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Columbia Funds Trust III · N-30D · For 4/30/97

Filed On 7/1/97 · SEC File 811-00881 · Accession Number 21847-97-81

  As Of               Filer                 Filing     On/For/As Docs:Pgs

 6/30/97  Columbia Funds Trust III          N-30D       4/30/97    1:31

Annual or Semi-Annual Report Mailed to Shareholders · Rule 30d-1
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: N-30D       Annual or Semi-Annual Report Mailed to                31±   136K 
                          Shareholders                                           

N-30D 1st "Page" of 20 TOC Top Previous Next Bottom Just 1st
 Sponsored Ads...







 -------------------
 THE
 COLONIAL FUND
 -------------------

 SEMIANNUAL REPORT
APRIL 30, 1997

[Graphic Omitted] 

NOT FDIC-    MAY LOSE VALUE   
INSURED      NO BANK GUARANTEE

N-30D 2nd "Page" of 20 TOC 1st Previous Next Bottom Just 2nd

--------------------------------------------------------------------------------
THE COLONIAL FUND HIGHLIGHTS
 NOVEMBER 1, 1996 - APRIL 30, 1997

INVESTMENT OBJECTIVE: The Colonial Fund seeks primarily income and capital      
growth and, secondarily, capital preservation.                                  

THE FUND IS DESIGNED TO OFFER:                                                  
|X| Long-term investment returns                                            
|X| Above-average value for their dollars                                   
|X| Reasonable protection in down markets and broad diversification         
|X| Quarterly dividend income                                               

PORTFOLIO MANAGER COMMENTARY: "Today, the old investing 'rules' don't really    
apply in the new, worldwide market environment. As value investors, we used to  
seek out utility and financial stocks. The value stocks we're researching today 
may well be service-oriented firms and franchises, not the former industrial    
giants of recent years."                                                        
--Portfolio Managers Dan Rie, James P. Haynie and Gordon Johnson

THE COLONIAL FUND PERFORMANCE*

--------------------------------------------------------------------------------
                                                   CLASS A         CLASS B
  Inception dates                                  4/30/82*         5/5/92
--------------------------------------------------------------------------------
  Six-month distributions declared per share        $0.643          $0.606
--------------------------------------------------------------------------------
  Six-month total returns, assuming                  7.71%           7.19%
reinvestment of all distributions                                     
and no sales charge or contingent                                     
deferred sales charge (CDSC)                                          
--------------------------------------------------------------------------------
  Net asset value per share at 4/30/97               $9.54           $9.52
--------------------------------------------------------------------------------
* Date Fund adopted current investment policies.                                

For more information about Class Z shares performance, please call Colonial at  
1-800-426-3750.                                                                 

TOP FIVE EQUITY HOLDINGS**                                                      
(as of 4/30/97)                                                                 
--------------------------------------------------------------------------------
1. Textron, Inc. ...................................................        2.9%
2. Johnson & Johnson Co. ...........................................        2.7%
3. CIGNA Corp. .....................................................        2.7%
4. American Brands, Inc. ...........................................        2.3%
5. Bristol-Myers Squibb ............................................        2.3%

TOP FIVE SECTORS**+                                                             
(as of 4/30/97)                                                                 
--------------------------------------------------------------------------------
1. Financials ......................................................       21.6%
2. Energy/Natural Resources ........................................       11.8%
3. Health Care .....................................................        9.8%
4. Technology ......................................................        8.5%
5. Capital Goods ...................................................        8.4%

** Holdings and sector breakdowns are calculated as a percentage of total net   
assets. Because the Fund is actively managed, there can be no guarantee the Fund
will continue to hold these securities or invest in these sectors in the future.

+ 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 used in the investment process.                

N-30D 3rd "Page" of 20 TOC 1st Previous Next Bottom Just 3rd

 PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS

I'm pleased to present your Fund's semiannual report, for the six month period  
ended April 30, 1997. Even as this is written, the investment environment in the
U.S. remains quite positive.                                                    

                                                     [PHOTO OF HAROLD W. COGGER]

Putting things in some perspective, U.S. stock markets are now in the midst of  
their 12th quarter of increased value. Just over two years ago, in February     
1995, the Dow Jones Industrial Average (DJIA) reached the 4,000 level. Now,     
we've already surpassed the 7,700 mark. The DJIA is widely quoted and a popular 
indicator of the stock market's health. Newer investors, who have never         
experienced a down market, may begin to feel that "the ride will never end."    
However, though we don't envision any investment shocks, risk always goes       
hand-in-hand with the potential for returns.                                    

With Colonial's "New Value" investment strategy, active risk management has     
become an integral part of this Fund, as the portfolio management team discusses
in the following pages. The Fund seeks out investments with low volatility and  
risk factors. Formerly restrictive investment criteria have been broadened to   
increase return potential while better managing risk.                           

The economic outlook is good -- with inflation under control and economic growth
quite strong, and visible in many areas. Operating in this relatively cloud-free
environment, your Fund's value stocks should continue to provide good returns --
with a well-diversified portfolio that has both domestic and foreign stock and  
bond investments.                                                               

Now, let's look at the detailed information on your Fund's performance          
--including a talk with your portfolio management team. Your continued          
confidence in the Fund is sincerely appreciated. We know you have many choices  
-- and welcome the opportunity of being selected to serve your investment needs.

Respectfully,                                                                   

/s/ Harold W. Cogger                                                            
Harold W. Cogger                                                        
President                                                                       
June 13, 1997                                                                   

Because market conditions change frequently, there can be no assurance that the 
trends described will continue, come to pass or affect Fund performance.        

N-30D 4th "Page" of 20 TOC 1st Previous Next Bottom Just 4th

 PORTFOLIO MANAGEMENT REPORT

DANIEL RIE, JAMES P. HAYNIE AND GORDON JOHNSON co-manage The Colonial Fund. Dr. 
Rie is Senior Vice President and Director of the Adviser (Colonial Management   
Associates, Inc.) and head of Colonial's Equity Group. He has managed or        
co-managed the Fund since 1993. Messrs. Haynie and Johnson, Vice Presidents of  
the Adviser, have co-managed The Colonial Fund since earlier this year.         

"HOW WE LOOK FOR NEW VALUE..."                                                  

Your Fund is diversified in two distinct ways: first, we have U.S. stocks,      
foreign stocks and U.S. Government bond investments. We search for investments  
in three distinct categories:                                                   

|X| companies whose current business activities provide dividends or assets that
represent above average value for each dollar invested;                 

|X| companies whose business activities are concentrated in industries or       
    business strategies which are expected to provide above average stability or
value in turbulent markets;                                             

|X| companies with anticipated business growth prospects that represent above   
average value for each dollar invested.                                 

This is what we call "New Value," and we feel it's a philosophy that adds to the
Fund's stability in uncertain markets. The market may change dramatically, but a
company's inherent value should remain stable and predictable.                  

Being price-sensitive investment managers also protect us from the natural      
inclination to overpay for a "growth stock." Patiently, we search for value and 
try to manage the Fund with relatively low risk, through a disciplined stock    
market strategy. We know our investors are like us -- conservative, and a bit   
defensive.                                                                      

"WE REALIZE VALUE -- AND SELL WHEN VALUE CHANGES."                              

We are always watchful and alert as new information surfaces, companies merge   
and outlooks change. Instead of trading for profits, we realize value, and      
reduce or sell the holding when it has met its objective.                       

Today, finding real and continuing value is more important than the industry,   
the "name" of the company or its past reputation. Today's value stocks are not  
just utilities and financial powerhouses -- they can can be found on NASDAQ or  
in the Fortune 500. We search for value in these markets and around the world.  

"...VERY GOOD POTENTIAL...U.S. AND WORLDWIDE.."                                 

Though we've cut back somewhat on utility and financial stocks during the       
period, we've invested a bit more in technology issues, in anticipation of a    
rebound in this area. With the economy itself continuing to demonstrate         
strength, we've also moved into additional basic industry and consumer stocks.  
Our foreign holdings haven't risen much, though we're keeping an eye on new     
values developing in Europe.                                                    

Our look ahead shows very good potential for both the U.S. and worldwide        
markets. We'll continue to search for new opportunities, wherever they may be.  

