<PAGE>
[Graphic Omitted]
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COLONIAL GLOBAL UTILITIES FUND ANNUAL REPORT
- ---------------------------------------------
OCTOBER 31, 1999
<PAGE>
TABLE OF CONTENTS
1 Highlights
2 Portfolio Managers'
Report
4 Performance
Information
5 Portfolio of
Investments
7 Financial Statements
9 Notes to Financial
Statements
12 Financial Highlights
- -------------------------------
Not FDIC May Lose Value
Insured No Bank Guarantee
- -------------------------------
- -------------------
PRESIDENT'S MESSAGE
- -------------------
[Photo of Stephen E. Gibson]
Dear Shareholder:
The Fund's fiscal year began with domestic economic strength, signs of firming
foreign economies and concerns about inflation. After a spike in energy prices
last spring, other commodity prices did not follow, and inflation fears calmed.
The Federal Reserve Board (Fed) raised short-term interest rates by one-quarter
point in June, August and again in November -- negating the three rate cuts
during the fall of 1998.
Toward the end of the period, large-company U.S. stocks declined from a
weakening bond market and dollar. The broader stock market, however, took on
strength, particularly in the technology sector. International economies showed
strengthening earnings momentum and little inflation risk. The big question
remained how long the U.S. economy could continue to grow without triggering
higher inflation.
Colonial Global Utilities Fund continued to emphasize investing in the
telecommunications sector, an integrated service and product technology that
truly binds nations together in our global economy. The managers are also
evaluating the evolution taking place in more traditional electric and gas
utilities. The Fund's strong performance in the last 12 months is the direct
result of their thorough analysis.
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 Global Utilities 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 conditions change frequently, there can be no
assurance that the trends described in this report will continue or come to
pass.
<PAGE>
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HIGHLIGHTS
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> RISE IN OIL PRICES BENEFITED GAS STOCKS.
In the spring of 1999, economically-sensitive cyclical stocks began to
rebound in response to stronger-than-expected economic growth in the U.S.
and signs of improving global economic conditions. This shift helped
natural gas stocks, whose prices rose along with oil prices, but hurt
electric stocks, as investors moved away from defensive sectors.
> GAINS IN TELECOMMUNICATIONS CONTRIBUTED TO FUND'S PERFORMANCE.
Telecommunication stocks benefited from improving economies worldwide and
continued domestic growth. Telephone stocks also offered attractive
opportunities due to increased merger and acquisition activity.
> FUND REMAINED COMPETITIVE WITH ITS LIPPER PEERS FOR THE PERIOD.
Despite challenges in some utility sectors due to pending merger approval
and deregulation, the Fund's overweighting in areas such as
telecommunications helped the Fund's Class A shares return 18.31% without
sales charge, performing in line with its Lipper peer group average.(1)
COLONIAL GLOBAL UTILITIES FUND - CLASS A SHARES VS.
LIPPER UTILITY FUND CATEGORY 11/1/98 - 10/31/99
COLONIAL GLOBAL UTILITIES FUND 18.31%
LIPPER UTILITY FUND 18.62%
(1) Lipper, Inc., a widely respected data provider in the industry, calculates
an average total return for mutual funds with similar investment objectives
as the Fund. The total return calculated for the Lipper Utility Fund
Category was 18.62% for the 12 months ended October 31, 1999. The Fund's
Class A shares were ranked in the second quartile for the one year (43 out
of 100 funds) and in the third quartile for the five years (47 out of 64
funds). Performance for different share classes will vary with fees
associated with each class.
Past performance cannot predict future results. Returns and values of an
investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions.
NET ASSET VALUE PER SHARE
AS OF 10/31/99
Class A $16.85
- ---------------------
Class B $16.84
- ---------------------
Class C $16.84
- ---------------------
DISTRIBUTIONS DECLARED PER
SHARE FROM 11/1/98 - 10/31/99
- ---------------------
Class A $0.735
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Class B $0.624
- ---------------------
Class C $0.624
- ---------------------
BOUGHT
- ------
KOREA TELECOM (1.1% of net assets) is a new addition to the Fund that marks our
re-entry directly into the Asian markets. We feel more comfortable now with the
region since its market correction in 1997-1998 and plan to explore
opportunities in Japan.
METROMEDIA FIBER NETWORK (1.7% of net assets), a provider of high bandwidth,
fiber-optic communications infrastructure to customers in the United States and
Europe, was acquired by Bell Atlantic at the end of the period. Bell Atlantic
entered into an agreement with Metromedia that would increase Bell Atlantic's
stake in the company to 19%. Metromedia plans to use this capital to build its
fiber network and enter new markets.
