[FRONT COVER]
[NAUTICAL PHOTO FOR COVER]
COLONIAL STRATEGIC BALANCED FUND Semiannual Report
April 30, 1998
Not FDIC
Insured
May Lose Value
No Bank Guarantee
<PAGE>
Colonial Strategic Balanced Fund Highlights
November 1, 1997 - April 30, 1998
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:
[check] Growth and income potential from a strategic blend of markets
[check] Favorable stock and bond opportunities worldwide
[check] Broad diversification to help reduce risk
[check] Expert management by stock and bond specialists
Portfolio Manager Commentary: "The Fund's diversification across six market
sectors gives it the ability to take advantage of new opportunities as they
arise in markets worldwide. Over the long term, this diversification has
provided shareholders with consistent, stable returns."
-Gita Rao and Carl Ericson
Colonial Strategic Balanced Fund Performance
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
Inception date 9/19/94 9/19/94 9/19/94
Six-month distributions declared
per share $0.368 $0.335 $0.335
Six-month total returns, assuming
reinvestment of all distributions and
no sales charge or contingent deferred
sales charge (CDSC) 11.92% 11.62% 11.60%
Net asset value per share on 4/30/98 $15.77 $15.74 $15.76
</TABLE>
<TABLE>
<S> <C>
Top Five Holdings - Equity
(as of 4/30/98)
1. Office Depot, Inc.. . . . . . . . 1.0%
2. TJX Companies, Inc. . . . . . . . 0.9%
3. Banco Totta & Acores SA . . . . 0.8%
4. Oy Nokia Ab . . . . . . . . . . . 0.8%
5. Safeway, Inc. . . . . . . . . . . 0.8%
Top Five Countries - Gov't Bonds
(as of 4/30/98)
1. United States . . . . . . . . . . 10.9%
2. United Kingdom . . . . . . . . . 2.2%
3. Australia . . . . . . . . . . . . 1.7%
4. Russia . . . . . . . . . . . . . 0.9%
5. Sweden . . . . . . . . . . . . . 0.9%
</TABLE>
Holding and country breakdowns are calculated as a percentage 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.
2
<PAGE>
President's Message
To Fund Shareholders
[photo of Harold W. Cogger]
I am pleased to present the semiannual report for Colonial Strategic Balanced
Fund. This report reflects on the investment environment for the six months
ended April 30, 1998 and on the performance of your Fund.
During the early part of the period, financial headlines in the U.S. and
elsewhere were dominated by continued economic turmoil in the Pacific Rim. A
currency crisis in Southeast Asia generated a negative spillover effect on stock
markets worldwide. Many investments experienced price declines as investors
worried that declining demand and depressed currencies in Asia would lead to a
global decline in economic activity. However, the Fund's emphasis on a
diversified portfolio of established U.S. and international companies served to
help stabilize returns and shield investors from some of this volatility. The
U.S. market in particular experienced the effects of a worldwide "flight to
quality." Investors were attracted to the safe haven offered by the U.S. market
- -- stable government with well-established monetary policies, fundamentally
strong economic prospects and good liquidity. During the second half of the
period, many markets worldwide recovered and went on to post strong gains,
particularly in the U.S. and Europe where many stock indices reached record
levels.
In addition to providing attractive growth prospects, the Fund offers an
opportunity to diversify your core portfolio. Asset allocation between fixed
income and equity markets, and among international and U.S. markets, provides
shareholders with both current income and long-term growth potential. Looking
ahead, economic growth prospects worldwide remain attractive and point to
opportunities for future gains.
The following report will provide you with specific information on your Fund's
performance as well as an in-depth report from your portfolio managers. Thank
you for giving us the opportunity to serve your investment needs.
Respectfully,
/s/Harold W. Cogger
Harold W. Cogger
President
June 9, 1998
Because market conditions change frequently, there can be no assurance that the
trends described herein will continue.
3
<PAGE>
Portfolio Management Report
Carl Ericson and Gita Rao are portfolio co-managers of Colonial Strategic
Balanced Fund. Mr. Ericson manages the fixed income portion of the portfolio and
is a senior vice president of Colonial Management Associates, Inc., as well as
Director of the Taxable Fixed Income Department. Ms. Rao manages the equity
portion and is a vice president of Colonial Management Associates, Inc.
Early period volatility gave way to improved market environment
Lingering effects of the "Asian flu" created significant market volatility
worldwide during the first part of the period and had an impact on all six
sectors in which the Fund invests. Investors were concerned about the
possibility of an economic slowdown in the U.S. and abroad as a result of
currency devaluations and declining economic health in Asia. However, as time
passed, it became apparent that many world economies continued to experience
well-balanced growth. In particular, the U.S. economy exhibited comfortable
growth with little inflation. Corporate earnings remained strong and many stock
market indices reached record highs. European markets benefited from similar
conditions as well as from the impending European Monetary Union (EMU).
Fixed-income investments benefited from positive economic fundamentals
The Fund's fixed-income investments were diversified across the U.S. corporate
high yield market, the U.S. Treasury market and international bond markets. We
allocated the largest proportion of assets to the high yield market, which
benefited from continued growth in the U.S. economy. In particular, we favored
investments in companies that we expect to capitalize on changes in the
telecommunications and media sector, such as Time-Warner Corp. and Nextel
Communications (0.6% and 0.2% of the Fund's total net assets, respectively). As
delivery channels for media and voice communication expand, companies like these
that have invested heavily in technology are well-positioned to capture
subscriber growth.
Our position in U.S. Treasury bonds also performed well. Prices of these
investments rose as interest rates declined during the second half of the
period. In the international bond markets, we reallocated our exposure in Europe
to reflect the impending changes from the EMU. We also increased our investment
in emerging markets as a result of the Asian turmoil which caused depressed bond
prices in many countries. We purchased a diversified portfolio of bonds in five
Latin American and eastern European markets that we believe offer good
opportunities for price appreciation.
Equity performance driven by international and large-cap U.S. stocks
During the early part of the period, large U.S. stocks dominated the market as
investors sought strength and liquidity in the wake of the Asian economic
crisis. International stock markets also began to enjoy a renaissance late in
1997. While the Fund had only a nominal presence in foreign stocks at the
beginning of the period, we began to increase our international investments,
particularly in Japan and Europe.
4
<PAGE>
Fund's performance reflects sector weightings
The Fund generated a six-month total return of 11.92% for Class A shares, based
on net asset value. This performance reflects the portfolio's strong performance
in the high yield corporate and U.S. Treasury bond market sectors. Detracting
from performance was the Fund's underweighting in international and large U.S.
stocks, both sectors that generated strong performance for the period. The
Fund's total return placed it between the return of the S&P 500 Index and that
of the Lehman Brothers Government/Corporate Bond Index, recognized measures of
stock and bond market performance, respectively. This performance is typical of
a balanced fund offering both stock and bond market exposure.
