COLONIAL TRUST I, 485BPOS, 1995-04-20

COLONIAL TRUST I
485BPOS, 1995-04-20

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Registration Nos: 2-41251
811-2214

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /

Pre-Effective Amendment No. / /

Post-Effective Amendment No. 39 / X /

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /

Amendment No. 21 / X /

COLONIAL TRUST I
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)

One Financial Center, Boston, Massachusetts 02111
-------------------------------------------------
(Address of Principal Executive Offices)

617-426-3750
----------------------------------------------------
(Registrant's Telephone Number, including Area Code)

Name and Address of
Agent for Service Copy to

Michael H. Koonce Peter MacDougall, Esq.
Colonial Management Associates, Inc. Ropes & Gray
One Financial Center One International Place
Boston, MA 02111 Boston, MA 02110-2624

It is proposed that this filing will become effective (check
appropriate box):

/ / immediately upon filing pursuant to paragraph (b).

/ X / on April 28, 1995 pursuant to paragraph (b).

/ / 60 days after filing pursuant to paragraph (a)(i).

/ / on (date) pursuant to paragraph (a)(i) of Rule 485.

/ / 75 days after filing pursuant to paragraph (a)(ii).

/ / on (date) pursuant to paragraph (a)(ii) of Rule 485.

If appropriate, check the following box:

/ / this post-effective amendment designates a
new effective date for a previously filed
post-effective amendment.

DECLARATION PURSUANT TO RULE 24f-2

The Registrant has registered an indefinite number of its shares
of beneficial interest under the Securities Act of 1933 pursuant
to Rule 24f-2 under the Investment Company Act of 1940. On
February 24, 1995, the Registrant filed a Rule 24f-2 Notice in
respect of its fiscal year ended December 31, 1994.

Colonial Mutual Funds
_________________________________________________________________
Please send your completed application to:

Colonial Mutual Funds
P.O. Box 1722
Boston, Massachusetts 02105-1722

New Account Application/Revision to Existing Account

To open a new account, complete sections 1, 2, 3, & 8.
To apply for special services for a new or existing account,
complete sections 4, 5, 6, 7, or 9 as appropriate.

___ Please check here if this is a revision.

1-----------Account Ownership--------------
Please choose one of the following.

__Individual: Print your name, Social Security #, U.S.
citizen status.

__Joint Tenant: Print all names, the Social Security # for
the first person, and his/her U.S. citizen status.

__Uniform Gift to Minors: Name of custodian and minor,
minor's Social Security #, minor's U.S. citizen status.

__Corporation, Association, Partnership: Include full name,
Taxpayer I.D. #.

__Trust: Name of trustee, trust title & date, and trust's
Taxpayer I.D. #.

______________________________________
Name of account owner

______________________________________
Name of joint account owner

______________________________________
Street address

______________________________________
City, State, and Zip

______________________________________
Daytime phone number

______________________________________
Social Security # or Taxpayer I.D. #

Are you a U.S. citizen? Yes___ No___

______________________________________
If no, country of permanent residence

______________________________________
Owner's date of birth

______________________________________
Account number (if existing account)

2 -----Colonial Fund(s) You Are Purchasing--------
Your investment will be made in Class A shares if no class
is indicated. Certificates are not available for Class B or
D shares. If no distribution option is selected,
distributions will be reinvested in additional Fund shares.
Please consult your financial adviser to determine which
class of shares best suits your needs.

Fund Choice(s)

Fund
___ A Shares ___ B Shares (less than $250,000)
___ D Shares (less than $500,000)

$______________________________________________
Amount

Method of Payment

Choose one for each fund

___Check payable to the Fund, enclosed

___Bank wired on (Date) ____/____/____
Wire confirmation #

___Dealer purchased on (Date) ____/____/____
Trade confirmation #

Ways to Receive Your Distributions

Choose one for each fund

___Reinvest dividends and capital gains

___Dividends in cash; reinvest capital gains

___Dividends and capital gains in cash

___Automatic Dividend Diversification See section 5A, inside

___Direct Deposit via Colonial Cash Connection See section
4B, inside

Fund Choice(s)

Fund
___ A Shares ___ B Shares (less than $250,000)
___ D Shares (less than $500,000)

$______________________________________________
Amount

Method of Payment

Choose one for each fund

___Check payable to the Fund, enclosed

___Bank wired on (Date) ____/____/____
Wire confirmation #

___Dealer purchased on (Date) ____/____/____
Trade confirmation #

Ways to Receive Your Distributions

Choose one for each fund

___Reinvest dividends and capital gains

___Dividends in cash; reinvest capital gains

___Dividends and capital gains in cash

___Automatic Dividend Diversification See section 5A, inside

___Direct Deposit via Colonial Cash Connection See section
4B, inside

Fund Choice(s)

Fund
___ A Shares ___ B Shares (less than $250,000)
___ D Shares (less than $500,000)

$______________________________________________
Amount

Method of Payment

Choose one for each fund

___Check payable to the Fund, enclosed

___Bank wired on (Date) ____/____/____
Wire confirmation #

___Dealer purchased on (Date) ____/____/____
Trade confirmation #

Ways to Receive Your Distributions

Choose one for each fund

___Reinvest dividends and capital gains

___Dividends in cash; reinvest capital gains

___Dividends and capital gains in cash

___Automatic Dividend Diversification See section 5A, inside

___Direct Deposit via Colonial Cash Connection See section
4B, inside

3---Your Signature & Taxpayer I.D. Number Certification----

Each person signing on behalf of an entity represents that
his/her actions are authorized.

I have received and read each appropriate Fund prospectus
and understand that its terms are incorporated by reference
into this application. I understand that this application
is subject to acceptance. I understand that certain
redemptions may be subject to a contingent deferred sales
charge. I certify, under penalties of perjury, that:

1. The Social Security # or Taxpayer I.D. # provided is
correct.
Cross out 2(a) or 2(b) if either is not true in your case.

2. I am not subject to 31% backup withholding because (a) I
have not been notified that I am subject to backup
withholding or (b) the Internal Revenue Service has notified
me that I am no longer subject to backup withholding.

It is agreed that the Fund, all Colonial companies and their
officers, directors, agents, and employees will not be
liable for any loss, liability, damage, or expense for
relying upon this application or any instruction believed
genuine.

X______________________________________________
Signature

_______________________________________________
Capacity, if applicable Date

X______________________________________________
Signature

_______________________________________________
Capacity, if applicable Date

4--------Ways to Withdraw from Your Fund-------

It may take up to 30 days to activate the following
features. Complete only the section(s) that apply to the
features you would like.

A. Systematic Withdrawal Plan (SWP)
You can receive monthly, quarterly, or semiannual checks
from your account in any amount you select, with certain
limitations. Your redemption checks can be sent to you at
the address of record for your account, to your bank
account, or to another person you choose. The value of the
shares in your account must be at least $5,000 and you must
reinvest all of your distributions. Checks will be processed
on the 10th calendar day of the month or the following
business day. Withdrawals in excess of 12% annually of your
current account value will not be accepted. Redemptions made
in addition to Plan payments may be subject to a contingent
deferred sales charge for Class B or Class D shares. Please
consult your financial or tax adviser before electing this
option.

Funds for Withdrawal:

______________________________________________
Name of fund

Withdrawal Amount
Redeem shares from account as follows:
Dollar amount of payment $___________
or
Total annual %_________

Frequency (choose one)
__Monthly __Quarterly __Semiannually

I would like payments to begin _________________ (month).

______________________________________________
Name of fund

Withdrawal Amount
Redeem shares from account as follows:
Dollar amount of payment $___________
or
Total annual %_________

Frequency (choose one)
__Monthly __Quarterly __Semiannually

I would like payments to begin _________________ (month).
______________________________________________
Name of fund

Withdrawal Amount
Redeem shares from account as follows:
Dollar amount of payment $___________
or
Total annual %_________

Frequency (choose one)
__Monthly __Quarterly __Semiannually

I would like payments to begin _________________ (month).

Payment Instructions
Send the payment to (choose one):
__My address of record.
__My bank account via Colonial Cash Connection. Please
complete Section 4B and the Bank Information section below.
__The payee listed at right.

______________________________________________
Name of payee

______________________________________________
Address of payee

______________________________________________
City

______________________________________________
State Zip

______________________________________________
Payee's bank account number, if applicable

X_____________________________________________
Signature of account owner(s)

Signatures of all owners must be guaranteed. Provide the
name, address, payment amount, and frequency for other
payees (maximum of 5) on a separate sheet.

B. Direct Deposit via Colonial Cash Connection
You can arrange to have distributions from your Colonial
fund account(s) or Systematic Withdrawal Plan checks
automatically deposited directly into your bank checking
account. Distribution deposits will be made 2 days after the
Fund's payable date. Please complete Bank Information below
and attach a blank check marked "VOID."

Please deposit my:
__Dividend distributions only
__Dividend and capital gain distributions
__Systematic Withdrawal Plan payments

I understand that my bank must be a member of the Automated
Clearing House system.

C. Telephone Withdrawal Options

All telephone transaction calls are recorded. These options
are not available for retirement accounts.

1. Fast Cash
You are automatically eligible for this service. You or
your financial adviser can withdraw up to $50,000 from your
account and have it sent to your address on our records. For
your protection, this service is only available on accounts
that have not had an address change within
60 days of the redemption request.

2. Telephone Redemption
__I would like the Telephone Redemption privilege.
You may withdraw shares from your fund account by telephone
and send your money to your bank account. If you are adding
this service to an existing account, complete the Bank
Information section below and have all shareholder
signatures guaranteed.

Colonial's and the Fund's liability is limited when
following telephone instructions; a shareholder may suffer a
loss from an unauthorized transaction reasonably believed by
Colonial to have been authorized. Telephone redemptions
exceeding $5,000 will be sent via Federal Fund Wire, usually
on the next business day ($7.50 will be deducted).
Redemptions of $5,000 or less will be sent by check to your
designated bank.

Bank Information (For A, B, or C Above)
I authorize deposits to the following bank account:

____________________________________________________________
____
Bank name City Bank account number

____________________________________________________________
____
Bank street address State Zip Bank routing # (your bank
can provide this)

5-----Ways to Make Additional Investments--------
These services involve continuous investments regardless of
varying share prices. Please consider your ability to
continue purchases through periods of price fluctuations.
Dollar cost averaging does not assure a profit or protect
against loss in declining markets.

A. Automatic Dividend Diversification
Please diversify my portfolio by investing fund
distributions in another Colonial fund. These investments
will be made in the same share class and without sales
charges. I have carefully read the prospectus for the
fund(s) listed below.

____________________________
From fund

____________________________
Account number (if existing)

____________________________
To fund

____________________________
Account number (if existing)

____________________________
From fund

____________________________
Account number (if existing)

____________________________
To fund

____________________________
Account number (if existing)

____________________________
From fund

____________________________
Account number (if existing)

____________________________
To fund

____________________________
Account number (if existing)

B. Automated Dollar Cost Averaging
This program allows you to automatically have money from any
Colonial fund in which you have a balance of at least
$5,000 transferred into the same share class of up to four
other Colonial funds, on a monthly basis. The minimum amount
for each transfer is $100. Please complete the section
below.

____________________________________
Fund from which shares will be sold

$_________________________
Amount to redeem monthly

____________________________________
Fund name

$_________________________
Amount to invest monthly

____________________________________
Fund name

$_________________________
Amount to invest monthly
____________________________________
Fund name

$_________________________
Amount to invest monthly

C. Fundamatic
Fundamatic automatically transfers the specified amount from
your bank checking account to your Colonial fund account.
Your bank needs to be a member of the Automated Clearing
House system. Please attach a blank check marked "VOID."
Also, complete the section below and Fundamatic
Authorization (Section 6).

____________________________________
Fund name

$_____________________ _________________
Amount to transfer Month to start

Frequency
__Monthly or __Quarterly

Date
__5th or __20th of the month

____________________________________
Fund name

$_____________________ _________________
Amount to transfer Month to start

Frequency
__Monthly or __Quarterly

Date
__5th or __20th of the month

____________________________________
Fund name

$_____________________ _________________
Amount to transfer Month to start

Frequency
__Monthly or __Quarterly

Date
__5th or __20th of the month

6 -------------Fundamatic Authorization--------------------
Authorization to honor checks drawn by Colonial Investors
Service Center. Do Not Detach. Make sure all depositors on
the bank account sign to the far right. Please attach a
blank check marked "VOID" here. See reverse for bank
instructions.

I authorize Colonial to draw on my bank account, by check or
electronic funds transfer, for an investment in a Colonial
fund. Colonial and my bank are not liable for any loss
arising from delays or dishonored draws. If a draw is not
honored, I understand that notice may not be given and
Colonial may reverse the purchase and charge my account $15.

______________________________________
Bank name

______________________________________
Bank street address

______________________________________
City State Zip

______________________________________
Bank account number

______________________________________
Bank routing #

X_____________________________________
Depositor's Signature(s)
Exactly as appears on bank records

7--Ways to Reduce Your Sales Charges for Class A Shares--
These services can help you reduce your sales charge while
increasing your share balance over the long term.

A. Right of Accumulation
If you, your spouse or your children own Class A, B, or D
shares in other Colonial funds, you may be eligible for a
reduced sales charge. The combined value of your accounts
must be $50,000 or more. Class A shares of money market
funds are not eligible unless purchased by exchange from
another Colonial fund.

The sales charge for your purchase will be based on the sum
of the purchase added to the value of all shares in other
Colonial funds at the previous day's public offering price.

__Please link the accounts listed below for Right of
Accumulation privileges, so that this and future purchases
will receive any discount for which they are eligible.

_____________________________________
Name on account

_____________________________________
Account number

_____________________________________
Name on account

_____________________________________
Account number

B. Statement of Intent
If you agree in advance to invest at least $50,000 within 13
months, you'll pay a lower sales charge on every dollar you
invest. If you sign a Statement of Intent within 90 days
after you establish your account, you can receive a
retroactive discount on prior investments. The amount
required to receive a discount varies by fund; see the sales
charge table in the "How to Buy Shares" section of your fund
prospectus.

__I want to reduce my sales charge.
I agree to invest $ _______________
over a 13-month period starting ______/______/ 19______ (not
more than 90 days prior to this application). I understand
an additional sales charge must be paid if I do not complete
this Statement of Intent.

8-------------Financial Service Firm---------------------
To be completed by a Representative of your financial
service firm.

This application is submitted in accordance with our selling
agreement with Colonial Investment Services (CIS), the
Fund's prospectus, and this application. We will notify CIS
of any purchase made under a Statement of Intent, Right of
Accumulation, or Sponsored Arrangement. We guarantee the
signatures on this application and the legal capacity of the
signers.

_____________________________________
Representative's name

_____________________________________
Representative's number

_____________________________________
Representative's phone number

_____________________________________
Account # for client at financial
service firm

_____________________________________
Branch office address

_____________________________________
City

_____________________________________
State Zip

_____________________________________
Branch office number

_____________________________________
Name of financial service firm

_____________________________________
Main office address

_____________________________________
City

_____________________________________
State Zip

X____________________________________
Authorized signature

9--Request for a Combined Quarterly Statement Mailing--
Colonial can mail all of your quarterly statements in one
envelope. This option simplifies your record keeping and
helps reduce fund expenses.

__I want to receive a combined quarterly mailing for all my
accounts.

Fundamatic (See Reverse Side)
Applications must be received before the start date for
processing.

This program's deposit privilege can be revoked by Colonial
without prior notice if any check is not paid upon
presentation. Colonial has no obligation to notify the
shareholder of non-payment of any draw. This program may be
discontinued by Colonial by written notice at least 30
business days prior to the due date of any draw or by the
shareholder at any time.

To the Bank Named on the Reverse Side:

Your depositor has authorized Colonial Investors Service
Center to collect amounts due under an investment program
from his/her personal checking account. When you pay and
charge the draws to the account of your depositor executing
the authorization payable to the order of Colonial Investors
Service Center, Colonial Management Associates, Inc., hereby
indemnifies and holds you harmless from any loss (including
reasonable expenses) you may suffer from honoring such draw,
except any losses due to your payment of any draw against
insufficient funds.