THE COLONIAL FUND INVESTMENT PERFORMANCE VS.
 STANDARD & POOR's 500 INDEX
 Change in Value of $10,000 from 4/30/87 - 4/30/97
 Based on NAV and MOP for Class A Shares

--------------------------------------------------------------------------------

  NAV       MOP            S&P 500
--------------------------------------------------------------------------------
Apr 30, 87               10,000     9,425         10,000                        
Jul 31, 87               10,644    10,032         11,133                        
Oct 31, 87                8,787     8,281          8,863                        
Jan 31, 88                9,366     8,827          9,119                        
Apr 30, 88               10,109     9,528          9,350                        
Jul 31, 88               10,450     9,849          9,824                        
Oct 31, 88               10,860    10,236         10,171                        
Jan 31, 89               11,375    10,721         10,946                        
Apr 30, 89               11,942    11,256         11,489                        
Jul 31, 89               12,908    12,166         12,957                        
Oct 31, 89               12,724    11,992         12,851                        
Jan 31, 90               12,350    11,640         12,526                        
Apr 30, 90               12,445    11,730         12,698                        
Jul 31, 90               12,114    12,360         13,796                        
Oct 31, 90               11,301    10,651         11,890                        
Jan 31, 91               12,674    11,945         13,574                        
Apr 30, 91               13,788    12,995         14,931                        
Jul 31, 91               14,460    13,628         15,552                        
Oct 31, 91               14,831    13,978         15,863                        
Jan 31, 92               15,570    14,675         16,648                        
Apr 30, 92               16,170    15,240         17,021                        
Jul 31, 92               16,531    15,580         17,538                        
Oct 31, 92               16,262    15,327         17,441                        
Jan 31, 93               17,703    16,686         18,407                        
Apr 30, 93               18,169    17,124         18,591                        
Jul 31, 93               18,706    17,630         19,065                        
Oct 31, 93               19,548    18,424         20,041                        
Jan 31, 94               20,454    19,278         20,773                        
Apr 30, 94               19,470    18,351         19,577                        
Jul 31, 94               19,513    18,391         20,048                        
Oct 31, 94               19,694    18,561         20,814                        
Jan 31, 95               19,554    18,429         20,882                        
Apr 30, 95               21,432    20,200         22,991                        
Jul 31, 95               23,426    22,079         25,274                        
Oct 31, 95               23,972    22,593         26,311                        
Jan 31, 96               25,653    24,178         28,946                        
Apr 30, 96               26,444    24,923         29,931                        
Jul 31, 96               25,465    24,001         29,457                        
Oct 31, 96               27,834    26,233         32,647                        
Jan 31, 97               29,884    28,166         36,566                        
Apr 30, 97               29,978    28,254         37,450                        

A $10,000 investment in Class B shares made on May 5, 1992 (inception), at net  
asset value (NAV) would have been valued at $17,762 on April 30, 1997. The same 
investment after deducting the applicable contingent deferred sales charge      
(CDSC) would have grown to $17,562 by April 30, 1997. The Standard & Poor's 500 
Index is an unmanaged index that tracks the performance of the U.S. stock       
market.                                                                         

N-30D 5th "Page" of 20 TOC 1st Previous Next Bottom Just 5th

AVERAGE ANNUAL TOTAL RETURNS
 As of 3/31/97 (Most Recent Quarter End)

--------------------------------------------------------------------------------
                      CLASS A SHARES                  CLASS B SHARES
                  Objective Change 4/30/82*           Inception 5/5/92
                      NAV                 MOP             NAV           w/CDSC
--------------------------------------------------------------------------------
1 YEAR                11.16%               4.77%         10.34%          5.34%  
--------------------------------------------------------------------------------

5 YEARS               12.94               11.61             --             --   
--------------------------------------------------------------------------------
10 YEARS              10.89               10.23             --             --   
--------------------------------------------------------------------------------

SINCE INCEPTION/                                                                
OBJECTIVE CHANGE      15.00               14.54          11.56          11.29   
--------------------------------------------------------------------------------

* Date Fund adopted current investment objective.                               

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. Net asset value (NAV) returns do not      
include sales charges or contingent deferred sales charges (CDSC). Maximum      
offering price (MOP) returns include the maximum sales charge of 5.75%. The CDSC
returns reflect charges 5% for one year; and 2% since inception. Performance for
different share classes will vary based on differences in sales charges and fees
associated with each class.                                                     

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INVESTMENT PORTFOLIO
APRIL 30, 1997 (UNAUDITED, IN THOUSANDS)

                                                        · Enlarge/Download Table

COMMON STOCK - 90.9%                         COUNTRY       SHARES          VALUE      
--------------------------------------------------------------------------------      
                                                                                      
AGRICULTURE, FORESTRY & FISHING  - 0.5%                                               
  AGRICULTURE - CROPS - 0.5%                                                          
  RJR Nabisco Holdings Corp.                                    191       $5,694      
                                                                       ---------      

  FORESTRY - 0.0%                                                                     
  Deltic Timber Corp.                                            14          363      
                                                                       ---------      

--------------------------------------------------------------------------------      
CONSTRUCTION - 1.2%                                                                   
  BUILDING CONSTRUCTION - 1.0%                                                        
  Centex Corp.                                                   86        3,100      
  GTM Entrepose SA                                  Fr            8          482      
  Koninklijke Volker Stevin NV                      Ne           74        8,439      
  Lennar Corp.                                                   53        1,424      
                                                                       ---------      
                                                                          13,445      
                                                                       ---------      

  HEAVY CONSTRUCTION-NON BUILDING CONSTRUCTION -0.2                                   
  Cubiertas y Mzov SA                               Sp           20        2,012      
                                                                       ---------      

--------------------------------------------------------------------------------      
FINANCE, INSURANCE & REAL ESTATE - 21.8%                                              
  DEPOSITORY INSTITUTIONS - 5.1%                                                      
  Amsouth Bancorporation                                         67        3,523      
  Astoria Financial Corp.                                        85        3,333      
  Banco de Santander SA                             Sp           18        1,355      
  Bank of Montreal                                  Ca          398       14,442      
  Banque Nationale de Belgique                      Be            1        1,716      
  Canadian Imperial Bank of Commerce                Ca          547       12,555      
  Collective Bancorp, Inc.                                       27        1,087      
  First Empire State Corp.                                        4        1,288      
  First Financial Corp.                                          17          452      
  Greenpoint Financial Corp.                                     57        3,179      
  H.F. Ahmanson & Co.                                           120        4,579      
  National Australia Bank Ltd.                      Au        1,000       13,709      
  Nations Bank Corp.                                             37        2,246      
  Standard Federal Bancorporation                                20        1,172      
  Synovus Financial Corp.                                        29          706      
  Toronto Dominion Bank                             Ca           50        1,413      
                                                                       ---------      
                                                                          66,755      
                                                                       ---------      

  HOLDING COMPANIES - 1.1%                                                            
  Fortis Amev NV                                    Ne          247        9,303      
  Sofina SA                                         Be            8        5,294      
                                                                       ---------      
                                                                          14,597      
                                                                       ---------      

  INSURANCE AGENTS & BROKERS - 0.1%                                                   
  Acordia, Inc.                                     19          585          585      
                                                                       ---------      

  INSURANCE CARRIERS - 8.5%                                                           
  Allstate Corp.                                                261       17,085      
  American Bankers Insurance Group, Inc.                        154        8,143      
  CNA Financial Corp. (a)                                        16        1,580      
  Cigna Corp.                                                   235       35,308      
  Loews Corp.                                                   220       20,213      
  Old Republic International Corp.                              195        5,513      
  Orion Capital Corp.                                            14          900      
  Providian Corp.                                                82        4,707      
  Safeco Corp.                                                   98        3,928      
  Sunamerica, Inc.                                              117        5,400      
  USLife Corp.                                                  157        7,629      
                                                                       ---------      
                                                                         110,406      
                                                                       ---------      

