<PAGE>
[graphic omitted]
COLONIAL GLOBAL UTILITIES FUND ANNUAL REPORT
October 31, 1998
---------------------------
Not FDIC May Lose Value
Insured No Bank Guarantee
---------------------------
<PAGE>
COLONIAL GLOBAL UTILITIES FUND HIGHLIGHTS
NOVEMBER 1, 1997 - OCTOBER 31, 1998
INVESTMENT OBJECTIVE: Colonial Global Utilities Fund seeks current income and
long-term growth of capital and income.
THE FUND IS DESIGNED TO OFFER:
[X] Long-term growth potential
[X] Worldwide diversification
[X] Experienced professional management
PORTFOLIO MANAGER COMMENTARY: "Significant volatility during the final months of
the period caused the stocks of many utility companies to underperform,
particularly those with investments in Asia and Latin America. During the
period, we maintained our conservative investment strategy, emphasizing a core
group of high-quality utility stocks. Over the long term, we believe this
strategy offers shareholders the potential for competitive returns."
- Ophelia Barsketis and Deborah Jansen
COLONIAL GLOBAL UTILITIES FUND PERFORMANCE
- --------------------------------------------------------------------------------
Class A Class B Class C
Inception dates 10/15/91 3/27/95 3/27/95
- --------------------------------------------------------------------------------
12-month distributions declared per share $1.168 $1.057 $1.057
- --------------------------------------------------------------------------------
12-month total returns, assuming 18.09% 17.12% 17.20%
reinvestment of all distributions and
no sales charge or contingent deferred
sales charge (CDSC)
- --------------------------------------------------------------------------------
Net asset value per share on 10/31/98 $14.92 $14.91 $14.92
- --------------------------------------------------------------------------------
TOP FIVE COMMON STOCK HOLDINGS TOP FIVE COUNTRIES
(as of 10/31/98) (as of 10/31/98)
- --------------------------------------------------------------------------------
1. Nokia Oy 3.9% 1. United States 57.5%
2. Colt Telecom Group 3.6% 2. Great Britain 9.9%
3. MCI World Com., Inc. 3.5% 3. Spain 6.1%
4. Swisscom AG 3.4% 4. Finland 3.9%
5. NIPSCO Industries, Inc.. 3.3% 5. Germany 3.9%
Countries and holdings are shown as a percentage net of other assets and
liabilities of LFC Utilities Trust. Because the Trust is actively managed, there
can be no guarantee the Trust will continue to hold these securities or invest
in these countries in the future.
<PAGE>
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[Photo of Stephen E. Gibson]
In June 1998, Harold Cogger retired as president of Colonial Global Utilities
Fund. I would like to take this opportunity to thank him for his guidance over
the past few years and wish him well. As the new president of the Fund, I am
pleased to present the annual report for the 12-month period ended October 31,
1998.
The past 12 months were characterized by changing investment conditions.
Initially, investors were concerned with the Asian economic crisis and its
potential impact on financial markets worldwide. During the summer, the
emergence of serious economic problems in Russia and Latin America renewed
concerns of a global economic slowdown. As a result, stock markets around the
world declined as investors sought "safe havens" in strong currencies and
relatively stable investments. This "flight to quality" was reflected in
stronger demand for U.S. Treasury securities and the household names of
large-cap, U.S. stocks. Interest rates fell sharply during this period - usually
a positive condition for utility stock prices. However, some of the
higher-growth utility stocks that have diversified their operations into
non-utility sectors, or that have utility operations in emerging markets,
experienced significant price declines.
During the final months of the period, the Federal Reserve Board announced two
successive interest rate cuts. The moves contributed to market rallies as
investors generally concluded that lower rates would stimulate the economy.
Markets were further encouraged by the Group of Seven (G7) industrial nations
and the International Monetary Fund's (IMF) proposal to establish a
precautionary line of credit to stimulate the world's economies and help
countries prevent financial panic.
The Fund maintained its emphasis on a diversified portfolio of fundamentally
strong, value-oriented utility stocks with good growth prospects. Because the
world's markets are not synchronized, the portfolio's asset allocation among
international and U.S. markets seeks to provide shareholders with a stabilizing
effect during periods of market uncertainty as well as current income and
long-term growth potential.
The following report will provide you with more specific information on your
Fund's performance. Thank you for giving us the opportunity to help you meet
your financial goals. We hope to continue serving you in the years to come.
Sincerely,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
December 11, 1998
The Fund's Board of Trustees approved a plan of reorganization with LFC
Utilities Trust ("Portfolio") pursuant to which the Fund and the Portfolio will
no longer be in a master/feeder fund arrangement. As a result of the
reorganization, the Fund will realize an overall reduction in shareholder
expenses while maintaining the same investment objective and policies.
Because market conditions change frequently, there can be no assurance that the
trends described above or on the pages that follow will continue.
<PAGE>
PORTFOLIO MANAGEMENT REPORT
OPHELIA BARSKETIS and DEBORAH JANSEN are portfolio co-managers of Colonial
Global Utilities Fund. Ms. Barsketis and Ms. Jansen are also senior vice
presidents of Stein Roe & Farnham Incorporated, the portfolio's advisor.