D-461L-594

COLONIAL TRUST I

Cross Reference Sheet
(Colonial High Yield Securities Fund)

Item Number of Form N-1A Prospectus Location or
Caption

Part A

1. Cover page

2. Summary of expenses

3. The Fund's financial
history

4. The Fund's investment
objective;
Organization and history;
How the Fund pursues its
objective

5. Cover page;
How the Fund is managed;
Organization and history;
Back cover

6. Organization and history;
Distributions and taxes;
How to buy shares

7. How to buy shares;
How the Fund values its
shares;
12b-1 plans; Back cover

8. How to sell shares;
How to exchange shares;
Telephone transactions

9. Not applicable

April 28, 1995

COLONIAL HIGH YIELD SECURITIES FUND

PROSPECTUS

BEFORE YOU INVEST

Colonial Management Associates, Inc. (Adviser) and your full-service
financial adviser want you to understand both the risks and benefits
of mutual fund investing.

While mutual funds offer significant opportunities and are
professionally managed, they also carry risks including possible loss
of principal. Unlike savings accounts and certificates of deposit,
mutual funds are not insured or guaranteed by any financial
institution or government agency.

Please consult your full-service financial adviser to determine how
investing in this mutual fund may suit your unique needs, time horizon
and risk tolerance.

Contents Page

Summary of expenses
The Fund's financial history
The Fund's investment
objective
How the Fund pursues its
objective
How the Fund measures its
performance
How the Fund is managed
How the Fund values its
shares
Distributions and taxes
How to buy shares
How to sell shares
How to exchange shares
Telephone transactions
12b-1 plans
Organization and history
Appendix

Colonial High Yield Securities Fund (Fund), a diversified portfolio of
Colonial Trust I (Trust), an open-end management investment company,
seeks high current income and total return by investing primarily in
lower rated corporate debt securities. The Fund invests primarily in
lower rated securities and is considered to be highly speculative.
The Fund is managed by the Adviser, an investment adviser since 1931.

The Fund may invest up to 100% of its assets in lower rated bonds
(commonly referred to as "junk bonds") which are regarded as
speculative as to payment of principal and interest and, therefore,
may not be suitable for all investors. These securities are subject
to greater risks, including the risk of default, than higher rated
bonds. See "How the Fund pursues its objective." Purchasers should
carefully assess the risks associated with an investment in the Fund.

This Prospectus explains concisely what you should know before
investing in the Fund. Read it carefully and retain it for future
reference. More detailed information about the Fund is in the April
28, 1995 Statement of Additional Information which has been filed with
the Securities and Exchange Commission and is obtainable free of
charge by calling the Adviser at 1-800-248-2828. The Statement of
Additional Information is incorporated by reference in (which means it
is considered to be a part of) this Prospectus.

The Fund offers three classes of shares. Class A shares are offered
at net asset value plus a sales charge imposed at the time of
purchase; Class B shares are offered at net asset value plus an annual
distribution fee and a declining contingent deferred sales charge on
redemptions made within six years after purchase; and Class D shares
are offered at net asset value plus a small initial sales charge, a
contingent deferred sales charge on redemptions made within one year
after purchase and a continuing distribution fee. Class B shares
automatically convert to Class A shares after approximately eight
years. See "How to buy shares."

FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED,
ENDORSED OR INSURED BY, ANY BANK OR GOVERNMENT AGENCY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

SUMMARY OF EXPENSES

Expenses are one of several factors to consider when investing in the
Fund. The following tables summarize your maximum transaction costs
and annual expenses for an investment in each Class of the Fund's
shares.

Shareholder Transaction Expenses(1)(2)

Class A Class B Class D
Maximum Initial Sales Charge
Imposed on a Purchase
(as a % of offering price)(3) 4.75% 0.00%(5) 1.00%(5)
Maximum Contingent Deferred
Sales Charge (as a % of
offering price)(3) 1.00%(4) 5.00% 1.00%

(5) Because of the 0.75% distribution fee applicable to Class B
shares and the 0.50% distribution fee applicable to Class D shares,
long-term Class B and Class D shareholders may pay more in
aggregate sales charges than the maximum initial sales charge
permitted by the National Association of Securities Dealers, Inc.
However, because the Fund's Class B shares automatically convert to
Class A shares after approximately 8 years, this is less likely for
Class B shares than for a class without a conversion feature.

Annual Operating Expenses (as a % of net assets)

Class A Class B Class D

Management fee 0.60% 0.60% 0.60%
12b-1 fees 0.25 1.00 0.75
Other expenses 0.38 0.38 0.38
---- ---- ----
Total expenses 1.23% 1.98% 1.73%
==== ==== ====

Example

The following Example shows the cumulative expenses attributable to a
hypothetical $1,000 investment in each Class of shares of the Fund for
the periods specified, assuming a 5% annual return and, unless
otherwise noted, redemption at period end. The 5% return and expenses
used in this Example should not be considered indicative of actual or
expected Fund performance or expenses, both of which will vary:

Class A Class B Class D
Period:

(6) (6)
1 year $59 $ 70 $ 20 $ 37 $ 27
3 years 85 93 63 64 64
5 years 112 128 108 103 103
10 years 189 213(7) 213(7) 213 213

(6) Assumes no redemption.

(7) Class B shares convert to Class A shares after approximately 8
years; therefore, years 9 and 10 reflect Class A expenses.

THE FUND'S FINANCIAL HISTORY

The following schedule of financial highlights for a share outstanding
throughout each year has been audited by Price Waterhouse LLP, independent
accountants. Their unqualified report is included in the Fund's 1994 Annual
Report and is incorporated by reference into the Statement of Additional
Information.

Year ended December 31

1994 1993 1992 1991 1990 1989
Class A Class B Class A Class B Class A Class B(a) Class A Class A Class A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of
period $6.950 $6.950 $6.400 $6.400 $5.860 $6.360 $4.640 $6.340 $7.210
Income (loss) from investment
operations:
Net investment income 0.599 0.549 0.634 0.585 0.669 0.332 0.726 0.799 0.888
Net realized and unrealized
gain (loss) on investments (0.622) (0.622) 0.576 0.576 0.531 0.057 1.207 (1.669) (0.867)
Total from investment
operations (0.023) (0.073) 1.210 1.161 1.200 0.389 1.933 (0.870) 0.021
Less distributions declared to
shareholders:
From net investment income (0.627) (0.577) (0.660) (0.611) (0.660) (0.349) (0.713) (0.830) (0.891)
Net asset value - End of period $6.300 $6.300 $6.950 $6.950 $6.400 $6.400 $5.860 $4.640 $6.340
Total return(b) (0.34)% (1.09)% 19.69% 18.83% 21.15% 5.53%(c) 43.88% (14.86)% 0.06%
Ratios to average net assets
Expenses 1.23% 1.98% 1.23% 1.98% 1.26% 2.01%(d) 1.36% 1.33% 1.21%
Net investment income 9.30% 8.28% 9.55% 8.80% 10.64% 9.89%(d) 13.41% 14.32% 12.71%
Portfolio turnover 123% 123% 122% 122% 66% 66% 37% 9% 22%
Net assets at end of period (000) $389,791 $253,438 $440,942 $222,536 $346,225 $94,653 $299,587 $233,813 $366,953
</TABLE>

(a) Class B shares were initially offered on June 8,
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 contingent deferred sales charge.

THE FUND'S FINANCIAL HISTORY (CONT'D)

Year ended December 31
1988 1987 1986 1985
Class A Class A Class A Class A
<S> <C> <C> <C> <C>
Net asset value - Beginning of
period $7.180 $7.690 $7.550 $7.070
Income from investment
operations:
Net investment income 0.873 0.873 0.888 0.956
Net realized and unrealized
gain (loss) on investments 0.030 (0.543) 0.177 0.484
Total from investment
operations 0.903 0.330 1.065 1.440
Less distributions declared to
shareholders:
From net investment income (0.873) (0.840) (0.925) (0.960)
Net asset value - End of period $7.210 $7.180 $7.690 $7.550
Total return(a) 13.00% 4.30% 14.81% 21.78%
Ratios to average net assets
Expenses 1.17% 1.18% 1.11% 1.08%
Net investment income 11.91% 11.56% 11.41% 13.06%
Portfolio turnover 40% 51% 52% 63%
Net assets at end of period (000) $463,498 $429,971 $442,071 $132,399
</TABLE>

(a) Total return at net asset value assuming all distributions
reinvested and no initial sales charge or contingent deferred
sales charge.

Further performance information is contained in the Fund's Annual Report to
shareholders, which is obtainable free of charge by calling 1-800-248-2828.

THE FUND'S INVESTMENT OBJECTIVE

The Fund seeks high current income and total return by investing
primarily in lower rated corporate debt securities.

HOW THE FUND PURSUES ITS OBJECTIVE

The Fund will normally invest at least 80% of its total assets (other
than cash and government securities) in lower rated securities.
However, when economic conditions cause a narrowing of yield spread
between these securities and higher rated securities, the Fund may
invest up to 100% of its assets in higher rated securities. The Fund
may invest in debt securities of any maturity. The value of debt
securities (and thus of Fund shares) usually fluctuates inversely to
changes in interest rates.

Investment Techniques and Risk Factors

Lower Rated Bonds (commonly referred to as"junk bonds"). The Fund
will purchase lower rated bonds, including bonds in the lowest rating
categories (C for Moody's and D for S&P) and unrated bonds. The
lowest rating categories include bonds which are in default. Because
these securities are regarded as predominantly speculative as to
payments of principal and interest, the Fund will not purchase debt
securities rated Ca by Moody's, CC by S&P or lower unless the Adviser
believes the quality of such securities is higher than indicated by
the rating.

Lower rated bonds are those rated lower than Baa by Moody's or BBB by
S&P, or comparable unrated securities. Relative to comparable
securities of high quality:

1. The market price is likely to be more volatile because:

a. An economic downturn or increased interest rates may have a more
significant effect on the yield, price and potential for default;
b. The secondary market may at times become less liquid or respond to
adverse publicity or investor perceptions, increasing the difficulty in
valuing or disposing of the bonds;

c. Existing or future legislation limits and may further limit (i) investment
by certain institutions or (ii) tax deductibility of the interest by the
issuer, which may adversely affect value; and

d. Certain lower rated bonds do not pay interest in cash on a current basis.
However, the Fund will accrue and distribute this interest on a current
basis, and may have to sell securities to generate cash for distributions.

2. The Fund's achievement of its investment objective is more dependent on
the Adviser's credit analysis.

3. Lower rated bonds are less sensitive to interest rate changes but are more
sensitive to adverse economic developments.

Weighted average composition of the Fund's portfolio for the year ended
December 31, 1994, was:

Investment grade 5.40%
BB 6.00
B 68.00
CCC 9.10
CC 0.30
C 0.00
D 0.30
Nonrated 3.00
-----
Subtotal 92.10
U.S. governments,
equities and others 7.90
-----
Total 100%
=====

This table does not necessarily reflect the current or future
composition of the portfolio.

Common Stock. The Fund may invest up to 20% of total assets in common
stocks, usually as a result of warrants associated with debt
instruments purchased by the Fund, but also under certain
circumstances to seek capital appreciation.

Foreign Investments. The Fund may invest up to 25% of its assets in
securities issued or guaranteed by foreign governments or foreign
companies. Foreign securities will subject the Fund to special
considerations related to political, economic and legal conditions
outside of the U.S. These considerations include the possibility of
unfavorable currency exchange rates, exchange control regulations
(including currency blockage), expropriation, nationalization,
withholding taxes on income and difficulties in enforcing judgments.
Foreign securities may be less liquid and more volatile than
comparable U.S. securities. Some foreign issuers are subject to less
comprehensive accounting and disclosure requirements than similar U.S.
issuers.

Transactions in foreign securities include currency conversion costs.
Brokerage and custodial costs for foreign securities may be higher
than for U.S. securities. See "Foreign Securities" in the Statement
of Additional Information for more information about foreign
investments.

Foreign Currency Transactions. In connection with its investments in
foreign securities, the Fund may purchase and sell (i) foreign
currencies on a spot or forward basis, (ii) foreign currency futures
contracts, and (iii) options on foreign currencies and foreign
currency futures. Such transactions will be entered into (i) to lock
in a particular foreign exchange rate pending settlement of a purchase
or sale of a foreign security or pending the receipt of interest,
principal or dividend payments on a foreign security held by the Fund,
or (ii) to hedge against a decline in the value, in U.S. dollars or in
other currency, of a foreign currency in which securities held by the
Fund are denominated. The Fund will not attempt, nor would it be
able, to eliminate all foreign currency risk. Further, although
hedging may lessen the risk of loss if the hedged currency's value
declines, it limits the potential gain from currency value increases.
See the Statement of Additional Information for information relating
to the Fund's obligations in entering into such transactions.

The Fund may invest temporarily available cash in certificates of
deposit, bankers' acceptances, commercial paper, treasury bills and
repurchase agreements. Under a repurchase agreement, the Fund buys a
security from a bank or dealer, which is obligated to buy it back at a
fixed price and time. The security is held in a separate account at
the Fund's custodian and constitutes the Fund's collateral for the
bank's or dealer's repurchase obligation. Additional collateral may
be added so that the obligation will at all times be fully
collateralized. However, if the bank or dealer defaults or enters
bankruptcy, the Fund may experience costs and delays in liquidating
the collateral and may experience a loss if it is unable to
demonstrate its right to the collateral in a bankruptcy proceeding.
Not more than 10% of the Fund's net assets will be invested in
repurchase agreements maturing in more than 7 days and other illiquid
assets.

For hedging purposes, the Fund may (1) buy or sell interest rate
futures and (2) buy put and call options on such futures. The total
market value of securities to be delivered or acquired pursuant to
such contracts will not exceed 5% of the Fund's net assets. A futures
contract creates an obligation by the seller to deliver and the buyer
to take delivery of the type of instrument at the time and in the
amount specified in the contract. Although futures contracts call for
the delivery (or acceptance) of the specified instrument, the
contracts are usually closed out before the settlement date through
the purchase (or sale) of an offsetting contract. If the price of the
initial sale of the futures contract exceeds (or is less than) the
price of the offsetting purchase, the Fund realizes a gain (or loss).

The Fund may acquire securities on a "when-issued" basis by
contracting to purchase securities for a fixed price on a date beyond
the customary settlement time with no interest accruing until
settlement. If made through a dealer, the contract is dependent on
the dealer completing the sale. The dealer's failure could deprive
the Fund of an advantageous yield or price. These contracts may be
considered securities and involve risk to the extent that the value of
the underlying security changes prior to settlement. The Fund may
realize short-term profits or losses if the contracts are sold.
Transactions in when-issued securities may be limited by certain
Internal Revenue Code requirements.

In periods of unusual market conditions, for temporary and defensive
purposes, when the Adviser considers it appropriate, the Fund may
invest part or all of the Fund's assets in cash, U.S. government
securities, commercial paper, bankers' acceptances, repurchase
agreements and certificates of deposit.

The Fund will not invest more than 25% of its assets in a single
industry.

Other. The Fund may not always achieve its investment objective. The
Fund's investment objective and non-fundamental policies may be
changed without shareholder approval. The Fund will notify investors
at least 30 days prior to any material change in the Fund's investment
objective. If there is a change in the investment objective,
shareholders should consider whether the Fund remains an appropriate
investment in light of their current financial position and needs.
Shareholders may incur a contingent deferred sales charge if shares
are redeemed in response to a change in objective. The Fund's
fundamental policies listed in the Statement of Additional Information
cannot be changed without the approval of a majority of the Fund's
outstanding voting securities. Additional information concerning
certain of the securities and investment techniques described above is
contained in the Statement of Additional Information.

HOW THE FUND MEASURES ITS PERFORMANCE

Performance may be quoted in sales literature and advertisements.
Each Class's average annual total returns are calculated in accordance
with the Securities and Exchange Commission's formula and assume the
reinvestment of all distributions, the maximum initial sales charge of
4.75% on Class A shares, the maximum initial sales charge of 1.00% on
Class D shares and the contingent deferred sales charge applicable to
the time period quoted on Class B and Class D shares. Other total
returns differ from the average annual total return only in that they
may relate to different time periods, may represent aggregate as
opposed to average annual total returns and may not reflect the
initial or contingent deferred sales charges.