  NONDEPOSITORY CREDIT INSTITUTIONS - 1.0%                                            
  Aames Financial Corp.                                         129        1,983      
  Green Tree Financial Corp.                                    288        8,544      
  The Money Store, Inc.                                         114        2,472      
                                                                       ---------      
                                                                          12,999      
                                                                       ---------      

  REAL ESTATE - 0.3%                                                                  
  New World Development Co., Ltd.                   HK          500        2,885      
  Societe Francaise d'Investissements                                                 
   Immobiliers et de Gestion                        Fr            4          333      
  Stewart Enterprises, Inc.                                      23          763      
                                                                       ---------      
                                                                           3,981      
                                                                       ---------      

  REAL ESTATE INVESTMENT TRUSTS - 0.0%                                                
  Manufactured Home Communities, Inc.                            31          641      
                                                                       ---------      

  SECURITY BROKERS & DEALERS - 5.7%                                                   
  A.G. Edwards, Inc.                                            432       15,122      
  Alex Brown, Inc.                                              303       19,505      
  Bear Stearns Co., Inc.                                         89        2,729      
  Merrill Lynch & Co., Inc.                                     183       17,450      
  Paine Webber Group, Inc.                                      244        8,303      
  Salomon, Inc.                                                 213       10,660      
                                                                       ---------      
                                                                          73,769      
                                                                       ---------      

--------------------------------------------------------------------------------      
MANUFACTURING - 44.6%                                                                 
  CHEMICALS & ALLIED PRODUCTS - 9.2%                                                  
  Akzo Nobel NV ADR                                              63        4,120      
  American Home Products Corp.                                   31        2,047      
  Biomet Inc. (a)                                                30          456      
  Bristol-Myers Squibb Co.                                      449       29,410      
  Dexter Corp.                                                   21          612      
  Dura Pharmaceuticals, Inc. (a)                                 20          580      
  Ethyl Corp.                                                   190        1,734      
  International Specialty Products, Inc. (a)                     40          520      
  Johnson & Johnson                                             579       35,439      
  Jones Medical Industries, Inc.                                 71        2,499      
  Merck & Co., Inc.                                             240       21,720      
  Norsk Hydro A.S                                                30        1,451      
  Pfizer, Inc.                                                  132       12,691      
  Rhone-Poulenc Rorer, Inc.                                      97        7,018      
                                                                       ---------      
                                                                         120,297      
                                                                       ---------      

  ELECTRONIC & ELECTRICAL EQUIPMENT - 0.5%                                            
  CTS Corp.                                                      21        1,313      
  Cooper Industries, Inc.                                        80        3,680      
  Helen of Troy Ltd. (a)                                         33          767      
  Sci Systems Inc. (a)                                           17        1,074      
                                                                       ---------      
                                                                           6,834      
                                                                       ---------      

  FABRICATED METAL - 0.3%                                                             
  Harsco Corp.                                                  110        4,064      
                                                                       ---------      

  FOOD & KINDRED PRODUCTS - 2.5%                                                      
  Archer Daniels Midland Co.                                    862       15,840      
  Bongrain SA                                       Fr          (b)          151      
  Flowers Industries, Inc.                                       60        1,455      
  Heinz (H.J.) Co.                                               35        1,432      
  IBP, Inc.                                                     529       12,564      
  Korn-OG Foderstof Kompagniet AS                   De           45        1,386      
  Lancaster Colony Corp.                                          5          206      
                                                                       ---------      
                                                                          33,034      
                                                                       ---------      

  FURNITURE & FIXTURES - 0.1%                                                         
  Herman Miller, Inc.                                            20          635      
                                                                       ---------      

  MACHINERY & COMPUTER EQUIPMENT - 4.1%                                               
  Bucher Holding                                    Sz            6        5,815      
  Compaq Computer Corp. (a)                                      51        4,346      
  Cummins Engine Co., Inc.                                       96        5,366      
  Diebold, Inc.                                                  39        1,290      
  Gateway 2000, Inc. (a)                                         28        1,514      
  Hewlett-Packard Co.                                            43        2,268      
  Kaydon Corp.                                                   28        1,217      
  Pentair, Inc.                                                  10          299      
  Pitney Bowes, Inc.                                             19        1,216      
  Sun Microsystems, Inc. (a)                                    532       15,328      
  Tandem Computers, Inc. (a)                                      5           64      
  Timken Co.                                                     46        2,697      
  Tyco International Ltd.                                       170       10,339      
  Western Digital Corp. (a)                                      18        1,134      
                                                                       ---------      
                                                                          52,893      
                                                                       ---------      

  MEASURING & ANALYZING INSTRUMENTS - 0.6%                                            
  Litton Industries, Inc. (a)                                    40        1,686      
  Tektronix, Inc.                                               120        6,468      
                                                                       ---------      
                                                                           8,154      
                                                                       ---------      

  MISCELLANEOUS MANUFACTURING - 1.2%                                                  
  Callaway Golf Co.                                             536       16,010      
                                                                       ---------      

  PAPER PRODUCTS - 0.1%                                                               
  Avery Dennison Corp.                                           29        1,066      
  Fort Howard Corp. (a)                                          25          861      
                                                                       ---------      
                                                                           1,927      
                                                                       ---------      

  PETROLEUM REFINING - 11.5%                                                          
  Amerada Hess Corp.                                            312       15,161      
  Amoco Corp.                                                    88        7,376      
  Atlantic Richfield Co.                                        160       21,780      
  British Petroleum Co., PLC                                     13        1,793      
  Elcor Corp.                                                    59        1,549      
  Exxon Corp.                                                   374       21,178      
  Kerr-McGee Corp.                                              196       11,840      
  Mobil Corp.                                                    54        6,981      
  Murphy Oil Corp.                                               57        2,484      
  Pennzoil Co.                                                   99        4,895      
  Phillips Petroleum Co.                                        733       28,866      
  USX-Marathon Group                                            410       11,329      
  Unocal Corp.                                                  380       14,503      
                                                                      ----------      
                                                                         149,735      
                                                                      ----------      

  PRIMARY METAL - 0.4%                                                                
  AK Steel Holdings Corp.                                        43        1,562      
  Asarco, Inc.                                                   87        2,471      
  LTV Corp.                                                      70          919      
                                                                       ---------      
                                                                           4,952      
                                                                       ---------      

  PRIMARY SMELTING - 2.0%                                                             
  Phelps Dodge Corp.                                            341       26,149      
                                                                       ---------      

  PRINTING & PUBLISHING - 0.3%                                                        
  CSS Industries, Inc. (a)                                       25          809      
  New York Times Co., Class A                                    20          865      
  Standard Register Co.                                          74        2,423      
                                                                       ---------      
                                                                           4,097      
                                                                       ---------      

  RUBBER & PLASTIC - 1.4%                                                             
  Cooper Tire & Rubber Co.                                       60        1,311      
  Goodyear Tire & Rubber Co.                                    253       13,303      
  Nike, Inc., Class B                                             6          326      
  Wynn's International, Inc.                                    158        3,800      
                                                                       ---------      
                                                                          18,740      
                                                                       ---------      

  TEXTILE MILL PRODUCTS - 0.1%                                                        
  Springs Industries, Inc.                                       22        1,043      
                                                                       ---------      

  TOBACCO PRODUCTS - 2.3%                                                             
  American Brands, Inc.                                         553       29,735      
                                                                       ---------      

