Colonial Global Equity Fund Annual report
October 31, 1998
Not FDIC May Lose Value
Insured No Bank Guarantee
Colonial Global Equity Fund Highlights
November 1, 1997 -- October 31, 1998
Investment Objective: Colonial Global Equity Fund seeks long-term growth by
investing primarily in global equities.
The Fund is Designed to Offer:
[V] Opportunities for long-term growth of capital
[V] International investment exposure
[V] Global diversification to help reduce risk
[V] Experienced professional management
Portfolio Manager Commentary:
"Negative economic factors and increased volatility in financial markets
over the past 12 months created a challenging environment for investors. The
Fund's broad global diversification, along with our decision to target
select markets for growth opportunities, resulted in solid returns for
shareholders during the period."
-- Gita Rao, Portfolio Manager
Colonial Global Equity Fund Performance(1)
<TABLE>
<CAPTION>
Class A Class B Class C
Inception date 6/8/92 6/8/92 8/1/97
- --------------------------------------------------------------------------
<C> <C> <C> <C>
12-month distributions declared per share $1.673 $1.562 $1.601
- --------------------------------------------------------------------------
12-month total returns, assuming 11.62% 10.64% 10.77%
reinvestment of all distributions
and no sales charge or contingent
deferred sales charge (CDSC)
- --------------------------------------------------------------------------
Net asset value per share on 10/31/98 $14.16 $13.98 $14.10
- --------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Top Five Holdings(2) Top Five Countries(2)
(as of 10/31/98) (as of 10/31/98)
- --------------------------------------------------------------------------
<C> <S> <C> <C> <S> <C>
1. Nokia Oyj 1.2% 1. United States 30.9%
2. Wal-Mart Stores, Inc. 1.2% 2. United Kingdom 9.2%
3. Clorox Co. 1.2% 3. Japan 8.2%
4. Schering -Plough Corp. 1.2% 4. Germany 7.0%
5. EMC Corp. 1.1% 5. France 6.8%
<F1> Performance results reflect any voluntary waivers or reimbursement of
Fund expenses by the Advisor. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
<F2> Holdings and country breakdowns are calculated as a percent of total
net assets. Because the Fund is actively managed, there can be no
guarantee the Fund will continue to hold these securities or invest in
these countries in the future.
</TABLE>
President's Message
To Fund Shareholders
In June 1998, Harold Cogger retired as president of Colonial Global Equity
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 you with your Fund's annual report for the 12-month
period ending October 31, 1998.
While various markets experienced short-term price gains over the past 12
months, global investors found it hard to escape the higher levels of
volatility that prevailed during much of the period. The economic and
financial turmoil that started in the countries of Southeast Asia in the
fall of 1997 resulted in a general global economic slowdown. During the
period, investors poured money into stocks of large, well-established
companies from the mature and fundamentally sound U.S. and Western European
markets. Overall, markets in continental Europe and the U.S. performed well
for most of the period, despite significant volatility.
The dramatic price swings we've seen in both U.S. and foreign investment
markets throughout the world serve to remind us of the benefits of
maintaining a globally diversified portfolio. We believe that Colonial
Global Equity Fund's commitment to broad geographic and sector
diversification can be a viable strategy for managing volatility while
remaining positioned to participate in future growth opportunities.
The following report will provide you with more specific information about
your Fund's performance and the markets and companies in which it has
invested. Thank you for choosing Colonial Global Equity Fund and for giving
us the opportunity to serve your investment needs.
Respectfully,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
December 11, 1998
Because market and economic conditions change frequently, there can be no
assurance that the trends described above or on the following pages will
continue.
Portfolio Management Report
Gita Rao is portfolio manager of Colonial Global Equity Fund and is vice
president of Colonial Management Associates, Inc. Nicolas Ghajar is
associate portfolio manager of the Fund.
Strong Fund performance despite volatile global markets
Over the past 12 months, investors have experienced market turbulence
worldwide. Early in the period, turmoil in Southeast Asia and the subsequent
concern over a global economic slowdown hurt most markets. Amid this market
volatility, U.S. and European markets continued in a positive direction
under conditions of slow, steady economic growth and favorable anticipation
of the European Monetary Union (EMU). As U.S. and European markets reached
record highs in July 1998, a monetary and political crisis in Russia and
continued concerns about Asia set the stage for a correction in U.S. and
European markets. By the end of the period, however, both U.S. and European
markets staged a strong recovery. In the U.S., investors responded to two
interest rate cuts in the fall, while in Europe, markets were bolstered by a
proposal by the Group of Seven (G7) industrial nations and the International
Monetary Fund (IMF) to establish a line of credit designed to help stimulate
world economies.
Within this challenging global investment environment, Colonial Global
Equity Fund posted a total return of 11.62% for Class A shares, based on net
asset value, for the 12 months ended October 31, 1998. The Fund's strong
performance put it in the top 21% of its Lipper peer group.(1)
Strategic country allocation drove performance
The Fund boosted its holdings in continental Europe, a region that saw
strong equity returns in a number of countries. During the period, stock
prices increased 25% in Germany, 29% in France, 35% in Italy, 36% in Spain,
and 22% in Switzerland. We cut back our holdings in Japan, where stock
prices fell 17%.(2)
In the U.S., with stocks appearing overvalued, we gradually pared back our
holdings prior to the August 1998 market correction. This enabled us to
reduce our exposure to overpriced stocks, while still capturing solid
returns in a market that was up 22%, as measured by the S&P 500 Index, over
the past 12 months.(3)
Opportunities found in financial and technology sectors
Despite the market's volatility, we found opportunities in several sectors -
- - notably, finance and technology. In the financial sector, commercial bank
stocks were hurt because of non-performing loans in Asia, Latin America and
Russia. However, the Fund's diversification among investment management,
commercial banks, brokerage, property and casualty, and life insurance
companies helped reduce downside risk.
Within the technology sector, a downturn in the semiconductor industry
caused by events in Southeast Asia had a negative impact on technology
stocks. We focused the majority of our efforts on high-quality, large-cap
companies in an effort to offset the sector's overall negative performance.
This strategy paid off when investors, in a search for stability, flocked to
stocks of the larger, more fundamentally sound companies.
