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COLONIAL SMALL CAP VALUE FUND Semiannual report
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December 31, 1998
[GRAPHIC OMITTED]
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Not FDIC May Lose Value
Insured No Bank Guarantee
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COLONIAL SMALL CAP VALUE FUND HIGHLIGHTS
JULY 1, 1998 - DECEMBER 31, 1998
Investment Objective: Colonial Small Cap Value Fund seeks long-term growth by
investing primarily in smaller-capitalization equities.
The Fund is Designed to Offer:
|X| Diversification
|X| Long-term growth potential
|X| Disciplined investment strategy
Portfolio Manager Commentary: "Small-company stocks fell further than
larger-company stocks during a third quarter correction, but they rebounded more
strongly by year end. We continue to believe the Fund's broad industry
diversification and our active search for attractively valued stocks position
the portfolio for future growth potential."
-- James Haynie & Michael Rega
Colonial Small Cap Value Fund Performance
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Class A Class B Class C
Inception dates 7/25/86 11/9/92 1/15/96
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Six-month total returns, assuming (12.31)% (12.61)% (12.65)%
reinvestment of all distributions
and no sales charge or contingent
deferred sales charge (CDSC)
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Net asset value per share on 12/31/98 $30.00 $28.55 $29.34
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Top Five Holdings(1)
(as of 12/31/98)
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1. Ames Dept. Stores Inc. .......... 2.0%
2. Furniture Brands Intl. .......... 1.8%
3. Valassis Communications ......... 1.6%
4. QLogic Corp. .................... 1.6%
5. CEC Entertainment Inc. .......... 1.6%
Top Five Sectors(1)
(as of 12/31/98)
- ------------------------------------------
1. Consumer Cyclicals .............. 19.1%
2. Technologies .................... 15.2%
3. Financials ...................... 14.1%
4. Capital Goods ................... 11.5%
5. Health Care ..................... 11.2%
(1) Because the Fund is actively managed, holdings and sectors will change.
Holdings and sector weightings are calculated as a percent of total net assets.
Industry sectors in the following financial statements are based upon the
standard industrial classifications (SIC) published by the U.S. Office of
Management and Budget. The sector classifications used on this page are based
upon Colonial's defined criteria as used in the investment process.
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2
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PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
I am pleased to present the semiannual report for Colonial Small Cap Value Fund
for the six months ended December 31, 1998.
[PHOTO OMITTED]
Investors witnessed dramatic price swings during the second half of 1998.
Following a market peak in mid-July, troubles in Russia -- most notably the
devalued currency -- helped trigger a dramatic correction in U.S. stock prices
that continued through the third quarter. In response to fears of a global
economic slowdown, the Federal Reserve announced a series of interest rate cuts.
With renewed investor confidence, the market turned around early in the fourth
quarter and kept climbing through year end. As 1998 came to a close, the S&P 500
Index achieved double-digit gains for a record-setting fourth year in a row.
Overall, market returns for the six-month period were strong, based on the
performance of the major U.S. equity indexes. However, gains were not evenly
spread among different sectors. Technology far outpaced the rest of the market,
with the most dramatic returns largely confined to Internet-related stocks.
Within the small-cap sector, our portfolio managers actively search out stocks
with attractive valuations, strong past performance and attractive future growth
potential. Casting their net widely, our portfolio managers maintain
diversification among a variety of industries rather than making large bets on
what is hot at the moment. This disciplined process enabled the Fund to stay
consistent with its objective of long-term growth while avoiding excessive risk.
For investors interested in maintaining broad diversification, small-company
investing may play a valuable role in their overall portfolio.
The following report will provide you with more specific information on your
Fund's performance and the market in which the Fund invests. Thank you for
choosing Colonial Small Cap Value Fund and for giving us the opportunity to
serve your investment needs.
Respectfully,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
February 11, 1999
Because market and economic conditions change, there can be no assurance that
the trends discussed above or on the following pages will continue.
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3
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PORTFOLIO MANAGEMENT REPORT
James Haynie and Michael Rega are portfolio managers of Colonial Small Cap Value
Fund and are vice presidents of Colonial Management Associates, Inc. The
following is a discussion of the Fund's performance for the six-month period
ended December 31, 1998.
Small-company stocks take part in market rebound
Stock prices were volatile over the past six months. After stock prices peaked
in mid-July, a third-quarter market correction hit bottom on October 8. From
that point, stock prices rebounded nicely through year end. Stocks of small
companies experienced more dramatic price swings than those of larger companies
- -- falling further and recovering more vigorously than the market as a whole.
Large companies have dominated the market since 1994, but the vigor of
small-company stock performance at the end of 1998 was encouraging.
Ironically, while earnings disappointments from larger companies have alarmed
investors, enthusiasm for small-company stocks was also dampened. During
uncertain global economic times, investors have continued their flight to
quality -- preferring the liquidity and perceived stability of large-company
stocks.
Technology sector boosted by unrealistic expectations
Technology stocks clearly led the charge during the past six months. The Nasdaq
Composite Index, a technology bellwether, soared 15.7%. In contrast, the S&P 500
Index, a proxy for the broader market, rose 8.4%.
Internet-related stocks were the strongest element in this upswing. We maintain
that the current bidding up of electronic commerce stocks is excessive, based
more on speculation than fundamentals. We believe the extent of their rise is
unwarranted by the facts. While the Internet is here to stay, it is too early to
determine which companies will have staying power. And while online transactions
are growing exponentially in number, it's important to consider the minuscule
numbers from which they are multiplying.
With its value orientation and commitment to broad sector diversification,
Colonial Small Cap Value Fund could not fully take part in the outsized gains in
the technology sector, causing it to lag its benchmarks. The underperformance of
financial and retail stocks also negatively impacted performance, as
credit-quality issues took center stage. For the six-month period, the Fund
generated a total return of negative 12.31% for Class A shares, based on net
asset value. Despite the Fund's underperformance, we believe our diversified
strategy makes the most sense for the long term.