Focus on active management to continue
We will continue to actively manage the Fund with the objective of generating
consistent, stable returns through diversification. We plan to capture gains
from market sectors that have performed well, such as large U.S. stocks, and
reallocate those assets to sectors that we believe offer greater long-term
value. The asset mix between stocks and bonds will likewise reflect our
assessment of where we can realize the greatest value. We believe the Fund has
provided shareholders with the ability to participate in changing markets and to
take advantage of new opportunities.
5
<PAGE>
Colonial Strategic Balanced Fund's Investment Performance vs.
Standard & Poor's 500 Index and
Lehman Brothers Government/Corporate Bond Index
Change in Value of $10,000 from 9/30/94 - 4/30/98
Class A Shares based on NAV and POP
<TABLE>
<CAPTION>
AS OF DATE NAV POP Lehman Brothers S&P 500 Index
- ---------- --- --- --------------- -------------
<S> <C> <C> <C> <C>
Sep 30, 94 10000 10000 10000 10000
Oct 31, 94 10030 9554 9989 10224
Nov 30, 94 9717 9255 9971 9852
Dec 30, 94 9801 9335 10037 9998
Jan 31, 95 9780 9316 10230 10257
Feb 28, 95 10127 9646 10467 10657
Mar 31, 95 10396 9902 10537 10971
Apr 28, 95 10611 10107 10684 11294
May 31, 95 10899 10381 11132 11744
Jun 30, 95 11253 10718 11221 12017
Jul 31, 95 11822 11260 11177 12415
Aug 31, 95 11935 11369 11320 12446
Sep 29, 95 12194 11615 11435 12971
Oct 31, 95 12184 11605 11603 12924
Nov 30, 95 12456 11864 11794 13491
Dec 29, 95 12486 11893 11968 13751
Jan 31, 96 12707 12104 12043 14219
Feb 29, 96 13013 12395 11787 14351
Mar 29, 96 13048 12429 11688 14489
Apr 30, 96 13378 12742 11608 14702
May 31, 96 13558 12914 11588 15081
Jun 28, 96 13276 12646 11743 15138
Jul 31, 96 13052 12432 11770 14470
Aug 30, 96 13287 12656 11742 14776
Sep 30, 96 13811 13155 11950 15607
Oct 31, 96 13918 13257 12229 16037
Nov 29, 96 14490 13801 12454 17248
Dec 31, 96 14443 13757 12316 16906
Jan 31, 97 14631 13936 12330 17962
Feb 28, 97 14642 13947 12356 18103
Mar 31, 97 14220 13544 12209 17361
Apr 30, 97 14476 13788 12388 18396
May 30, 97 15100 14383 12503 19521
Jun 30, 97 15602 14861 12654 20388
Jul 31, 97 16398 15619 13041 22010
Aug 29, 97 15983 15224 12894 20778
Sep 30, 97 16668 15876 13097 21916
Oct 31, 97 16318 15543 13307 21184
Nov 28, 97 16488 15704 13377 22164
Dec 31, 97 16557 15771 13517 22545
Jan 30, 98 16868 16067 13708 22794
Feb 27, 98 17605 16769 13680 24437
Mar 31, 98 18136 17274 13722 25687
Apr 30, 98 18263 17395 13791 25950
</TABLE>
[Graphic Omitted]
Value of a $10,000 Investment
made on 9/30/94 at 4/30/98
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Class A Class B Class C
NAV POP NAV w/CDSC NAV w/CDSC
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$18,263 $17,395 $17,987 $17,687 $17,983 $17,983
- ------------------------------------------------------------------------------
</TABLE>
Average Annual Total Returns
as of 4/30/98
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Class A Class B Class C
Inception 9/19/94 9/19/94 9/19/94
NAV POP NAV w/CDSC NAV w/CDSC
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 year 26.16% 20.17% 25.58% 20.58% 25.54% 24.54%
- ------------------------------------------------------------------------------
Life 17.73 16.15 17.20 16.65 17.19 17.19
- ------------------------------------------------------------------------------
</TABLE>
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 charge (CDSC). Public
offering price (POP) returns include the maximum sales charges of 4.75% for
Class A. The CDSC returns reflect charges of 5% for one year and 3% since
inception for Class B shares and 1% for one year for Class C shares.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
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.
6
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO
APRIL 30, 1998 (UNAUDITED, IN THOUSANDS)
COMMON STOCKS - 56.6% COUNTRY SHARES VALUE
===============================================================================
<S> <C> <C> <C>
CONSTRUCTION - 0.1%
Heavy Construction - Non Building Construction
Superfos AS De 5 $ 131
--------
...............................................................................
FINANCE, INSURANCE & REAL ESTATE - 10.2%
Depository Institutions - 5.9%
Banco Totta & Acores SA Pt 34 1,277
BankAmerica Corp. 12 1,020
BankBoston Corp. 3 367
Bank of Montreal Ca 4 218
Bank of New York Co., Inc. 7 437
Banker's Trust New York Co. 3 370
Citicorp 5 722
Comerica, Inc. 2 120
Corporacion Bancaria de Espana SA Sp 5 416
Firstar Corp. 14 522
Greenpoint Financial Corp. 17 691
HSBC Holdings PLC HK 6 165
J.P. Morgan & Co., Inc. 4 525
Kredietbank NV Be (a) 113
Lloyds Bank PLC UK 19 282
National Westminster Bank PLC UK 9 172
Norwest Corp. 7 292
Skandinaviska Enskilda Banken Sw 55 914
The Bank of Tokyo Mitsubishi Ja 46 567
--------
9,190
--------
Insurance Carriers - 3.3%
AGF (Assurances Generales de France) (b) Fr (a) (a)
Allstate Corp. 3 268
American Bankers Insurance Group, Inc. 6 369
American International Group, Inc. 9 1,184
Fremont General Corp. 4 239
Loews Corp. 5 460
Progressive Corp. 6 840
Protective Life Corp. 6 237
Toro Assicurazioni It 40 700
Zurich Versicherungs-Gesellschaft Sz 1 898
--------
5,195
--------
Nondepository Credit Institutions - 0.6%
Associates First Capital Corp. 2 118
Green Tree Financial Corp. 10 408
The Money Store, Inc. 13 439
--------
965
--------
7
<PAGE>
Investment Portfolio/April 30, 1998
- -------------------------------------------------------------------------------
COMMON STOCKS - CONT. COUNTRY SHARES VALUE
===============================================================================
FINANCE, INSURANCE & REAL ESTATE - CONT.
Security Brokers & Dealers - 0.4%
Paine Webber Group, Inc. 15 $ 672
--------
...............................................................................