Technology holdings showed promise
In the technology sector, two companies exemplified the dynamic growth
opportunities we seek for this portfolio. The first, EMC Corp. (1.1% of
total net assets), is a recent addition. We bought shares in August and
again in September, and the stock has already appreciated 23% (through
October 31, 1998) from our average acquisition price. EMC, based in
Hopkinton, Massachusetts, is the world's leading provider of large-scale
computer storage systems. The company designs and manufactures hardware and
software, and has an extensive service division for its cutting-edge product
line.
The second company, Cap Gemini (1.0% of total net assets), is a high-tech
company based in France that we purchased in March 1998. Cap Gemini provides
consulting services for complex computer problems primarily in the European
market. The company is currently working on the Y2K problem and the
conversion to the new Euro currency. But more importantly, it has excellent
long-term growth prospects, as exemplified by a 10-year contract that it
just won to provide systems consulting for British Gas. Since we acquired
the stock last spring, it has appreciated 13%.
Increased investment flexibility
At a recent meeting, the Fund's Board of Trustees approved a proposal to
increase the percentage of your Fund's net assets that can be invested in
emerging markets to 35% effective December 31, 1998. Emerging markets have
been quite volatile in recent months. However, we believe that, over the
long term, they offer excellent growth potential. While we do not expect to
invest more than 25% of the Fund's net assets in emerging-market securities
at this time, the higher limit will increase our flexibility to seek future
investment opportunities around the world.
Positioning the portfolio for future growth opportunities
Going forward, we expect continued volatility in investment markets
throughout the world, which could reveal attractive value opportunities.
Accordingly, we will maintain our emphasis on broad country and sector
diversification, while emphasizing investments in select markets that appear
poised for future growth.
While some signs of recovery in Southeast Asia are starting to appear, we
will continue to remain cautious, investing minimally in that region. In
Europe, we will keep an eye on important developments such as the
introduction of the Euro -- Europe's new common currency -- on January 1,
1999. With products being priced in the same units throughout Europe, some
companies may come under earnings pressure.
Our investment discipline suggests that the best way to achieve results is
to hold well-diversified, long-term positions while accepting the relatively
high level of market volatility that can always exist. This strategy has
historically proven effective in helping mitigate the risks of investing in
domestic and foreign markets, while also providing potential opportunities
for future growth.
[FN]
<F1> Source: Lipper Analytical Services, Inc. Lipper rankings are based on
the Lipper Global Funds category. The Fund's Class A share ranking is
in the first quartile for the one-year period (ranked 44th out of 211
funds); in the second quartile for the three-year period (ranked 35th
out of 138 funds); and in the second quartile for the five-year period
(ranked 17th out of 66 funds). Rankings do not include any sales
charges. Performance for different share classes will vary with fees
associated with each class. Past performance cannot guarantee future
results.
<F2> Based on returns for the 12 months ended October 31, 1998 for the
following indexes: DAX Index (Germany); CAC 40 Index (France); Milan
Mib 30 Index (Italy); Ibex 35 Index (Spain); Swiss Market Index
(Switzerland); and the Nikkei 225 Index (Japan). These are broad-
based, unmanaged indexes which track stocks traded in their respective
countries.
<F3> The S&P 500 Index is a broad-based, unmanaged index which tracks
large-capitalization stocks traded in the U.S. Indexes do not incur
fees or expenses. It is not possible to invest directly in an index.
</FN>
Colonial Global Equity Fund's Investment Performance vs.
The Morgan Stanley Capital International World (GDP) ND Index
Change in Value of $10,000 from 6/30/92 -- 10/31/98
Based on NAV and POP for Class A Shares
<TABLE>
<CAPTION>
MSCI NAV POP
---- --- ---
<S> <C> <C> <C>
Jun 30, 92 10,000 10,000 10,000
Ju1 31, 92 9,905 10,081 9,501
Aug 31, 92 10,130 9,869 9,301
Sep 30, 92 9,895 9,747 9,187
Oct 31, 92 9,661 9,434 8,892
Nov 30, 92 9,783 9,505 8,959
Dec 31, 92 9,825 9,690 9,133
Jan 31, 93 9,917 9,946 9,374
Feb 28, 93 10,194 10,069 9,490
Mar 31, 93 10,711 10,540 9,934
Apr 30, 93 11,277 10,755 10,136
May 31, 93 11,485 11,010 10,377
Jun 30, 93 11,358 10,734 10,116
Ju1 31, 93 11,566 10,961 10,331
Aug 31, 93 12,248 11,746 11,071
Sep 30, 93 12,022 11,756 11,080