Each Class's yield, which differs from total return because it does
not consider changes in net asset value, is calculated in accordance
with the Securities and Exchange Commission's formula. Each Class's
distribution rate is calculated by dividing the most recent month's
distribution, annualized, by the maximum offering price of that Class
at the end of the month. Each Class's performance may be compared to
various indices. Quotations from various publications may be included
in sales literature and advertisements. See "Performance Measures" in
the Statement of Additional Information for more information.

All performance information is historical and does not predict future
results.

HOW THE FUND IS MANAGED

The Trustees formulate the Fund's general policies and oversee the
Fund's affairs as conducted by the Adviser.

The Adviser is a subsidiary of The Colonial Group, Inc. Colonial
Investment Services, Inc. (Distributor) is a subsidiary of the Adviser
and serves as the distributor for the Fund's shares. The Colonial
Group, Inc. is the parent of Colonial Investors Service Center, Inc.
(Transfer Agent), which serves as the shareholder services and
transfer agent for the Fund. Liberty Financial Companies, Inc., an
indirect subsidiary of Liberty Mutual Insurance Company, is considered
to be the controlling entity of The Colonial Group, Inc.

The Adviser furnishes the Fund with investment management, accounting
and administrative personnel and services, office space and other
equipment and services at the Adviser's expense. For these services,
the Fund paid the Adviser 0.60% of the Fund's average net assets for
fiscal year 1994.

Helen Frame Peters, Senior Vice President and Director of the Adviser
and and head of the Taxable Fixed Income Group, and Andrea S.
Feingold, Vice President of the Adviser, have co-managed the Fund
since 1993. Ms. Peters has managed various other Colonial taxable
fixed income funds since 1993. Prior to joining the Adviser in 1991,
Ms. Peters was Managing Director and Risk Manager of the Taxable
Income Division of the U.S. subsidiary of Union Bank of Switzerland.
Ms. Feingold joined the Adviser in 1991 as an Investment Analyst.
Prior to joining the Adviser, she was an Investment Analyst at Sun
Financial Group.

The Adviser also provides pricing and bookkeeping services to the Fund
for a monthly fee of $2,250 plus a percentage of the Fund's average
net assets over $50 million. The Transfer Agent provides transfer
agency and shareholder services to the Fund for a fee of 0.25%
annually of average net assets plus out-of pocket expenses.

Each of the foregoing fees is subject to any reimbursement or fee
waiver to which the Adviser may agree.

The Adviser places all orders for the purchase and sale of portfolio
securities. In selecting broker-dealers, the Adviser may consider
research and brokerage services furnished to it and its affiliates.
Subject to seeking best execution, the Adviser may consider sales of
shares of the Fund (and of certain other Colonial funds) in selecting
broker-dealers for portfolio security transactions.

HOW THE FUND VALUES ITS SHARES

Per share net asset value is calculated by dividing the total value of
each Class's net assets by its number of outstanding shares. Shares
are valued as of the close of the New York Stock Exchange (Exchange)
each day the Exchange is open. Portfolio securities for which market
quotations are readily available are valued at market. Short-term
investments maturing in 60 days or less are valued at amortized cost,
when it is determined, pursuant to procedures adopted by the
Trustees, that such cost approximates market value. All other
securities and assets are valued at their fair value following
procedures adopted by the Trustees.

DISTRIBUTIONS AND TAXES

The Fund intends to qualify as a "regulated investment company" under
the Internal Revenue Code and to distribute to shareholders virtually
all net income and any net realized gain, at least annually. The Fund
generally declares distributions daily and pays them monthly.
Distributions are invested in additional shares of the same Class of
the Fund at net asset value unless the shareholder elects to receive
cash. Regardless of the shareholder's election, distributions of $10
or less will not be paid in cash but in additional shares of the same
Class of the Fund at net asset value. To change your election, call
the Transfer Agent for information.

Whether you receive distributions in cash or in additional Fund
shares, you must report them as taxable income unless you are a tax-
exempt institution. If you buy shares shortly before a distribution
is declared, the distribution will be taxable although it is in effect
a partial return of the amount invested. Each January, information on
the amount and nature of your distributions for the prior year is sent
to shareholders.

The Fund has a significant capital loss carry forward and, until it is
exhausted, it is unlikely that capital gain distributions will be
made. Any capital gains will, however, be reflected in the net asset
value.

HOW TO BUY SHARES

The minimum initial investment is $1,000; subsequent investments may
be as small as $50. The minimum initial investment for the Colonial
Fundamatic program is $50 and the minimum initial investment for a
Colonial retirement account is $25. Certificates will not be issued
for Class B or Class D shares and there are some limitations on the
issuance of Class A certificates. The Fund may refuse any purchase
order for its shares. See the Statement of Additional Information for
more information.

Class A Shares. Class A shares are offered at net asset value plus an
initial or a contingent deferred sales charge as follows:

Initial Sales Charge
Retained
by
Financial
Service
as % of Firm
---------------------- as % of
Amount Offering Offering
Amount Purchased Invested Price Price
- ---------------- -------- -------- ----------
Less than $50,000 4.99% 4.75% 4.25%
$50,000 to less than $100,000 4.71% 4.50% 4.00%
$100,000 to less than $250,000 3.63% 3.50% 3.00%
$250,000 to less than $500,000 2.56% 2.50% 2.00%
$500,000 to less than $1,000,000 2.04% 2.00% 1.75%
$1,000,000 or more 0.00% 0.00% 0.00%

On purchases of $1 million or more, the Distributor pays the financial
service firm a cumulative commission as follows:

Amount Purchased Commission
- ---------------- ----------

First $3,000,000 1.00%
Next $2,000,000 0.50%
Over $5,000,000 0.25%(1)

(1) Paid over 12 months but only to the extent the shares remain
outstanding.

Purchases of $1 million to $5 million are subject to a 1.00%
contingent deferred sales charge payable to the Distributor on
redemptions within 18 months from the first day of the month following
the purchase. The contingent deferred sales charge does not apply to
the excess of any purchase over $5 million.

Class A shares bear a 0.25% annual service fee.

Class B Shares. Class B shares are offered at net asset value,
without an initial sales charge, subject to a 0.75% annual
distribution fee for approximately 8 years (at which time they convert
to Class A shares not bearing a distribution fee), a 0.25% annual
service fee and a contingent deferred sales charge if redeemed within
6 years after purchase. As shown below, the amount of the contingent
deferred sales charge depends on the number of years after purchase
that the redemption occurs:

Years Contingent Deferred
After Purchase Sales Charge
- --------------- -------------------

0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
More than 6 0.00%

Year one ends one year after the end of the month in which the
purchase was accepted and so on. The Distributor pays financial
service firms a commission of 4.00% on Class B share purchases.

Class D Shares. Class D shares are offered at net asset value plus a
1.00% initial sales charge, subject to a 0.50% annual distribution
fee, a 0.25% annual service fee and a 1.00% contingent deferred sales
charge on redemptions made within one year from the first day of the
month after purchase.

The Distributor pays financial service firms an initial commission of
1.75% on purchases of Class D shares and an ongoing commission of
0.50% annually. Payment of the ongoing commission is conditioned on
receipt by the Distributor of the 0.50% distribution fee referred to
above. The commission may be reduced or eliminated if the
distribution fee paid by the Fund is reduced or eliminated for any
reason.

General. All contingent deferred sales charges are deducted from the
redemption, not the amount remaining in the account, and are paid to
the Distributor. Shares issued upon distribution reinvestment and
amounts representing appreciation are not subject to a contingent
deferred sales charge. The contingent deferred sales charge is
imposed on redemptions which result in the account value falling below
its Base Amount (the total dollar value of purchase payments
(including initial sales charge, if any), in the account reduced by
prior redemptions on which a contingent deferred sales charge was paid
and any exempt redemptions). See the Statement of Additional
Information for more information.

Which Class is more beneficial to an investor depends on the amount
and intended length of the investment. Large investments, qualifying
for a reduced Class A sales charge, avoid the distribution fee.
Investments in Class B shares have 100% of the purchase invested
immediately. Investors investing for a relatively short period of
time might consider Class D shares. Purchases of $250,000 or more
must be for Class A or Class D shares. Purchases of $500,000 or more
must be for Class A shares. Consult your financial service firm.

Financial service firms may receive different compensation rates for
selling different classes of shares. The Distributor may pay
additional compensation to financial service firms which have made or
may make significant sales. Initial or contingent deferred sales
charges may be reduced or eliminated for certain persons or
organizations purchasing Fund shares alone or in combination with
certain other Colonial funds. See the Statement of Additional
Information for more information.

Shareholder Services. A variety of shareholder services are
available. For more information about these services or your account,
call 1-800-345-6611. Some services are described in the attached account
application. A shareholder's manual explaining all available services
will be provided upon request.

HOW TO SELL SHARES

Shares may be sold on any day the New York Stock Exchange is open,
either directly to the Fund or through your financial service firm.
Sale proceeds generally are sent within seven days (usually on the
next business day after your request is received in good form).
However, for shares recently purchased by check, the Fund will send
proceeds as soon as the check has cleared (which may take up to 15
days).

Selling Shares Directly To The Fund. Send a signed letter of
instruction or stock power form to the Transfer Agent, along with any
certificates for shares to be sold. The sale price is the net asset
value (less any applicable contingent deferred sales charge) next
calculated after the Fund receives the request in proper form.
Signatures must be guaranteed by a bank, a member firm of a national
stock exchange or another eligible guarantor institution. Stock power
forms are available from financial service firms, the Transfer Agent
and many banks. Additional documentation is required for sales by
corporations, agents, fiduciaries, surviving joint owners and
individual retirement account holders. For details contact:

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

Selling Shares Through Financial Service Firms. Financial service
firms must receive requests before 4:00 p.m. Eastern time to receive
that day's price, are responsible for furnishing all necessary
documentation to the Transfer Agent and may charge for this service.

General. The sale of shares is a taxable transaction for federal tax
purposes and may be subject to a contingent deferred sales charge.
The contingent deferred sales charge may be waived under certain
circumstances. See the Statement of Additional Information for more
information. Under unusual circumstances, the Fund may suspend
repurchases or postpone payment for up to seven days or longer, as
permitted by federal securities law. In June of any year, the Fund
may deduct $10 (payable to the Transfer Agent) from accounts valued at
less than $1,000 unless the account value has dropped below $1,000
solely as a result of share value depreciation. Shareholders will
receive 60 days' written notice to increase the account value before
the fee is deducted.

HOW TO EXCHANGE SHARES

Exchanges at net asset value may be made among shares of the same
class of most Colonial funds. The only other Colonial funds currently
offering Class D shares are Colonial International Fund for Growth,
Colonial U.S. Fund for Growth, Colonial Government Money Market Fund,
Colonial Strategic Balanced Fund, Colonial Newport Tiger Fund and
Colonial Global Utilities Fund. Shares will continue to age without
regard to the exchange for purposes of conversion and determining the
contingent deferred sales charge, if any, upon redemption. Carefully
read the prospectus of the fund into which the exchange will go before
submitting the request. Call 1-800-248-2828 to receive a prospectus
and an exchange authorization form. Call 1-800-422-3737 to exchange
shares by telephone. An exchange is a taxable capital transaction.
The exchange service may be changed, suspended or eliminated on 60
days' written notice.

Class A Shares. An exchange from a money market fund into a non-money
market fund will be at the applicable offering price next determined
(including sales charge), except for amounts on which an initial sales
charge was paid. Non-money market fund shares must be held for five
months before qualifying for exchange to a fund with a higher sales
charge, after which, exchanges are made at the net asset value next
determined.

Class B Shares. Exchanges of Class B shares are not subject to the
contingent deferred sales charge. However, if shares are redeemed
within six years after the original purchase, a contingent deferred
sales charge will be assessed using the schedule of the fund into
which the original investment was made.

Class D Shares. Exchanges of Class D shares will not be subject to
the contingent deferred sales charge. However, if shares are redeemed
within one year after the original purchase, a 1.00% contingent
deferred sales charge will be assessed.

TELEPHONE TRANSACTIONS

All shareholders and/or their financial advisers may redeem up to
$50,000 of Fund shares by telephone, and may elect telephone
redemption privileges for larger amounts on the account application.
All exchanges may be accomplished by telephone. See the Statement of
Additional Information for more information. The Adviser, the
Transfer Agent and the Fund will not be liable when following
telephone instructions reasonably believed to be genuine and a
shareholder may suffer a loss from unauthorized transactions. The
Transfer Agent will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Shareholders
and/or their financial advisers will be required to provide their
name, address and account number. Financial advisers will also be
required to provide their broker number. Proceeds and confirmations
of telephone transactions will be mailed or sent to the address of
record. Telephone redemptions are not available on accounts with an
address change in the preceding 60 days. All telephone transactions
are recorded. Shareholders are not obligated to transact by
telephone.

12B-1 PLANS

Under 12b-1 Plans, the Fund pays the Distributor an annual service fee
of 0.25% of the Fund's average net assets attributed to each Class of
shares. The Fund also pays the Distributor an annual distribution fee
of 0.75% of the average net assets attributed to its Class B shares
and 0.50% of the average net assets attributed to its Class D shares.
Because the Class B and Class D shares bear the additional
distribution fees, their dividends will be lower than the dividends of
Class A shares. Class B shares automatically convert to Class A
shares, approximately eight years after the Class B shares were
purchased. Class D shares do not convert. The multiple class
structure could be terminated should certain Internal Revenue Service
rulings be rescinded. See the Statement of Additional Information for
more information. The Distributor uses the fees to defray the cost of
commissions and service fees paid to financial service firms which
have sold Fund shares, and to defray other expenses such as sales
literature, prospectus printing and distribution, shareholder
servicing costs and compensation to wholesalers. Should the fees
exceed the Distributor's expenses in any year, the Distributor would
realize a profit. The Plans also authorize other payments to the
Distributor and its affiliates (including the Adviser) which may be
construed to be indirect financing of sales of Fund shares.

ORGANIZATION AND HISTORY

The Trust is a Massachusetts business trust organized in 1985. The
Trust is the successor to Colonial High Yield Securities, Inc., a
Massachusetts corporation organized as Colonial Convertible Fund, Inc.
in 1971. The Fund represents the entire interest in a separate
portfolio of the Trust.

The Trust is not required to hold annual shareholder meetings, but
special meetings may be called for certain purposes. You receive one
vote for each of your Fund shares. Shares of the Trust vote together
except when required by law to vote separately by fund or by class.
Shareholders owning in the aggregate ten percent of Trust shares may
call meetings to consider removal of Trustees. Under certain
circumstances, the Trust will provide information to assist
shareholders in calling such a meeting. See the Statement of
Additional Information for more information.

APPENDIX
DESCRIPTION OF BOND RATINGS

S&P

AAA The highest rating assigned by S&P indicates an extremely strong
capacity to repay principal and interest.
AA bonds also qualify as high quality. Capacity to repay principal
and pay interest is very strong, and in the majority of instances,
they differ from AAA only in small degree.
A bonds have a strong capacity to repay principal and interest,
although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB bonds are regarded as having an adequate capacity to repay
principal and interest. Whereas they normally exhibit protection
parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to repay principal and
interest than for bonds in the A category.
BB, B, CCC and CC bonds are regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and principal in
accordance with the terms of the obligation. BB indicates the lowest
degree of speculation and CC the highest degree. While likely to have
some quality and protection characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
C ratings are reserved for income bonds on which no interest is being
paid.
D bonds are in default, and payment of interest and/or principal is in
arrears.
Plus(+) or minus (-) are modifiers relative to the standing within the
major rating categories.