Growth of service economy may dull traditional business cycles
The economy has changed fundamentally during the 1990s. As our economy has
evolved over the years -- from an industrial one to a more service-based one --
some believe that recessions may not be as pronounced as before. In the past,
mammoth capital expenditures by heavy manufacturing companies made
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4
<PAGE>
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them less adaptable to changing economic cycles. Because these companies
represented a significant percentage of the overall U.S. economy, we saw strong
cycles of alternate booms and busts. Today's service economy is dominated by
lower-overhead companies that can cut back on costs during downturns. This may
be one reason why the current economic expansion has continued longer than
expected.
Investors have traditionally favored small-company stocks as the economy emerges
from a recession. However, because no one can time the stock market with
accuracy, and because the economy has changed significantly, we believe that the
best strategy for achieving long-term results is to invest in fundamentally
sound companies. With small-company stocks trading at such attractive prices, we
believe they offer the potential for solid long-term results.
Continued positive outlook for U.S. equities
Whether U.S. companies will be able to grow their earnings in 1999 remains to be
seen. However, the economy appears to have the ability to continue its pace of
slow, steady growth. In an environment of low interest rates, low inflation and
low unemployment, the stock prices of well-managed companies have the potential
to move upward. With a broadly diversified portfolio and a focus on attractively
valued holdings -- many with little or no international exposure -- we continue
to believe Colonial Small Cap Value Fund makes sense for a long-term investment
portfolio.
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5
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Colonial Small Cap Value Fund Investment Performance vs. The Russell 2000 Index
Change in Value of $10,000 from 12/31/88 - 12/31/98
Based on NAV and POP for Class A Shares
[The following table was originally a mountain graph in the printed materials.]
RUSSELL 2000 NAV POP
------------ --- ---
12/88 10000 10000 10000
3/89 10771 11025 10391
6/89 11457 11317 10666
9/89 12229 11726 11052
12/89 11626 11179 10536
3/90 11365 11053 10418
6/90 11796 11372 10718
9/90 8911 8705 8204
12/90 9362 8535 8044
3/91 12146 10232 9644
6/91 11953 9741 9181
9/91 12931 10027 9450
12/91 13672 10153 9569
3/92 14697 11879 11196
6/92 13691 10380 9784
9/92 14085 10456 9855
12/92 16189 12249 11545
3/93 16881 13344 12577
6/93 17251 13352 12585
9/93 18760 14085 13275
12/93 19246 14556 13719
3/94 18733 14725 13878
6/94 18000 14034 13227
9/94 19251 15314 14433
12/94 18895 15474 14584
3/95 19767 16661 15703
6/95 21620 18740 17663
9/95 23756 21586 20345
12/95 24271 21284 20060
3/96 25509 22800 21489
6/96 26785 23483 22133
9/96 26876 24015 22634
12/96 28274 25189 23741
3/97 26812 23775 22408
6/97 31159 28072 26458
9/97 35796 32150 30301
12/97 34597 31205 29410
3/98 38077 35480 33440
6/98 36302 33391 31471
9/98 28988 24675 23256
12/98 33716 29282 27598
Value of a $10,000 investment made on 12/31/88
As of 12/31/98
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Class A Class B Class C Class Z
NAV POP NAV w/CDSC NAV w/CDSC NAV
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$29,282 $27,598 $28,000 $28,000 $28,669 $28,669 $29,522
Average Annual Total Returns
As of 12/31/98
<TABLE>
<CAPTION>
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Class A Shares Class B Shares Class C Shares Class Z Shares
Inception 7/25/86(1) 11/9/92 1/15/96 7/31/95
NAV POP NAV w/CDSC NAV w/CDSC NAV
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 year (6.16)% (11.56)% (6.85)% (11.51)% (6.86)% (7.79)% (5.96)%
- ---------------------------------------------------------------------------------------------
5 years 15.00 13.65 14.16 13.93 14.52 14.52 15.19
- ---------------------------------------------------------------------------------------------
10 years 11.34 10.68 10.84 10.84 11.11 11.11 11.43
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) Investment policies changed November 2, 1992.
Past performance cannot predict future results. Returns and value of an
investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. NAV returns do not include initial sales
charges or contingent deferred sales charges (CDSCs). Public offering price
(POP) returns include the maximum sales charge of 5.75%. The applicable CDSC for
Class B shares is 5% for one year and 2% for five years. The applicable CDSC for
Class C shares is 1% for one year.
Class B, Class C and Class Z 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 are 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 periods prior to the inception of
Class A and Class B shares would have been lower.
The Russell 2000 Index is an unmanaged index that tracks the performance of
small-capitalization stocks traded on the New York Stock Exchange, the American
Stock Exchange and the Nasdaq. Unlike mutual funds, indexes are not investments,
do not incur fees or charges and are not professionally managed. It is not
possible to invest directly in an index.
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6
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INVESTMENT PORTFOLIO
DECEMBER 31, 1998 (UNAUDITED, IN THOUSANDS)
COMMON STOCKS - 96.6% SHARES VALUE
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CONSTRUCTION - 3.0%
Building Construction - 1.7%
Lennar Corp. 78 $ 1,970
NVR, Inc. 166 7,916
Toll Brothers, Inc. (a) 177 3,991
----------
13,877
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Heavy Construction-Non Building - 1.3%
Granite Construction, Inc. 304 10,203
----------
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FINANCE, INSURANCE & REAL ESTATE - 13.7%
Depository Institutions - 2.1%
Charter One Financial, Inc. 121 3,352
Downey Financial Corp. 221 5,622
FirstFed Financial Corp. (a) 196 3,494
Peoples Heritage Financial Group, Inc. 167 3,337
Silicon Valley Bancshares (a) 70 1,197
----------
17,002
----------
Insurance Carriers - 8.5%
ARM Financial Group, Inc. 294 6,527
American Bankers Insurance Group, Inc. 84 4,063
CMAC Investment Corp. 52 2,389
Capital RE Corp. 191 3,830
Conseco, Inc. 67 2,058
Delphi Financial Group, Inc. (a) 116 6,061
Enhance Financial Services Group, Inc. 201 6,015
Executive Risk Inc. 73 4,010
Fidelity National Finance, Inc. 188 5,724
Fremont General Corp. 486 12,024
LandAmerica Financial Group, Inc. 129 7,200
NAC Re Corp. 75 3,502
Orion Capital Corp. 100 3,973
----------
67,376
----------
Nondepository Credit Institutions - 1.3%
Consumer Portfolio Services, Inc. (a) 126 487
Imperial Credit Industries, Inc. 150 1,255
Resource America, Inc. 195 1,767
Resource Bancshares Mortgage Group, Inc. 393 6,501
----------
10,010
----------
Real Estate Investment Trusts - 0.3%
Imperial Credit Mortgage Holdings 445 2,030
----------
7
<PAGE>
Investment Portfolio/December 31, 1998
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COMMON STOCKS - CONT. SHARES VALUE
- ------------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - CONT.