  TRANSPORTATION EQUIPMENT - 8.0%                                                     
  Arvin Industries Inc.                                          44        1,152      
  Eaton Corp.                                                    10          749      
  Ford Motor Co.                                                 99        3,440      
  General Dynamics Corp.                                        214       15,262      
  General Motors Corp.                                           70        4,045      
  Harley-Davidson, Inc.                                          80        3,160      
  MascoTech, Inc.                                                 5           96      
  McDonnell Douglas Corp.                                       125        7,422      
  Paccar, Inc.                                                   20        1,377      
  Peugeot SA                                        Fr           20        1,992      
  TRW, Inc.                                                     320       16,690      
  Textron, Inc.                                                 335       37,322      
  Thiokol Corp.                                                 142        9,278      
  Toyota Motor Corp. ADR                            Ja           27        1,559      
                                                                       ---------      
                                                                         103,544      
                                                                       ---------      

--------------------------------------------------------------------------------      
MINING & ENERGY - 0.5%                                                                
  METAL MINING - 0.1%                                                                 
  Cleveland-Cliffs, Inc.                                         27        1,136      
                                                                       ---------      

  OIL & GAS EXTRACTION - 0.4%                                                         
  Helmerich & Payne                                             106        5,081      
                                                                       ---------      

--------------------------------------------------------------------------------      
RETAIL TRADE - 3.4%                                                                   
  APPAREL & ACCESSORY STORES - 0.0%                                                   
  DEB Shops, Inc.                                                14           60      
                                                                       ---------      

  FOOD STORES - 0.2%                                                                  
  Kroger Corp.  (a)                                              85        2,349      
                                                                       ---------      
  GENERAL MERCHANDISE STORES - 3.0%                                                   
  Family Dollar Stores, Inc.                                     10          261      
  Meyer (Fred), Inc.  (a)                                       101        4,137      
  Sears, Roebuck & Co.                                          511       24,509      
  Shopko Stores, Inc.                                            45          904      
  Waban, Inc. (a)                                               343        9,175      
                                                                       ---------      
                                                                          38,986      
                                                                       ---------      

  HOME FURNISHINGS & EQUIPMENT - 0.2%                                                 
  CompUSA, Inc. (a)                                             166        3,203      
                                                                       ---------      

--------------------------------------------------------------------------------      
SERVICES - 7.8%                                                                       
  BUSINESS SERVICES - 0.5%                                                            
  Omnicom Group, Inc.                                           125        6,646      
                                                                       ---------      

  COMPUTER RELATED SERVICES - 2.6%                                                    
  BMC Software, Inc. (a)                                        274       11,833      
  Cadence Design Systems, Inc. (a)                               50        1,600      
  Cognos, Inc. (a)                                              184        4,669      
  Computer Associates International, Inc.                       309       16,066      
                                                                       ---------      
                                                                          34,168      
                                                                       ---------      

  COMPUTER SOFTWARE - 2.3%                                                            
  McAfee Associates, Inc. (a)                                    30        1,672      
  Oracle Systems Corp. (a)                                      721       28,652      
                                                                       ---------      
                                                                          30,324      
                                                                       ---------      

  ENGINEERING, ACCOUNTING, RESEARCH & MANAGEMENT - 0.7%                               
  Corrections Corp. of America (a)                              156        5,080      
  International-Muller NV                           Ne          146        4,224      
                                                                       ---------      
                                                                           9,304      
                                                                       ---------      

  HEALTH SERVICES - 0.7%                                                              
  Allegiance Corp.                                               77        1,704      
  Lincare Holdings, Inc. (a)                                     58        2,273      
  Sun Healthcare Group, Inc. (a)                                140        1,976      
  Universal Health Services, Inc., Class B (a)                   83        3,143      
                                                                       ---------      
                                                                           9,096      
                                                                       ---------      

  HOTELS, CAMPS & LODGING - 0.0%                                                      
  Harbour Centre Development                        HK          416          556      
                                                                       ---------      

  MOTION PICTURES - 0.2%                                                              
  King World Productions, Inc.                                   68        2,497      
                                                                       ---------      

  PERSONAL SERVICES - 0.8%                                                            
  Service Corporation International                             297       10,186      
                                                                       ---------      

--------------------------------------------------------------------------------      
TRANSPORTATION, COMMUNICATION, ELECTRIC,                                              
 GAS & SANITARY SERVICES - 9.6%                                                       
  AIR TRANSPORTATION - 1.0%                                                           
  AMR Corp. (a)                                                  66        6,118      
  British Airways PLC  ADR                          UK            7          768      
  Delta Air Lines, Inc.                             64        5,924                   
                                                                       ---------      
                                                                          12,810      
                                                                       ---------      
  ELECTRIC, GAS & SANITARY SERVICES - 1.4%                                            
  Enova Corp.                                                   139        3,069      
  Gas y Electricidad SA                             Sp          224       11,040      
  Illinova Corp.                                                128        2,887      
  Teco Energy, Inc.                                              36          864      
  United Waste Systems, Inc. (a)                                 22          742      
                                                                       ---------      
                                                                          18,602      
                                                                       ---------      

  ELECTRIC SERVICES - 4.0%                                                            
  Allegheny Power System, Inc.                                   64        1,680      
  Carolina Power & Light Co.                                    151        5,129      
  DQE, Inc.                                                      79        2,171      
  Echelon International Corp. (a)                                 4           74      
  Florida Progress Corp.                                        110        3,367      
  Hawaiian Electric Industries, Inc.                              5          168      
  Houston Industries, Inc.                                       95        1,902      
  Nipsco Industries, Inc.                                        89        3,516      
  New England Electric System                                   126        4,286      
  New York State Electric & Gas Corp.                           180        3,780      
  Northern States Power Co.                                      60        2,739      
  Portland General Corp.                                         95        3,478      
  Public Service Enterprise Group, Inc.                         149        3,592      
  Texas Utilities Co.                                           411       13,874      
  Union Electrica Fenosa SA                         Sp          177        1,478      
                                                                       ---------      
                                                                          51,234      
                                                                       ---------      

  GAS SERVICES - 0.9%                                                                 
  Consolidated Natural Gas Co.                                  186        9,345      
  Laclede Gas Co.                                                47        1,035      
  Pacific Enterprises                                            25          765      
                                                                       ---------      
                                                                          11,145      
                                                                       ---------      

  RAILROAD - 0.2%                                                                     
  Norfolk Southern Corp.                                         31        2,795      
                                                                       ---------      

  SANITARY SERVICES - 1.6%                                                            
  Severn Trent Water PLC                            UK          403        4,937      
  United Utilities PLC                              UK        1,096       12,075      
  Yorkshire Water PLC                               UK          742        4,340      
                                                                       ---------      
                                                                          21,352      
                                                                       ---------      

  TRANSPORTATION SERVICES - 0.1%                                                      
  Cross Harbour Tunnel Co.                          HK          307          648      
                                                                       ---------      

  WATER TRANSPORTATION - 0.4%                                                         
  APL Ltd.                                          HK          115        3,369      
  Tidewater, Inc.                                                48        1,934      
                                                                       ---------      
                                                                           5,303      
                                                                       ---------      

--------------------------------------------------------------------------------      
WHOLESALE TRADE - 1.5%                                                                
  DURABLE GOODS - 1.0%                                                                
  Beers NV                                          Ne          213        6,899      
  Marshall Industries (a)                                        25          829      
  Pioneer Standard Electronics, Inc.                            399        4,886      
                                                                       ---------      
                                                                          12,614      
                                                                       ---------      

  NONDURABLE GOODS - 0.5%                                                             
  Bergen Brunswig Corp., Class A                                107        3,658      
  Nash-Finch Co.                                                 60        1,048      
  Richfood Holdings Inc.                                         66        1,345      
                                                                       ---------      
                                                                           6,051      
                                                                          ------      

  TOTAL COMMON STOCKS (cost of $905,470)                               1,183,236      
                                                                       ---------      

                                                      MATURITIES                      
BOND & NOTES - 6.9%                             COUPON       FROM/TO         PAR      
--------------------------------------------------------------------------------      
US GOVERNMENT AGENCY OBLIGATIONS - 6.8%                                               
  GOVERNMENT AGENCIES - 4.1%                                                          
  Federal National Mortgage Association,                                              
                                   6.500%     2007-2009     $54,328       52,769      
                                                                          ------      

