<PAGE>
[Graphic Omitted]
- --------------------------------------------------
COLONIAL STRATEGIC BALANCED FUND Semiannual Report
- --------------------------------------------------
April 30, 1999
-------------------------------
Not FDIC May Lose Value
Insured ------------------
No Bank Guarantee
-------------------------------
<PAGE>
Table of Contents
1 Highlights
2 Portfolio Manager's Report
3 Performance
4 Portfolio of Investments
9 Financial Statements
11 Notes to Financial Statements
14 Financial Highlights
- --------------------------------------------------------------------------------
COLONIAL STRATEGIC BALANCED FUND
- --------------------------------------------------------------------------------
PRESIDENT'S MESSAGE TO SHAREHOLDERS:
[Photo of Stephen E. Gibson]
In the six-month period ended April 30, 1999, global equity markets benefited
from improving economic conditions, and rising stock markets. Although several
critical world economies -- including Southeast Asia, Japan and Europe -- have
further steps to take before they can achieve sustained economic growth, it has
been encouraging to see improvement.
During this reporting period, investors appeared to develop a more positive
outlook for the global economy. Last November, concerns about recessions in
Southeast Asia and Japan and the ability of U.S. companies to maintain profits
created a degree of uncertainty. Despite steadily declining interest rates in a
number of countries throughout the world, investors remained worried about the
direction of the global economy. However, during the first quarter of 1999,
rising commodity prices and a steady stream of positive economic news helped
create a more favorable outlook for global growth. In response, stocks of
economically sensitive U.S. companies rallied sharply late in the period, as did
stocks in many developing countries.
For investors seeking investment opportunities both in the U.S. and abroad, the
Fund offers diversification between fixed-income and equity markets, and among
foreign and domestic markets. The Fund also provides shareholders with current
income and long-term growth potential. We continue to believe that a long-term
approach combined with broad diversification among countries and industries
remains one of the best strategies for balancing the risks and rewards of global
investing.
The following report will provide you with more specific information about your
Fund's performance and the strategies used during the period. As always, we
thank you for choosing Colonial Strategic Balanced Fund and for giving us the
opportunity to serve your investment needs.
Sincerely,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
June 15, 1999
Because market and economic conditions change frequently, there can be no
assurance that the trends described above or on the following pages will
continue.
<PAGE>
- --------------------------------------------------------------------------------
HIGHLIGHTS
- --------------------------------------------------------------------------------
> GLOBAL CONDITIONS UNCERTAIN EARLY IN THE PERIOD.
During the final months of 1998, investors remained concerned about a slower
global economy and the ability of U.S. companies to maintain profits.
> RISING COMMODITY PRICES HELPED BOOST EMERGING MARKETS.
An agreement reached among the Organization of Petroleum Exporting Countries
(OPEC) and non-OPEC oil producers to cut production enabled oil prices to
climb significantly toward the end of the period. This dramatic rise in oil
prices helped strengthen the economies of developing nations that depend
heavily on oil exports.
> POSITIVE GLOBAL ECONOMIC TRENDS HELPED SHIFT INVESTOR SENTIMENT.
Late in the period, anticipation for stronger global economic growth had a
favorable impact on stock and bond prices in a number of markets throughout
the world. When expectations of global economic growth shifted in April
1999, economically sensitive, cyclical stocks -- like energy and basic
materials -- achieved strong gains relative to growth stocks.
BROAD-BASED MARKET INDEX PERFORMANCE
Cumulative Total Returns 10/31/98 -- 4/30/99
The S&P 500 index tracks the performance of 500 large-capitalization U.S.
stocks. The Lehman Brothers Government/Corporate Bond Index tracks the
performance of U.S. government and U.S. corporate bonds. These indexes are
common benchmarks for the markets in which the Fund normally invests.
Lehman Brothers
Government/ S&P
Corporate Bond Index 500 Index
10/31/98 0 0
11/30/98 0.6 6.06
12/31/98 0.84 12.17
1/31/99 1.56 16.85
2/28/99 -0.85 13.22
3/31/99 -0.36 17.75
4/30/99 -0.12 22.31
Unlike mutual funds, indexes are not investments, are not actively managed and
do not incur fees or expenses. It is not possible to invest directly in an
index.
SIX-MONTH CUMULATIVE TOTAL RETURNS FOR THE PERIOD ENDED 4/30/99
POP(1)
or
NAV w/CDSC
--- ------
Class A 9.99% 4.76%
- ------------------------------
Class B 9.77% 4.77%
- ------------------------------
Class C 9.68% 8.68%
- ------------------------------
NET ASSET VALUE PER SHARE ON 4/30/99
NAV POP
--- ---
Class A $15.84 $16.63
- ------------------------------
Class B $15.81 $15.81
- ------------------------------
Class C $15.83 $15.83
- ------------------------------
DISTRIBUTIONS DECLARED PER SHARE FOR THE PERIOD
ENDED 4/30/99
Class A $0.810
- ------------------------------
Class B $0.776
- ------------------------------
Class C $0.776
- ------------------------------
(1) Public offering price (POP) performance reflects the maximum initial sales
charge of 4.75% applicable to Class A shares. The applicable contingent
deferred sales charge (CDSC) for the six-month period is 5% for Class B
shares and 1% for Class C shares.
<PAGE>
SEMIANNUAL REPORT: COLONIAL STRATEGIC BALANCED FUND
TOP FIVE EQUITY HOLDINGS AS OF 4/30/99 AS A PERCENTAGE OF TOTAL NET ASSETS
1. Lucent Technologies 1.70%
- -----------------------------
2. Texaco, Inc. 1.56%
- -----------------------------
3. CIGNA Corp. 1.48%
- -----------------------------
4. Kellogg Co. 1.48%
- -----------------------------
5. Chase Manhattan 1.46%
Corp.
- -----------------------------
TOP FIVE COUNTRIES -- GOV'T BONDS AS OF 4/30/99 AS A PERCENTAGE OF TOTAL
NET ASSETS
- ------------------------------------------------------------------------------
1. United States 9.9%
- -----------------------------
2. United Kingdom 2.5%
- -----------------------------
3. Greece 1.2%
- -----------------------------
4. Mexico 1.0%
- -----------------------------
5. Australia 0.9%
- -----------------------------
Holdings and country breakdowns are calculated as a percentage of total net
assets. Because the Fund is actively managed, there can be no guarantee the Fund
will continue to hold these securities or invest in these countries in the
future.