Security Brokers & Dealers - 1.5%
Jeffries Group, Inc. 154 $ 7,623
Raymond James Financial, Inc. 189 3,984
----------
11,607
----------
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MANUFACTURING - 37.1%
Apparel - 0.8%
Kellwood Co. 79 1,977
Nautica Enterprises, Inc. (a) 281 4,220
----------
6,197
----------
Chemicals & Allied Products - 4.6%
A. Schulman, Inc. 88 1,996
Barr Laboratories, Inc. (a) 51 2,448
Chattem, Inc. 44 2,106
Dexter Corp. 127 3,996
Ferro Corp. 98 2,549
Goodrich (B.F.) Co. 79 2,816
Jones Medical Industries, Inc. 68 2,482
Medicis Pharmaceutical Corp. 166 9,880
NBTY, Inc. (a) 291 2,072
NL Industries, Inc. 8 114
Rexall Sundown, Inc. (a) 148 2,065
Serologicals Corp. (a) 126 3,782
----------
36,306
----------
Communications Equipment - 1.1%
Comverse Technology, Inc. 80 5,645
Premisys Communications, Inc. (a) 314 2,883
----------
8,528
----------
Electrical Industrial Equipment - 0.1%
Artesyn Technologies, Inc. 60 840
----------
Electric Components - 5.7%
Innovex, Inc. 267 3,663
Park Electrochemical Corp. 177 5,059
Plexus Corp. (a) 161 5,447
QLogic Corp. (a) 96 12,564
Sanmina Corp. (a) 126 7,875
SemTech Corp. (a) 297 10,658
----------
45,266
----------
Fabricated Metal - 0.8%
Barnes Group, Inc. 220 6,451
----------
8
<PAGE>
Investment Portfolio/December 31, 1998
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Food & Kindred Products - 2.0%
Canandaigua Brands, Inc., Class A (a) 149 $ 8,585
Michael Foods, Inc. 244 7,308
----------
15,893
----------
Furniture & Fixtures - 2.8%
Ethan Allen Interiors, Inc. (a) 187 7,651
Furniture Brands International, Inc. (a) 539 14,685
----------
22,336
----------
Lighting Equipment - 0.4%
Technitrol, Inc. 105 3,334
----------
Lumber & Wood Products - 0.4%
Oakwood Homes Corp. 183 2,787
----------
Machinery & Computer Equipment - 6.3%
Applied Power, Inc., Class A 178 6,734
Asyst Technology, Inc. 223 4,552
Bell and Howell Co. 53 2,004
Gehl Co. (a) 192 2,944
J. Ray McDermott, S.A. (a) 79 1,931
Kaydon Corp. 114 4,547
Manitowoc, Inc. 141 6,266
Milacron, Inc. 138 2,657
NACCO Industries, Inc. 53 4,876
Pentair, Inc. 51 2,030
Terex Corp. (a) 242 6,898
Xircom, Inc. (a) 51 1,734
Zebra Technologies Corp., Class A (a) 105 3,016
----------
50,189
----------
Measuring & Analyzing Instruments - 2.9%
ADAC Laboratories 382 7,628
ESC Medical Systems Ltd. (a) 198 2,082
Esterline Technologies Corp. (a) 184 3,996
Fossil, Inc. (a) 275 7,896
Ocular Sciences, Inc. (a) 29 776
VISX, Inc. (a) 10 874
----------
23,252
----------
Miscellaneous Manufacturing - 0.4%
Russ Berrie & Company, Inc. 136 3,203
----------
Paper Products - 0.4%
Wausau-Mosinee Paper Corp. 156 2,761
----------
9
<PAGE>
Investment Portfolio/December 31, 1998
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COMMON STOCKS - CONT. SHARES VALUE
- ------------------------------------------------------------------------------
MANUFACTURING - CONT.