  GOVERNMENT OBLIGATIONS - 2.7%                                                       
  U.S. Treasury Note,                                                                 
                                   7.875%     4/15/1998      35,085       35,693      
                                                                       ---------      

  TOTAL U.S. GOVERNMENT & AGENCY                                                      
     OBLIGATIONS (cost of $91,166)                                        88,462      
                                                                       ---------      

CORPORATE ADJUSTABLE RATE BONDS & NOTES - 0.1%                PAR          VALUE      
--------------------------------------------------------------------------------      
TRANSPORTATION, COMMUNICATION, ELECTRIC                                               
  GAS & SANITARY SERVICES - 0.1%                                                      
  PIPELINES                                                                           
  SFP Pipeline Holdings (c)                                                           
  (cost of $720)                  10.420%      08/15/10         600    $     726      
                                                                       ---------      
  TOTAL BONDS & NOTES (cost of $91,886)                                   89,188      
                                                                       ---------      
  TOTAL INVESTMENTS - 97.8% (cost of $997,356)(d)                      1,272,424      
                                                                       ---------      
SHORT-TERM OBLIGATIONS - 4.2%                                                         
--------------------------------------------------------------------------------      
  Repurchase agreement with Chase Securities Inc.,                                    
  dated 4/30/97, due 05/01/97 at 5.340%,                                              
  collateralized by U.S. Treasury notes with                                          
  various maturities to 2016, market value $56,389,                                   
  (repurchase proceeds $54,822).                             54,814       54,814      
                                                                       ---------      

OTHER ASSETS & LIABILITIES, NET - (2.0)%                                 (25,661)     
--------------------------------------------------------------------------------      

  NET ASSETS - 100%                                                  $ 1,301,577      
                                                                     -----------      

NOTES TO INVESTMENT PORTFOLIO:                                                        
--------------------------------------------------------------------------------      
(a) Non-income producing.                                                             
(b) Rounds to less than one.                                                          
(c) Interest rates change quarterly. The rate listed is as of April 30, 1997.         
(d) Cost for federal income tax purposes is $997,357.                                 

Summary of Securities by Country         Country             Value    % of Total      
--------------------------------------------------------------------------------------
United States                                              $1,141,384       89.7      
Netherlands                                   Ne               28,865        2.3      
Canada                                        Ca               28,410        2.2      
United Kingdom                                UK               21,352        1.7      
Spain                                         Sp               15,886        1.2      
Australia                                     Au               13,709        1.1      
Belgium                                       Be                7,010        0.6      
Switzerland                                   Sz                5,815        0.5      
Hong Kong                                     HK                4,089        0.3      
France                                        Fr                2,958        0.2      
Japan                                         Ja                1,559        0.1      
Denmark                                       De                1,387        0.1      
                                                           ----------      -----      
                                                          $ 1,272,424      100.0      
                                                          ===========      =====      

  Certain securities are listed by country of underlying exposure but may trade       
  predominantly on other exchanges.                                                   

     ACRONYM                                      NAME                                
  --------------                               -----------                            
       ADR                             American Depository Receipt                    

See notes to financial statements                                                     

N-30D 7th "Page" of 20 TOC 1st Previous Next Bottom Just 7th

STATEMENT OF ASSETS & LIABILITIES 
April 30, 1997 (Unaudited)

(in thousands except for per share amounts and footnotes)                       

ASSETS                                                                          
Investments at value (cost $997,356)                            $1,272,424      
Short-term obligations                                              54,814      
                                                          ----------
                                                           1,327,238
Cash held in foreign banks (cost $18)       $    18                             
Receivable for:                                                                 
Investments sold                           36,909                           
Dividends                                   1,579                           
Fund shares sold                              888                           
Interest                                      437                           
Foreign tax reclaims                          149                           
Other                                            33                 40,013      
                                      -------             ----------
Total Assets                                                 1,367,251  

LIABILITIES                                                                     
Payable for:                                                                    
Investments purchased                      64,157                           
Fund shares repurchased                     1,502                           
Accrued:                                                                        
Deferred Trustees fees                          9                           
Other                                             6                             
               -------
Total Liabilities                                               65,674  
                                                          ----------

NET ASSETS                                                      $1,301,577      
                                                          ==========

Net asset value & redemption price per share -                                  
Class A ($796,755/83,548)                                            $9.54      
                                                          ==========
Maximum offering price per share - Class A                                      
($9.54/0.9425)                                                      $10.12(a)   
                                                          ==========
Net asset value & offering price per share -                                    
Class B ($490,697/51,541)                                            $9.52(b)   
                                                          ==========
Net asset value, offering and redemption price                                  
per share - Class Z ($14,125/1,480)                                  $9.54      
                                                          ==========
COMPOSITION OF NET ASSETS                                                       
Capital paid in                                                 $  974,264      
Undistributed net investment income                                    930      
Accumulated net realized gain                                       51,352      
Net unrealized appreciation (depreciation) on:                                  
Investments                                                      275,068    
Foreign currency transactions                                        (37)   
                                                          ----------
                                                          $1,301,577
                                                          ==========

(a) On sales of $50,000 or more the offering price is reduced.                  
(b) Redemption price per share is equal to net asset value less any             
applicable contingent deferred sales charge.                            
See notes to financial statements.                                              

N-30D 8th "Page" of 20 TOC 1st Previous Next Bottom Just 8th

STATEMENT OF OPERATIONS 
For the Six Months Ended April 30, 1997 
(Unaudited) 

(in thousands)                                                                  
INVESTMENT INCOME                                                               
Dividends                                                                $11,641
Interest                                                                   4,877
                                                                         -------
Total investment income (net of nonrebatable                          
foreign taxes withheld at source which                                
     amounted to $227)                                                    16,518

EXPENSES                                                                        
Management fee                                    $ 3,530                       
Service fee - Class A & B                           1,509                       
Distribution fee - Class B                          1,798                       
Transfer agent                                      1,892                       
Bookkeeping fee                                       215                       
Registration fee                                       26                       
Custodian fee                                          65                       
Audit fee                                              21                       
Trustees fee                                           33                       
Reports to shareholders                                15                       
Legal fee                                               5                       
Other                                                  16                  9,125
                                                  -------                -------
       Net Investment Income                                               7,393
                                                                         -------

NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS                    
Net realized gain (loss) on:                                                    
Investments                                        51,305                       
Foreign currency transactions                         (25)                      
                           -------
    Net Realized Gain                                                     51,280
Net unrealized appreciation (depreciation) during                               
the period on:                                                                  
Investments                                        32,984                       
Foreign currency transactions                         (17)                      
                           -------
    Net Unrealized Appreciation                                           32,967
                                                                         -------
       Net Gain                                                           84,247
                                                                         -------
Net Increase in Net Assets from Operations                               $91,640
                                                                         =======

See notes to financial statements.                                              

N-30D 9th "Page" of 20 TOC 1st Previous Next Bottom Just 9th

STATEMENT OF CHANGES IN NET ASSETS

                                                        · Enlarge/Download Table

                                                                (Unaudited)              
                                                                 Six months              
                                                                    end       Year ended 
(in thousands)                                                    April 30    October 31 
                                                                -----------   ---------- 
INCREASE (DECREASE) IN NET ASSETS                                   1997         1996    
Operations:                                                                              
                                                                                         