MIXED INVESTMENT ENVIRONMENT PRESENTED CHALLENGES
The past 12 months presented investors with a number of challenges. First,
lingering concern about Asia's weakening economies and the possibility of slower
economic growth around the world created a negative effect on global stock
markets. However, the U.S. and other well-established economies, particularly in
Europe, continued to have well-balanced growth with few signs of inflation. The
European markets also benefited from the impending European Monetary Union
(EMU). A period of market recovery, when the U.S. and some European stock market
indices reached record high levels, ended in August when a monetary and
political crisis in Russia emerged. Financial markets worldwide worried that
this crisis, along with continued weakness in Asia, would result in a global
economic slowdown. Investors quickly sold emerging market securities based on
fears of underlying economic problems. Other stock and bond markets around the
world declined as investors sought a safe haven in strong currencies such as the
U.S. dollar, and relatively stable investments such as U.S. Treasury securities.
This flight to quality increased demand for U.S. government bonds and long-term
interest rates fell sharply. In the utility sector, investors' desire for
quality led them to favor "plain vanilla" utility stocks with little or no
exposure to the weak economies of Asia, Russia, Eastern Europe and Latin
America.
As worries about the world's economies continued, the Federal Reserve Board
announced two successive interest rate cuts intended to reduce the likelihood of
a recession. Markets reacted positively and were further encouraged by the Group
of Seven industrial nations and the International Monetary Fund's commitment to
promote global liquidity.
FUND STRATEGY EMPHASIZED QUALITY
We maintained our emphasis on a globally diversified portfolio of high-quality
utilities, but we reduced our investments in Asian and emerging market utility
stocks throughout the period. While we believed that many companies in these
countries had attractive long-term investment characteristics, we were more
concerned with economic, political and monetary instability. By October 1998, we
had increased the proportion of U.S. stocks in the portfolio to about 50%, while
our international exposure was limited primarily to Europe. Within those
markets, we concentrated our activity on companies that provide basic electric,
gas, water and telephone service to territories with attractive demographics.
For example, in the U.S. we had good performance from FPL Group (3.2% of net
assets), a Florida-based electric utility whose diversification activities have
been limited to the United States. FPL serves a high-growth service area in the
Southeast. Overseas, Colt Holdings (3.6% of net assets) in the United Kingdom
generated strong returns. Colt is a London-based telecommunications company that
provides service only in Europe. The company's stock price increased about 292%
during the period, reflecting its prospects for healthy earnings growth.
PERFORMANCE REFLECTS LINGERING EMERGING MARKET EXPOSURE
The Fund generated a 12-month total return of 18.09% for Class A shares, based
on net asset value. The Fund underperformed the Standard & Poor's Utility Index
and outperformed the Morgan Stanley Capital International World Index which
posted total returns of 26.65% and 15.26%, respectively.
We believe our performance was hurt by our exposure to emerging markets.
Although we reduced our direct exposure to emerging markets during the course of
the year, the portfolio held a number of U.S. and European stocks which were
penalized for their investments in those emerging economies.
DEPRESSED PRICES CREATED OPPORTUNITY
As the period came to a close, we took advantage of a number of good utility
stocks whose prices had declined well below their fundamental values. For
example, stocks in New Zealand and Australia were tainted by their proximity to
Asia. We bought New Zealand Telecom (2.3% of net assets), a provider of cellular
and land line telephone service in New Zealand. Not only was this stock priced
at an attractive discount to the telephone sector, it provided the Fund with an
excellent yield. Closer to home, we saw opportunity in natural gas stocks.
Prices in this sector had declined on the basis of natural gas price
uncertainty. We invested in KN Energy (3.0% of net assets), a Colorado-based gas
utility that has grown by expanding pipeline capacity into the Midwest. We
expect Midwestern demand for natural gas to increase as a number of troubled
nuclear facilities go off-line.
ENCOURAGING SIGNS FOR THE FUTURE
We believe that we will see interest rates decline further in both the U.S. and
Europe, a positive factor for utility prices. Looking ahead, we will maintain
our conservative focus on a broadly diversified portfolio of quality utilities.
Our strategy will be to concentrate on domestic and European stocks. We plan to
avoid utilities in Asia and emerging markets until we see signs of political and
economic stability. Despite increased volatility the past year, many of our core
top-quality holdings in the U.S. and Europe performed well. While we intend to
emphasize these types of holdings, we believe that deregulation, privatization
and the European Monetary Union will provide additional opportunities to seek
attractive returns.
<PAGE>
COLONIAL GLOBAL UTILITIES FUND'S INVESTMENT PERFORMANCE VS.
MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDEX ND AND
THE STANDARD & POOR'S UTILITIES INDEX
Change in Value of $10,000 from 10/31/91 - 10/31/98
based on NAV and POP for Class A shares
MSCI S&P
DATE TOTAL RETURN NAV POP WORLD IX ND UTILITIES
- -------------------------------------------------------------------------------
10/31/1991 0.999 $9,990 $9,416 $10,000 $10,000
12/31/1991 1.049721529 $10,497 $9,894 $10,254 $10,635
03/31/1992 1.019257706 $10,193 $9,607 $9,416 $9,643
06/30/1992 1.067683959 $10,677 $10,063 $9,585 $10,394
09/30/1992 1.118784253 $11,188 $10,545 $9,744 $11,213
12/31/1992 1.158483605 $11,585 $10,919 $9,718 $11,496
03/31/1993 1.259256696 $12,593 $11,868 $10,551 $12,736
06/30/1993 1.28798069 $12,880 $12,139 $11,191 $13,038
09/30/1993 1.360165845 $13,602 $12,820 $11,716 $13,951
12/31/1993 1.332756652 $13,328 $12,561 $11,905 $13,156
03/31/1994 1.275959496 $12,760 $12,026 $11,978 $12,070
06/30/1994 1.240912816 $12,409 $11,696 $12,337 $12,067
09/30/1994 1.25240561 $12,524 $11,804 $12,602 $12,124
12/31/1994 1.241481488 $12,415 $11,701 $12,509 $12,111
03/31/1995 1.28141329 $12,814 $12,077 $13,094 $12,946
06/30/1995 1.355052231 $13,551 $12,771 $13,653 $13,908
09/30/1995 1.399786725 $13,998 $13,193 $14,416 $15,468
12/31/1995 1.465512286 $14,655 $13,812 $15,101 $17,092
03/31/1996 1.46626083 $14,663 $13,820 $15,716 $16,279
06/30/1996 1.516618916 $15,166 $14,294 $16,171 $17,100
09/30/1996 1.520753234 $15,208 $14,333 $16,387 $16,523
12/31/1996 1.651436882 $16,514 $15,565 $17,137 $17,626
03/31/1997 1.692314083 $16,923 $15,950 $17,186 $17,032
06/30/1997 1.854283277 $18,543 $17,477 $19,773 $18,032
09/30/1997 1.901866459 $19,019 $17,925 $20,339 $18,898
12/31/1997 2.022425883 $20,224 $19,061 $19,838 $21,970
03/31/1998 2.241661408 $22,417 $21,128 $22,679 $23,205
06/30/1998 2.240705512 $22,407 $21,119 $23,140 $23,485
09/30/1998 2.074648749 $20,746 $19,554 $20,366 $24,573
10/31/1998 2.164160989 $21,663 $20,418 $22,204 $24,141
GROWTH OF A $10,000 INVESTMENT MADE ON 10/31/91
As of 10/31/98
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
NAV POP NAV W/CDSC NAV W/CDSC
- --------------------------------------------------------------------------------
$21,663 $20,418 $21,075 $21,075 $21,089 $21,089
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/98
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
INCEPTION 10/15/91 3/27/95 3/27/95
NAV POP NAV W/CDSC NAV W/CDSC
- --------------------------------------------------------------------------------
1 year 18.09% 11.30% 17.12% 12.12% 17.20% 16.20%
- --------------------------------------------------------------------------------
5 years 9.66 8.37 9.06 8.78 9.08 9.08
- --------------------------------------------------------------------------------
Life 11.57 10.64 11.13 11.13 11.15 11.15
- --------------------------------------------------------------------------------
Past performance cannot predict future results. Returns and value of an
investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. Net asset value (NAV) returns do not
include sales charges or contingent deferred sales charges (CDSC). Public
offering price (POP) returns include the maximum sales charges of 5.75% for
Class A shares. The CDSC returns reflect the maximum applicable charges of 5%
for 1 year and 2% for 5 years for Class B shares, and 1% for 1 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 Fund initially commenced operations as the Liberty Financial Utilities Fund
on 10/15/91. Performance shown is based, in part, on the performance of the
Liberty Financial Utilities Fund, which had a different expense structure than
the Fund.
Performance results reflect any voluntary waivers or reimbursements of Fund
expenses by the Advisor or its affiliates. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
Class B and Class C share (newer class shares) performance information includes
returns of the Fund's Class A shares (the oldest existing fund class) for
periods prior to the inception dates of the newer class shares. These Class A
share returns are not restated to reflect any expense differential (e.g., Rule
12b-1 fees) between Class A shares and the newer class shares. Had the expense
differential been reflected, the returns for periods prior to the inception date
of the newer class shares would have been lower.
The Morgan Stanley Capital International World Index ND is an unmanaged index
that tracks the performance of global stocks. The Standard & Poor's Utilities
Index is an unmanaged index that tracks the performance of domestic utility
stocks. Unlike mutual funds, indexes are not investments, do not incur fees or
expenses, and are not professionally managed.
<PAGE>
LFC UTILITIES TRUST
INVESTMENT PORTFOLIO
OCTOBER 31,1998 (IN THOUSANDS)
COMMON STOCKS - 88.6% COUNTRY SHARES VALUE
- --------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 80.6%
COMMUNICATIONS - 35.4%
AirTouch Communications (a) 93 $ 5,202
Ameritech Corp. 40 2,136
COLT Telecom Group ADR (a) UK 120 6,165
Lucent Technologies, Inc. 43 3,408
MCI WorldCom, Inc. (a) 108 5,967
Nokia Oy Ab ADR Fi 71 6,617
Portugal Telecom S.A. ADR Pt 63 2,953
SBC Communications 93 4,316
Sprint 73 5,595
Swisscom AG (a) Chf 17 5,898
Telecom Italia (Saving shares) It 675 3,404
Telecom New Zealand-SP ADR NZ 120 3,960
Telefonica de Espana ADR Sp 37 5,053
---------
60,674
---------
ELECTRIC SERVICES - 35.8%
AES Corp. (a) 69 2,812
British Energy PLC UK 520 5,073
Edison International 121 3,202
Electricade de Portugal ADR Pt 39 1,935
FPL Group, Inc. 87 5,443
Iberdrola SA Sp 339 5,465
National Power PLC ADR UK 49 1,702
New Century Energies 77 3,715
NIPSCO Industries, Inc. 191 5,718
PECO Energy Co. 129 4,991
Pinnacle West Capital Corp. 122 5,332
Scottish Power UK 411 4,034
Sierra Pacific Resources 50 1,837
Texas Utilities Co. 83 3,631
VEBA AG G 30 1,653
Viag AG G 7 4,959
---------
61,501
---------
Gas Services - 9.4%
CMS Energy Corp. 82 3,613
Columbia Energy Group 65 3,733
K N Energy, Inc. 105 5,192
Questar Corp. 98 1,929
UGI Corp. 72 1,642
---------
16,109
---------
- -------------------------------------------------------------------------------
SERVICES - 8.0%
Conglomerates and Miscellaneous Services - 2.7%
Waste Management, Inc. (a) 104 4,693
---------
WATER SERVICES - 5.3%
American Water Works Co., Inc. 115 3,673
Vivendi Fr 23 5,344
---------
9,017
---------
TOTAL COMMON STOCKS (cost of $107,086) 151,995
---------
CONVERTIBLE PREFERRED STOCK - 2.4%
- -------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES
COMMUNICATIONS
LM Ericsson Telecommunications,
(cost of $1,855) 4.250% Sw 664 4,109
---------
CORPORATE FIXED-INCOME BOND - 2.7% CURRENCY PAR
- -------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 2.7%
ELECTRICAL SERVICES
Hydro-Quebec,
(cost of $4,328) 8.050% 07/07/24 Ca $ 4,000 4,638
---------
SHORT-TERM OBLIGATIONS - 10.2%
- -------------------------------------------------------------------------------
Associates Corp. of North America,
(cost of $17,467) 5.700% 11/02/98 17,470 17,467
---------
TOTAL INVESTMENTS - 103.9% (cost of $130,736)(b) 178,209
---------
OTHER ASSETS & LIABILITIES, NET - (3.9)% (6,613)
- -------------------------------------------------------------------------------
NET ASSETS - 100% $171,596
---------
NOTES TO INVESTMENT PORTFOLIO:
- -------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Cost for federal income tax purposes is the same.
