<PAGE>
LETTER FROM THE PRESIDENT
Dear Shareholder:
Following is Colonial Income Fund's semiannual report for the six months
ended June 30, 1995. The Fund offers investors the opportunity for high current
income through investments primarily in corporate bonds. The Fund's flexible
investment strategy also allows it to supplement income with investments in high
yield, high risk corporate bonds and U.S. government securities. Overall, the
average quality rating of the portfolio will be investment grade.
FUND PERFORMANCE (1/1/95 - 6/30/95)(1)
<TABLE>
<CAPTION>
CLASS A CLASS B
INCEPTION 12/1/69 5/15/92
---------------------------------------------------------------------------------
<S> <C> <C>
Distributions declared per share $0.240 $0.217
---------------------------------------------------------------------------------
SEC yield on 6/30/95 6.24% 5.80%
---------------------------------------------------------------------------------
Total returns assuming reinvestment of all distributions
and no sales charge or CDSC 12.29% 11.88%
---------------------------------------------------------------------------------
Net asset value per share on 6/30/95 $6.43 $6.43
---------------------------------------------------------------------------------
</TABLE>
ECONOMIC OVERVIEW
The strength of the U.S. economy during the final quarter of 1994 -- gross
domestic product (GDP) was 5.1% on an annualized basis -- caused some anxiety
about inflation. However, over the first half of 1995, the economy slowed
considerably. GDP for the first three months of 1995 was 2.8% on an annualized
basis. This translated into lower interest rates, a development that had a
favorable impact on most fixed-income investments, including the
investment-grade corporate bonds that are your Fund's primary investment focus.
The Federal Reserve Board provided additional reassuring evidence for investors
in early July, soon after the close of the Fund's fiscal year -- they reduced
the federal funds rate from 6.00% to 5.75%.
INVESTMENT STRATEGY
As interest rates moved lower and the economy slowed, the Fund's average
duration increased slightly, from 6.8 to 7.2 years. (Duration is a commonly used
measure of an investment's price sensitivity to interest rate changes. While
lengthening a fund's duration can increase price volatility, in a stabilizing or
decreasing interest rate environment a longer duration may increase the fund's
potential for price appreciation.)
Although there was a significant rally in U.S. government bonds,
investments in this sector were decreased from 27.4% of investments on December
31 to 20.1% on June 30. These assets were gradually invested in additional
investment-grade corporate bonds, reflecting our belief that this sector would
produce better long-term returns for investors. Investment-grade corporate bonds
were increased from 47.5% to 52.7%. Investments in high yield corporate bonds
remained steady at approximately 18.7% of the portfolio.
[PHOTO]
John A. McNeice, Jr.
President
On June 30, 1995, the Fund owned 100 individual issues, an increase from
the 88 issues owned at the end of December, 1994. This demonstrates our efforts
to reduce risk by further diversifying the Fund's portfolio. More than 80% of
the securities in the portfolio were rated investment grade, with 25.5% rated
AAA, the highest quality rating available.
Management's outlook for the corporate bond market in the months ahead is
favorable. Over the second half of 1995, the pace of economic growth should
sustain earnings at respectable levels. This should help corporate bond
performance.
Sincerely,
/s/ John A. McNeice, Jr.
------------------------
John A. McNeice, Jr.
President
August 11, 1995
(1)The 30-day SEC yield on June 30, 1995, of 6.24% for Class A shares and 5.80%
for Class B shares reflects the portfolio's earning power, net of expenses, and
does not include changes in Fund price.
Net asset value (NAV) return does not include sales charges or contingent
deferred sales charges (CDSC).
Past performance cannot predict future results. Return and value of an
investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. Performance for different share classes
will vary based on differences in sales charges and fees associated with each
class.