MOODY'S

Aaa bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as
"gilt edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa bonds are judged to be of high quality by all standards. Together
with Aaa bonds they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risk appear somewhat larger
than in Aaa securities.
Those bonds in the Aa through B groups which Moody's believes possess
the strongest investment attributes are designated by the symbol Aa1,
A1 and Baa1.
A bonds possess many of the favorable investment attributes and are to
be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa bonds are considered as medium grade, neither highly protected nor
poorly secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length
of time. Such bonds lack outstanding investment characteristics and,
in fact, have speculative characteristics as well.
Ba bonds are judged to have speculative elements: their future cannot
be considered as well secured. Often, the protection of interest and
principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future.
Uncertainty of position characterizes these bonds.
B bonds generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa bonds are of poor standing. They may be in default or there may
be present elements of danger with respect to principal or interest.
Ca bonds are speculative in a high degree, often in default or having
other marked shortcomings.
C bonds are the lowest rated class of bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment
standing.

Investment Adviser
Colonial Management Associates, Inc.
One Financial Center
Boston, MA 02111-2621

Distributor
Colonial Investment Services, Inc.
One Financial Center
Boston, MA 02111-2621

Custodian
Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02108-2624

Shareholder Services and Transfer Agent
Colonial Investors Service Center, Inc.
One Financial Center
Boston, MA 02111-2621
1-800-345-6611

Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110-2624

Legal Counsel
Ropes & Gray
One International Place
Boston, MA 02110-2624

Your financial service firm is:

Printed in U.S.A.

April 28, 1995

COLONIAL HIGH YIELD SECURITIES FUND

PROSPECTUS

Colonial High Yield Securities Fund, seeks, high current income and
total return by investing primarily in lower rated corporate debt
securities.

For more detailed information about the Fund, call the Adviser at
1-800-248-2828 for the April 28, 1995 Statement of Additional Information.

FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED,
ENDORSED OR INSURED BY, ANY BANK OR GOVERNMENT AGENCY.

COLONIAL TRUST I

Cross Reference Sheet
(Colonial Income Fund)

Item Number of Form N-1A Prospectus Location or
Caption

Part A

1. Cover page

2. Summary of expenses

3. The Fund's financial
history

4. The Fund's investment
objective;
Organization and history;
How the Fund pursues its
objective

5. Cover page;
How the Fund is managed;
Organization and history;
Back cover

6. Organization and history;
Distributions and taxes;
How to buy shares

7. How to buy shares;
How the Fund values its
shares;
12b-1 plans; Back cover

8. How to sell shares;
How to exchange shares;
Telephone transactions

9. Not applicable

April 28, 1995

COLONIAL INCOME FUND

PROSPECTUS

BEFORE YOU INVEST

Colonial Management Associates, Inc. (Adviser) and your full-service
financial adviser want you to understand both the risks and benefits of
mutual fund investing.

While mutual funds offer significant opportunities and are professionally
managed, they also carry risks including possible loss of principal.
Unlike savings accounts and certificates of deposit, mutual funds are not
insured or guaranteed by any financial institution or government agency.

Please consult your full-service financial adviser to determine how
investing in this mutual fund may suit your unique needs, time horizon and
risk tolerance.

Colonial Income Fund (Fund), a diversified portfolio of Colonial Trust I
(Trust), an open-end management investment company, seeks as high a level
of current income and total return, as is consistent with prudent risk, by
investing primarily in corporate debt securities.

The Fund is managed by the Adviser, an investment adviser since 1931.

This Prospectus explains concisely what you should know before investing in
the Fund. Read it carefully and retain it for future reference. More
detailed information about the Fund is in the April 28, 1995 Statement of
Additional Information, which has been filed with the Securities and
Exchange Commission and is obtainable free of charge by calling the Adviser
at 1-800-248-2828. The Statement of Additional Information is incorporated
by reference in (which means it is considered to be a part of) this
Prospectus.

The Fund offers two classes of shares. Class A shares are offered at net
asset value plus a sales charge imposed at the time of purchase; Class B
shares are offered at net asset value plus a distribution fee and a
declining contingent deferred sales charge on redemptions made within six
years after purchase. Class B shares automatically convert to Class A
shares after approximately eight years. See "How to buy shares."

Contents Page
Summary of expenses
The Fund's financial history
The Fund's investment objective
How the Fund pursues its
objective
How the Fund measures its
performance
How the Fund is managed
How the Fund values its shares
Distributions and taxes
How to buy shares
How to sell shares
How to exchange shares
Telephone transactions
12b-1 plans
Organization and history

FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED, ENDORSED OR
INSURED BY, ANY BANK OR GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

SUMMARY OF EXPENSES
Expenses are one of several factors to consider when investing in the Fund.
The following tables summarize your maximum transaction costs and annual
expenses for an investment in each Class of the Fund's shares.
Shareholder Transaction Expenses(1)(2)
Class A Class B
Maximum Initial Sales
Charge Imposed on a
Purchase (as % of offering 4.75% 0.00%(5)
price)(3)
Maximum Contingent
Deferred Sales Charge (as
% of offering price)(3) 1.00%(4) 5.00%
(1) For accounts less than $1,000 an annual fee of
$10 may be deducted. See "How to sell shares."
(2) Redemption proceeds exceeding $5,000 sent via
federal funds wire will be subject to a $7.50
charge per transaction.
(3) Does not apply to reinvested distributions.
(4) Only with respect to any portion of purchases of
$1 million to $5 million redeemed within
approximately 18 months after purchase. See "How
to buy shares."

(5) Because of the 0.75% distribution fee applicable
to Class B shares, long-term Class B shareholders
may pay more in aggregate sales charges than the
maximum initial sales charge permitted by the
National Association of Securities Dealers, Inc.
However, because the Fund's Class B shares
automatically convert to Class A shares after
approximately 8 years, this is less likely for
Class B shares than for a class without a
conversion feature.

Annual Operating Expenses (as a % of net assets)
Class A Class B

Management 0.50% 0.50%
fee
12b-1 fees 0.25 1.00
Other 0.36 0.36
expenses
Total 1.11% 1.86%
expenses

Example

The following Example shows the cumulative expenses attributable to a
hypothetical $1,000 investment in each Class of shares of the Fund for the
periods specified, assuming a 5% annual return and, unless otherwise noted,
redemption at period end. The 5% return and expenses used in this Example
should not be considered indicative of actual or expected Fund performance
or expenses, both of which will vary:

Class Class B
A
Period: (6)

1 year $58 $69 $19
3 years 81 89 59
5 years 106 121 101
10 years 176 199(7) 199(7)

(6) Assumes no redemption

(7) Class B shares convert to Class A
shares after approximately 8 years;
therefore, years 9 and 10 reflect Class
A expenses.

THE FUND'S FINANCIAL HISTORY

<TABLE>
<CAPTION>
CLASS A

Year Ended December 31
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $6.720 $6.460 $6.460 $5.970 $6.430
Income (loss) from
investment operations:
Net investment income 0.487 0.501 0.546 0.587 0.632
Net realized and unrealized
gain (loss) on
investments (0.761) 0.261 0.001 0.487 (0.477)
Total from investment
operations (0.274) 0.762 0.547 1.074 0.155
Less distributions declared to
shareholders:
From net investment
income (0.496) (0.502) (0.547) (0.584) (0.615)
From capital paid in --- -- --- -- ---
Total distributions declared
to shareholders (0.496) (0.502) (0.547) (0.584) (0.615)
Net asset value -
End of period $5.950 $6.720 $6.460 $6.460 $5.970
Total return (a) (4.09)% 12.05% 8.83% 18.80% 2.65%
Ratios to average net assets:
Expenses 1.11% 1.10% 1.24% 1.25% 1.23%
Net investment income 7.80% 7.45% 8.49% 9.46% 10.30%
Portfolio turnover 16% 46% 68% 44% 29%
Net assets at end
of period (000) $129,560 $155,543 $149,309 $146,905 $141,467
_________________________________
</TABLE>

<TABLE>
<CAPTION>
CLASS A

Year Ended December 31
1989 1988 1987 1986 1985
<S> <C> <C> <C> <C> <C>
Net asset value - Beginning of
period $6.61 $6.52 $7.22 $7.18 $6.68
Income (loss) from investment
operations:
Net investment income 0.647 0.687 0.703 0.789 0.830
Net realized and unrealized
gain (loss) on investments (0.159) 0.081 (0.649) 0.061 0.500
Total from investment
operations 0.488 0.768 0.054 0.850 1.330
Less distributions declared to
shareholders:
From net investment income (0.662) (0.678) (0.754) (0.810) (0.830)
From capital paid in (0.006) --- --- --- ---
Total distributions
declared to shareholders (0.668) (0.678) (0.754) (0.810) (0.830)
Net asset value - End of period $6.43 $6.61 $6.52 $7.22 $7.18
Total return (a) 7.62% 12.45% 0.48% 12.34% 21.00%
Ratios to average net assets:
Expenses 1.15% 1.13% 1.15% 1.11% 0.94%
Net investment income 9.82% 10.37% 10.10% 10.77% 11.93%
Portfolio turnover 41% 19% 32% 42% 51%
Net assets at end
of period (000) $162,163 $159,991 $164,636 $162,550 $147,306
_________________________________

(a) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
</TABLE>

THE FUND'S FINANCIAL HISTORY (CONT'D)
<TABLE>
<CAPTION>
CLASS B

Year ended December 31
1994 1993 1992(a)
<S> <C> <C> <C>
Net asset value - Beginning of period $6.720 $6.460 $6.390
Income (loss) from investment operations:
Net investment income 0.440 0.451 0.290
Net realized and unrealized
gain (loss).on investments (0.761) 0.261 0.088
Total from investment operations (0.321) 0.712 0.378
Less distributions declared to shareholders:
From net investment income (0.449) (0.452) (0.308)
From capital paid in --- --- ---
Total distributions declared to shareholders (0.449) (0.452) (0.308)
Net asset value - End of period $5.950 $6.720 $6.460
Total return.(b) (4.82)% 11.23% 6.00%(c)
Ratios to average net assets:
Expenses 1.86% 1.85% 1.99%(d)
Net investment income 7.05% 6.70% 7.74%(d)
Portfolio turnover 16% 46% 68%
Net assets at end of period (000) $22,805 $19,787 $6,092
_________________________________

(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 contingent deferred sales charge.
(c) Not annualized.
(d) Annualized.
</TABLE>

Further performance information is contained in the Fund's Annual Report to
shareholders, which is obtainable free of charge by calling 1-800-248-2828.

THE FUND'S INVESTMENT OBJECTIVE

The Fund seeks as high a level of current income and total return, as
is consistent with prudent risk, by investing primarily in corporate
debt securities.

HOW THE FUND PURSUES ITS OBJECTIVE

The Fund invests primarily in corporate and government debt securities
and preferred stocks, but intends to limit investment in preferred
stocks to 10% of net assets. The Fund may invest in debt securities
of any maturity. Some preferred stocks may be accompanied by rights
to acquire the issuer's common stock, but the Fund intends to dispose
of any common stock acquired through these rights. The type of
securities held by the Fund will vary over time based on management's
judgment of market and economic conditions, fiscal and monetary policy
and interest rate trends. The value of debt securities (and thus of
Fund shares) usually fluctuates inversely to changes in interest
rates.

The Fund may also invest in real estate mortgage investment conduits
(REMICs), collateralized mortgage obligations (CMOs) and other
mortgage-backed securities of investment grade or which are considered
by the Adviser to be of comparable rating. Certain of these
securities may be issued by non-U.S. government agencies although the
underlying mortgages will in all cases be guaranteed by a U.S.
government agency. The Fund may experience costs and delays in
liquidating the collateral if the non-U.S. government issuer defaults
or enters bankruptcy and may incur a loss. CMOs are obligations
issued by special-purpose trusts, secured by mortgages. REMICs own
mortgages and elect REMIC status under the Internal Revenue Code.
Both CMOs and REMICs issue one or more classes of securities of which
one (the Residual) is in the nature of equity. The Fund will not
invest in the Residual class. Principal on a REMIC, CMO or other
mortgage-backed security may be prepaid if the underlying mortgages
are prepaid. Because of the prepayment feature these investments may
not increase in value when interest rates fall. The Fund may be able
to invest prepaid principal only at lower yields. The Fund may invest
in "stripped" mortgage-backed securities representing interests in,
for example, only the principal or only the interest on underlying
mortgages. Interest-only strips involve the additional risk of loss
of the entire value of the investment if the underlying mortgages are
prepaid. The prepayment of REMICs, CMOs or other mortgage-backed
securities purchased at a premium may result in losses equal to the
premium.

The Fund currently intends to limit its investments in lower rated
bonds (commonly referred to as "junk bonds") to less than 25% of total
assets. Lower rated bonds are rated lower than Baa by Moody's or BBB
by S&P and comparable unrated securities. Relative to comparable
securities of high quality the market price for lower rated securities
is likely to be more volatile and because of greater investment risk,
the Fund's achievement of its investment objective is more dependent
on the Adviser's credit analysis. For the year ended December 31,
1994, 19.4% of the Fund's weighted average total assets were invested
in lower rated bonds. The 1994 portfolio composition does not
necessarily reflect the current or future portfolio composition.

The Fund will invest no more than 25% of its assets in a single
industry.

Other Investment Practices. The Fund may engage in the following
investment practices some of which are described in more detail in the
Statement of Additional Information.

The Fund may invest temporarily available cash in high quality
certificates of deposit, bankers' acceptances, commercial paper,
treasury bills and repurchase agreements. Under a repurchase
agreement, the Fund buys a security from a bank or dealer, which is
obligated to buy it back at a fixed price and time. The security is
held in a separate account at the Fund's custodian and, constitutes
the Fund's collateral for the bank's repurchase obligation. However,
if the bank or dealer defaults or enters bankruptcy, the Fund may
experience costs and delays in liquidating the collateral and may
experience a loss if it is unable to demonstrate its right to the
collateral in a bankruptcy hearing. Not more than 10% of the Fund's
net assets will be invested in repurchase agreements maturing in more
than 7 days or other illiquid assets.

For hedging purposes, the Fund may (1) buy or sell interest rate
futures and (2) buy and sell options on such futures. The total
market value of securities to be delivered or acquired pursuant to
such contracts will not exceed 5% of the Fund's net assets. A futures
contract creates an obligation by the seller to deliver and the buyer
to take delivery of the type of instrument at the time and in the
amount specified in the contract. Although futures contracts call for
the delivery (or acceptance) of the specified instrument, the
contracts are usually closed out before the settlement date through
the purchase (or sale) of an offsetting contract. If the price of the
initial sale of the futures contract exceeds (or is less than) the
price of the offsetting purchase, the Fund realizes a gain (or loss).

The Fund may acquire securities on a "when-issued" basis by
contracting to purchase securities for a fixed price on a date beyond
the customary settlement time with no interest accruing until
settlement. If made through a dealer the contract is dependent on the
dealer's consummation of the sale. The dealer's failure could deprive
the Fund of an advantageous yield or price. These contracts may be
considered securities and involve risk to the extent that the value of
the underlying security changes prior to settlement. The Fund may
realize short-term profits or losses if the contracts are sold.

In periods of unusual market conditions, when the Adviser considers it
appropriate, the Fund may invest part or all of the Fund's assets in
cash, U.S. government securities, and high quality commercial paper
and bankers' acceptances (but not more than 25% of total assets),
repurchase agreements and certificates of deposit.

Other. The Fund may not always achieve its investment objective. The
Fund's investment objective and non-fundamental policies may be
changed without shareholder approval. The Fund will notify investors
at least 30 days prior to any change in the Fund's investment
objective. If there is a change in the investment objective,
shareholders should consider whether the Fund remains an appropriate
investment in light of their current financial position and needs.
Shareholders may incur a contingent deferred sales charge if shares
are redeemed in response to a change in objective. The Fund's
fundamental policies listed in the Statement of Additional Information
cannot be changed without the approval of a majority of the Fund's
outstanding voting securities. Additional information concerning
certain of the securities and investment techniques described above is
contained in the Statement of Additional Information.

HOW THE FUND MEASURES ITS PERFORMANCE

Performance may be quoted in sales literature and advertisements.
Each Class's average annual total returns are calculated in accordance
with the Securities and Exchange Commission's formula, assume the
reinvestment of all distributions, the maximum initial sales charge of
4.75% on Class A shares and the contingent deferred sales charge
applicable to the time period quoted on Class B shares. Other total
returns differ from average annual total return only in that they may
relate to different time periods, may represent aggregate as opposed
to average annual total returns, and may not reflect the initial sales
charge or contingent deferred sales charges.