Oct 31, 93 12,334 12,149 11,450
Nov 30, 93 11,652 11,973 11,285
Dec 31, 93 12,237 13,101 12,348
Jan 31, 94 13,009 13,685 12,898
Feb 28, 94 12,828 13,258 12,495
Mar 31, 94 12,516 12,705 11,974
Apr 30, 94 12,980 12,861 12,122
May 31, 94 12,849 12,747 12,014
Jun 30, 94 12,706 12,567 11,845
Ju1 31, 94 13,054 13,009 12,261
Aug 31, 94 13,390 13,419 12,647
Sep 30, 94 13,007 13,124 12,370
Oct 31, 94 13,347 13,335 12,568
Nov 30, 94 12,794 12,767 12,033
Dec 31, 94 12,925 12,889 12,148
Jan 31, 95 12,827 12,510 11,790
Feb 28, 95 13,023 12,924 12,181
Mar 31, 95 13,519 13,211 12,452
Apr 30, 95 14,043 13,614 12,831
May 31, 95 14,178 13,878 13,080
Jun 30, 95 14,222 14,095 13,285
Ju1 31, 95 14,987 15,046 14,181
Aug 31, 95 14,574 14,768 13,918
Sep 30, 95 14,895 14,768 13,918
Oct 31, 95 14,609 14,431 13,602
Nov 30, 95 15,034 14,663 13,820
Dec 31, 95 15,521 15,010 14,147
Jan 31, 96 15,850 15,502 14,611
Feb 29, 96 15,931 15,650 14,750
Mar 31, 96 16,126 15,883 14,970
Apr 30, 96 16,541 16,351 15,411
May 31, 96 16,537 16,486 15,538
Jun 30, 96 16,639 16,388 15,446
Ju1 31, 96 16,077 15,820 14,910
Aug 31, 96 16,203 16,116 15,189
Sep 30, 96 16,801 16,536 15,586
Oct 31, 96 16,859 16,611 15,655
Nov 30, 96 17,779 17,525 16,517
Dec 31, 96 17,564 17,866 16,838
Jan 31, 97 17,779 18,045 17,007
Feb 28, 97 17,894 18,155 17,111
Mar 31, 97 17,792 17,935 16,903
Apr 30, 97 18,171 18,279 17,228
May 31, 97 19,162 19,258 18,151
Jun 30, 97 20,182 20,237 19,074
Ju1 31, 97 21,032 21,289 20,065
Aug 31, 97 19,622 19,712 18,578
Sep 30, 97 20,795 21,026 19,817
Oct 31, 97 19,608 19,753 18,618
Nov 30, 97 19,878 20,182 19,022
Dec 31, 97 20,172 20,465 19,288
Jan 31, 98 20,892 20,884 19,683
Feb 28, 98 22,201 22,311 21,028
Mar 31, 98 23,399 23,676 22,315
Apr 30, 98 23,715 23,924 22,549
May 31, 98 23,743 23,692 22,329
Jun 30, 98 24,210 23,870 22,497
Ju1 31, 98 24,265 24,057 22,674
Aug 31, 98 20,948 20,569 19,386
Sep 30, 98 21,100 20,351 19,181
Oct 31, 98 23,166 22,048 20,780
</TABLE>
Value of a $10,000 investment made on 6/30/92
As of 10/31/98
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Class A Shares Class B Shares Class C Shares
NAV POP NAV w/CDSC NAV w/CDSC
- --------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$22,048 $20,780 $20,938 $20,938 $20,963 $20,963
</TABLE>
Average Annual Total Returns
As of 10/31/98
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
Inception 6/8/92 6/8/92 8/1/97
NAV POP NAV w/CDSC NAV w/CDSC
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 year 11.62% 5.20% 10.64% 5.69% 10.77% 9.78%
5 years 12.66 11.33 11.74 11.48 11.76 11.76
Life 12.97 11.93 12.04 12.04 12.06 12.06
</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 charges (CDSC). Public
offering price (POP) returns include the maximum sales charge of 5.75% for
Class A shares. The CDSC returns reflect the maximum charges of 5% for one
year, and 2% for five years 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.
Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Advisor. Absent these waivers or reimbursement arrangements,
performance results would have been lower.
Class C share performance includes returns of the fund's Class B shares (the
oldest existing fund class) for periods prior to 8/1/97. These class B share
returns are not restated to reflect any expense differential (e.g., rule
12b-1 fees) between Class B shares and Class C shares.
The Morgan Stanley Capital International World (GDP) ND Index is an
unmanaged index that tracks the performance of global stocks. Unlike mutual
funds, an index does not incur fees or charges. It is not possible to invest
directly in an index.
INVESTMENT PORTFOLIO
OCTOBER 31, 1998 (IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCKS - 96.0% COUNTRY SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C> <C>
AGRICULTURE, FORESTRY & FISHING - 0.5%
Agriculture - Crops
Tabacalera SA Sp 26 $ 634
--------
- --------------------------------------------------------------------------
CONSTRUCTION - 0.3%
Building Construction
Sulzer AG Sz 1 433
--------
- --------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 21.6%
Depository Institutions - 11.6%
Allied Irish Banks PLC Ir 45 652
Argentaria Corp. Sp 27 592
Banamex 'B' (a) Mx 223 235
Banco Popolare di Milano (BPM) It 41 318
Banco Pinto & Sotto Mayor SA Pt 46 884
Banco Popular Espanol SA Sp 7 420
Bank of Montreal Ca 11 445
Barclays PLC UK 23 492
Bayerische Vereinsbank G 7 555
Cie Financiere de Paribas Fr 6 449
Commerzbank AG G 15 447
First American Corp. 29 1,184
ForeningsSparbanken AB Sw 31 847
HSBC Holdings PLC UK 34 775
HSBC Holdings PLC HK 20 451
Mandamus AB (a) Sw 2 9
Merita Ltd., Class A Fi 103 552
Royal Bank of Scotland Group PLC UK 36 478
Standard Chartered PLC UK 39 420
Svenska Handelsbanken Class A Sw 15 637
The Bank of Tokyo Mitsubishi Ja 95 884
Union Bank of Switzerland (a) Sz 2 550
Unicredito Italiano It 145 780