Net investment income                                           $    7,393   $    17,670 
Net realized gain                                                   51,280        72,976 
Net unrealized appreciation                                         32,967        74,411 
                                                                ----------   ----------- 
    Net Increase from Operations                                    91,640       165,057 
Distributions:                                                                           
From net investment income - Class A                                (6,085)      (12,646)
From net realized gains - Class A                                  (45,097)      (47,071)
From net investment income - Class B                                (1,871)       (4,191)
From net realized gains - Class B                                  (27,199)      (25,891)
From net investment income - Class Z                                  (125)         (232)
From net realized gains - Class Z                                     (810)         (684)
                                                                ----------   ----------- 
                                                                    10,453        74,342 
                                                                ----------   ----------- 
Fund Share Transactions:                                                                 
Receipts for shares sold - Class A                                  79,481       108,502 
Value of distributions reinvested - Class A                         46,529        53,915 
Cost of shares repurchased - Class A                               (95,276)     (117,196)
                                                                ----------   ----------- 
                                                                    30,734        45,221 
                                                                ----------   ----------- 
Receipts for shares sold - Class B                                  44,977       104,995 
Value of distributions reinvested - Class B                         27,494        28,337 
Cost of shares repurchased - Class B                               (39,072)      (60,702)
                                                                ----------   ----------- 
                                                                    33,399        72,630 
                                                                ----------   ----------- 
Receipts for shares sold - Class Z                                     276         9,783 
Value of distributions reinvested - Class Z                            935           916 
Cost of shares repurchased - Class Z                                  (652)       (1,561)
                                                                ----------   ----------- 
                                                                       559         9,138 
                                                                ----------   ----------- 
Net Increase from Fund Share                                                             
  Transactions                                                      64,692       126,989 
                                                                ----------   ----------- 
        Total Increase                                              75,145       201,331 
NET ASSETS                                                                               
Beginning of period                                              1,226,432     1,025,101 
                                                                ----------   ----------- 
End of period (including undistributed net                                               
  investment income of $930 and $1,641,                                                  
  respectively)                                                 $1,301,577   $ 1,226,432 
                                                                ==========   =========== 

Statement of Changes in Net Assets continued on following page.                          

See notes to financial statements.                                                       

N-30D 10th "Page" of 20 TOC 1st Previous Next Bottom Just 10th

STATEMENT OF CHANGES IN NET ASSETS - CONT.

                                                                · Download Table

                                               (Unaudited)              
                                                Six months              
                                                  ended      Year ended 
(in thousands)                                   April 30    October 31 
                                               ------------  -----------
NUMBER OF FUND SHARES                              1997         1996    
                                                                        

Sold - Class A                                      8,362        12,023 
Issued for distributions reinvested - Class A       5,156         6,267 
Repurchased - Class A                              (9,986)      (12,967)
                                                   ------       ------- 
                                                    3,532         5,323 
                                                   ------       ------- 

Sold - Class B                                      4,740        11,645 
Issued for distributions reinvested - Class B       3,055         3,308 
Repurchased - Class B                              (4,112)       (6,730)
                                                   ------       ------- 
                                                    3,683         8,223 
                                                   ------       ------- 

Sold - Class Z                                         29         1,084 
Issued for distributions reinvested - Class Z         104           106 
Repurchased - Class Z                                 (80)         (172)

                                                       53         1,018 
                                                   ------       ------- 

See notes to financial statements.                                      

N-30D 11th "Page" of 20 TOC 1st Previous Next Bottom Just 11th

 NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997 (UNAUDITED)

NOTE 1. INTERIM FINANCIAL STATEMENTS                                            
------------------------------------------------------------------------------- 

In the opinion of management of The Colonial Fund (the Fund), a series of       
Colonial Trust III, the accompanying financial statements contain all normal and
recurring adjustments necessary for the fair presentation of the financial      
position of the Fund at April 30, 1997, 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 seeks primarily income and     
capital growth and, secondarily, capital preservation. The Fund may issue an    
unlimited number of shares. The Fund offers three classes of shares: Class A,   
Class B and Class Z. Class A shares are sold with a front-end sales charge;     
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 Z shares are offered     
continuously at net asset value. There are certain restrictions on the purchase 
of 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 revenue 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 are valued at the last   
sale price or, in the case of unlisted or listed securities for which there were
no sales during the day, at current quoted bid prices.                          

Debt securities generally are valued by a pricing service based upon market     
transactions for normal, institutional-size trading units of similar securities.
When management deems it appropriate, an over-the-counter or exchange bid       
quotation is used.                                                              

Forward currency contracts are valued based on the weighted value of the        
exchange traded contracts with similar durations.                               

Short-term obligations with a maturity of 60 days or less are valued at         
amortized cost.                                                                 

The value of all assets and liabilities quoted in foreign currencies are        
translated into U.S. dollars at that day's exchange rates.                      

Portfolio positions which cannot be valued as set forth above are valued at fair
value under procedures approved by the Trustees.                                

Security transactions are accounted for on the date the securities are          
purchased, sold or mature.                                                      

Cost is determined and gains and losses are based upon the specific             
identification method for both financial statement and federal income tax       
purposes.                                                                       

The Fund may trade securities on other than normal settlement terms. This may   
increase the risk if the other party to the transaction fails to deliver and    
causes the Fund to subsequently invest at less advantageous prices.             

DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: All income,   
expenses (other than the Class A and Class B service fee and Class B            
distribution fee), 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.                                                            

Class A, Class B and Class Z per share data was calculated using the average    
shares outstanding during the period. In addition, net investment income per    
share data reflects the service fee applicable to both Class A and Class B      
shares and the distribution fee applicable to Class B shares only.              

Class A and Class B 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 both Class A and Class B shares and by the distribution fee       
applicable to Class B 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.                                            

INTEREST INCOME, DEBT DISCOUNT AND PREMIUM: Interest income is recorded on the  
accrual basis. Original issue discount is accreted to interest income over the  
life of a security with a corresponding increase in the cost basis; premium and 
market discount are not amortized or accreted.                                  

DISTRIBUTIONS TO SHAREHOLDERS: Distributions to shareholders are recorded on the
ex-date.                                                                        

The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted 
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital    
loss carryforwards) under income tax regulations.                               

FOREIGN CURRENCY TRANSACTIONS: Net realized and unrealized gains (losses) on    
foreign currency transactions includes the fluctuation in exchange rates on     
gains (losses) between trade and settlement dates on securities transactions,   
gains (losses) arising from the disposition of foreign currency and currency    
gains (losses) between the accrual and payment dates on dividends and interest  
income and foreign withholding taxes.                                           

The Fund does not distinguish that portion of gains (losses) on investments     
which is due to changes in foreign exchange rates from that which is due to     
changes in market prices of the investments. Such fluctuations are included with
the net realized and unrealized gains (losses) on investments.                  

FORWARD CURRENCY CONTRACTS: The Fund may enter into forward currency contracts  
to purchase or sell foreign currencies at predetermined exchange rates in       
connection with the settlement of purchases and sales of securities. The Fund   
may also enter into forward currency contracts to hedge certain other foreign   
currency denominated assets. The contracts are used to minimize the exposure to 
foreign exchange rate fluctuations during the period between trade and          
settlement date of the contracts. All contracts are marked-to-market daily,     
resulting in unrealized gains or losses which become realized at the time the   
forward currency contracts are closed or mature. Realized and unrealized gains  
(losses) arising from such transactions are included in net realized and        
unrealized gains (losses) on foreign currency transactions. Forward currency    
contracts do not eliminate fluctuations in the prices of the Fund's portfolio   
securities. While the maximum potential loss from such contracts is the         
aggregate face value in U.S. dollars at the time the contract was opened,       
exposure is typically limited to the change in value of the contract (in U.S.   
dollars) over the period it remains open. Risks may also arise if counterparties
fail to perform their obligations under the contracts.                          

OTHER: Corporate actions are recorded on the ex-date (except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware of
such), net of nonrebatable tax withholdings. Where a high level of uncertainty  
as to collection exists, income on securities is recorded net of all tax        
withholdings with any rebates recorded when received.                           

The Fund's custodian takes possession through the federal book-entry system of  
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains          
sufficient to protect the Fund. The Fund may experience costs and delays in     
liquidating the collateral if the issuer defaults or enters bankruptcy.         

NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES                                
 ...............................................................................