<PAGE>
- --------------------------
PORTFOLIO MANAGERS' REPORT
- --------------------------
TOP FIVE HOLDINGS
AS OF 10/31/99
Colt Telecom 4.5%
- ----------------------------
Nokia 4.0%
- ----------------------------
Sprint Corp. 3.9%
- ----------------------------
Edison International 3.4%
- ----------------------------
Vodafone Airtouch 3.3%
- ----------------------------
TOP FIVE COUNTRIES
AS OF 10/31/99
1. United States 56.3%
- ----------------------------
2. Great Britain 13.2%
- ----------------------------
3. Finland 7.5%
- ----------------------------
4. Spain 5.9%
- ----------------------------
5. Sweden 3.4%
- ----------------------------
TOP FIVE SECTOR BREAKDOWNS
10/31/99 VS. 10/31/98
FUND AS OF FUND AS OF
10/31/99 10/31/98
-------- --------
Telecom/Telephone 50% 38%
Electric 22% 36%
Gas 12% 9%
Real Estate 4% 0%
Broadcasting 3% 0%
Sector and portfolio holding breakdowns are calculated as a percentage of net
assets. Country breakdowns are calculated as a percentage of total investments.
Because the Fund is actively managed, there can be no guarantee the Fund will
continue to hold these securities or invest in these sectors or countries in the
future.
STRONG 12-MONTH PERFORMANCE DRIVEN BY TELECOMMUNICATIONS
The Fund's Class A shares returned 18.31% for the 12-month period, based on net
asset value. This performance placed the Fund in the top half of the Lipper
Utility Funds Average. The Fund significantly outperformed the Standard & Poor's
Utilities Index which returned 2.1%, but underperformed the Morgan Stanley
Capital International World Index's return of 24.9% since this index includes
some non-utility stocks.(1)
We emphasized investments in the telecommunications sector, which continued to
outperform other sectors of the utility industry. Attractive performance came
from both domestic and European telecommunications companies. Our holdings
included telephone services and cellular companies as well as telephone
equipment companies such as Ericsson, Nokia and Tellabs (3.3%, 4.0% and 3.1% of
net assets, respectively).
CHANGING ENVIRONMENT FOR ELECTRIC UTILITIES
In the United States, the electric industry has made progress toward a
competitive marketplace, but issues of deregulation and consolidation also
created a mixed investment environment in this sector. Although many companies
have restructured to meet the challenges presented by a deregulated environment,
performance of this sector was hampered because the regulatory approval process,
which can take more than one year, delays the beneficial effects to the
companies.
We own high-quality companies with attractive growth prospects and strong
management. However, the sector sold at a 25-year low. Although electric stocks
generally underperformed other utility market sectors during the period, there
is still dividend income being paid, with possible capital appreciation, and the
Fund is sharing in these returns. Power generation companies are also becoming
an emerging business. These companies own the existing fossil fuel and the newer
combined gas-cycle turbine generating plants, as well as some nuclear power
plants. This business is commodity-like, and pricing is dependent on the
competitive market for energy.
While electric utility stocks faced challenges, the portfolio benefited from
diversified holdings such as Edison International (3.4% of net assets), which
increased its growth potential through its domestic and international
independent power business.
(1) The Standard & Poor's Utilities Index is an unmanaged index that tracks the
performance of domestic utility stocks. The Morgan Stanley Capital
International World Index ND is an unmanaged index that tracks the
performance of global stocks. Unlike mutual funds, indexes are not
investments, do not incur fees or expenses, and it is not possible to invest
in an index.
<PAGE>
GAS STOCKS IMPROVED DUE TO PRICE INCREASES IN OIL
We increased our holdings in the gas sector, which has improved over the period
due to rising oil prices. 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. Some of the rebound in prices can also be
attributed to expectations of tighter oil supplies over the winter.
Like other sectors of the utilities market, deregulation has also been
increasing competition among gas utilities, forcing companies to streamline
their operations. Over the period, we have seen gas companies consolidate and
enter other areas of the utilities market in order to diversify and become more
dynamic. Williams Companies (2.3% of net assets) entered into a
telecommunications venture, and Columbia Energy (2.6% of net assets) was
involved in a hostile takeover toward the end of the period. Although Columbia's
stock is trading under the last price offer, it is up year to date.
LONG-TERM OUTLOOK REMAINS POSITIVE
Rising long-term interest rates in the United States and Europe have weighed
heavily on utilities, and the cyclical upturn in Europe has hurt defensive
stocks like utilities. Even with the interest rate increases that have occurred,
the economy should remain strong and encouraging to our markets. The Fund's
holdings are solid companies with strong network partners and good management,
and we will continue to emphasize these types of globally diversified,
high-quality utilities as we look for nice buying opportunities in the remainder
of 1999 and into 2000.