MANUFACTURING - 27.1%
Apparel - 0.1%
Nautica Enterprises, Inc. (b) 8 209
--------
Chemicals & Allied Products - 6.7%
American Home Products Corp. 7 652
BASF AG G 6 267
Bayer AG G 10 443
Bristol-Myers Squibb Co. 10 1,059
DSM NV Ne 1 70
E.I. DuPont de Nemours & Co. 3 204
Eli Lilly & Co. 13 904
International Specialty Products, Inc. (b) 35 698
Johnson & Johnson 7 511
Kao Corp. Ja 48 702
Merck & Co., Inc. 10 1,181
Merck KGAA G 4 158
Norsk Hydro A.S. No 2 75
Rhone Poulenc, Class A Fr 15 725
Schering-Plough Corp. 10 792
Union Carbide Corp. 8 369
Warner-Lambert Co. 5 927
Yamanouchi Pharmaceutical Co. Ja 29 683
--------
10,420
--------
Communications Equipment - 2.2%
Aspect Telecommunications Corp. (b) 8 230
Motorola, Inc. 12 668
Philips Electronics NV Ne 12 1,074
Sony Corp. Ja 8 663
Telefonakteibolaget LM Ericsson ADR Sw 17 895
--------
3,530
--------
Electronic Components - 0.3%
Sanmina Corp. (b) Fr 5 432
--------
Electronic Machinery, Computers & Supplies - 0.1%
Hitachi Maxwell Ja 10 190
--------
Fabricated Metal - 0.1%
Buderus AG G (a) 94
--------
8
<PAGE>
Investment Portfolio/April 30, 1998
- -------------------------------------------------------------------------------
Food & Kindred Products - 3.2%
Archer Daniels Midland Co. 14 $ 311
Group Industrial Maseca Mx 603 434
Nestle Ag (Reg) Sz (a) 678
Parmalat Finanziara SPA It 465 1,041
PepsiCo, Inc. 4 158
Philip Morris Co., Inc. 25 937
Sara Lee Corp. 14 804
Smithfield Foods, Inc. (b) 5 146
Yakult Honsha Co., Ltd. Ja 104 448
--------
4,957
--------
Furniture & Fixtures - 0.8%
Ethan Allen Interiors, Inc. 15 748
Hillenbrand Industries, Inc. 7 436
--------
1,184
--------
Lumber & Wood Products - 0.1%
Oakwood Homes Corp. 5 147
--------
Machinery & Computer Equipment - 4.2%
Applied Materials, Inc. (b) 10 361
Brunswick Corp. 4 114
Caterpillar, Inc. 5 285
Deere & Co. 3 158
EMC Corp. (b) 13 609
Fujitsu Ltd. Ja 4 47
Gateway 2000, Inc. (b) 10 587
Hewlett-Packard Co. 8 572
Hitachi Ltd. Ja 14 100
International Business Machines Corp. 7 788
Lam Research Corp. (b) 3 78
Mannesmann AG G 1 1,110
Oerlikon-Buehrle Holding AG Sz 5 818
Seagate Technology, Inc. (b) 14 363
Sun Microsystems, Inc. (b) 16 675
--------
6,665
--------
Measuring & Analyzing Instruments - 0.6%
Fuji Photo Film Co., Ltd. Ja 5 177
Medtronic, Inc. 15 810
--------
987
--------
Miscellaneous Manufacturing - 0.2%
Callaway Golf Co. 12 338
--------
9
<PAGE>
Investment Portfolio/April 30, 1998
- -------------------------------------------------------------------------------
COMMON STOCKS - CONT. COUNTRY SHARES VALUE
===============================================================================
MANUFACTURING - CONT.
Paper Products - 0.8%
Potlatch Corp. 10 $ 460
Royal Koninklijke PTT Nederland NV Ne 16 826
--------
1,286
--------
Petroleum Refining - 4.2%
Amerada Hess Corp. 8 437
Amoco Corp. 18 797
British Petroleum Co., PLC UK 5 491
Chevron Corp. 10 827
ENI SPA It 112 747
Exxon Corp. 6 438
Kerr-Mcgee Corp. 7 429
Lyondell Petrochemical Co. 9 293
Murphy Oil Corp. 7 360
OMV Handels AG Aus 5 715
Phillips Petroleum Co. 3 124
USX-Marathon Group 25 895
--------
6,553
--------
Primary Metal - 0.5%
Acerinox SA Sp 3 491
Alcan Aluminum Ltd. 5 146
British Steel PLC UK 29 76
--------
713
--------
Primary Smelting - 0.2%
Phelps Dodge Corp. 5 349
--------
Printing & Publishing - 0.5%
Gannett Co., Inc. 10 678
--------
Rubber & Plastic - 0.3%
Continental AG G 8 213
Nike, Inc., Class B 6 287
--------
500
--------
Stone, Clay, Glass & Concrete - 0.1%
Owens Corning Fiberglass Corp. 3 125
Vitro S.A. Mx 12 45
--------
170
--------
Tobacco Products - 0.3%
B.A.T. Industries PLC UK 54 509
10
<PAGE>
Investment Portfolio/April 30, 1998
- -------------------------------------------------------------------------------
Swedish Match AB, ADR Sw 1 $ 18
--------
527
--------
Transportation Equipment - 1.6%
Alliedsignal, Inc. 20 876
Borg-Warner Automotive, Inc. 10 597
Ford Motor Co. 6 275
Honda Motor Co., Ltd. Ja 2 72
Northrop Grumman Corp. 5 521
Volvo AB ADR Sw 5 141
--------
2,482
--------
...............................................................................
MINING & ENERGY - 0.5%
Crude Petroleum & Natural Gas - 0.4%
Burlington Resources, Inc. 8 390
Occidental Petroleum Corp. 9 250
--------
640
--------
Nonmetallic, Except Fuels - 0.1%
Potash Corp. of Saskatchewan, Inc. Ca 1 107
--------
...............................................................................
RETAIL TRADE - 7.0%
Apparel & Accessory Stores - 1.2%
Ross Stores, Inc. 10 463
TJX Companies, Inc. 34 1,487
--------
1,950
--------
Food Stores - 2.7%
American Stores Co. 25 600
General Nutrition Companies, Inc. (b) 14 502
Giant Food, Inc. 12 436
Safeway, Inc. (b) 31 1,193
Tesco PLC UK 81 758
Vendex International NV Ne 12 782
--------
4,271
--------
General Merchandise Stores - 1.7%
BJ'S Wholesale Club, Inc. (b) 6 232
Dollar General Corp. 20 749
Federated Department Stores, Inc. (b) 6 290
Jardine Strategic Holdings, Ltd. Si 22 57
Fred Meyer, Inc. (b) 22 987
Sears, Roebuck & Co. 7 415
--------
2,730
--------
Home Furnishings & Equipment - 0.2%
Circuit City Stores, Inc. 4 167
CompUSA, Inc. (b) 8 149
--------
316
--------
11
<PAGE>
Investment Portfolio/April 30, 1998
- -------------------------------------------------------------------------------
COMMON STOCKS - CONT. COUNTRY SHARES VALUE
===============================================================================
RETAIL TRADE - CONT.
Miscellaneous Retail - 1.2%
Imasco, Ltd. Ca 7 $ 263
Office Depot, Inc. (b) 48 1,577
--------
1,840
--------
Restaurants - 0.0%
Tricon Global Restaurants, Inc. (b) (a) 13
--------
...............................................................................