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS' REPORT
- --------------------------------------------------------------------------------
DEFENSIVE STANCE IN EQUITIES HAMPERED PERFORMANCE DURING THE PERIOD
Based on the relatively weak global economic outlook during the fourth quarter
of 1998, the portfolio was positioned defensively as we entered the period. For
example, we were underweighted in emerging markets, which had been suffering
from financial and economic problems for two years. At the same time, the Fund
was also underweighted in cyclical industries such as energy -- an area that
remained relatively weak throughout 1998. When expectations of global economic
growth shifted late in the period, emerging-market stocks and cyclical U.S.
stocks achieved impressive gains relative to growth stocks, which have dominated
the market for some time now. Despite positive performance from a number of the
Fund's holdings, our underweighting in these markets limited our ability to
fully participate in the rally. The Fund's Class A shares generated a total
return of 9.99%, at NAV, for the past six months.
FIXED-INCOME HOLDINGS PERFORMED WELL IN A MIXED ENVIRONMENT FOR BONDS
While the six-month period presented a mixed environment for bonds, the Fund's
diversified structure enabled it to benefit from the strong performance of a
number of holdings in the high-yield and emerging market sectors. Varied
performance within each sector once again highlighted the advantages of
diversification and its stabilizing effect during periods of market uncertainty.
Early in the period, the market continued to favor U.S. Treasury bonds. However,
indications of a surprisingly strong U.S. economy and rising commodity prices
created a shift in market preference. U.S. Treasury prices moved lower, and
emerging market bonds, particularly our holdings in Mexico, appreciated nicely.
Rising commodity prices, as well as consolidation within select industries, also
produced strong gains on some of our high-yield holdings, specifically those in
cyclical industries and telecommunications. The Fund's allocation to
fixed-income securities remained at approximately 39% during the period. Of
these holdings, 26% was invested in U.S. Treasury securities, 28% in foreign
government bonds (including emerging markets) and 46% in U.S. high-yield bonds.
ADJUSTMENTS MADE TO POSITION THE PORTFOLIO FOR FUTURE GROWTH
Based on the shift in investor sentiment and the strength exhibited by select
markets and sectors during April, we made some significant changes to the
structure of the portfolio. We reallocated our country and industry weightings,
increasing our weightings in the U.K. and the U.S. We also increased allocation
to cyclical industries such as energy and capital equipment, which had benefited
from increased demand abroad. In addition, we reduced our allocation to the
retail sector, particularly in Europe, where growth has slowed. Although stocks
in emerging markets have risen dramatically over a few short months, we do not
anticipate substantial reallocations to these markets until we see evidence of
more stable economic growth.
FAVORABLE FORECAST FOR GLOBAL ECONOMIES
We are cautiously optimistic about the economic trends overseas, and believe the
U.S. should continue to show solid growth in 1999, provided that inflation
remains in check and interest rates do not spike. As we move into the second and
third quarter of 1999, investors will have a much better idea whether a
strengthening global economy is sustainable. Going forward, we believe the
adjustments made to the portfolio during the period position it well for the
current economic scenario.
/s/ Gita Rao /s/ Laura A. Ostrander
Gita Rao and Laura Ostrander are portfolio co-managers of Colonial Strategic
Balanced Fund. Ms. Rao, a senior vice president of the Advisor, manages the
equity portion of the portfolio. Ms. Ostrander manages the fixed-income
portion of the portfolio and is a senior vice president of the Advisor.
PERFORMANCE INFORMATION
AVERAGE ANNUAL TOTAL RETURNS AS OF 4/30/99
Share Class A B C
Inception 9/19/94 9/19/94 9/19/94
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
NAV POP NAV w/CDSC NAV w/CDSC
- ------------------------------------------------------------------------------
1 year 7.36% 2.26% 6.90% 1.90% 6.89% 5.89%
- ------------------------------------------------------------------------------
Life 15.40 14.19 14.89 14.63 14.88 14.88
- ------------------------------------------------------------------------------
Past performance is no guarantee of future results. Share price and investment
returns will vary, so you may have a gain or loss when you sell shares. Total
return performance includes changes in share price and reinvestment of income
and capital gains distributions.
Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Advisor or its affiliates. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
Public offering price (POP) performance reflects the maximum initial sales
charge of 4.75% applicable to Class A shares. The applicable contingent deferred
sales charge (CDSC) for Class B shares is 5% for one year and 2% since
inception. The CDSC for Class C shares is 1% for one year.
BOUGHT
- ------------------------------------------------------------------------------
TEXACO (1.56% of total net assets) is a strong addition in the energy sector
that should benefit from the rising trend in commodity prices. As a global
company, Texaco in involved in exploration, production, transportation, refining
and marketing of crude oil, natural gas and petroleum products.
MCI WORLDCOM (0.79% of total net assets) provides long distance
telecommunications services to business and residential customers. Its global
presence in a growing industry makes it an attractive company.
NOKIA (0.78% of total net assets) is an international telecommunications company
based in Finland. As a developer and manufacturer of mobile phones, networks and
systems for cellular and fixed networks, Nokia operates in 45 countries and
sells its products worldwide.
CHASE MANHATTAN (1.46% of total net assets) is a new addition in the financial
sector. As the largest bank holding company in the U.S., Chase is involved in a
variety of domestic and international financial services businesses.