MANAGEMENT FEE: Colonial Management Associates, Inc. (the Adviser) is the       
investment Adviser of the Fund and furnishes accounting and other services and  
office facilities for a monthly fee equal to 0.55% annually of the Fund's       
average net assets.                                                             

BOOKKEEPING FEE: The Adviser 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: Colonial Investors Service Center, Inc. (the Transfer Agent), an
affiliate of the Adviser, provides shareholder services for a monthly fee equal 
to 0.25% annually of the Fund's average net assets and receives reimbursement   
for certain out-of-pocket expenses.                                             

UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Colonial Investment      
Services, Inc. (the Distributor), an affiliate of the Adviser, is the Fund's    
principal underwriter. For the six months ended April 30, 1997, the Fund has    
been advised that the Distributor retained net underwriting discounts of $92,268
on sales of the Fund's Class A shares and received contingent deferred sales    
charges (CDSC) of $488,883 on Class B share redemptions.                        

The Fund has adopted a 12b-1 plan which 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. The plan also requires the payment to the       
Distributor of a service fee on Class A and Class B shares as follows:          

    Value of shares                                       Annual
outstanding on the 20th of                                   Fee    
each month which were issued                                  Rate    
----------------------------------------                       -------------    
Prior to April 1, 1989                                     0.15%
On or after April 1, 1989                                   0.25% 

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 Adviser.                                                                 

The Fund's Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the  
Fund's assets.                                                                  

NOTE 4.  PORTFOLIO INFORMATION                                                  
 ...............................................................................

INVESTMENT ACTIVITY: During the six months ended April 30, 1997, purchases and  
sales of investments, other than short-term obligations, were $285,791,209 and  
$257,746,862, of which none and $3,286,231, respectively, were U.S. government  
securities.                                                                     

Unrealized appreciation (depreciation) at April 30, 1997, based on cost of      
investments for federal income tax purposes was:                                

Gross unrealized appreciation                                  $298,789,981     
Gross unrealized depreciation                                   (23,722,600)    
                                                          ------------
   Net unrealized appreciation                            $275,067,381
                                                          ============

OTHER: There are certain additional risks involved when investing in foreign    
securities that are not inherent with investments in domestic securities. These 
risks may involve foreign currency exchange rate fluctuations, adverse political
and economic developments and the possible prevention of foreign currency       
exchange or the imposition of other foreign governmental laws or restrictions.  

The Fund may focus its investments in certain industries, subjecting it to      
greater risk than a fund that is more diversified.                              

NOTE 5. LINE OF CREDIT                                                          
 ...............................................................................
The Fund may borrow up to 10% 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 April 30, 1997.                                            

N-30D 12th "Page" of 20 TOC 1st Previous Next Bottom Just 12th

    FINANCIAL HIGHLIGHTS

Selected data for a share of each class outstanding throughout each period are  
as follows:                                                                     

                                                        · Enlarge/Download Table

                                                                                (Unaudited)                             
                                                                              Six months ended                          
                                                                                  April 30                              
                                                    ------------------------------------------------------------------  
                                                                                    1997                                
                                                       Class A                     Class B                    Class Z   
                                                     -----------                 -----------                 ---------- 
                                                                                                                        
Net asset value -                                                                                                       
   Beginning of period                                 $  9.490                   $  9.480                   $  9.500   
                                                       --------                   --------                   --------   
INCOME FROM INVESTMENT OPERATIONS:                                                                                      
Net investment                                                                                                          
income(a)                                                 0.068                      0.032                      0.079   
Net realized and                                                                                                        
 unrealized gain (loss)(a)                                0.625                      0.614                      0.615   
                                                       --------                   --------                   --------   
   Total from Investment                                                                                                
      Operations                                          0.693                      0.646                      0.694   
                                                       --------                   --------                   --------   
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:                                                                            
From net investment                                                                                                     
 income                                                  (0.075)                    (0.038)                    (0.086)  
From net                                                                                                                
 realized gains                                          (0.568)                    (0.568)                    (0.568)  
                                                       --------                   --------                   --------   
 Total Distributions                                                                                                    
  Declared to                                                                                                           
  Shareholders                                           (0.643)                    (0.606)                    (0.654)  
                                                       --------                   --------                   --------   
Net asset value -                                                                                                       
  End of period                                        $  9.540                   $  9.520                   $  9.540   
                                                       ========                   ========                   ========   
Total return(c)                                           7.71%(d)                   7.19%(d)                   7.72%(d)
                                                       ========                   ========                   ========   

RATIOS TO AVERAGE NET ASSETS                                                                                            
Expenses(e)                                               1.15%(f)                   1.90%(f)                   0.91%(f)
Net investment                                                                                                          
 income(e)                                                1.43%(f)                   0.68%(f)                   1.67%(f)
Portfolio turnover                                          21%(d)                     21%(d)                     21%(d)
Average commission rate (g)                            $ 0.0413                   $ 0.0413                   $ 0.0413   
Net assets at end                                                                                                       
of period (000)                                        $796,755                   $490,697                    $14,125   

(a) Per share data was calculated using average shares outstanding during the                                           
    period.                                                                                                             
(b) Class Z shares were initially offered on July 31, 1995. Per share amounts                                           
    reflect activity from that date.                                                                                    
(c) Total return at net asset value assuming all distributions reinvested and                                           
    no initial sales charge or contingent deferred sales charge.                                                        
(d) Not annualized.                                                                                                     


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FINANCIAL HIGHLIGHTS - CONT.  

Selected data for a share of each class outstanding throughout each period      

                                                        · Enlarge/Download Table

                                             Year ended October 31                                                
------------------------------------------------------------------------------------------------------------------
                          1996                                                      1995                          
    Class A             Class B            Class Z             Class A             Class B          Class Z (b)   
----------------    -----------------   ---------------    ----------------    ----------------    ---------------
                                                                                                                  

   $  8.940            $  8.930           $  8.940             $  8.060           $  8.050           $  8.780     
   --------            --------           --------             --------           --------           --------     

      0.165               0.097              0.186                0.200              0.137              0.041     

      1.183               1.182              1.192                1.393              1.395              0.167     
   --------            --------           --------             --------           --------           --------     

      1.348               1.279              1.378                1.593              1.532              0.208     
   --------            --------           --------             --------           --------           --------     

     (0.162)             (0.093)            (0.182)              (0.212)            (0.151)            (0.048)    

     (0.636)             (0.636)            (0.636)              (0.501)            (0.501)                -      
   --------            --------           --------             --------           --------           --------     

     (0.798)             (0.729)            (0.818)              (0.713)            (0.652)            (0.048)    
   --------            --------           --------             --------           --------           --------     

   $  9.490            $  9.480           $  9.500             $  8.940           $  8.930           $  8.940     
   ========            ========           ========             ========           ========           ========     
     16.11%              15.27%             16.50%               21.72%             20.84%              2.02%(d)  
   ========            ========           ========             ========           ========           ========     

      1.15%               1.90%              0.91%               1.16%               1.93%              0.93%(f)  

      1.82%               1.07%              2.06%               2.43%               1.66%              2.66%(f)  
        38%                 38%                38%                 66%                 66%                66%     
   $ 0.0347            $ 0.0347           $ 0.0347                   -                   -                  -     

   $759,409            $453,468           $ 13,555             $667,611           $353,831           $ 3,659      

(e) The benefits derived from custody credits and directed brokerage                                              
    arrangements had no impact. Prior years' ratios are net of benefits                                           
    received, if any.                                                                                             
(f) Annualized.                                                                                                   
(g) For fiscal years beginning on or after September 1, 1995, a fund is                                           
    required to disclose its average commission rate per share for trades                                         
    on which commissions are charged.                                                                             

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FINANCIAL HIGHLIGHTS - CONT.                  