SERVICES - 3.4%
Business Services - 0.2%
Cendant Corp. (b) 14 360
--------
Computer Related Services - 1.1%
Cadence Design Systems, Inc. (b) 25 901
HBO & Co. 14 812
--------
1,713
--------
Computer Software - 1.1%
Computer Associates International, Inc. 5 296
Microsoft Corp. (b) 10 901
Network Associates, Inc. (b) 5 343
Oracle Systems Corp. (b) 6 155
--------
1,695
--------
Engineering, Accounting, Research & Management - 0.1%
International-Muller NV Ne 3 118
--------
Health Services - 0.9%
Lincare Holdings, Inc. (b) 9 730
Tenet Healthcare Corp. (b) 18 678
--------
1,408
--------
...............................................................................
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS & SANITARY SERVICES - 7.9%
Air Transportation - 0.9%
British Airways PLC UK 1 105
Comair Holdings, Inc. 14 369
Delta Air Lines, Inc. 7 814
Lufthansa AG G 5 119
--------
1,407
--------
Electric Services - 1.5%
Allegheny Energy, Inc. 4 107
American Electric Power Co., Inc. 14 645
FPL Group, Inc. 13 776
Public Service Enterprise Group, Inc. 16 537
Unicom Corp. 10 348
--------
2,413
--------
12
<PAGE>
Investment Portfolio/April 30, 1998
- -------------------------------------------------------------------------------
Gas Services - 0.7%
Consolidated Natural Gas Co. 4 $ 230
MCN Corp., 8.750%, PRIDES 10 378
NICOR, Inc. 3 115
Pacific Enterprises 11 429
--------
1,152
--------
Railroad - 0.3%
Canadian Pacific, Ltd. 15 442
--------
Sanitary Services - 0.4%
U.S.A Waste Services, Inc. (b) 10 491
Yorkshire Water PLC UK 14 116
--------
607
--------
Telecommunication - 4.1%
BellSouth Corp. 17 1,091
Hong Kong Telecommunications, Ltd. HK 332 639
Nippon Telegraph & Telephone Corp. Ja (a) 681
Oy Nokia Ab, Class K Fi 19 1,248
Portugal Telecom S.A. Pt 15 800
SBC Communications, Inc. 5 191
Telecom Italia SPA It 83 627
Telefonica de Espana Sp 18 751
Telefonos de Mexico SA Mx 1 62
WorldCom, Inc. (b) 7 299
--------
6,389
--------
...............................................................................
WHOLESALE TRADE - 0.4%
Durable Goods - 0.4%
Arrow Electronics, Inc. (b) 4 109
Patterson Dental Co. (b) 11 502
--------
611
--------
Nondurable Goods - 0.0%
Dalgety PLC UK 11 69
--------
TOTAL COMMON STOCKS (cost of $57,572) 88,815
--------
PREFERRED STOCKS - 0.8%
===============================================================================
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS & SANITARY SERVICES - 0.8%
Cable
CSC Holdings, Ltd.,
11.125%, PIK, Series M 3 342
Time Warner, 10.250%, Series M 1 950
--------
TOTAL PREFERRED STOCKS (cost of $1,255) 1,292
--------
13
<PAGE>
Investment Portfolio/April 30, 1998
- -------------------------------------------------------------------------------
RIGHTS - 0.0% (b) COUNTRY SHARES VALUE
===============================================================================
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS & SANITARY SERVICES - 0.0%
Telecommunication
Telefonica de Espana (cost of $0) Sp 18 $ 14
--------
BONDS & NOTES - 36.6% PAR
===============================================================================
CORPORATE FIXED-INCOME BONDS & NOTES - 15.8%
===============================================================================
CONSTRUCTION - 0.6%
Building Construction
Falcon Building Products, Inc.
stepped coupon, (10.500% 06/15/02)
(c) 06/15/07 $ 500 335
Nortek, Inc.,
9.875% 03/01/04 500 515
--------
850
--------
..............................................................................
MANUFACTURING - 6.0%
Chemicals & Allied Products - 0.7%
Agricultural Minerals Co., L.P.,
10.750% 09/30/03 100 107
Laroche Industries, Inc.,
9.500% 09/15/07 500 493
Sterling Chemicals, Inc.,
11.250% 04/01/07 500 494
--------
1,094
--------
Fabricated Metal - 0.5%
Euramax International, PLC,
11.250% 10/01/06 (d) 250 273
Renco Metals, Inc.,
11.500% 07/01/03 250 268
US Can Corp.,
10.125% 10/15/06 200 210
--------
751
--------
Lumber & Wood Products - 0.1%
Triangle Pacific Corp.,
10.500% 08/01/03 100 105
--------
Machinery & Computer Equipment - 0.2%
IMO Industries,
11.750% 05/01/06 250 285
--------
14
<PAGE>
Investment Portfolio/April 30, 1998
- -------------------------------------------------------------------------------
Measuring & Analyzing Instruments - 0.2%
Intertek Finance, PLC,
10.250% 11/01/06 (d) $ 250 $ 265
--------
Miscellaneous Manufacturing - 1.2%
AEI Holding Co.,
10.000% 11/15/07 (e) 500 521
American Standard Co.,
stepped coupon, (10.500% 06/01/98)
(c) 06/01/05 250 260
ISP Holdings, Inc.,
9.750% 02/15/02 250 264
Polymer Group, Inc.,
9.000% 07/01/07 500 514
Shop Vac Corp.,
10.625% 09/01/03 250 274
--------
1,833
--------
Paper Products - 0.5%
Repap New Brunswick, Inc.,
9.875% 07/15/00 500 527
Stone Container Corp.,
10.750% 10/01/02 250 267
--------
794
--------
Primary Metal - 1.4%
Algoma Steel, Inc.,
12.375% 07/15/05 250 298
Kaiser Aluminum & Chemical Corp.,
10.875% 10/15/06 300 327
Keystone Consolidated Industries,
9.625% 08/01/07 500 513
WCI Steel Inc.,
10.000% 12/01/04 1,000 1,043
--------
2,181
--------
Printing & Publishing - 0.7%
American Lawyer Media, Inc.,
9.750% 12/15/07 500 524
Hollinger International Publishing,
9.250% 03/15/07 500 528
--------
1,052
--------
Transportation Equipment - 0.5%
Aftermarket Technology Corp.,
12.000% 08/01/04 86 95
15
<PAGE>
Investment Portfolio/April 30, 1998
- -------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - CONT. PAR VALUE
===============================================================================
MANUFACTURING - CONT.
Transportation Equipment - Cont.
Collins & Aikman Products Co.,
11.500% 04/15/06 $ 200 $ 224
LDM Technologies, Inc.,
10.750% 01/05/07 500 538
--------
857
--------
..............................................................................
MINING & ENERGY - 0.6%
Crude Petroleum & Natural Gas - 0.1%
Ferrellgas Finance Corp., LP,
10.000% 08/01/01 200 211
--------
Oil & Gas Extraction - 0.5%
Gulf Canada Resources, Ltd.,
9.625% 07/01/05 100 109
Magnum Hunter Resources, Inc.,
10.000% 06/01/07 500 508
Nuevo Energy Co.,
9.500% 04/15/06 200 211
--------
828
--------
..............................................................................