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- ----------------------------------------------------------------------------------------------------
April 30, 1999 (Unaudited)
(In thousands)
<CAPTION>
COMMON STOCKS - 53.5% COUNTRY SHARES VALUE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCE, INSURANCE & REAL ESTATE - 11.1%
DEPOSITORY INSTITUTIONS - 4.0%
Bank Boston Corp. 29 $ 1,421
Chase Manhattan Corp. 33 2,739
Corporacion Bancaria de Espana SA Sp 42 983
First Union Corp. (a) (a)
Firstar Corp. 32 960
Skandinaviska Enskilda Banken Sw 55 718
The Bank of Tokyo Mitsubishi Ja 46 679
--------
7,500
--------
HOLDING & OTHER INVESTMENT OFFICES - 0.5%
Zurich Allied AG Sz 1 951
--------
INSURANCE CARRIERS - 4.1%
AGF (Assurances Generales de France) (b) Fr (a) (a)
American International Group, Inc. 18 2,102
CIGNA Corp. 32 2,790
Chrysler Corp. 31 2,318
Toro Assicurazioni It 40 599
--------
7,809
--------
INVESTMENT COMPANIES - 1.1%
Standard and Poor's Depository Receipts 15 2,001
--------
NONDEPOSITORY CREDIT INSTITUTIONS - 1.4%
Associates First Capital Corp. 58 2,574
--------
- ---------------------------------------------------------------------------------------------------
MANUFACTURING - 26.0%
CHEMICALS & ALLIED PRODUCTS - 6.3%
Bristol-Myers Squibb Co. 20 1,271
Clorox Co. 22 2,561
E.I. du Pont de Nemours & Co. 14 968
Eli Lilly & Co. 13 957
Johnson & Johnson 13 1,234
Merck & Co., Inc. 19 1,321
Merck KGAA G 4 137
Procter & Gamble Co. 12 1,098
Rhone Poulenc, Class A Fr 15 707
Schering-Plough Corp. 17 802
Warner-Lambert Co. 12 836
--------
11,892
--------
COMMUNICATIONS EQUIPMENT - 3.2%
Lucent Technologies, Inc. 53 3,187
Philips Electronics NV Ne 12 1,052
Sony Corp. Ja 8 747
Telefonakteibolaget LM Ericsson ADR 35 940
--------
5,926
--------
ELECTRICAL INDUSTIAL EQUIPMENT - 1.0%
General Electric Co. 18 1,941
--------
ELECTRONIC COMPONENTS - 0.8%
Texas Instruments, Inc. 15 1,542
--------
FOOD & KINDRED PRODUCTS - 3.7%
Kellogg Co. 75 2,786
Nestle AG (Reg) Sz (a) 648
PepsiCo, Inc. 69 2,541
Philip Morris Co., Inc. 25 880
--------
6,855
--------
FURNITURE & FIXTURES - 0.7%
Ethan Allen Interiors, Inc. 27 1,389
--------
MACHINERY & COMPUTER EQUIPMENT - 4.3%
Caterpillar, Inc. 21 1,320
EMC Corp. (b) 10 1,122
International Business Machines Corp. 7 1,422
Mannesmann AG G 11 1,457
Oerlikon-Buehrle Holding AG Sz 5 707
Sun Microsystems, Inc. (b) 34 2,046
--------
8,074
--------
MEASURING & ANALYZING INSTRUMENTS - 0.6%
Medtronic, Inc. 15 1,108
--------
PETROLEUM REFINING - 4.2%
British Petroleum Co., PLC ADR UK 17 1,937
Chevron Corp. 12 1,177
ENI SPA It 112 734
Exxon Corp. 14 1,121
Texaco, Inc. 47 2,930
--------
7,899
--------
STONE, CLAY, GLASS & CONCRETE - 0.7%
Cimentos de Portugal SA Pt 47 1,299
--------
TRANSPORTATION EQUIPMENT - 0.5%
Ford Motor Co. 15 959
--------
- ---------------------------------------------------------------------------------------------------
RETAIL TRADE - 7.7%
APPAREL & ACCESSORY STORES - 1.6%
Ross Stores, Inc. 29 1,323
TJX Companies, Inc. 51 1,696
--------
3,019
--------
FOOD STORES - 2.3%
Albertson's, Inc. 18 907
Safeway, Inc. (b) 27 1,477
Tesco PLC UK 243 723
Vedior NV Ne 28 625
Vendex International NV Ne 23 563
--------
4,295
--------
GENERAL MERCHANDISE STORES - 2.4%
Fred Meyer, Inc. (b) 16 850
Metro AG G 14 999
Wal-Mart Stores, Inc. 59 2,705
--------
4,554
--------
MISCELLANEOUS RETAIL - 0.8%
Office Depot, Inc. (b) 71 1,571
--------
RESTAURANTS - 0.6%
McDonald's Corp. 26 1,085
--------
- ---------------------------------------------------------------------------------------------------
SERVICES - 1.3%
COMPUTER SOFTWARE - 0.9%
Microsoft Corp. (b) 20 1,626
--------
HOTELS, CAMPS & LODGING - 0.4%
Accor SA Fr 3 782
--------
- ---------------------------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS & SANITARY SERVICES - 7.4%
AIR TRANSPORTATION - 1.3%
Comair Holdings, Inc. 69 1,512
Delta Air Lines, Inc. 14 888
--------
2,400
--------
ELECTRIC, GAS & SANITARY SERVICES - 0.2%
Sempra Energy 22 453
--------
ELECTRIC SERVICES - 1.8%
Texas Utilities Co. 60 2,397
Unicom Corp. 26 1,025
--------
3,422
--------
TELECOMMUNICATION - 4.1%
BellSouth Corp. 34 1,521
Hong Kong Telecommunications Ltd. HK 332 886
MCI WorldCom, Inc. (b) 18 1,488
Nippon Telegraph & Telephone Corp. Ja 78 849
Oy Nokia AB, Class A Fi 19 1,470
SBC Communications, Inc., Class A 26 1,473
--------
7,687
--------
Total Common Stocks (cost of $71,877) 100,613
--------
PREFERRED STOCKS - 0.2%
- ---------------------------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS & SANITARY SERVICES - 0.2%
CABLE
CSC Holdings Ltd., 11.125%,
PIK, Series M (cost of $334) 3 386
--------
BONDS & NOTES - 38.8% PAR
- ---------------------------------------------------------------------------------------------------
CORPORATE FIXED INCOME BONDS & NOTES - 17.8%
- ---------------------------------------------------------------------------------------------------
CONSTRUCTION - 0.2%
Falcon Building Products, Inc., stepped coupon,
(10.500% 06/15/02) (c) 06/15/07 $ 500 320
--------
- ---------------------------------------------------------------------------------------------------
MANUFACTURING - 6.5%
CHEMICALS & ALLIED PRODUCTS - 0.8%
Agricultural Minerals & Chemicals Co., L.P., 10.750% 09/30/
2003 100 100
LaRoche Industries, Inc., 9.500% 09/15/2007 500 375
Sterling Chemicals, Inc.,
11.250% 04/01/2007 500 460
Trans-Resources, Inc., 10.750% 03/15/2008 500 495
--------
1,430
--------
ELECTRONIC & ELECTRICAL EQUIPMENT - 0.3%
TransDigm, Inc., 10.375% 12/01/2008 (d) 500 505
--------
FABRICATED METAL - 0.5%
Earle M. Jorgensen & Co.,
9.500% 04/01/2005 500 465
Euramax International, PLC,
11.250% 10/01/2006 (e) 250 265
US Can Corp., 10.125% 10/15/2006 200 213
--------
943
--------
FOOD & KINDRED PRODUCTS - 0.3%
Chattem, Inc., 8.875% 04/01/2008 500 506
--------
MACHINERY & COMPUTER EQUIPMENT - 0.1%
IMO Industries, Inc., 11.750% 05/01/2006 250 262
--------
MISCELLANEOUS MANUFACTURING - 0.8%
