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|
COLONIAL INTERNATIONAL HORIZONS FUND | Annual Report
|
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October 31, 1999
<PAGE>
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President's Message
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[PHOTO Dear Shareholder:
STEPHEN
E. The 12-month period ended October 31, 1999 was characterized
GIBSON] by a changing investment environment that included improving
economic conditions around the world.
As the period began, lingering concerns about recession in
Southeast Asia and Japan, and possible global repercussions
created significant uncertainty. Early in 1999, however, a
stream of favorable economic news, rising commodity prices
and improving overseas markets encouraged investors. These
conditions led to strengthening earnings overseas and little
inflation risk. In addition, emerging markets began posting
strong gains, Japan's economy began to show signs of life in
the first quarter of 1999, and several other struggling Asian
economies appeared to stabilize and turn upward.
Colonial International Horizon's Fund has faced challenges such as concerns
about recession and currency devaluation in many emerging world markets since
1997. Based on the relatively weak global economic outlook that continued into
the fourth quarter of 1998, the portfolio's exposure to emerging markets, Asia
and cyclical industries was limited. As a result of this weighting, the Fund
did not benefit from the improvements these markets experienced in 1999. While
the Fund's defensive stance early in this period dampened total return, we
believe that the Fund is now better positioned for the current investment
environment.
The following report provides you with more specific information about your
Fund's performance and investment strategy during the period. As always, we
thank you for choosing Colonial International Horizons Fund and for giving us
the opportunity to serve your investment needs.
Sincerely,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
December 13, 1999
Because economic and market trends change frequently, there can be no assurance
that the trends described in this report will continue or come to pass.
[BEGIN SIDE BAR]
Table of Contents
<TABLE>
<S> <C>
1 Highlights
2 Portfolio Manager's
Report
4 Performance
Information
5 Portfolio of
Investments
8 Financial
Statements
10 Notes to Financial
Statements
13 Financial Highlights
</TABLE>
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| Not FDIC | May Lose Value |
| Insured | No Bank Guarantee |
- -------------------------------------
[END SIDE BAR]
<PAGE>
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Highlights
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> Rising commodity prices helped boost emerging markets.
In the spring, oil prices rose after the Organization of Petroleum
Exporting Countries (OPEC) and non-OPEC oil producers agreed to cut oil
production. Oil prices surged again after OPEC reinforced the cutback on
output at the beginning of October. This dramatic rise in oil prices
helped strengthen the economies of developing nations that depend
heavily on oil exports.
> Tangible signs of economic recovery in Japan.
During the year, the Japanese government engineered a $1.1 trillion
economic recovery program. This infusion of funds into the banking
system gave banks additional liquidity, enabling them to lend money to a
wider range of businesses. This increased credit contributed to higher
consumer confidence and helped boost capital spending by corporations.
As a result, Japan's economy underwent an encouraging turnaround, and
Japanese stocks rallied in the second half of the period.
> Portfolio repositioned for future growth.
Fund performance was dampened during the early part of the period due to
its defensive stance. Based on the strengthening of select markets and
sectors, such as emerging markets and cyclical industries, we made some
significant changes to the portfolio. We reallocated the portfolio's
country and industry weightings in order to better position the Fund in
the current economic environment.
Morgan Stanley Capital International EAFE (GDP) Index vs.
Nikkei 225 Index
11/1/98 - 10/31/99
[BEGIN BAR CHART]
<TABLE>
<S> <C>
MSCI EAFE 26.14%
Nikkei 33.33%
</TABLE>
[END BAR CHART]
The Morgan Stanley Capital International (MSCI) EAFE (GDP) Index is an unmanaged
index that tracks the performance of equity securities of developed countries
outside North America. The Nikkei 225 Index is an unmanaged index that tracks
the performance of stocks traded on the Tokyo Stock Exchange. Unlike mutual
funds, indexes are not investments and do not incur fees or expenses. It is not
possible to invest in an index.
[BEGIN SIDE BAR]
12-month total returns
for the period ended
10/31/99
<TABLE>
<CAPTION>
Without With
Sales Sales
Charge Charge
- --------------------------------
<S> <C> <C>
Class A 17.77% 11.00%
- --------------------------------
Class B 16.85% 11.85%
- --------------------------------
Class C 16.90% 15.90%
- --------------------------------
Class Z 17.95%(1) N/A
- --------------------------------
</TABLE>
Net asset value per share
as of 10/31/99
<TABLE>
<S> <C>
Class A $13.38
- --------------------------------
Class B $13.19
- --------------------------------
Class C $13.30
- --------------------------------
Class Z $13.40
- --------------------------------
</TABLE>
Capital gain distributions
declared per share from
11/1/98 to 10/31/99
<TABLE>
<S> <C>
Class A $0.948
- --------------------------------
Class B $0.898
- --------------------------------
Class C $0.908
- --------------------------------
Class Z (2/16-10/31/99) $0.000
- --------------------------------
</TABLE>
(1) Please see footnote on page 4 for an explanation of how performance is
calculated for the period prior to the inception of Class Z shares.
[END SIDE BAR]
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| 1
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<PAGE>
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Portfolio Manager's Report
- --------------------------------------------------------------------------------
Defensive stance hampered portfolio
In response to turmoil overseas and the threat of recession, we structured the
Fund defensively entering the period. The Fund invested heavily in more
developed markets, such as Europe, and more defensive sectors, such as
telecommunications, financial and high-quality, large-cap stocks. As emerging
markets and cyclical industries experienced strong signs of recovery in 1999,
the Fund's underweighting in these areas hindered performance.
Investment shifted to Japan and emerging markets
We repositioned the Fund to take advantage of the current economic environment
by increasing the portfolio weighting in Japan, South Korea and other emerging
markets. Those investments were shifted from Europe, particularly Portugal,
Italy, France and Germany. We also increased sector weightings in technology,
capital goods and health care. These moves helped to strengthen portfolio
returns in the second half of the Fund's fiscal year.
