--------------------------------------------------------------------------------
COLONIAL STRATEGIC BALANCED FUND Semiannual Report
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April 30, 2000
[COVER PHOTO]
<PAGE>
President's Message
Dear Shareholder:
Over the past six months, investment markets experienced volatility, affecting
the performance of many securities. Typically, a fund that invested across
several markets, such as Colonial Strategic Balanced Fund, provided diversity to
support the Fund when one area of the market declined. During a time when most
major markets were volatile, we found that holding quality investments across a
diversified portfolio was the best strategy.
Global stock markets offered solid growth potential for much of the period, but
spiraled into negative territory during the last six weeks as rising interest
rates, market corrections and individual company concerns spilled over from
market to market. A lack of investor demand in the bond market resulted in
continued mutual fund outflows and restricted liquidity.
For the six-month period ended April 30, 2000, Colonial Strategic Balanced
Fund's Class A shares returned 3.63% without a sales charge, while the S&P 500
Index returned 7.18% and the Lehman Brothers Government/Corporate Bond Index
returned 1.51% for the same period. The Fund's portfolio managers seek to own a
diversified portfolio of high-quality domestic and international growth stocks
with a balance of fixed income investments. The managers reduced the number of
holdings in the Fund and converted more assets to fewer higher quality holdings
where they had the most confidence.
The following report details the strategies employed by the Fund's portfolio
managers during the period. For more information, contact your financial advisor
or visit us on the Internet at www.libertyfunds.com for updates on the Fund. 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 16, 2000
---------------------------
Not FDIC May Lose Value
Insured No Bank Guarantee
---------------------------
Because economic and market conditions change frequently, there can be no
assurance that the trends described above or on the following pages will
continue or come to pass.
<PAGE>
--------------------------------------------------------------------------------
Highlights
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o Stock markets around the world experienced volatility during the latter
part of the six-month period ended April 30, 2000.
The causes were varied, but included aggressive tightening by the Federal
Reserve Board, higher inflation reports and a sell-off in technology
stocks in the U.S.
o The high-yield bond market suffered during the early months of 2000.
This was due more to mutual fund outflows and trading liquidity problems
than credit-related problems.
o A positive outlook for the remainder of the year.
We believe the Fund's higher-quality growth repositioning should support
the Fund under these conditions. Our outlook calls for moderate global
economic expansion.
Colonial Strategic Balanced Fund vs. Index Performance
11/1/99 - 4/30/00
Colonial Strategic
Balanced Fund, Class A Lehman Brothers
shares, without a Government/Corporate
sales charge S&P 500 Index Bond Index
--------------------------------------------------------------------------------
3.63% 7.18% 1.51%
Past performance does not guarantee future results. Returns and value of an
investment may vary resulting in a gain or loss on sale.
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 both U.S. government and U.S. corporate bonds. These indexes are
common benchmarks for the markets in which the Fund normally invests. Unlike
mutual funds, it is not possible to invest directly in an index.
Net asset value per share on 4/30/00
Class A $14.08
------------------------------
Class B $14.04
------------------------------
Class C $14.07
------------------------------
Distributions declared per share from 10/31/99 to 4/30/00
Class A $1.82
------------------------------
Class B $1.76
------------------------------
Class C $1.76
------------------------------
1
<PAGE>
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Portfolio Managers' Report
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BOUGHT
As part of our attempt to reposition the portfolio in high-quality,
large-capitalization companies, we purchased Cisco Systems (2.4% of net assets),
computer networking hardware and software manufacturer; Intel (1.4% of net
assets), the world's largest semiconductor chip maker; Oracle (1.8% of net
assets), a business applications and systems software developer and
manufacturer; and Sun Microsystems (1.3% of net assets), a worldwide provider of
networking products, services and support.
Top five government bonds as of 4/30/00
1. FHLMC 30 Yr.
6.50% 2014-2030 3.6%
-----------------------------
2. U.S. Treasury Bonds
8.75% 2017 2.2%
-----------------------------
3. U.S. Treasury Notes
11.88% 2003 1.5%
-----------------------------
4. FHLMC 15 Yr.
7.00% 2009-2030 1.4%
-----------------------------
5. U.S. Treasury Bonds
11.63% 2004 1.2%
-----------------------------
Portfolio holdings 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 maintain the same portfolio holdings in the future.
Positive performance amid volatile market conditions
Colonial Strategic Balanced Fund Class A shares provided a total return of 3.63%
without sales charge for the six-month period ended April 30, 2000, while the
S&P 500 Index and the Lehman Brothers Government/Corporate Bond Indexes returned
7.18% and 1.51%, respectively, for the same period.
Portfolio restructuring helped reduce risk
During the six-month period ended April 30, 2000, we restructured the Portfolio
with the objective of reducing risk and increasing the quality of holdings. We
sold several of the Fund's smaller holdings that had weaker growth prospects and
unfavorable corporate performance. We maintained the Fund's diversity, but
reallocated domestic and international assets into large-capitalization globally
positioned stocks that we believe have better long-term growth potential. For
example, we replaced positions in a few smaller banks and financial stocks with
a major position in Citigroup (1.3% of net assets), a leading global financial
institution. Equity holdings increased slightly from around 55% to around 60% of
assets, with 20% of those holdings being foreign.
Fixed-income repositioning
The fixed-income portion of the Portfolio was significantly redirected, with
large reductions in both the high yield and foreign bond components to 5% of
assets each, down from more than 20% of the Portfolio combined at the beginning
of the period. Recent malaise in the high-yield market was most likely the
result of mutual fund outflows and trading liquidity, and not about
credit-related concerns. We moved fixed-income assets into less risky, lower
volatility holdings such as U.S. Treasurys and investment-grade bonds as U.S.
long-term interest rates moved lower in the first few months of 2000.
Half of the foreign bond portion of the Fund is in developed markets including
the Dollar bloc, United Kingdom and Scandinavia, and the other half is mainly in
emerging countries in Latin America and Eastern Europe. Foreign bond performance
supported the Fund during the period as spreads tightened significantly in the
emerging debt markets.
2
<PAGE>
--------------------------------------------------------------------------------
Portfolio Managers' Report (continued)
--------------------------------------------------------------------------------
Expectations for a stronger Japanese economy and positive global environment
We increased Japanese holdings during the period. Although the Japanese economy
is underperforming, the previously troubled banking system has stabilized
somewhat with the help of consolidation in the industry. The economy also boasts
tax-rate reductions, mild deflation and corporate restructuring efforts. With
these improved conditions, and an improving economy, we believe the Japanese
market will see heightened worldwide demand and that we are well positioned
there. We scaled down European holdings due to currency concerns, reducing
exposure to the consumer and utility industries.
We foresee continued global economic expansion at a somewhat slower rate as we
move through the second half of this year. The Portfolio is well-positioned if,
as we believe, Japan's economy and European domestic growth improve. There are
some risks to this outcome, mainly surrounding the strength of the dollar and
euro currency, as well as increased market volatility and inflation. We believe
European growth is dependent upon fiscal policy to become effective, and tax
cuts to materialize.
/s/ Harvey B. Hirschhorn /s/ Carl C. Ericson
/s/ Laura A. Ostrander /s/ Michael T. Kennedy
Harvey Hirschhorn is an executive vice president of Colonial Management
Associates (CMA) and is lead portfolio manager of the Fund. Carl Ericson is a
senior vice president and Director and Manager of the Taxable Fixed-Income Group
of CMA. Laura Ostrander and Mike Kennedy are senior vice presidents of CMA.