<PAGE>
Investment Portfolio/October 31, 1998
- -------------------------------------------------------------------------------
Summary of Securities by Country/
Country/Currency Currency Value % of Total
- --------------------------------------------------------------------------------
United States $105,247 59.1
United Kingdom UK 16,974 9.5
Spain Sp 10,518 5.9
Finland Fi 6,617 3.7
Germany G 6,612 3.7
Switzerland Chf 5,898 3.3
France Fr 5,344 3.0
Portugal Pt 4,888 2.8
Canada Ca 4,638 2.6
Sweden Sw 4,109 2.3
New Zealand NZ 3,960 2.2
Italy It 3,404 1.9
-------- -----
$178,209 100.0
-------- -----
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
Acronym Name
ADR American Depositary Receipts
See notes to financial statements.
<PAGE>
LFC UTILITIES TRUST
STATEMENT OF ASSETS & LIABILITIES
OCTOBER 31, 1998
(in thousands)
ASSETS
Investments at value (cost $130,736) $ 178,209
Foreign currency (cost $5,206) 5,196
Cash 38
---------
183,443
Receivable for:
Investments sold $ 1,266
Dividends 591
Interest 102
Other 14 1,973
------- ---------
Total Assets 185,416
LIABILITIES
Payable for:
Investments purchased 13,709
Management, accounting
and transfer agent fees 80
Other 31
-------
Total Liabilities 13,820
---------
NET ASSETS applicable to
investors' beneficial interest $ 171,596
---------
See notes to financial statements.
<PAGE>
LFC UTILITIES TRUST
STATEMENT OF CHANGES IN OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1998
(in thousands)
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $239) $ 3,918
Interest 1,264
---------
Total Investment Income 5,182
EXPENSES
Management fees $ 990
Accounting fees 28
Audit & legal fees 15
Transfer agent fees 8
Custodian & other fees 61 1,102
------- ---------
Net Investment Income 4,080
---------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments 7,720
Foreign currency transactions (98)
-------
Net realized gain from investments
and foreign currency transactions 7,622
Net change in unrealized appreciation (depreciation)
during the period on:
Investments 18,873
Translation of other assets and liabilities (48)
-------
Net unrealized appreciation from
investments and foreign currency
translations 18,825
---------
Net gain 26,447
---------
Increase in Net Assets from Operations $ 30,527
---------
See notes to financial statements.
<PAGE>
LFC UTILITIES TRUST
STATEMENT OF CHANGES IN NET ASSETS
(in thousands) Year ended October 31
------------------------------
INCREASE (DECREASE) IN NET ASSETS 1998 1997
Operations:
Net investment income $ 4,080 $ 5,561
Net realized gain from investments
and foreign currency transactions 7,622 12,294
Change in unrealized appreciation from
investments and foreign currency
translations 18,825 11,781
------------ ------------
Increase from Operations 30,527 29,636
------------ ------------
Transactions in investors' beneficial interest:
Contributions 251 120
Withdrawals (25,723) (35,537)
------------ ------------
Net transactions in investors' beneficial
interest (25,472) (35,417)
------------ ------------
Total Increase (Decrease) 5,055 (5,781)
------------ ------------
NET ASSETS
Beginning of period 166,541 172,322
------------ ------------
End of period $ 171,596 $ 166,541
------------ ------------
See notes to financial statements.
<PAGE>
LFC UTILITIES TRUST
FINANCIAL HIGHLIGHTS
Year ended October 31
--------------------------------
1998 1997 1996
RATIOS TO AVERAGE NET ASSETS
Expenses 0.61% 0.60% 0.60%
Net investment income 2.27% 3.16% 4.47%
Portfolio turnover 48% 48% 34%
Year ended October 31
------------------------
1995 1994
RATIOS TO AVERAGE NET ASSETS
Expenses 0.63% (a) 0.61%
Net investment income 5.97% (b) 5.48%
Portfolio turnover 46% 34%
(a) If the Portfolio had paid all of its expenses and there had been no
reimbursement from the Investment Advisor, this ratio would have been
0.64%.
(b) Computed giving effect to the Investment Advisor's expense limitation
undertaking.