RETAIL TRADE - 0.2%
Food Stores - 0.1%
Pathmark Stores, Inc.,
9.625% 05/01/03 200 203
--------
Miscellaneous Retail - 0.1%
Finlay Fine Jewelry Corp.,
10.625% 05/01/03 100 104
--------
..............................................................................
SERVICES - 1.5%
Amusement & Recreation - 0.1%
E & S Holdings, 10.375% 10/01/06 250 209
--------
Business Services - 0.3%
Pierce Leahy Corp.,
11.125% 07/15/06 162 183
Unisys Corp.,
11.750% 10/15/04 250 288
--------
471
--------
Hotels, Camps & Lodging - 0.7%
Eldorado Resorts,
10.500% 08/15/06 250 274
16
<PAGE>
Investment Portfolio/April 30, 1998
- ------------------------------------------------------------------------------
HMH Properties, Inc.,
9.500% 05/15/05 $ 150 $ 162
Horseshoe Gaming,
9.375% 06/15/07 600 647
--------
1,083
--------
Other Services - 0.4%
Borg-Warner Security Corp.,
9.625% 03/15/07 500 569
--------
..............................................................................
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS & SANITARY SERVICES - 6.6%
Air Transportation - 0.1%
U.S. Air, Inc.,
10.375% 03/01/13 200 227
--------
Broadcasting - 0.7%
Allbritton Communications Co.,
9.750% 11/30/07 500 525
Fox Kids Worldwide, Inc.,
stepped coupon, (10.250% 11/01/02)
(c) 11/01/07 500 318
NWCG Holding Corp.,
(f) 06/15/99 175 163
Young Broadcasting Corp.,
11.750% 11/15/04 100 111
--------
1,117
--------
Cable - 1.1%
Diamond Cable Co.,
stepped coupon, (10.750% 02/15/02)
(c) 02/15/07 500 350
Echostar Communications Corp.,
stepped coupon, (12.875% 06/01/99)
(c) 06/01/04 500 480
Marcus Cable Co., L.P.,
stepped coupon, (14.250% 06/15/00)
(c) 12/15/05 600 545
Telewest Communication, PLC,
stepped coupon, (11.000% 10/01/00)
(c) 10/01/07 (d) 500 406
--------
1,781
--------
Electric Services - 0.1%
California Energy Co., Inc.,
9.500% 09/15/06 100 108
--------
17
<PAGE>
Investment Portfolio/April 30, 1998
- ------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - CONT. PAR VALUE
===============================================================================
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS & SANITARY SERVICES - CONT.
Gas Services - 0.3%
California Energy Co., Inc.,
9.875% 06/30/03 $ 250 $ 270
HS Resources, Inc.,
9.250% 11/15/06 250 258
--------
528
--------
Pipelines - 0.2%
Falcon Holding Group, L.P.,
stepped coupon, (9.285% 04/15/03)
(c) 04/15/10 500 319
--------
Sanitary Services - 0.3%
Allied Waste Industries, Inc.,
stepped coupon, (11.300% 06/01/02)
(c) 06/01/07 350 258
Allied Waste North America, Inc.,
10.250% 12/01/06 250 276
--------
534
--------
Telecommunication - 3.8%
Adelphia Communications Corp.,
9.875% 03/01/07 500 540
Clearnet Communications, Inc.,
stepped coupon, (14.750% 12/15/00)
(c) 12/15/05 500 420
Comcast Cellular Corp.,
9.500% 05/01/07 500 519
GST USA, Inc.,
stepped coupon, (13.875% 12/15/00)
(c) 12/15/05 500 405
Hyperion Telecommunications, Inc.,
stepped coupon, (13.000% 04/15/01)
(c) 04/15/03 500 375
Intermedia Communications, Inc.,
stepped coupon, (11.250% 07/15/02)
(c) 07/15/07 500 368
McLeod USA, Inc.,
8.375% 03/15/08 (e) 500 508
Nextel Communications, Inc.,
stepped coupon, (9.750% 10/31/02)
(c) 10/31/07 500 328
Nextlink Communications, Inc.,
stepped coupon, (9.450% 04/15/03)
(c) 04/15/08 (e) 500 315
18
<PAGE>
Investment Portfolio/April 30, 1998
- -------------------------------------------------------------------------------
Orion Network Systems, Inc.,
stepped coupon, (12.500% 01/15/02)
(c) 01/15/07 $ 500 $ 390
RCN Corp.,
stepped coupon, (11.125% 10/15/02)
(c) 10/15/07 500 334
Sprint Spectrum, LP,
stepped coupon, (12.500% 08/15/01)
(c) 08/15/06 850 697
Teleport Communications Group, Inc.,
stepped coupon, (11.125% 07/01/01)
(c) 07/01/07 850 731
--------
5,930
--------
...............................................................................
WHOLESALE TRADE - 0.3%
Nondurable Goods
Ameriserv Food Co.,
10.125% 07/15/07 500 533
--------
TOTAL CORPORATE FIXED-INCOME
BONDS & NOTES (cost of $24,213) 24,822
--------
U.S. GOVERNMENT OBLIGATIONS - 10.9%
===============================================================================
U.S. Treasury Bonds:
8.750% 05/15/17 (g) 5,063 6,616
11.625% 11/15/04 4,062 5,348
--------
11,964
--------
U.S. Treasury Note,
11.875% 11/15/03 (g) 3,940 5,074
--------
TOTAL U.S. GOVERNMENT OBLIGATIONS (cost of $16,550) 17,038
--------
FOREIGN GOVERNMENT &
AGENCY OBLIGATIONS - 9.9% CURRENCY
===============================================================================
Argentina Global Bonds,
11.375% 01/30/17(h) 570 631
Government of Sweden,
10.250% 05/05/03 SK 9,300 1,467
Hellenic Republic:
8.600% 03/26/08 GD 95,000 318
8.900% 03/21/04 GD 200,000 647
Kingdom of Denmark,
8.000% 03/15/06 DK 4,650 801
Mexican Global Bonds:
9.750% 02/06/01(i) 610 645
11.375% 09/15/16(i) 430 504
19
<PAGE>
Investment Portfolio/April 30, 1998
- -------------------------------------------------------------------------------
FOREIGN GOVERNMENT &
AGENCY OBLIGATIONS - CONT. CURRENCY PAR VALUE
===============================================================================
Poland Non-U.S. Global Registered Bond,
6.688% 10/27/24 (j) 593 $ 583
Republic of Argentina,
11.250% 04/10/06 (k) G 425 269
Republic of Brazil,
10.125% 05/15/27 (l) 1,120 1,091
Republic of Poland (Brady),
4.000% 10/27/14 (m) 840 766
Russian Ministry of Finance:
9.375% 03/31/05(e)(n) G 1,080 592
10.000% 06/26/07 (o) 910 876
Treasury Corp. Victoria,
12.500% 10/15/03 A$ 621 531
United Kingdom,
9.500% 04/18/05 KB 1,700 3,401
United Mexican States,
10.375% 01/29/03 (p) G 450 279
Western Australia Treasury Corp.:
8.000% 10/15/07 A$ 1,283 948
10.000% 07/15/05 A$ 1,455 1,171
--------
TOTAL FOREIGN GOVERNMENT & AGENCY
OBLIGATIONS (cost of $15,473) 15,520
--------
TOTAL BONDS & NOTES (cost of $56,236) 57,380
--------
TOTAL INVESTMENTS - 94.0% (cost of $115,063) (q) 147,501
--------
SHORT-TERM OBLIGATIONS - 4.4%
===============================================================================
Repurchase agreement with ABN AMRO Chicago Corp., dated 04/30/98, due
05/01/98 at 5.520%, collateralized by U.S. Treasury notes with various
maturities to 2005, market value $7,025 (repurchase proceeds
$6,851) 6,850 6,850
--------
FORWARD CURRENCY CONTRACTS - 0.0% (r) 51
===============================================================================
OTHER ASSETS & LIABILITIES, NET - 1.6% 2,566
===============================================================================
NET ASSETS - 100.0% $156,968
========
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
===============================================================================
(a) Rounds to less than one.