Petroleum Refining - 0.3%
Tesoro Petroleum Corp. (a) 196 $ 2,377
----------
Primary Metal - 2.8%
Encore Wire Corp. (a) 168 1,554
Inland Steel Industries, Inc. 79 1,330
Mueller Industries, Inc. (a) 135 2,734
Precision Castparts Corp. 127 5,615
Quanex Corp. 93 2,098
RTI International Metals (a) 278 3,891
Texas Industries, Inc. 88 2,357
Tredegar Industries, Inc. 123 2,756
----------
22,335
----------
Printing & Publishing - 1.9%
Bowne & Co., Inc. 152 2,710
Valassis Communications, Inc. (a) 245 12,653
----------
15,363
----------
Rubber & Plastic - 0.3%
Carlisle Cos., Inc. 54 2,762
----------
Stone, Clay, Glass & Concrete - 1.0%
Centex Construction Products, Inc. 22 873
Libbey, Inc. 45 1,299
Lone Star Industries, Inc. 164 6,052
----------
8,225
----------
Textile Mill Products - 0.3%
Interface, Inc. 277 2,571
----------
Transportation Equipment - 1.8%
AAR Corp. 63 1,504
Arvin Industries, Inc. 180 7,500
Varlen Corp. 238 5,490
----------
14,494
----------
- ------------------------------------------------------------------------------
MINING & ENERGY - 1.9%
Oil & Gas Extraction - 0.9%
Devon Energy Corp. 89 2,731
Patterson Energy, Inc. (a) 315 1,280
Pride International, Inc. (a) 190 1,342
Stolt Comex Seaway, S.A. (a) 281 1,897
----------
7,250
----------
10
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Investment Portfolio/December 31, 1998
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Oil & Gas Field Services - 1.0%
Marine Drilling Companies, Inc. (a) 275 $ 2,114
Pool Energy Services Co. (a) 272 2,942
Veritas DGC, Inc. (a) 249 3,233
----------
8,289
----------
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RETAIL TRADE - 11.4%
Apparel & Accessory Stores - 2.6%
Claire's Stores, Inc. 209 4,285
Dress Barn, Inc. (a) 247 3,745
Finish Line, Inc., Class A (a) 285 2,282
Genesco, Inc. (a) 336 1,913
Paul Harris Stores, Inc. (a) 137 1,113
Ross Stores, Inc. 183 7,210
----------
20,548
----------
General Merchandise Stores - 3.8%
Ames Department Stores, Inc. (a) 604 16,319
Fred Meyer, Inc. (a) 124 7,441
Shopko Stores, Inc. 200 6,650
----------
30,410
----------
Home Furnishings & Equipment - 0.5%
CompUSA, Inc. 96 1,254
Musicland Stores Corp. (a) 186 2,778
----------
4,032
----------
Miscellaneous Retail - 1.3%
Fingerhut Companies, Inc. 169 2,604
Tiffany & Co. 68 3,538
Zale Corp. 133 4,289
----------
10,431
----------
Restaurants - 3.2%
CEC Entertainment, Inc. (a) 451 12,501
CKE Restaurants, Inc. 129 3,805
Foodmaker, Inc. (a) 434 9,566
----------
25,872
----------
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SERVICES - 17.3%
Amusement & Recreation - 0.5%
Anchor Gaming (a) 66 3,693
----------
Auto Repair, Rental & Parking - 0.0%
Midas, Inc. 1 25
----------
11
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Investment Portfolio/December 31, 1998
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COMMON STOCKS - CONT. SHARES VALUE
- ------------------------------------------------------------------------------
SERVICES - CONT.
Business Services - 3.0%
Acclaim Entertainment, Inc. 167 $ 2,046
Advo, Inc. 302 7,957
Health Management Systems, Inc. 237 1,866
Interim Services, Inc. (a) 107 2,501
Norrell Corp. 241 3,548
Ogden Corp. 226 5,664
----------
23,582
----------
Computer Related Services - 4.6%
DSP Group, Inc. 318 6,644
Inacom Corp. 340 5,062
Jack Henry & Associates 100 4,950
Personnel Group of America, Inc. (a) 115 2,012
Rent-Way, Inc. (a) 282 6,859
StaffMark, Inc. (a) 337 7,543
Systems & Computer Technology Corp. (a) 253 3,475
----------
36,545
----------
Computer Software - 2.5%
Data Dimensions, Inc. 437 3,745
Hyperion Solutions Corp. 343 6,182
PRI Automation, Inc. (a) 110 2,860
Progress Software Corp. (a) 126 4,263
Symantec Corp. (a) 148 3,219
----------
20,269
----------
Engineering, Accounting, Research & Management - 1.0%
Core Laboratories N.V. (a) 110 2,104
Jacobs Engineering Group, Inc. (a) 137 5,595
----------
7,699
----------
Health Services - 5.1%
Curative Health Services, Inc. (a) 237 7,922
Hooper Holmes, Inc. 86 2,482
Integrated Health Services, Inc. 183 2,584
Lincare Holdings, Inc. (a) 40 1,623
Osteotech, Inc. (a) 220 10,216
Pediatrix Medical Group, Inc. (a) 35 2,098
RehabCare Group, Inc. (a) 188 3,513
Total Renal Care Holdings, Inc. (a) 217 6,404
Universal Health Services, Inc., Class B (a) 79 4,083
----------
40,925
----------
Hotels, Camps & Lodging - 0.6%
Sunterra Resorts, Inc. 340 5,100
----------
12
<PAGE>
Investment Portfolio/December 31, 1998
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TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 5.6%
Hotels, Camps & Lodging - 1.7%
Airborne Freight Corp. 157 $ 5,661
Comair Holdings, Inc. 136 4,579
Midwest Express Holdings (a) 66 1,737
Offshore Logistics, Inc. (a) 155 1,841
----------
13,818
----------
Electric Services - 1.3%
Public Service Co. of New Mexico 246 5,033
Sierra Pacific Resources 100 3,800
The United Illuminating Co. 33 1,700
----------
10,533
----------
Gas Services - 0.8%
Atmos Energy Co. 69 2,225
UGI Corp. 187 4,432
----------
6,657
----------
Motor Freight & Warehousing - 0.7%
CNF Transportation 28 1,052
US Freightways Corp. 165 4,797
----------
5,849
----------
Sanitary Services - 0.5%
Piedmont Natural Gas Co. 99 3,584
----------
Transportation Services - 0.6%
Avis Rent-A-Car, Inc. (a) 87 2,104
Circle International Group, Inc. 135 2,772
----------
4,876
----------
- ------------------------------------------------------------------------------
WHOLESALE TRADE - 6.5%
Durable Goods - 2.6%
Brightpoint, Inc. 200 2,750
Healthsource, Inc. 496 8,394
Owens & Minor, Inc. 230 3,618
Patterson Dental Co. (a) 140 6,068
----------
20,830
----------
Nondurable Goods - 3.9%
Bindley Western Industries, Inc. 70 3,432
Fleming Co., Inc. 282 2,930
Richfood Holdings, Inc. 147 3,040
13
<PAGE>
Investment Portfolio/December 31, 1998
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COMMON STOCKS - CONT. SHARES VALUE
- ------------------------------------------------------------------------------
WHOLESALE TRADE - CONT.
Nondurable Goods - Cont.