/s/ Ophelia Barsketis /s/ Deborah Jansen
Ophelia Barsketis and Deborah Jansen are portfolio co-managers of Colonial
Global Utilities Fund. Ms. Barsketis and Ms. Jansen are also senior vice
presidents of Stein Roe & Farnham Incorporated, the portfolio's advisor.
International investing offers 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. Additionally, because the Fund
focuses solely on utility securities, it may involve special risks due to
limited diversification.
HELD
- ----
NOKIA (4.0% 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 (4.5% of net assets) is a London-based alternative access provider
that saw its price double in a year.
WILLIAMS COMPANIES (2.3% of net assets) is a domestic company that transports
and sells natural gas and petroleum products. It has also entered into a
telecommunications venture that has increased its stock.
<PAGE>
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PERFORMANCE INFORMATION
- -----------------------
PERFORMANCE OF A $10,000
INVESTMENT IN ALL SHARE CLASSES
FROM 10/31/91 - 10/31/99
WITHOUT SALES WITH SALES
CHARGE CHARGE
- ------------------------------------------
Class A $25,644 $24,169
Class B $24,764 $24,764
Class C $24,778 $24,778
PERFORMANCE OF A $10,000 INVESTMENT IN CLASS A SHARES 10/31/91 - 10/31/99
CGUF WITHOUT CGUF WITH S&P UTILITIES MSCI WORLD
SALES CHARGE SALES CHARGE INDEX INDEX
------------ ------------ ------------- ----------
10/91 $10,000 $10,000 $10,000 $10,000
10/92 11,083 10,445 11,113 9,477
10/93 13,660 12,873 13,927 12,037
10/94 12,648 11,920 12,219 12,960
10/95 13,953 13,150 15,797 14,186
10/96 15,626 14,726 17,345 16,498
10/97 18,345 17,289 19,063 19,265
10/98 21,663 20,416 24,143 22,205
10/99 25,644 24,169 24,646 27,736
The Morgan Stanley Capital International (MSCI)World Index ND is an unmanaged
index that tracks the performance of global stocks. The Standard & Poor's
Utilities Index is an unmanaged index that tracks the performance of domestic
utility stocks. Unlike mutual funds, indexes are not investments 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
Share Class A B C
Inception 10/15/91 3/27/95 3/27/95
- --------------------------------------------------------------------------------
Without With Without With Without With
Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge
- --------------------------------------------------------------------------------
1 year 18.31% 11.50% 17.50% 12.50% 17.42% 16.42%
- --------------------------------------------------------------------------------
5 years 15.17 13.82 14.38 14.15 14.38 14.38
- --------------------------------------------------------------------------------
Life 12.38 11.56 11.91 11.91 11.91 11.91
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 9/30/99
Share Class A B C
- --------------------------------------------------------------------------------
Without With Without With Without With
Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge
- --------------------------------------------------------------------------------
1 year 15.79% 9.14% 15.01% 10.01% 14.92% 13.92%
- --------------------------------------------------------------------------------
5 years 13.91 12.57 13.15 12.91 13.15 13.15
- --------------------------------------------------------------------------------
Life 11.63 10.80 11.16 11.16 11.16 11.16
- --------------------------------------------------------------------------------
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.
The Fund initially commenced operations as the Liberty Financial Utilities Fund
on 10/15/1991. Performance shown is based, in part, on the performance of the
Liberty Financial Utilities Fund, which had a different expense structure than
the Fund.
Class B and C share (newer class shares) performance information includes
returns of the Fund's Class A shares (the oldest existing fund class) for
periods prior to the inception of the newer class shares. These Class A share
returns were not restated to reflect any expense differential (e.g., Rule 12b-1
fees) between Class A shares and the newer class shares. Had the expense
differential been reflected, the returns for the periods prior to the inception
of the newer class shares would have been lower.
