<PAGE>
LETTER FROM THE PRESIDENT
Dear Shareholder:
Following is Colonial Strategic Income Fund's semiannual report for the six
months ended June 30, 1995. Your Fund is designed to provide investors with a
high level of current income. The Fund pursues its objective by investing in
three sectors of the bond market -- U.S. government, high yield corporate, and
foreign government bonds.
FUND PERFORMANCE (1/1/95 - 6/30/95)(1)
<TABLE>
<CAPTION>
CLASS A CLASS B
INCEPTION 4/21/77 5/15/92
- --------------------------------------------------------------------------------
<S> <C> <C>
Distributions declared per share $0.293 $0.268
- --------------------------------------------------------------------------------
SEC yield on 6/30/95 7.39% 7.01%
- --------------------------------------------------------------------------------
Total returns assuming reinvestment of all distributions
and no sales charge or CDSC 11.25% 10.84%
- --------------------------------------------------------------------------------
Net asset value per share on 6/30/95 $ 6.96 $ 6.96
- --------------------------------------------------------------------------------
</TABLE>
ECONOMIC/MARKET OVERVIEW
Almost all sectors of the bond market performed well during the period,
including the sectors that are your Fund's primary investment focus. High yield
corporate bonds benefited from strong earnings growth by their issuing
corporations. Foreign bonds showed some improvement as local currencies
strengthened relative to the U.S. dollar. Finally, there was a dramatic
recovery in the U.S. government bond market, reflecting a general decline in
U.S. interest rates.
U.S. GOVERNMENT MARKET
It appears likely the Federal Reserve Board will achieve its goal of a
"soft landing" for the economy. This has already been reflected in a marked
economic slow down. Annualized gross domestic product, which was 5.1% for the
fourth quarter of 1994, declined to 2.8% for the first quarter of 1995. This
slowing of the U.S. economy and the general decline in interest rates that
followed sparked a recovery in the U.S. government bond market. For example,
the yield for the 30-year Treasury bond declined from 7.89% on December 31,
1994, to 6.63% on June 30, 1995. As a result of the strength of this sector,
investments were reduced slightly, to 20.8% of the portfolio.
HIGH YIELD U.S. CORPORATE MARKET
During the period high yield corporate bonds benefited from increased
demand. Many investors were attracted by the relatively high yields available
from these securities as yields from some other investments declined. Although
high yield corporate remains the Fund's largest sector, we have reduced our
holdings here to further diversify the portfolio. We have also reduced our
positions in some of the more cyclical industries, including steel and forest
products, as the economy has slowed.
[PHOTO]
John A. McNeice, Jr.
President
INTERNATIONAL MARKET
The higher yielding international markets, including Spain, were given lower
profiles in the portfolio during the period. This was done to reduce the Fund's
sensitivity to economic volatility in these markets. Greater emphasis was
placed on developed countries, primarily those of Northern Europe. Among these
was Denmark, which is currently the Fund's largest foreign country position.
Denmark has become attractive because of its deficit reduction program and a
strong export market.
As expected, interest rates have moved lower during 1995. Although there
may be periods of consolidation when rates move slightly higher, we believe the
overall interest rate trend will remain favorable for fixed-income investments.
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 7.39% for Class A shares and 7.01%
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(A)-93.1% PAR VALUE
- --------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - 41.1%
- --------------------------------------------------------------------------------
<S> <C> <C>
CONSTRUCTION - 2.0%
BUILDING CONSTRUCTION - 1.3%
Nortek, Inc.,
9.875% 03/01/04........................... $ 3,500 $ 3,150
Toll Corp.,
10.500% 03/15/02........................... 3,000 3,090
U.S. Home Corp.,
9.750% 06/15/03........................... 4,500 4,365
USG Corp.,
9.250% 09/15/01........................... 6,000 6,150
----------
16,755
----------
SPECIAL TRADE CONTRACTORS - 0.7%
Building Materials Corp.,
stepped-coupon, (11.750%
07/01/99) 07/01/04 (b)............................. 7,000 4,165
Overhead Door, Inc.,
12.250% 02/01/00........................... 5,000 5,025
----------
9,190
- --------------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 1.0%
FINANCIAL SERVICES - 0.6%
Comdata Network, Inc.,
13.250% 12/15/02........................... 7,000 7,875
----------
INSURANCE CARRIERS - 0.4%
Reliance Group Holdings Co.,
9.750% 11/15/03........................... 6,000 5,820
----------
NONDEPOSITORY CREDIT INSTITUTION - 0.0%
Drum Financial Corp.,
12.875% 09/15/99 (c)....................... 1,000 10 (d)
- --------------------------------------------------------------------------------
MANUFACTURING - 15.4%
CHEMICALS - 2.4%
Agricultural Minerals Co.,
Limited Partnership,
10.750% 09/30/03........................... 7,200 7,398
Energy Ventures, Inc.,
10.250% 03/15/04........................... 2,500 2,550
Huntsman Corp.,
11.000% 04/15/04........................... 7,000 7,647
N.L. Industries, Inc.,
11.750% 10/15/03........................... 6,340 6,609
OSI Special Holding Co.,
stepped-coupon, (11.500%
04/15/96) 04/15/04 (b)............................. 6,000 4,140
Rexene Corp.,
11.750% 12/01/04........................... 2,000 2,135
Revlon Consumer Products Corp.,
Series B,
9.375% 04/01/01........................... 2,000 1,930
----------
32,409
----------
ELECTRONIC & ELECTRICAL EQUIPMENT - 1.3%
Amphenol Corp.:
10.450% 11/01/01........................... 6,000 6,540
12.750% 12/15/02........................... 2,500 2,859
Exide Corp.:
10.000% 04/15/05........................... 2,000 2,060
10.750% 12/15/02........................... 3,500 3,701
Lamson & Sessions Co.,
14.000% 06/01/97........................... 1,500 1,513
----------
16,673
----------
FABRICATED METAL - 0.2%
Haynes International, Inc.,
13.500% 08/15/99........................... 3,000 1,972
----------
FOOD & KINDRED PRODUCTS - 0.9%
Cott Corp.,
9.375% 07/01/05........................... 3,000 3,015
Pilgrim's Pride Corp.,
10.875% 08/01/03........................... 5,000 4,600
Specialty Foods Corp., Series B,
11.250% 08/15/03........................... 5,000 4,925
----------
12,540
----------
LUMBER & WOOD PRODUCTS - 0.7%
Southwest Forest Industries,
12.125% 09/15/01........................... 3,000 3,030
Triangle Pacific Corp.,
10.500% 08/01/03........................... 6,000 6,105
----------
9,135
----------
MACHINERY & COMPUTER EQUIPMENT - 0.3%
SPX, Inc.,
11.750% 06/01/02........................... 4,000 4,180
----------
MEASURING & ANALYZING INSTRUMENTS - 0.3%
Sola Group Ltd., stepped-coupon,
6.000% (9.625% 12/15/98)
12/15/03 (e)........................................ 5,000 4,600
----------
</TABLE>
See notes to investment portfolio.