Selected data for a share of each class outstanding throughout each period are  
as follows:                                                                     

                                                        · Enlarge/Download Table

                                                 Year ended October 31                                             
                -------------------------------------------------------------------------------------------        
                                                 1994                                 1993(b)                      
                                     Class A             Class B             Class A          Class B              
                                     -------             -------             -------          -------              
                                                                                                                   
Net asset value -                                                                                                  
   Beginning of period                   $  8.410            $  8.400            $  7.390         $  7.390         
                                         --------            --------            --------         --------         
INCOME FROM INVESTMENT OPERATIONS:                                                                                 
Net investment income (a)                   0.171               0.109               0.156            0.104         
Net realized and                                                                                                   
  unrealized gain (loss)(a)                (0.116)             (0.111)              1.293            1.282         
                                         --------            --------            --------         --------         
   Total from Investment Operations         0.055              (0.002)              1.449            1.386         
                                         --------            --------            --------         --------         
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:                                                                       
From net investment income                 (0.160)             (0.103)             (0.147)          (0.094)        
From net realized gains                    (0.245)             (0.245)             (0.282)          (0.282)        
                                         --------            --------            --------         --------         
 Total Distributions                                                                                               
  Declared to Shareholders                 (0.405)             (0.348)             (0.429)          (0.376)        
                                         --------            --------            --------         --------         
Net asset value -                                                                                                  
  End of period                          $  8.060            $  8.050            $  8.410         $  8.400         
                                         ========            ========            ========         ========         
Total return (d)                            0.74%              (0.04)%             20.21%           19.38%         
                                         ========            ========            ========         ========         
RATIOS TO AVERAGE NET ASSETS                                                                                       
Expenses                                    1.14%               1.89%               1.10%            1.85%         
Net investment income                       2.07%               1.32%               1.94%            1.19%         
Portfolio turnover                            54%                 54%                 14%              14%         
Net assets at end of period (000)        $555,275            $264,122            $520,706         $124,161         

(a) Per share data was calculated using average shares outstanding during the period.                              
(b) All per share amounts have been restated to reflect the 3 for 1 stock split effective December 10, 1993.       
(c) Class B shares initially offered on May 5, 1992. Per share amounts reflect activity from that date.            
(d) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent
    deferred sales charge.                                                                                         
(e) Not annualized.                                                                                                
(f) Annualized.                                                                                                    

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Year ended October 31 
--------------------------------  
1992 (b)    
Class A            Class B(c) 
-------            ---------- 

$   7.050          $   7.440    
---------          ---------    

0.173              0.052

 0.489             (0.044)
---------          ---------    

0.662              0.008
---------          ---------    

(0.185)            (0.058)

(0.137)            --     
---------          ---------    

(0.322)            (0.058)
---------          ---------    

$   7.390          $   7.390    
=========          =========    
   9.65%            (0.31)%(e)
=========          =========    

   1.09%              1.84%(f)

   2.52%               177%(f)
  37%                37%

$413,228         $  15,582    

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 HOW TO REACH COLONIAL
 BY PHONE OR BY MAIL

BY TELEPHONE                                                                    

COLONIAL 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 Colonial 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 am to 8:00 pm ET, and Saturdays from February through    
mid-April, 10:00 am to 2:00 pm ET.                                              

COLONIAL TELEPHONE TRANSACTION DEPARTMENT - 1-800-422-3737                      
To purchase, exchange, or sell shares by telephone, call Monday to Friday, 9:00 
am to 7:00 pm 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 Colonial fund, call Monday to Friday, 8:30 am to   
6:30 pm ET.                                                                     

BY MAIL                                                                         

COLONIAL INVESTORS SERVICE CENTER, INC.                                         
P.O. BOX 1722                                                                   
BOSTON, MA 02105-1722                                                           

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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     
Colonial 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.                                         

COLONIAL SHAREHOLDER NEWS: 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.)                                                            

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  SHAREHOLDER SERVICES
TO MAKE INVESTING EASIER

Colonial has one of the most extensive selections of shareholder services       
available. Your financial adviser can help you arrange for any of these         
services, or you can call Colonial directly at 1-800-345-6611.                  

AFFORDABLE ADDITIONAL INVVESTMENTS: Add to your account with as little as $50 on
most funds; $25 for an IRA account.                                             

FREE EXCHANGES*: Exchange all or part of your account into the same share class 
of another Colonial fund, by phone or mail.                                     

EASY ACCESS TO YOUR MONEY*: 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 to Colonial within one year, you can reinvest in any        
Colonial fund 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 Colonial 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 the account balance at the 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     
payable 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     
Colonial fund with a balance of $5,000 into the same share class of up to four  
other Colonial funds. Minimum for each transfer is $100.                        

COLONIAL RETIREMENT PLANS: Choose from a broad range of retirement plans,       
including IRAs.                                                                 

* Redemptions and exchanges are made at the next determined net asset value     
after the request is received by Colonial. 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 D   
shares (for applicable funds), or $1 million or more of Class A shares, may be  
subject to a contingent deferred sales charge.                                  

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 IMPORTANT INFORMATION ABOUT THIS REPORT

The Transfer Agent for The Colonial Fund is:                                    

Colonial Investors Service Center, Inc.                                         
P.O. Box 1722                                                                   
Boston, MA 02105-1722                                                           
1-800-345-6611                                                                  

The Colonial Fund mails one shareholder report to each shareholder address. If  
you would like more than one report, please call Colonial at 1-800-426-3750 and 
additional reports will be sent to you.                                         

This report has been prepared for shareholders of The Colonial 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 objective and    
operating policies of the Fund.                                                 

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[LOGO]                                                                          

Mutual Funds for                                                                
Planned Portfolios                                                              

TRUSTEES
ROBERT J. BIRNBAUM                                                              
Retired (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief 
Operating Officer, New York Stock Exchange, Inc.)                               

TOM BLEASDALE                                                                   
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank 
& Trust Company)                                                                

LORA S. COLLINS                                                                 
Attorney (formerly Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel)  

JAMES E. GRINNELL                                                               
Private Investor (formerly Senior Vice President-Operations, The Rockport       
Company)                                                                        

WILLIAM D. IRELAND, JR.                                                         
Retired (formerly Chairman of the Board, Bank of New England-Worcester)         

RICHARD W. LOWRY                                                                
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood   
Corporation)                                                                    

WILLIAM E. MAYER                                                                
Partner, Development Capital, L.L.C. (formerly Dean, College of Business and    
Management, University of Maryland; Dean, Simon Graduate School of Business,    
University of Rochester; Chairman and Chief Executive Officer, C. S. First      
Boston Merchant Bank; and President and Chief Executive Officer, The First      
Boston Corporation)                                                             

JAMES L. MOODY, JR.                                                             
Retired (formerly Chairman of the Board and Chief Executive Officer, Hannaford  
Bros. Co.)                                                                      

JOHN J. NEUHAUSER                                                               
Dean, Boston College School of Management                                       

GEORGE L. SHINN                                                                 
Financial Consultant (formerly Chairman, Chief Executive Officer and Consultant,
The First Boston Corporation)                                                   

ROBERT L. SULLIVAN                                                              
Retired Partner, Peat Marwick Main & Co. (formerly Management Consultant,       
Saatchi and Saatchi Consulting Ltd. and Principal and International Practice    
Director, Management Consulting, Peat Marwick Main & Co.)                       

SINCLAIR WEEKS, JR.                                                             
Chairman of the Board, Reed & Barton Corporation                                

COLONIAL INVESTMENT SERVICES, INC., Distributor (C) 1997
 A Liberty Financial Company (NYSE: L)
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750

TF-03/660D-0497 M (6/97)

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Dates Referenced Herein and Documents Incorporated By Reference

		Referenced-On Page
This N-30D Filing	Date	First	Last	Other Filings

	5/5/92	4	14
	12/10/93	14
	7/31/95	12
	9/1/95	13
	11/1/96	2
For The Period Ended	4/30/97	1	11	N-30D, NSAR-A
	6/13/97	3
Filed As Of	6/30/97			N-30D
Filed On	7/1/97

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Columbia Funds Trust III · N-30D · For 4/30/97

Filed On 7/1/97 · SEC File 811-00881 · Accession Number 21847-97-81

Annual or Semi-Annual Report Mailed to Shareholders · Rule 30d-1Filing Table of Contents

Dates Referenced Herein and Documents Incorporated By Reference

Annual or Semi-Annual Report Mailed to Shareholders · Rule 30d-1
Filing Table of Contents