Building Materials Corp. of America,
8.000% 12/01/2008 (d) 500 494
ISP Holdings, Inc., 9.750% 02/15/2002 250 260
Shop Vac Corp., 10.625% 09/01/2003 250 272
United Industries, 9.875% 04/01/2009 (d) 500 522
--------
1,548
--------
PAPER PRODUCTS - 0.1%
Stone Container Corp., 10.750% 10/01/2002 250 261
--------
PRIMARY METAL - 1.8%
Algoma Steel, Inc., 12.375% 07/15/2005 250 251
Bayou Steel Corp., 9.500% 05/15/2008 500 499
Kaiser Aluminum & Chemcial Corp.,
10.875% 10/15/2006 300 312
Keystone Consolidated Industries, Inc.,
9.625% 08/01/2007 500 493
Renco Metals, Inc., 11.500% 07/01/2003 250 261
WCI Steel Inc., 10.000% 12/01/2004 1,000 1,045
WHX Corp., 10.500% 04/15/2005 500 502
--------
3,363
--------
PRINTING & PUBLISHING - 0.6%
American Lawyer Media, Inc.,
9.750% 12/15/2007 500 519
Hollinger International Publishing, Inc.,
9.250% 03/15/2007 500 520
--------
1,039
--------
TRANSPORTATION EQUIPMENT - 1.2%
Collins & Aikman Products Co.,
11.500% 04/15/2006 200 209
Dura Operating Corp.,
9.000% 05/01/2009 (d) 500 509
Johnstown America Industries, Inc.,
11.750% 08/15/2005 500 542
LDM Technologies, Inc.,
10.750% 01/15/2007 500 518
Venture Holdings Trust, Series B,
9.500% 07/01/2005 500 505
--------
2,283
--------
- ---------------------------------------------------------------------------------------------------
MINING & ENERGY - 1.0%
COAL MINING - 0.3%
AEI Resources, Inc.,
10.500% 12/15/2005 (d) 500 507
--------
OIL & GAS EXTRACTION - 0.7%
Belden & Blake Corp., 9.875% 06/15/2007 500 380
Gulf Canada Resources, Ltd.,
9.625% 07/01/2005 100 103
HS Resources, Inc., 9.250% 11/15/2006 250 252
Magnum Hunter Resources, Inc.,
10.000% 06/01/2007 500 455
Mariner Energy, Inc., 10.500% 08/01/2006 250 225
--------
1,415
--------
RETAIL TRADE - 0.1%
FOOD STORES
Pathmark Stores, Inc., 9.625% 05/01/2003 200 206
--------
- ---------------------------------------------------------------------------------------------------
SERVICES - 2.2%
AMUSEMENT & RECREATION - 0.9%
Coast Hotels & Casinos,
9.500% 04/01/2009 (d) 500 511
E&S Holdings Corp., 10.375% 10/01/2006 250 115
Horseshoe Gaming, L.L.C.,
9.375% 06/15/2007 600 624
Regal Cinemas, 9.500% 06/01/2008 500 498
--------
1,748
--------
BUSINESS SERVICES - 0.1%
Unisys Corp., 11.750% 10/15/2004 250 284
--------
HOTELS, CAMPS & LODGING - 0.7%
Eldorado Resorts L.L.C.,
10.500% 08/15/2006 250 263
Isle Of Capri Casinos, 8.750% 04/15/2009 (d) 1,000 995
--------
1,258
--------
OTHER SERVICES - 0.5%
Borg-Warner Security Corp.,
9.625% 03/15/2007 500 505
Intertek Finance, PLC.,
10.250% 11/01/2006 (e) 500 488
--------
993
--------
- ---------------------------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS & SANITARY SERVICES - 7.5%
AIR TRANSPORTATION - 0.1%
U.S. Air, Inc., 10.375% 03/01/2013 200 221
--------
BROADCASTING - 0.9%
Allbritton Communications Co.,
9.750% 11/30/2007 500 535
Fox Family Worldwide, Inc.,
9.250% 11/01/2007 500 486
LIN Holding Corp., stepped coupon,
(10.500% 06/15/02) (c) 03/01/2008 500 348
NWCG Holding Corp., (f) 06/15/1999 175 174
Young Broadcasting Corp.,
11.750% 11/15/2004 100 107
--------
1,650
--------
CABLE - 1.6%
Adelphia Communications Corp.,
9.875% 03/01/2007 500 553
Charter Communications Inc., stepped coupon,
(9.920% 04/01/04) (c) 04/01/2011 750 496
Classic Cable, Inc., 9.875% 08/01/2008 (d) 500 536
Diamond Cable Co., stepped coupon,
(10.750% 02/15/02) (c) 02/15/2007 500 404
Echostar Communications Corp.,
9.250% 02/01/2006 (d) 500 523
Telewest Communication PLC, stepped coupon,
(11.000% 10/01/00) (c)
10/01/07 (e) 500 446
--------
2,958
--------
COMMUNICATIONS - 0.5%
Price Communications Wireless, Inc., PIK,
11.250% 08/15/2008 505 517
Spectrasite Holdings Inc., stepped coupon,
(11.250% 04/15/04) (c) 04/15/2009 850 495
--------
1,012
--------
PIPELINES - 0.2%
Falcon Holding Group L.P., stepped coupon, (9.285% 04/15/03)
(c) 04/15/2010 500 360
--------
TELECOMMUNICATIONS - 4.2%
Carrier 1 13.250% 02/15/2009 (d) 500 520
Clearnet Communications, Inc., stepped coupon,
(14.750% 12/15/00) (c) 12/15/2005 500 470
Hyperion Telecommunications, Inc., stepped coupon, (13.000%
04/15/01) (c) 04/15/2003 (d) 500 419
Intermedia Communications, Inc., stepped coupon,
(11.250 07/15/02) (c) 07/15/2007 500 384
Level 3 Communications, Inc.,
9.125% 05/01/2008 750 765
Loral Space & Communications Ltd.,
11.250% 01/15/2007 500 460
McLeodUSA, Inc., stepped coupon,
(10.500% 03/01/02) (c) 03/01/2007 500 403
Metrocall, Inc., 10.375% 10/01/2007 500 436
NTL, Inc.:
stepped coupon, (9.750% 04/01/03) (c)
04/01/2008 500 357
stepped coupon, (9.750% 04/15/04) (c)
04/15/09 (e) 750 733
Nextel Communications, Inc., stepped coupon,
(9.750% 10/31/02) (c) 10/31/2007 500 385
Nextlink Communications L.L.C., stepped coupon,
(9.450% 04/15/03) (c) 04/15/2008 500 320
Price Communications Wireless, Inc.,
9.125% 12/15/2006 500 528
RCN Corp., stepped coupon,
(11.125% 10/15/02) (c) 10/15/2007 500 349
Rogers Cantel, Inc., 9.750% 06/01/2016 460 529
Sprint Spectrum L.P., stepped coupon,
(12.500% 08/15/01) (c) 08/15/2006 630 570
Viatel, Inc. 11.500% 03/15/2009 (d) 250 266
--------
7,894
--------
- ---------------------------------------------------------------------------------------------------
WHOLESALE TRADE - 0.3%
DURABLE GOODS
Holmes Products Corp., 9.875% 11/15/2007 500 495
--------
TOTAL CORPORATE FIXED INCOME
BONDS & NOTES (cost $34,735) 33,461
--------
CURRENCY PAR VALUE
- ---------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT &
AGENCY OBLIGATIONS - 10.8%
Argentina Global Bonds,
11.375% 01/30/2017 (g) $ 865 $ 859
Bulgaria Brady Floating Rate (IAB),
5.875% 07/28/2011 (h) 1,250 845
Government of France, 8.500% 10/25/2008 Eu 904 1,297
Government of Mexico,
11.375% 09/15/2016 (i) 1,440 1,634
Government of New Zealand,
8.000% 11/15/2006 NZ 2,035 1,299
Government Of Norway:
6.750% 01/15/2007 NK 2,360 342
9.500% 10/31/2002 NK 4,620 682
Hellenic Republic:
8.600% 03/26/2008 GD 271,000 1,036
8.900% 03/21/2004 GD 340,300 1,225
Kingdom of Sweden, 10.250% 05/05/2003 SK 5,900 878