Washington Mutual, Inc. 32 1,205
Westpac Banking Corp. Au 76 463
--------
14,724
--------
Holding Companies - 0.3%
Cheung Kong (Holdings) Ltd. HK 64 438
--------
Insurance Carriers - 6.3%
AXA Fr 9 976
Allianz AG G 2 618
CIGNA Corp. 16 1,138
International Nederlanden Groep Ne 18 872
Mercury General Corp. 13 553
Old Republic International Corp. 33 636
Royal & Sun Alliance Insurance Group PLC UK 44 403
Storebrand ASA No 72 566
Torchmark Corp. 21 923
Toro Assicurazioni It 34 508
Zurich Allied AG (a) Sz 1 819
--------
8,012
--------
Investment Companies - 1.1%
Irish Investment Fund, Inc. Ir 46 829
Templeton Dragon Fund, Inc. (b) 63 531
--------
1,360
--------
Nondepository Credit Institutions - 2.1%
Associates First Capital Corp. 12 818
Nichiei Co., Ltd. Ja 9 689
Promise Co., Ltd. Ja 24 1,089
--------
2,596
--------
Real Estate - 0.2%
New World Development Co., Ltd. HK 116 270
--------
- --------------------------------------------------------------------------
MANUFACTURING - 42.5%
Chemicals & Allied Products - 8.9%
Akzo Nobel NV Ne 16 638
BASF AG G 681
Clorox Co. 14 1,475
E.I. DuPont De Nemours & Co. 14 776
Kao Corp. Ja 60 1,219
Merck & Co., Inc. 8 1,123
Novartis Sz 1 1,040
Rhone Poulenc, Class A Fr 17 779
Roche Holding AG Sz (c) 526
Schering-Plough Corp. 14 1,471
Yamanouchi Pharmaceutical Co. Ja 23 661
Zeneca Group PLC UK 22 845
--------
11,234
--------
Communications Equipment - 3.7%
LM Ericsson ADR Sw 42 955
Lucent Technologies, Inc.. 15 1,235
Philips Electronics NV Ne 12 628
Racal Electronics PLC UK 240 1,089
Sony Corp. Ja 13 828
--------
4,735
--------
Electrical Industrial Equipment - 0.6%
General Electric Co. 9 770
--------
Electronic Components - 1.0%
Alcatel Alsthom (Cie Gen El) Fr 4 401
TDK Corp. Ja 14 926
--------
1,327
--------
Fabricated Metal - 0.5%
Compagnie Generale d'Industrie
et de Participations Fr 13 639
--------
Food & Kindred Products - 6.1%
Associated British Foods PLC UK 72 675
Bass PLC UK 76 934
Bass PLC Class B UK 80 121
Diageo PLC UK 52 562
Groupe Danone Fr 3 842
Kellogg Co. 28 921
MASECA Mx 494 401
Montedison SPA It 452 446
Nestle AG Sz (c) 714
Parmalat Finanziara Spa It 290 456
PepsiCo, Inc. 23 780
Unilever NV Ne 12 899
--------
7,751
--------
Household Appliances - 0.4%
Electrolux AB, Series B Sw 34 513
--------
Machinery & Computer Equipment - 5.0%
Canon, Inc. Ja 39 740
Cummins Engine Co., Inc. 10 351
EMC Corp. (a) 22 1,442
Fujitsu Ltd. Ja 56 598
Hewlett-Packard Co. 9 542
Mannesmann AG G 12 1,188
Oerlikon-Buehrle Holding AG Sz 4 576
Siebe PLC UK 228 936
--------
6,373
--------
Measuring & Analyzing Instruments - 1.0%
Fuji Photo Film Co., Ltd. Ja 25 919
Gambro AB Class A Sw 31 351
--------
1,270
--------
Miscellaneous Manufacturing - 0.5%
Polygram NV Ne 10 590
--------
Paper Products - 1.1%
Aracruz Celulose SA ADR Bz 26 218
Carter Holt Harvey NZ 190 155
Royal Koninklijke PTT Nederland NV Ne 15 572
TNT Post Group NV Ne 15 394
--------
1,339
--------
Petroleum Refining - 3.1%
Amerada Hess Corp. 19 1,022
Ashland Oil, Inc. 15 736
ENI It 95 565
OMV Handels AG Aus 8 751
Royal Dutch Petroleum Co. Ne 10 488
Texaco, Inc. 7 421
--------
3,983
--------
Primary Metal - 0.7%
Pirelli SPA It 188 536
USX-US Steel Group, Inc. 14 326
--------
862
--------
Printing & Publishing - 1.3%
Belo (A.H.) Corp., Series A 55 991
Mondadori (Arnoldo) Editore SPA It 63 695
--------
1,686
--------
Rubber & Plastic - 1.5%
Continental AG G 30 797
Cooper Tire & Rubber Co. 21 346
Premark International, Inc. 26 817
--------
1,960
--------
Stone, Clay, Glass & Concrete - 3.0%
Cemex SA Mx 197 469
Cimentos de Portugal SA Pt 35 1,211
Hanson PLC UK 127 891
Holderbank Financiere Glaris AG Sz 1 586
Lafarge SA Fr 7 700
--------
3,857
--------
Tobacco Products - 0.6%
Allied Zurich PLC (a) UK 35 401
B.A.T. Industries PLC UK 35 309
--------
710
--------
Transportation Equipment - 3.5%
Dana Corp. 17 694
General Dynamics Corp. 13 746
Honda Motor Co., Ltd. Ja 35 1,055
MAN AG G 2 734
Textron, Inc. 9 647
Volkswagen AG G 8 621
--------
4,497
--------
- --------------------------------------------------------------------------
MINING & ENERGY - 1.4%
Oil & Gas Extraction - 0.9%
Santos Ltd. Aus 85 250
YPF SA Ar 30 861
--------
1,111
--------
Oil & Gas Field Services - 0.5%
Petroleum Geo-Services (a) No 29 610
--------
- --------------------------------------------------------------------------
RETAIL TRADE - 8.9%
Apparel & Accessory Stores - 0.8%
Hennes & Mauritz AB Sw 15 1,081
--------
Food Stores - 3.9%
Jeronimo Martins SGPS SA Pt 13 546
Laurus NV Ne 19 474
Safeway, Inc. (a) 23 1,119
Tesco PLC UK 312 881
Valora Holding AG Sz 3 681
Vedior NV Ne 20 503
Vendex International NV Ne 27 685
--------
4,889
--------
General Merchandise Stores - 1.7%
Karstadt AG G 1 639
Wal-Mart Stores, Inc. 22 1,483
--------
2,122
--------
Miscellaneous Retail - 1.9%
Imasco Ltd. Ca 16 306
Pinault-Printemps SA Fr 6 1,065