As the period progressed, European economic growth picked up in the summer of
1999. Signs of inflation began to appear, which raised the risk of higher
interest rates, dampening performance in telecommunications, financial and
other sectors sensitive to rising interest rates in which the Fund had large
investments. Despite positive performance from some of the Fund's holdings, our
underweighting in emerging markets and cyclical industries caused the Fund to
turn in disappointing performance in fiscal 1999.
[BEGIN SIDE BAR]
BOUGHT
- -------------------------
We added cyclical stocks that benefit from global demand such as steel, paper,
oil and related exporting industries. For example:
Aracruz Cellulose (0.5% of net assets), located in Brazil, is the world's
leading producer of bleached eucalyptus pulp, which is used to manufacture
consumer products such as tissue, high-quality printing, writing and specialty
papers.
HELD
- -------------------------
Nokia (1.6% of 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.
Colt Telecom Group (1.2% of net assets), a London-based telecommunications
company that provides service in Europe.
[END SIDE BAR]
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2 |
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<PAGE>
Portfolio anticipates worldwide growth
Moving forward, we anticipate strong GDP growth worldwide. This environment
will create new global demand, benefiting exporting companies and markets:
o Europe should continue its strong economic recovery, aided by lower interest
rates and cheaper exports, merger and acquisition activities, corporate
restructurings, and continued global economic growth.
o Japan, despite the risk of a strong yen, should experience higher consumer
demand and benefit from restructuring.
o Asia should get a boost from this recovery, as well as from global demand for
goods.
o Korea, Singapore and the Philippines should be leading beneficiaries.
o In Latin America, Mexico and Brazil should benefit from global growth, low
inflation, lower interest rates and successful reforms.
/s/ Nicolas Ghajar
Nicolas Ghajar is portfolio manager of Colonial International Horizons Fund and
a vice president of the Advisor. Prior to managing the Fund, Mr. Ghajar was an
equity analyst of various equity funds since 1992.
International investing offers significant long-term growth potential, but also
involves certain risks. The Fund may be affected by political, business and
economic conditions in the countries in which it invests.
[BEGIN SIDE BAR]
Top Five Holdings
as of 10/31/99
<TABLE>
<S> <C>
NTT Mobile Comm. 1.94%
- ----------------------------
Murata MGF 1.88%
- ----------------------------
Nippon Tel. 1.78%
- ----------------------------
Nokia Oy 1.58%
- ----------------------------
BQE Nat'l Paris 1.55%
- ----------------------------
</TABLE>
Top Five Countries
as of 10/31/99
<TABLE>
<S> <C>
United Kingdom 21.6%
- ----------------------------
Japan 21.1%
- ----------------------------
France 11.9%
- ----------------------------
Germany 6.4%
- ----------------------------
Netherlands 6.1%
- ----------------------------
</TABLE>
Country breakdowns are calculated as a percentage of total investments.
Portfolio holding breakdowns are calculated as a percentage of 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.
SOLD
- -------------------------
To accomplish the asset shift from Europe to Japan, South Korea and emerging
markets, we sold Eridania Beghin-Say, Veba and Valora Holdings.
[END SIDE BAR]
|
| 3
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<PAGE>
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Performance Information
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Performance of a $10,000 investment in Class A shares 6/30/92 - 10/31/99
Colonial International Horizons Fund
Without Sales Charge
Colonial International Horizons Fund
With Sales Charge
MSCI EAFE (GDP) INDEX
<TABLE>
<S> <C> <C> <C>
6/92 10.00 10.00 10.00
9.68 9.12 9.61
12.22 11.51 13.22
13.45 12.68 14.55
13.06 12.31 14.5
15.90 14.98 16.02
18.74 17.66 16.76
18.52 17.46 18.37
10/99 21.81 20.55 22.61
</TABLE>
The Morgan Stanley Capital International (MSCI) EAFE (GDP) Index is an
unmanaged index that tracks the performance of equity securities of developed
countries outside North America. Unlike mutual funds, indexes are not
investments and do not incur fees or expenses. It is not possible to invest in
an index.
Average Annual Total Returns as of 10/31/99
<TABLE>
<CAPTION>
Share Class ( A ) ( B ) ( C ) ( Z )
Inception 6/8/92 6/8/92 8/1/97 2/16/99
- ----------------------------------------------------------------------------------------------------------------------------
Without With Without With Without With Without
Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year 17.77% 11.00% 16.85% 11.85% 16.90% 15.90% 17.95%
- ----------------------------------------------------------------------------------------------------------------------------
5 Years 10.16 8.86 9.34 9.06 9.40 9.40 10.19
- ----------------------------------------------------------------------------------------------------------------------------
Life 11.23 10.34 10.40 10.40 10.44 10.44 11.25
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Average Annual Total Returns as of 9/30/99
<TABLE>
<CAPTION>
Share Class ( A ) ( B ) ( C ) ( Z )
- ----------------------------------------------------------------------------------------------------------------------------
Without With Without With Without With Without
Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year 23.79% 16.68% 22.85% 17.85% 22.95% 21.95% 23.99%
- ----------------------------------------------------------------------------------------------------------------------------
5 Years 9.49 8.20 8.67 8.39 8.73 8.73 9.52
- ----------------------------------------------------------------------------------------------------------------------------
Life 10.86 9.96 10.04 10.04 10.08 10.08 10.88
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Past performance cannot predict future investment 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 5.75% charge for Class A shares and the contingent deferred sales
charge (CDSC) maximum charge of 5% for one year and 2% for five years for Class
B shares and 1% for one year for Class C shares. 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.
Performance for different share classes will vary based on differences in share
charges and fees associated with each class.
Class C share performance information includes returns of the Fund's Class B
shares (the oldest existing fund class with a similar expense structure) for
periods prior to its inception date.
Class Z share performance information includes returns of the Fund's Class A
shares (as its expense structure more closely resembles that of the newer class)
for periods prior to its inception date. These Class A share returns are not
restated to reflect any expense differential (e.g., Rule 12b-1 fees) between
Class A shares and Class Z shares. Had the expense differential been reflected,
the returns for the periods prior to the inception of the newer class shares
would have been higher.