See notes to financial statements.
<PAGE>
LFC UTILITIES TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
- ------------------------------------------------------------------------------
ORGANIZATION: LFC Utilities Trust (the Portfolio) was organized on August 14,
1991 as a trust under Massachusetts law and is registered under the Investment
Company Act of 1940 as an open-end investment company. The Declaration of Trust
permits the Trustees to issue non-transferable interests in the Portfolio. The
Portfolio commenced operations on August 23, 1991.
The following is a summary of significant accounting policies followed by the
Portfolio in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. 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
increases and decreases in net assets from operations during the reporting
period. Actual results could differ from those estimates.
All amounts are disclosed in thousands.
VALUATION OF INVESTMENTS: All securities are valued as of October 31, 1998.
Domestic securities traded on national securities exchanges are valued at the
last reported sales price or, if there are no sales, at the latest bid
quotation. Each domestic over-the-counter security for which the last sales
price is available from Nasdaq is valued at that price. All other domestic
over-the-counter securities for which reliable quotations are available are
valued at the latest bid quotation. Domestic securities convertible into equity
securities and long-term debt obligations are valued at a fair value using a
procedure determined in good faith by the Board of Trustees, which has
authorized the use of valuations provided by a pricing service. Foreign security
valuations are generally based upon market quotations which, depending upon
local convention or regulation, may be last sale price, last bid or asked price,
or the mean between last bid and asked prices as of, in each case, the close of
the appropriate exchange or other designated time.
Other assets and securities of the Portfolio are valued by a method that the
Board of Trustees believes represents fair value.
FEDERAL INCOME TAXES: The Portfolio has complied and intends to comply with the
applicable provisions of the Internal Revenue Service Code. Accordingly, no
provisions for federal income taxes is considered necessary.
FOREIGN CURRENCY TRANSLATIONS: The books and records of the Portfolio are
maintained in U.S. dollars. All assets and liabilities of the Portfolio
denominated in foreign currencies are translated into U.S. dollar amounts using
a rate that represents the mid-point between bid and asked market rates for such
currencies. Purchases and sales of foreign securities and income derived from
foreign securities are converted at the prevailing rate of exchange on the
respective dates of such transactions. The Portfolio may enter into "forward
currency contracts" for purchases and sales of securities denominated in foreign
currency.
OTHER: Investment transactions are accounted for on the trade date. Interest
income and expenses are recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date.
NOTE 2. INVESTMENT TRANSACTIONS
- ------------------------------------------------------------------------------
Realized gains and losses are computed on the identified cost basis for both
financial reporting and federal income tax purposes. The cost of investments
purchased and proceeds from investments sold, excluding short-term investments,
for the year ended October 31, 1998 were $84,211 and $113,621, respectively.
Unrealized appreciation (depreciation) at October 31, 1998, based on the cost of
investments for both financial statement and federal income tax purposes was:
Gross unrealized appreciation $ 48,474
Gross unrealized depreciation (1,001)
--------
Net unrealized appreciation $ 47,473
--------
NOTE 3. TRANSACTIONS WITH AFFILIATED INVESTMENT MANAGEMENT
- ------------------------------------------------------------------------------
The Portfolio has a management agreement with Stein Roe & Farnham, Inc. (Stein
Roe), an indirect majority-owned subsidiary of Liberty Mutual Insurance Company
(Liberty Mutual) under which Stein Roe provides investment management and
administrative services. The investment management fee paid to Stein Roe is
accrued daily and paid monthly at an annual rate of 0.55 percent of the
Portfolio's average daily net assets up to $400 million and 0.50 percent of its
average daily net assets thereafter.
The transfer agent fees are paid to Stein Roe Services, Inc., an indirect,
majority-owned subsidiary of Liberty Mutual. For the year ended October 31,
1998, the Portfolio incurred charges of $8.
Stein Roe also provides the Portfolio with certain accounting services. For the
year ended October 31, 1998, the Portfolio incurred charges of $28.
<PAGE>
INDEPENDENT AUDITORS' REPORT
THE TRUSTEES AND INVESTORS
LFC UTILITIES TRUST:
We have audited the accompanying statement of assets and liabilities of LFC
Utilities Trust including the Investment Portfolio, as of October 31, 1998, and
the related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1998, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of LFC
Utilities Trust as of October 31, 1998, the result of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
November 25, 1998
<PAGE>
COLONIAL GLOBAL UTILITIES FUND
STATEMENT OF ASSETS & LIABILITIES
OCTOBER 31, 1998
(in thousands except for per share amounts and footnotes)
ASSETS
Investment in LFC Utilities Trust, at value $ 171,593
Receivable for Fund shares sold 82
-----------
Total Assets 171,675
LIABILITIES
Payable for:
Fund shares repurchased $ 87
Accrued:
Administration fee 14
Distribution fee - B 3
Distribution fee - C 1
Bookkeeping fee 4
Service fee 35
Transfer Agent fee 28
Deferred Trustee fees 3
Other 7
----
Total Liabilities 182
-----------
NET ASSETS $ 171,493
-----------
Net asset value & redemption price per share -
Class A ($165,566/11,098) $ 14.92 (a)
-----------
Maximum offering price per share - Class A
($14.92/0.9425) $ 15.83 (b)
-----------
Net asset value & offering price per share -
Class B ($4,957/332) $ 14.91 (a)
-----------
Net asset value & offering price per share -
Class C ($970/65) $ 14.92 (a)
-----------
COMPOSITION OF NET ASSETS
Capital paid in $ 116,206
Undistributed net investment income 194
Accumulated net realized gain 7,670
Net unrealized appreciation (depreciation) on:
Investments 47,473
Foreign currency transactions (50)
-----------
$ 171,493
-----------
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
(b) On sales of $50,000 or more the offering price is reduced.