All performance information is historical and does not predict future
results.

HOW THE FUND IS MANAGED

The Trustees formulate the Fund's general policies and oversee the
Fund's affairs as conducted by the Adviser.

The Adviser is a subsidiary of The Colonial Group, Inc. Colonial
Investment Services, Inc. (Distributor) is a subsidiary of the Adviser
and serves as the distributor of the Fund's shares.The Colonial Group,
Inc. is the parent of Colonial Investors Service Center, Inc.
(Transfer Agent), which serves as the shareholder services and
transfer agent for the Fund. Liberty Financial Companies, Inc., an
indirect subsidiary of Liberty Mutual Insurance Company, is considered
to be the controlling entity of The Colonial Group, Inc.

The Adviser furnishes the Fund with investment management, accounting
and administrative personnel and services, office space and other
equipment and services at the Adviser's expense. For these services,
the Fund paid the Adviser 0.50% of the Fund's average net assets for
fiscal year 1994.

Mr. Carl C. Ericson, Vice President of the Adviser, has managed the
Fund since 1991 and various other Colonial taxable income funds since
1985.

The Adviser also provides pricing and bookkeeping services to the Fund
for a monthly fee of $2,250 plus a percentage of the Fund's average
net assets over $50 million. The Transfer Agent provides transfer
agency and shareholder services to the Fund for a fee of 0.18%
annually of average net assets plus out-of-pocket expenses.

Each of the foregoing fees is subject to any reimbursement or fee
waiver to which the Adviser may agree.

HOW THE FUND VALUES ITS SHARES

Per share net asset value is calculated by dividing the total value of
each Class's net assets by its number of outstanding shares. Shares
are valued as of the close of the New York Stock Exchange (Exchange)
each day the Exchange is open. Portfolio securities for which market
quotations are readily available are valued at market. Short-term
investments maturing in 60 days or less are valued at amortized cost
when it is determined, pursuant to procedures adopted by the Trustees,
that such cost approximates market value. All other securities and
assets are valued at their fair value following procedures adopted by
the Trustees.

DISTRIBUTIONS AND TAXES

The Fund intends to qualify as a "regulated investment company" under
the Internal Revenue Code and to distribute to shareholders virtually
all net income and any net realized gain at least annually.

The Fund generally declares distributions daily and pays them monthly.
Distributions are invested in additional shares of the same Class of
the Fund at net asset value unless the shareholder elects to receive
cash. Regardless of the shareholder's election, distributions of $10
or less will not be paid in cash but will be invested in additional
shares of the same Class of the Fund at net asset value. To change
your election, call the Transfer Agent for information. Whether you
receive taxable distributions in cash or in additional fund shares,
you must report them as taxable income unless you are a tax-exempt
institution. Each January, information on the amount and nature of
distributions for the prior year is sent to shareholders.

The Fund has a significant capital loss carry forward and, until it is
exhausted, it is unlikely that capital gains distributions will be
made. Any capital gains will, however, be reflected in the net asset
value.

HOW TO BUY SHARES

Shares are offered continuously. Orders received in good form prior
to 4:00 p.m. Eastern time (or placed with a financial service firm
before such time and transmitted by the financial service firm before
the Fund processes that day's share transactions) will be processed
based on that day's closing net asset value, plus any applicable
initial sales charge. The minimum initial investment is $1,000;
subsequent investments may be as small as $50. The minimum initial
investment for the Colonial Fundamatic program is $50 and the minimum
initial investment for a Colonial retirement account is $25.
Certificates will not be issued for Class B shares and there are some
limitations on the issuance of Class A certificates. The Fund may
refuse any purchase order for its shares. See the Statement of
Additional Information for more information.

Class A Shares. Class A shares are offered at net asset value plus an
initial sales charge or a contingent deferred sales charge as follows:
Initial Sales Charge_____
Retained
by
Financial
Service
Firm
as % of as % of
Amount Offering Offering
Amount Purchased Invested Price Price

Less than $50,000 4.99% 4.75% 4.25%
$50,000 to less
than 4.71% 4.50% 4.00%
$100,000
$100,000 to less
than 3.63% 3.50% 3.00%
$250,000
$250,000 to less
than 2.56% 2.50% 2.00%
$500,000
$500,000 to less
than 2.04% 2.00% 1.75%
$1,000,000
$1,000,000 or 0.00% 0.00% 0.00%
more

On purchases of $1 million or more, the Distributor pays the financial
service firm a cumulative commission as follows:

Amount Purchased Commission

First $3,000,000 1.00%
Next $2,000,000 0.50%
Over $5,000,000 0.25%(1)

(1) Paid over 12 months but only to the extent the shares
remain outstanding.

Class A shares bear a 0.25% annual service fee.

Years After Contingent
Purchase Deferred
Sales Charge

0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
More than 6 0.00%

Year one ends one year after the end of the month in which the
purchase was accepted and so on.

The Distributor pays financial service firms a commission of 4.00% on
Class B share purchases.

General. All contingent deferred sales charges are deducted from the
redemption, not the amount remaining in the account, and are paid to
the Distributor. Shares issued upon distribution reinvestment and
amounts representing appreciation are not subject to a contingent
deferred sales charge. The contingent deferred sales charge is
imposed on redemptions which result in the account value falling below
its Base Amount (the total dollar value of purchase payments in the
account reduced by prior redemptions on which a contingent deferred
sales charge was paid and any exempt redemption). See the Statement
of Additional Information for more information.

Which Class is more beneficial to an investor depends on the amount
and intended length of the investment. Large investments, qualifying
for a reduced Class A sales charge, avoid the distribution fee.
Investments in Class B shares have 100% of the purchase invested
immediately. Purchases of $250,000 or more must be for Class A
shares. Consult your financial service firm.

Initial or contingent deferred sales charges may be reduced or
eliminated for certain persons or organizations purchasing Fund shares
alone or in combination with certain other Colonial Funds. See the
Statement of Additional Information for more information.

Shareholder Services. A variety of shareholder services are
available. For more information about these services or your account,
call 1-800-345-6611. Some services are described in the attached
account application. A shareholder's manual explaining all available
services will be provided upon request.

HOW TO SELL SHARES

Selling Shares Directly To The Fund. Send a signed letter of
instruction or stock power form to the Transfer Agent, along with any
certificates for shares to be sold. The sale price is the net asset
value (less any applicable contingent deferred sales charge) next
calculated after the Fund receives the request in proper form.
Signatures must be guaranteed by a bank, a member firm of a national
stock exchange or another eligible guarantor institution. Stock power
forms are available from your financial service firm, the Transfer
Agent and many banks. Additional documentation is required for sales
by corporations, agents, fiduciaries, surviving joint owners and
individual retirement account holders. For details contact:

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

Selling Shares Through Financial Service Firms. Financial service
firms must receive requests before 4:00 P.M. Eastern time to receive
that day's price, are responsible for furnishing all necessary
documentation to the Transfer Agent and may charge for this service.

HOW TO EXCHANGE SHARES

Exchanges at net asset value may be made among shares of the same
class of most Colonial funds. Shares will continue to age without
regard to the exchange for purposes of conversion and determining the
contingent deferred sales charge, if any, upon redemption. Carefully
read the prospectus of the fund into which the exchange will go before
submitting the request. Call 1-800-248-2828 to receive a prospectus
and an exchange authorization form. Call 1-800-422-3737 to exchange
shares by telephone. An exchange is a taxable capital transaction for
federal tax purposes. The exchange service may be changed, suspended
or eliminated on 60 days' written notice.

Class A Shares. An exchange from a money market fund into a non-money
market fund will be at the applicable offering price next determined
(including sales charge), except for amounts on which an initial sales
charge previously was paid. Non-money market fund shares must be held
for five months before qualifying for exchange to a fund with a higher
sales charge, after which, exchanges are made at the net asset value
next determined.

TELEPHONE TRANSACTIONS

12B-1 PLANS

Under 12b-1 Plans, the Fund pays the Distributor an annual service fee
of 0.25% of the Fund's average net assets attributed to each Class of
shares. The Fund also pays the Distributor an annual distribution fee
of 0.75% of the average net assets attributed to its Class B shares.
Because the Class B shares bear the additional distribution fee, their
dividends will be lower than the dividends of Class A shares. Class B
shares automatically convert to Class A shares, approximately eight
years after the Class B shares were purchased. The multiple class
structure could be terminated should certain Internal Revenue Service
rulings be rescinded. See the Statement of Additional Information for
more information. The Distributor uses the fees to defray the cost of
commissions and service fees paid to financial service firms which
have sold Fund shares, and to defray other expenses such as sales
literature, prospectus printing and distribution, shareholder
servicing costs and compensation to wholesalers. Should the fees
exceed the Distributor's expenses in any year, the Distributor would
realize a profit. The Plans also authorize other payments to the
Distributor and its affiliates (including the Adviser) which may be
construed to be indirect financing of sales of Fund shares.

ORGANIZATION AND HISTORY

The Fund is the successor to Colonial Income Fund, Inc. a
Massachusetts corporation organized in 1969 and to Colonial Income
Trust a Massachusetts business trust organized in 1987. The Fund
represents the entire interest in a separate portfolio of the Trust,
which is a Massachusetts business trust organized in 1985.

Distributor
Colonial Investment Services, Inc.
One Financial Center
Boston, MA 02111-2621

Custodian
Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02108-2624

Shareholder Services and Transfer Agent
Colonial Investors Service Center, Inc.
One Financial Center
Boston, MA 02111-2621
1-800-345-6611

Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110-2624

Legal Counsel
Ropes & Gray
One International Place
Boston, MA 02110-2624

Your financial service firm is:

Printed in U.S.A.

April 28, 1995

COLONIAL INCOME FUND

PROSPECTUS

Colonial Income Fund seeks as high a level of current income and total
return, as is consistent with prudent risk, by investing primarily in
corporate debt securities.

For more detailed information about the Fund, call the Adviser at 1-
800-248-2828 for the April 28, 1995 Statement of Additional
Information.

FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED,
ENDORSED OR INSURED BY, ANY BANK OR GOVERNMENT AGENCY.

COLONIAL TRUST I

Cross Reference Sheet
(Colonial Strategic Income Fund)

Item Number of Form N-1A Prospectus Location or
Caption

Part A

1. Cover page

2. Summary of expenses

3. The Fund's financial
history

4. The Fund's investment
objective;
Organization and history;
How the Fund pursues its
objective

5. Cover page;
How the Fund is managed;
Organization and history;
Back cover

6. Organization and history;
Distributions and taxes;
How to buy shares

7. How to buy shares;
How the Fund values its
shares;
12b-1 plans; Back cover

8. How to sell shares;
How to exchange shares;
Telephone transactions

9. Not applicable

April 28, 1995

COLONIAL STRATEGIC
INCOME FUND

PROSPECTUS

BEFORE YOU INVEST

Colonial Management Associates, Inc. (Adviser) and your full-service
financial adviser want you to understand both the risks and benefits
of mutual fund investing.

Please consult your full-service financial adviser to determine how
investing in this mutual fund may suit your unique needs, time horizon
and risk tolerance.

Contents Page
Summary of expenses
The Fund's financial history
The Fund's investment objective
How the Fund pursues its objective
How the Fund measures its performance
How the Fund is managed
How the Fund values its shares
Distributions and taxes
How to buy shares
How to sell shares
How to exchange shares
Telephone transactions
12b-1 plans
Organization and history
Appendix

SI-

Colonial Strategic Income Fund (Fund), a diversified portfolio of
Colonial Trust I (Trust), an open-end management investment company
seeks as high a level of current income and total return, as is
consistent with prudent risk, by diversifying investments primarily in
U.S. and foreign government and lower rated corporate debt securities.
The Fund is managed by the Adviser, an investment adviser since 1931.

The Fund may invest a significant portion of its assets in lower rated
bonds (commonly referred to as "junk bonds") which are regarded as
speculative as to payment of principal and interest and, therefore,
may not be suitable for all investors. These securities are subject
to greater risks, including the risk of default, than higher rated
bonds. See "How the Fund pursues its objectives." Purchasers should
carefully assess the risks associated with an investment in the Fund.

This Prospectus explains concisely what you should know before
investing in the Fund. Read it carefully and retain it for your
future reference. More detailed information about the Fund is in the
April 28, 1995 Statement of Additional Information, which has been
filed with the Securities and Exchange Commission and is obtainable
free of charge by calling the Adviser at 1-800-248-2828. The
Statement of Additional Information is incorporated by reference in
(which means it is considered to be a part of) this Prospectus.

The Fund offers three classes of shares. Class A shares are offered
at net asset value plus a sales charge imposed at the time of
purchase; Class B shares are offered at net asset value plus a
distribution fee and a declining contingent deferred sales charge on
redemptions made within six years after purchase; and Class D shares
are offered at net asset value plus a small initial sales charge, a
contingent deferred sales charge on redemptions made within one year
after purchase and a continuing distribution fee. Class B shares
automatically convert to Class A shares after approximately eight
years. See "How to buy shares."

FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED,
ENDORSED OR INSURED BY, ANY BANK OR GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

SUMMARY OF EXPENSES

Shareholder Transaction Expenses(1) (2)
Class A Class B Class D

Maximum Initial Sales Charge Imposed on a Purchase
(as a % of offering price) (3) 4.75% 0.00%(5) 1.00%(5)
Maximum Contingent Deferred Sales Charge
(as a % of offering price) (3) 1.00%(4) 5.00% 1.00%

(1) For accounts less than $1,000 an annual fee of $10 may be
deducted. See "How to sell shares."
(2) Redemption proceeds exceeding $5,000 sent via federal funds wire
will be subject to a $7.50 charge per transaction.
(3) Does not apply to reinvested distributions.
(4) Only with respect to any portion of purchases of $1 million to
$5 million redeemed within approximately 18 months after purchase.
See "How to buy shares."
(5) Because of the 0.75% distribution fee applicable to Class B
shares and the 0.50% distribution fee applicable to Class D
shares, long-term Class B and Class D shareholders may pay more
in aggregate sales charges than the maximum initial sales charge
permitted by the National Association of Securities Dealers, Inc.
However, because the Fund's Class B shares automatically convert
to Class A shares after approximately 8 years, this is less
likely for Class B shares than for a class without a conversion
feature.

Annual Operating Expenses (as a % of net assets)
Class A Class B Class D
Management fee 0.64% 0.64% 0.64%
12b-1 fees (6) 0.23 0.98 0.73
Other expenses 0.34 0.34 0.34
Total expenses 1.21% 1.96% 1.71%

(6) The service fee rate will fluctuate but will not exceed 0.25%.

Example

Class A Class B Class D
Period: (7)
1 year $ 59 $ 70 $ 20 $ 37 $ 27
3 years 84 92 60 63 63
5 years 111 127 107 102 102
10 years 187 211 210(8) 210 210(8)

(7) Assumes no redemption.
(8) Class B shares convert to Class A shares after approximately
8 years; therefore years 9 and 10 reflect Class A expenses.

THE FUND'S FINANCIAL HISTORY

The following schedule of financial highlights for a share outstanding
throughout each period has been audited by Price Waterhouse LLP,
independent accountants. Their unqualified report is included in the
Fund's 1994 Annual Report and is incorporated by reference into the
Statement of Additional Information. The Fund adopted its current
objectives on November 30, 1994. The data presented below represents
operations under earlier objectives.