[BEGIN SIDE BAR]
Performance of a
$10,000 investment
in all share classes
from 6/30/92 - 10/31/99
<TABLE>
<CAPTION>
Without With
Sales Sales
Charge Charge
- --------------------------------
<S> <C> <C>
Class A $21,829 $20,574
- --------------------------------
Class B $20,680 $20,680
- --------------------------------
Class C $20,731 $20,731
- --------------------------------
Class Z $21,861 $21,861
- --------------------------------
</TABLE>
[END SIDE BAR]
|
4 |
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<PAGE>
- --------------------------------------------------------------------------------
Investment Portfolio
- --------------------------------------------------------------------------------
October 31, 1999
(In thousands)
<TABLE>
<CAPTION>
Common Stocks - 93.5% Country Shares Value
- ---------------------------------------------------------------------
<S> <C> <C> <C>
AGRICULTURE, FORESTRY & FISHING - 0.4%
Agriculture - Crops
Tabacalera SA Sp 27 $ 444
------
- ---------------------------------------------------------------------
CONSTRUCTION - 2.3%
Building Construction - 0.7%
Daiwa House Industry Co., Ltd. Ja 96 880
------
Heavy Construction-Non Building
Construction - 1.1%
Hyder PLC UK 51 460
Vivendi Fr 10 775
------
1,235
------
Special Trade Contractors - 0.5%
Tomkins PLC UK 171 577
------
- ---------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 22.3%
Depository Institutions - 11.3%
Argentina Caja Posta Sp 18 400
Banca Nazionale del Lavoro (a) It 90 306
Banco Pinto & Sotto Mayor SA Pt 40 828
Bank of Montreal Ca 5 204
Banque Nationale de Paris Fr 20 1,805
Banque Nationale de Paris - CVG (a) Fr 4 22
Bayerische HypoVereinsbank G 6 402
Cie Financiere de Paribas Fr (b) 1
Commerzbank AG G 8 302
Credito Italiano It 159 743
DenNorske Bank ASA No 57 221
Deutsche Bank AG G 13 917
Generale Banque, STRIP VVPR (a) Be (b) (b)
Grupo Financiero Banamex Accival Mx 217 543
Lloyds TSB Group UK 70 958
Merita Ltd., Series A Fi 168 978
Standard Chartered PLC UK 62 876
Svenska Handelsbanken Sw 62 859
The Bank of Tokyo Mitsubishi Ja 81 1,345
UBS AG Sz 2 605
Westpac Banking Au 130 836
------
13,151
------
Financial Services - 0.9%
Halifax PLC UK 86 1,094
------
Holding & Other Investment Offices - 0.6%
Fortis AG - CVG (a) Be 5 25
Fortis AG - STRIP VVPR (a) Be 41 (b)
Zurich Allied AG Sz 1 710
------
735
------
Holding Companies - 1.8%
CGU PLC UK 35 508
Cheung Kong (Holdings) Ltd. HK 85 771
Fortis Amev NV Ne 22 766
------
2,045
------
Insurance Carriers - 1.5%
Assurances Generales de France Fr 15 836
AXA Fr 6 891
------
1,727
------
</TABLE>
<TABLE>
<CAPTION>
Country Shares Value
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Companies - 4.3%
Henderson Japanese Smaller Companies
Trust PLC (a) UK 1,250 $ 1,480
Irish Investment Fund, Inc. Ir 44 724
Korea Fund, Inc. Ko 47 601
Morgan Stanley Emerging Markets Fund (a) 52 585
Scudder New Asia Fund, Inc. (a) 47 720
Templeton Emerging Markets Fund, Inc. 41 442
World Equity Benchmark Share - Japan Ja 29 436
--------
4,988
--------
Nondepository Credit Institutions - 1.6%
Nichiei Co., Ltd. Ja 11 586
Promise Co., Ltd. Ja 19 1,284
--------
1,870
--------
Real Estate - 0.3%
New World Development Co., Ltd. HK 205 388
--------
- ------------------------------------------------------------------------
MANUFACTURING - 42.7%
Chemicals & Allied Products - 7.5%
Akzo Nobel NV Ne 12 536
BASF AG G 13 607
Bayer AG G 13 515
Celanese AG (a) G 1 22
E.I. DuPont de Nemours & Co. 4 259
Glaxo Holdings PLC UK 35 1,034
Hoechst AG G 14 605
Kao Corp. Ja 44 1,344
Norsk Hydro AS Ne 8 308
Novartis Sz (b) 649
Rhone Poulenc, Class A Fr 18 1,015
SmithKline Beecham PLC UK 83 1,083
Yamanouchi Pharmaceutical Co. Ja 18 818
--------
8,795
--------
Communications Equipment - 2.8%
LM Ericsson, Class B Sw 21 876
Racal Electronics PLC UK 149 1,098
Sony Corp. Ja 8 1,249
--------
3,223
--------
Electronic Components - 4.8%
Alcatel Alsthom (Cie Gen El) Fr 6 958
Koninklijke Philips Electronics NV
ADR (a) Ne 9 899
Murata Manufacturing Co., Ltd. Ja 17 2,188
Samsung Electronics Ko 19 1,604
--------
5,649
--------
Electronic & Electrical Equipment - 0.8%
Bowthorpe PLC UK 89 900
--------
Fabricated Metal - 0.7%
Amcor Ltd. Au 180 787
--------
Food & Kindred Products - 1.0%
Diageo PLC UK 30 301
Groupe Danone Fr 3 844
--------
1,145
--------
</TABLE>
|
| 5
|
<PAGE>
- --------------------------------------------------------------------------------
Investment Portfolio
- --------------------------------------------------------------------------------
October 31, 1999
(In thousands)
<TABLE>
<CAPTION>
Country Shares Value
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Household Appliances - 0.5%
Electrolux AB, Series B Sw 26 $ 528
------
Machinery & Computer Equipment - 5.9%
Canon, Inc. Ja 46 1,303
Equant NV (a) Ne 6 615
Fujitsu Ltd. Ja 35 1,056
Hitachi Ltd. Ja 110 1,191
Invensys PLC UK 108 527
Mannesmann AG G 5 781
Sumitomo Heavy Industries, Ltd. (a) Ja 435 1,387
------
6,860
------
Measuring & Analyzing Instruments - 0.3%
Fuji Photo Film Co., Ltd. Ja 11 354
------
Paper Products - 3.1%
Aracruz Celulose SA ADR Bz 27 554
Jefferson Smurfit Group PLC UK 98 255
Mo och Domsjo AB, Class B Sw 17 510
Royal Koninklijke PTT Nederland NV Ne 19 985
Stora Enso Oyj Class R Fi 69 906
TNT Post Group NV Ne 18 453
------
3,663