<PAGE>
- --------------------
INVESTMENT PORTFOLIO
- --------------------
October 31, 1999
(In thousands)
COMMON STOCKS - 92.6% COUNTRY SHARES VALUE
- -------------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 4.1%
REAL ESTATE INVESTMENT TRUSTS
Liberty Property Trust 165 $ 3,866
Prologis Trust 191 3,696
---------
7,562
---------
- -------------------------------------------------------------------------------
MANUFACTURING - 12.5%
COMMUNICATIONS EQUIPMENT - 11.0%
Lucent Technologies, Inc. 84 5,378
Nokia Corp. ADR Fi 64 7,373
Portugal Telecom SA Pt 39 1,698
Tellabs, Inc. (a) 89 5,655
---------
20,104
---------
MACHINERY & COMPUTER EQUIPMENT - 1.5%
Tyco International Ltd. 70 2,796
---------
- -------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 76.0%
BROADCASTING - 3.2%
Grupo Televisa SA (a) Mx 138 5,865
---------
COMMUNICATIONS - 1.8%
Metromedia Fiber Network, Inc.,
Class A (a) 97 3,207
---------
ELECTRIC SERVICES - 21.7%
AES Corp. (a) 102 5,757
CMS Energy Corp. 83 3,060
Edison International 213 6,301
Electricidade de Portugal SA ADR Pt 12 360
FPL Group, Inc. 69 3,477
National Grid Group PLC (a) UK 670 5,085
NIPSCO Industries, Inc. 151 3,085
Pinnacle West Capital Corp. 102 3,754
Scottish Power PLC UK 420 3,897
Texas Utilities Co. 131 5,072
---------
39,848
---------
GAS SERVICES - 11.9%
Columbia Energy Group 74 4,810
El Paso Energy Corp. 118 4,838
Kinder Morgan Energy Partners, L.P. 104 4,418
Kinder Morgan, Inc. 167 3,366
Williams Companies, Inc. 115 4,294
---------
21,726
---------
SANITARY SERVICES - 1.9%
American Water Works Co., Inc. 122 3,546
---------
TELECOMMUNICATION - 35.5%
AT&T Corp. 103 4,822
COLT Telecom Group ADR (a) UK 70 8,283
Korea Telecom Corp. ADR (a) Ko 56 1,974
MCI WorldCom, Inc. (a) 57 4,866
SBC Communications, Inc., Class A 94 4,768
Sonera Group Oyj Fi 194 5,854
Sprint Corp. 96 7,149
Sprint PCS (a) 35 2,940
Tele Norte Leste Participadoes SA ADR Bz 226 3,819
Telecom Corporation of New Zealand NZ 160 5,193
Telecom Italia S It 637 3,150
Telefonica de Espana ADR Sp 88 4,419
Telstra Corp. Ltd. ADR Au 74 1,891
Vodafone AirTouch PLC ADR UK 125 6,004
---------
65,132
---------
TOTAL COMMON STOCKS (cost of $117,468)(b) 169,786
---------
CONVERTIBLE PREFERRED STOCK - 3.3%
- -------------------------------------------------------------------------------
MANUFACTURING - 3.3%
COMMUNICATIONS EQUIPMENT
LM Ericsson Telecommunications ADR
(cost of $1,482) 4.250% Sw 504 5,989
---------
TOTAL INVESTMENTS - 95.9%
(cost of $118,950) 175,775
---------
SHORT-TERM OBLIGATIONS - 3.8% PAR
- -------------------------------------------------------------------------------
Repurchase agreement with Lehman Brothers Corp.,
dated 10/29/99, due 11/01/1999 at 5.220%,
collateralized by U.S. Treasury bonds
and/or notes with various maturities to
2009, market value $7,076 (repurchase
proceeds $6,907) $ 6,904 6,904
---------
FORWARD CURRENCY CONTRACTS - 0.0% (c) (d)
- -------------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - 0.3% 627
- -------------------------------------------------------------------------------
NET ASSETS - 100.0% $ 183,306
=========
NOTES TO PORTFOLIO OF INVESTMENTS
- -------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Cost for federal income tax purposes is $118,734.
(c) As of October 31, 1999, the Fund had entered into the
following forward currency exchange contract:
NET UNREALIZED
CONTRACTS IN EXCHANGE APPRECIATION
TO DELIVER FOR SETTLEMENT DATE (U.S.$)
- -------------------------------------------------------------------------------
KB 273 US$ 450 11/03/1999 (d)
(d) Rounds to less than one.
SUMMARY OF SECURITIES
BY COUNTRY COUNTRY VALUE % OF TOTAL
- -----------------------------------------------------------------------------
United States $104,921 59.7
United Kingdom UK 23,269 13.2
Finland Fi 13,227 7.5
Spain Sp 4,419 2.5
Sweden Sw 5,989 3.4
Mexico Mx 5,865 3.3
New Zealand NZ 5,193 3.0
Brazil Bz 3,819 2.2
Italy It 3,150 1.8
Portugal Pt 2,058 1.2
Korea Ko 1,974 1.1
Australia Au 1,891 1.1
-------- -----
$175,775 100.0
======== =====
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
ACRONYM NAME
- --------------------------------------------------------------------------------
ADR American Depositary Receipt
KB British Pounds
See notes to financial statements.
