES(1)
INCEPTION 6/8/92 6/8/92 8/1/97
NAV POP NAV w/CDSC NAV w/CDSC
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1 YEAR 27.15% 19.84% 26.17% 21.17% - -
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5 YEARS 16.62% 15.25% 15.69% 15.46% - -
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SINCE INCEPTION 14.78% 13.51% 13.85% 13.75% (1.23)% (2.22)%
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(1) Class C share total returns are cumulative since inception on August 1,
1997.
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. NAV returns do not include sales charges
or CDSC. Public offering price (POP) returns include the maximum sales charge of
5.75% for Class A shares. The CDSC returns reflect the maximum charges of 5% for
one year, 2% for five years and 1% since inception for Class B shares and 1%
since inception for Class C shares. Performance for different share classes
will vary based on differences in sales charges and fees associated with each
class.
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INVESTMENT PORTFOLIO
OCTOBER 31, 1997 (IN THOUSANDS)
<CAPTION>
COMMON STOCKS - 88.3% COUNTRY SHARES VALUE
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CONSTRUCTION - 0.8%
BUILDING CONSTRUCTION
<S> <C> <C>
Centex Corp. 15 $ 889
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.................................................................................
FINANCE, INSURANCE & REAL ESTATE - 17.1%
DEPOSITORY INSTITUTIONS - 7.6%
Banca Popolare di Milano (BPM) It 147 808
Barclays PLC UK 42 1,049
Commerzbank AG G 15 503
Corporacion Bancaria de Espana SA Sp 29 1,632
Development Bank of Singapore Ltd. Si 35 327
First American Corp. 19 884
HSBC Holdings PLC HK 20 448
Sparbanken Sverige AB Sw 50 1,132
Storebrand ASA (a) No 72 533
Westpac Banking Corp. Au 160 931
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8,247
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HOLDING COMPANIES - 0.7%
HSBC Holdings PLC UK 34 797
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INSURANCE CARRIERS - 4.6%
AXA Fr 14 975
Cigna Corp. 5 807
International Nederlanden Groep Ne 26 1,094
Mercury General Corp. 13 552
Old Republic International Corp. 22 797
Torchmark Corp. 21 841
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5,066
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INVESTMENT COMPANIES - 3.4%
Chile Fund, Inc. Ch 45 1,022
First Australia Fund, Inc. Au 58 433
First Philippine Fund, Inc. Ph 41 347
Irish Investment Fund, Inc. Ir 46 731
Southern Africa Fund, Inc. SA 25 395
Templeton Dragon Fund, Inc. (b) 63 806
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3,734
--------------
REAL ESTATE - 0.8%
Cheung Kong (Holdings) Ltd. HK 64 445
New World Development Co., Ltd. HK 116 408
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853
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Investment Portfolio/October 31, 1997
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<CAPTION>
COMMON STOCKS - CONT. COUNTRY SHARES VALUE
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MANUFACTURING - 37.9%
CHEMICALS & ALLIED PRODUCTS - 9.0%
<S> <C> <C> <C>
Akzo Nobel NV Ne 5 $ 950
BASF AG G 22 737
Clorox Co. 16 1,106
Hoechst AG G 16 601
Merck & Co., Inc. 10 919
Merck KGaA G 13 467
Rhone-Poulenc Fr 39 1,678
Roche Holding AG Genusscheine Sz (c) 1,275
Schering-Plough Corp. 22 1,217
Yamanouchi Pharmaceutical Co., Ltd. Ja 37 911
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9,861
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COMMUNICATIONS EQUIPMENT - 3.6%
Philips Electronics NV Ne 12 922
Racal Electronic PLC UK 304 1,124
Sony Corp. Ja 5 415
Telefonakteibolaget LM Ericsson Sw 34 1,482
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3,943