------
Petroleum Refining - 3.8%
BP Amoco PLC ADR UK 19 1,076
Chevron Corp. 8 767
Compagnie Francaise de Petroleum,
Total B Shares Fr 5 736
ENI It 45 265
Repsol SA Sp 23 471
Royal Dutch Petroleum Co. Ne 8 486
Royal Dutch Petroleum Co. - NY Shares Ne 10 581
------
4,382
------
Primary Metals - 1.6%
Acerinox SA Sp 18 549
Billiton PLC UK 255 1,111
Pirelli SPA It 101 233
------
1,893
------
Printing & Publishing - 0.5%
Arnoldo Mondadori Editore SPA It 30 564
------
Rubber & Plastic - 1.5%
Bridgestone Corp. Ja 34 937
Michelin, Class B Fr 18 797
------
1,734
------
Stone, Clay, Glass & Concrete - 3.0%
Cemex SA Mx 119 540
Cimentos de Portugal SA Pt 28 466
CRH PLC Ir 35 662
Hanson PLC UK 55 425
Holderbank Financiere Glaris AG Sz (b) 587
Lafarge SA Fr 8 768
------
3,448
------
</TABLE>
<TABLE>
<CAPTION>
Country Shares Value
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Tobacco Products - 0.4%
Allied Zurich PLC UK 29 $ 349
B.A.T. Industries PLC UK 29 192
------
541
------
Transportation Equipment - 4.5%
DaimlerChrysler AG UK 6 429
GKN PLC UK 78 1,253
Honda Motor Co. Ltd. Ja 23 972
MAN AG. G 34 1,127
Toyota Motor Corp. Ja 21 728
Volvo AB Sw 30 785
------
5,294
------
- ------------------------------------------------------------------------
MINING & ENERGY - 0.8%
Crude Petroleum & Natural Gas - 0.2%
Conoco., Inc. Class B 8 230
------
Oil & Gas Field Services - 0.6%
Petroleum Geo-Services (a) No 44 659
------
- ------------------------------------------------------------------------
RETAIL TRADE - 4.9%
Apparel & Accessory Stores - 1.2%
Hennes & Mauritz AB (a) Sw 51 1,353
------
Food Stores - 1.3%
IFIL Finanziaria di Partecipazioni SPA It 2 (b)
Koninklijke Ahold NV Ne 10 293
Tesco PLC UK 138 416
Vendex International NV Ne 26 773
------
1,482
------
General Merchandise Stores - 1.1%
Ito-Yokado Co., Ltd. Ja 9 721
Metro AG G 10 539
------
1,260
------
Miscellaneous Retail - 1.3%
Centros Comerciales Sp 20 485
Imasco Ltd. Ca 12 322
Pinault-Printemps SA Fr 4 757
------
1,564
------
- ------------------------------------------------------------------------
SERVICES - 3.6%
Amusement & Recreation - 0.5%
Hilton Group PLC UK 194 607
------
Computer Related Services - 1.6%
Cap Gemini SA Fr 6 896
Dixons Group PLC UK 54 969
------
1,865
------
Computer Software - 0.9%
Olivetti & C. SPA (a) It 175 339
SAP AG G 2 652
------
991
------
Hotels, Camps & Lodging - 0.6%
Accor SA Fr 3 729
------
</TABLE>
|
6 |
|
<PAGE>
- --------------------------------------------------------------------------------
Investment Portfolio
- --------------------------------------------------------------------------------
October 31, 1999
(In thousands)
<TABLE>
<CAPTION>
Country Shares Value
- -----------------------------------------------------------------------
<S> <C> <C> <C>
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 16.5%
Broadcasting - 0.4%
Mediaset SPA It 48 $ 475
--------
Communications - 1.2%
Vodafone Group PLC UK 305 1,398
--------
Electric Services - 0.6%
Empresa Nacional de Electricidad Sp 22 449
Korea Eletric Power Corp., ADR Ko 18 279
--------
728
--------
Gas Services - 1.5%
BG PLC UK 160 871
Centrica UK 299 868
--------
1,739
--------
Telecommunication - 12.8%
British Telecommunications PLC UK 60 1,088
COLT Telecom Group PLC (a) UK 46 1,387
France Telecom SA Fr 13 1,219
Hong Kong Telecommunications Ltd. HK 146 332
Nippon Telegraph & Telephone Corp. Ja (b) 2,075
Nokia Oyj Fi 16 1,836
NTT Mobile Communication Network,
Inc. Ja (b) 2,261
SK Telecom Co. Ltd. Ko 57 751
Telecel-Comunicacaoes Pessoais SA Pt 7 885
Telecom Italia SPA It 153 757
Telecomunicacoes Brasileiras ADR (a) Bz 11 1
Telecomunicacoes Brasileiras SA Bz 11 857
Telefonica de Espana Sp 20 999
Telefonos de Mexico SA Mx 109 462
--------
14,910
--------
TOTAL COMMON STOCKS
(cost of $85,704) 108,884
--------
Preferred Stocks - 0.6%
- -----------------------------------------------------------------------
CONSTRUCTION - 0.1%
Heavy Constuction - Non Building Construction
Hyder PLC, 7.875% UK 30 49
--------
- -----------------------------------------------------------------------
MANUFACTURING - 0.5%
Chemicals & Allied Products
Henkel KGA G 9 607
--------
TOTAL PREFERRED STOCKS
(cost of $41) 656
--------
Warrants - 0.0%
- -----------------------------------------------------------------------
CONSTRUCTION - 0.0%
Heavy Constuction - Non Building Construction
Vivendi (a) Fr 9 21
--------
- -----------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 0.0%
Depository Institutions
Siam Commercial Bank Public Co.,
Ltd. (a)(c) Th 37 (b)
TOTAL WARRANTS - 0.0%
(cost of $6) 21
--------
TOTAL INVESTMENTS - 94.1%
(cost of $85,751) (d) 109,561
--------
</TABLE>
<TABLE>
<CAPTION>
Short-Term Obligations - 5.6% Par Value
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase agreement with Lehman Brothers
Corp., dated 10/29/99, due 11/01/99 at 5.220%,
collateralized by U.S. Treasury bonds and/or
notes and bills with various maturities to 2009,
market value $6,691 (repurchase proceeds $6,530) $6,528 $ 6,528
--------
Other Assets & Liabilities Net - 0.3% 383
- ------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $116,472
========
Notes to Investment Portfolio:
- ------------------------------------------------------------------------------------------
</TABLE>
(a) Non-income producing.