The value and returns earned on an investment in the Fund may be affected by
stock market fluctuations. Investing in smaller-cap stocks may include liquidity
risks as well. Changes in interest rates and financial strength of issuers of
lower-rated bonds, foreign, political and economic developments may also affect
Fund performance.
Top five equity holdings as of 4/30/00
1. Nokia 2.8%
------------------------------
2. Cisco Systems 2.4%
------------------------------
3. Vodafone AirTouch 1.9%
------------------------------
4. General Electric 1.8%
------------------------------
5. Oracle 1.8%
------------------------------
Portfolio holdings 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 maintain the same portfolio holdings in the future.
SOLD
We sold several of the Fund's larger positions in consumer and technology
stocks, including Kellogg and Lucent. These companies' operations were
performing below our expectations so we reallocated these positions to companies
with better longer-term prospects.
3
<PAGE>
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Performance Information
--------------------------------------------------------------------------------
Average Annual Total Returns as of 4/30/00
<TABLE>
<CAPTION>
Share Class A B C
Inception Date 9/19/94 9/19/94 9/19/94
----------------------------------------------------------------------------------------------
Without With Without With Without With
Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Six months 3.63% (1.29)% 3.19% (1.39)% 3.25% 2.33%
(Cumulative)
----------------------------------------------------------------------------------------------
1 year 2.21 (2.65) 1.40 (3.04) 1.46 0.57
----------------------------------------------------------------------------------------------
5 years 13.56 12.46 12.96 12.71 12.97 12.97
----------------------------------------------------------------------------------------------
Life of Fund 12.93 11.95 12.36 12.25 12.36 12.36
----------------------------------------------------------------------------------------------
</TABLE>
Average Annual Total Returns as of 3/31/00
<TABLE>
<CAPTION>
Share Class A B C
----------------------------------------------------------------------------------------------
Without With Without With Without With
Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Six months 9.51% 4.31% 9.12% 4.28% 9.18% 8.21%
(Cumulative)
----------------------------------------------------------------------------------------------
1 year 7.50 2.39 6.67 2.00 6.72 5.79
----------------------------------------------------------------------------------------------
5 years 14.72 13.60 14.15 13.91 14.16 14.16
----------------------------------------------------------------------------------------------
Life of Fund 13.75 12.75 13.18 13.08 13.18 13.18
----------------------------------------------------------------------------------------------
</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. The "with sales charge" returns include
the maximum 4.75% sales charge for Class A shares, the appropriate Class B
contingent deferred sales charge for the holding period after purchase as
follows: through first year - 5%, second year - 4%, third year - 3%, fourth year
- 3%, fifth year - 2%, sixth year - 1%, thereafter - 0% and the Class C
contingent deferred sales charge of 1% for the first year only. Performance
results reflect any voluntary waivers or reimbursement of Fund expenses by the
Advisor or its affiliates. Absent these waivers or reimbursement arrangement,
performance results would have been lower.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
4
<PAGE>
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Investment Portfolio
--------------------------------------------------------------------------------
April 30, 2000 (Unaudited)
(In thousands)
Common Stocks - 60.8% COUNTRY SHARES VALUE
--------------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 8.7%
Depository Institutions - 2.7%
Banco Bilbao Vizcaya Argentaria S.A. Sp 70 $ 949
Bayerische HypoVereinsbank G 10 620
Chase Manhattan Corp. 14 1,009
First Union Corp. (a) (a)
Royal Bank of Scotland Group PLC UK 47 708
The Bank of Tokyo Mitsubishi Ja 46 593
Wells Fargo & Co. 7 288
--------
4,167
--------
Financial Services - 0.3%
The Goldman Sachs Group, Inc. 5 466
--------
Holding & Other Investment Offices - 0.4%
Zurich Allied AG Sz 1 628
--------
Insurance Agents & Brokers - 0.5%
Marsh & McLennan Companies, Inc. 8 789
--------
Insurance Carriers - 2.8%
Ace, Ltd. 20 479
American International Group, Inc. 17 1,865
AGF (Assurances Genetales
de France) (b) Fr (a) (a)
Citigroup, Inc. 35 2,080
--------
4,424
--------
Investment Companies - 1.0%
World Equity Benchmark Share - Japan 100 1,525
--------
Nondepository Credit Institutions - 1.1%
Associates First Capital Corp. 25 555
Capital One Financial Corp. 13 569
Freddie Mac 12 551
--------
1,675
--------
--------------------------------------------------------------------------------
MANUFACTURING - 26.8%
Chemicals & Allied Products - 5.1%
Amgen, Inc. (b) 9 504
Aventis S.A. Fr 15 817
Bristol-Myers Squibb Co. 17 892
E.I. du Pont de Nemours & Co. 13 616
Merck & Co., Inc. 19 1,307
Pharmacia & Upjohn, Inc. 18 891
Procter & Gamble Co. 10 596
Schering-Plough Corp. 28 1,129
Warner-Lambert Co. 11 1,252
--------
8,004
--------
Communications Equipment - 3.6%
360networks, Inc. (b) 24 365
Philips Electronics NV (b) Ne 45 2,005
Sony Corp. Ja 16 1,842
Telefonakteibolaget LM Ericsson 16 1,415
--------
5,627
--------
Electrical Industrial Equipment - 1.9%
General Electric Co. (b) 18 2,893
--------
Electronic & Electrical Equipment - 0.1%
UTStarcom, Inc. (b) 4 166
--------
Electronic Components - 1.4%
Intel Corp. 17 2,156
--------
Food & Kindred Products - 1.0%
Nestle AG Registered Sz 618
PepsiCo, Inc. 24 881
--------
1,499
--------
Lumber & Wood Products - 0.3%
Georgia Pacific Corp. 14 515
--------
Machinery & Computer Equipment - 6.7%
Caterpillar, Inc. 14 552
Cisco Systems, Inc. (b) 55 3,813
EMC Corp. (b) 14 1,945
Hewlett-Packard Co. 11 1,485
International Business Machines Corp. 14 1,518
Oerlikon-Buehrle Holding AG Sz 5 1,099
--------
10,412
--------
Measuring & Analyzing Instruments - 1.1%
JDS Uniphase Corp. (b) 4 415
Medtronic, Inc. 9 467
Teradyne, Inc. (b) 7 770
--------
1,652
--------
Miscellaneous Manufacturing - 0.7%
Tyco International Ltd. 25 1,148
--------
Office Machines - 0.5%
Pitney Bowes, Inc. 20 818
--------
Petroleum Refining - 1.8%
BP Amoco PLC ADR 17 867
Exxon Mobil Corp. 19 1,476
Texaco, Inc. 10 495
--------
2,838
--------
Primary Metal - 0.7%
Alcoa, Inc. 10 649
Nucor Corp. 10 430
--------
1,079
--------
Rubber & Plastic - 0.4%
Illinois Tool Works, Inc. 9 580
--------
Stone, Clay, Glass & Concrete - 0.6%
Corning, Inc. 5 988
--------
Transportation Equipment - 0.9%
Ford Motor Co. 14 766
United Technologies Corp. 10 622
--------
1,388
--------
--------------------------------------------------------------------------------
MINING & ENERGY - 2.2%
Crude Petroleum & Natural Gas - 0.3%
Conoco, Inc. Class B 17 419
--------
Oil & Gas Field Services - 0.3%
PetroChina Co., Ltd. ADR (b) 34 510
--------
Oil & Gas Field Services - 1.6%
Enron Corp. 20 1,394
Schlumberger Ltd. 15 1,148
--------
2,542
--------
--------------------------------------------------------------------------------
RETAIL TRADE - 3.9%
Apparel & Accessory Stores - 0.4%
Kohl's Corp. (b) 14 672
--------
See notes to investment portfolio.