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ELECTRICAL INDUSTRIAL EQUIPMENT - 0.5%
General Electric Co. 9 568
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FABRICATED METAL - 0.7%
Compagnie Generale d'Industrie
et de Participations Fr 2 727
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FOOD & KINDRED PRODUCTS - 5.6%
Associated British Foods PLC UK 126 1,012
Bass PLC UK 127 1,760
Fraser & Neave Ltd. Si 40 203
Grupo Industrial Maseca (a) Mx 492 473
Nestle AG Sz 1 1,636
Unilever NV Ne 19 990
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6,074
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HOUSEHOLD APPLIANCES - 0.5%
Electrolux AB, Series B Sw 7 562
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MACHINERY & COMPUTER EQUIPMENT - 2.3%
Cummins Engine Co., Inc. 10 628
Fujitsu Ltd. Ja 69 757
Hitachi Ltd. Ja 54 415
Sanyo Electric Co. Ja 221 735
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2,535
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Investment Portfolio/October 31, 1997
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MEASURING & ANALYZING INSTRUMENTS - 0.9%
<S> <C> <C> <C>
Fuji Photo Film Co., Ltd. Ja 26 $ 943
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PAPER PRODUCTS - 0.7%
Aracruz Celulose SA ADR Bz 26 390
Carter Holt Harvey Ltd. NZ 190 331
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721
--------------
PETROLEUM REFINING - 2.8%
Amerada Hess Corp. 19 1,137
Ashland, Inc. 15 730
OMV Handels AG Aus 8 1,137
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3,004
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PRIMARY METAL - 2.2%
Acerinox SA Sp 3 514
ALFA SA de C.V. Mx 126 913
Thyssen AG G 2 496
USX-US Steel Group, Inc. 14 476
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2,399
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PRINTING & PUBLISHING - 0.7%
Belo (A.H.) Corp. 17 801
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RUBBER & PLASTIC - 1.7%
Continental AG G 30 713
Cooper Tire & Rubber Co. 21 441
Premark International, Inc. 26 700
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1,854
--------------
STONE, CLAY, GLASS & CONCRETE - 0.7%
Cemex SA de C.V. Mx 197 780
--------------
TOBACCO PRODUCTS - 2.4%
B.A.T. Industries PLC UK 175 1,531
Hanson Trust PLC UK 224 1,146
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2,677
--------------
TRANSPORTATION EQUIPMENT - 3.6%
Dana Corp. 17 777
Federal-Mogul Corp. 16 656
Fiat Auto SPA Ord It 218 693
General Dynamics Corp. 6 511
MAN AG G 1 421
Volkswagen AG G 1 827
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3,885
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9
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Investment Portfolio/October 31, 1997
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<CAPTION>
COMMON STOCKS - CONT. COUNTRY SHARES VALUE
- ---------------------------------------------------------------------------------
MINING & ENERGY - 2.3%
OIL & GAS EXTRACTION - 1.4%
<S> <C> <C> <C>
Elf Gabon SA Fr 1 $ 164
Santos Ltd. Au 85 390
YPF Sociedad Anonima Ar 30 942
--------------
1,496
--------------
OIL & GAS FIELD SERVICES - 0.9%
Petroleum Geo-Services A/S (a) No 14 980
--------------
.................................................................................
RETAIL TRADE - 6.1%
APPAREL & ACCESSORY STORES - 0.7%
Hennes & Mauritz AB Sw 20 796
--------------
FOOD STORES - 2.7%
Safeway, Inc. (a) 19 1,075
Tesco PLC UK 165 1,318
Vendex International NV Ne 10 545
--------------
2,938
--------------
GENERAL MERCHANDISE STORES - 1.4%
Wal-Mart Stores, Inc. 45 1,567
--------------
MISCELLANEOUS RETAIL - 1.3%
Imasco Ltd. Ca 29 929
Rite Aid Corp. 8 469
--------------
1,398
--------------
.................................................................................