See notes to financial statements.
<PAGE>
COLONIAL GLOBAL UTILITIES FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1998
(in thousands)
INVESTMENT INCOME
Dividend income from LFC Utilities Trust $ 3,918
Interest income from LFC Utilities Trust 1,264
Expenses allocated from LFC Utilities Trust (1,102)
--------
Investment Income from LFC Utilities Trust
(net of nonrebatable foreign taxes withheld
at source which amounted to $239) 4,080
EXPENSES
Administration fee $ 180
Service fee 452
Distribution fee - Class B 31
Distribution fee - Class C 8
Transfer agent 446
Bookkeeping fee 48
Trustees fee 12
Custodian fee 6
Audit fee 15
Legal fee 11
Registration fee 32
Reports to shareholders 15
Other 18 1,274
------ --------
Net Investment Income 2,806
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments 7,719
Foreign currency transactions (98)
------
Net Realized Gain 7,621
Net change in unrealized appreciation
(depreciation) during the period on:
Investments 18,873
Foreign currency transactions (48)
------
Net Change in Unrealized Appreciation 18,825
--------
Net Gain 26,446
--------
Increase in Net Assets from Operations $ 29,252
--------
See notes to financial statements.
<PAGE>
COLONIAL GLOBAL UTILITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
(in thousands) Year ended October 31
-----------------------
INCREASE (DECREASE) IN NET ASSETS 1998 1997(a)
Operations:
Net investment income $ 2,806 $ 4,290
Net realized gain 7,621 12,293
Net unrealized appreciation 18,825 11,781
----------- ---------
Net Increase from Operations 29,252 28,364
Distributions:
From net investment income - Class A (2,908) (4,558)
From net realized gains - Class A (10,710) -
From net investment income - Class B (37) (45)
From net realized gains - Class B (224) -
From net investment income - Class C (9) (13)
From net realized gains - Class C (58) -
----------- ---------
15,306 23,748
----------- ---------
Fund Share Transactions:
Receipts for shares sold - Class A 3,912 4,239
Value of distributions reinvested - Class A 12,984 4,093
Cost of shares repurchased - Class A (28,521) (39,270)
----------- ---------
(11,625) (30,938)
----------- ---------
Receipts for shares sold - Class B 2,120 2,324
Value of distributions reinvested - Class B 234 37
Cost of shares repurchased - Class B (935) (950)
----------- ---------
1,419 1,411
----------- ---------
Receipts for shares sold - Class C 274 306
Value of distributions reinvested - Class C 58 10
Cost of shares repurchased - Class C (267) (171)
----------- ---------
65 145
----------- ---------
Net Decrease from Fund Share Transactions (10,141) (29,382)
----------- ---------
Total Increase (Decrease) 5,165 (5,634)
NET ASSETS
Beginning of period 166,328 171,962
----------- ---------
End of period (including undistributed
net investment income of $194 and $440,
respectively) $ 171,493 $ 166,328
----------- ---------
(a) Effective July 1, 1997, Class D shares were redesignated Class C shares.
Statement of Changes in Net Assets continued on following page.
See notes to financial statements.
<PAGE>
COLONIAL GLOBAL UTILITIES FUND
STATEMENT OF CHANGES IN NET ASSETS - CONT.
(in thousands) Year ended October 31
------------------------
NUMBER OF FUND SHARES 1998 1997(a)
Sold - Class A 263 317
Issued for distributions reinvested - Class A 944 313
Repurchased - Class A (1,934) (2,954)
----------- ---------
(727) (2,324)
----------- ---------
Sold - Class B 142 175
Issued for distributions reinvested - Class B 17 3
Repurchased - Class B (63) (70)
----------- ---------
96 108
----------- ---------
Sold - Class C 18 23
Issued for distributions reinvested - Class C 4 1
Repurchased - Class C (17) (13)
----------- ---------
5 11
----------- ---------
(a) Effective July 1, 1997, Class D shares were redesignated Class C shares.
See notes to financial statements.
<PAGE>
COLONIAL GLOBAL UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998
NOTE 1. ACCOUNTING POLICIES
- ------------------------------------------------------------------------------
ORGANIZATION: Colonial Global Utilities 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 invests all of its assets in interests
in the LFC Utilities Trust (the Portfolio), a Massachusetts business trust,
having the same investment objective as the Fund. The Fund records its share of
the investment income, expenses and realized and unrealized gains (losses)
recorded by the Portfolio on a daily basis. The investment income, expenses and
realized and unrealized gains and losses are allocated daily to investors in the
Portfolio based upon the value of their investments in the Portfolio. Such
investments are adjusted on a daily basis. The value of the Fund's investment in
the Portfolio reflects the Fund's proportionate interest in the net assets of
the Portfolio (99.9% at October 31, 1998). The performance of the Fund is
directly affected by the performance of the Portfolio.
The financial statements of the Portfolio, including the portfolio of
investments are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements. 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
1.00% contingent deferred sales charge on redemptions made within eighteen
months on an original purchase of $1 million to $5 million. 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 a contingent deferred
sales charge on redemptions made within one year after purchase and an annual
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
accounting policies that are consistently followed by the Fund in the
preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS: Valuation of securities by the Portfolio is
discussed in Note 1 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: All income,
expenses (other than the Class B and Class C distribution fees) and realized and
unrealized gains (losses) are allocated to each class proportion- ately on a
daily basis for purposes of determining the net asset value of each class.