2
<PAGE>
INVESTMENT PORTFOLIO - CONTINUED
<TABLE>
<CAPTION>
BONDS & NOTES(A) - CONT. PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
MANUFACTURING - CONT.
MISCELLANEOUS MANUFACTURING - 1.2%
American Standard Co.,
stepped-coupon, (10.500%
06/01/98) 06/01/05 (b)............................. $ 11,000 $ 8,360
Coleman Holdings Co., Series B,
(f) 05/27/98........................... 6,000 4,410
Eagle Industries, Inc., stepped-
coupon, (10.500% 07/15/98)
07/15/03 (b)........................................ 5,000 3,700
----------
16,470
----------
PAPER PRODUCTS - 3.0%
Container Corporation of America,
Series A,
11.250% 05/01/04........................... 7,500 7,800
Domtar, Inc.,
12.000% 04/15/01........................... 1,500 1,725
Gaylord Container Corp., stepped-
coupon, (12.750% 05/15/96)
05/15/05 (b)........................................ 5,000 4,900
Repap New Bruswick,
10.625% 04/15/05........................... 2,000 2,015
Repap Wisconsin, Inc.,
9.875% 05/01/06........................... 7,000 6,772
Riverwood International Corp.,
11.250% 06/15/02........................... 3,000 3,270
SD Warren Co.,
12.000% 12/15/04........................... 3,500 3,780
Stone Container Corp.:
9.875% 02/01/01........................... 3,000 2,974
11.500% 10/01/04........................... 2,000 2,125
11.875% 12/01/98........................... 3,750 4,041
12.625% 07/15/98........................... 1,000 1,085
----------
40,487
----------
PETROLEUM REFINING - 0.3%
Day International Group,
11.125% 06/01/05........................... 1,250 1,256
Flores & Rucks, Inc.,
13.500% 12/01/04........................... 3,000 3,375
----------
4,631
----------
PRIMARY METAL - 0.7%
A.K. Steel Corp.,
10.750% 04/01/04........................... 5,000 5,250
Ucar Global Enterprises,
12.000% 01/15/05........................... 3,500 3,771
----------
9,021
----------
PRINTING & PUBLISHING - 1.0%
American Media Operations, Inc.,
11.625% 11/15/04........................... 2,000 2,140
K-III Communications Corp.,
10.625% 05/01/02........................... 5,000 5,300
Marvel Entertainment Group, Inc.,
(f) 04/15/98........................... 8,250 5,816
----------
13,256
----------
RUBBER & PLASTIC - 0.7%
Atlantis Group, Inc.,
11.000% 02/15/03........................... 6,300 6,206
Berry Plastics Corp.,
12.250% 04/15/04........................... 3,000 3,045
----------
9,251
----------
STONE, CLAY, GLASS & CONCRETE - 0.5%
Owens-Illinois, Inc.,
9.950% 10/15/04........................... 6,000 6,120
----------
TEXTILE MILL PRODUCTS - 0.5%
Westpoint Stevens, Inc.,
9.375% 12/15/05........................... 6,850 6,593
----------
TOBACCO PRODUCTS - 0.1%
Consolidated Cigar Corp.,
10.500% 03/01/03........................... 1,000 995
----------
TRANSPORTATION EQUIPMENT - 1.3%
Aftermarket Technology Corp.,
12.000% 08/01/04........................... 2,500 2,650
Fairfield Manufacturing, Inc.,
11.375% 07/01/01........................... 3,625 3,426
Lear Seating Corp.,
11.250% 07/15/00........................... 1,500 1,567
Roadmaster Industries, Inc.,
11.750% 07/15/02........................... 5,500 5,335
Venture Holdings Trust Co.,
9.750% 04/01/04........................... 5,500 4,565
----------
17,543
- --------------------------------------------------------------------------------
MINING & ENERGY - 5.0%
CRUDE PETROLEUM & NATURAL GAS - 0.8%
Ferrellgas Finance Corp.,
Limited Partnership,
10.000% 08/01/01........................... 2,500 2,600
Triton Energy Corp.:
stepped-coupon, (9.750%
12/15/96) 12/15/00 (b).............................. 4,500 3,960
(f) 11/01/97........................... 5,000 4,075
----------
10,635
----------
See notes to investment portfolio.
3
<PAGE>
INVESTMENT PORTFOLIO - CONTINUED
</TABLE>
<TABLE>
<CAPTION>
BONDS & NOTES(A) - CONT. PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
MINING - CONT.