SERVICES - 7.6%
AMUSEMENT & RECREATION - 1.1%
Ladbroke Group PLC UK 266 1,189
--------------
BUSINESS SERVICES - 0.6%
Cerner Corp. (a) 29 698
--------------
COMPUTER SOFTWARE - 0.7%
Sungard Data Systems, Inc. (a) 32 756
--------------
HEALTH SERVICES - 3.3%
Health Care & Retirement Corp. (a) 30 1,123
Novartis (Reg) Sz 1 1,334
Quorum Health Group, Inc. (a) 47 1,139
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3,596
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10
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<TABLE>
Investment Portfolio/October 31, 1997
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OTHER SERVICES - 1.3%
<S> <C> <C> <C>
Linde AG G 1 $ 512
VEBA AG G 15 855
--------------
1,367
--------------
PERSONAL SERVICES - 0.6%
Service Corporation International 22 676
--------------
.................................................................................
TRANSPORTATION, COMMUNICATIONS, ELECTRIC,
GAS & SANITARY SERVICES - 16.5%
AIR TRANSPORTATION - 0.6%
Lufthansa AG G 40 689
--------------
COMMUNICATIONS - 12.3%
British Telecommunications PLC UK 103 781
Compuware Corp. (a) 14 906
Deutsche Telekom AG (a) G 30 556
Hong Kong Telecommunications Ltd. HK 244 467
Lucent Technologies, Inc. 13 1,080
Nippon Telegraph & Telephone Ja (c) 933
Nokia AB Fi 19 1,669
Royal Koninklijke PTT Nederland NV Ne 15 561
Telecom Italia SPA It 209 1,308
Telecomunicacoes Brasileiras SA ADR Bz 8 810
Telefonica de Argentina SA ADR Ar 30 830
Telefonica de Espana Sp 42 1,143
Telefonos de Mexico SA - Series A Mx 497 1,077
Telus Corp. Ca 62 1,243
--------------
13,364
--------------
ELECTRIC, GAS & SANITARY SERVICES - 0.5%
Enova Corp. 22 535
--------------
ELECTRIC SERVICES - 2.6%
Empresa Nacional De Electricidad Sp 50 931
Oesterreichische Elektrizitaetswirtschafts AG,
Class A Aus 7 532
Union Electrica Fenosa SA Sp 145 1,378
--------------
2,841
--------------
GAS SERVICES - 0.5%
NICOR, Inc. 14 555
--------------
TOTAL INVESTMENTS (cost of $85,094)(d) 96,361
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11
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Investment Portfolio/October 31, 1997
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<CAPTION>
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS - 10.6% PAR VALUE
- ---------------------------------------------------------------------------------
Repurchase agreement with Greenwich Capital Markets
Inc., dated 10/31/97, due 11/03/97 at 5.625%, collateralized
by U.S. Treasury notes with various maturities to 2016,
market value $11,905 (repurchase proceeds $11,600) $ 11,595 $ 11,595
--------------
FORWARD CURRENCY CONTRACTS - 0.0% (e) (2)
- ---------------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - 1.1% 1,154
- ---------------------------------------------------------------------------------
NET ASSETS - 100.0% $ 109,108
==============
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NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) Non-income producing.
(b) This security is subject to the risks of the various countries in which the
issuer is investing. (See notes to Financial Statements: Note 3. - Other.)
(c) Rounds to less than one.
(d) Cost for federal income tax purposes is the same.
(e) As of October 31, 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. $)
---------- --- ---- --------
SP 73,996 US$ 507 11/04/97 1
US$ 163 FF 940 11/28/97 (c)
US$ 376 FF 2,166 11/28/97 (c)
US$ 868 NG 1,694 11/04/97 (3)
-------------
(2)
-------------
12
<PAGE>
Investment Portfolio/October 31, 1997
- --------------------------------------------------------------------------------
Summary of Securities by Country Country Value % of Total
- --------------------------------------------------------------------------------
United States $ 26,015 27.0
United Kingdom UK 11,706 12.1
Germany G 7,378 7.7
Spain Sp 5,599 5.8
Japan Ja 5,109 5.3
Netherlands Ne 5,062 5.3
Switzerland Sz 4,244 4.4
Sweden Sw 3,972 4.1
France Fr 3,544 3.7
Mexico Mx 3,243 3.4
Italy It 2,809 2.9
Canada Ca 2,172 2.3
Argentina Ar 1,771 1.8
Hong Kong HK 1,769 1.8
Australia Au 1,754 1.8
Austria Aus 1,670 1.7
Finland Fi 1,669 1.7
Norway No 1,513 1.6
Brazil Bz 1,200 1.2
Chile Ch 1,022 1.1
Other 806 0.8
Ireland Ir 731 0.8
Singapore Si 530 0.6
South Africa SA 395 0.4
Philippines Ph 347 0.4
New Zealand NZ 331 0.3
----------- -------------
$ 96,361 100.0
----------- -------------
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
Acronym Name
------- ----
ADR American Depositary Receipt
FF French Francs
NG Netherland Guilders
SP Spanish Pesetas
See notes to financial statements.