<PAGE>
- -----------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- -----------------------------------
October 31, 1999
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $118,950) $175,775
Short-term obligations 6,904
--------
182,679
Receivable for:
Dividends 659
Investments sold 449
Fund shares sold 41
Interest 3
Other 73
--------
1,225
--------
Total assets 183,904
LIABILITIES
Payable for:
Fund shares repurchased 190
Accrued:
Deferred Trustees fee 3
Other 405
--------
Total liabilities 598
--------
Net assets $183,306
========
Net asset value & redemption price per share --
Class A ($174,521/10,355) $ 16.85(a)
--------
Maximum offering price per share -- Class A ($16.85/0.9425) $ 17.88(b)
--------
Net asset value & offering price per share -- Class B ($7,594/451) $ 16.84(a)
--------
Net asset value & offering price per share -- Class C ($1,191/71) $ 16.84(a)
--------
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
(b) On sales of $50,000 or more the offering price is reduced.
<PAGE>
- -----------------------
STATEMENT OF OPERATIONS
- -----------------------
For the Year Ended October 31, 1999
(in thousands)
INVESTMENT INCOME
Dividends $ 4,130
Interest 487
-------
Total investment income (net of nonreclaimable foreign taxes
withheld at source which amounted to $143) 4,617
EXPENSES
Management fee 484
Administration fee 363
Expenses allocated from Portfolio (see Note 1) 348
Service fee 457
Distribution fee -- Class B 48
Distribution fee -- Class C 8
Transfer agent fee 509
Bookkeeping fee 65
Registration fee 36
Audit fee 36
Trustees fee 15
Reports to shareholders 21
Legal fee 12
Custodian fee 23
Other 43
-------
2,468
-------
Net investment income 2,149
-------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
PORTFOLIO POSITIONS
NET REALIZED GAIN (LOSS) ON:
Investments 18,852
Foreign currency transactions (98)
-------
Net Realized Gain 18,754
Net change in unrealized appreciation/depreciation during the
period on:
Investments 9,352
Foreign currency transactions 26
-------
Net Change in Unrealized Appreciation/Depreciation 9,378
-------
Net Gain 28,132
-------
INCREASE IN NET ASSETS FROM OPERATIONS $30,281
-------
See notes to financial statements.
<PAGE>
- ----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------
(in thousands)
YEARS ENDED OCTOBER 31
--------------------------
INCREASE (DECREASE) IN NET ASSETS 1999 1998
- -------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 2,149 $ 2,806
Net realized gain 18,754 7,621
Net change in unrealized appreciation/depreciation 9,378 18,825
-------- --------
Net increase from operations 30,281 29,252
DISTRIBUTIONS
From net investment income -- Class A (1,671) (2,908)
From net realized gains -- Class A (6,355) (10,710)
From net investment income -- Class B (18) (37)
From net realized gains -- Class B (199) (224)
From net investment income -- Class C (3) (9)
From net realized gains -- Class C (38) (58)
-------- --------
21,997 15,306
-------- --------
FUND SHARE TRANSACTIONS
Receipts for shares sold -- Class A 5,807 3,912
Value of distributions reinvested -- Class A 7,677 12,984
Cost of shares repurchased -- Class A (25,660) (28,521)
-------- --------
(12,176) (11,625)
-------- --------
Receipts for shares sold -- Class B 3,058 2,120
Value of distributions reinvested -- Class B 194 234
Cost of shares repurchased -- Class B (1,349) (935)
-------- --------
1,903 1,419
-------- --------
Receipts for shares sold -- Class C 150 274
Value of distributions reinvested -- Class C 38 58
Cost of shares repurchased -- Class C (99) (267)
-------- --------
89 65
-------- --------
Net decrease from fund share transactions (10,184) (10,141)
-------- --------
Total increase 11,813 5,165
NET ASSETS
Beginning of period 171,493 166,328
-------- --------
End of period (including undistributed net
investment income of $332 and $194, respectively) $183,306 $171,493
======== ========
NUMBER OF FUND SHARES
Sold -- Class A 362 263
Issued for distributions reinvested -- Class A 493 944
Repurchased -- Class A (1,598) (1,934)
-------- --------
(743) (727)
-------- --------
Sold -- Class B 190 142
Issued for distributions reinvested -- Class B 13 17
Repurchased -- Class B (84) (63)
-------- --------
119 96
-------- --------
Sold -- Class C 9 18
Issued for distributions reinvested -- Class C 3 4
Repurchased -- Class C (6) (17)
-------- --------
6 5
-------- --------
See notes to financial statements.
<PAGE>
- -----------------------------
NOTES TO FINANCIAL STATEMENTS
- -----------------------------
October 31, 1999
NOTE 1. ACCOUNTING POLICIES
ORGANIZATION
Colonial Global Utilities Fund (the Fund), a series of Liberty Funds Trust III
(formerly Colonial Trust III), is a diversified portfolio of a Massachusetts
business trust, registered under the Investment Company Act of 1940, as amended,
as an open-end management investment company. The Fund's investment objective is
to seek current income and long-term growth of capital and income. On February
26, 1999, LFC Utilities Trust (the Portfolio) collapsed into Colonial Global
Utilities Fund (the Fund) therefore terminating their master/feeder structure.