Republic of Argentina, 11.250%
04/10/2006 (j) Eu 625 367
Republic of Brazil, 10.125% 05/15/2027 (k) 1,900 1,515
Republic of Colombia, 8.375%
02/15/2027 (l) 365 296
Republic of Panama, 8.875% 09/30/2027 (m) 915 864
Republic of Venezuela,
9.250% 09/15/2027 (n) 500 363
Russian Federation, 11.000% 07/24/2018 (o) 611 245
United Kingdom Treasury:
9.000% 07/12/2011 KB 161 361
10.000% 02/26/2001 KB 1,960 3,423
10.000% 09/08/2003 KB 487 938
United Mexican States,
10.375% 01/29/2003 (p) Eu 450 272
Western Australia Treasury Corp.,
10.000% 07/15/2005 A$ 2,005 1,628
--------
TOTAL FOREIGN GOVERNMENT & AGENCY OBLIGATIONS (cost $19,506) 20,369
--------
- ---------------------------------------------------------------------------------------------------
US GOVERNMENT & AGENCY OBLIGATIONS - 10.2%
Federal Home Loan Mortgage Corp.,
8.000% 07/01/2020 580 608
U.S. Treasury Bonds:
8.750% 05/15/2017 4,000 5,245
11.625% 11/15/2004 (q) 4,372 5,660
11.875% 11/15/2003 (q) 4,965 6,253
12.000% 08/15/2013 1,018 1,480
--------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(cost of $19,089) 19,246
--------
TOTAL BONDS & NOTES
(cost of $73,330) 73,076
--------
TOTAL INVESTMENTS
(cost of $145,541) (r) 174,075
--------
SHORT-TERM OBLIGATIONS - 6.4%
- ---------------------------------------------------------------------------------------------------
Repurchase agreement with ABN AMRO Chicago Corp., dated 04/
30/99, due 05/03/99 at 4.870%, collaterized by U.S. Treasury
bonds and notes with various maturities to 2015, market value
$12,190 (repurchase proceeds $11,951) $ 11,946 $ 11,946
--------
FORWARD CURRENCY CONTRACTS - 0.0% (s) (36)
- ---------------------------------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES - 1.1% 1,966
- ---------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $187,951
========
NOTES TO PORTFOLIO OF INVESTMENTS
- ---------------------------------------------------------------------------------------------------
(a) Rounds to less than one.
(b) Non-income producing.
(c) Currently zero coupon. Shown parenthetically is the interest rate to be paid and the date the
Fund will begin accruing this rate.
(d) These securities are exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from registration, normally to qualified
institutional buyers. At April 30, 1999 the value of these securities amounted to $6,307 or
3.4% of net assets.
(e) This is a British security. Par amount is stated in U.S. dollars.
(f) Zero coupon bond.
(g) This is an Argentinean security. Par amount is stated in U.S. dollars.
(h) This is a Bulgarian security. Par amount is stated in U.S. dollars.
(i) This is a Mexican security. Par amount is stated in U.S. dollars.
(j) This is an Argentinean security. Par amount is stated in German Deutschemarks.
(k) This is a Brazilian security. Par amount is stated in U.S. dollars.
(l) This is a Colombian security. Par amount is stated in U.S. dollars
(m) This is a Panamanian security. Par amount is stated in U.S. dollars.
(n) This is a Venezuelean security. Par amount is stated in U.S. dollars.
(o) This is a Russian security. Par amount is stated in U.S. dollars.
(p) This is a Mexican security. Par amount is stated in German Deutschemarks.
(q) These securities, or a portion thereof, with a total market value of $9,166 are being used to
collateralize the forward currency exchange contracts indicated in note (s) below.
(r) Cost for federal income tax purposes is $145,624.
(s) As of April 30, 1999, the Fund has entered into the following portfolio hedges:
</TABLE>
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION
CONTRACTS IN EXCHANGE (DEPRECIATION)
TO DELIVER FOR SETTLEMENT DATE (U.S.$)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
A$ 1,157 US$ 766 06/22/1999 $(13)
SK 7,250 US$ 865 06/30/1999 6
KB 2,758 US$ 4,436 06/09/1999 13
NZ 2,318 US$ 1,297 06/09/1999 (42)
---
$(36)
====
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF SECURITIES
BY COUNTRY/CURRENCY COUNTRY/CURRENCY VALUE % OF TOTAL
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $131,522 75.6
United Kingdom UK/KB 9,314 5.4
France Fr/Eu 2,786 1.6
Germany G/Eu 2,593 1.5
Switzerland Sz 2,306 1.3
Japan Ja 2,275 1.3
Greece Gr/GD 2,261 1.3
Netherlands Ne 2,240 1.3
Mexico Mx 1,906 1.1
Australia Au/A$ 1,628 0.9
Sweden Sw/SK 1,596 0.9
Brazil Bz 1,515 0.9
Finland Fi 1,470 0.8
Italy It 1,333 0.8
New Zealand NZ 1,299 0.7
Portugal Pt 1,299 0.7
Argentina Ar 1,226 0.7
Norway No/NK 1,024 0.6
Spain Sp 983 0.6
Hong Kong HK 886 0.5
Panama Pa 864 0.5
Bulgaria Bu 845 0.5
Venezuela Ve 363 0.2
Colombia Co 296 0.2
Russia RU 245 0.1
-------- -----
$174,075 100.0
======== =====
</TABLE>
<TABLE>
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
<CAPTION>
ACRONYM NAME
- -------------------------------------------------------------
<S> <C>
AU Australian Dollars
ADR American Depositary Receipt
Eu euro
GD Greek Drachmas
KB British Pounds
NK Norwegian Kroner
PIK Payment-In-Kind
SK Swedish Kroner
</TABLE>
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $145,541) $174,075
Short-term obligations 11,946
--------
186,021
Unrealized appreciation on forward
currency contracts $ 19
Receivable for:
Interest 1,887
Investments sold 556
Fund shares sold 249
Dividends 172
Foreign tax reclaims 14
Deferred organization expenses 7
Other 13
--------
2,917
--------
Total assets 188,938
LIABILITIES
Unrealized depreciation on forward
currency contracts 55
Payable for:
Investments purchased 754
Fund shares repurchased 132
Accrued:
Deferred Trustees fees 3
Other 43
--------
Total liabilities 987
--------
Net assets $187,951
========
CLASS A
Net asset value & redemption price per share ($58,792/3,710) $ 15.84(a)
--------
Maximum offering price per share ($15.84/0.9525) $ 16.63(b)
--------
CLASS B
Net asset value & offering price per share
($120,015/7,593) $ 15.81(a)
--------
CLASS C
Net asset value & offering price per share
($9,144/578) $ 15.83(a)
--------
(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.