(b) Rounds to less than one.
(c) Represents fair market value as determined in good faith under the
direction of the trustees.
(d) Cost for federal income tax purposes is $86,972.
<TABLE>
<CAPTION>
Summary of
Securities by Country Country Value % of Total
- --------------------------------------------------------
<S> <C> <C> <C>
United Kingdom UK $ 23,639 21.6
Japan Ja 23,115 21.1
France Fr 13,070 11.9
Germany G 7,076 6.4
Netherlands Ne 6,695 6.1
Sweden Sw 4,911 4.5
Spain Sp 3,797 3.5
Finland Fi 3,720 3.4
Italy It 3,682 3.4
Korea Ko 3,235 2.9
United States 3,003 2.7
Switzerland Sz 2,551 2.3
Portugal Pt 2,179 2.0
Australia Au 1,623 1.5
Mexico Mx 1,545 1.4
Hong Kong HK 1,491 1.4
Brazil Bz 1,412 1.3
Ireland Ir 1,386 1.3
Norway No 880 0.8
Canada Ca 526 0.5
Belgium Be 25 0.0
-------- -----
$109,561 100.0%
-------- -----
</TABLE>
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
<TABLE>
<CAPTION>
Acronym Name
------- -----------
ADR American Depositary Receipt
<S> <C>
STRIP Separately Traded Receipt of Interest and Principal
</TABLE>
|
| 7
|
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets & Liabilities
- --------------------------------------------------------------------------------
October 31, 1999
(In thousands except for per share amounts and footnotes)
<TABLE>
<S> <C> <C>
Assets
Investments at value (cost $85,751) $109,561
Short-term obligations 6,528
--------
116,089
Receivable for:
Cash including foreign currencies $ 23
Investments sold 4
Dividends 423
Fund shares sold 2,732
Other 85 3,267
----- --------
Total Assets 119,356
Liabilities
Payable for:
Fund shares repurchased 2,259
Accrued:
Deferred Trustee fees 4
Other 621
-----
Total Liabilities 2,884
--------
Net Assets $116,472
========
Class A
Net asset value & redemption price per
share ($57,814/4,321) $ 13.38(a)
--------
Maximum offering price per share
($13.38/0.9425) $ 14.20(b)
--------
Class B
Net asset value & offering price per
share ($51,930/3,936) $ 13.19(a)
--------
Class C
Net asset value & offering price per
share ($1,299/98) $ 13.30(a)
--------
Class Z
Net asset value & offering price per
share ($5,429/405) $ 13.40
--------
Composition of Net Assets
Capital paid in $100,151
Overdistributed net investment income (690)
Accumulated net realized loss (6,779)
Net unrealized appreciation
(depreciation) on:
Investments 23,810
Foreign currency transactions (20)
--------
$116,472
========
</TABLE>
(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
- --------------------------------------------------------------------------------
October 31, 1999
(In thousands)
<TABLE>
<S> <C> <C>
Investment Income
Dividends $ 1,902
Interest 224
-------
Total investment income (net of
nonreclaimable foreign taxes withheld
at source which amounted to $240) 2,126
Expenses
Management fee $ 861
Service fee -- Class A 139
Service fee -- Class B 138
Service fee -- Class C 3
Distribution fee -- Class B 411
Distribution fee -- Class C 9
Transfer agent 395
Bookkeeping fee 50
Registration fee 43
Custodian fee 85
Audit fee 55
Trustees fee 11
Reports to shareholders 23
Legal fee 15
Other 60 2,298
------ -------
Net Investment Loss (172)
-------
Net Realized and Unrealized Gain (Loss)
on Portfolio Positions
Net realized loss on:
Investments (6,585)
Foreign currency transactions (15)
------
Net Realized Loss (6,600)
Net change in unrealized appreciation/
depreciation during the period on:
Investments 26,346
Foreign currency transactions (65)
------
Net Change in Unrealized
Appreciation/Depreciation 26,281
-------
Net Gain 19,681
-------
Increase in Net Assets from Operations $19,509
-------
</TABLE>
|
8 | See notes to financial statements.