Rite Aid Corp. 27 1,076
--------
2,447
--------
Restaurants - 0.6%
TelePizza SA (a) Sp 94 768
--------
- --------------------------------------------------------------------------
SERVICES - 8.8%
Amusement & Recreation - 0.6%
Ladbroke Group PLC UK 215 788
--------
Computer Related Services - 1.0%
Cap Gemini SA Fr 8 1,210
--------
Computer Software - 4.4%
Cerner Corp. (a) 29 644
Computer 2000 AG (a) G 2 779
Compuware Corp. (a) 20 1,089
Microsoft Corp. (a) 9 911
PeopleSoft, Inc. (a) 12 252
SAP AG G 2 903
Sungard Data Systems, Inc. (a) 29 972
--------
5,550
--------
Health Services - 1.2%
Health Care & Retirement Corp. (a) 29 946
Quorum Health Group, Inc. (a) 42 614
--------
1,560
--------
Hotels, Camps & Lodging - 0.6%
Accor SA Fr 4 789
--------
Personal Services - 1.0%
Service Corporation International 35 1,236
--------
- --------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATIONS, ELECTRIC, GAS &
SANITARY SERVICES - 11.7%
Electric, Gas & Sanitary Services - 0.5%
Sempra Energy 22 572
--------
Electric Services - 2.2%
ABB AB Class A Sw 10 111
Empresa Nacional de Electricidad Sp 38 958
Oestereichisch Elektrizitatswirtschafts
AG, Class A Aus 5 815
Texas Utilities Co. 21 932
--------
2,816
--------
Gas Services - 0.5%
NICOR, Inc. 14 610
--------
Telecommunication - 8.5%
Bell Atlantic Corp. 23 1,243
British Telecommunications PLC UK 56 724
Deutsche Telekom G 20 551
France Telecom SA Fr 11 781
Hong Kong Telecommunications Ltd. HK 244 493
MCI Worldcom, Inc. (a) 15 845
Nippon Telegraph & Telephone Corp. Ja (c) 864
Nokia Oyj Class A Fi 16 1,493
Portugal Telecom SA Pt 13 598
Telecel-Comunicacaoes Pessoais SA Pt 3 516
Telecom Italia SPA It 65 472
Telecomunicacoes Brasileiras SA ADR (a) Bz 6 456
Telefonica de Espana Sp 15 685
Telefonos de Mexico SA Mx 290 761
Telus Corp. Ca 15 315
--------
10,797
--------
- --------------------------------------------------------------------------
WHOLESALE TRADE - 0.3%
Nondurable Goods
VEBA AG G 7 383
--------
TOTAL COMMON STOCKS (cost of $110,098)(d) 121,902
--------
<CAPTION>
SHORT-TERM OBLIGATIONS - 3.1% PAR
- --------------------------------------------------------------------------
<S> <C> <C>
Repurchase agreement with ABN AMRO Chicago
Corp., dated 10/30/98, due 11/02/98 at 5.380%,
collateralized by U.S. Treasury notes with
various maturities to 2021, market value
$3,992 (repurchase proceeds $3,945) $3,943 3,943
--------
OTHER ASSETS & LIABILITIES, NET - 0.9% 1,098
- --------------------------------------------------------------------------
NET ASSETS - 100.0% $126,943
--------
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------
<FN>
<Fa> Non-income producing.
<Fb> This security is subject to the risks of the various countries in
which the issuer is investing. (See notes to Financial Statements:
Note 3. - Other.)
<Fc> Rounds to less than one.
<Fd> Cost for federal income tax purposes is the same.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Summary of Securities by Country Country Value % of Total
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
United States $ 39,164 32.0
United Kingdom UK 11,724 9.6
Japan Ja 10,472 8.6
Germany G 8,896 7.3
France Fr 8,631 7.1
Netherlands Ne 6,743 5.5
Switzerland Sz 5,925 4.9
Italy It 4,776 3.9
Sweden Sw 4,504 3.7
Spain Sp 4,057 3.3
Portugal Pt 3,755 3.1
Finland Fi 2,045 1.7
Mexico Mx 1,866 1.5
Austria Aus 1,816 1.5
Hong Kong HK 1,652 1.4
Ireland Ir 1,481 1.2
Norway No 1,176 1.0
Canada Ca 1,066 0.9
Argentina Ar 861 0.7
Brazil Bz 674 0.6
Australia Au 463 0.4
New Zealand NZ 155 0.1
-------- -----
$121,902 100.0
-------- -----
</TABLE>
Certain securities are listed by country of underlying exposure but may
trade predominantly on other exchanges.
Acronym Name
------- ----
ADR American Depositary Receipt
See Notes to financial statements.
STATEMENT OF ASSETS & LIABILITIES
OCTOBER 31, 1998
(in thousands except for per share amounts and footnotes)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value (cost $110,098) $121,902
Short-term obligations 3,943
--------
125,845
Cash held in foreign banks (cost $248) $264
Receivable for:
Fund shares sold 886
Dividends 172
Foreign tax reclaims 60
Interest 1
Other 3 1,386
------------------
Total Assets 127,231
LIABILITIES
Payable for:
Fund shares repurchased 211
Accrued:
Deferred Trustees fees 1
Other Payables 76
----
Total Liabilities 288
--------
NET ASSETS $126,943
========
Net asset value & redemption price per share -
Class A ($46,344/3,274) $ 14.16(a)
========
Maximum offering price per share - Class A
($14.16/0.9425) $ 15.02(b)
========
Net asset value & offering price per share -
Class B ($78,668/5,626) $ 13.98(a)
========
Net asset value & offering price per share -
Class C ($1,931/137) $ 14.10(a)
========
<FN>
<Fa> Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
<Fb> On sales of $50,000 or more the offering price is reduced.