5
<PAGE>
--------------------------------------------------------------------------------
Investment Portfolio (continued)
--------------------------------------------------------------------------------
April 30, 2000 (Unaudited)
(In thousands)
Common Stocks (continued) COUNTRY SHARES VALUE
--------------------------------------------------------------------------------
RETAIL TRADE (continued)
Building, Hardware & Garden Supply - 0.9%
Home Depot, Inc. 25 $ 1,402
--------
Food Stores - 0.8%
Safeway, Inc. (b) 28 1,236
--------
General Merchandise Stores - 1.3%
Wal-Mart Stores, Inc. 36 1,994
--------
Restaurants - 0.5%
McDonald's Corp. 22 839
--------
--------------------------------------------------------------------------------
SERVICES - 6.5%
Business Services - 1.8%
Concord EFS, Inc. (b) 20 448
Sun Microsystems, Inc. (b) 22 2,023
Young & Rubicam, Inc. 7 390
--------
2,861
--------
Computer Related Services - 0.5%
Crayfish Co., Ltd. ADR (b) 11 164
Network Appliance, Inc. (b) 7 518
--------
682
--------
Computer Software - 4.0%
Affiliated Computer Services, Inc., Class A (b) 17 563
Microsoft Corp. (b) 28 1,953
Oracle Corp. 35 2,798
SunGard Data Systems, Inc. (b) 20 691
Sycamore Networks, Inc. (b) 3 236
--------
6,241
--------
Engineering, Accounting,
Research & Management - 0.2%
Genentech, Inc. (b) 3 351
--------
--------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS & SANITARY SERVICES - 12.5%
Broadcasting - 0.7%
Clear Channel Communications, Inc. (b) 6 432
Infineon Technologies AG ADR (b) 9 631
--------
1,063
--------
Communications - 2.4%
GT Group Telecom, Inc. Class B (b) 8 104
Infonet Services Corp. Class B (b) 18 304
Viacom, Inc. Class A (b) 7 384
Vodafone AirTouch PLC UK 652 2,976
--------
3,768
--------
Electric Services - 1.0%
AES Corp. (b) 9 809
Texas Utilities Corp. 10 337
Unicom Corp. 10 398
--------
1,544
--------
Gas Services - 0.8%
Kinder Morgan, Inc. 30 894
Nicor, Inc. 10 339
--------
1,233
--------
Telecommunication - 7.6%
AT&T Corp. 20 934
AT&T Wireless Group (b) 14 449
Bell Atlantic Corp. 20 1,185
Charter Communications, Inc. (b) 28 411
Comcast Corp. Special Class A 17 681
Worldcom, Inc. (b) 31 1,409
Nippon Telegraph & Telephone Corp. Ja 966
Oyj Nokia AB, Class A (b) Fi 76 4,365
SBC Communications, Inc., Class A 21 920
Williams Communications Group, Inc. (b) 14 518
--------
11,838
--------
--------------------------------------------------------------------------------
WHOLESALE TRADE - 0.2%
Durable Goods
Softbank Corp. Ja 2 369
--------
TOTAL COMMON STOCKS
(cost of $71,834) 95,001
--------
Preferred Stocks - 0.1%
--------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS & SANITARY SERVICES - 0.1%
Broadcasting - 0.0%
Granite Broadcasting Corp.
12.750% PIK 29
PriMedia Inc. 9.200% 46
--------
74
--------
Cable - 0.1%
CSC Holdings Ltd.,
11.125% PIK, Series M 117
--------
Communications - 0.0%
Dobson Communication Corp.
12.250% PIK 21
--------
TOTAL PREFERRED STOCKS
(cost of $202) 212
--------
Warrants - 0.0%
--------------------------------------------------------------------------------
RETAIL TRADE - 0.0%
Food Stores
Ono Finance, PLC 8
--------
SERVICES - 0.0%
--------------------------------------------------------------------------------
Health Services
AirGate PCS, Inc. 5
--------
--------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS & SANITARY SERVICES - 0.0%
Telecommunication
Carrier 1 International (b) 9
--------
TOTAL WARRANTS
(cost of $7) 22
--------
Bonds & Notes - 34.4% PAR
--------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - 13.8%
Construction - 0.0%
Atrium Companies, Inc.,
10.500% 05/01/09 $ 50 47
--------
See notes to investment portfolio.
6
<PAGE>
--------------------------------------------------------------------------------
Investment Portfolio (continued)
--------------------------------------------------------------------------------
Bonds & Notes (continued) PAR VALUE
--------------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 4.9%
Depository Institutions - 1.3%
ABN Amro Bank NV (Chicago)
6.625% 10/31/01 $1,000 $ 979
Citicorp,
8.040% 12/15/19 (c) 1,050 1,057
Sovereign Bancorp, Inc.,
10.500% 11/15/06 50 49
--------
2,085
--------
Financial Services - 0.2%
PDVSA Finance Ltd., Series 1999 I,
9.750% 02/15/10 370 358
--------
Insurance Carriers - 1.2%
Florida Windstorm Underwriting Association:
6.500% 08/25/02 (c) 350 337
7.125% 02/25/19 (c) 950 869
Transamerica Finance Corp.,
6.125% 11/01/01 750 735
--------
1,941
--------
Nondepository Credit Institutions - 2.2%
Associates Corp. of North America,
5.875% 07/15/02 1,000 965
Ford Motor Credit Co.,
7.250% 01/15/03 750 742
Household Finance Corp.,
5.875% 11/01/02 1,000 961
National Rural Utilities Cooperative
Finance Corp.,
6.000% 01/15/04 750 712
--------
3,380
--------
--------------------------------------------------------------------------------
MANUFACTURING - 3.6%
Chemicals & Allied Products - 0.9%
Agricultural Minerals Co., L.P.,
10.750% 09/30/03 40 30
Allied Waste North America, Inc.,
10.000% 08/01/09 100 69
Bio-Rad Laboratories, Inc.,
11.625% 02/15/07 (c) 50 51
Hanson Overseas BV,
6.750% 09/15/05 850 808
Huntsman ICI Holdings L.L.C.,
(d) 12/31/09 180 57
HydroChem Industrial Services, Inc.,
10.375% 08/01/07 25 19
Lyondell Chemical Co.:
9.625% 05/01/07 50 50
10.875% 05/01/09 50 50
PCI Chemicals Canada, Inc.,
9.250% 10/15/07 45 36
Sterling Chemicals, Inc.,
11.250% 04/01/07 100 85
Terra Industries, Inc.,
10.500% 06/15/05 50 38
Texas Petrochemical Corp.,
11.125% 07/01/06 50 41
Trans Resources, Inc.,
10.750% 03/15/08 50 27
--------
1,361
--------
Electronic & Electrical Equipment - 0.1%
Gentek, Inc.,
11.000% 08/01/09 50 50
TransDigm, Inc.,
10.375% 12/01/08 50 40
--------
90
--------
Fabricated Metal - 0.1%
Earle M. Jorgensen & Co.,
9.500% 04/01/05 50 46
Euramax International, PLC,
11.250% 10/01/06 100 101
US Can Corp.,
10.125% 10/15/06 50 53
--------
200
--------
Food & Kindred Products - 0.1%
Chattem, Inc.,
8.875% 04/01/08 100 86
Premier International Foods, PLC,
12.000% 09/01/09 (c) 100 95
--------
181
--------
Machinery & Computer Equipment - 0.1%
IMO Industries, Inc.,
11.750% 05/01/06 50 50
--------
Measuring & Analyzing Instruments - 0.0%
Envirosource, Inc.,
9.750% 06/15/03 50 33
--------
Miscellaneous Manufacturing - 0.7%
Blount, Inc.,
13.000% 08/01/09 60 60
Koppers Industries, Inc.,
9.875% 12/01/07 50 46
Owens-Illinois, Inc.,
7.500% 05/15/10 100 88
Raytheon Co.,
6.750% 08/15/07 800 728
Terex Corp.,
8.875% 04/01/08 50 44
Tokheim Corp.,
11.375% 08/01/08 35 11
United Industries, Inc.,
9.875% 04/01/09 50 38
Werner Holding Co.,
10.000% 11/15/07 50 47
--------
1,062
--------
Paper Products - 0.3%
Gaylord Container Corp.,
9.750% 06/15/07 200 177
Georgia Gulf Corp.,
10.375% 11/01/07 30 31
Repap New Brunswick, Inc.,
10.625% 04/15/05 50 47
Riverwood International Corp.,
10.875% 04/01/08 100 95
See notes to investment portfolio.