|
<PAGE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
(In thousands)
<TABLE>
<CAPTION>
Years Ended October 31
--------------------------
Increase (Decrease) in Net Assets 1999(a) 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment loss $ (172) $ (76)
Net realized gain (loss) (6,600) 11,751
Net change in unrealized appreciation (depreciation) 26,281 (21,070)
---------- --------
Net Increase (Decrease) from Operations 19,509 (9,395)
---------- --------
Distributions:
From net investment income -- Class A -- (181)
In excess of net investment income -- Class A -- (185)
From net realized gains -- Class A (4,278) (6,412)
From net realized gains -- Class B (4,151) (4,631)
From net investment income -- Class C -- (1)
In excess of net investment income -- Class C -- (1)
From net realized gains -- Class C (85) (30)
---------- --------
10,995 (20,836)
---------- --------
Fund Share Transactions:
Receipts for shares sold -- Class A 168,531 41,507
Receipts for shares issued in the acquisition of Colonial International Fund for Growth -- 25,736
Value of distributions reinvested -- Class A 3,628 5,525
Cost of shares repurchased -- Class A (178,536) (39,191)
---------- --------
(6,377) 33,577
---------- --------
Receipts for shares sold -- Class B 15,544 10,506
Receipts for shares issued in the acquisition of Colonial International Fund for Growth -- 44,615
Value of distributions reinvested -- Class B 3,730 4,123
Cost of shares repurchased -- Class B (29,662) (17,601)
---------- --------
(10,388) 41,643
---------- --------
Receipts for shares sold -- Class C 598 589
Receipts for shares issued in the acquisition of Colonial International Fund for Growth -- 842
Value of distributions reinvested -- Class C 80 32
Cost of shares repurchased -- Class C (654) (219)
---------- --------
24 1,244
---------- --------
Receipts for shares sold -- Class Z 5,585 --
Cost of shares repurchased -- Class Z (560)
---------- --------
5,025 --
---------- --------
Net Increase (Decrease) from Fund Share Transactions (11,716) 76,464
---------- --------
Total Increase (Decrease) (721) 55,628
Net Assets
Beginning of period 117,193 61,565
---------- --------
End of period (net of overdistributed net investment income of $690 and $194,
respectively) $ 116,472 $117,193
========== ========
Number of Fund Shares
Sold -- Class A 13,331 3,227
Issued in the acquisition of Colonial International Fund for Growth -- 1,838
Issued for distributions reinvested -- Class A 303 451
Repurchased -- Class A (14,061) (3,039)
---------- --------
(427) 2,477
---------- --------
Sold -- Class B 1,251 824
Issued in the acquisition of Colonial International Fund for Growth -- 3,211
Issued for distributions reinvested -- Class B 314 340
Repurchased -- Class B (2,391) (1,392)
---------- --------
(826) 2,983
---------- --------
Sold -- Class C 48 44
Issued in the acquisition of Colonial International Fund for Growth -- 60
Issued for distributions reinvested -- Class C 7 3
Repurchased -- Class C (53) (18)
---------- --------
2 89
---------- --------
Sold -- Class Z 448 --
Repurchased -- Class Z (43) --
---------- --------
405 --
---------- --------
</TABLE>
(a) Class Z shares were initially offered on February 16, 1999.
|
| 9
|
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
October 31, 1999
Note 1. Accounting Policies
Organization
Colonial International Horizons Fund, (the Fund), a series of Liberty Funds
Trust III (formerly Colonial Trust III), is a nondiversified 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 preservation of capital, purchasing power and
long-term growth. The Fund may issue an unlimited number of shares. The Fund
offers four classes of shares: Class A, Class B, Class C and Class Z. Class A
shares are sold with a front-end sales charge and a 1.00% contingent deferred
sales charge on redemptions made within eighteen months on an original purchase
of $1 million to $5 million. Class B shares are subject to an annual
distribution fee and a contingent deffered sales charge. Class B shares will
convert to Class A shares when they have been outstanding approximately eight
years. Class C shares are subject to a contingent deferred sales charge on
redemptions made within one year after purchase and an annual distribution fee.
Effective February 16, 1999, the Fund began offering Class Z shares. Class Z
shares are offered continuously at net asset value. There are certain
restrictions on the purchase of Class Z shares, as described in the Fund's
prospectus.
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 that are 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 is
translated into U.S. dollars at that day's exchange rates. In certain
countries, the Fund may hold portfolio positions for which market quotations
are not readily available. Such securities 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 (losses) are based upon the specific
identification method for both financial statement and federal income tax
purposes.
Determination of class net asset values and financial
highlights
All income, expenses (other than the Class A, Class B and Class C service fees
and Class B and Class C distribution fees), and realized and unrealized gains
(losses) are allocated to each class proportionately on a daily basis for
purposes of determining the net asset value of each class.
The per share data was calculated using average shares outstanding during the
period. In addition, Class A, Class B and Class C net investment income per
share data reflects the service fee per share applicable to Class A, Class B
and Class C shares and the distribution fee applicable to Class B and Class C
shares only.
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 service
fee applicable to Class A, Class B and Class C shares and the distribution fee
applicable to Class B and Class C shares only.
Federal income taxes
Consistent with the Funds' policy to qualify as a regulated investment company
and to distribute all of its taxable income, no federal income tax has been
accrued.
Interest income, debt discount and premium
Interest income is recorded on the accrual basis. Original issue discount is
accreted to interest income over the life of a security with a corresponding
increase in the cost basis; premium and market discount are not amortized or
accreted.
Distributions to shareholders
Distributions to shareholders are recorded on the ex-date.
The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
Foreign currency transactions
Net realized and unrealized gains (losses) on foreign currency transactions
includes the gains (losses) arising from the fluctuations in exchange rates
between trade and settlement dates on securities transactions, gains (losses)
arising from the disposition of foreign currency and currency gains (losses)
between the accrual and payment dates on dividends and interest income and
foreign withholding taxes.
The Fund does not distinguish that portion of gains (losses) on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the
|
10 |
|
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements Cont.
- --------------------------------------------------------------------------------
October 31, 1999
investments. Such fluctuations are included with the net realized and
unrealized gains (losses) from 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 Funds portfolio securities. While the maximum
potential loss from such contracts is the aggregate face value in U.S. dollars
at the time the contract is opened, the actual 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 2. Fees and Compensation Paid to Affiliates
Management fee
Colonial Management Associates, Inc. (the Advisor) is the investment Advisor of
the Fund and furnishes accounting and other services and office facilities for
a monthly fee equal to 0.75% annually of the Fund's average net assets.
Bookkeeping fee
The Advisor provides bookkeeping and pricing services for a monthly fee equal
to $27,000 plus 0.035% annually 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. During the year ended October 31, 1999,
the Fund has been advised that the Distributor retained net underwriting
discounts of $59,968 on sales of the Fund's Class A shares and received
contingent deferred sales charges (CDSC) of $7,913, $202,376 and $793 on Class
A, Class B and Class C share redemptions, respectively.