The Fund may issue an unlimited number of shares. The Fund offers three classes
of shares: Class A, Class B and Class C. Class A shares are sold with a front
end sales charge and a 1.00% contingent deferred sales charge on redemptions
made within eighteen months on an original purchase of $1 million to $5 million.
Class B share are subject to an annual distribution fee and a contingent
deferred sales charge. Class B shares will convert to Class A shares when they
have been outstanding approximately eight years. Class C shares are subject to a
contingent deferred sales charge on redemptions made within one year after
purchase and an annual distribution fee.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary
of significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS
Equity securities generally are valued at the last sale price or, in the case
of unlisted or listed securities for which there were no sales during the day,
at current quoted bid prices.
Forward currency contracts are valued based on the weighted value of the
exchange traded contracts with similar durations.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific
identification method for both financial statement and federal income tax
purposes.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS
All income, expenses (other than the Class B and Class C distribution fees)
and realized and unrealized gains (losses) are allocated to each class
proportionately on a daily basis for purposes of determining the net asset
value of each class.
The per share data was calculated using the average shares outstanding during
the period. In addition, Class B and Class C net investment income per share
data reflects the distribution fee applicable to Class B and Class C shares
only.
Class B and Class C ratios are calculated by adjusting the expense and net
investment income ratios for the Fund for the entire period by the
distribution fee applicable to Class B and Class C shares only.
FEDERAL INCOME TAXES
Consistent with the Fund's policy to qualify as a regulated investment company
and to distribute all of its taxable income, no federal income tax has been
accrued.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on ex-date.
The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
FOREIGN CURRENCY TRANSACTIONS
Net realized and unrealized gains (losses) on foreign currency transactions
includes gains (losses) arising from the fluctuations in exchange rates
between trade and settlement dates on securities transactions, gains (losses)
arising from the disposition of foreign currency, and currency gains (losses)
between the accrual and payment dates on dividends, 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 nonreclaimable 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. Interest income
is recorded on the accrual basis.
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 under- lying 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
Stein Roe & Farnham 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 0.40% annually of the Fund's average net assets.
ADMINISTRATOR FEE
Colonial Management Associates, Inc. (the Administrator), an affiliate of the
Advisor, provides accounting and other services and office facilities for a
monthly fee equal to 0.25% annually of the Fund's average net assets.
BOOKKEEPING FEE
The Administrator provides bookkeeping and pricing services for $27,000 per
year plus a percentage of the Fund's average net assets as follows:
AVERAGE NET ASSETS ANNUAL FEE RATE
------------------ ---------------
First $50 million No charge
Next $950 million 0.035%
Next $1 billion 0.025%
Next $1 billion 0.015%
Over $3 billion 0.001%
TRANSFER AGENT FEE
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.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES
Liberty Funds Distributor, Inc. (the Distributor), a subsidiary of the
Administrator, 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 $19,547 on sales of the Fund's Class A shares and
received contingent deferred sales charges (CDSC) of none, $11,848 and $124 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 of the Fund's net assets as of the
20th of each month. The plan also requires the payment of a distribution fee
to the Distributor equal to 0.75% annually of the average net assets
attributable to Class B and Class C shares only.
The CDSC and the fees received from the 12b-1 plan are used principally as
repayment to the Distributor for amounts paid by the Distributor to dealers
who sold such shares.
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 $76,871,850 and $70,967,754,
respectively.
Unrealized appreciation (depreciation) at October 31, 1999, based on cost of
investments for federal income tax purposes was:
Gross unrealized appreciation $61,847,096
Gross unrealized depreciation (4,806,574)
-----------
Net unrealized appreciation $57,040,522
===========
OTHER
The Fund concentrates its investments in utility securities, subjecting it to
greater risk than a fund that is more diversified.
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.
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
for the year ended October 31, 1999.
NOTE 5. COMPOSITION OF NET ASSETS
Capital paid in $108,580
Undistributed net investment income 332
Accumulated net realized gain 17,593
Net unrealized appreciation (depreciation) on:
Investments 56,825
Foreign currency transactions (24)
--------
$183,306
========
NOTE 6. OTHER RELATED PARTY TRANSACTIONS
At October 31, 1999, the Fund had one shareholder, Colonial Management
Associates who owned greater than 5% of the Fund's shares outstanding.