<TABLE>
<CAPTION>
CLASS A
Year Ended December 31
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Net asset value - Beginning of
period $7.390 $7.010 $7.020 $6.050 $7.250
Income from investment
operations:
Net investment income 0.580 0.565 0.669 0.684 0.697
Net realized and unrealized
gain (loss) (0.848) 0.448 (0.004) 0.966 (1.177)
Total from investment
operations (0.268) 1.013 0.665 1.650 (0.480)
Less distributions declared to
shareholders:
From net investment income (0.580) (0.585) (0.673) (0.680) (0.697)
In excess of net investment income --- --- (0.002) --- ---
From net realized gains --- --- --- --- ---
From capital paid in (0.012) (0.048) --- --- (0.023)
Total distributions declared to
shareholders (0.592) (0.633) (0.675) (0.680) (0.720)
Net asset value - End of period $6.530 $7.390 $7.010 $7.020 $6.050
Total return (a) (3.67)% 14.95% 9.77% 28.41% (7.04)%
Ratios to average net assets:
Expenses 1.21% 1.19% 1.18% 1.12% 1.12%
Net investment income 8.38% 8.42% 9.39% 10.27% 10.27%
Portfolio turnover 78% 138% 96% 48% 2%
Net assets at end of period (000) $636,824 $660,654 $437,380 $424,824 $410,270
_________________________________
</TABLE>

<TABLE>
<CAPTION>
CLASS A
Year Ended December 31
1989 1988 1987 1986 1985
<S> <C> <C> <C> <C> <C>
Net asset value - Beginning of
period $7.270 $6.890 $7.580 $8.290 $8.040
Income from investment
operations:
Net investment income 0.661 0.387 0.272 0.179 0.214
Net realized and unrealized
gain (loss) 0.039 0.733 0.098 0.211 1.296
Total from investment
operations 0.700 1.120 0.370 0.390 1.510
Less distributions declared to
shareholders:
From net investment income (0.661) (0.476) (0.250) (0.170) (0.250)
In excess of net investment income --- --- --- --- ---
From net realized gains --- (0.044) (0.810) (0.930) (1.010)
From capital paid in (0.059) (0.220) --- --- ---
Total distributions declared to
shareholders (0.720) (0.740) (1.060) (1.100) (1.260)
Net asset value - End of period $7.250 $7.270 $6.890 $7.580 $8.290
Total return (a) 9.93% 16.66% 3.74% 4.76% 20.28%
Ratios to average net assets:
Expenses 1.10% 1.07% 1.00% 0.99% 0.93%
Net investment income 8.94% 5.33% 3.31% 2.21% 2.64%
Portfolio turnover 32% 28% 82% 134% 121%
Net assets at end of period (000) $498,294 $631,982 $783,125 $1,068,974 $1,382,360
_________________________________
</TABLE>

(a) Total return at net asset value assuming all distributions
reinvested and no initial sales charge or contingent deferred
sales charge.

Further performance information is contained in the Fund's Annual
Report to shareholders, which is obtainable free of charge by calling
1-800-248-2828.

THE FUND'S FINANCIAL HISTORY (CONT'D)

<TABLE>
<CAPTION>
CLASS B
Year ended December 31
1994 1993 1992(a)
<S> <C> <C> <C>
Net asset value - Beginning of period $7.390 $7.010 $7.080
Income (loss) from investment operations:
Net investment income 0.529 0.511 0.385
Net realized and unrealized gain (loss) on investments (0.849) 0.448 (0.067)
Total from investment operations (0.320) 0.959 0.318
Less distributions declared to shareholders:
From net investment income (0.529) (0.535) (0.388)
From capital paid in (0.011) (0.044) ---
Total distributions declared to shareholders (0.540) (0.579) (0.388)
Net asset value - End of period $6.530 $7.390 $7.010
Total return (b) (4.40)% 14.11% 2.48%(c)
Ratios to average net assets:
Expenses 1.96% 1.94% 1.93%(d)
Net investment income 7.63% 7.67% 8.64%(d)
Portfolio turnover 78% 138% 96%
Net assets at end of period (000) $608,348 $475,141 $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 contingent deferred
sales charge.
(c) Not annualized.
(d) Annualized.

Further performance information is contained in the Fund's Annual
Report to shareholders, which is obtainable free of charge by calling
1-800-248-2828.

THE FUND'S INVESTMENT OBJECTIVE

The Fund seeks as high a level of current income and total return, as
is consistent with prudent risk, by diversifying investments primarily
in U.S. and foreign government and lower rated corporate debt
securities.

HOW THE FUND PURSUES ITS OBJECTIVE

The Fund will seek to achieve its objectives by investing its assets
in each of the following sectors of the debt securities markets: (i)
securities issued or guaranteed as to principal and interest by the
U.S. government, its agencies, authorities or instrumentalities
(government securities); (ii) debt securities issued by foreign
governments and their political subdivisions; and (iii) lower rated
securities, some of which may involve equity features. The Fund may
invest in debt securities of any maturity. The allocation of
investments among these types of securities at any given time is based
on the Adviser's estimate of expected performance and risk of each
type of investment. The value of debt securities (and thus of Fund
shares) usually fluctuates inversely to changes in interest rates.

Investment Techniques and Risk Factors

U.S. Government Securities. U.S. government securities in which the
Fund may invest include (1) U.S. Treasury obligations, (2) obligations
issued or guaranteed by U.S. government agencies and instrumentalities
(Agencies) which are supported by: (a) the full faith and credit of
the U.S. government, (b) the right of the issuing agency to borrow
under a line of credit with the U.S. Treasury, (c) discretionary power
of the U.S. government to purchase obligations of the Agencies or (d)
the credit of the Agencies, and (3) "when-issued" government
securities.

The Fund may invest in U.S. government securities of any maturity,
including (1) zero coupon securities (zeros) (which are issued at a
significant discount from face value and pay interest only at maturity
rather than at intervals during the life of the security) and (2)
certificates representing undivided interests in the interest or
principal of mortgage backed securities (interest only/principal
only), which tend to be more volatile than other types of securities.
The Fund is required to accrue and distribute income from zeros on a
current basis even though the Fund does not receive that income
currently in cash. Thus the Fund may have to sell other investments
to obtain cash needed to make income distributions. The interest only
class involves the risk of loss of the entire value of the investment
if the underlying mortgages are prepaid.

CMOs and REMICs. The Fund may also invest in real estate mortgage
investment conduits (REMICs), collateralized mortgage obligations
(CMOs) and other mortgage-backed securities of investment grade which
are considered by the Adviser to be of comparable rating. Certain of
these securities may not be U.S. government securities, although the
underlying mortgages will in all cases be guaranteed by an Agency.
The Fund may experience costs and delays in liquidating the collateral
if the issuer defaults or enters bankruptcy and may incur a loss.
CMOs are obligations issued by special-purpose trusts, secured by
mortgages. REMICs own mortgages and elect REMIC status under the
Internal Revenue Code. Both CMOs and REMICs issue one or more classes
of securities of which one (the Residual) is in the nature of equity.
The Fund will not invest in the Residual class. Principal on a REMIC,
CMO or other mortgage-backed security may be prepaid if the underlying
mortgages are prepaid. Because of the prepayment feature these
investments may not increase in value when interest rates fall. The
Fund may be able to invest prepaid principal only at lower yields.
The prepayment of REMICs, CMOs or other mortgage-backed securities
purchased at a premium may result in losses equal to the premium.

Foreign Investments. The Fund may invest any portion of its assets in
securities issued or guaranteed by foreign governments. Foreign
securities will subject the Fund to special considerations related to
political, economic and legal conditions outside of the United States.
These considerations include the possibility of unfavorable currency
exchange rates, exchange control regulations (including currency
blockage), expropriation, withholding taxes on income and difficulties
in enforcing judgments. Foreign securities may be less liquid and
more volatile than comparable U.S. securities.

Transactions in foreign securities include currency conversion costs.
Foreign brokerage and custodial costs may be higher than in the United
States. See "Foreign Securities" in the Statement of Additional
Information for more information about foreign investments.

Foreign Currency Transactions. In connection with its investments in
foreign securities, the Fund may purchase and sell (i) foreign
currencies on a spot or forward basis, (ii) foreign currency futures
contracts, and (iii) options on foreign currencies and foreign
currency futures. Such transactions will be entered into (i) to lock
in a particular foreign exchange rate pending settlement of a purchase
or sale of a foreign security or pending the receipt of interest,
principal or dividend payments on a foreign security held by the Fund,
or (ii) to hedge against a decline in the value, in U.S. dollars or in
another currency, of a foreign currency in which securities held by
the Fund are denominated. The Fund will not attempt, nor would it be
able, to eliminate all foreign currency risk. Further, although
hedging may lessen the risk of loss if the hedged currency's value
declines, it limits the potential gain from currency value increases.
See the Statement of Additional Information for information relating
to the Fund's obligations in entering into such transactions.

Lower Rated Bonds. The Fund may purchase high yield, high risk bonds
(commonly referred to as junk bonds), including bonds in the lowest
rating categories (C for Moody's and D for S&P) and unrated bonds. The
lowest rating categories include bonds which are in default. Because
these securities are regarded as predominantly speculative as to
payment of principal and interest, the Fund will not purchase the debt
securities of an issuer rated Ca by Moody's or CC by S&P or lower or
comparable unrated securities, if as a result holdings of that issuer
exceed 0.5% of the Fund's net assets. Lower rated bonds are those
rated lower than Baa by Moody's or BBB by S&P, or comparable unrated
securities. Relative to comparable securities of higher quality:

1. The market price is likely to be more volatile because:

a. an economic downturn or increased interest rates may have a
more significant effect on the yield, price and potential
for default;

b. the secondary market may at times become less liquid or
respond to adverse publicity or investor perceptions,
increasing the difficulty in valuing or disposing of the
bonds;

c. existing and future legislation limits and may further
limit (i) investment by certain institutions and (ii) tax
deductibility of the interest by the issuer, which may
adversely affect value; and

d. certain lower rated bonds do not pay interest in cash on a
current basis. However, the Fund will accrue and
distribute this interest on a current basis, and may have
to sell securities to generate cash for distributions.

2. The Fund's achievement of its investment objective is more
dependent on the Adviser's credit analysis.

3. Lower rated bonds are less sensitive to interest rate changes
but are more sensitive to adverse economic developments.

Weighted average composition of the Fund's portfolio for the year
ended December 31, 1994 was:

Rated Unrated
Investment grade 0.2% 0%
B-BB and equivalent 42.6 1.2
Below B 4.8 0
47.6 1.2
Subtotal 48.8
Equities and Governments 51.2
Total 100%

This table does not necessarily reflect the current or future
composition of the portfolio.

Other Investment Practices. The Fund may engage in the following
investment practices, some of which are described in more detail in
the Statement of Additional Information. The Fund may invest
temporarily available cash in certificates of deposit, bankers'
acceptances, high quality commercial paper, Treasury bills and
repurchase agreements to enhance current return. The Fund also may
invest in when-issued securities. "When-issued" securities are
contracts to purchase securities for a fixed price on a date beyond
the customary settlement time with no interest accruing until
settlement. If made through a dealer, the contract is dependent on
the dealercompleting the sale. The dealer's failure could deprive the
Fund of advantageous yields. These contracts involve the risk that
the value of the underlying security may change prior to settlement.
The Fund currently will not purchase these securities with more than
120 days to settlement. Transactions in when-issued securities may be
limited by certain Internal Revenue Code requirements. Under a
repurchase agreement, the Fund buys a security from a bank or dealer,
which is obligated to buy it back at a fixed price and time. The
security is held in a separate account at the Fund's custodian and
constitutes the Fund's collateral for the bank's repurchase
obligation. However, if the bank or dealer defaults or enters
bankruptcy, the Fund may experience costs and delays in liquidating
the collateral and may experience a loss if it is unable to
demonstrate its right to the collateral in a bankruptcy hearing. Not
more than 15% of the Fund's net assets will be invested in repurchase
agreements maturing in more than 7 days and other illiquid assets.

The Fund may engage in foreign currency exchange transactions
(including forward contracts, options, futures and options thereon)
and in transactions involving interest rate futures contracts and
options thereon as a hedge against changes in exchange and interest
rates. The Fund will engage in such activities only with respect to
currencies, securities it may otherwise purchase or indices composed
of such securities.

In periods of unusual market conditions, when the Adviser considers it
appropriate, the Fund may invest part or all of the Fund's assets in
cash, U.S. government securities, high quality commercial paper,
bankers' acceptances, repurchase agreements and certificates of
deposit.

The Fund will not invest more than 25% of its assets in any single
industry.

Other. The Fund may not always achieve its investment objective. The
Fund's investment objective and non-fundamental policies may be
changed without shareholder approval. The Fund will notify investors
at least 30 days prior to any material change in the Fund's investment
objective. If there is a change in the investment objective,
shareholders should consider whether the Fund remains an appropriate
investment in light of their current financial position and needs.
Shareholders may incur a contingent deferred sales charge if shares
are redeemed in response to a change in objectives. The Fund's
fundamental policies listed in the Statement of Additional Information
cannot be changed without the approval of a majority of the Fund's
outstanding voting securities. Additional information concerning
certain of the securities and investment techniques described above is
contained in the Statement of Additional Information.

HOW THE FUND MEASURES ITS PERFORMANCE

Performance may be quoted in sales literature and advertisements.
Each Class's average annual total returns are calculated in accordance
with the Securities and Exchange Commission's formula and assume the
reinvestment of all distributions, the maximum initial sales charge of
4.75% on Class A shares, the maximum initial sales charge of 1.00% on
Class D shares and the contingent deferred sales charge applicable to
the time period quoted on Class B and Class D shares. Other total
returns differ from average annual total return only in that they may
relate to different time periods, may represent aggregate as opposed
to average annual total returns and may not reflect the initial or
contingent deferred sales charges.

Each Class's yield, which differs from total return because it does
not consider changes in net asset value, is calculated in accordance
with the Securities and Exchange Commission's formula. Each Class's
distribution rate is calculated by dividing the most recent quarter's
distributions, annualized, by the maximum offering price of that Class
at the end of the quarter. Each Class's performance may be compared
to various indices. Quotations from various publications may be
included in sales literature and advertisements. See "Performance
Measures" in the Statement of Additional Information for more
information.

All performance information is historical and does not predict future
results.

HOW THE FUND IS MANAGED

The Trustees formulate the Fund's general policies and oversee the
Fund's affairs as conducted by the Adviser.

The Adviser furnishes the Fund with investment management, accounting
and administrative personnel and services, office space and other
equipment and services at the Adviser's expense. For these services,
the Fund paid the Adviser 0.64% of the Fund's average net assets for
fiscal year 1994.

Carl C. Ericson, Vice President of the Adviser, has managed the Fund
since 1991 and various other Colonial taxable income funds since 1985.

The Adviser also provides pricing and bookkeeping services to the Fund
for a monthly fee of $2,250 plus a percentage of the Fund's average
net assets over $50 million.

The Transfer Agent provides transfer agency and shareholder services
to the Fund for a fee of 0.20% annually of average net assets plus
out-of-pocket expenses.

Each of the foregoing fees is subject to any reimbursement or fee
waiver to which the Adviser may agree.

HOW THE FUND VALUES ITS SHARES

Per share net asset value is calculated by dividing the total value of
each Class's net assets by its number of outstanding shares. Shares
are valued as of the close of the New York Stock Exchange (Exchange)
each day the Exchange is open. Portfolio securities for which market
quotations are readily available are valued at market. Short-term
investments maturing in 60 days or less are valued at amortized cost,
when it is determined, pursuant to procedures adopted by the Trustees,
that such cost approximates market value. All other securities and
assets are valued at their fair value following procedures adopted by
the Trustees.

DISTRIBUTIONS AND TAXES

Whether you receive distributions in cash or in additional Fund
shares, you must report them as taxable income unless you are a tax-
exempt institution. If you buy shares shortly before a distribution
is declared, the distribution will be taxable although it is in effect
a partial return of the amount invested. Each January, information on
the amount and nature of distributions for the prior year is sent to
shareholders.

The Fund has a significant capital loss carryforward, and until it is
exhausted it is unlikely that capital gain distributions will be made.
Any capital gains will, however, be reflected in the net asset value.

HOW TO BUY SHARES

Shares are continuously offered. Orders received in good form prior
to 4:00 p.m. Eastern time (or placed with a financial service firm
before such time and transmitted by the financial service firm before
the Fund processes that day's share transactions) will be processed
based on that day's closing net asset value, plus any applicable
initial sales charge.