</FN>
</TABLE>
See notes to financial statements.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1998
(in thousands)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends $ 2,259
Interest 437
-------
Total investment income (net of nonreclaimable
foreign taxes withheld at source which
amounted to $197) 2,696
EXPENSES
Management fee $ 1,180
Service fee 312
Distribution fee - Class B 590
Distribution fee - Class C 10
Transfer agent 386
Bookkeeping fee 53
Trustees fee 13
Custodian fee 93
Audit fee 33
Legal fee 4
Registration fee 40
Reports to shareholders 14
Other 51
-------
2,779
Fees and expenses waived
or borne by the Advisor (132) 2,647
--------------------
Net Investment Income 49
------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments 10,154
Foreign currency transactions (82)
-------
Net Realized Gain 10,072
Net change in unrealized appreciation
during the period on:
Investments 537
Foreign currency transactions 22 559
--------------------
Net Gain 10,631
-------
Increase in Net Assets from Operations $10,680
=======
</TABLE>
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(in thousands) Year ended October 31
----------------------
INCREASE (DECREASE) IN NET ASSETS 1998 1997 (a)
<S> <C> <C>
Operations:
Net investment income $ 49 $ 679
Net realized gain 10,072 11,621
Net unrealized appreciation 559 3,189
----------------------
Net Increase from Operations 10,680 15,489
Distributions:
From net investment income - Class A (241) (131)
In excess of net investment income - Class A (155) ---
From net realized gains - Class A (3,875) (2,143)
From net investment income - Class B (99) ---
In excess of net investment income - Class B (63) ---
From net realized gains - Class B (7,785) (6,988)
From net investment income - Class C (3) ---
In excess of net investment income - Class C (2) ---
From net realized gains - Class C (97) ---
----------------------
(1,640) 6,227
----------------------
Fund Share Transactions:
Receipts for shares sold - Class A 42,663 18,684
Value of distributions reinvested - Class A 3,967 2,135
Cost of shares repurchased - Class A (35,088) (6,517)
----------------------
11,542 14,302
----------------------
Receipts for shares sold - Class B 29,295 21,200
Value of distributions reinvested - Class B 7,331 6,378
Cost of shares repurchased - Class B (29,964) (24,577)
----------------------
6,662 3,001
----------------------
Receipts for shares sold - Class C 2,404 777
Value of distributions reinvested - Class C 97 ---
Cost of shares repurchased - Class C (1,230) (5)
----------------------
1,271 772
----------------------
Net Increase from
Fund Share Transactions 19,475 18,075
----------------------
Total Increase 17,835 24,302
NET ASSETS
Beginning of period 109,108 84,806
----------------------
End of period (net of overdistributed
and including undistributed net investment
income of $346 and $343, respectively) $126,943 $109,108
======================
NUMBER OF FUND SHARES
Sold - Class A 3,003 1,339
Issued for distributions reinvested - Class A 296 168
Repurchased - Class A (2,489) (463)
----------------------
810 1,044
----------------------
Sold - Class B 2,007 1,523
Issued for distributions reinvested - Class B 555 509
Repurchased - Class B (2,117) (1,772)
----------------------
445 260
----------------------
Sold - Class C 163 52
Issued for distributions reinvested - Class C 7 ---
Repurchased - Class C (85) (b)
----------------------
85 52
----------------------
<FN>
<Fa> Class C shares were initially offered on August 1, 1997.
<Fb> Rounds to less than one
</FN>
</TABLE>
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998
NOTE 1. ACCOUNTING POLICIES
- --------------------------------------------------------------------------
Organization: Colonial Global Equity Fund (the Fund), a series of Colonial
Trust III, is a diversified portfolio of a Massachusetts business trust,
registered under the Investment Company Act of 1940, as amended, as an open-
end management investment company. The Fund's investment objective is to
seek long-term growth by investing primarily in global equities. The Fund
may issue an unlimited number of shares. The Fund offers three classes of
shares: Class A, Class B, and Class C. Class A shares are sold with a
front-end sales charge and 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 significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
Security valuation and transactions: Equity securities generally are valued
at the last sale price or, in the case of unlisted or listed securities for
which there were no sales during the day, at current quoted bid prices.
Forward currency contracts are valued based on the weighted value of the
exchange traded contracts with similar durations.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Portfolio positions for which market quotations are not readily available
are valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
Determination of class net asset values and financial highlights: All
income, expenses (other than the Class B and Class C distribution fees), and
realized and unrealized gains (losses), are allocated to each class
proportionately on a daily basis for purposes of determining the net asset
value of each class.
The per share data was calculated using average shares outstanding during
the period. In addition, Class B and Class C net investment income per
share data reflects the distribution fee applicable to Class B and Class C
shares only.
Class B and Class C ratios are calculated by adjusting the expense and net
investment income per share data and ratios for the Fund for the entire
period by the distribution fee applicable to Class B and Class C shares
only.
Federal income taxes: Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
Interest Income, debt discount and premium: Interest income is recorded on
the accrual basis. Original issue discount is accreted to interest income
over the life of a security with a corresponding increase in the cost basis;
premium and market discount are not amortized or accreted.
Distributions to shareholders: Distributions to shareholders are recorded
on the ex-date.
The amount and character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. Reclassifications are made to the
Fund's capital accounts to reflect income and gains available for
distribution (or available capital loss carryforwards) under income tax
regulations.
Foreign currency transactions: Net realized and unrealized gains (losses) on
foreign currency transactions includes gains (losses) arising from the
fluctuations in exchange rates between trade and settlement dates on
securities transactions, gains (losses) arising from the disposition of
foreign currency, and currency gains (losses) between the accrual and
payment dates on dividends and interest income and foreign withholding
taxes.
The Fund does not distinguish that portion of gains (losses) on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included
with the net realized and unrealized gains (losses) on investments.
Forward currency contracts: The Fund may enter into forward currency
contracts to purchase or sell foreign currencies at predetermined exchange
rates in connection with the settlement of purchases and sales of
securities. The Fund may also enter into forward currency contracts to hedge
certain other foreign currency denominated assets. The contracts are used
to minimize the exposure to foreign exchange rate fluctuations during the
period between trade and settlement date of the contracts. All contracts
are marked-to-market daily, resulting in unrealized gains (losses) which
become realized at the time the forward currency contracts are closed or
mature. Realized and unrealized gains (losses) arising from such
transactions are included in net realized and unrealized gains (losses) on
foreign currency transactions. Forward currency contracts do not eliminate
fluctuations in the prices of the Fund's portfolio securities. While the
maximum potential loss from such contracts is the aggregate face value in
U.S. dollars at the time the contract was opened, exposure is typically
limited to the change in value of the contract (in U.S. dollars) over the
period it remains open. Risks may also arise if counterparties fail to
perform their obligations under the contracts.
Other: Corporate actions are recorded on ex-date (except for certain
foreign securities which are recorded as soon after ex-date as the Fund
becomes aware of such), net of nonrebatable tax withholdings. Where a high
level of uncertainty as to collection exists, income on securities is
recorded net of all tax withholdings with any rebates recorded when
received.
The Fund's custodian takes possession through the federal book-entry system
of securities collateralizing repurchase agreements. Collateral is marked-
to-market daily to ensure that the market value of the underlying assets
remains sufficient to protect the Fund. The Fund may experience costs and
delays in liquidating the collateral if the issuer defaults or enters
bankruptcy.
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES
- --------------------------------------------------------------------------
Management fee: Colonial Management Associates, Inc. (the Advisor) is the
investment Advisor of the Fund and furnishes accounting and other services
and office facilities for a monthly fee equal to 0.95% annually of the
Fund's average net assets.