United Stationers, Inc. (a) 364 $ 9,451
Universal Corp. 348 12,213
----------
31,066
----------
TOTAL COMMON STOCKS (cost of $704,278)(b) 769,458
----------
SHORT-TERM OBLIGATIONS - 4.3% PAR
- ------------------------------------------------------------------------------
Repurchase agreement with ABN AMRO
Chicago Corp., dated 12/31/98, due
01/04/99 at 4.750%, collateralized
by U.S. Treasury notes with various
maturities to 2015, value $34,618
(repurchase proceeds $34,038) $ 34,020 34,020
----------
OTHER ASSETS & LIABILITIES, NET - (0.8)% (6,672)
- ------------------------------------------------------------------------------
NET ASSETS - 100.0% $796,806
==========
NOTES TO INVESTMENT PORTFOLIO:
- ------------------------------------------------------------------------------
(a) Non-income producing.
(b) Cost for federal income tax purposes is $705,406.
See notes to financial statements.
14
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
DECEMBER 31, 1998 (UNAUDITED)
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $704,278) $ 769,458
Short-term obligations 34,020
--------------
803,478
Receivable for:
Fund shares sold $ 2,812
Investments sold 1,471
Dividends 650
Interest 4
Other 202 5,139
-------------- --------------
Total Assets 808,617
LIABILITIES
Payable for:
Fund shares repurchased 7,466
Investments purchased 4,326
Accrued:
Deferred Trustees fee 5
Other 14
--------------
Total Liabilities 11,811
--------------
NET ASSETS $ 796,806
==============
Net asset value & redemption price per share - Class A
($401,171/13,371) $ 30.00 (a)
==============
Maximum offering price per share - Class A
($30.00/0.9425) $ 31.83 (b)
==============
Net asset value & offering price per share - Class B
($348,062/12,193) $ 28.55 (a)
==============
Net asset value & offering price per share - Class C
($38,455/1,310) $ 29.34 (a)
==============
Net asset value, offering and redemption
price per share - Class Z ($9,118/301) $ 30.29
==============
COMPOSITION OF NET ASSETS
Capital paid in $ 764,520
Overdistributed net investment income (15)
Net realized loss (32,879)
Net unrealized appreciation 65,180
--------------
$ 796,806
==============
(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.
See notes to financial statements.
15
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998
(UNAUDITED)
(in thousands)
INVESTMENT INCOME
Dividends $ 2,608
Interest 991
--------------
3,599
EXPENSES
Management fee $ 2,911
Service fee - Class A, Class B, Class C 919
Distribution fee - Class B 1,215
Distribution fee - Class C 130
Transfer agent 1,032
Bookkeeping fee 132
Trustees fee 12
Custodian fee 6
Audit fee 12
Legal fee 3
Registration fee 95
Reports to shareholders 11
Other 64 6,542
-------------- --------------
Net Investment Loss (2,943)
--------------
NET REALIZED & UNREALIZED LOSS ON PORTFOLIO POSITIONS
Net realized loss (32,879)
Net change in unrealized depreciation (59,326)
--------------
Net Loss (92,205)
--------------
Decrease in Net Assets from Operations $ (95,148)
==============
See notes to financial statements.
16
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
Six months ended Year ended
(in thousands) December 31 June 30
-------------- -------------
INCREASE (DECREASE) IN NET ASSETS 1998 1998 (a)
Operations:
Net investment loss $ (2,943) $ (3,989)
Net realized gain (loss) (32,879) 31,123
Net unrealized appreciation (depreciation) (59,326) 54,532
-------------- -------------
Net Increase (Decrease) from Operations (95,148) 81,666
Distributions:
From net realized gains - Class A - (16,194)
In excess of net realized gains - Class A - (199)
From net realized gains - Class B - (16,680)
In excess of net realized gains - Class B - (205)
From net realized gains - Class C - (1,153)
In excess of net realized gains - Class C - (14)
From net realized gains - Class Z - (302)
In excess of net realized gains - Class Z - (4)
-------------- -------------
(95,148) 46,915
-------------- -------------
Fund Share Transactions:
Receipts for shares sold - Class A 187,387 891,244
Value of distributions reinvested - Class A - 14,748
Cost of shares repurchased - Class A (146,592) (661,166)
-------------- -------------
40,795 244,826
-------------- -------------
Receipts for shares sold - Class B 75,810 217,087
Value of distributions reinvested - Class B - 15,906
Cost of shares repurchased - Class B (50,580) (59,973)
-------------- -------------
25,230 173,020
-------------- -------------
Receipts for shares sold - Class C 10,769 34,266
Value of distributions reinvested - Class C - 1,108
Cost of shares repurchased - Class C (5,833) (5,846)
-------------- -------------
4,936 29,528
-------------- -------------
Receipts for shares sold - Class Z 4,478 1,139
Value of distributions reinvested - Class Z - 306
Cost of shares repurchased - Class Z (973) (650)
-------------- -------------
3,505 795
-------------- -------------
Net Increase from Fund Share
Transactions 74,466 448,169
-------------- -------------
Total Increase (Decrease) (20,682) 495,084
NET ASSETS
Beginning of period 817,488 322,404
-------------- -------------
End of period (net of overdistributed
net investment income of $15
and $12, respectively) $ 796,806 $ 817,488
============== =============
(a) Class D shares were redesignated Class C shares on July 1, 1997.
Continued on next page.
See notes to financial statements.
17
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS - CONT.
(Unaudited)
Six months ended Year ended
December 31 June 30
-------------- -------------
(in thousands) 1998 1998 (a)
NUMBER OF FUND SHARES
Sold - Class A 6,832 26,435
Issued for distributions reinvested - Class A - 452
Repurchased - Class A (5,210) 19,429
-------------- -------------
1,622 7,458
-------------- -------------
Sold - Class B 2,754 6,641
Issued for distributions reinvested - Class B - 509
Repurchased - Class B (1,907) (1,848)
-------------- -------------
847 5,302
-------------- -------------
Sold - Class C 375 1,020
Issued for distributions reinvested - Class C - 34
Repurchased - Class C (213) (177)
-------------- -------------
162 877
-------------- -------------
Sold - Class Z 153 35
Issued for distributions reinvested - Class Z - 10
Repurchased - Class Z (35) (19)
-------------- -------------
118 26
-------------- -------------
(a) Class D shares were redesignated Class C shares on July 1, 1997.