METAL MINING - 0.2%
Freeport-McMoRan Resource
Partners, Limited Partnership,
8.750% 02/15/04........................... $ 3,500 $ 3,343
----------
OIL & GAS EXTRACTION - 3.7%
Falcon Drilling Co., Inc.,
9.750% 01/15/01........................... 5,000 4,950
Global Marine, Inc.,
12.750% 12/15/99........................... 3,000 3,300
Gulf Canada Resources Ltd.,
9.250% 01/15/04........................... 7,500 7,312
Kelley Oil & Gas,
13.500% 06/01/99........................... 4,000 3,960
Maxus Energy Corp.,
9.875% 10/15/02........................... 3,000 2,865
Mesa Capital Corp.,
12.750% 06/30/98........................... 4,000 3,620
Occidental Petroleum Corp.,
11.750% 03/15/11........................... 1,000 1,081
Plains Resources, Inc.,
12.000% 10/01/99........................... 4,000 4,150
Rowan Companies, Inc.,
11.875% 12/01/01........................... 4,000 4,280
Santa Fe Energy Resources, Inc.,
11.000% 05/15/04........................... 7,000 7,420
TransTexas Gas Corp.,
11.500% 06/15/02........................... 3,500 3,570
Trident NGL, Inc.,
10.250% 04/15/03........................... 2,500 2,750
----------
49,258
----------
OIL & GAS FIELD SERVICES - 0.3%
Tuboscope Vetco International Corp.,
10.750% 04/15/03........................... 4,000 4,080
- --------------------------------------------------------------------------------
RETAIL TRADE - 2.1%
AUTO DEALERS & GAS STATIONS - 0.0%
Iroquois Brands Ltd.,
12.000% 09/15/99 (c)....................... 1,000 10 (d)
----------
FOOD STORES - 0.9%
Dominicks Finer Foods,
10.875% 05/01/05........................... 2,000 2,030
Pathmark Stores, Inc.:
9.625% 05/01/03........................... 2,250 2,194
stepped-coupon, (10.750%
11/01/99) 11/01/03 (b)....................... 13,500 8,066
----------
12,290
----------
MISCELLANEOUS RETAIL - 1.2%
Barry's Jewelers, Inc.,
12.625% 05/15/96........................... 7 7
Brylane Capital Corp.,
Series B,
10.000% 09/01/03........................... 5,000 4,650
Finlay Fine Jewelry Corp.,
10.625% 05/01/03........................... 5,000 4,775
Thrifty Payless Holdings, Inc.,
11.750% 04/15/03........................... 6,000 6,330
----------
15,762
- --------------------------------------------------------------------------------
SERVICES - 6.3%
AMUSEMENT & RECREATION - 1.8%
Boyd Gaming Corp.,
10.750% 09/01/03........................... 3,000 3,090
Bally's Grand, Inc., Series B,
10.375% 12/15/03........................... 7,500 7,312
Empress River Casino Finance
Corp.,
10.750% 04/01/02........................... 4,000 4,000
Falcon Holdings,
11.000% 09/15/03........................... 4,318 3,886
Hollywood Casino,
14.000% 04/01/98........................... 5,000 5,488
----------
23,776
----------
BUSINESS SERVICES - 0.0%
Darling International, Inc.,
11.000% 07/15/00........................... 401 399
----------
HEALTH SERVICES - 3.1%
Abbey Healthcare Group, Inc.,
9.500% 11/01/02........................... 7,000 7,210
Community Health Systems, Inc.,
10.250% 11/30/03........................... 6,000 6,300
Genesis Health Ventures,
9.750% 06/15/05........................... 1,500 1,519
HealthSouth Rehabilitation Corp.,
9.500% 04/01/01........................... 3,500 3,614
Hillhaven Corp.,
10.125% 09/01/01........................... 3,500 3,640
Integrated Health Services, Inc.,
10.750% 07/15/04........................... 3,000 3,195
OrNda Health Corp.:
11.375% 08/15/04........................... 2,500 2,731
12.250% 05/15/02........................... 3,000 3,323
See notes to investment portfolio.
4
<PAGE>
INVESTMENT PORTFOLIO - CONTINUED
</TABLE>
<TABLE>
<CAPTION>
BONDS & NOTES(A) - CONT. PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
SERVICES - CONT.
HEALTH SERVICES - CONT.