13
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
OCTOBER 31, 1997
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $85,094) $ 96,361
Short-term obligations 11,595
-----------
107,956
Cash held in foreign banks (cost $338) $ 339
Receivable for:
Investments sold 4,229
Fund shares sold 578
Dividends 102
Foreign tax reclaims 69
Interest 2
Other 3 5,322
----------- -----------
Total Assets 113,278
LIABILITIES
Unrealized depreciation on forward
currency contracts 2
Payable for:
Investments purchased 3,957
Fund shares repurchased 170
Accrued:
Deferred Trustees fees 2
Other 39
-----------
Total Liabilities 4,170
-----------
NET ASSETS $109,108
===========
Net asset value & redemption price per share -
Class A ($35,181/2,464) $ 14.28
===========
Maximum offering price per share - Class A
($14.28/0.9425) $ 15.15 (a)
===========
Net asset value & offering price per share -
Class B ($73,188/5,181) $ 14.13 (b)
===========
Net asset value & offering price per share -
Class C ($739/52) $ 14.26 (b)
===========
(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.
14
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1997
(in thousands)
INVESTMENT INCOME
Dividends $ 2,362
Interest 448
-----------
Total investment income (net of nonrebatable
foreign taxes withheld at source which
amounted to $218) 2,810
EXPENSES
Management fee $ 771
Service fee 253
Distribution fee - Class B 538
Distribution fee - Class C 1
Transfer agent 323
Bookkeeping fee 44
Trustees fee 14
Custodian fee 80
Audit fee 33
Legal fee 5
Registration fee 45
Reports to shareholders 10
Amortization of deferred
organization expenses 5
Other 9 2,131
----------- -----------
Net Investment Income 679
-----------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments 11,744
Foreign currency transactions (123)
-----------
Net Realized Gain 11,621
Change in net unrealized appreciation
during the period on:
Investments 3,189
Foreign currency transactions (a)
-----------
Net Change in Unrealized Appreciation 3,189
-----------
Net Gain 14,810
-----------
Increase in Net Assets from Operations $ 15,489
===========
(a) Rounds to less than one.
See notes to financial statements.
15
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands) Year ended October 31
------------------------
INCREASE (DECREASE) IN NET ASSETS 1997 (A) 1996
Operations:
Net investment income $ 679 $ 276
Net realized gain 11,621 9,011
Net unrealized appreciation 3,189 881
----------- -----------
Net Increase from Operations 15,489 10,168
Distributions:
From net investment income - Class A (131) (105)
In excess of net investment income - Class A ---- (37)
From net realized gains - Class A (2,143) (618)
From net investment income - Class B ---- (133)
In excess of net investment income - Class B ---- (46)
From net realized gains - Class B (6,988) (3,141)
----------- -----------
6,227 6,088
----------- -----------
Fund Share Transactions:
Receipts for shares sold - Class A 18,684 8,563
Value of distributions reinvested - Class A 2,135 713
Cost of shares repurchased - Class A (6,517) (2,848)
----------- -----------
14,302 6,428
----------- -----------
Receipts for shares sold - Class B 21,200 13,370
Value of distributions reinvested - Class B 6,378 3,088
Cost of shares repurchased - Class B (24,577) (14,800)
----------- -----------
3,001 1,658
----------- -----------
Receipts for shares sold - Class C 777 ----
Cost of shares repurchased - Class C (5) ----
----------- -----------
772 ----
----------- -----------
Net Increase from
Fund Share Transactions 18,075 8,086
----------- -----------
Total Increase 24,302 14,174
NET ASSETS
Beginning of period 84,806 70,632
----------- -----------
End of period (including undistributed
and net of overdistributed net investment
income of $343 and $75, respectively) $109,108 $ 84,806
=========== ===========
(a) Class C shares were initially offered on August 1, 1997.