<PAGE>
- --------------------
FINANCIAL HIGHLIGHTS
- --------------------
<TABLE>
Selected data for a share of each class outstanding throughout each period are as follows:
<CAPTION>
YEAR ENDED OCTOBER 31, 1999 YEAR ENDED OCTOBER 31, 1998
-------------------------------------------- --------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD $ 14.920 $ 14.910 $ 14.920 $ 13.720 $ 13.720 $ 13.720
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a)(b) 0.195 0.075 0.075 0.234 0.123 0.123
Net realized and unrealized
gain 2.470 2.479 2.469 2.134 2.124 2.134
-------- -------- -------- -------- -------- --------
Total from Investment
Operations 2.665 2.554 2.544 2.368 2.247 2.257
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income (0.155) (0.044) (0.044) (0.248) (0.137) (0.137)
From net realized gains (0.580) (0.580) (0.580) (0.920) (0.920) (0.920)
-------- -------- -------- -------- -------- --------
Total Distributions Declared
to Shareholders (0.735) (0.624) (0.624) (1.168) (1.057) (1.057)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 16.850 $ 16.840 $ 16.840 $ 14.920 $ 14.910 $ 14.920
-------- -------- -------- -------- -------- --------
Total return (c) 18.31% 17.50% 17.42% 18.09% 17.12% 17.20%
-------- -------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses (b)(d) 1.33% 2.08% 2.08% 1.30% 2.05% 2.05%
Net investment income (b)(d) 1.21% 0.46% 0.46% 1.58% 0.83% 0.83%
Portfolio turnover 43% 43% 43% 48%(e) 48%(e) 48%(e)
Net assets at end of period
(000) $174,521 $ 7,594 $ 1,191 $165,566 $ 4,957 $ 970
(a) Per share data was calculated using the average shares outstanding during the period.
(b) Per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income
and expenses of LFC Utilities Trust prior to the termination of their master/feeder fund structure on February 26, 1999.
(c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred
sales charge.
(d) The benefits derived from custody credits and directed brokerage arrangements had no impact.
(e) Portfolio turnover disclosed is for LFC Utilities Trust.
- ------------------------------------------------------------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
For the fiscal year ended October 31, 1999, the Fund designates long-term capital gains of $18,194,247.
100% of ordinary income distributed by the Fund in the fiscal year ended October 31, 1999 qualifies for corporate dividends
received deduction.
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED OCTOBER 31, 1997 YEAR ENDED OCTOBER 31, 1996
-------------------------------------------- -------------------------------------------
CLASS A CLASS B CLASS C(a) CLASS A CLASS B CLASS C(a)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 12.000 $ 12.010 $ 12.000 $ 11.080 $ 11.080 $ 11.080
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b)(c) 0.328 0.225 0.225 0.427 0.340 0.340
Net realized and unrealized
gain 1.740 1.732 1.742 0.878 0.889 0.879
-------- -------- -------- -------- -------- --------
Total from Investment
Operations 2.068 1.957 1.967 1.305 1.229 1.219
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income (0.348) (0.247) (0.247) (0.385) (0.299) (0.299)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 13.720 $ 13.720 $ 13.720 $ 12.000 $ 12.010 $ 12.000
-------- -------- -------- -------- -------- --------
Total return (d) 17.40% 16.43% 16.53% 11.99% 11.25% 11.16%
-------- -------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses (c)(e) 1.31% 2.06% 2.06% 1.38% 2.13% 2.13%
Net investment income (c)(e) 2.46% 1.71% 1.71% 3.70% 2.95% 2.95%
Portfolio turnover (f) 48% 48% 48% 34% 34% 34%
Net assets at end of period
(000) $162,267 $ 3,243 $ 818 $169,840 $ 1,538 $ 584
(a) Effective July 1, 1997, Class D shares were redesignated Class C shares.
(b) Per share data was calculated using the average shares outstanding during the period.
(c) Per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income
and expenses of LFC Utilities Trust.
(d) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred
sales charge.
(e) The benefits derived from custody credits and directed brokerage arrangements had no impact.
(f) Portfolio turnover disclosed is for LFC Utilities Trust.
</TABLE>
<PAGE>
- --------------------
FINANCIAL HIGHLIGHTS
- --------------------
<TABLE>
Selected data for a share of each class outstanding throughout each period are as follows:
<CAPTION>
YEAR ENDED OCTOBER 31, 1995
--------------------------------------------------------
CLASS A CLASS B(d) CLASS C(b)(d)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.610 $10.420 $10.420
-------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a)(c)(d) 0.536 0.248 0.248
Net realized and unrealized gain 0.520 0.665 0.665
-------- ------- -------
Total from Investment Operations 1.056 0.913 0.913
-------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income (0.517) (0.253) (0.253)
From net realized gains (0.069) -- --
-------- ------- -------
Total Distributions Declared to Shareholders (0.586) (0.253) (0.253)
-------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 11.080 $11.080 $11.080
-------- ------- -------
Total return (f)(g) 10.32% 8.82%(h) 8.82%(h)
-------- ------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses (d)(k) 1.29% 2.05%(i) 2.05%(i)
Net investment income (d)(k) 5.14% 3.73%(i) 3.73%(i)
Fees and expenses waived or borne by Liberty
Securities and LFC Utilities Trust 0.03% 0.02%(i) 0.02%(i)
Portfolio turnover (j) 46% 46% 46%
Net assets at end of period (000) $211,916 $ 745 $ 307
(a) Net of fees and expenses waived or borne by Liberty
Securities which amounted to: $ 0.002 -- --
(b) Effective July 1, 1997, Class D shares were redesignated Class C shares.