Class A Shares. Class A shares are offered at net asset value plus an
initial or a contingent deferred sales charge as follows:

Initial Sales Charge
Retained
by
Financial
Service
Firm
as % of as % of
Amount Amount Offering Offering
Purchased Invested Price Price
Less than $50,000 4.99% 4.75% 4.25%
$50,000 to less than $100,000 4.71% 4.50% 4.00%
$100,000 to less than $250,000 3.63% 3.50% 3.00%
$250,000 to less than $500,000 2.56% 2.50% 2.00%
$500,000 to less than $1,000,000 2.04% 2.00% 1.75%
$1,000,000 or more 0.00% 0.00% 0.00%

On purchases of $1 million or more, the Distributor pays the financial
service firm a cumulative commission as follows:

Amount Purchased Commission
First $3,000,000 1.00%
Next $2,000,000 0.50%
Over $5,000,000 0.25%(1)

(1) Paid over 12 months but only to the extent the shares remain
outstanding.

Class A shares bear a 0.15% annual service fee for shares outstanding
on January 1, 1993, and a 0.25% annual service fee for shares issued
thereafter.

Class B Shares. Class B shares are offered at net asset value,
without an initial sales charge, subject to a 0.75% annual
distribution fee for approximately 8 years (at which time they convert
to Class A shares not bearing a distribution fee), a 0.15% annual
service fee for shares outstanding on January 1, 1993, and a 0.25%
annual service fee for shares issued thereafter and a contingent
deferred sales charge if redeemed within 6 years after purchase. As
shown below, the amount of the contingent deferred sales charge
depends on the number of years after purchase that the redemption
occurs:

Years Contingent Deferred
After Purchase Sales Charge
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
More than 6 0.00%

Year one ends one year after the end of the month in which the
purchase was accepted and so on. The Distributor pays financial
service firms a commission of 4.00% on Class B share purchases.

Class D Shares. Class D shares are offered at net asset value plus a
1.00% initial sales charge, subject to a 0.50% annual distribution
fee, a 0.15% annual service fee for shares outstanding on
January 1, 1993, and a 0.25% annual service fee for shares issued
thereafter and a 1.00% contingent deferred sales charge on redemptions
made within one year from the first day of the month after purchase.

General. All contingent deferred sales charges are deducted from the
redemption, not the amount remaining in the account, and are paid to
the Distributor. Shares issued upon distribution reinvestment and
amounts representing appreciation are not subject to a contingent
deferred sales charge. The contingent deferred sales charge is
imposed on redemptions which result in the account falling below its
Base Amount (the total dollar value of purchase payments (including
initial sales charge, if any), in the account reduced by prior
redemptions on which a contingent deferred sales charge was paid and
any exempt redemptions). See the Statement of Additional Information
for more information.

Shareholder Services. A variety of shareholder services are
available. For more information about these services or your account
call 1-800-345-6611. Some services are described in the attached
account application. A shareholder's manual explaining all available
services will be provided upon request.

HOW TO SELL SHARES

Selling Shares Directly To The Fund. Send a signed letter of
instruction or stock power form to the Transfer Agent, along with any
certificates, for shares to be sold. The sale price is the net asset
value (less any applicable contingent deferred sales charge) next
calculated after the Fund receives the request in proper form.
Signatures must be guaranteed by a bank, a member firm of a national
stock exchange or another eligible guarantor institution. Stock power
forms are available from financial service firms, the Transfer Agent
and many banks. Additional documentation is required for sales by
corporations, agents, fiduciaries, surviving joint owners and
individual retirement account holders. For details contact:

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

HOW TO EXCHANGE SHARES

Exchanges at net asset value may be made among shares of the same
class of most other Colonial funds. The only other Colonial funds
currently offering Class D shares are Colonial High Yield Securities
Fund, Colonial International Fund for Growth, Colonial U.S. Fund for
Growth, Colonial Government Money Market Fund, Colonial Strategic
Balanced Fund, Colonial Global Utilities Fund and Colonial Newport
Tiger Fund. Shares will continue to age without regard to the
exchange for purposes of conversion and determining the contingent
deferred sales charge, if any, upon redemption. Carefully read the
prospectus of the fund into which the exchange will go before
submitting the request. Call 1-800-248-2828 to receive a prospectus
and an exchange authorization form. Call 1-800-422-3737 to exchange
shares by telephone. An exchange is a taxable capital transaction.
The exchange service may be changed, suspended or eliminated on 60
days' written notice.

TELEPHONE TRANSACTIONS

12B-1 PLANS

Under 12b-1 Plans, the Fund pays the Distributor an annual
service fee of 0.15% of the Fund's average net assets outstanding
on January 1, 1993, and 0.25% of the Fund's average net assets
issued thereafter. The Fund also pays the Distributor an annual
distribution fee of 0.75% of the average net assets attributed to
its Class B shares and 0.50% of the average net assets attributed
to its Class D shares. Because the Class B and Class D shares
bear the additional distribution fees, their dividends will be
lower than the dividends of Class A shares. Class B shares
automatically convert to Class A shares, approximately eight years
after the Class B shares were purchased. Class D shares do not
convert. The multiple class structure could be terminated should
certain Internal Revenue Service rulings be rescinded. See the
Statement of Additional Information for more information. The
Distributor uses the fees to defray the cost of commissions and
service fees paid to financial service firms which have sold Fund
shares, and to defray other expenses such as sales literature,
prospectus printing and distribution, shareholder servicing costs and
compensation to wholesalers. Should the fees exceed the Distributor's
expenses in any year, the Distributor would realize a profit. The
Plans also authorize other payments to the Distributor and its
affiliates (including the Adviser) which may be construed to be
indirect financing of sales of Fund shares.

ORGANIZATION AND HISTORY

The Fund was organized in Massachusetts in 1977. The Fund represents
the entire interest in a separate portfolio of the Trust, which is a
Massachusetts business trust organized in 1985. The Trust is not
required to hold annual shareholder meetings, but special meetings may
be called for certain purposes. You receive one vote for each of your
Fund shares. Shares of the Trust vote together except when required
by law to vote separately by fund or by class. Shareholders owning in
the aggregate ten percent of Trust shares may call meetings to
consider removal of Trustees. Under certain circumstances, the Trust
will provide information to assist shareholders in calling such a
meeting. See the Statement of Additional Information for more
information.

APPENDIX

DESCRIPTION OF BOND RATINGS

S&P

MOODY'S

Those bonds in the Aa through B groups that Moody's believes possess
the strongest investment attributes are designated by the symbol Aa1,
A1 and Baa1.

A bonds possess many of the favorable investment attributes and are to
be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but
elements may be present that suggest a susceptibility to impairment
sometime in the future.

Baa bonds are considered as medium grade, neither highly protected nor
poorly secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length
of time. Such bonds lack outstanding investment characteristics and
in fact, have speculative characteristics as well.
Ba bonds are judged to have speculative elements; their future cannot
be considered as well secured. Often, the protection of interest and
principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future.
Uncertainty of position characterizes these bonds.
B bonds generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa bonds are of poor standing. They may be in default or there may
be present elements of danger with respect to principal or interest.
Ca bonds are speculative in a high degree, often in default or having
other marked shortcomings.
C bonds are the lowest rated class of bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment
standing.

Investment Adviser
Colonial Management Associates, Inc.
One Financial Center
Boston, MA 02111-2621

Distributor
Colonial Investment Services, Inc.
One Financial Center
Boston, MA 02111-2621

Custodian
Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02108-2624

Shareholder Services and Transfer Agent
Colonial Investors Service Center, Inc.
One Financial Center
Boston, MA 02111-2621
1-800-345-6611

Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110-2624

Legal Counsel
Ropes & Gray
One International Place
Boston, MA 02110-2624

Your financial service firm is:

Printed in U.S.A.

April 28, 1995

COLONIAL STRATEGIC
INCOME FUND

PROSPECTUS

Colonial Strategic Income Fund seeks as high a level of current income
and total return, as is consistent with prudent risk, by diversifying
investments primarily in U.S. and foreign government and lower rated
corporate debt securities. The Fund may invest a substantial portion
of its assets in lower rated bonds and, therefore, may not be suitable
for all investors.

For more detailed information about the Fund, call the Adviser at
1-800-248-2828 for the April 28, 1995 Statement of Additional
Information.

FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED,
ENDORSED OR INSURED BY, ANY BANK OR GOVERNMENT AGENCY.

COLONIAL TRUST I

Cross Reference Sheet
(Colonial High Yield Securities Fund)

Item Number of Form N-1A Statement of Additional
Information Location or
Caption

Part B

10. Cover Page

11. Table of Contents

12. Not Applicable

13. Investment Objective and
Policies;
Fundamental Investment
Policies;
Other Investment Policies;
Portfolio Turnover;
Miscellaneous Investment
Practices

14. Management of the Funds

15. Fund Charges and Expenses

16. Fund Charges and Expenses;
Management of the Funds

17. Fund Charges and Expenses;
Management of the Funds

18. Shareholder Liability

19. How to Buy Shares;
Determination of Net Asset
Value;
Suspension of Redemptions;
Investor Services

20. Taxes

21. Fund Charges and Expenses;
Management of the Funds

22. Fund Charges and Expenses;
Investment Performance;
Performance Measures

23. Independent Accountants

COLONIAL HIGH YIELD SECURITIES FUND
Statement of Additional Information
April 28, 1995

This Statement of Additional Information (SAI) contains information
which may be useful to investors but which is not included in the
Prospectus of Colonial High Yield Securities Fund (Fund). This SAI
is not a prospectus and is only authorized for distribution when
accompanied or preceded by the Prospectus of the Fund dated April
28, 1995. This SAI should be read together with the Prospectus.
Investors may obtain a free copy of the Prospectus from Colonial
Investment Services, Inc., One Financial Center, Boston, MA 02111-
2621.

Part 1 of this SAI contains specific information about the Fund.
Part 2 includes information about the Colonial funds generally and
additional information about certain securities and investment
techniques described in the Fund's prospectus.

TABLE OF CONTENTS

Part 1 Page

Definitions
Investment Objective and Policies
Fundamental Investment Policies
Other Investment Policies
Portfolio Turnover
Fund Charges and Expenses
Investment Performance
Custodian
Independent Accountants

Part 2

Miscellaneous Investment Practices
Taxes
Management of the Funds
Determination of Net Asset Value
How to Buy Shares
Investor Services
Suspension of Redemptions
Shareholder Liability
Performance Measures
Appendix I
Appendix II

HY--0495

PART 1
COLONIAL HIGH YIELD SECURITIES FUND
Statement of Additional Information
April 28, 1995

DEFINITIONS
"Trust" Colonial Trust I
"Fund" Colonial High Yield Securities Fund
"Colonial" Colonial Management Associates, Inc., the Fund's
investment adviser

"CISI" Colonial Investment Services, Inc., the Fund's
distributor

"CISC" Colonial Investors Service Center, Inc., the
Fund's shareholder services and transfer agent

INVESTMENT OBJECTIVE AND POLICIES
The Fund's Prospectus describes its investment objective and
investment policies. Part 1 includes additional information
concerning, among other things, the investment restrictions of the
Fund. Part 2 of this SAI contains additional information about the
following securities and investment techniques:

Short-Term Trading
Foreign Securities
Zero Coupon Securities
Step Coupon Bonds
Pay-in-kind Securities
Securities Loans
Forward Commitments
Repurchase Agreements
Futures Contracts and Related Options (interest rate futures
and related options)
Foreign Curreny Transactions

Except as described below under "Fundamental Investment Policies",
the Fund's investment policies are not fundamental, and the Trustees
may change the policies without shareholder approval.

FUNDAMENTAL INVESTMENT POLICIES
The Investment Company Act of 1940 (Act) provides that a "vote of a
majority of the outstanding voting securities" means the affirmative
vote of the lesser of (1) more than 50% of the outstanding shares of
the Fund, or (2) 67% or more of the shares present at a meeting if
more than 50% of the outstanding shares are represented at the
meeting in person or by proxy. The following fundamental investment
policies can not be changed without such a vote.

The Fund may:
1. Issue senior securities only through borrowing money from banks
for temporary or emergency purposes up to 10% of its net assets;
however, the Fund will not purchase additional portfolio
securities while borrowings exceed 5% of net assets;
2. Only own real estate acquired as the result of owning securities
and not more than 5% of total assets;
3. Invest up to 10% of its net assets in illiquid assets;
4. Purchase and sell futures contracts and related options so long
as the total initial margin and premiums on the contracts do not
exceed 5% of its total assets;
5. Underwrite securities issued by others only when disposing of
portfolio securities;
6. Make loans through lending of securities not exceeding 30% of
total assets, through the purchase of debt instruments or similar
evidences of indebtedness typically sold privately to financial
institutions and through repurchase agreements; and
7. Not concentrate more than 25% of its total assets in any one
industry or with respect to 75% of total assets purchase any
security (other than obligations of the U.S. Government and cash
items including receivables) if as a result more than 5% of its
total assets would then be invested in securities of a single
issuer, or purchase voting securities of an issuer if, as a
result of such purchase, the Fund would own more than 10% of the
outstanding voting shares of such issuer.

OTHER INVESTMENT POLICIES
As non-fundamental investment policies which may be changed without
a shareholder vote the Fund may not:
1. Purchase securities on margin, but the Fund may receive short-
. term credit to clear securities transactions and may make initial
or maintenance margin deposits in connection with futures
transactions;
2. Have a short securities position, unless the Fund owns, or owns
rights (exercisable without payment) to acquire, an equal amount
of such securities;
3. Own securities of any company if the Trust knows that officers
and Trustees of the Trust or officers and directors of Colonial
who individually own more than 0.5% of such securities together
own more than 5% of such securities;
4. Invest in interests in oil, gas or other mineral exploration or
development programs, including leases;
5. Purchase any security resulting in the Fund having more than 5%
of its total assets invested in securities of companies
(including predecessors) less than three years old;
6. Pledge more than 33% of its total assets;
7. Purchase any security if, as a result of such purchase, more than
10% of its total assets would be invested in the securities of
issuers which are restricted as to disposition and
8. Invest in warrants if, immediately after giving effect to any
such investment, the Fund's aggregate investment in warrants,
valued at the lower of cost or market, would exceed 5% of the
value of the Fund's net assets. Included within that amount, but
not to exceed 2% of the value of the Fund's net assets, may be
warrants which are not listed on the New York Stock Exchange or
the American Stock Exchange. Warrants acquired by the Fund in
units or attached to securities will be deemed to be without
value.

Total assets and net assets are determined at current value for
purposes of compliance with investment restrictions and policies.
All percentage limitations will apply at the time of investment and
are not violated unless an excess or deficiency occurs as a result
of such investment. For the purpose of the Act diversification
requirement, an issuer is the entity whose revenues support the
security.

PORTFOLIO TURNOVER

1994 1993
---- ----
123% 122%

FUND CHARGES AND EXPENSES

Under the Fund's management agreement, the Fund pays Colonial a
monthly fee based on the average net assets of the Fund, determined
at the close of each business day during the month, at the annual
rate of 0.60%.

Recent Fees paid to Colonial, CISI and CISC (for fiscal years ended
December 31) (dollars in thousands)

1994 1993 1992
---- ---- ----
Management fee $3,832 $3,363 $2,245
Bookkeeping fee 233 206 140
Shareholder service and
transfer agent fee 1,848 1,591 1,079(a)
12b-1 fees:
Service fee 1,599 1,402 936
Distribution fee (Class B)(b) 1,742 1,217 327

(a) Under a different fee schedule.
(b) Class B shares were initially offered on June 8, 1992.

Brokerage Commissions (for fiscal years ended December 31) (dollars
in thousands)

1994 1993 1992
---- ---- ----
Total commissions $10 $11 $9
Directed transactions(c) 0 2 0
Commissions on directed transactions 0 3 0

Trustees Fees

For the year ended December 31, 1994, the Trustees received the
following compensation for serving as Trustees:

Total
Aggregate Pension or Estimated Compensation
Compensation Retirement Annual From Fund
Trustee From Fund Benefits Benefits and Other
Accrued As Upon Colonial
Part of Retirement Funds(e)
Fund
Expense
- ------------ ---------- --------- ---------- ------------
Tom Bleasdale $3,938(d) $0 $0 $101,000(f)
Lora S.
Collins 3,705 0 0 95,000
William D.
Ireland, Jr. 4,293 0 0 110,000
William E.
Mayer 3,504 0 0 89,752
John A.
McNeice, Jr. 0 0 0 0
James L.
Moody, Jr. 4,265 0 0 109,000
John J.
Neuhauser 3,706 0 0 95,000
George L.
Shinn 4,368 0 0 112,000
Robert L.
Sullivan 4,098 0 0 104,561
Sinclair
Weeks, Jr. 4,527 0 0 116,000

(d) Included $1,906 payable as deferred compensation.
(e) At December 31, 1994, the Colonial Funds Complex consisted
of 31 open-end and 5 closed-end management investment
company portfolios advised by Colonial.
(f) Included $49,000 payable as deferred compensation.