See notes to financial statements.
16
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(continued)
Year ended October 31
------------------------
NUMBER OF FUND SHARES 1997 (A) 1996
Sold - Class A 1,339 658
Issued for distributions reinvested - Class A 168 59
Repurchased - Class A (463) (221)
----------- -----------
1,044 496
----------- -----------
Sold - Class B 1,523 1,042
Issued for distributions reinvested - Class B 509 257
Repurchased - Class B (1,772) (1,151)
----------- -----------
260 148
----------- -----------
Sold - Class C 52 ----
Repurchased - Class C (b) ----
----------- -----------
52 ----
----------- -----------
(a) Class C shares were initially offered on August 1, 1997.
(b) Rounds to less than one
See notes to financial statements.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997
NOTE 1. ACCOUNTING POLICIES
................................................................................
ORGANIZATION: Colonial Global Equity Fund (the Fund), a series of
Colonial Trust III, 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 long-term growth by investing primarily in global
equities. The Fund may issue an unlimited number of shares. The Fund
offers three classes of shares: Class A, Class B, and Class C. Class A shares
are sold with a front-end sales charge and 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. Effective August 1, 1997, the Fund began offering
Class C shares which are subject to 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 generally 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.
Forward currency contracts are valued based on the weighted value of the
exchange traded contracts with similar durations.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Portfolio positions for which market quotations are not readily available 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.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: All
income, expenses (other than the Class B and Class C distribution fees), and
18
<PAGE>
Notes to Financial Statements/October 31, 1997
- --------------------------------------------------------------------------------
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, Class B and Class C net investment income
per share data reflects the distribution fee applicable to Class B and
Class C shares only.
Class B and Class C ratios are calculated by adjusting the expense and net
investment income per share data and ratios for the Fund for the entire
period by the distribution fee applicable to Class B and Class C 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.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses of
$43,895 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 were
amortized on a straight-line basis over five years.
DISTRIBUTIONS TO SHAREHOLDERS: Distributions to shareholders are
recorded on the ex-date.
The amount and character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ
from generally accepted accounting principles. 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 gains (losses) arising from the
fluctuations in exchange rates 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.
19
<PAGE>
Notes to Financial Statements/October 31, 1997
- --------------------------------------------------------------------------------
NOTE 1. ACCOUNTING POLICIES - CONT.
................................................................................
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 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 2. 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 0.95% annually of the
Fund's average net assets. Prior to September 30, 1997, the monthly fee was
0.75% 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.
20
<PAGE>
Notes to Financial Statements/October 31, 1997
- --------------------------------------------------------------------------------
Effective October 1, 1997 and continuing through September 1998, the
Transfer Agent fee will be reduced by .0012% in cumulative monthly
increments, resulting in a decrease in the fee from 0.25% to 0.236% annually.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Liberty
Finanical Investments, Inc., formerly Colonial Investment Services, Inc.
(the Distributor), an affiliate of the Adviser, is the Fund's principal
underwriter. For the year ended October 31, 1997, the Fund has been advised
that the Distributor retained net underwriting discounts of $15,623 on sales
of the Fund's Class A shares and received contingent deferred sales charges
(CDSC) of $113,537 and none on Class B and Class C 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 0.75% annually of the average net assets attributable
to Class B and Class C shares only.
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 1.40% annually of the
Fund's average net assets.
For the year ended October 31, 1997, the Fund's operating expenses did
not exceed the 1.40% expense limit.
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 3. PORTFOLIO INFORMATION
................................................................................