Tenant Healthcare Corp.,
10.125% 03/01/05........................... $ 4,500 $ 4,753
Total Renal Care, Inc., Unit, stepped-
coupon, (12.000% 08/15/97)
08/15/05 (b)(g)..................................... 5,500 5,005
----------
41,290
----------
HOTELS, CAMPS & LODGING - 1.1%
California Hotel Finance Corp.,
11.000% 12/01/02........................... 5,000 5,125
HMH Properties, Inc.,
9.500% 05/15/05........................... 5,100 4,934
MGM Grand Hotels Finance Corp.,
12.000% 05/01/02........................... 2,000 2,225
Santa Fe Hotel, Inc., Unit,
11.000% 12/15/00 (g)....................... 2,000 1,870
----------
14,154
----------
MISCELLANEOUS REPAIR SERVICES - 0.1%
Universal Outdoor, Inc.,
11.000% 11/15/03........................... 1,500 1,455
----------
MOTION PICTURES - 0.2%
Plitt Theatres, Inc.,
10.875% 06/15/04........................... 2,350 2,327
- --------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 9.3%
AIR TRANSPORTATION - 0.2%
Pan American World Airways, Inc.,
15.000% 04/15/04 (h)....................... 1,000 3
World Corporation, Inc.,
13.875% 08/15/97........................... 2,500 2,487
----------
2,490
----------
COMMUNICATIONS - 8.6%
Adelphia Communications Corp.:
9.500% 02/15/04 PIK....................... 5,479 4,506
12.500% 05/15/02........................... 4,000 3,980
Allbritton Communications Co.,
11.500% 08/15/04........................... 7,000 7,420
Cablevision Systems Corp.,
10.750% 04/01/04........................... 5,000 5,250
Cencall Communications Corp.,
stepped-coupon, (10.125%
01/15/99) 01/15/04 (b)....................... 6,000 3,000
Continental Cablevision, Inc.,
11.000% 06/01/07........................... 6,000 6,660
Diamond Cable Corp., stepped-
coupon, (13.250% 09/30/99)
09/30/99 (b)........................................ 7,250 4,803
Groupe Videotron,
10.625% 02/15/05........................... 3,000 3,158
Heritage Media Corp.,
11.000% 06/15/02........................... 1,500 1,616
International Cabletelevision,
stepped-coupon, (12.750%
04/15/00) 04/15/05 (b)....................... 5,500 3,259
Jones Intercable, Inc.:
9.625% 03/15/02........................... 2,000 2,090
10.500% 03/01/08........................... 2,500 2,650
11.500% 07/15/04........................... 2,500 2,763
MFS Communications Co., Inc.,
stepped-coupon, (9.375%
01/15/99) 01/15/04 (b)....................... 7,750 5,386
Mobilemedia Communications, Inc.,
stepped-coupon, (10.500%
12/01/98) 12/01/03 (b)....................... 3,500 2,327
NWCG Holding Corp.,
(f) 06/15/99........................... 6,000 3,720
Panamsat Limited Partnership,
stepped-coupon, (11.375%
08/01/98) 08/01/03 (b)....................... 3,000 2,145
Pegasus Media, Unit,
stepped-coupon, (13.125%
06/01/00) 06/01/04 (b)....................... 3,000 1,470
Pricellular Wireless Corp.,
stepped-coupon, (14.000%
11/15/97) 11/15/01 (b)....................... 6,000 4,830
Paging Network, Inc.:
8.875% 02/01/06........................... 2,000 1,820
11.750% 05/15/02........................... 2,500 2,675
Rogers Cablesystem
10.000% 03/15/05........................... 3,000 3,083
Rogers Communications, Inc.,
10.875% 04/15/04........................... 3,000 3,075
SCI Television, Inc.,
11.000% 06/30/05........................... 5,000 5,225
Sinclair Broadcast Group, Inc.,
10.000% 12/15/03........................... 2,975 2,975
USA Mobile Communications
Holdings, Inc.:
9.500% 02/01/04........................... 3,000 2,617
14.000% 11/01/04........................... 3,000 3,270
Viacom International, Inc.,
8.000% 07/07/06........................... 4,000 3,870
Videotron Holding Co., stepped-
coupon, (11.125% 01/01/99)
07/01/04) (b)....................................... 13,000 8,515
</TABLE>
See notes to investment portfolio.
5
<PAGE>
INVESTMENT PORTFOLIO - CONTINUED
<TABLE>
<CAPTION>
BONDS & NOTES(A) - CONT. PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - CONT. .....................
COMMUNICATIONS - CONT. ...............................
Young Broadcasting, Inc.:
10.125% 02/15/05 ............................... $ 3,000 $ 3,008
11.750% 11/15/04 ............................... 4,000 4,360
--------
115,526
--------
ELECTRIC SERVICES - 0.1%
System Energy Resources, Inc.,
11.375% 09/01/16 ............................... 1,123 1,223
--------
MOTOR FREIGHT & WAREHOUSING - 0.4%
Trism, Inc.,
10.750% 12/15/00 ............................... 5,500 5,418
- --------------------------------------------------------------------------------
Total corporate fixed-income bonds & notes
(cost $589,007) ..................................... 548,962
- --------------------------------------------------------------------------------
CORPORATE CONVERTIBLE BONDS & NOTES - 0.6%
- --------------------------------------------------------------------------------
MANUFACTURING - 0.1%
ELECTRONIC & ELECTRICAL EQUIPMENT - 0.0%
Kollmorgen Corp.,
8.750% 05/01/09 ............................... 622 594
--------
TEXTILE MILL PRODUCTS - 0.1%
Guilford Mills, Inc.,
6.000% 09/15/12 ............................... 700 672
- --------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.5%
COMMUNICATIONS - 0.5%
Bell Cablemedia, stepped-
coupon, (11.950% 07/15/99)
07/15/04 (b) ....................................... 10,000 6,738
- --------------------------------------------------------------------------------
Total convertible bonds & notes
(cost $1,039) ....................................... 8,004
- --------------------------------------------------------------------------------
<CAPTION>
U.S. GOVERNMENT & AGENCIES OBLIGATIONS - 20.8%
Maturities
Coupon From/to
------ ----------
<S> <C> <C>
Federal Home Loan Mortgage Corporation:
7.500% 2016 393 392
8.000% 2006-2016 2,027 2,072
8.500% 2007-2010 2,159 2,233
8.750% 2005-2008 870 893
9.000% 2004-2022 2,392 2,494
9.250% 2007-2016 2,039 2,115
9.500% 2008-2016 1,601 1,682
9.750% 2008-2016 177 184
10.000% 2019 2,460 2,651
10.500% 2020 2,105 2,297
10.750% 2010-2013 2,381 2,566
11.250% 2010-2015 1,670 1,804
--------
21,383
--------
Federal National Mortgage Association:
7.500% 2003-2011 1,247 1,269
8.000% 2002-2009 1,669 1,715
8.250% 2007-2009 531 540
8.500% 2008-2021 4,110 4,280
9.000% 2003-2021 6,782 7,136
9.250% 2016 541 565
10.000% 2013-2016 2,049 2,224
10.500% 2007-2016 2,876 3,133
--------
20,862
--------
Government National Mortgage Association:
8.500% 2006 78 82
9.000% 2008-2017 21,354 22,574
9.500% 2009-2017 10,070 10,777
10.000% 2009-2021 3,941 4,276
10.500% 2001-2021 1,093 1,201
11.750% 2013-2015 241 267
12.000% 2014 45 51
--------
39,228
--------
U.S. Treasury Bonds:
9.875% 11/15/15 27,430 37,048
12.000% 08/15/13 5,591 8,247
13.125% 05/15/01 5,455 7,342
--------
52,637
--------
U.S. Treasury Notes:
9.250% 01/15/96 48,405 49,267
10.375% 11/15/12 50,531 66,835
11.875% 11/15/03 20,517 27,958
--------
144,060
- --------------------------------------------------------------------------------
Total U.S. government & agency obligations
(cost $279,109) 278,170
- --------------------------------------------------------------------------------
<CAPTION>
CURRENCY
ABBREV.