<PAGE>
INVESTMENT PORTFOLIO (unaudited, in thousands) JUNE 30, 1995
<TABLE>
<CAPTION>
BONDS & NOTES - 93.9% PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS & NOTES - 73.8%
CONSTRUCTION - 0.9%
BUILDING CONSTRUCTION
USG Corp.,
9.250% 09/15/01................... $1,500 $1,538
--------------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 8.7%
DEPOSITORY INSTITUTIONS - 4.3%
Capital One Bank, Inc.,
8.125% 03/01/00................... 2,000 2,095
Great Western Financial Corp.,
8.600% 02/01/02................... 3,000 3,254
NCNB Corp.,
9.125% 10/15/01................... 2,000 2,217
------
7,566
------
FINANCIAL SERVICES - 1.2%
US Leasing International, Inc.,
8.750% 12/01/01................... 2,000 2,200
------
NON-DEPOSITORY CREDIT INSTITUTIONS - 3.2%
General Motors Acceptance Corp.,
8.400% 10/15/99................... 2,000 2,125
Green Tree Financial Corp.,
10.250% 06/01/02................... 3,000 3,521
------
5,646
--------------------------------------------------------------------------------
MANUFACTURING - 22.6%
CHEMICALS - 4.1%
Agricultural Minerals Co., LP,
10.750% 09/30/03................... 1,500 1,541
Huntsman Corp.,
11.000% 04/15/04................... 1,250 1,366
Rohm & Haas Co.,
9.375% 11/15/19................... 2,000 2,254
Union Carbide Corp.,
7.875% 04/01/23................... 2,000 2,012
------
7,173
------
FABRICATED METAL - 1.2%
Masco Corp.,
9.000% 10/01/01................... 2,000 2,198
------
FOOD & KINDRED PRODUCTS - 5.3%
Coca-Cola Bottling Co. of the
Southwest,
9.000% 11/15/03................... 1,500 1,478
ConAgra, Inc.,
9.750% 03/01/21................... 3,000 3,639
Nabisco, Inc.,
6.850% 06/15/05................... 2,000 1,971
Ralston Purina Co.,
9.300% 05/01/21................... 2,000 2,303
------
9,391
LUMBER & WOOD PRODUCTS - 0.9%
Georgia Pacific Corp.,
9.625% 03/15/22................... 1,500 1,670
------
MACHINERY & COMPUTER EQUIPMENT - 1.4%
Tenneco Corp.,
10.000% 03/15/08................... 2,000 2,473
------
PAPER PRODUCTS - 2.5%
James River Corp.,
9.250% 11/15/21................... 1,000 1,130
Riverwood International Corp.,
11.250% 06/15/02................... 1,500 1,635
Stone Container Corp.,
11.500% 10/01/04................... 1,500 1,594
------
4,359
------
PETROLEUM REFINING - 2.6%
Ashland Oil, Inc.,
8.800% 11/15/12................... 2,000 2,235
Pennzoil Co.,
10.125% 11/15/09................... 1,025 1,232
Sun Co., Inc.,
9.375% 06/01/16................... 1,000 1,137
------
4,604
------
PRIMARY METAL - 1.3%
International Minerals & Chemical Corp.,
9.875% 03/15/11................... 2,000 2,328
------
RUBBER & PLASTIC - 2.1%
Armstrong World Industries, Inc.,
9.750% 04/15/08................... 2,050 2,510
Premark International, Inc.,
10.500% 09/15/00................... 1,000 1,129
------
3,639
------
STONE, CLAY, GLASS & CONCRETE - 1.2%
Owens-Illinois, Inc.,
10.000% 08/01/02................... 2,000 2,035
--------------------------------------------------------------------------------
MINING & ENERGY - 7.9%
CRUDE PETROLEUM & NATURAL GAS - 2.0%
Amerigas,
10.125% 04/15/07................... 1,500 1,567
Coastal Corp.
10.750% 10/01/10................... 1,500 1,903
------
3,470
------
METAL MINING - 1.1%
Freeport-McMoran Resource Partners,
LP,
8.750% 02/15/04................... 2,000 1,910
------
</TABLE>
See note to investment portfolio.