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1999 (Unaudited)
(in thousands)
INVESTMENT INCOME
Interest $ 3,425
Dividends 636
-------
Total investment income (net of nonreclaimable foreign
taxes withheld at source which amounted to $13) 4,061
EXPENSES
Management fee 629
Service fee 225
Distribution fee - Class A 61
Distribution fee - Class B 427
Distribution fee - Class C 33
Transfer agent 260
Bookkeeping fee 36
Registration fee 18
Custodian fee 26
Audit fee 9
Trustees fees 7
Reports to shareholders 11
Legal fee 2
Amortization of deferred organization expenses 7
Other 28
-------
Total expenses 1,779
-------
Net investment income 2,282
-------
REALIZED AND UNREALIZED GAIN (LOSS) ON
PORTFOLIO POSITIONS
Net realized gain on:
Investments 6,590
Foreign currency transactions 126
-------
Net realized gain 6,716
-------
Net change in unrealized appreciation (depreciation)
during the period on:
Investments 7,575
Foreign currency transactions (57)
-------
Net unrealized appreciation 7,518
-------
Net gain 14,234
-------
INCREASE IN NET ASSETS FROM OPERATIONS $16,516
-------
See accompanying notes to financial statements.
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
INCREASE (DECREASE) IN NET ASSETS 1999 1998
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 2,282 $ 3,759
Net realized gain 6,716 7,019
Net unrealized appreciation 7,518 791
-------- --------
Net increase from operations 16,516 11,569
-------- --------
DISTRIBUTIONS
From net investment income -- Class A (757) (1,505)
From net realized gains -- Class A (2,112) (470)
From net investment income -- Class B (1,276) (2,266)
From net realized gains -- Class B (4,213) (802)
From net investment income -- Class C (99) (184)
From net realized gains -- Class C (328) (67)
-------- --------
7,731 6,275
-------- --------
FUND SHARE TRANSACTIONS
Receipt for shares sold -- Class A 5,029 12,412
Value of distributions reinvested -- Class A 2,721 1,852
Cost of shares repurchased -- Class A (5,072) (8,621)
-------- --------
2,678 5,643
-------- --------
Receipt for shares sold -- Class B 16,395 36,356
Value of distributions reinvested -- Class B 5,200 2,877
Cost of shares repurchased -- Class B (11,966) (14,398)
-------- --------
9,629 24,835
-------- --------
Receipt for shares sold -- Class C 1,106 2,671
Value of distributions reinvested -- Class C 403 229
Cost of shares repurchased -- Class C (1,016) (1,362)
-------- --------
493 1,538
-------- --------
Net increase from Fund share transactions 12,800 32,016
-------- --------
Total increase 20,531 38,291
NET ASSETS
Beginning of period 167,420 129,129
-------- --------
End of period (including undistributed net investment income of
$530 and $384, respectively) $187,951 $167,420
======== ========
NUMBER OF FUND SHARES
Sold -- Class A 323 820
Issued for distributions reinvested -- Class A 178 126
Repurchased -- Class A (326) (575)
-------- --------
175 371
-------- --------
Sold -- Class B 1,055 2,388
Issued for distributions reinvested -- Class B 341 197
Repurchased -- Class B (770) (955)
-------- --------
626 1,630
-------- --------
Sold -- Class C 71 177
Issued for distributions reinvested -- Class C 26 16
Repurchased -- Class C (64) (90)
-------- --------
33 103
-------- --------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
April 30, 1999(Unaudited)
NOTE 1. INTERIM FINANCIAL STATEMENTS
In the opinion of management of Colonial Strategic Balanced Fund (the Fund), a
series of Liberty Funds Trust III, formerly Colonial Trust III, the
accompanying financial statements contain all normal and recurring adjustments
necessary for the fair presentation of the financial position of the Fund at
April 30, 1999, and the results of its operations, the changes in its
net assets and the financial highlights for the six months
then ended.
NOTE 2. ACCOUNTING POLICIES ORGANIZATION
The Fund is a diversified portfolio of a Massachusetts business trust,
registered under the Investment Company Act of 1940, as amended, as an open-
end management investment company. The Fund's investment objective is to seek
current income and long term growth, consistent with prudent risk, by
diversifying investments primarily in U.S. and foreign equity and debt
securities. The Fund may issue an unlimited number of shares. The Fund offers
three classes of shares: Class A, Class B and Class C. Class A shares are sold
with a front-end sales charge, an annual distribution fee 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 an annual
distribution fee and a contingent deferred sales charge.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary
of significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS
Equity securities generally are valued at the last sale price or, in the case
of unlisted or listed securities for which there were no sales during the day,
at current quoted bid prices.
Debt securities generally are valued by a pricing service based upon market
transactions for normal, institutional-size trading units of similar
securities. When management deems it appropriate, an over-the-counter or
exchange bid quotation
is used.
Forward currency contracts are valued based on the weighted value of the
exchange traded contracts with similar durations.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's
exchange rates.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS
All income, expenses (other than the Class A, Class B and Class C distribution
fees), and realized and unrealized gains (losses), are allocated to each class
proportionately on a daily basis for purposes of determining the net asset
value of each class.
Per share data is calculated using the average shares outstanding during the
period. In addition, net investment income per share data reflects the
distribution fee applicable to each class.
Class A, Class B and Class C ratios are calculated by adjusting the expense
and net investment income ratios for the Fund for the entire period by the
distribution fee applicable to Class A, Class B and Class C shares.
FEDERAL INCOME TAXES
Consistent with the Fund's policy to qualify as a regulated investment company
and to distribute all of its taxable income, no federal income tax has been
accrued.
INTEREST INCOME, DEBT DISCOUNT AND PREMIUM
Interest income is recorded on the accrual basis. Original issue discount is
accreted to interest income over the life of a security with a corresponding
increase in the cost basis; premium and market discount are not amortized or
accreted.
The value of additional securities received as an interest payment is recorded
as income and as the cost basis of
such securities.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-date.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforwards) under income tax regulations.