7
<PAGE>
--------------------------------------------------------------------------------
Investment Portfolio (continued)
--------------------------------------------------------------------------------
April 30, 2000 (Unaudited)
(In thousands)
Bonds & Notes (continued) PAR VALUE
--------------------------------------------------------------------------------
MANUFACTURING (continued)
Stone Container Corp.,
10.750% 10/01/02 $ 50 $ 51
--------
400
--------
Petroleum Refining - 0.7%
Benton Oil & Gas Co.:
9.375% 11/01/07 50 30
11.625% 05/01/03 15 10
USX Corp.,
6.850% 03/01/08 1,200 1,105
--------
1,145
--------
Primary Metal - 0.2%
AK Steel Corp.,
7.875% 02/15/09 50 46
Algoma Steel, Inc.,
12.375% 07/15/05 50 49
Bayou Steel Corp.,
9.500% 05/15/08 50 46
Kaiser Aluminum & Chemical Corp.,
10.875% 10/15/06 50 48
Keystone Consolidated Industries, Inc.,
9.625% 08/01/07 50 43
Renco Metals, Inc.,
11.500% 07/01/03 50 24
WCI Steel Inc.,
10.000% 12/01/04 75 74
--------
330
--------
Printing & Publishing - 0.0%
American Lawyer Media, Inc.,
9.750% 12/15/07 45 42
--------
Textile Mill Products - 0.0%
Collins & Aikman Products Co.,
10.000% 01/15/07 50 49
--------
Transportation Equipment - 0.4%
Collins & Aikman Products Co.,
11.500% 04/15/06 50 49
Dura Operating Corp.,
9.000% 05/01/09 50 45
General Motors Corp.,
9.125% 07/15/01 500 510
LDM Technologies, Inc.,
10.750% 01/15/07 50 37
--------
641
--------
--------------------------------------------------------------------------------
MINING & ENERGY - 0.3%
Coal Mining - 0.0%
AEI Resources, Inc.,
10.500% 12/15/05 (c) 50 10
--------
Oil & Gas Extraction - 0.3%
HS Resources, Inc.,
9.250% 11/15/06 75 73
Magnum Hunter Resources, Inc.,
10.000% 06/01/07 100 90
Mariner Energy, Inc.,
10.500% 08/01/06 100 92
Ocean Energy, Inc.,
8.875% 07/15/07 50 49
Vintage Petroleum, Inc.,
9.750% 06/30/09 100 101
--------
405
--------
Oil & Gas Field Services - 0.0%
RBF Finance Co.,
11.000% 03/15/06 50 53
--------
--------------------------------------------------------------------------------
RETAIL TRADE - 1.0%
Food Stores - 0.0%
Pathmark Stores, Inc.,
9.625% 05/01/03 50 36
--------
General Merchandise Stores - 1.0%
Dayton Hudson Co.,
6.400% 02/15/03 750 729
Wal-Mart Stores, Inc.,
6.750% 10/15/23 850 782
--------
1,511
--------
--------------------------------------------------------------------------------
SERVICES - 0.4%
Amusement & Recreation - 0.3%
Coast Hotels & Casinos, Inc.,
9.500% 04/01/09 80 75
Hollywood Casino Corp.,
11.250% 05/01/07 75 76
Hollywood Park, Inc.,
9.500% 08/01/07 25 25
Horseshoe Gaming, L.L.C.,
9.375% 06/15/07 75 73
Mohegan Tribal Gaming Authority,
8.750% 01/01/09 150 143
Regal Cinemas, Inc.,
9.500% 06/01/08 100 41
--------
433
--------
Health Services - 0.0%
Tenet Healthcare Corp.,
8.625% 01/15/07 25 24
--------
Hotels, Camps & Lodging - 0.1%
CapRock Communications Corp.,
11.500% 05/01/09 75 71
Eldorado Resorts L.L.C.,
10.500% 08/15/06 50 49
--------
120
--------
Other Services - 0.0%
Intertek Finance, PLC,
10.250% 11/01/06 (e) 50 42
--------
--------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS & SANITARY SERVICES - 3.6%
Air Transportation - 0.0%
U.S. Airways, Inc.,
10.375% 03/01/13 50 42
--------
Broadcasting - 0.2%
Allbritton Communications Co.,
9.750% 11/30/07 100 96
See notes to investment portfolio.