2
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO - CONTINUED
BONDS & NOTES - CONT. PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
OIL & GAS EXTRACTION - 4.8%
Gulf Canada Resources, Ltd.,
9.625% 07/01/05................... $2,000 $ 1,987
Occidental Petroleum Corp.,
11.125% 08/01/10................... 2,500 3,289
Oryx Energy Co.,
10.000% 04/01/01................... 1,500 1,620
Santa Fe Energy Resources, Inc.,
11.000% 05/15/04................... 1,500 1,590
--------
8,486
--------------------------------------------------------------------------------
RETAIL TRADE - 2.3%
APPAREL & ACCESSORY STORES - 1.1%
Dayton Hudson Co.,
8.500% 12/01/22................... 2,000 2,000
--------
GENERAL MERCHANDISE STORES - 1.2%
May Department Stores Co.,
8.375% 10/01/22................... 2,000 2,092
--------------------------------------------------------------------------------
SERVICES - 3.0%
HEALTH SERVICES - 0.8%
Tenant Healthcare, Inc.,
10.125% 03/01/05................... 1,250 1,320
--------
HOTELS, CAMPS & LODGING - 1.1%
Marriott International,
7.125% 06/01/07................... 2,000 1,970
--------
MOTION PICTURES - 1.1%
Paramount Communications, Inc.,
8.250% 08/01/22................... 2,000 1,920
--------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 28.4%
AIR TRANSPORTATION - 1.3%
Federal Express Corp.,
9.650% 06/15/12................... 2,000 2,352
--------
COMMUNICATIONS - 11.2%
CBS, Inc.,
8.875% 06/01/22................... 2,000 2,107
Cox Communication, Inc.
6.875% 06/15/05................... 2,000 1,974
GTE Corp.
8.500% 04/01/17................... 2,000 2,056
Heritage Media Corp.,
11.000% 06/15/02................... 1,500 1,616
Jones Intercable, Inc.:
10.500% 03/01/08................... 1,000 1,060
11.500% 07/15/04................... 1,000 1,105
MCI Communications Corp.,
7.750% 03/15/24................... 2,000 1,996
Rogers Communications, Inc.,
10.875% 04/15/04................... 1,500 1,537
Sprint Corp.,
9.250% 04/15/22................... 2,000 2,390
Tele-Communications, Inc.,
9.250% 01/15/23................... 2,000 2,017
Time Warner, Inc.
7.750% 06/15/05................... 2,000 1,986
--------
19,844
--------
ELECTRIC SERVICES - 9.6%
Arizona Public Service Co.,
9.500% 04/15/21................... 2,000 2,230
Boston Edison Co.,
9.875% 06/01/20................... 2,000 2,220
Commonwealth Edison Co.:
8.000% 04/15/23................... 1,000 1,000
9.875% 06/15/20................... 1,000 1,150
Connecticut Light & Power Co.,
7.500% 07/01/23................... 1,500 1,442
Houston Lighting & Power Co.,
7.500% 07/01/23................... 1,100 1,087
Illinois Power Co.,
8.000% 02/15/23................... 2,000 1,989
Mississippi Power & Light Co.,
8.650% 01/15/23................... 2,000 2,089
Niagara Mohawk Power Corp.,
9.500% 03/01/21................... 2,000 2,089
Utilicorp United, Inc.,
9.000% 11/15/21................... 1,500 1,590
-------
16,886
-------
GAS SERVICES - 1.2%
Panhandle Eastern Corp.,
8.625% 04/15/25................... 2,000 2,095
-------
MOTOR FREIGHT & WAREHOUSING - 1.2%
Ryder System, Inc.,
8.750% 03/15/17................... 2,000 2,117
-------
PIPELINES - 1.6%
McDermott, Inc.,
9.375% 03/15/02................... 2,500 2,759
-------
RAILROAD - 2.3%
Burlington Northern, Inc.,
7.500% 07/15/23................... 2,000 1,918
Union Pacific Corp.,
7.600% 05/01/05................... 2,000 2,130
-------
4,048
--------------------------------------------------------------------------------
Total corporate bonds & notes (cost $123,477) 130,089
--------------------------------------------------------------------------------
</TABLE>
See note to investment portfolio.