- --------------------------------------------------------------------------------
FOREIGN GOVERNMENT & AGENCY OBLIGATIONS - 30.6%
- --------------------------------------------------------------------------------
<S> <C> <C>
Argentina Par Brady,
5.000% 03/31/23 (i) AP 69,750 33,306
Government of Finland Bond:
9.500% 03/15/04 FM 155,000 37,620
11.000% 01/15/99 FM 78,000 19,908
Kingdom of Denmark,
9.000% 11/15/00 DK 765,835 147,133
Treasury Corp. of Victoria:
12.000% 09/22/01 A$ 83,830 67,675
12.500% 10/15/03 A$ 28,759 24,076
United Kingdom Treasury,
9.750% 08/27/02 UK 46,966 80,036
- --------------------------------------------------------------------------------
</TABLE>
See notes to investment portfolio.
6
<PAGE>
INVESTMENT PORTFOLIO - CONTINUED
<TABLE>
<CAPTION>
VALUE
- --------------------------------------------------------------------------------
Total foreign government & agency obligations - 30.6%
(cost $352,816) $ 409,754
- --------------------------------------------------------------------------------
Total bonds & notes (cost $1,221,971) 1,244,890
- --------------------------------------------------------------------------------
COMMON STOCKS - 0.5% SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
CONSTRUCTION - 0.1%
BUILDING CONSTRUCTION - 0.1%
Calton, Inc. (c) 356 134
U.S. Home Corp. (c) 31 718
----------
852
- --------------------------------------------------------------------------------
MANUFACTURING - 0.1%
FOOD & KINDRED PRODUCTS - 0.1%
FoodBrands America, Inc. (c) 14 184
Spreckels Industries, Inc. (c) 164 1,330
----------
1,514
----------
MACHINERY & COMPUTER EQUIPMENT - 0.0%
Thermadyne Holdings Corp. (c) 2 28
----------
PRIMARY METAL- 0.1%
LTV Corp. (c) 38 560
Texas Industries, Inc. (c) 15 565
----------
1,125
- --------------------------------------------------------------------------------
MINING & ENERGY - 0.0%
OIL & GAS EXTRACTION - 0.0%
Mesa, Inc. (c) 70 333
- --------------------------------------------------------------------------------
RETAIL TRADE - 0.2%
FOOD STORES - 0.0%
National Convenience Stores, Inc. (c) (j) 2
----------
GENERAL MERCHANDISE STORES - 0.1%
Federated Department Stores, Inc. (c) 30 780
----------
MISCELLANEOUS RETAIL - 0.1%
Hanover Direct, Inc. (c) 338 971
Pharmhouse Corp. (c) 4 16
----------
987
- --------------------------------------------------------------------------------
SERVICES - 0.0%
BUSINESS SERVICES - 0.0%
Darling International, Inc. (c) 27 540
----------
HEALTH SERVICES - 0.0%
Continental Health Affiliates, Inc. (c) 530 530
- --------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.0%
GAS SERVICES - 0.0%
United Gas Holdings Corp. (c)(d) 30 416
----------
LOCAL & SUBURBAN TRANSIT - 0.0%
Greyhound Lines, Inc., 12.50% Escrow
Receipt (c)(d) 1 (j)
----------
MOTOR FREIGHT & WAREHOUSING - 0.0%
St. Johnsbury Trucking Co. (c)(d) 31 63
Sun Carriers, Inc. (c)(d) 130 1
----------
64
- --------------------------------------------------------------------------------
Total common stocks (cost $11,440) 7,171
- --------------------------------------------------------------------------------
PREFERRED STOCKS - 0.0%
- --------------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 0.0%
DEPOSITORY INSTITUTIONS - 0.0%
Guardian Savings Bank,
Series A, PIK (c)(d) 4,611 46
----------
HOLDING & OTHER INVESTMENT OFFICE - 0.0%
Riggs National Corp., 10.75% 19 484
- --------------------------------------------------------------------------------
Total preferred stocks (cost $2,848) 530
- --------------------------------------------------------------------------------
WARRANTS (C) - 0.0%
- --------------------------------------------------------------------------------
BPC Holdings Corp., expires 4/15/04 3 37
Capital Gaming International,
expires 02/01/99 6 1
Forest Oil Corp., expires 10/01/96 82 26
National Convenience Stores, Inc.,
expires 03/09/98 (j) 1
OSI Specialties Holding Co.,
expires 04/15/99 6 12
- --------------------------------------------------------------------------------
Total warrants (cost $137) 77
- --------------------------------------------------------------------------------
Total investments - 93.6%
(cost $1,236,396) (k) 1,252,668
- --------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 4.8% PAR
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT
Repurchase agreement with Lehman
Government Securities, Inc., dated 06/30/95,
due 07/03/95 at 6.210% collateralized
by U.S. Treasury notes and bills with various
maturities to 1999, market value $65,494
(repurchase proceeds $64,120) $64,087 64,087
- --------------------------------------------------------------------------------
FORWARD CURRENCY CONTRACTS (L) - 0.1% 1,237
- --------------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - 1.5% 19,654
- --------------------------------------------------------------------------------
NET ASSETS - 100.0% $1,337,646
- --------------------------------------------------------------------------------
</TABLE>
See notes to investment portfolio.