8
<PAGE>
--------------------------------------------------------------------------------
Investment Portfolio (continued)
--------------------------------------------------------------------------------
Bonds & Notes (continued) PAR VALUE
--------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS & SANITARY SERVICES (continued)
Cumulua Media, Inc.,
10.375% 07/01/08 $ 25 $ 23
--------
Fox Family Worldwide, Inc.,
9.250% 11/01/07 100 89
LIN Holding Corp.,
stepped coupon, (d) (10.000% 03/01/03)
03/01/08 100 60
Sinclair Broadcast Group, Inc.,
9.000% 07/15/07 75 67
--------
335
--------
Cable - 0.7%
Adelphia Communications Corp.:
8.375% 02/01/08 200 179
9.875% 03/01/07 100 98
Charter Communications Holdings, L.L.C.,
stepped coupon, (d) (9.920% 04/01/04)
04/01/11 200 110
Diamond Cable Co.,
stepped coupon, (d) (10.750% 02/15/02)
02/15/07 100 76
EchoStar DBS Corp.,
9.250% 02/01/06 150 145
FrontierVision Holdings L.P.,
stepped coupon, (d) (11.875% 09/15/01)
09/15/07 100 87
NTL, Inc.,
stepped coupon, (d) (9.750% 04/15/04)
04/15/09 (e) 200 176
Northland Cable Television, Inc.,
10.250% 11/15/07 65 62
Telewest Communication PLC,
stepped coupon, (d) (11.000% 10/01/00)
10/01/07 100 94
--------
1,027
--------
Communications - 0.2%
Call-Net Enterprises, Inc.,
stepped coupon, (d) (10.800% 05/15/04)
05/15/09 100 37
Centennial Cellular Corp.,
10.750% 12/15/08 50 50
Exodus Communications, Inc.,
10.750% 12/15/09 (c) 25 25
Spectrasite Holdings, Inc.:
stepped coupon, (d) (11.250% 04/15/04)
04/15/09 100 55
10.750% 03/15/10 (c) 10 10
United Pan-Europe Communications N.V.,
11.500% 02/01/10 (c) 75 70
Verio, Inc.,
11.250% 12/01/08 100 99
--------
346
--------
Electric Services - 0.8%
Israel Electric Corp., Ltd.,
7.750% 03/01/09 (c) 1,000 955
COUNTRY PAR VALUE
--------------------------------------------------------------------------------
Tenet Healthcare Corp.,
8.125% 12/01/08 100 93
AES Corp.,
9.500% 06/01/09 100 98
--------
1,146
--------
Motor Freight & Warehousing - 0.0%
MTL, Inc.,
10.000% 06/15/06 25 19
--------
Telecommunications - 1.7%
AirGate PCS, Inc.,
stepped coupon, (d) (13.500% 10/01/04)
10/01/09 40 23
Carrier 1 International,
13.250% 02/15/09 50 50
Clearnet Communications, Inc.,
stepped coupon, (d) (14.750% 12/15/00)
12/15/05 50 50
Covad Communications Group, Inc.,
12.000% 02/15/10 (c) 25 24
Crown Castle International Corp.,
stepped coupon, (d) (10.375% 05/15/09)
05/15/11 175 103
Flag Telecom Holdings Ltd.,
11.625% 03/30/10 (c) 50 46
Global Crossing, Inc.,
9.125% 11/15/06 60 58
Hyperion Telecommunications, Inc.,
stepped coupon, (d) (13.000% 04/15/01)
04/15/03 50 46
Jazztel PLC, KB
13.250% 12/15/09 25 23
Level 3 Communications, Inc.:
9.125% 05/01/08 50 44
11.000% 03/15/08 30 29
McLeod USA, Inc.,
stepped coupon, (d) (10.500% 03/01/02)
03/01/07 100 80
Metromedia Fiber Network, Inc.,
10.000% 11/15/08 100 96
Nextlink Communications, Inc.,
10.750% 06/01/09 100 99
Nextel Communications, Inc.:
9.375% 11/15/09 100 95
stepped coupon, (d) (9.750% 10/31/02)
01/31/07 100 72
Nextel International, Inc.,
stepped coupon, (d) (12.125% 04/15/03)
04/15/08 25 16
Nextel Partners, Inc.,
11.000% 03/15/10 (c) 50 49
Ono Finance PLC,
13.000% 05/01/09 50 50
RCN Corp.,
stepped coupon, (d) (11.125% 10/15/02)
10/15/07 100 63
Rogers Cantel, Inc.,
9.750% 06/01/16 100 107
See notes to investment portfolio.
9
<PAGE>
--------------------------------------------------------------------------------
Investment Portfolio (continued)
--------------------------------------------------------------------------------
April 30, 2000 (Unaudited)
(In thousands)
Bonds & Notes (Continued) PAR VALUE
--------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS & SANITARY SERVICES (continued)
Sprint Spectrum L.P.,
stepped coupon, (d) (12.500% 08/15/01)
08/15/06 $ 100 $ 94
TeleCorp PCS, Inc.,
stepped coupon, (d) (11.625% 04/15/04)
04/15/09 100 65
Viatel, Inc.,
11.500% 03/15/09 500 46
Williams Communications Group, Inc.,
10.875% 10/01/09 75 76
WinStar Equipment Corp.,
12.500% 04/15/08 (c) 50 49
WorldCom, Inc.,
6.125% 08/15/01 1,000 986
Worldwide Fiber, Inc.,
12.000% 08/01/09 75 69
XM Satellite Radio Holdings, Inc.,
14.000% 03/15/10 (c) 50 45
--------
2,653
--------
Water Transportation - 0.0%
Azurix Corp.,
10.750% 02/15/10 (c) 25 25
--------
TOTAL CORPORATE FIXED-INCOME
BONDS & NOTES
(cost $24,069) 21,622
--------
CURRENCY PAR VALUE
--------------------------------------------------------------------------------
FOREIGN GOVERNMENT & AGENCY
OBLIGATIONS - 4.6%
Buoni Poliennali Del Tes,
7.750% 11/01/06 EU 287 295
Government of France,
6.750% 10/25/04 EU 197 192
Government of New Zealand,
8.000% 11/15/06 NZ 500 255
Government of Poland,
8.500% 10/12/04 (f) Po 480 89
Hellenic Republic,
8.900% 03/21/04 GD 170,300 507
Kingdom of Norway:
6.750% 01/15/07 NK 2,360 270
9.500% 10/31/02 NK 4,050 482
Kingdon of Sweden,
6.000% 02/09/05 SK 1,800 207
Queensland Treasury,
8.000% 09/14/07 A$ 265 165
Republic of Argentina:
11.250% 04/10/06 (g) DM 200 100
11.375% 01/30/17 (h) 826 787
Republic of Brazil:
10.125% 05/15/27 (i) 515 399
12.750% 01/15/20 (i) 250 238
14.500% 10/15/09 (i) 245 259
Republic of Bulgaria,
6.500% 07/28/11 (j) 250 189
Republic of Colombia:
9.750% 04/23/09 (k) 149 118
11.750% 02/25/20 (k) 70 60
Republic of South Africa,
9.125% 05/19/09 (l) 100 96
Republic of Turkey:
11.875% 11/05/04 (m) 185 194
12.375% 06/15/09 (m) 185 199
Republic of Venezuela,
9.250% 09/15/27 (n) 550 351
Russian Federation,
11.000% 07/24/18 (o) 645 461
United Kingdom Treasury,
10.000% 09/08/03 KB 300 521
United Mexican States:
9.875% 02/01/10 660 680
10.375% 01/29/03 (p) DM 200 101
--------
TOTAL FOREIGN GOVERNMENT
& AGENCY OBLIGATIONS
(cost $7,378) 7,215
--------
--------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 15.6%
Government Agencies - 8.9%
Federal Home Loan Mortgage Corp.:
6.500% 2014-2030 5,897 5,564
7.000% 2009-2030 2,299 2,202
8.000% 07/01/20 453 452
--------
8,218
--------
Federal National Mortgage Association:
5.125% 02/13/04 1,250 1,164
6.625% 09/15/09 1,600 1,525
7.125% 02/15/05 1,050 1,046
--------
3,735
--------
Government National Mortgage Association:
6.000% 01/15/29 2,243 2,038
--------
Government Obligations - 6.6%
U.S. Treasury Bonds:
8.125% 08/15/19 800 961
8.750% 05/15/17 2,725 3,406
11.625% 11/15/04 1,572 1,873
12.000% 08/15/13 1,323 1,768
--------
8,009
--------
U.S. Treasury Notes,
11.875% 11/15/03 2,000 2,321
--------
TOTAL U.S. GOVERNMENT
& AGENCY OBLIGATIONS
(cost $22,979) 24,321
--------
See notes to investment portfolio.
10
<PAGE>
--------------------------------------------------------------------------------
Investment Portfolio (continued)
--------------------------------------------------------------------------------
Bonds & Notes (Continued) PAR VALUE
--------------------------------------------------------------------------------
ASSET-BACKED SECURITIES - 0.4%
JP Morgan Commerical Mortgage Finance Corp.,
Series 1999 C8, Class A2,
7.400% 07/15/31 $ 700 $ 685
--------
TOTAL ASSET-BACKED
SECURITIES
(cost of $686) 685
--------
TOTAL BONDS & NOTES
(cost $55,112) 53,843
--------
TOTAL INVESTMENTS
(cost $127,155) (q) 149,078
--------
Short-Term Obligations - 3.1%
--------------------------------------------------------------------------------
Repurchase agreement with SBC Warburg Ltd.,
dated 04/28/00, due 05/01/00 at 5.710%,
collaterized by U.S. Treasury notes with various
maturities to 2025, market value $4,803
(repurchase proceeds $4,805) 4,803 4,803
FORWARD CURRENCY CONTRACTS - 0.0% 39
--------
OTHER ASSETS & LIABILITIES - 1.6% 2,471
--------
NET ASSETS - 100% $156,391
========
Notes to Investment Portfolio:
--------------------------------------------------------------------------------
(a) Rounds to less than one.