3
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO - CONTINUED
BONDS & NOTES - CONT. PAR VALUE
----------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 20.1%
----------------------------------------------------------------------------------
GOVERNMENT BONDS & NOTES - 13.3%
U.S. Treasury bond,
12.000% 08/15/13................... $3,167 $ 4,671
--------
U.S. Treasury notes:
8.625% 08/15/97................... 8,632 9,100
9.250% 01/15/96................... 4,110 4,183
10.375% 11/15/12................... 1,488 1,968
11.875% 11/15/03................... 2,634 3,589
--------
18,840
----------------------------------------------------------------------------------
Total government bonds & notes (cost $23,824) 23,511
----------------------------------------------------------------------------------
GOVERNMENT AGENCIES - 6.8%
Federal Farm Credit Bank,
11.900% 10/20/97................... 5,000 5,638
--------
Federal National Mortgage Association,
10.350% 12/10/15................... 2,000 2,715
--------
Government National Mortgage
Association:
Coupon Maturities
-----------------------
9.000% 2016-17.................... 2,423 2,560
10.000% 2017-19.................... 67 73
10.500% 2020...................... 292 322
11.500% 2013...................... 124 139
12.500% 2010-14.................... 385 437
13.000% 2011...................... 58 65
14.000% 2011-12.................... 14 16
--------
3,612
----------------------------------------------------------------------------------
Total government agencies (cost $11,688) 11,965
----------------------------------------------------------------------------------
Total U.S. government & agency obligations
(cost $35,512) 35,476
----------------------------------------------------------------------------------
Total bonds & notes (cost $158,989) 165,565
----------------------------------------------------------------------------------
PREFERRED STOCKS - 0.7% SHARES
----------------------------------------------------------------------------------
GAS SERVICES
Enron Capital, 8.000% (cost $1,250) 50 1,238
----------------------------------------------------------------------------------
Total investments - 94.6% (cost $160,239) (a) 166,803
----------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 5.1% PAR
----------------------------------------------------------------------------------
Repurchase agreement with Lehman
Government Securities, Inc., dated 06/30/95
due 7/03/95 at 6.210%, collateralized by
U.S. Treasury bills and notes with various
maturities to 1999, market value $9,122
(repurchase proceeds $8,931) $8,926 8,926
----------------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - 0.3% 594
----------------------------------------------------------------------------------
NET ASSETS - 100.0% $176,323
----------------------------------------------------------------------------------
</TABLE>
Note to investment portfolio:
(a) Cost for federal income tax purposes is
the same.
See notes to financial statements.
4
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
STATEMENT OF ASSETS & LIABILITIES (UNAUDITED)
June 30, 1995
(in thousands except for per share amounts and footnote)
-------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments at value (cost $160,23...................... $166,803
Short-term obligations.................................. 8,926
--------
175,729
Receivable for:
Interest............................................. $3,394
Investments sold..................................... 2,278
Fund shares sold..................................... 186
Other................................................... 41 5,899
------ --------
Total assets...................................... 181,628
LIABILITIES
Payable for:
Investments purchased................................ 4,095
Distributions........................................ 1,059
Fund shares repurchased.............................. 141
Accrued:
Deferred Trustees fee................................ 1
Other................................................ 9
------
Total liabilities................................. 5,305
--------
Net assets....................................................... $176,323
--------
Net asset value & redemption price per share -
Class A ($145,343/22,595)..................................... $ 6.43
--------
Maximum offering price per share - Class A
($6.43/0.9525)................................................ $ 6.75 *
--------
Net asset value & offering price per share -
Class B ($30,980/4,816)........................................ $ 6.43
--------
COMPOSITION OF NET ASSETS
Capital paid in............................................... $190,701
Undistributed net investment income........................... 259
Accumulated net realized loss................................. (21,201)
Net unrealized appreciation................................... 6,564
--------
$176,323
--------
</TABLE>
* On sales of $50,000 or more the offering
price is reduced.