Bookkeeping fee: The Advisor 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: Liberty Funds Services, Inc., formerly Colonial Investors
Service Center, Inc. (the Transfer Agent), an affiliate of the Advisor,
provides shareholder services for a monthly fee equal to 0.236% 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 was 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 Funds
Distributor, Inc., formerly Liberty Finanical Investments, Inc. (the
Distributor), a subsidiary of the Advisor, is the Fund's principal
underwriter. For the year ended October 31, 1998, the Fund has been advised
that the Distributor retained net underwriting discounts of $16,462 on sales
of the Fund's Class A shares and received contingent deferred sales charges
(CDSC) of $1,439, $152,309 and $1,440 on Class A, Class B and Class C share
redemptions, respectively.
The Fund has adopted a 12b-1 plan which requires it to pay the Distributor a
service fee equal to 0.25% annually of the Fund's net assets as of the 20th
of each month. The plan also requires the payment of a distribution fee to
the Distributor equal to 0.75% annually of the average net assets
attributable to Class B and Class C shares only.
The CDSC and the fees received from the 12b-1 plan are used principally as
repayment to the Distributor for amounts paid by the Distributor to dealers
who sold such shares.
Expense limits: The Advisor has agreed, until further notice, to waive fees
and bear certain Fund expenses to the extent that total expenses (exclusive
of service and distribution fees, brokerage commissions, interest, taxes and
extraordinary expenses, if any) exceed 1.40% annually of the
Fund's average net assets.
Other: The Fund pays no compensation to its officers, all of whom are
employees of the Advisor.
The Fund's Trustees may participate in a deferred compensation plan which
may be terminated at any time. Obligations of the plan will be paid solely
out of the Fund's assets.
NOTE 3. PORTFOLIO INFORMATION
- --------------------------------------------------------------------------
Investment activity: For the year ended October 31, 1998, purchases and
sales of investments, other than short term obligations, were $63,610,855
and $48,827,856, respectively.
Unrealized appreciation (depreciation) at October 31, 1998, based on cost of
investments for both financial statement and federal income tax purposes
was:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 22,723,188
Gross unrealized depreciation (10,918,808)
------------
Net unrealized appreciation $ 11,804,380
============
</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 4. 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
offshore loan rate plus 1/2 of 1%. There were no borrowings under the line
of credit during the year ended October 31, 1998.
NOTE 5. COMPOSITION OF NET ASSETS
- --------------------------------------------------------------------------
<TABLE>
<S> <C>
At October 31, 1998, net assets consisted of:
Capital paid in $105,261
Overdistributed net investment income (346)
Accumulated net realized gain 10,212
Net unrealized appreciation on:
Investments 11,804
Foreign currency transactions 12
--------
$126,943
========
</TABLE>
NOTE 6. 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 for
the Meeting. On August 21,1998, the record date for the Meeting, the Fund
had outstanding 9,214,291 shares of beneficial interest. The votes cast at
the Meeting were as follows:
<TABLE>
<CAPTION>
Authority
For Withheld
--- ---------
<S> <C> <C>
To elect a Board of Trustees.
Robert J. Birnbaum 4,554,303 190,775
Tom Bleasdale 4,554,303 190,775
John Carberry 4,554,303 190,775
Lora S. Collins 4,554,303 190,775
James E. Grinnell 4,554,303 190,775
Richard W. Lowry 4,554,303 190,775
Salvatore Macera 4,554,303 190,775
William E. Mayer 4,554,303 190,775
James L. Moody, Jr. 4,554,303 190,775
John J. Neuhauser 4,554,303 190,775
Thomas E. Stitzel 4,554,303 190,775
Robert L. Sullivan 4,554,303 190,775
Anne- Lee Verville 4,554,303 190,775
</TABLE>
To amend fundamental investment policies regarding borrowing and lending.
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
3,388,910 137,845 266,015
</TABLE>
To reclassify the fundamental investment policy regarding the purchase of
illiquid securities.
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
3,358,695 162,235 271,398
</TABLE>
To approve policies for a master fund/ feeder fund structure.
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
3,378,901 142,349 271,520
</TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period
are as follows:
<TABLE>
<CAPTION>
Year ended October 31
-------------------------------
1998
Class A Class B Class C
-------------------------------
<S> <C> <C> <C>
Net asset value -
Beginning of period $14.280 $14.130 $14.260
-------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(a)(b) 0.075 (0.032) (0.033)
Net realized and
unrealized gain (loss) 1.478 1.444 1.474
-------------------------------
Total from Investment
Operations 1.553 1.412 1.441
-------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.087) (0.020) (0.043)
In excess of
investment income (0.056) (0.012) (0.028)
From net realized gains (1.530) (1.530) (1.530)
-------------------------------
Total Distributions Declared
to Shareholders (1.673) (1.562) (1.601)
-------------------------------
Net asset value -
End of period $14.160 $13.980 $14.100
===============================
Total return (c)(d) 11.62 % 10.64 % 10.77 %
===============================
RATIOS TO AVERAGE NET ASSETS:
Expenses (e) 1.65 % 2.40 % 2.40 %
Fees and expenses waived or
borne by Advisor (e) 0.11 % 0.11 % 0.11 %
Net investment income (loss) (e) 0.53 % (0.22)% (0.22)%
Portfolio turnover 42 % 42 % 42 %
Net assets at end
of period (000) $46,344 $78,668 $ 1,931
<FN>
<Fa> Net of fees and expenses waived or borne by the Advisor which amounted
to:
$0.015 $0.015 $0.015
<Fb> Per share data was calculated using average shares outstanding during
the period.
<Fc> Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
<Fd> Had the Advisor not waived or reimbursed a portion of expenses, total
return would have been reduced.
<Fe> The benefits derived from custody credits and directed brokerage
arrangements had no impact.