INVESTMENT ACTIVITY: For the year ended October 31, 1997, purchases and sales
of investments, other than short-term obligations, were $86,483,630 and
$81,778,675, respectively.
Unrealized appreciation (depreciation) at October 31, 1997, based on cost of
investments for both financial statement and federal income tax purposes
was:
Gross unrealized appreciation $14,974,600
Gross unrealized depreciation (3,707,437)
-------------
Net unrealized appreciation $11,267,163
=============
21
<PAGE>
Notes to Financial Statements/October 31, 1997
- --------------------------------------------------------------------------------
NOTE 3. PORTFOLIO INFORMATION - CONT.
................................................................................
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 4. 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 year ended October 31, 1997.
NOTE 5. RESULTS OF SPECIAL MEETING OF SHAREHOLDERS (UNAUDITED)
- --------------------------------------------------------------------------------
On September 30, 1997, a Special Meeting of Shareholders of the Fund was
held to approve a new management agreement, and to ratify the selection of
Price Waterhouse LLP as independent accountants for the fiscal year
ending October 31, 1998. On July 14, 1997, the record date for the Meeting,
the Fund had outstanding 7,415,827 shares of beneficial interest. The votes
cast at the Meeting were as follows:
Approval of a new management agreement for the Fund:
AUTHORITY
FOR AGAINST WITHHELD
--- ------- --------
3,001,760 989,377 476,257
Ratification of the selection of Price Waterhouse LLP:
AUTHORITY
FOR AGAINST WITHHELD
--- ------- --------
3,902,129 113,755 451,510
NOTE 6. COMPOSITION OF NET ASSETS
- --------------------------------------------------------------------------------
At October 31, 1997, net assets consisted of:
Capital paid in $ 85,786
Undistributed net investment income 343
Accumulated net realized gain 11,722
Net unrealized appreciation (depreciation) on:
Investments 11,267
Foreign currency transactions (10)
-------------
$ 109,108
=============
22
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period
are as follows:
Year ended October 31
--------------------------------------
1997
Class A Class B Class C (a)
---------- ---------- ----------
Net asset value -
Beginning of period $ 13.440 $ 13.350 $ 15.390
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(b) 0.169 0.065 (0.025)
Net realized and
unrealized gain (loss)(b) 2.179 2.158 (1.105)(c)
---------- ---------- ----------
Total from Investment
Operations 2.348 2.223 (1.130)
---------- ---------- ----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.065) ---- ----
From net realized gains (1.443) (1.443) ----
---------- ---------- ----------
Total Distributions Declared
to Shareholders (1.508) (1.443) ----
---------- ---------- ----------
Net asset value -
End of period $ 14.280 $ 14.130 $ 14.260
========== ========== ==========
Total return (d) 18.92% 18.02% (7.34)%(e)
========== ========== ==========
RATIOS TO AVERAGE NET ASSETS:
Expenses (f) 1.58% 2.33% 2.44%(g)
Net investment income (f) 1.22% 0.47% (0.68)%(g)
Portfolio turnover 90% 90% 90%
Average commission rate (h) $ 0.0250 $ 0.0250 $ 0.0250
Net assets at end
of period (000) $ 35,181 $ 73,188 $ 739
(a) Class C shares were initially offered on August 1, 1997. Per share amounts
reflect activity from that date.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) The amount shown for a share outstanding does not correspond with the
aggregate net gain on investments for the period due to the timing of sales
and repurchases of Fund shares in relation to fluctuating market values of
the investments of the Fund.
(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) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(g) Annualized.
(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.