<TABLE>
STATEMENT OF OPERATIONS (UNAUDITED)
Six months ended June 30, 1995
(in thousands)
-------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest......................................................... $ 7,190
Dividends........................................................ 50
--------
7,240
EXPENSES
Management fee.......................................... $ 408
Service fee............................................. 205
Distribution fee - Class B.............................. 99
Transfer agent.......................................... 182
Bookkeeping fee......................................... 33
Registration fees....................................... 18
Audit fee............................................... 20
Custodian fee........................................... 4
Trustees fees........................................... 9
Legal fee............................................... 3
Reports to shareholders................................. 3
Other................................................... 16 1,000
------ --------
Net investment income................................. 6,240
--------
NET REALIZED & UNREALIZED GAIN (LOSS)
ON PORTFOLIO POSITIONS
Net realized loss....................................... (1,116)
Net unrealized appreciation
during the period.................................... 13,768
------
Net gain............................................. 12,652
--------
Net increase in net assets from operations....................... $18,892
--------
See notes to financial statements.
5
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
(unaudited)
Six months Year
ended ended
June 30 December 31
----------- -----------
1995 1994
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income.................................................. $ 6,240 $ 12,533
Net realized loss...................................................... (1,116) (1,616)
Net unrealized appreciation (depreciation)............................. 13,768 (18,562)
-------- --------
Net increase (decrease) from operations.......................... 18,892 (7,645)
Distributions
From net investment income - Class A................................... (5,309) (11,213)
From net investment income - Class B................................... (928) (1,553)
-------- --------
12,655 (20,411)
-------- --------
Fund share transactions
Receipts for shares sold - Class A..................................... 14,137 10,341
Value of distributions reinvested - Class A............................ 2,301 5,653
Cost of shares repurchased - Class A................................... (11,257) (24,102)
-------- --------
5,181 (8,108)
-------- --------
Receipts for shares sold - Class B..................................... 8,335 9,212
Value of distributions reinvested - Class B............................ 441 834
Cost of shares repurchased - Class B................................... (2,654) (4,402)
-------- --------
6,122 5,644
-------- --------
Net increase (decrease) from Fund share transactions............. 11,303 (2,464)
-------- --------
Total increase (decrease).................................. 23,958 (22,875)
NET ASSETS
Beginning of period.................................................... 152,365 175,240
-------- --------
End of period (including undistributed
net investment income of $259 and $253, respectively)................. $176,323 $152,365
-------- --------
NUMBER OF FUND SHARES
Sold - Class A......................................................... 2,274 1,620
Issued for distributions reinvested - Class A.......................... 371 914
Repurchased - Class A.................................................. (1,826) (3,874)
-------- --------
819 (1,340)
-------- --------
Sold - Class B......................................................... 1,340 1,470
Issued for distributions reinvested - Class B.......................... 71 135
Repurchased - Class B.................................................. (428) (714)
-------- --------
983 891
-------- --------
See notes to financial statements.
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Note 1. INTERIM FINANCIAL STATEMENTS
In the opinion of management of Colonial Income Fund (the Fund), a series
of Colonial Trust I, the accompanying financial statements contain all normal
and recurring adjustments necessary for the fair presentation of the financial
position of the Fund at June 30, 1995, 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
The Fund is a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end, management
investment company. The Fund may issue an unlimited number of shares. The Fund
offers Class A shares sold with a front-end sales charge and Class B shares
which 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. The following significant accounting
policies are consistently followed by the Fund in the preparation of its
financial statements and conform to generally accepted accounting principles.
--------------------------------------------------------------------------------
SECURITY VALUATION AND TRANSACTIONS
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.
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.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
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 or sold.
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 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 B per share data and ratios are calculated by adjusting the expense
and net investment income per share data and ratios for the Fund for the entire
period 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 and tax-exempt 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; market discount is not accreted. Premium is
amortized against interest income with a corresponding decrease in the cost
basis.
--------------------------------------------------------------------------------
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS
The Fund declares and records distributions daily and pays monthly.
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.
--------------------------------------------------------------------------------
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 0.50% annually of the Fund's average net
assets.
--------------------------------------------------------------------------------
BOOKKEEPING FEE
The Adviser provides bookkeeping and pricing services for $27,000 per year
plus 0.035% of the Fund's average net assets over $50 million.