</FN>
</TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period
are as follows:
<TABLE>
<CAPTION>
Year ended October 31
-----------------------------------
1997
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Net asset value -
Beginning of period $13.440 $13.350 $15.390 (c)
-------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(a)(b) 0.169 0.065 (0.025)
Net realized and
unrealized gain (loss) (b) 2.179 2.158 (1.105)(d)
-------------------------------
Total from Investment
Operations 2.348 2.223 (1.130)
-------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.065) --- ---
In excess of
investment income --- --- ---
From net realized gains (1.443) (1.443) ---
-------------------------------
Total Distributions Declared
to Shareholders (1.508) (1.443) ---
-------------------------------
Net asset value -
End of period $14.280 $14.130 $14.260
===============================
Total return (e) 18.92 % 18.02 % (7.34%)(f)
===============================
RATIOS TO AVERAGE NET ASSETS:
Expenses (h) 1.58 % 2.33 % 2.44% (i)
Fees and expenses waived or
borne by Advisor --- --- ---
Net investment income (loss) (h) 1.22 % 0.47 % (0.68)%(i)
Portfolio turnover 90 % 90 % 90 %
Net assets at end
of period (000) $35,181 $73,188 $ 739
<FN>
<Fa> Net of fees and expenses waived or borne by the Advisor which amounted
to:
--- --- ---
<Fb> Per share data was calculated using average shares outstanding during
the period.
<Fc> Class C shares were initially offered on August 1, 1997. Per share
amounts reflect activity from that date.
<Fd> The amount shown for a share outstanding does not correspond with the
aggregate net gain on investments for the period due to the timing of
sales and repurchases of Fund shares in relation to fluctuating market
values of the investments of the Fund.
<Fe> Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
<Ff> Not annualized.
<Fg> Had the Advisor not waived or reimbursed a portion of expenses, total
return would have been reduced.
</FN>
</TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period
are as follows:
<TABLE>
<CAPTION>
Year ended October 31
-----------------------------------------------
1996 1995
Class A Class B Class A Class B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $12.450 $12.390 $12.690 $12.630
-----------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(a)(b) 0.123 0.027 0.167 0.076
Net realized and
unrealized gain (loss) (b) 1.664 1.634 0.735 0.735
-----------------------------------------------
Total from Investment
Operations 1.787 1.661 0.902 0.811
-----------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.098) (0.027) (0.198) (0.107)
In excess of
investment income (0.035) (0.010) --- ---
From net realized gains (0.664) (0.664) (0.944) (0.944)
-----------------------------------------------
Total Distributions Declared
to Shareholders (0.797) (0.701) (1.142) (1.051)
-----------------------------------------------
Net asset value -
End of period $13.440 $13.350 $12.450 $12.390
===============================================
Total return (e) 15.10 % 14.04 % 8.23 %(g) 7.43 %(g)
===============================================
RATIOS TO AVERAGE NET ASSETS:
Expenses (h) 1.58 % 2.33 % 1.36 % 2.11 %
Fees and expenses waived or
borne by Advisor --- --- 0.26 %(h) 0.26 %(h)
Net investment income (loss) (h) 0.96 % 0.21 % 1.40 % 0.65 %
Portfolio turnover 125 % 125 % 74 % 74 %
Net assets at end
of period (000) $19,092 $65,714 $11,501 $59,131
--- --- $ 0.031 $ 0.031
<FN>
<Fh> The benefits derived from custody credits and directed brokerage
arrangements had no impact.
<Fi> Annualized.
</FN>
</TABLE>
- ----------------------------------------------------------------------------
Federal Income Tax Information (Unaudited)
3% 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 $7,342,514 of
long term gains of which none and $7,342,514 are 28% and 20% rate gains,
respectively.
- ----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period
are as follows:
<TABLE>
<CAPTION>
Year ended October 31
---------------------
1994
Class A Class B
------- -------
<S> <C> <C>
Net asset value -
Beginning of period $11.760 $11.720
-------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a)(b) 0.170 0.077
Net realized and unrealized
gain (b) 0.969 0.959
-------------------
Total from Investment
Operations 1.139 1.036
-------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.166) (0.083)
From net realized gains (0.043) (0.043)
-------------------
Total Distributions Declared
to Shareholders (0.209) (0.126)
-------------------
Net asset value -
End of period $12.690 $12.630
===================
Total return (c)(d) 9.76 % 8.88 %
===================
RATIOS TO AVERAGE NET ASSETS
Operating Expenses 1.25 % 2.00 %
Fees and expenses waived or
borne by the Advisor 0.36 % 0.36 %
Net investment income 1.38 % 0.63 %
Portfolio turnover 52 % 52 %
Net assets at end
of period (000) $10,525 $63,139
<FN>
<Fa> Net of fees and expenses waived or borne by the Advisor which amounted
to:
$ 0.045 $ 0.045
<Fb> Per share data was calculated using average shares outstanding during
the period.
<Fc> Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
<Fd> Had the Advisor not waived or reimbursed a portion of expenses, total
return would have been reduced.
</FN>
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
T0 THE TRUSTEES OF COLONIAL TRUST III AND THE SHAREHOLDERS OF
COLONIAL GLOBAL EQUITY FUND
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of
operations, changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Colonial Global
Equity Fund (a series of Colonial Trust III) at October 31, 1998, the
results of its operations, the changes in its net assets and the financial
highlights for the period indicated, in conformity with generally accepted
accounting principles. These financial statements and the financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of portfolio positions
at October 31, 1998 by correspondence with the custodian, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 11, 1998
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.
Liberty Funds Distributor, Inc. 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.)
Important Information About this Report
The Transfer Agent for Colonial Global Equity Fund is:
Liberty Funds Services, Inc.*
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial Global Equity Fund mails one shareholder report to each shareholder
address. If you would like more than one report, please call 1-800-426-3750
and additional reports will be sent to you.
This report has been prepared for shareholders of Colonial Global Equity
Fund. This report may also be used as sales literature when preceded or
accompanied by the current prospectus which provides details of sales
charges, investment objectives and operating policies of the Fund and with
the most recent copy of the Liberty Funds Distributor, Inc. Performance
Update.
* Effective October 1, 1998, Colonial Investors Service Center, Inc. --
the Transfer Agent for Colonial, Crabbe Huson, Newport and Stein Roe
Advisor Funds -- changed its name to Liberty Funds Services, Inc.
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 Itek 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) LIBERTY
COLONIAL * CRABBE HUSON * NEWPORT * STEIN ROE ADVISOR
Liberty Funds Distributor, Inc. (C)1998
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
Visit us as www.libertyfunds.com GE-02/175G-11/98 (12/98)98/1315