(b) Non-income producing.
(c) Currently zero coupon. Shown parenthetically is the interest
rate to be paid and the date the Fund will begin accruing this rate.
(d) This is a British security. Par amount is stated in U.S. dollars.
20
<PAGE>
Investment Portfolio/April 30, 1998
- -------------------------------------------------------------------------------
(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, 1998, the value of these
securities amounted to $1,936 or 1.2% of net assets.
(f) Zero coupon bond.
(g) These securities, or a portion thereof, with a total market
value of $7,499 are being used to collateralize the forward
currency exchange contracts indicated in note (s) below.
(h) This is an Argentinean security. Par amount is stated in U.S.
dollars.
(i) This is a Mexican security. Par amount is stated in U.S.
dollars.
(j) This is a Polish security. Par amount is stated in U.S.
dollars. Interest rate shown is a floating rate coupon which changes
every six months.
(k) This is an Argentinean security. Par amount is stated in German
Deutschemarks.
(l) This is a Brazilian security. Par amount is stated in U.S. dollars.
(m) This is a Polish security. Par amount is stated in U.S. dollars.
(n) This is a Russian security. Par amount is stated in German Deutschemarks.
(o) This is a Russian security. Par amount is stated in U.S. dollars.
(p) This is a Mexican security. Par amount is stated in German Deutschemarks.
(q) Cost for federal income tax purposes is $115,128.
(r) As of April 30, 1998, the Fund had entered into the following
forward currency exchange contracts:
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
Contracts In Exchange Settlement (Depreciation)
to Deliver For Date (U.S. $)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DK 2,382 US$ 348 05/07/1998 $ (a)
US$ 321 GD 100,720 05/07/1998 (a)
A$ 4,161 US$ 2,776 05/11/1998 72 (s)
KB 1,534 US$ 2,567 06/23/1998 10 (s)
SK 6,044 US$ 759 07/09/1998 (23)(s)
DK 2,540 US$ 364 07/14/1998 (8)(s)
US$ 123 DK 840 07/14/1998 (a)(s)
-----------
$ 51
===========
</TABLE>
(s) These foreign currency exchange contracts are portfolio hedges.
21
<PAGE>
Investment Portfolio/April 30, 1998
- ------------------------------------------------------------------------------
NOTES TO INVESTMENT PORTFOLIO - CONT.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Summary of Securities
by Country/Currency Country/Currency Value % of Total
-------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $ 103,144 69.9
United Kingdom UK/KB 5,979 4.1
Japan Ja 4,330 2.9
Germany G 3,544 2.4
Sweden Sw/SK 3,435 2.3
Italy It 3,115 2.1
Netherlands Ne 2,870 2.0
Australia Au/A$ 2,650 1.8
Switzerland Sz 2,394 1.6
Portugal Pt 2,077 1.4
Mexico Mx 1,690 1.2
Spain Sp 1,672 1.1
Poland PL 1,349 0.9
Finland Fi 1,248 0.8
France Fr 1,157 0.8
Brazil Bz 1,091 0.7
Greece GD 965 0.7
Denmark De/DK 932 0.6
Hong Kong HK 804 0.6
Russia RU 876 0.6
Austria Aus 715 0.5
Argentina Ar 631 0.4
Canada Ca 588 0.4
Belgium Be 113 0.1
Norway No 75 0.1
Singapore Si 57 0.0
------- -----
$ 147,501 100.0
========= =====
</TABLE>
Certain securities are listed by country of underlying exposure but
may trade predominantly on other exchanges.
<TABLE>
<CAPTION>
Acronym Name
------- ----
<S> <C>
A$ Australian Dollars
ADR American Depositary Receipt
DK Danish Kroner
GD Greek Drachmas
KB British Pounds
PIK Payment-In-Kind
PRIDES Preferred Redeemable Increased Dividend Equity Securities
SK Swedish Kroner
</TABLE>
See notes to financial statements.
22
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
APRIL 30, 1998 (UNAUDITED)
(in thousands except for per share amounts and footnotes)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value (cost $115,063) $147,501
Short-term obligations 6,850
---------
154,351
Receivable for:
Interest $ 1,393
Fund shares sold 1,089
Investments sold 373
Dividends 152
Foreign tax reclaims 13
Deferred organization expenses 21
Unrealized appreciation on forward
currency contracts 51
Other 12 3,104
---------- ---------
Total Assets 157,455
LIABILITIES
Payable for:
Investments purchased 321
Fund shares repurchased 137
Payable to Adviser 6
Accrued:
Deferred Trustees fees 2
Other 21
----------
Total Liabilities 487
---------
NET ASSETS $156,968
---------
Net asset value & redemption price per share -
Class A ($54,666/3,466) $ 15.77
=========
Maximum offering price per share - Class A
($15.77/0.9525) $ 16.56(a)
=========
Net asset value & offering price per share -
Class B ($94,361/5,994) $ 15.74(b)
=========
Net asset value & offering price per share -
Class C ($7,941/504) $ 15.76(b)
=========
</TABLE>
(a) On sales of $50,000 or more the offering price is reduced.
(b) Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
See notes to financial statements.
23
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1998
(UNAUDITED)
(in thousands)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest $ 2,361
Dividends 640
----------
Total investment income (net of nonreclaimable
foreign taxes withheld at source which
amounted to $29) 3,001
EXPENSES
Management fee $ 494
Service fee 177
Distribution fee - Class A 75
Distribution fee - Class B 316
Distribution fee - Class C 26
Transfer agent 203
Bookkeeping fee 29
Registration fee 26
Custodian fee 15
Audit fee 8
Trustees fee 8
Reports to shareholders 14
Legal fee 2
Amortization of deferred
organization expenses 7
Other 5
-------
1,405
Fees and expenses waived or borne
by the Adviser (14) 1,391
------- ----------
Net Investment Income 1,610
----------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments 1,922
Foreign currency transactions (46)
-------
Net Realized Gain 1,876
Net unrealized appreciation during
the period on:
Investments 12,143
Foreign currency transactions 167
-------
Net Unrealized Appreciation 12,310
----------
Net Gain 14,186
----------
Increase in Net Assets from Operations $ 15,796
=========
</TABLE>
See notes to financial statements.