See notes to financial statements.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In the opinion of management of Colonial Small Cap Value Fund (the Fund), a
series of Colonial Trust VI, the accompanying financial statements contain all
normal and recurring adjustments necessary for the fair presentation of the
financial position of the Fund at December 31, 1998, and the results of its
operations, the changes in its net assets and the financial highlights for the
six months then ended.
NOTE 2. ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Organization: The Fund is a diversified portfolio of a Massachusetts business
trust, registered under the Investment Company Act of 1940, as amended, as an
open-end, management investment company. The Fund's investment objective is to
seek long-term growth by investing primarily in smaller capitalization equities.
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 deferred sales charge. Class B shares will convert to Class A shares
when they have been outstanding approximately eight years. Class C shares are
subject to an annual distribution fee and a contingent deferred sales charge.
Class Z shares are offered continuously at net asset value. There are certain
restrictions on purchasing Class Z shares, please refer to a 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 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.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
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.
19
<PAGE>
Notes to Financial Statements/December 31, 1998
- --------------------------------------------------------------------------------
NOTE 2. ACCOUNTING POLICIES - CONT.
- --------------------------------------------------------------------------------
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 fee 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 the 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 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 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 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.
Other: Corporate actions are recorded on the ex-date. 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 underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
- --------------------------------------------------------------------------------
Management fee: Colonial Management Associates, Inc. (the Advisor) is the
investment Advisor of the Fund and furnishes accounting and other services and
office facilities for a monthly fee equal to 0.80% annually of the Fund's
average net assets.
Bookkeeping fee: The Advisor provides bookkeeping and pricing services for
$27,000 per year plus 0.035% of the Fund's average net assets over $50 million.
20
<PAGE>
Notes to Financial Statements/December 31, 1998
- --------------------------------------------------------------------------------
Transfer agent: Liberty Funds Services, Inc., formerly Colonial Investors
Service Center, Inc. (the Transfer Agent), an affiliate of the Advisor, provides
shareholder services for a monthly fee equal to 0.236% annually of the Fund's
average net assets and receives reimbursement for certain out-of-pocket
expenses.
Effective October 1, 1997, and continuing through September 1998, the Transfer
Agent fee was reduced by 0.0012% in cumulative monthly increments, resulting in
a decrease in the fee from 0.25% to 0.236% annually.
Underwriting discounts, service and distribution fees: Liberty Funds
Distributor, Inc., formerly Liberty Financial Investments, Inc. (the
Distributor), a subsidiary of the Advisor, is the Fund's principal underwriter.
For the six months ended December 31, 1998, the Fund has been advised that the
Distributor retained net underwriting discounts of $72,203 on sales of the
Fund's Class A shares and received contingent deferred sales charges (CDSC) of
$526,464, $16,778, and $41,035 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 attributable to
Class A, Class B, and Class C, 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 shares 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 4. PORTFOLIO INFORMATION
- --------------------------------------------------------------------------------
Investment activity: During the six months ended December 31, 1998, purchases
and sales of investments, other than short-term obligations, were $239,957,821
and $132,475,517, respectively.
Unrealized appreciation (depreciation) at December 31, 1998, based on cost of
investments for federal income tax purposes was approximately:
Gross unrealized appreciation $ 161,774,000
Gross unrealized depreciation (97,722,000)
---------------
Net unrealized appreciation $ 64,052,000
---------------
Other: The Fund may focus its investments in certain industries, subjecting it
to greater risk than a fund that is more diversified.
21
<PAGE>
Notes to Financial Statements/December 31, 1998
- --------------------------------------------------------------------------------
NOTE 5. LINE OF CREDIT
- --------------------------------------------------------------------------------
The Fund may borrow up to 33 1/3% of its net assets under a line of credit for
temporary or emergency purposes. Any borrowings bear interest at one of the
following options determined at the inception of the loan: (1) federal funds
rate plus 1/2 of 1%, (2) the lending bank's base rate or (3) IBOR offshore loan
rate plus 1/2 of 1%. There were no borrowings under the line of credit during
the six months ended December 31, 1998.
NOTE 6. RESULTS OF SPECIAL MEETING OF SHAREHOLDERS
- --------------------------------------------------------------------------------
An adjourned Special Meeting of Shareholders of the Fund was held on November
13, 1998, to approve the following items, all as described in the Proxy
Statement for the Meeting. On August 21, 1998, the record date for the Meeting,
the Fund had outstanding 25,318,672 shares of beneficial interest. The votes
cast at the Meeting were as follows:
Authority
For Withheld
--- --------
To elect a Board of Trustees:
Robert J. Birnbaum 12,343,374 616,835
Tom Bleasdale 12,359,092 601,117
John Carberry 12,368,762 591,446
Lora S. Collins 12,363,235 596,974
James E. Grinnell 12,356,824 603,385
Richard W. Lowry 12,368,208 592,000
Salvatore Macera 12,356,157 604,052
William E. Mayer 12,369,125 591,083
James L. Moody, Jr. 12,364,646 595,563
John J. Neuhauser 12,369,445 590,764
Thomas E. Stitzel 12,366,865 593,343
Robert L. Sullivan 12,348,044 612,166
Anne-Lee Verville 12,361,524 598,685
To approve policies for a master fund/feeder fund structure:
For Against Abstain
--- ------- -------
9,167,861 52,017 756,842
To amend fundamental investment policies regarding borrowing and lending:
For Against Abstain
--- ------- -------
9,235,420 425,123 716,176
22
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
(Unaudited)
Six months ended December 31
-------------------------------------------------------------
1998
Class A Class B Class C Class Z
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 34.210 $ 32.670 $ 33.590 $ 34.490
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
loss (a) (0.063) (0.163) (0.167) (0.026)
Net realized and
unrealized loss (4.147) (3.957) (4.083) (4.174)
----------- ----------- ----------- -----------
Total from Investment
Operations (4.210) (4.120) (4.250) (4.200)
----------- ----------- ----------- -----------
Net asset value -
End of period $ 30.000 $ 28.550 $ 29.340 $ 30.290
=========== =========== =========== ===========
Total return (b)(c) (12.31)% (12.61)% (12.65)% (12.18)%
=========== =========== =========== ===========
RATIOS TO AVERAGE NET ASSETS
Expenses (d)(e) 1.43% 1.18% 2.18% 1.18%
Net investment
loss (d)(e) (0.44)% (1.19)% (1.19)% (0.19)%
Portfolio turnover (c) 19% 19% 19% 19%
Net assets at end
of period (000) $ 401,171 $ 348,062 $ 38,455 $ 9,118
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(c) Not annualized.