DEFERRED ORGANIZATION EXPENSES
The Fund incurred expenses of $69,500 in connection with its organization,
initial registration with the Securities and Exchange Commission and with
various states, and the initial public offering of its shares. These expenses
were deferred and are being amortized on a straight-line basis over five
years.
FOREIGN CURRENCY TRANSACTIONS
Net realized and unrealized gains (losses) on foreign currency transactions
includes the gains (losses) arising from the fluctuation in exchange rates
between trade and settlement dates on securities transactions, gains (losses)
arising from the disposition of foreign currency, and currency gains (losses)
between the accrual and payment dates on dividends and interest income and
foreign withholding taxes.
The Fund does not distinguish that portion of gains (losses) on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included
with the net realized and unrealized gains (losses) on investments.
FORWARD CURRENCY CONTRACTS
The Fund may enter into forward currency contracts to purchase or sell foreign
currencies at predetermined exchange rates in connection with the settlement
of purchases and sales of securities. The Fund may also enter into forward
currency contracts to hedge certain other foreign currency denominated assets.
The contracts are used to minimize the exposure to foreign exchange rate
fluctuations during the period between trade and settlement date of the
contracts. All contracts are marked-to-market daily, resulting in unrealized
gains (losses) which become realized at the time the forward currency
contracts are closed or mature. Realized and unrealized gains (losses) arising
from such transactions are included in net realized and unrealized gains
(losses) on foreign currency transactions. Forward currency contracts do not
eliminate fluctuations in the prices of the Fund's portfolio securities. While
the maximum potential loss from such contracts is the aggregate face value in
U.S. dollars at the time the contract was opened, exposure is typically
limited to the change in value of the contract (in U.S. dollars) over the
period it remains open. Risks may also arise if counterparties fail to perform
their obligations under the contracts.
OTHER
Corporate actions are recorded on the ex-date (except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware
of such), net of 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 3. FEES AND COMPENSATION PAID TO AFFILITES 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 0.70% 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 FEE
Liberty Funds Services, 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.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES
Liberty Funds Distributor, Inc. (the Distributor), a subsidiary of the
Advisor, is the Fund's principal underwriter. For the six months ended April
30, 1999, the Fund has been advised that the Distributor retained net
underwriting discounts of $15,122 on sales of the Fund's Class A shares and
received contingent deferred sales charges (CDSC) $14, $188,435 and $1,113 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% for Class B and Class C and through February 28,
1999, a distribution fee equal to 0.30% for Class A, annually, of the average
net assets attributable to Class A, Class B, and Class C shares. Effective
March 1, 1999, the plan decreased the payment of the distribution fee to equal
0.10% annually for Class A. Also, the Distributor has voluntarily agreed,
until further notice, to waive a portion of the Class A share distribution fee
so that it will not exceed 0.05% annually.
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.
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 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY
During the six months ended April 30, 1999, purchases and sales of
investments, other than short-term obligations, were $55,561,764 and
$52,647,340, respectively, of which $3,697,264 and $3,178,332, respectively,
were U.S. government securities.
Unrealized appreciation (depreciation) at April 30, 1999, based on cost of
investments for federal income tax purposes was:
Gross unrealized appreciation $ 31,919,819
Gross unrealized depreciation (3,468,504)
------------
Net unrealized appreciation $ 28,451,315
============
OTHER
There are certain additional risks involved when investing in foreign
securities that are not inherent with investments in domestic securities.
These risks may involve foreign currency exchange rate fluctuations, adverse
political and economic developments and the possible prevention of foreign
currency exchange or the imposition of other foreign governmental laws or
restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
NOTE 5. LINE OF CREDIT
The Fund may borrow up to 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 April 30, 1999.
NOTE 6. COMPOSITION OF NET ASSETS
At April 30, 1999, net assets consisted of:
Capital paid in $ 152,297
Undistributed net investment income 530
Accumulated net realized gain 6,636
Net unrealized appreciation (depreciation) on:
Investments 28,534
Foreign currency transactions (46)
---------
$ 187,951
=========
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding
throughout each period are as follows:
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED APRIL 30, 1999
----------------------------------------------------------------
CLASS A CLASS B CLASS C
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $15.170 $ 15.140 $15.170
------- -------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) 0.226 0.185 0.185
Net realized and unrealized gain 1.254 1.261 1.251
------- -------- -------
Total from Investment Operations 1.480 1.446 1.436
------- -------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income (0.210) (0.176) (0.176)
From net realized gains (0.600) (0.600) (0.600)
------- -------- -------
Total Distributions Declared to Shareholders (0.810) (0.776) (0.776)
------- -------- -------
NET ASSET VALUE, END OF PERIOD $15.840 $ 15.810 $15.830
------- -------- -------
Total return (b)(c)(d) 9.99% 9.77% 9.68%
------- -------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses (e)(f) 1.61% 2.15% 2.15%
Net investment income (e)(f) 2.91% 2.37% 2.37%
Portfolio turnover (d) 31% 31% 31%
Net assets at end of period (000) $58,792 $120,015 $ 9,144
(a) Per share data was calculated using average shares outstanding
(b) Total return at net asset value assuming no initial sales charge or contingent deferred sales charge.
(c) Had the Distributor not waived or reimbursed a portion of expenses, total return would have been reduced.
(d) Not annualized.
(e) The benefits derived from custody credits and directed brokerage arrangements had no impact.
(f) Annualized.
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
-------------------------------------------------------------------------
1998 1997
---------------------------------- ---------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C(c)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $14.450 $ 14.430 $14.450 $12.910 $12.890 $12.910
------- -------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a)(b) 0.418 0.350 0.350 0.404 0.342 0.342
Net realized and unrealized gain 0.890 0.882 0.891 1.762 1.766 1.766
------- -------- ------- ------- ------- -------
Total from Investment Operations 1.308 1.232 1.241 2.166 2.108 2.108
------- -------- ------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income (0.440) (0.374) (0.373) (0.393) (0.335) (0.335)
From net realized gains (0.148) (0.148) (0.148) (0.233) (0.233) (0.233)
------- -------- ------- ------- ------- -------
Total Distributions Declared to
Shareholders (0.588) (0.522) (0.521) (0.626) (0.568) (0.568)
------- -------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $15.170 $ 15.140 $15.170 $14.450 $14.430 $14.450
------- -------- ------- ------- ------- -------
Total return (d)(e) 9.25% 8.71% 8.76% 17.24% 16.77% 16.75%
------- -------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses (f) 1.69% 2.14% 2.14% 1.65% 2.10% 2.10%
Net investment income (f) 2.76% 2.31% 2.31% 2.93% 2.48% 2.48%
Fees and expenses waived or borne by
the Advisor (f) 0.01% 0.01% 0.01% 0.09% 0.09% 0.09%
Portfolio turnover 51% 51% 51% 45% 45% 45%
Net assets at end of period (000) $53,639 $105,513 $ 8,268 $45,736 $77,005 $ 6,388
(a) Net of fees and expenses waived or
borne by the Advisor which amounted
to: $ 0.001 $ 0.001 $ 0.001 $ 0.013 $ 0.013 $ 0.013
(b) Per share data was calculated using average shares outstanding during the period.