23
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period
are as follows:
Year ended October 31
----------------------------------------------
1996 1995
Class A Class B Class A Class B
--------- --------- --------- ---------
Net asset value -
Beginning of period $ 12.450 $ 12.390 $ 12.690 $ 12.630
--------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a)(b) 0.123 0.027 0.167 0.076
Net realized and unrealized
gains (b) 1.664 1.634 0.735 0.735
--------- --------- --------- ---------
Total from Investment
Operations 1.787 1.661 0.902 0.811
--------- --------- --------- ---------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.098) (0.027) (0.198) (0.107)
In excess of net
investment income (0.035) (0.010) --- ---
From net realized gains (0.664) (0.664) (0.944) (0.944)
--------- --------- --------- ---------
Total Distributions Declared
to Shareholders (0.797) (0.701) (1.142) (1.051)
--------- --------- --------- ---------
Net asset value -
End of period $ 13.440 $ 13.350 $ 12.450 $ 12.390
========= ========= ========= =========
Total return (c) 15.10% 14.04% 8.23%(d) 7.43%(d)
========= ========= ========= =========
RATIOS TO AVERAGE NET ASSETS
Operating Expenses 1.58%(e) 2.33%(e) 1.36%(e) 2.11%(e)
Interest expense --- --- --- ---
Fees and expenses waived or
borne by the Adviser --- --- 0.26%(e) 0.26%(e)
Net investment income 0.96%(e) 0.21%(e) 1.40%(e) 0.65%(e)
Portfolio turnover 125% 125% 74% 74%
Average commission rate (f) $ 0.0261 $ 0.0261 --- ---
Net assets at end
of period (000) $ 19,092 $ 65,714 $ 11,501 $ 59,131
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
--- --- $ 0.031 $ 0.031
(b) Per share data was calculated using average shares outstanding during
the period.
(c) Total return at net asset value assuming all distributions reinvested
and 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) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(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.
24
<PAGE>
FINANCIAL HIGHLIGHTS - CONTINUED
Year ended October 31
-----------------------------------------------
1994 1993
Class A Class B Class A Class B
--------- --------- --------- ---------
$ 11.760 $ 11.720 $ 9.340 $ 9.310
--------- --------- --------- ---------
0.170 0.077 0.182 0.104
0.969 0.959 2.461 2.447
--------- --------- --------- ---------
1.139 1.036 2.643 2.551
--------- --------- --------- ---------
(0.166) (0.083) (0.223) (0.141)
--- --- --- ---
(0.043) (0.043) --- ---
--------- --------- --------- ---------
(0.209) (0.126) (0.223) (0.141)
--------- --------- --------- ---------
$ 12.690 $ 12.630 $ 11.760 $ 11.720
========= ========= ========= =========
9.76(d) 8.88(d) 28.77(d) 27.70%(d)
========= ========= ========= =========
1.25% 2.00% 1.25% 2.00%
--- --- 0.01% 0.01%
0.36% 0.36% 0.51% 0.51%
1.38% 0.63% 1.75% 1.00%
52% 52% 58% 58%
--- --- --- ---
$ 10,525 $ 63,139 $ 1,769 $ 40,837
$ 0.045 $ 0.045 $ 0.053 $ 0.053
- ----------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
42% of the ordinary income distributed by the Fund in the year ended
October 31, 1997 qualifies for the corporate dividends received deduction.
- ----------------------------------------------------------------------------
25
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES OF COLONIAL TRUST III AND THE SHAREHOLDERS OF
COLONIAL GLOBAL EQUITY FUND
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial Global Equity Fund (a
series of Colonial Trust III) at October 31, 1997, the results of its
operations, the changes in its net assets and the financial highlights for the
period indicated, in conformity with generally accepted accounting principles.
These financial statements and the financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of portfolio positions
at October 31, 1997 by correspondence with the custodian and brokers provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
December 10, 1997
26
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Global Equity Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial Global Equity Fund mails one shareholder report to each shareholder
address. If you would like more than one report, please call 1-800-426-3750 and
additional reports will be sent to you.
This report has been prepared for shareholders of Colonial Global Equity 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.
27
<PAGE>
- --------------------------------------------------------------------------------
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, CS 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
[LOGO] LIBERTY FINANCIAL INVESTMENTS, INC. (Copyright) 1997
Distributor for Colonial Funds, Stein Roe Advisor Funds and Newport Funds
One Financial Center, Boston, MA 02111-2621
GE-02/317E-1097 M (12/97)
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