(d) The benefits derived from custody credits and directed brokerage arrange-
ments had no impact.
(e) Annualized.
23
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended June 30
----------------------------------------------------------
1998
Class A Class B Class C (b) Class Z
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 30.570 $ 29.490 $ 30.240 $ 30.740
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income (loss) (a) (0.096) (0.338) (0.348) (0.010)
Net realized and
unrealized gain 5.786 5.568 5.748 5.810
----------- ----------- ----------- -----------
Total from Investment
Operations 5.690 5.230 5.400 5.800
----------- ----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net realized
gains (2.025) (2.025) (2.025) (2.023)
----------- ----------- ----------- -----------
In excess of net
realized gains (0.025) (0.025) (0.025) (0.027)
----------- ----------- ----------- -----------
Total Distributions
Declared to Shareholders (2.050) (2.050) (2.050) (2.050)
----------- ----------- ----------- -----------
Net asset value -
End of period $ 34.210 $ 32.670 $ 33.590 $ 34.490
=========== =========== =========== ===========
Total return (c) 18.95% 18.05% 18.17% 19.21%
=========== =========== =========== ===========
RATIOS TO AVERAGE NET ASSETS
Expenses (d) 1.42% 2.17% 2.17% 1.17%
Net investment
income (loss) (d) (0.28)% (1.03)% (1.03)% (0.03)%
Portfolio turnover 35% 35% 35% 35%
Net assets at end
of period (000) $ 401,929 $ 370,699 $ 38,562 $ 6,298
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Class D shares were redesignated Class C shares on July 1, 1997.
(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 arrange-
ments had no impact.
24
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Year ended June 30
------------------------------------------------------------
1997
Class A Class B Class C (b) Class Z
----------- ----------- ----------- -----------
$ 26.480 $ 25.770 $ 26.400 $ 26.550
----------- ----------- ----------- -----------
(0.003) (0.199) (0.208) 0.065
5.073 4.899 5.028 5.105
----------- ----------- ----------- -----------
5.070 4.700 4.820 5.170
----------- ----------- ----------- -----------
(0.980) (0.980) (0.980) (0.980)
- - - -
----------- ----------- ----------- -----------
(0.980) (0.980) (0.980) (0.980)
----------- ----------- ----------- -----------
$ 30.570 $ 29.490 $ 30.240 $ 30.740
=========== =========== =========== ===========
19.54% 18.63% 18.64% 19.87%
=========== =========== =========== ===========
1.32% 2.07% 2.07% 1.07%
(0.01)% (0.76)% (0.76)% 0.24%
54% 54% 54% 54%
$ 131,151 $ 178,234 $ 8,194 $ 4,825
25
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended June 30
------------------------------------------------------------------------
1996
Class A Class B Class C(b) Class Z(c)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 22.260 $ 21.840 $ 22.550 $ 24.790
------------- ------------- ------------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income (loss) (a) 0.036(d) (0.147)(d) (0.072)(d)) 0.096(d)
Net realized and
unrealized gain 5.479 5.372 3.922 2.959
------------- ------------- ------------- -------------
Total from Investment
Operations 5.515 5.225 3.850 3.055
------------- ------------- ------------- -------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net realized
gains (1.295) (1.295) - (1.295)
------------- ------------- ------------- -------------
Net asset value -
End of period $ 26.480 $ 25.770 $ 26.400 $ 26.550
============= ============= ============= =============
Total return (e) 25.31% 24.44% 17.07%(f) 12.81%(f)
============= ============= ============= =============
RATIOS TO AVERAGE NET ASSETS
Expenses 1.38%(g) 2.13%(g) 2.15%(g)(h) 1.13%(g)(h)
Net investment
income (loss) 0.15%(g) (0.60)%(g) (0.54%)(g)(h) 0.41%(g)(h)
Portfolio turnover 46% 46% 46% 46%
Net assets at end
of period (000) $ 89,924 $ 96,158 $ 2,585 $ 3,616
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Class C shares were initially offered on January 15, 1996. Per share data
reflects activity from that date.
(c) Class Z shares were initially offered on July 31, 1995. Per share data
reflects activity from that date.
(d) Includes distribution from Advo, Inc., which amounted to $0.047 per share.
(e) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(f) Not annualized
(g) The benefits derived from custody credits and directed brokerage arrange-
ments had no impact. Prior years' ratios are net of benefits received, if
any.
(h) Annualized.
26
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Year ended June 30
------------------------------------------------------------
1995 1994
Class A Class B Class A Class B
---------- ---------- ---------- ----------
$ 16.670 $ 16.470 $ 15.860 $ 15.790
---------- ---------- ---------- ----------
0.002 (0.139) (0.047) (0.176)
5.588 5.509 0.857 0.856
---------- ---------- ---------- ----------
5.590 5.370 0.810 0.680
---------- ---------- ---------- ----------
- - - -
---------- ---------- ---------- ----------
$ 22.260 $ 21.840 $ 16.670 $ 16.470
========== ========== ========== ==========
33.53% 32.60% 5.11% 4.31%
========== ========== ========== ==========
1.45% 2.20% 1.56% 2.31%
0.01% (0.74)% (0.27)% (1.02)%
64% 64% 35% 35%
$ 40,661 $ 29,458 $ 24,760 $ 8,489
27
<PAGE>
SHAREHOLDER SERVICES
TO MAKE INVESTING EASIER
Your Fund has one of the most extensive selections of shareholder services
available. Your financial advisor can help you arrange for any of these
services, or you can call Liberty Funds Services directly at 1-800-345-6611.
Affordable Additional Investments: Add to your account with as little as $50 on
most funds; $25 for an IRA account.
Free Exchanges(1): Exchange all or part of your account into the same share
class of another fund distributed by Liberty Funds Distributor, Inc. by phone or
mail.