Per share data was calculated using the average shares outstanding during the
period. In addition, Class B and Class C net investment income per share data
reflects the distribution fee per share 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 ratios for the Fund for the entire period by the distribu-
tion 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.
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.
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES
- ------------------------------------------------------------------------------
ADMINISTRATOR FEE: Colonial Management Associates, Inc. (the Administrator), an
affiliate of Stein Roe, is the administrator of the Fund and furnishes
accounting and other services and office facilities for a monthly fee equal to
0.10% annually of the Fund's average net assets.
BOOKKEEPING FEE: The Administrator provides bookkeeping and pricing services for
$18,000 per year plus 0.0233% of the Fund's average net assets over $50 million.
TRANSFER AGENT FEE: Liberty Funds Services, Inc., formerly Colonial Investors
Service Center, Inc. (the Transfer Agent), an affiliate of the Administrator,
provides shareholder services for a monthly fee equal to 0.20% annually of the
Fund's average net assets and receives reimbursement for certain out-of-pocket
expenses.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Liberty Funds
Distributor, Inc., formerly Liberty Financial Investments, Inc. (the
Distributor), a subsidiary of the Administrator, is the Fund's principal
underwriter. During the year ended October 31, 1998, the Fund has been advised
that the Distributor retained net underwriting discounts of $16,617 on sales of
the Fund's Class A shares and received $0, $ 13,225, and $19 of contingent
deferred sales charges (CDSC) on Class A, Class B, and Class C share
redemptions, 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.
The Fund has adopted a 12b-1 plan which requires the payment of a service fee to
the Distributor 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.
OTHER: The Fund pays no compensation to its officers, all of whom are employees
of the Administrator.
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. LINE OF CREDIT
- ------------------------------------------------------------------------------
The Fund may borrow up to 33 1/3% of its net assets under a line of credit for
temporary or emergency purposes. Any borrowings bear interest at one of the
following options determined at the inception of the loan: (1) federal funds
rate plus 1/2 of 1%, (2) the lending bank's base rate or (3) IBOR off- shore
loan rate plus 1/2 of 1%. There were no borrowings under the line of credit
during the year ended October 31, 1998.
NOTE 4. RESULTS OF SPECIAL MEETING OF SHAREHOLDERS (UNAUDITED)
- ------------------------------------------------------------------------------
On October 30, 1998, a Special Meeting of Shareholders of the Fund was held to
approve the following items, all as described in the Proxy Statement of the
Meeting. On August 21, the record date for the Meeting, the Fund had outstanding
11,860,423 shares of beneficial interest. The votes cast at the Meeting were as
follows:
Authority
For Withheld
--------- ---------
To elect a Board of Trustees:
Robert J. Birnbaum 5,639,614 359,747
Tom Bleasdale 5,641,201 358,160
John Carberry 5,650,859 348,502
Lora S. Collins 5,650,859 348,502
James E. Grinnell 5,650,859 348,502
Richard W. Lowry 5,650,305 349,056
Salvatore Macera 5,646,401 352,960
William Mayer 5,650,414 348,947
James L. Moody, Jr. 5,650,859 348,502
John J. Neuhauser 5,650,381 348,980
Thomas E. Stitzel 5,628,504 370,857
Robert L. Sullivan 5,649,863 349,498
Anne-Lee Verville 5,630,858 368,503
To amend fundamental investment policies regarding borrowing and
lending:
For Against Abstain
--------- ------- -------
5,094,278 150,024 468,536
<PAGE>
COLONIAL GLOBAL UTILITIES FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each
period are as follows:
Year ended October 31
-------------------------------------
1998
Class A Class B Class C
-------- -------- --------
Net asset value -
Beginning of period $ 13.720 $ 13.720 $ 13.720
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a)(b) 0.234 0.123 0.123
Net realized and unrealized gain 2.134 2.124 2.134
-------- -------- --------
Total from Investment Operations 2.368 2.247 2.257
-------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.248) (0.137) (0.137)
From net realized gains (0.920) (0.920) (0.920)
-------- -------- --------
Total Distributions
Declared to Shareholders (1.168) (1.057) (1.057)
-------- -------- --------
Net asset value -
End of period $ 14.920 $ 14.910 $ 14.920
-------- -------- --------
Total return (c) 18.09% 17.12% 17.20%
-------- -------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses (b) 1.30% 2.05% 2.05%
Net investment income (b) 1.58% 0.83% 0.83%
Net assets at end of period (000) $165,566 $ 4,957 $ 970
(a) Per share data was calculated using average shares outstanding during
the period.
(b) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses
of LFC Utilities Trust.
(c) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
- -------------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
84% of the ordinary income distribution distributed by the Fund in the year
ended October 31, 1998 qualifies for the corporate dividends received deduction.
For the fiscal year ended October 31, 1998 the Fund earned $7,702,307 of long
term capital gains of which none and $7,702,307 are 28% and 20% rate
gains, respectively.
- -------------------------------------------------------------------------------
<PAGE>
COLONIAL GLOBAL UTILITIES FUND
FINANCIAL HIGHLIGHTS - CONT.
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 $ 12.000 $12.010 $12.000
-------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (b)(c) 0.328 0.225 0.225
Net realized and unrealized gain 1.740 1.732 1.742
-------- ------- -------
Total from Investment Operations 2.068 1.957 1.967
-------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.348) (0.247) (0.247)
-------- ------- -------
Net asset value - End of period $ 13.720 $13.720 $13.720
-------- ------- -------
Total return (d) 17.40% 16.43% 16.53%
-------- ------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses (c) 1.31% 2.06% 2.06%
Net investment income (c) 2.46% 1.71% 1.71%
Net assets at end of period (000) $162,267 $ 3,243 $ 818
(a) Effective July 1, 1997, Class D shares were redesignated Class C shares.