24
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(Unaudited)
Six months ended Year ended
(in thousands) April 30 October 31
------------------- ---------------
INCREASE (DECREASE) IN NET ASSETS 1998 1997 (a)
<S> <C> <C>
Operations:
Net investment income $ 1,610 $ 2,699
Net realized gain 1,876 1,528
Net unrealized appreciation 12,310 11,346
---------- ---------
Net Increase from Operations 15,796 15,573
Distributions:
From net investment income - Class A (720) (1,033)
From net realized gains - Class A (469) (485)
From net investment income - Class B (1,042) (1,442)
From net realized gains - Class B (802) (783)
From net investment income - Class C (87) (125)
From net realized gains - Class C (67) (71)
---------- ---------
12,609 11,634
---------- ---------
Fund Share Transactions:
Receipts for shares sold - Class A 6,877 19,814
Value of distributions reinvested - Class A 1,121 1,423
Cost of shares repurchased - Class A (3,528) (5,245)
---------- ---------
4,470 15,992
---------- ---------
Receipts for shares sold - Class B 15,306 36,345
Value of distributions reinvested - Class B 1,737 2,074
Cost of shares repurchased - Class B (7,203) (8,391)
---------- ---------
9,840 30,028
---------- ---------
Receipts for shares sold - Class C 1,523 3,286
Value of distributions reinvested - Class C 143 174
Cost of shares repurchased - Class C (746) (1,184)
---------- ---------
920 2,276
---------- ---------
Net Increase from Fund
Share Transactions 15,230 48,296
---------- ---------
Total Increase 27,839 59,930
NET ASSETS
Beginning of period 129,129 69,199
----------- ---------
End of period (including undistributed
net investment income of $248 and $580,
respectively) $ 156,968 $129,129
=========== =========
</TABLE>
(a) Class D shares were redesignated Class C shares on July 1, 1997.
Statement of Changes in Net Assets continued on following page.
See notes to financial statements.
25
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS - CONT.
<TABLE>
<CAPTION>
(Unaudited)
Six months ended Year ended
(in thousands) April 30 October 31
----------------- ---------------
NUMBER OF FUND SHARES 1998 1997 (a)
<S> <C> <C>
Sold - Class A 460 1,458
Issued for distributions reinvested - Class A 78 106
Repurchased - Class A (236) (381)
---------- --------
302 1,183
---------- --------
Sold - Class B 1,017 2,684
Issued for distributions reinvested - Class B 120 154
Repurchased - Class B (480) (608)
---------- --------
657 2,230
---------- --------
Sold - Class C 101 241
Issued for distributions reinvested - Class C 10 13
Repurchased - Class C (49) (87)
---------- --------
62 167
---------- --------
</TABLE>
(a) Class D shares were redesignated Class C shares on July 1, 1997.
See notes to financial statements.
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998 (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, 1998, 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 C. Class A shares are sold
with a front-end sales charge and a continuing distribution fee 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. Class C shares are subject to an annual
distribution fee and a contingent deferred sales charge.
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.
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.
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
27
<PAGE>
Notes to Financial Statements/April 30, 1998
- -------------------------------------------------------------------------------
NOTE 2. ACCOUNTING POLICIES - CONT.
...............................................................................
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.
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 C distribution fees), and
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 C 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 C 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, 1998
- -------------------------------------------------------------------------------
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 gains (losses) arising from the
fluctuation 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.
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 nonreclaimable 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, 1998
- --------------------------------------------------------------------------------
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.
Effective October 1, 1997, and continuing through September 1998, the Transfer
Agent fee will be reduced by 0.0012% 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 Financial
Investments, Inc. (the Distributor), a subsidiary of the Adviser, is the Fund's
principal underwriter. During the six months ended April 30, 1998, the Fund has
been advised that the Distributor retained net underwriting discounts of $18,642
on sales of the Fund's Class A shares and received contingent deferred sales
charges (CDSC) of $92,260 and $986, 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 0.30% for Class A and 0.75% for Class B and Class C,
annually, of the average net assets attributable to Class A, Class B, and Class
C 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: Through December 31, 1997, the Adviser waived fees and bore
certain Fund expenses to the extent that total expenses (exclusive of service
and distribution fees, brokerage commissions, interest, taxes and extraordinary
expenses, if any) exceeded 1.10% annually of the Fund's average net assets.
Effective January 1, 1998, the expense limit was eliminated.
30
<PAGE>
Notes to Financial Statements/April 30, 1998
- -------------------------------------------------------------------------------
Other: The Fund pays no compensation to its officers, all of whom are employees
of the Adviser.
The Fund's Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
Fund's assets.
NOTE 4. PORTFOLIO INFORMATION
...............................................................................
Investment activity: During the six months ended April 30, 1998, purchases and
sales of investments, other than short-term obligations, were $48,232,203 and
$31,912,584, respectively, of which $4,389,378 and $529,063, respectively, were
U.S. government securities.
Unrealized appreciation (depreciation) at April 30, 1998, based on cost of
investments for federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $33,920,192
Gross unrealized depreciation (1,547,473)
------------
Net unrealized appreciation $32,372,719
============
</TABLE>
Other: There are certain additional risks involved when investing in foreign
securities that are not inherent with investments in domestic securities. These
risks may involve foreign currency exchange rate fluctuations, adverse political
and economic developments and the possible prevention of foreign currency
exchange or the imposition of other foreign governmental laws or restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
NOTE 5. LINE OF CREDIT
...............................................................................
The Fund may borrow up to 10% of its net assets under a line of credit for
temporary or emergency purposes. Any borrowings bear interest at one of the
following options determined at the inception of the loan: (1) federal funds
rate plus 1/2 of 1%, (2) the lending bank's base rate or (3) IBOR offshore loan
rate plus 1/2 of 1%. There were no borrowings under the line of credit during
the six months ended April 30, 1998.
NOTE 6. COMPOSITION OF NET ASSETS
...............................................................................