Easy Access to Your Money(1): Make withdrawals from your account by phone, by
mail or, for certain funds, by check.
One-Year Reinstatement Privilege: If you need access to your money, but then
choose to return it within one year, you can reinvest in any fund distributed by
Liberty Funds Distributor of the same share class without any penalty or sales
charge.
Fundamatic: Make periodic investments as low as $50 from your checking account
to your Fund account.
Systematic Withdrawal Plan (SWP): Receive monthly, quarterly or semiannual
payments via check or bank transmission. There is a $5,000 account value
required, but no minimum for the payment amount. The maximum annual withdrawal
is 12% of account balance at time SWP is established. SWPs by check are
processed on the 10th calendar day of each month unless the 10th falls on a
non-business day or the first business day of the week. If this occurs, the
processing date will be the previous business day. Dividends and capital gains
must be reinvested.
Automated Dollar Cost Averaging: Transfer money on a monthly basis from any fund
with a balance of $5,000 into the same share class of up to four other funds
distributed by Liberty Funds Distributor. Minimum for each transfer is $100.
Retirement Plans: Choose from a broad range of retirement plans, including IRAs.
(1) Redemptions and exchanges are made at the next determined net asset value
after the request is received by the Transfer Agent. Proceeds may be more or
less than your original cost. The exchange privilege may be terminated at any
time. Exchanges are not available on all funds. Investors who purchase Class B
or C shares, or $1 million or more of Class A shares, may be subject to a
contingent deferred sales charge.
28
<PAGE>
HOW TO REACH US
BY PHONE OR BY MAIL
BY TELEPHONE
Customer Connection - 1-800-345-6611
For 24-hour account information, call from your touch-tone phone. (Rotary
callers will be automatically connected to a representative during business
hours.) A recorded message will guide you through the menu:
For fund prices, dividends and capital gains information ............ press 1
For account information ............................................. press 2
To speak to a service representative ................................ press 3
For yield and total return information .............................. press 4
For duplicate statements or new supply of checks .................... press 5
To order duplicate tax forms and year-end statements ................ press 6
(February through May)
To review your options at any time during your call ................. press *
To speak with a shareholder services representative about your account, call
Monday to Friday, 8:00 a.m. to 8:00 p.m. ET, and Saturdays from February through
mid-April, 10:00 a.m. to 2:00 p.m. ET.
Telephone Transaction Department - 1-800-422-3737
To purchase, exchange or sell shares by telephone, call Monday to Friday, 9:00
a.m. to 7:00 p.m. ET. Transactions received after the close of the New York
Stock Exchange will receive the next business day's closing price.
Literature - 1-800-426-3750
To request literature on any fund distributed by Liberty Funds Distributor,
Inc., call Monday to Friday, 8:30 a.m. to 6:30 p.m. ET.
BY MAIL
Liberty Funds Services, Inc.
P.O. Box 1722
Boston, MA 02105-1722
29
<PAGE>
SHAREHOLDER COMMUNICATIONS
TO KEEP YOU INFORMED
To make recordkeeping easy and keep you up-to-date on the performance of your
investments, you can expect to receive the following information about your
account:
Transaction Confirmations: Each time you make a purchase, sale or exchange, you
receive a confirmation statement within just a few days.
Quarterly Statements: Every three months, if any transactions are made that
affect your share balance, this statement reports on your account activity
during the quarter (including any reinvestment of dividends). This statement
also provides year-to-date information.
Liberty Funds Distributor Investor Opportunities: Mailed with your quarterly
account statements, this newsletter highlights timely investment strategies,
portfolio manager commentary and shareholder service updates.
Tax Forms and Year-End Tax Guide: Easy-to-use forms and timely information are
designed to make tax reporting simpler. (Usually mailed in January.)
Average Cost Basis Statements: If you sold or exchanged shares during the year,
this statement may help you calculate your gain/loss for tax purposes. (Usually
mailed in February.)
30
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Small Cap Value Fund is:
Liberty Funds Services, Inc.*
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial Small Cap Value 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 Small Cap Value 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 the most recent copy of our
Performance Update.
* Effective October 1, 1998, Colonial Investors Service Center, Inc. -- the
Transfer Agent for Colonial, Crabbe Huson, Newport and Stein Roe Advisor Funds
- -- changed its name to Liberty Funds Services, Inc.
31
<PAGE>
- --------------------------------------------------------------------------------
TRUSTEES
ROBERT J. BIRNBAUM
Consultant (formerly Special Counsel, Dechert, Price & Rhoads; President and
Chief Operating Officer, New York Stock Exchange, Inc.; President, American
Stock Exchange, Inc.)
TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
JOHN CARBERRY
Senior Vice President of Liberty Financial Companies, Inc. (formerly Managing
Director, Salomon Brothers)
LORA S. COLLINS
Attorney (formerly Attorney, Kramer, Levin, Naftalis & Frankel)
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
SALVATORE MACERA
Private Investor (formerly Executive Vice President of Itek Corp. and President
of Itek Optical & Electronic Industries, Inc.)
WILLIAM E. MAYER
Partner, Development Capital, LLC (formerly Dean, College of Business and
Management, University of Maryland; Dean, Simon Graduate School of Business,
University of Rochester; Chairman and Chief Executive Officer, CS First Boston
Merchant Bank; and President and Chief Executive Officer, The First Boston
Corporation)
JAMES L. MOODY, JR.
Retired (formerly Chairman of the Board, Chief Executive Officer and Director,
Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
THOMAS E. STITZEL
Professor of Finance, College of Business, Boise State University; Business
Consultant and Author
ROBERT L. SULLIVAN
Retired Partner, KPMG LLP (formerly Management Consultant, Saatchi and Saatchi
Consulting Ltd. and Principal and International Practice Director, Management
Consulting, Peat Marwick Main & Co.)
ANNE-LEE VERVILLE
Consultant (formerly General Manager, Global Education Industry, and President,
Applications Solutions Division, IBM Corporation)
[LOGO] LIBERTY
COLONIAL 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
Visit us at www.libertyfunds.com SC-03/339G-1298 (2/99) 99/119
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