(c) Per share data was calculated using the average shares outstanding during the period.
(d) Per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of
the income and expenses of LFC Utilities Trust.
(e) Class B and Class C shares were initially offered on March 27, 1995. Per share data reflects activity from that
date.
(f) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent
deferred sales charge.
(g) Total return would have been lower had Liberty Securities and LFC Utilities Trust not waived certain expenses.
(h) Not annualized.
(i) Annualized.
(j) Portfolio turnover disclosed is for LFC Utilities Trust.
(k) The benefits derived from custody credits and directed brokerage arrangements had no impact.
</TABLE>
<PAGE>
- ---------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- ---------------------------------
TO THE TRUSTEES OF LIBERTY FUNDS TRUST III
AND THE SHAREHOLDERS OF COLONIAL GLOBAL UTILITIES 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 Global Utilities
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
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Trustees & Transfer Agent
- --------------------------------------------------------------------------------
ROBERT J. BIRNBAUM WILLIAM E. MAYER
Consultant (formerly Special Partner, Development Capital, LLC
Counsel, Dechert, Price & Rhoads; (formerly Dean, College of Business
President and Chief Operating and Management, University of
Officer, New York Stock Exchange, Maryland; Dean, Simon Graduate
Inc.; President, American Stock School of Business, University of
Exchange Inc.) Rochester; Chairman and Chief
Executive Officer, CS First Boston
TOM BLEASDALE Merchant Bank; and President and
Retired (formerly Chairman of the Chief Executive Officer, The First
Board and Chief Executive Officer, Boston Corporation)
Shore Bank & Trust Company)
JAMES L. MOODY, JR.
JOHN V. CARBERRY Retired (formerly Chairman of the
Senior Vice President of Liberty Board, Chief Executive Officer and
Financial Companies, Inc. (formerly Director Hannaford Bros. Co.)
Managing Director, Salomon
Brothers) JOHN J. NEUHAUSER
Academic Vice President and Dean of
LORA S. COLLINS Faculties, Boston College (former
Attorney (formerly Attorney, Dean, Boston College School of
Kramer, Levin, Naftalis & Frankel) Management)
JAMES E. GRINNELL THOMAS E. STITZEL
Private Investor (formerly Senior Professor of Finance, College of
Vice President-Operations, The Business, Boise State University;
Rockport Company) Business Consultant and Author
RICHARD W. LOWRY ROBERT L. SULLIVAN
Private Investor (formerly Chairman Retired Partner, KPMG LLP (formerly
and Chief Executive Officer, U.S. Management Consultant, Saatchi and
Plywood Corporation) Saatchi Consulting Ltd. and
Principal and International
SALVATORE MACERA Practice Director, Management
Private Investor (formerly Consulting, Peat Marwick Main &
Executive Vice President of Itek Co.)
Corp. and President of Itek Optical
& Electronic Industries, Inc.) 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 Global Utilities Fund is:
Liberty Funds Services, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
The Funds mail one shareholder report to each shareholder address. If you would
like more than one report, please call 1-800-426-3750 and additional reports
will be sent to you.
This report has been prepared for shareholders of Colonial Global Utilities
Fund. 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 Funds and with the most
recent copy of the Liberty Funds Distributor, Inc. Performance Update.
ANNUAL REPORT:
COLONIAL GLOBAL UTILITIES 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.
- --------------------------------------------------------------------------------
L I B E R T Y
- ---------------
F U N D S
- --------------------------------------------------------------------------------
ALL-STAR Institutional money management approach for individual investors.
COLONIAL Fixed-income and value style equity investing.
CRABBE
HUSON A contrarian approach to fixed-income and equity investing.
NEWPORT A leader in international investing.
STEIN ROE Growth style equity investing.
ADVISOR
[graphic omitted]
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 GLOBAL UTILITIES FUND ANNUAL REPORT
- ----------------------------------------------
---------------
BULK RATE
U.S. POSTAGE
PAID
[Graphic HOLLISTON, MA
Omitted] L I B E R T Y PERMIT NO. 20
----------------- ---------------
F U N D S
ALL-STAR o COLONIAL o CRABBE HUSON o 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
GU-02/081I-1099 (12/99) 99/1530