The Fund has adopted a 12b-1 plan which requires the payment of a service fee
to the Distributor equal to 0.25% annually on Class A, Class B and Class C 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% of the average net assets
attributable to Class B and Class C shares.
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 3. Portfolio Information
Investment activity
During the year ended October 31, 1999, purchases and sales of investments,
other than short-term obligations, were $47,690,005 and $69,010,186,
respectively.
Unrealized appreciation (depreciation) at October 31, 1999, based on cost of
investments for federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $28,064,947
Gross unrealized depreciation (5,476,172)
-----------
Net unrealized appreciation $22,588,775
===========
</TABLE>
Capital loss carryforwards
At October 31, 1999, capital loss carryforwards available (to the extent
provided in regulations) to offset future realized gains were approximately as
follows:
<TABLE>
<CAPTION>
Year of Capital loss
expiration carryforward
---------- ------------
<S> <C>
2005 $ 4,354,000
2007 6,775,000
-----------
$11,129,000
===========
</TABLE>
This capital loss carryforward expiring in 2005 was acquired in the merger with
Colonial International Fund for Growth. The availability for use in offsetting
any future gains may be limited in a given year.
|
| 11
|
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements Cont.
- --------------------------------------------------------------------------------
October 31, 1999
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 currency
exchange or other foreign governmental laws or restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
Note 4. Line of Credit
The Fund may borrow up to 33 1/3% of its net assets under a line of credit for
temporary or emergency purposes. Any borrowings bear interest at one of the
following options determined at the inception of the loan: (1) federal funds
rate plus 1/2 of 1%, (2) the lending bank's base rate or (3) IBOR offshore loan
rate plus 1/2 of 1%. There were no borrowings under the line of credit during
the year ended October 31, 1999.
Note 5. Merger Information
On July 24, 1998, Colonial International Fund for Growth (CIFFG) was merged
into the Fund by a non-taxable exchange of 1,837,762 Class A shares, 3,210,998
Class B shares and 60,081 Class C shares of the Fund (valued at $25,735,942,
$44,614,889 and $841,510, respectively) for the 2,624,572, 4,629,964 and
87,046, respectively, of CIFFG shares then outstanding. The assets of CIFFG
acquired included unrealized appreciation of $10,684,592. The aggregate net
assets of the Fund and CIFFG immediately after the merger were $132,217,563.
Note 6. Other Related Party Transactions
At October 31, 1999, the Fund had two shareholders, Colonial Management
Association, Inc. and Alphatrade who owned greater than 5% of the Fund's shares
outstanding.
|
12 |
|
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of each class outstanding
throughout each period are as follows:
<TABLE>
<CAPTION>
Year Ended October 31, 1999
---------------------------------------------------------
Class A Class B Class C Class Z (a)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 12.260 $ 12.140 $ 12.240 $ 11.950
-------- -------- -------- --------
Income from Investment Operations:
Net investment income (loss) (b) 0.027 (0.067) (0.068) 0.076
Net realized and unrealized gain 2.041 2.015 2.036 1.374
-------- -------- -------- --------
Total from Investment Operations 2.068 1.948 1.968 1.450
-------- -------- -------- --------
Less Distributions Declared to Shareholders:
From net realized gains (0.948) (0.898) (0.908) --
-------- -------- -------- --------
Net Asset Value, End of Period $ 13.380 $ 13.190 $ 13.300 $ 13.400
-------- -------- -------- --------
Total return (c) 17.77% 16.85% 16.90% 12.13%(d)
-------- -------- -------- --------
Ratios to Average Net Assets
Expenses (e) 1.64% 2.39% 2.39% 1.37%(f)
Net investment income (e) 0.21% (0.54)% (0.54)% 0.85%(f)
Portfolio turnover 43% 43% 43% 43%
Net assets at end of period (000) $ 57,814 $ 51,930 $ 1,299 $ 5,429
</TABLE>
<TABLE>
<CAPTION>
Year Ended October 31, 1998
------------------------------------------
Class A Class B Class C
-------- -------- --------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 15.260 $ 15.070 $ 15.220
-------- -------- --------
Income from Investment Operations:
Net investment income (loss) (b) 0.032 (0.062) (0.061)
Net realized and unrealized loss (0.222) (0.208) (0.181)
-------- -------- --------
Total from Investment Operations (0.190) (0.270) (0.242)
-------- -------- --------
Less Distributions Declared to Shareholders:
Net investment income (0.074) -- (0.039)
In excess of net investment income (0.076) -- (0.039)
From net realized gains (2.660) (2.660) (2.660)
-------- -------- --------
Total Distributions Declared to Shareholders (2.810) (2.660) (2.738)
-------- -------- --------
Net Asset Value, End of Period $ 12.260 $ 12.140 $ 12.240
-------- -------- --------
Total return (c) (1.14)% (1.76)% (1.53)%
-------- -------- --------
Ratios to Average Net Assets
Expenses (e) 1.68% 2.43% 2.43%
Net investment income (loss) (e) 0.24% (0.51)% (0.51)%
Portfolio turnover 100% 100% 100%
Net assets at end of period (000) $ 58,213 $ 57,809 $ 1,171
</TABLE>
(a) Class Z share were initially offered on February 16, 1999. Per share amounts
reflect activity from that date.
(b) Per share data was calculated using the average shares outstanding during
the period.