--------------------------------------------------------------------------------
TRANSFER AGENT
Colonial Investors Service Center, Inc. (the Transfer Agent), an affiliate
of the Adviser, provides shareholder services for a monthly fee equal to 0.18%
annually of the Fund's average net assets, and receives a reimbursement for
certain out of pocket expenses.
--------------------------------------------------------------------------------
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES
The Adviser, through Colonial Investment Services, Inc. (the Distributor),
is the Fund's principal underwriter. During the six months ended June 30, 1995,
the Distributor retained net underwriting discounts of $9,225 on sales of the
Fund's Class A shares and received contingent deferred sales charges (CDSC) of
$49,340 on Class B share redemptions.
The Fund has adopted a 12b-1 plan which requires it to pay the Distributor
a service fee equal to 0.25% annually of the Fund's net assets as of the 20th of
each month.
The plan also requires the payment of a distribution fee to the Distributor
equal to 0.75% annually of the average net assets attributable to Class B
shares.
The CDSC and the fees received from the 12b-1 plan are used principally as
repayment to the Distributor for amounts paid by the Distributor to dealers who
sold such shares.
--------------------------------------------------------------------------------
OTHER
The Fund pays no compensation to its officers, all of whom are employees of
the 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
During the six months ended June 30, 1995, purchases and sales of
investments, other than short-term obligations, were $73,851,603 and
$63,527,083, respectively.
Unrealized appreciation (depreciation) at June 30, 1995, based on cost of
investments for both financial statement and federal income tax purposes was:
</TABLE>
<TABLE>
<S> <C>
Gross unrealized appreciation................. $ 8,136,425
Gross unrealized depreciation................. (1,572,134)
------------
Net unrealized appreciation................ $ 6,564,291
============
</TABLE>
--------------------------------------------------------------------------------
CAPITAL LOSS CARRYFORWARDS
At December 31, 1994, capital loss carry-forwards available (to the extent
provided in regulations) to offset future realized gains were approximately as
follows:
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
---------- ------------
<S> <C>
1996................ $ 491,000
1997................ 2,834,000
1998................ 4,686,000
1999................ 10,466,000
2002................ 1,007,000
-----------
$19,484,000
===========
</TABLE>
Expired capital loss carryforwards, if any, are recorded as a reduction of
capital paid in.
To the extent loss carryforwards are used to offset any future realized
gains, it is unlikely that such gains would be distributed since they may be
taxable to shareholders as ordinary income.
--------------------------------------------------------------------------------
OTHER
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
--------------------------------------------------------------------------------
NOTE 5. RESULTS OF SPECIAL SHAREHOLDERS MEETING
On February 15, 1995, a special meeting of shareholders was held and a new
Management Agreement between the Trust and Colonial Management Associates, Inc.
was approved that became effective upon the completion of the merger of The
Colonial Group, Inc. and Apple Merger Corporation, a subsidiary of Liberty
Financial Companies, Inc. on March 24, 1995. Out of the shares of beneficial
interest outstanding on December 9, 1994, 17,976,864 voted for the new
Management Agreement, 241,299 voted against and 880,999 abstained. Of the shares
of beneficial interest outstanding that abstained 166,894 represented broker
non-votes.