(b) Non-income producing.
(c) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At April 30,
2000 the value of these securities amounted to $3,717 or 2.4% of net
assets.
(d) Currently zero coupon. Shown parenthetically is the interest rate to be
paid and the date the Fund will begin accruing this rate.
(e) This is a British security. Par amount is stated in U.S. dollars.
(f) This is an Polish security. Par amount is stated in U.S. dollars.
(g) This is a Argentinean security. Par amount is stated in German
Deutschmarks.
(h) This is a Argentinean security. Par amount is stated in U.S. dollars.
(i) This is a Brazilian security. Par amount is stated in U.S. dollars.
(j) This is a Bulgarian security. Par amount is stated in U.S. dollars.
(k) This is a Colombian security. Par amount is stated in U.S. dollars.
(l) This is a South African security. Par amount is stated in U.S. dollars.
(m) This is a Turkish security. Par amount is stated in U.S. dollars.
(n) This is a Venezuelan security. Par amount is stated in U.S. dollars.
(o) This is a Russian security. Par amount is stated in U.S. dollars.
(p) This is a Mexican security. Par amount is stated in German Deutschmarks.
(q) Cost for federal income tax purposes is the same.
(r) As of April 30, 2000, the Fund had entered into the following portfolio
hedges:
Net Unrealized
Appreciation
Contracts In Exchange Settlement (Depreciation)
to Deliver For Date (US$)
----------------------------------------------------------------
EU 309 US$ 281 05/08/00 18
EU 309 US$ 281 06/26/00 9
EU 26 US$ 23 06/16/00 1
KB 173 US$ 269 05/08/00 6
NO 3,497 US$ 391 07/26/00 11
NZ 993 US$ 483 06/09/00 (3)
SK 1,700 US$ 191 06/30/00 1
---------
$ 43
---------
Net Unrealized
Appreciation
Contracts In Exchange Settlement (Depreciation)
to Receive For Date (US$)
----------------------------------------------------------------
NZ 503 US$ 245 06/06/00 $ (4)
---------
Summary of Securities
by Country/Currency Country/Currency Value % of Total
------------------------------------------------------------------------------
United States $123,163 82.6
Finland Fi/Eu 4,365 2.9
United Kingdom UK/KB 4,228 2.8
Japan Ja 3,401 2.3
Switzerland Sz 2,345 1.6
Netherlands Ne/Eu 2,005 1.4
France Fr/Eu 1,009 0.7
Spain Sp/Eu 949 0.6
Brazil Bz 896 0.6
Argentina Ar 887 0.6
Germany G/DM 821 0.6
Norway No/NK 752 0.5
Mexico Mx 680 0.5
Greece Gr/GD 507 0.3
Poland Po 480 0.3
Russia Ru 461 0.3
Turkey Tu 393 0.3
Venezuela Ve 351 0.2
Italy It/Eu 295 0.2
New Zealand NZ 255 0.2
Sweden Sw/SK 207 0.1
Bulgaria Bu 189 0.1
Panama Pa 178 0.1
Australia Au/A$ 165 0.1
South Africa SR/SA 96 0.1
-------- -----
$149,078 100.0
======== =====
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
Name Acronym
---- -------
A$ Australian Dollars
ADR American Depositary Receipt
Eu Euro
GD Greek Drachmas
KB British Pounds
NK Norwegian Krone
PIK Payment-In-Kind
SK Swedish Krona
See notes to investment portfolio.
11
<PAGE>
--------------------------------------------------------------------------------
Statement of Assets & Liabilities
--------------------------------------------------------------------------------
April 30, 2000 (Unaudited)
(In thousands except for per share amounts and footnotes)
Assets
Investments at value (cost $127,155) $ 149,078
Short-term obligations 4,803
---------
153,881
Cash $ 8
Unrealized appreciation on forward
currency contracts 43
Receivable for:
Investments sold 3,714
Interest 1,152
Fund shares sold 128
Dividends 87
Foreign tax reclaims 23
Other 153 5,308
--------- ---------
Total Assets 159,189
Liabilities
Unrealized depreciation on forward
currency contracts 4
Payable for:
Investments purchased 1,894
Fund shares repurchased 604
Accrued:
Management fee 92
Service fee 35
Transfer agent fee 61
Bookkeeping fee 5
Deferred Trustees fees 3
Other 100
---------
Total Liabilities 2,798
---------
Net Assets $ 156,391
=========
Net asset value & redemption price per share -
Class A ($49,728/3,533) $ 14.08 (a)
=========
Maximum offering price per share -
Class A ($14.08/0.9525) $ 14.78 (b)
=========
Net asset value & offering price per share -
Class B ($99,300/7,071) $ 14.04 (a)
=========
Net asset value & offering price per share -
Class C ($7,363/523) $ 14.07 (a)
=========
Composition of Net Assets
Capital paid in $ 142,746
Undistributed net investment income 660
Accumulated net realized loss (8,962)
Net unrealized appreciation on:
Investments 21,923
Foreign currency transactions 24
---------
$ 156,391
=========
(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, 2000 (Unaudited)
(In thousands)
Investment Income
Interest $ 2,945
Dividends 543
---------
Total Investment Income (net of nonreclaimable
foreign taxes withheld at source which
amounted to $17) 3,488
Expenses
Management fee $ 584
Service fee 209
Distribution fee - Class A 26
Distribution fee - Class B 398
Distribution fee - Class C 32
Transfer agent fee 256
Bookkeeping fee 34
Trustees fee 7
Custodian fee 21
Audit fee 9
Legal fee 3
Registration fee 20
Reports to shareholders 8
Other 11
---------
1,618
Interest expense 1
---------
Total expenses 1,619
Fees waived by the Distributor - Class A (13) 1,606
--------- ---------
Net Investment Income 1,882
---------
Net Realized and Unrealized Gain (Loss)
on Portfolio Positions
Net realized gain (loss) on:
Investments (8,805)
Foreign currency transactions 10
---------
Net Realized Gain (8,795)
---------
Net change in unrealized appreciation /depreciation
during the period on:
Investments 12,519
Foreign currency transactions 63
---------
Net Change in Unrealized
Appreciation/Depreciation 12,582
---------
Net Gain 3,787
---------
Increase in Net Assets from Operations $ 5,669
=========
See notes to financial statements.