(c) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(d) Not annualized.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(f) Annualized.
|
| 13
|
<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, 1997
-------------------------------------------
Class A Class B Class C (a)
-------- --------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 14.320 $ 14.230 $ 15.910
-------- --------- ----------
Income from Investment Operations:
Net investment income (loss) (b) 0.098 (0.011) (0.017)
Net realized and unrealized gain (loss) 2.296 2.275 (0.673)(c)
-------- --------- ----------
Total from Investment Operations 2.394 2.264 (0.690)
-------- --------- ----------
Less Distributions Declared to Shareholders:
Net investment income (0.030) -- --
From net realized gains (1.424) (1.424) --
-------- --------- ----------
Total Distributions Declared to Shareholders (1.454) (1.424) --
-------- --------- ----------
Net Asset Value, End of Period $ 15.260 $ 15.070 $ 15.220
-------- --------- ----------
Total return (d) 17.87% 16.98% (4.34)%(e)
-------- --------- ----------
Ratios to Average Net Assets
Expenses (f) 1.62% 2.37% 2.39%(g)
Net investment income (loss) (f) 0.67% (0.08%) (0.42%)(g)
Portfolio turnover 67% 67% 67%
Net assets at end of period (000) $ 34,645 $ 26,817 $ 103
</TABLE>
<TABLE>
<CAPTION>
Year Ended October 31
-----------------------------------------------------------
1996 1995
------------------------ -------------------------
Class A Class B Class A Class B
-------- --------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 12.430 $ 12.380 $ 13.160 $ 13.110
-------- --------- -------- --------
Income from Investment Operations:
Net investment income (loss) (b) 0.075 (0.026) 0.102 0.009
Net realized and unrealized gain (loss) 2.525 2.506 (0.496) (0.489)
-------- --------- -------- --------
Total from Investment Operations 2.600 2.480 (0.394) (0.480)
-------- --------- -------- --------
Less Distributions Declared to Shareholders:
Net investment income (0.080) -- (0.106) (0.020)
From net realized gains (0.630) (0.630) (0.230) (0.230)
-------- --------- -------- --------
Total Distributions Declared to Shareholders (0.710) (0.630) (0.336) (0.250)
-------- --------- -------- --------
Net Asset Value, End of Period $ 14.320 $ 14.230 $ 12.430 $ 12.380
-------- --------- -------- --------
Total return (d) 21.69% 20.70% (2.88)% (3.56)%
-------- --------- -------- --------
Ratios to Average Net Assets
Expenses (f) 1.61% 2.36% 1.66% 2.41%
Net investment income (loss) (f) 0.56% (0.19%) 0.82% 0.07%
Portfolio turnover 84% 84% 65% 65%
Net assets at end of period (000) $ 36,655 $ 25,482 $ 31,297 $ 20,931
</TABLE>
(a) Class C shares were initially offered on August 1, 1997. Per share amounts
reflect activity from that date.
(b) Per share data was calculated using the average shares outstanding during
the period.
(c) The amount shown for a share outstanding does not correspond with the
aggregate net gain on investments for the period due to the timing of sales
and repurchases of Fund shares in relation to fluctuating market values of
the investments of the Fund.
(d) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(g) Annualized.
|
14 |
|
<PAGE>
- --------------------------------------------------------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Trustees of Liberty Funds Trust III and the Shareholders of
Colonial International Horizons Fund
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial International Horizons
Fund (the "Fund") (a series of Liberty Funds Trust III, formerly Colonial Trust
III), at October 31, 1999, the results of its operations, the changes in its
net assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and the financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
portfolio positions at October 31, 1999 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 13, 1999
|
| 15
|
<PAGE>
This page intentionally left blank
|
16 |
|
<PAGE>
Trustees & Transfer Agent
<TABLE>
<S> <C>
Robert J. Birnbaum William E. Mayer
Consultant (formerly Special Counsel, Partner, Development Capital, LLC
Dechert, Price & Rhoads; President and (formerly Dean, College of Business and
Chief Operating Officer, New York Stock Management, University of Maryland;
Exchange, Inc.; President, American Dean, Simon Graduate School of Business,
Stock Exchange Inc.) University of Rochester; Chairman and
Chief Executive Officer, CS First Boston
Merchant Bank; and President and Chief
Tom Bleasdale Executive Officer, The First Boston
Corporation)
Retired (formerly Chairman of the Board
and Chief Executive Officer, Shore Bank
& Trust Company) James L. Moody, Jr.
Retired (formerly Chairman of the Board,
John V. Carberry Chief Executive Officer and Director
Hannaford Bros. Co.)
Senior Vice President of Liberty
Financial Companies, Inc. (formerly
Managing Director, Salomon Brothers) John J. Neuhauser
Academic Vice President and Dean of
Lora S. Collins Faculties, Boston College (former Dean,
Boston College School of Management)
Attorney (formerly Attorney, Kramer,
Levin, Naftalis & Frankel)
Thomas E. Stitzel
James E. Grinnell Professor of Finance, College of
Business, Boise State University;
Private Investor (formerly Senior Vice Business Consultant and Author
President-Operations, The Rockport
Company)
Robert L. Sullivan
Richard W. Lowry Retired Partner, KPMG LLP (formerly
Management Consultant, Saatchi and
Private Investor (formerly Chairman and Saatchi Consulting Ltd. and Principal
Chief Executive Officer, U.S. Plywood and International Practice Director,
Corporation) Management Consulting, Peat Marwick Main
& Co.)
Salvatore Macera
Anne-Lee Verville
Private Investor (formerly Executive
Vice President of Itek Corp. and Consultant (formerly General Manager,
President of Itek Optical & Electronic Global Education Industry, and
Industries, Inc.) President, Applications Solutions
Division, IBM Corporation)
</TABLE>
- --------------------------------------------------------------------------------
Important Information About This Report
The Transfer Agent for Colonial International Horizons 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 International
Horizons 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.
Annual Report:
Colonial International Horizons 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.
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L I B E R T Y
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F U N D S
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ALL-STAR Institutional money management approach for individual investors.
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COLONIAL Fixed income and value style equity investing.
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CRABBE A contrarian approach to fixed income and equity investing.
HUSON
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NEWPORT A leader in international investing.(SM)
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STEIN ROE Growth style equity investing.
ADVISOR
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[KEYPORT LOGO] A leading provider of innovative annuity products.
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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.
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COLONIAL INTERNATIONAL HORIZONS FUND | Annual Report
|
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[LIBERTY FUNDS LOGO]
ALL-STAR o COLONIAL o CRABBE HUSON NEWPORT o STEIN ROE ADVISOR
Liberty Funds Distributor, Inc. (C) 1999
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
www.libertyfunds.com
HZ-02/082I-1099 (12/99) 99/1538