(c) Class D shares were redesignated Class C shares on July 1, 1997.
(d) Total return at net asset value assuming no initial sales charge or contingent deferred sales charge.
(e) Had the Advisor not waived or reimbursed a portion of expenses, total return would have been reduced.
(f) The benefits derived from custody credits and directed brokerage arrangements had no impact.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding
throughout each period are as follows:
<CAPTION>
YEAR ENDED OCTOBER 31
-------------------------------------------------------------------------
1996 1995
---------------------------------- ---------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.650 $11.640 $11.650 $ 9.910 $ 9.900 $ 9.900
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a)(b) 0.369 0.314 0.314 0.325 0.277 0.277
Net realized and unrealized gain 1.264 1.260 1.258 1.764 1.769 1.774
------- ------- ------- ------- ------- -------
Total from Investment Operations 1.633 1.574 1.572 2.089 2.046 2.051
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income (0.333) (0.284) (0.272) (0.349) (0.306) (0.301)
From net realized gains (0.040) (0.040) (0.040) -- -- --
------- ------- ------- ------- ------- -------
Total Distributions Declared to
Shareholders (0.373) (0.324) (0.312) (0.349) (0.306) (0.301)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $12.910 $12.890 $12.910 $11.650 $11.640 $11.650
------- ------- ------- ------- ------- -------
Total return (c)(d) 14.24% 13.71% 13.68% 21.47% 21.00% 21.04%
------- ------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses (e) 1.65% 2.10% 2.10% 1.65% 2.10% 2.10%
Net investment income (e) 2.99% 2.54% 2.54% 3.05% 2.60% 2.60%
Fees and expenses waived or borne by
the Advisor (e) 0.19% 0.19% 0.19% 0.43% 0.43% 0.43%
Portfolio turnover 59% 59% 59% 49% 49% 49%
Net assets at end of period (000) $25,580 $40,065 $ 3,554 $16,346 $18,284 $ 4,164
(a) Net of fees and expenses waived or
borne by the Advisor which amounted to: $ 0.023 $ 0.023 $ 0.023 $ 0.042 $ 0.042 $ 0.042
(b) Per share data was calculated using average shares outstanding during the period.
(c) Total return at net asset value assuming no initial sales charge or contingent deferred sales charge.
(d) Had the Advisor not waived or reimbursed a portion of expenses, total return would have been reduced.
(e) The benefits derived from custody credits and directed brokerage arrangements had no impact.
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED OCTOBER 31, 1994(b)
-------------------------------------------------------------
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.000 $10.000 $10.000
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a)(c) 0.035 0.029 0.029
Net realized and unrealized loss (0.125) (0.129) (0.129)
------- ------- -------
Total from Investment Operations (0.090) (0.100) (0.100)
------- ------- -------
NET ASSET VALUE, END OF PERIOD $9.910 $9.900 $9.900
------- ------- -------
Total return (d)(e)(f) (0.90)% (1.00)% (1.00)%
------- ------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses (g) 1.65% 2.10% 2.10%
Net investment income (g) 3.01% 2.56% 2.56%
Fees and expenses waived or borne by the Advisor (g) 0.35% 0.35% 0.35%
Portfolio turnover (g) 0% 0% 0%
Net assets at end of period (000) $6,394 $6,332 $2,231
(a) Net of fees and expenses waived or borne by the
Advisor which amounted to: $0.004 $0.004 $0.004
(b) The Fund commenced investment operations on September 19, 1994
(c) Per share data was calculated using average shares outstanding during the period.
(d)Total return at net asset value assuming no initial sales charge or contingent deferred sales charge.
(e) Had the Advisor not waived or reimbursed a portion of expenses, total return would have been reduced.
(f) Not annualized.
(g) Annualized.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
SEMIANNUAL REPORT: COLONIAL STRATEGIC BALANCED FUND
Trustees & Transfer Agent
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 V. 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 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)
- --------------------------------------------------------------------------------
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Strategic Balanced Fund is:
Liberty Funds Services, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
The Fund mails one shareholder report to each shareholder address. If you would
like more than one report, please call 1-800-426-3750 and additional reports
will be sent to you.
This report has been prepared for shareholders of Colonial Strategic Balanced
Fund. This report may also be used as sales literature when preceded or
accompanied by the current prospectus which provides details of sales charges,
investment objectives and operating policies of the Fund and with the most
recent copy of the Liberty Funds Distributor, Inc.
Performance Update.
<PAGE>
CHOOSE LIBERTY
BECAUSE NO SINGLE INVESTMENT MANAGER CAN BE ALL THINGS TO ALL INVESTORS.(SM)
At Liberty Funds Distributor, Inc. (Liberty), we believe that -- try as they may
- -- no single investment manager can do all things well. That's why we make
available the individual talents of investment managers that have excelled in a
particular investment discipline. These managers not only specialize in a
distinct investment style, they hold a passion for the style along with a
demonstrated track record.
BOSTON, MA Colonial has long been a PORTLAND, OR Crabbe Huson's
recognized leader in fixed-income contrarian investment style seeks
investing. In addition, Colonial has long-term performance by investing in
distinguished itself with both a stocks from high-quality,
traditional value and a more out-of-favor companies. This
contemporary approach to equity risk-averse strategy capitalizes on
investing. the potential of these companies to
regain market popularity.
COLONIAL
[logo] Management [logo]
Associates, Inc. CRABBE HUSON
[graphic omitted]
LIBERTY
[logo]
STEIN
ROE &
NEWPORT FARNHAM
[logo] FUND ---------------------
MANAGEMENT INVESTMENT MANAGEMENT
CHICAGO, IL Stein Roe's growth
SAN FRANCISCO, CA A leader in Asian management style emphasizes companies
investing(TM), Newport has an with the ability to create, maintain
unparalleled knowledge of Asian and grow earnings in different market
economies, business and culture. environments.
Each of these managers is a member of the Liberty Financial Companies (NYSE: L),
a diversified asset accumulation and management organization with approximately
$61 billion in assets under management for more than 1.7 million investors.
- --------------------------------------------------------------------------------
COLONIAL STRATEGIC BALANCED FUND
- --------------------------------------------------------------------------------
[logo] L I B E R T Y
COLONIAL o CRABBE HUSON o NEWPORT o STEIN ROE ADVISOR
Liberty Funds Distriburtor, Inc. (C)1999
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
SB-03/120H-0499 (6/99) 99/693