7
<PAGE>
INVESTMENT PORTFOLIO - CONTINUED
Notes to investment portfolio:
(a) Par of each bond or note is shown in its issued currency according to the
abbreviations shown below. Value of all securities is shown in U.S. dollars.
(b) Currently zero coupon. Shown parenthetically is the interest rate to be
paid and the date the Fund will begin accruing this rate.
(c) Non-income producing.
(d) Represents fair value as determined in good faith under the direction of the
Trustees.
(e) Shown parenthetically is the next interest rate to be paid and the date the
Fund will begin accruing this rate.
(f) Zero coupon bond.
(g) This security consists of one bond and one warrant per unit.
(h) This issuer has filed under Chapter 11 of the Federal Bankruptcy Code.
Income is not being accrued.
(i) The interest rate shown is the average rate over the life of the security.
(j) Rounds to less than one.
(k) Cost for federal income tax purposes is $1,236,500.
(l) As of June 30, 1995, the Fund had entered into the following forward
currency exchange contracts resulting in the net unrealized appreciation of
$1,237.
<TABLE>
<CAPTION>
Net Unrealized
Contracts In Exchange Settlement Appreciation
to Deliver For Date ($US)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
AU 44,000 USD 31,746 7/12/1995 $536
AU 44,000 USD 31,900 7/19/1995 $701
</TABLE>
SUMMARY OF SECURITIES BY COUNTRY/CURRENCY
<TABLE>
<CAPTION>
Country/ % of total
Currency securities
Country abbrev. Value at value
------- ------- ----- -----
<S> <C> <C> <C>
United States $ $ 842,914 67.3
Denmark DK 147,133 11.7
Australia AU/A$ 91,751 7.3
United Kingdom UK 80,036 6.4
Finland FM 57,528 4.6
Argentina AP 33,306 2.7
---------- -----
$1,252,668 100.0
---------- -----
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
Acronym Name
------- ---------------
PIK Payment-In-Kind
See notes to financial statements.
8
<PAGE>
FINANCIAL STATEMENTS
</TABLE>
<TABLE>
<CAPTION>
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 $1,236,396).................... $1,252,668
Short-term obligations.................................... 64,087
----------
1,316,755
Receivable for:
Interest..................................... 31,201
Fund shares sold............................. 2,020
Forward currency contracts................... 1,237
Investments sold............................. 175
Other........................................... 94 34,727
------ ----------
Total assets............................... 1,351,482
LIABILITIES
Payable for:
Distributions................................ 8,797
Investments purchased........................ 3,500
Fund shares repurchased...................... 1,446
Accrued:
Deferred Trustees fees...................... 5
Other....................................... 88
------
Total liabilities.......................... 13,836
----------
NET ASSETS................................................ $1,337,646
==========
Net asset value & redemption price per share - Class A
($678,528/97,480)...................................... $6.96
==========
Maximum offering price per share - Class A
($6.96/0.9525)......................................... $7.31*
==========
Net asset value & offering price per share - Class B
($659,118/94,693)....................................... $6.96
==========
COMPOSITION OF NET ASSETS
Capital paid in........................................ $1,655,210
Overdistributed net investment income.................. (2,573)
Accumulated net realized loss.......................... (332,939)
Net unrealized appreciation on:
Investments.......................................... 16,272
Foreign currency transactions........................ 1,676
----------
$1,337,646
==========
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS (UNAUDITED)
Six months ended June 30, 1995
(in thousands)
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................. $ 63,638
Dividends................................................. 309
----------
63,947
EXPENSES
Management fee.................................. 4,110
Service fee..................................... 1,468
Distribution fee - Class B...................... 2,369
Transfer agent.................................. 1,516
Bookkeeping fee................................. 216
Trustees fees................................... 29
Custodian fee................................... 168
Audit fee....................................... 34
Legal fee....................................... 7
Reports to shareholders......................... 9
Registration fees............................... 143
Other........................................... 58 10,127
------- ----------
Net investment income............................ 53,820
----------
NET REALIZED & UNREALIZED GAIN (LOSS)
ON PORTFOLIO POSITIONS
Net realized loss on:
Investments.................................. (18,651)
Foreign currency
transactions.............................. (452)
-------
Net realized loss................................ (19,103)
Net unrealized appreciation
during the period on:
Investments................................ 98,245
Foreign currency
transactions............................. 1,791
-------
Net unrealized appreciation...................... 100,036
----------
Net gain...................................... 80,933
----------
Net increase in net assets from operations................ $ 134,753
==========
</TABLE>
* On sales of $50,000 or more the offering price is reduced.
See notes to financial statements.
9
<PAGE>
FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
- -----------------------------------------------------------------------------------------
(unaudited)
Six months Year
ended ended
June 30 December 31
----------- -----------
1995 1994
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income.................................. $ 53,820 $ 102,096
Net realized loss...................................... (19,103) (52,069)
Net unrealized appreciation (depreciation)............. 100,036 (104,252)
---------- ----------
Net increase (decrease) from operations............. 134,753 (54,225)
Distributions
From net investment income - Class A................... (27,071) (56,419)
From capital paid in - Class A......................... -- (1,168)
In excess of net investment income - Class A........... (1,369) (13)
From net investment income - Class B................... (23,823) (45,965)
From capital paid in - Class B......................... -- (951)
In excess of net investment income - Class B........... (1,205) (10)
---------- ----------
81,285 (158,751)
---------- ----------
Fund share transactions
Receipts for shares sold - Class A..................... 33,344 139,735
Value of distributions reinvested - Class A............ 12,071 29,165
Cost of shares repurchased - Class A................... (45,101) (109,086)
---------- ----------
314 59,814
---------- ----------
Receipts for shares sold - Class B..................... 48,902 285,091
Value of distributions reinvested - Class B............ 9,871 22,255
Cost of shares repurchased - Class B................... (47,898) (99,032)
---------- ----------
10,875 208,314
---------- ----------
Net increase from Fund share transactions........... 11,189 268,128
---------- ----------
Total increase ............................ 92,474 109,377
NET ASSETS
Beginning of period ................................... 1,245,172 1,135,795
---------- ----------
End of period (net of overdistributed net
investment income of $2,573 and $23, respectively)... $1,337,646 $1,245,172
========== ==========
NUMBER OF FUND SHARES
Sold - Class A......................................... 4,917 19,709
Issued for distributions reinvested - Class A.......... 1,780 4,270
Repurchased - Class A.................................. (6,690) (15,921)
---------- ----------
7 8,058
---------- ----------
Sold - Class B......................................... 7,228 40,112
Issued for distributions reinvested - Class B.......... 1,456 3,267
Repurchased - Class B.................................. (7,109) (14,569)
---------- ----------
1,575 28,810
========== ==========
</TABLE>
See notes to financial statements.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
In the opinion of management of Colonial Strategic 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.