12
<PAGE>
--------------------------------------------------------------------------------
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
(In thousands)
(Unaudited)
Six months Year
ended ended
April 30, October 31,
---------- -----------
Increase (Decrease) in Net Assets 2000 1999
--------------------------------------------------------------------------------
Operations:
Net investment income $ 1,882 $ 5,111
Net realized gain (loss) (8,795) 19,872
Net change in unrealized appreciation/
depreciation 12,582 (11,605)
--------- ---------
Net Increase from Operations 5,669 13,378
Distributions:
From net investment income - Class A (786) (1,696)
From net realized gains - Class A (5,548) (2,112)
From net investment income - Class B (1,212) (2,819)
From net realized gains - Class B (11,370) (4,213)
From net investment income - Class C (98) (217)
From net realized gains - Class C (929) (328)
--------- ---------
(14,274) 1,993
--------- ---------
Fund Share Transactions:
Receipts for shares sold - Class A 1,671 7,542
Value of distributions reinvested - Class A 5,986 3,596
Cost of shares repurchased - Class A (7,879) (11,089)
--------- ---------
(222) 49
--------- ---------
Receipts for shares sold - Class B 5,345 26,884
Value of distributions reinvested - Class B 11,779 6,630
Cost of shares repurchased - Class B (20,945) (28,019)
--------- ---------
(3,821) 5,495
--------- ---------
Receipts for shares sold - Class C 498 2,530
Value of distributions reinvested - Class C 982 508
Cost of shares repurchased - Class C (2,492) (2,275)
--------- ---------
(1,012) 763
--------- ---------
Net Increase (Decrease) from Fund
Share Transactions (5,055) 6,307
--------- ---------
Total Increase (Decrease) (19,329) 8,300
Net Assets
Beginning of period 175,720 167,420
--------- ---------
End of period (including undistributed
net investment income of $660 and
$874, respectively) $ 156,391 $ 175,720
========= =========
Number of Fund Shares
Sold - Class A 117 486
Issued for distributions reinvested - Class A 429 235
Repurchased - Class A (553) (716)
--------- ---------
(7) 5
--------- ---------
Sold - Class B 374 1,735
Issued for distributions reinvested - Class B 845 433
Repurchased - Class B (1,470) (1,814)
--------- ---------
(251) 354
--------- ---------
Sold - Class C 35 163
Issued for distributions reinvested - Class C 70 33
Repurchased - Class C (176) (147)
--------- ---------
(71) 49
--------- ---------
See notes to financial statements.
13
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements
--------------------------------------------------------------------------------
April 30, 2000 (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, 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, 2000, and the results of its
operations, the changes in its net assets and the financial highlights for the
six months then ended.
Note 2. Accounting Policies
Organization
The Fund is a diversified portfolio of a Massachusetts business trust,
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The Fund's investment objective is to seek
current income and long term growth, consistent with prudent risk, by
diversifying investments primarily in U.S. and foreign equity and debt
securities. The Fund may issue an unlimited number of shares. The Fund offers
three classes of shares: Class A, Class B and Class C. Class A shares are sold
with a front-end sales charge and an annual distribution fee. A 1.00% contingent
deferred sales charge is assessed 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. Effective
February 1, 2000, Class B shares will convert to Class A shares as follows:
Converts to
Original purchase Class A shares
-------------------- ------------------
Less than $250,000 8 years
$250,000 to less than $500,000 4 years
$500,000 to less than $1,000,000 3 years
Class C shares are subject to an annual distribution fee and 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.
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.
The per share data was calculated using average shares outstanding during the
period. In addition, net investment income per share data reflects the
distribution fee applicable to each class.
Class A, Class B and Class C ratios are calculated by adjusting the expense and
net investment income ratios for the Fund for the entire period by the
distribution fee applicable to Class A, Class B and Class C shares.
Federal income taxes
Consistent with the Fund's policy to qualify as a regulated investment company
and to distribute all of its taxable income, no federal income tax has been
accrued.
Interest income, debt discount and premium
Interest income is recorded on the accrual basis. Original issue discount is
accreted to interest income over the life of a security with a corresponding
increase in the cost basis; premium and market discount are not amortized or
accreted.
The value of additional securities received as an interest payment is recorded
as income and as the cost basis of such securities.
Distributions to shareholders
Distributions to shareholders are recorded on the ex-date.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforwards) under income tax regulations.
14
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
April 30, 2000 (Unaudited)
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 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 0.70% 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
Liberty Funds Services, Inc. (the Transfer Agent), an affiliate of the
Administrator, 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 January 1, 2000, the Transfer Agent fee was changed to a fee comprised
of 0.07% annually of average net assets plus charges based on the number of
shareholder accounts and transactions.
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, 2000,
the Fund has been advised that the Distributor retained net underwriting
discounts of $4,121 on sales of the Fund's Class A shares and received
contingent deferred sales charges (CDSC) of $93, $249,160 and $960, 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 0.30% for Class A and 0.75% for Class B and Class C,
annually, of the average net assets attributable to Class A, Class B, and Class
C shares, respectively. Effective March 1, 1999, the plan decreased the payment
of the distribution fee to equal 0.10% annually for Class A. 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, 2000, purchases and sales of investments,
other than short-term obligations, were $99,100,605 and $118,481,428,
respectively, of which $16,737,797 and $10,644,168, respectively, were U.S.
government securities.
15
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
April 30, 2000 (Unaudited)
Unrealized appreciation (depreciation) at April 30, 2000, based on cost of
investments for both financial statement and federal income tax purposes was:
Gross unrealized appreciation $29,358,303
Gross unrealized depreciation (7,435,096)
-----------
Net unrealized appreciation $21,923,207
===========
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%. For the six months ended April 30, 2000, the Fund had taken
out one loan of $3,000,000 at an interest rate of 6.52%.
Note 6. Other Related Party Transactions
During the six months ended April 30, 2000, the Fund used Alphatrade, a wholly
owned subsidiary of Colonial Management Associates, Inc., as a broker. Total
commissions paid to Alphatrade during the year were $33,109.
16
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
(Unaudited)
Six months ended April 30, 2000
-------------------------------------------------------
Class A Class B Class C
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value - Beginning of Period $ 15.360 $ 15.330 $ 15.350
----------- ----------- -----------
Income from Investment Operations:
Net investment income (a) 0.196(b) 0.146 0.146
Net realized and unrealized gain 0.340 0.326 0.336
----------- ----------- -----------
Total from Investment Operations 0.536 0.472 0.482
----------- ----------- -----------
Less Distributions Declared to Shareholders:
From net investment income (0.224) (0.169) (0.169)
From net realized gains (1.593) (1.593) (1.593)
----------- ----------- -----------
Total Distributions Declared to Shareholders (1.817) (1.762) (1.762)
----------- ----------- -----------
Net asset value - End of period $ 14.080 $ 14.040 $ 14.070
=========== =========== ===========
Total return (c) (d) 3.63%(e) 3.19% 3.25%
=========== =========== ===========
Ratios to Average Net Assets:
Expenses (f) (g) 1.44%(b) 2.14% 2.14%
Net investment income (f) (g) 2.74%(b) 2.04% 2.04%
Portfolio turnover (d) 63% 63% 63%
Net assets at end of period (000) $ 49,728 $ 99,300 $ 7,363
</TABLE>
(a) Per share data was calculated using average shares outstanding.
(b) Net of fees waived by the Distributor which amounted to $0.004 and 0.05%
(annualized).
(c) Total return at net asset value assuming no initial sales charge or
contingent deferred sales charge.
(d) Not annualized.
(e) Had the Distributor 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.
(g) Annualized.
<TABLE>
<CAPTION>
Year ended October 31, 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) 0.504(b) 0.409 0.409
Net realized and unrealized gain 0.756 0.763 0.751
------------ ------------ ------------
Total from Investment Operations 1.260 1.172 1.160
------------ ------------ ------------
Less Distributions Declared to Shareholders:
From net investment income (0.470) (0.382) (0.380)
From net realized gains (0.600) (0.600) (0.600)
------------ ------------ ------------
Total Distributions Declared to Shareholders (1.070) (0.982) (0.980)
------------ ------------ ------------
Net asset value - End of period $ 15.360 $ 15.330 $ 15.350
============ ============ ============
Total return (c) 8.47%(d) 7.87% 7.78%
============ ============ ============
Ratios to Average Net Assets:
Expenses (e) 1.55%(b) 2.17% 2.17%
Net investment income (e) 3.26%(b) 2.64% 2.64%
Portfolio turnover 61% 61% 61%
Net assets at end of period (000) $ 54,385 $ 112,213 $ 9,122
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Net of fees waived by the Distributor which amounted to $0.005 and 0.05%
(annualized).