<TABLE>
<S> <C>
At April 30, 1998, net assets consisted of:
Capital paid in $ 122,306
Undistributed net investment income 248
Accumulated net realized gain 1,925
Net unrealized appreciation on:
Investments 32,438
Foreign currency transactions 51
----------
$ 156,968
==========
</TABLE>
31
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each
period are as follows:
<TABLE>
<CAPTION>
(Unaudited)
Six months ended April 30
-----------------------------------------------------------
1998
Class A Class B Class C
---------------- --------------- -----------
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 14.450 $ 14.430 $ 14.450
-------- -------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a)(c) 0.193 0.159 0.159
Net realized and
unrealized gain 1.495 1.486 1.486
-------- -------- ---------
Total from Investment
Operations 1.688 1.645 1.645
-------- -------- ---------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.220) (0.187) (0.187)
From net realized gains (0.148) (0.148) (0.148)
-------- -------- ---------
Total Distributions Declared
to Shareholders (0.368) (0.335) (0.335)
-------- -------- ---------
Net asset value -
End of period $ 15.770 $ 15.740 $ 15.760
======== ======== ========
Total return (d)(e) 11.92%(f) 11.62%(f) 11.60%(f)
======== ======== ========
RATIOS TO AVERAGE NET ASSETS
Expenses (g) 1.68%(h) 2.13%(h) 2.13%(h)
Net investment income (g) 2.57%(h) 2.12%(h) 2.12%(h)
Fees and expenses waived
or borne by the Adviser (g) 0.02%(h) 0.02%(h) 0.02%(h)
Portfolio turnover 24%(f) 24%(f) 24%(f)
Average commission rate $ 0.0163 $ 0.0163 $ 0.0163
Net assets at end
of period (000) $ 54,666 $ 94,361 $ 7,941
(a) Net of fees and expenses waived or borne by the Adviser which
amounted to: $ 0.002 $ 0.002 $ 0.002
(b) Class D shares were redesignated Class C shares on July 1, 1997.
(c) Per share data was calculated using average shares
outstanding during the period.
(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.
(h) Annualized.
</TABLE>
32
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
<TABLE>
<CAPTION>
Year ended October 31
- --------------------------------------------------
1997
Class A Class B Class C (b)
---------- ---------- ----------
<S> <C> <C>
$ 12.910 $ 12.890 $ 12.910
---------- ---------- ----------
0.404 0.342 0.342
1.762 1.766 1.766
---------- ---------- ----------
2.166 2.108 2.108
---------- ---------- ----------
(0.393) (0.335) (0.335)
(0.233) (0.233) (0.233)
---------- ---------- ----------
(0.626) (0.568) (0.568)
---------- ---------- ----------
$ 14.450 $ 14.430 $ 14.450
========== ========== ==========
17.24% 16.77% 16.75%
========== ========== ==========
1.65% 2.10% 2.10%
2.93% 2.48% 2.48%
0.09% 0.09% 0.09%
45% 45% 45%
$ 0.0260 $ 0.0260 $ 0.0260
$ 45,736 $ 77,005 $ 6,388
$ 0.013 $ 0.013 $ 0.013
</TABLE>
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
-----------------------------------------------------------------
1996
Class A Class B Class C (b)
---------- ----------- -----------
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 11.650 $ 11.640 $ 11.650
---------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a)(c) 0.369 0.314 0.314
Net realized and
unrealized gain 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 (d)(e) 14.24% 13.71% 13.68%
========== =========== ===========
RATIOS TO AVERAGE NET ASSETS
Expenses (f) 1.65% 2.10% 2.10%
Net investment income (f) 2.99% 2.54% 2.54%
Fees and expenses waived or
borne by the Adviser (f) 0.19% 0.19% 0.19%
Portfolio turnover 59% 59% 59%
Average commission rate (g) $ 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
(b) Class D shares were redesignated Class C shares on July 1, 1997.
(c) Per share data was calculated using average shares outstanding during the period.
(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) The benefits derived from custody credits and directed
brokerage arrangements had no impact. Prior years' ratios are
net of benefits received, if any.
(g) 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.
</TABLE>
34
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
<TABLE>
<CAPTION>
Year ended October 31
- --------------------------------------------------
1995
Class A Class B Class C (b)
---------- ---------- ----------
<S> <C> <C>
$ 9.910 $ 9.900 $ 9.900
---------- ---------- ----------
0.325 0.277 0.277
1.764 1.769 1.774
---------- ---------- ----------
2.089 2.046 2.051
---------- ---------- ----------
(0.349) (0.306) (0.301)
- - -
---------- ---------- ----------
(0.349) (0.306) (0.301)
---------- ---------- ----------
$ 11.650 $11.640 $11.650
========== ========== ==========
21.47% 21.00% 21.04%
========== ========== ==========
1.65% 2.10% 2.10%
3.05% 2.60% 2.60%
0.43% 0.43% 0.43%
49% 49% 49%
- - -
$16,346 $18,284 $4,164
$ 0.042 $ 0.042 $0.042
</TABLE>
35
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each
period are as follows:
<TABLE>
<CAPTION>
Period ended October 31
-----------------------------------------------------
1994 (b)
Class A Class B Class C (c)
----------- ------------ -----------
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 10.000 $ 10.000 $ 10.000
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income (a)(d) 0.035 0.029 0.029
Net realized and
unrealized gain (loss) (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 (e)(f) (0.90)%(g) (1.00)%(g) (1.00)%(g)
======== ======== ========
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% 0% 0%
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
(b) The Fund commenced investment operations on September 19, 1994.
(c) Class D shares were redesignated Class C shares on July 1, 1997.
(d) Per share data was calculated using average shares outstanding
during the period.
(e) Total return at net asset value assuming no initial sales
charge or contingent deferred sales charge.
(f) Had the Adviser not waived or reimbursed a portion of expenses,
total return would have been reduced.
(g) Not annualized.
(h) Annualized.
</TABLE>
36
<PAGE>
SHAREHOLDER SERVICES
TO MAKE INVESTING EASIER
Your fund has one of the most extensive selections of shareholder services
available. Your financial advisor can help you arrange for any of these
services, or you can call Colonial Investors Service Center 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 Exchanges1: Exchange all or part of your account into the same share class
of another fund distributed by Liberty Financial Investments, by phone or mail.
Easy Access to Your Money(1): 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 within one year, you can reinvest in any fund distributed by
Liberty Financial Investments 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 Fund 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
processing 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 fund
with a balance of $5,000 into the same share class of up to four other funds
distributed by Liberty Financial Investments. Minimum for each transfer is $100.
Retirement Plans: Choose from a broad range of retirement plans, including IRAs.
(1) Redemptions and exchanges are made at the next determined net asset value
after the request is received by the Transfer Agent. 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 C shares, or $1 million or more of Class A shares, may be subject to a
contingent deferred sales charge.
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
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 dur-
ing the quarter (including any reinvestment of dividends). This statement also
provides year-to-date information.
Liberty Financial Investments Investor Opportunities: 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
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>
[BACK COVER]
TRUSTEES
Robert J. Birnbaum
Consultant (formerly Special Counsel, Dechert, Price & Rhoads; President and
Chief Operating Officer, New York Stock Exchange, Inc.; President, American
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 & Frankel)
James E. Grinnell
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
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
Robert L. Sullivan
Retired Partner, KPMG Peat Marwick LLP (formerly Management Consultant, Saatchi
and Saatchi Consulting Ltd. and Principal and International Practice Director,
Management Consulting, Peat Marwick Main & Co.)
[Liberty Logo]
LIBERTY FINANCIAL INVESTMENTS, INC. (c) 1998
Distributor for Colonial Funds, Stein Roe Advisor Funds and Newport Funds
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
Visit us at www.libertyfunds.com
SB-03/338F-0498 (06/98) 98/583