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 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 income, no federal income tax has
been accrued.
- --------------------------------------------------------------------------------
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
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.
The value of additional securities received as an interest payment is
recorded as income and as the cost basis of such securities.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSACTIONS
Net realized and unrealized gain (loss) on foreign currency transactions
includes the fluctuation in exchange rates on gains and losses between trade
and settlement dates on securities transactions, gains and losses arising from
the disposition of foreign currency, and currency gains and losses between the
accrual and payment dates on dividend and interest income and foreign
withholding taxes.
The Fund does not distinguish that portion of gains and 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 and losses from investments.
- --------------------------------------------------------------------------------
FORWARD CURRENCY CONTRACTS
The Fund may enter into forward currency contracts to purchase or sell
foreign currencies at predetermined exchange rates in connection with the
settlement of purchases and sales of securities. The Fund may also enter into
forward currency contracts to hedge certain other foreign currency denominated
assets. The contracts are used to minimize the exposure to foreign exchange rate
fluctuations during the period between trade and settlement date of the
contracts. All contracts are marked-to-market daily, resulting in unrealized
gains 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, the actual exposure is typically limited to
the change in value of the contract (in U.S. dollars) over the period it remains
open. Risks may also arise if counterparties fail to perform their obligations
under the contracts.
- --------------------------------------------------------------------------------
OTHER
Corporate actions are recorded on the ex-date (except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware of
such), net of nonrebatable tax withholdings. Where a high level of uncertainty
as to collection exists, income on securities is recorded net of all tax
withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system
of securities collateralizing repurchase agreements. Collateral is
marked-to-market daily to ensure that the market value of the underlying assets
remains sufficient to protect the Fund. The Fund may experience costs and delays
in liquidating the collateral if the issuer defaults or enters bankruptcy.
- --------------------------------------------------------------------------------
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
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 based on the Fund's average net assets as follows:
<TABLE>
Average Net Assets Annual Fee Rate
------------------ ---------------
<S> <C>
First $1 billion.......................................... 0.65%
Over $1 billion........................................... 0.60%
</TABLE>
- --------------------------------------------------------------------------------
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:
<TABLE>
<CAPTION>
Average Net Assets Annual Fee Rate
------------------ ---------------
<S> <C>
First $50 million......................................... No charge
Next $950 million......................................... 0.035%
Next $1 billion........................................... 0.025%
</TABLE>
- --------------------------------------------------------------------------------
TRANSFER AGENT
Colonial Investors Service Center, Inc. (the Transfer Agent), an affiliate
of the Adviser, provides shareholder services for a monthly fee equal to 0.20%
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 $76,375 on sales of the
Fund's Class A shares and received contingent deferred sales charges (CDSC) of
$1,104,199 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 of a
service fee to the Distributor as follows:
<TABLE>
<CAPTION>
Value of shares Annual
outstanding on the 20th of Fee
each month which were issued Rate
---------------------------- ------
<S> <C>
Prior to January 1, 1993................................. 0.15%
On or after January 1, 1993.............................. 0.25%
</TABLE>
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 $275,029,229 and
$293,681,964, respectively, of which $238,337,763 and $220,305,574,
respectively, were U.S. government securities.
Unrealized appreciation(depreciation) at June 30, 1995, based on cost of
investments for federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation............................ $ 52,522,419
Gross unrealized depreciation............................ (36,354,237)
------------
Net unrealized appreciation............................ $ 16,168,182
============
</TABLE>
- --------------------------------------------------------------------------------
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
CAPITAL LOSS CARRYFORWARDS
At December 31, 1994, capital loss carryforwards available (to the extent
provided in regulations) to offset future realized gains were approximately as
follows:
<TABLE>
<CAPTION>
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
---------- ------------
<S> <C>
1996........................ $106,389,000
1997........................ 122,574,000
1998........................ 5,118,000
1999........................ 36,511,000
2000........................ 23,761,000
2001........................ 3,442,000
2002........................ 42,652,000
------------
$340,447,000
============
</TABLE>
Of the loss carryforwards expiring in 1996 and 1997, $31,908,027 and
$1,549,000, respectively, were acquired in the merger with Colonial Income Plus
Fund.
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
There are certain additional risks involved when investing in foreign
securities that are not inherent with investments in domestic securities. These
risks may involve foreign currency exchange rate fluctuations, adverse political
and economic developments and the possible prevention of currency exchange or
other foreign governmental laws or restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
- --------------------------------------------------------------------------------
NOTE 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 become 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, 137,908,062 voted for the new
Management Agreement, 1,765,613 voted against and 6,303,256 abstained. Of the
shares of beneficial interest outstanding that abstained, 459,484 represented
broker non-votes.