--------------------------------------------------------------------------------
9
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are as follows:
---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
(UNAUDITED)
SIX MONTHS
ENDED
JUNE 30
-----------------------------
1995
-----------------------------
CLASS A CLASS B
------- -------
<S> <C> <C>
Net asset value - Beginning of period............ $ 5.950 $ 5.950
-------- -------
Income (loss) from investment operations:
Net investment income....................... 0.239 0.216
Net realized and unrealized gain (loss)
on investments........................... 0.481 0.481
-------- -------
Total from investment operations.... 0.720 0.697
-------- -------
Less distributions declared to shareholders:
From net investment income................. (0.240) (0.217)
-------- -------
Net asset value - End of period................. $ 6.430 $ 6.430
-------- -------
Total return (b)................................. 12.29% (c) 11.88% (c)
-------- -------
Ratios to average net assets:
Expenses .................................... 1.10% (d) 1.85% (d)
Net investment income ....................... 7.76% (d) 7.01% (d)
Portfolio turnover............................... 82% (d) 82% (d)
Net assets at end of period (000)................ $145,343 $30,980
YEAR ENDED
DECEMBER 31
----------------------------------------------------------------------
1994 1993 1992
---------------------- -------------------- ------------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B(A)
---------- ---------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period............ $ 6.720 $ 6.720 $ 6.460 $ 6.460 $ 6.460 $ 6.390
-------- ------- -------- -------- -------- -------
Income (loss) from investment operations:
Net investment income....................... 0.487 0.440 0.501 0.451 0.546 0.290
Net realized and unrealized gain (loss)
on investments........................... (0.761) (0.761) 0.261 0.261 0.001 0.088
-------- ------- -------- ------- -------- -------
Total from investment operations.... (0.274) (0.321) 0.762 0.712 0.547 0.378
-------- ------- -------- ------- -------- -------
Less distributions declared to shareholders:
From net investment income................. (0.496) (0.449) (0.502) (0.452) (0.547) (0.308)
-------- ------- -------- ------- -------- -------
Net asset value - End of period................. $ 5.950 $ 5.950 $ 6.720 $ 6.720 $ 6.460 $ 6.460
-------- ------- -------- ------- -------- -------
Total return (b)................................. (4.09)% (4.82)% 12.05% 11.23% 8.83% 6.00%(c)
-------- ------- -------- ------- -------- -------
Ratios to average net assets:
Expenses .................................... 1.11% 1.86% 1.10% 1.85% 1.24% 1.99%(d)
Net investment income ....................... 7.80% 7.05% 7.45% 6.70% 8.49% 7.74%(d)
Portfolio turnover............................... 16% 16% 46% 46% 68% 68%
Net assets at end of period (000)................ $129,560 $22,805 $155,453 $19,787 $149,309 $ 6,092
</TABLE>
(a) Class B shares were initially offered on May 5, 1992. Per share amounts
reflect activity from that date.
(b) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or CDSC.
(c) Not annualized.
(d) Annualized.
10
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS - CONTINUED
Selected data for a share of each class outstanding throughout each period are as follows:
------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED
DECEMBER 31
1991 1990
------- -------
CLASS A CLASS A
------- -------
<S> <C> <C>
Net asset value - Beginning of period....................... $ 5.970 $ 6.430
-------- --------
Income (loss) from investment operations:
Net investment income.................................... 0.587 0.632
Net realized and unrealized gain (loss)
on investments..................................... 0.487 (0.477)
-------- --------
Total from investment operations............... 1.074 0.155
-------- --------
Less distributions declared to shareholders:
From net investment income............................... (0.584) (0.615)
-------- --------
Net asset value - end of period............................ $ 6.460 $ 5.970
-------- --------
Total return (a)............................................ 18.80 2.65%
-------- --------
Ratios to average net assets:
Expenses................................................. 1.25% 1.23%
Net investment income.................................... 9.46% 10.30%
Portfolio turnover.......................................... 44% 29%
Net assets at end of period
(000)................................................... $146,905 $141,467
</TABLE>
(a) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or CDSC
ABOUT OUR COVER...
[GRAPHIC]
The symbol on the cover of this Report represents the Fund's primary investment
focus on corporate bonds.
--------------------------------------------------------------------------------
Colonial Income Fund mails one shareholder report to each shareholder address.
If you would like more than one report, please call our Literature Department at
1-800-248-2828 and additional reports will be sent to you.
SHAREHOLDER SERVICES AND TRANSFER AGENT
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
This report has been prepared for shareholders of Colonial Income Fund. This
report may also be used as sales literature when preceded or accompanied by the
current prospectus which provides details of sales charges, investment
objectives and operating policies of the Fund.
11
<PAGE>
[LOGO]
COLONIAL
MUTUAL FUNDS
[GRAPHIC]
COLONIAL
INCOME
FUND
------------------------------------
SEMIANNUAL REPORT
JUNE 30, 1995
[COLONIAL MUTUAL FUNDS]
[LOGO] Printed on recycled paper
IF-03/133B-0695
Colonial Investment Services, Inc. (C)1995