(b) Per share data was calculated using average shares outstanding during
the period.
(c) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses
of LFC Utilities Trust.
(d) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
<PAGE>
COLONIAL GLOBAL UTILITIES FUND
FINANCIAL HIGHLIGHTS - CONT.
Year ended October 31
------------------------------------
1996
Class A Class B Class C(a)
-------- -------- --------
$ 11.080 $ 11.080 $ 11.080
-------- -------- --------
0.427 0.340 0.340
0.878 0.889 0.879
-------- -------- --------
1.305 1.229 1.219
-------- -------- --------
(0.385) (0.299) (0.299)
-------- -------- --------
$ 12.000 $ 12.010 $ 12.000
-------- -------- --------
11.99% 11.25% 11.16%
-------- -------- --------
1.38% 2.13% 2.13%
3.70% 2.95% 2.95%
$169,840 $ 1,538 $ 584
<PAGE>
<TABLE>
COLONIAL GLOBAL UTILITIES FUND
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period
are as follows:
<CAPTION>
Year ended October 31
----------------------------------------------------------------------
1995 1994
Class A Class B(b) Class C(b)(c) Class A
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 10.610 $ 10.420 $ 10.420 $ 12.150
------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a)(d) 0.536(e) 0.248(e) 0.248(e) 0.550
Net realized and unrealized gain (loss) 0.520 0.665 0.665 (1.430)
------------ ------------ ------------ ------------
Total from Investment Operations 1.056 0.913 0.913 (0.880)
------------ ------------ ------------ ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.517) (0.253) (0.253) (0.500)
From net realized gains (0.069) -- -- (0.160)
------------ ------------ ------------ ------------
Total Distributions
Declared to Shareholders (0.586) (0.253) (0.253) (0.660)
------------ ------------ ------------ ------------
Net asset value -
End of period $ 11.080 $ 11.080 $ 11.080 $ 10.610
------------ ------------ ------------ ------------
Total return (f) 10.32%(g) 8.82%(h) 8.82%(h) (7.40)%
------------ ------------ ------------ ------------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.29%(e) 2.05%(e)(i) 2.05%(e)(i) 1.20%
Net investment income 5.14%(e) 3.73%(e)(i) 3.73%(e)(i) 4.90%
Fees and expenses waived
or borne by Liberty Securities
and LFC Utilities Trust 0.03% 0.02%(i) 0.02%(i) --
Net assets at end
of period (000) $ 211,916 $ 745 $ 307 $ 260,450
(a) Net of fees and expenses waived or
borne by Liberty Securities
which amounted to $ 0.002 -- -- --
(b) Class B and Class C shares were initially offered on March 27, 1995. Per share data reflects activity from that date.
(c) Effective July 1, 1997, Class D shares were redesignated Class C shares.
(d) Per share data was calculated using average shares outstanding during the period.
(e) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of
the income and expenses of LFC Utilities Trust.
(f) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent
deferred sales charge.
(g) Total return would have been lower had Liberty Securities and LFC Utilities Trust not waived certain expenses.
(h) Not annualized.
(i) Annualized.
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
T0 THE TRUSTEES OF COLONIAL TRUST III AND THE SHAREHOLDERS OF COLONIAL GLOBAL
UTILITIES FUND
In our opinion, the accompanying statement of assets and liabilities, and the
related statements of operations, changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Colonial Global Utilities Fund (a series of Colonial Trust III) at October 31,
1998, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended and the financial
highlights for each of the four years in the period then ended, 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 investments owned at October 31, 1998,
provide a reasonable basis for the opinion expressed above. The Financial
Highlights for the period ended October 31, 1994 was audited by another
Independent Accountant whose report, dated December 15, 1994, expressed an
unqualified opinion on those statements.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 11, 1998
<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
during the quarter (including any reinvestment of dividends). This statement
also provides year-to-date information.
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.)
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Global Utilities Fund is:
Liberty Funds Services, Inc.*
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial Global Utilities 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 Utilities
Fund. It 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 and with the most recent copy of
the Liberty Funds Distributor, Inc. Performance Update.
*Effective October 1, 1998, Colonial Investor Service Center, Inc. -- the
Transfer Agent for Colonial, Crabbe Huson, Newport and Stein Roe Advisor funds
- -- changed its name to Liberty Funds Services, Inc.
<PAGE>
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)
JOHN CARBERRY
Senior Vice President of Liberty Financial Companies, Inc.
(formerly Managing Director, Salomon Brothers)
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)
SALVATORE MACERA
Private investor (formerly Executive Vice President of Itek Corp. and President
of Optical & Electronic Industries, Inc.)
WILLIAM E. MAYER
Partner, Development Capital, LLC (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, Chief Executive Officer and Director,
Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
THOMAS E. STITZEL
Professor of Finance, College of Business, Boise State University; Business
Consultant and Author
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.)
ANNE-LEE VERVILLE
Consultant (formerly General Manager, Global Education Industry, and President,
Applications Solutions Division, IBM Corporation)
[logo] L I B E R T Y
COLONIAL o CRABBE HUSON o NEWPORT o STEIN ROE ADVISOR
Liberty Funds Distributor, Inc. (C)1998
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
Visit us at www.libertyfunds.com
GU-02/157G-1098 (12/98) 98/1324