14
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS
ENDED
JUNE 30 YEAR ENDED DECEMBER 31
----------------------- ----------------------
1995 1994
----------------------- ----------------------
CLASS A CLASS B CLASS A CLASS B
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period......................... $ 6.530 $ 6.530 $ 7.390 $ 7.390
-------- -------- -------- --------
Income (loss) from investment operations:
Net investment income .................... 0.295 0.270 0.580 0.529
Net realized and unrealized
gain (loss) on investments.............. 0.428 0.428 (0.848) (0.849)
-------- -------- -------- --------
Total from investment operations...... 0.723 0.698 (0.268) (0.320)
-------- -------- -------- --------
Less distributions declared to
shareholders:
From net investment income............... (0.279) (0.255) (0.580) (0.529)
In excess of net investment income....... (0.014) (0.013) -- --
From capital paid in...................... -- -- (0.012) (0.011)
-------- -------- -------- --------
Total distributions declared
to shareholders..................... (0.293) (0.268) (0.592) (0.540)
======== ======== ======== ========
Net asset value - End of period............. $ 6.960 $ 6.960 $ 6.530 $ 6.530
======== ======== ======== ========
Total return (b).............................. 11.25%(c) 10.84%(c) (3.67)% (4.40)%
======== ======== ======== ========
Ratios to average net assets:
Expenses ................................... 1.21%(d) 1.96%(d) 1.21% 1.96%
Net investment income ...................... 8.72%(d) 7.97%(d) 8.38% 7.63%
Portfolio turnover............................ 45%(d) 45%(d) 78% 78%
Net assets at end of period (000)............. $678,528 $659,118 $636,824 $608,348
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------
1993 1992
----------------------- ----------------------
CLASS A CLASS B CLASS A CLASS B(a)
-------- -------- -------- -------
Net asset value -
Beginning of period............................. $ 7.010 $ 7.010 $ 7.020 $ 7.080
-------- -------- -------- -------
Income (loss) from investment operations:
Net investment income ........................ 0.565 0.511 0.669 0.385
Net realized and unrealized
gain (loss) on investments.................. 0.448 0.448 (0.004) (0.067)
-------- -------- -------- -------
Total from investment operations.......... 1.013 0.959 0.665 0.318
-------- -------- -------- -------
Less distributions declared to
shareholders:
From net investment income.................... (0.585) (0.535) (0.673) (0.388)
In excess of net investment income............ -- -- (0.002) --
From capital paid in.......................... (0.048) (0.044) -- --
-------- -------- -------- -------
Total distributions declared
to shareholders......................... (0.633) (0.579) (0.675) (0.388)
======== ======== ======== =======
Net asset value - End of period................. $ 7.390 $ 7.390 $ 7.010 $ 7.010
======== ======== ======== =======
Total return (b).................................. 14.95% 14.11% 9.77% 2.48%(c)
======== ======== ======== =======
Ratios to average net assets:
Expenses ....................................... 1.19% 1.94% 1.18% 1.93%(d)
Net investment income .......................... 8.42% 7.67% 9.39% 8.64%(d)
Portfolio turnover................................ 138% 138% 96% 96%
Net assets at end of period (000)................. $660,654 $475,141 $437,380 $37,935
</TABLE>
(a) Class B shares were initially offered on May 15, 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.
15
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------
1991 1990
-------- --------
CLASS A CLASS A
-------- --------
<S> <C> <C>
Net asset value -
Beginning of period............................... $ 6.050 $ 7.250
-------- --------
Income (loss) from investment operations:
Net investment income........................... 0.684 0.697
Net realized and unrealized
gain (loss) on investments.................... 0.966 (1.177)
-------- --------
Total from investment operations........... 1.650 (0.480)
-------- --------
Less distributions declared to shareholders:
From net investment income..................... (0.680) (0.697)
From capital paid in........................... -- (0.023)
-------- --------
Total distributions declared
to shareholders.......................... (0.680) (0.720)
-------- --------
Net asset value - End of period.................... $ 7.020 $ 6.050
======== ========
Total return (a)................................... 28.41% (7.04)%
======== ========
Ratios to average net assets:
Expenses......................................... 1.12% 1.12%
Net investment income............................ 10.27% 10.27%
Portfolio turnover................................. 48% 2%
Net assets at end of period (000).................. $424,824 $410,270
</TABLE>
(a) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or CDSC.
<PAGE>
TRUSTEES
ROBERT J. BIRNBAUM
Trustee (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief
Operating Officer, New York Stock Exchange, Inc.)
TOM BLEASDALE
Trustee (formerly Chairman of the Board and Chief Executive
Officer, Shore Bank & Trust Company)
LORA S. COLLINS
Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
WILLIAM D. IRELAND, JR.
Trustee (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
Dean, College of Business and Management, University of Maryland (formerly 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)
JOHN A. MCNEICE, JR.
Chairman of the Board and Director, The Colonial Group, Inc. and Colonial
Management Associates, Inc. (formerly Chief Executive Officer, The Colonial
Group, Inc. and Colonial Management Associates, Inc.)
JAMES L. MOODY, JR.
Chairman of the Board, Hannaford Bros. Co. (formerly 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
Management Consultant (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
17
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ABOUT OUR COVER...
[GRAPHIC]
The symbol on the cover of this Report represents the Fund's primary investment
focus on corporate bonds, and U.S. and foreign government bonds.
- --------------------------------------------------------------------------------
Colonial Strategic 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 Strategic 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.
<PAGE>
[LOGO]
COLONIAL
MUTUAL FUNDS
[GRAPHIC]
COLONIAL
STRATEGIC
INCOME FUND
- ----------------------------------------
SEMIANNUAL REPORT
JUNE 30, 1995
[LOGO]
COLONIAL
MUTUAL FUNDS
[LOGO] Printed on recycled paper.
SI-03/132B-0695
COLONIAL INVESTMENT SERVICES, INC. (C)1995