(c) Total return at net asset value assuming no initial sales charge or
contingent deferred sales charge.
(d) Had the Distributor 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.
17
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------
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 $ 14.450 $ 14.430 $ 14.450
--------- --------- ---------
Income from Investment Operations:
Net investment income (a) (b) 0.418 0.350 0.350
Net realized and unrealized gain 0.890 0.882 0.891
--------- --------- ---------
Total from Investment Operations 1.308 1.232 1.241
--------- --------- ---------
Less Distributions Declared to Shareholders:
From net investment income (0.440) (0.374) (0.373)
From net realized gains (0.148) (0.148) (0.148)
--------- --------- ---------
Total Distributions Declared to Shareholders (0.588) (0.522) (0.521)
Net asset value - End of period $ 15.170 $ 15.140 $ 15.170
========= ========= =========
Total return (c) (d) 9.25% 8.71% 8.76%
========= ========= =========
Ratios to Average Net Assets:
Expenses (e) 1.69% 2.14% 2.14%
Net investment income (e) 2.76% 2.31% 2.31%
Fees and expenses waived or borne by the Advisor (e) 0.01% 0.01% 0.01%
Portfolio turnover 51% 51% 5%
Net assets at end of period (000) $ 53,639 $ 105,513 $ 8,268
(a) Net of fees and expenses waived or borne by
the Advisor which amounted to: $ 0.001 $ 0.001 $ 0.001
(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>
Year ended October 31, 1997
------------------------------------
Class A Class B Class C
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value - Beginning of Period $ 12.910 $ 12.890 $ 12.910
--------- --------- ---------
Income from Investment Operations:
Net investment income (a) (c) 0.404 0.342 0.342
Net realized and unrealized gain 1.762 1.766 1.766
--------- --------- ---------
Total from Investment Operations 2.166 2.108 2.108
--------- --------- ---------
Less Distributions Declared to Shareholders:
From net investment income (0.393) (0.335) (0.335)
From net realized gains (0.233) (0.233) (0.233)
--------- --------- ---------
Total Distributions Declared to Shareholders (0.626) (0.568) (0.568)
--------- --------- ---------
Net asset value - End of period $ 14.450 $ 14.430 $ 14.450
========= ========= =========
Total return (d) (e) 17.24% 16.77% 16.75%
========= ========= =========
Ratios to Average Net Assets:
Expenses (f) 1.65% 2.10% 2.10%
Net investment income (f) 2.93% 2.48% 2.48%
Fees and expenses waived or borne by the Advisor (f) 0.09% 0.09% 0.09%
Portfolio turnover 45% 45% 45%
Net assets at end of period (000) $ 45,736 $ 77,005 $ 6,388
(a) Net of fees and expenses waived or borne by
the Advisor which amounted to: $ 0.013 $ 0.013 $ 0.013
(b) Class D shares were redesignated Class C shares on July 1, 1997.
(c) Per share data was calculated using average shares outstanding during the
period.
(d) Total return at net asset value assuming no initial sales charge or
contingent deferred sales charge.
(e) Had the 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.
</TABLE>
18
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended October 31, 1996
------------------------------------
Class A Class B Class C
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value - Beginning of Period $ 11.650 $ 11.640 $ 11.650
--------- --------- ---------
Income from Investment Operations:
Net investment income (a) (b) 0.369 0.314 0.314
Net realized and unrealized gain 1.264 1.260 1.258
--------- --------- ---------
Total from Investment Operations 1.633 1.574 1.572
--------- --------- ---------
Less Distributions Declared to Shareholders:
From net investment income (0.333) (0.284) (0.272)
From net realized gains (0.040) (0.040) (0.040)
--------- --------- ---------
Total Distributions Declared to Shareholders (0.373) (0.324) (0.312)
--------- --------- ---------
Net asset value - End of period $ 12.910 $ 12.890 $ 12.910
========= ========= =========
Total return (c) (d) 14.24% 13.71% 13.68%
========= ========= =========
Ratios to Average Net Assets:
Expenses (e) 1.65% 2.10% 2.10%
Net investment income (e) 2.99% 2.54% 2.54%
Fees and expenses waived or borne by the Advisor (e) 0.19% 0.19% 0.19%
Portfolio turnover 59% 59% 59%
Net assets at end of period (000) $ 25,580 $ 40,065 $ 3,554
(a) Net of fees and expenses waived or borne by
the Advisor which amounted to: $ 0.023 $ 0.023 $ 0.023
(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>
Year ended October 31, 1995
------------------------------------
Class A Class B Class C
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value - Beginning of Period $ 9.910 $ 9.900 $ 9.900
--------- --------- ---------
Income from Investment Operations:
Net investment income (a) (b) 0.325 0.277 0.277
Net realized and unrealized gain 1.764 1.769 1.774
--------- --------- ---------
Total from Investment Operations 2.089 2.046 2.051
--------- --------- ---------
Less Distributions Declared to Shareholders:
From net investment income (0.349) (0.306) (0.301)
Net asset value - End of period $ 11.650 $ 11.640 $ 11.650
--------- --------- ---------
Total return (c) (d) 21.47% 21.00% 21.04%
--------- --------- ---------
Ratios to Average Net Assets:
Expenses (e) 1.65% 2.10% 2.10%
========= ========= =========
Net investment income (e) 3.05% 2.60% 2.60%
Fees and expenses waived or borne by the Advisor (e) 0.43% 0.43% 0.43%
Portfolio turnover 49% 49% 49%
Net assets at end of period (000) $ 16,346 $ 18,284 $ 4,164
(a) Net of fees and expenses waived or borne by
the Advisor which amounted to: $ 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>
19
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Trustees & Transfer Agent
--------------------------------------------------------------------------------
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
Academic Vice President and Dean of Faculties, Boston College (formerly Dean,
Boston College School of Management)
Thomas E. Stitzel
Professor of Finance, College of Business, Boise State University; Business
Consultant and Author
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.
Semiannual Report:
Colonial Strategic Balanced Fund
<PAGE>
Liberty offers the independent thinking and collective strength of six financial
specialists. Our distinguished product line helps financial advisors and their
clients build diversified investment portfolios for long-term financial goals.
LIBERTY
--------
FUNDS
ALL-STAR Institutional money management approach for individual investors.
COLONIAL Fixed income and value style equity investing.
CRABBE A contrarian approach to fixed income and equity investing.
HUSON
NEWPORT A leader in international investing.(SM)
STEIN ROE Solutions for growth and income investing.
ADVISOR
KEYPORT A leading provider of innovative annuity products.
Liberty's mutual funds are offered by prospectus through Liberty Funds
Distributor, Inc.
Before you invest, consult your financial advisor.
Your financial advisor can help you develop a long-term plan for reaching your
financial goals.
--------------------------------------------------------------------------------
COLONIAL STRATEGIC BALANCED FUND Semi-Annual Report
--------------------------------------------------------------------------------
[LOGO] LIBERTY
--------
FUNDS
ALL-STAR * COLONIAL * CRABBE HUSON * NEWPORT * STEIN ROE ADVISOR
Liberty Funds Distributor, Inc. [Copyright] 2000
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
www.libertyfunds.com
---------------
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PERMIT NO. 20
---------------
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