The following table sets forth the amount of compensation paid to
Messrs. Birnbaum, Grinnell and Lowry in their capacities as Trustees
of the Liberty All-Star Equity Fund, The Charles Allmon Trust, Inc.,
Liberty Financial Trust (now known as Colonial Trust VII) and LFC
Utilities Trust (together, Liberty Funds) for service during the
year ended December 31, 1994:

Aggregate Pension or Estimated
Compensation Retirement Annual Total
Trustee From Fund Benefits Benefits Compensation
Accrued As Upon From Liberty
Part of Retirement Funds (g)
Fund
Expense
- -------- ----------- ---------- ----------- --------------

Robert J.
Birnbaum(h) $0 $0 $0 $ 0
James E.
Grinnell(h) 0 0 0 31,032
Richard W.
Lowry(h) 0 0 0 31,282

(g) At December 31, 1994, the Liberty Funds consisted of 5 open-
end and 2 closed-end management investment company
portfolios, each advised by Stein Roe & Farnham
Incorporated, an indirect wholly-owned subsidiary of Liberty
Financial, an intermediate parent of Colonial. On March 27,
1995, four of the portfolio series in the Liberty Financial
Trust (now known as Colonial Trust VII) were merged into
existing Colonial Funds and a fifth was merged into a new
portfolio series of Colonial Trust III.
(h) Elected as Trustee to the Fund on April 21, 1995.

Ownership of the Fund

At March 31, 1995, the officers and Trustees of the Trust as a group
owned less than 1% of the outstanding shares of the Fund.

At March 31, 1995, there were 22,028 Class A and 11,775 Class B
shareholders.

Sales Charges (for fiscal years ended December 31) (dollars in
thousands)

Class A Shares

1994 1993 1992
---- ---- ----

Aggregate initial sales
charges on Fund share sales $1,066 $1,904 $1,185
Initial sales charges
retained by CISI 159 217 136

Class B Shares

June 8, 1992
(commencement
of investment
operations)
1994 1993 through
December 31, 1992
---- ---- -----------------
Aggregate contingent
deferred sales charges (CDSC)
on Fund redemptions
retained by CISI $684 $254 $69

12b-1 Plans, CDSCs and Conversion of Shares

The Fund offers three classes of shares - Class A, Class B and Class
D. The Fund may in the future offer other classes of shares. The
Trustees have approved 12b-1 plans pursuant to Rule 12b-1 under the
Act. Under the Plans, the Fund pays CISI a service fee at an annual
rate of 0.25% of average net assets attributed to each Class, a
distribution fee at an annual rate of 0.75% of average net assets
attributed to Class B shares and 0.50% of average net assets
attributed to Class D shares. CISI may use the entire amount of
such fees to defray the costs of commissions and service fees paid
to financial service firms (FSFs) and for certain other purposes.
Since the distribution and service fees are payable regardless of
the amount of CISI's expenses, CISI may realize a profit from the
fees.

The Plans authorize any other payments by the Fund to CISI and its
affiliates (including Colonial) to the extent that such payments
might be construed to be indirect financing of the distribution of
Fund shares.

The Trustees believe the Plans could be a significant factor in the
growth and retention of Fund assets resulting in a more advantageous
expense ratio and increased investment flexibility which could
benefit each class of Fund shareholders. The Plans will continue in
effect from year to year so long as continuance is specifically
approved at least annually by a vote of the Trustees, including the
Trustees who are not interested persons of the Trust and have no
direct or indirect financial interest in the operation of the Plans
or in any agreements related to the Plans (Independent Trustees),
cast in person at a meeting called for the purpose of voting on the
Plans. The Plans may not be amended to increase the fee materially
without approval by vote of a majority of the outstanding voting
securities of the relevant class of shares and all material
amendments of the Plans must be approved by the Trustees in the
manner provided in the foregoing sentence. The Plans may be
terminated at any time by vote of a majority of the Independent
Trustees or by vote of a majority of the outstanding voting
securities of the relevant class of shares. The continuance of the
Plans will only be effective if the selection and nomination of the
Trustees who are non-interested Trustees is effected by such non-
interested Trustees.

Class A shares are offered at net asset value plus varying sales
charges which may include a CDSC. Class B shares are offered at net
asset value subject to a CDSC if redeemed within six years after
purchase. Class D shares are offered at net asset value plus a
1.00% initial sales charge and subject to a 1.00% CDSC on
redemptions within one year after purchase. The CDSCs are described
in the Prospectus.

No CDSC will be imposed on shares derived from reinvestment of
distributions or on amounts representing capital appreciation. In
determining the applicability and rate of any CDSC, it will be
assumed that a redemption is made first of shares representing
capital appreciation, next of shares representing reinvestment of
distributions and finally of other shares held by the shareholder
for the longest period of time.

Eight years after the end of the month in which a Class B share is
purchased, such share and a pro rata portion of any shares issued on
the reinvestment of distributions will be automatically converted
into Class A shares having an equal value, which are not subject to
the distribution fee.

Sales-related expenses (dollars in thousands) of CISI for the fiscal
year ended December 31, 1994, were:

Class A Shares Class B Shares
-------------- --------------

Fees to FSFs $1,115 $2,488
Cost of sales material
relating to the Fund 114 153
Allocated travel,
entertainment and
other promotional 221 292

INVESTMENT PERFORMANCE

The Fund's Class A and Class B yields for the month ended December
31, 1994, were 9.42% and 9.13%, respectively.

The Fund's average annual total returns at December 31, 1994, were:

Class A Shares

1 year 5 years 10 years
------ ------- --------
With sales charge of 4.75% (5.08)% 11.02% 10.77%
Without sales charge (0.34)% 12.10% 111.31%

Class B Shares

June 8, 1992
(commencement of
investment operations)
1 year through December 31, 1994
------ -------------------------

With CDSC of 5.00% (5.62)% 8.02%
Without CDSC (1.09)% 9.03%

The Fund's Class A and Class B distribution rates at December 31,
1994, based on the most recent month's distribution, annualized, and
the maximum offering price (net asset value for Class B) at the end
of the month, were 9.90% and 9.16%, respectively.

See Part 2 of this SAI, "Performance Measures," for how calculations
are made.

CUSTODIAN
Boston Safe Deposit and Trust Company is the Fund's custodian. The
custodian is responsible for safeguarding the Fund's cash and
securities, receiving and delivering securities and collecting the
Fund's interest and dividends.

INDEPENDENT ACCOUNTANTS

Price Waterhouse LLP are the Fund's independent accountants,
providing audit and tax return preparation services and assistance
and consultation in connection with the review of various SEC
filings. The financial statements incorporated by reference in this
SAI have been so incorporated, and the schedule of financial
highlights included in the Prospectus has been so included, in
reliance upon the report of Price Waterhouse LLP given on the
authority of said firm as experts in accounting and auditing.

The financial statements and Report of Independent Accountants
appearing on pages 3 through 15 of the December 31, 1994 Annual
Report, are incorporated in this SAI by reference.

<PAGE>
INVESTMENT PORTFOLIO (in thousands) DECEMBER 31, 1994
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
BONDS & NOTES - 96.3% PAR VALUE
- ------------------------------------------------------------------------------
CORPORATE FIXED INCOME BONDS & NOTES - 86.6%
- ------------------------------------------------------------------------------
<S> <C> <C>
CONSTRUCTION - 1.5%
BUILDING CONSTRUCTION - 0.5%
Nortek, Inc.,
9.875% 03/01/04. . . . . . . . . $ 3,500 $ 3,115
--------

SPECIAL TRADE CONTRACTORS - 1.0%
Overhead Door, Inc.,
12.250% 02/01/00. . . . . . . . . 6,750 6,817
- ------------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 2.9%
DEPOSITORY INSTITUTIONS - 0.2%
Pioneer Financial Corp.,
13.500% 12/01/98. . . . . . . . . 2,000 1,440
--------

FINANCIAL SERVICES - 0.8%
Comdata Network, Inc.,
12.500% 12/15/99. . . . . . . . . 5,000 5,350
--------

INSURANCE CARRIERS - 0.9%
Reliance Group Holdings, Inc.,
9.000% 11/15/00. . . . . . . . . 6,000 5,460
--------

NONDEPOSITORY CREDIT INSTITUTIONS - 0.6%
Card Establishment Services, Inc.,
Series B,
10.000% 10/01/03. . . . . . . . . 4,000 4,160
--------

REAL ESTATE - 0.4%
Residential Trust Co.,
10.500% 10/15/03. . . . . . . . . 2,500 2,366
- ------------------------------------------------------------------------------
MANUFACTURING - 41.0%
CHEMICALS - 6.0%
Agricultural Minerals Co., Limited
Partnership,
10.750% 09/30/03. . . . . . . . . 8,500 8,585
Energy Ventures, Inc.,
10.250% 03/15/04. . . . . . . . . 3,500 3,290
Huntsman Corp.,
11.000% 04/15/04. . . . . . . . . 9,000 9,360
OSI Special Holdings Co.,
stepped coupon, (11.500%
04/15/99) 04/15/04 (a). . . . . . . . . . . . . 6,000 3,660
Polymer Group, Inc.,
12.250% 07/15/02. . . . . . . . . 3,500 3,360
Revlon Worldwide Corp.,
(b) 03/15/98. . . . . . . . . 9,000 5,265
UCC Investors Holdings, Inc.:
11.000% 05/01/03. . . . . . . . . 3,000 2,955
stepped coupon, (12.000%
5/01/98) 05/01/05 (a) . . . . . . . . . . 3,000 1,987
--------
38,462
--------
ELECTRONIC & ELECTRICAL EQUIPMENT - 2.3%
Amphenol Corp.:
10.450% 11/01/01. . . . . . . . . 4,000 4,240
12.750% 12/15/02. . . . . . . . . 4,000 4,480
Exide Corp.,
10.750% 12/15/02. . . . . . . . . 2,000 2,000
IMO Industries, Inc.,
12.000% 11/01/01. . . . . . . . . 2,000 2,018
International Semi-Tech
Microelectronics, Inc., stepped
coupon, (11.500%
08/15/00) 08/15/03 (a) . . . . . . . . . . . . 5,000 2,150
--------
14,888
--------

FOOD & KINDRED PRODUCTS - 2.4%
Gillett Holdings, Inc.,
12.250% 06/30/02. . . . . . . . . 4,650 4,743
Pilgrim's Pride Corp.,
10.875% 08/01/03. . . . . . . . . 6,000 5,655
Seminole Kraft, Inc.,
13.500% 10/15/96. . . . . . . . . 601 601
Specialty Foods Corp., Series B,
11.250% 08/15/03. . . . . . . . . 5,000 4,350
--------
15,349
--------

FURNITURE & FIXTURES - 0.6%
Interco, Inc., Series A,
10.000% 06/01/01. . . . . . . . . 3,834 3,872
--------

LUMBER & WOOD PRODUCTS - 0.9%
Triangle Pacific Corp.,
10.500% 08/01/03. . . . . . . . . 6,000 5,745
--------

MACHINERY & COMPUTER EQUIPMENT - 1.2%
Foamex Corp., Limited Partnership,
11.250% 10/01/02. . . . . . . . . 2,000 1,900
SPX, Inc.,
11.750% 06/01/02. . . . . . . . . 6,000 5,970
--------
7,870
--------

MISCELLANEOUS MANUFACTURING - 3.7%
American Standard Co.:
stepped coupon, (10.500%
06/01/98) 06/01/05 (a) . . . . . . . . . . . . 14,000 8,995
11.375% 05/15/04. . . . . . . . . 2,000 2,050
Coleman Holdings Co.,Series B,
(b) 05/27/98. . . . . . . . . 7,000 4,707
Eagle Industries, Inc., stepped coupon,
(10.500% 07/15/98) 07/15/03 (a) . . . . . . . . 12,250 7,962
--------
23,714
--------
</TABLE>

See notes to investment portfolio.

<PAGE>
INVESTMENT PORTFOLIO - continued
- ------------------------------------------------------------------------------

<TABLE>
<CAPTION>
BONDS & NOTES - CONT. PAR VALUE
- ------------------------------------------------------------------------------
<S> <C> <C>
PAPER PRODUCTS - 6.0%
Container Corp. of America,
Series A,
11.250% 05/01/04. . . . . . . . . $ 6,000 $ 6,150
Domtar, Inc.,
12.000% 04/15/01. . . . . . . . . 6,000 6,240
Fort Howard Corp.,
12.625% 11/01/00. . . . . . . . . 285 293
Gaylord Container Corp.,
stepped coupon, (12.750%
05/15/96) 05/15/05 (a). . . . . . . . . . . . . 3,500 3,097
Repap Wisconsin, Inc.,
9.250% 02/01/02. . . . . . . . . 9,500 8,550
SD Warren Co.
12.000% 12/15/04. . . . . . . . . 5,000 5,125
Stone Container Corp.:
9.875% 02/01/01. . . . . . . . . 2,000 1,880
11.500% 10/01/04. . . . . . . . . 2,000 2,010
11.875% 12/01/98. . . . . . . . . 5,000 5,175
--------
38,520
--------

PETROLEUM REFINING - 1.6%
Flores & Rucks, Inc.,
13.500% 12/01/04. . . . . . . . . 4,500 4,511
Wainoco Oil Corp.,
12.000% 08/01/02. . . . . . . . . 6,000 6,120
--------
10,631
--------

PRIMARY METAL - 5.0%
A.K. Steel Corp.,
10.750% 04/01/04. . . . . . . . . 8,000 7,920
Inland Steel Co.:
12.000% 12/01/98. . . . . . . . . 3,000 3,180
12.750% 12/15/02. . . . . . . . . 2,000 2,152
Jorgensen Earle M. Co.,
10.750% 03/01/00. . . . . . . . . 6,000 5,760
Magma Copper Co.,
12.000% 12/15/01. . . . . . . . . 6,500 7,020
Talley Manufacturing & Technology,
Inc.,
10.750% 10/15/03. . . . . . . . . 2,250 1,969
Weirton Steel Corp.,
10.875% 10/15/99. . . . . . . . . 4,000 3,950
--------
31,951
--------
PRINTING & PUBLISHING - 1.6%
American Media Operations, Inc.,
11.625% 11/15/04. . . . . . . . . 5,000 5,125
K-III Communications Corp.,
10.625% 05/01/02. . . . . . . . . 2,000 1,940
Marvel Entertainment Group, Inc.,
(b) 04/15/98. . . . . . . . . 5,000 3,075
--------
10,140
--------
RUBBER & PLASTIC - 1.5%
Atlantis Group, Inc.,
11.000% 02/15/03. . . . . . . . . $ 6,500 $ 6,305
Berry Plastics Corp.,
12.250% 04/15/04. . . . . . . . . 3,500 3,378
--------
9,683
--------

STONE, CLAY, GLASS & CONCRETE - 2.8%
Owens-Illinois Inc.:
10.500% 06/15/02. . . . . . . . . 6,000 5,925
11.000% 12/01/03. . . . . . . . . 5,000 5,188
USG Corp.,
10.250% 12/15/02. . . . . . . . . 6,600 6,715
--------
17,828
--------

TEXTILE MILL PRODUCTS - 0.8%
Bibb Co.,
14.000% 10/01/99. . . . . . . . . 1,750 928
Consoltex Group, Inc., Series B,
11.000% 10/01/03. . . . . . . . . 3,500 3,220
NTC/BIBB Group, Inc.,
13.875% 08/01/99. . . . . . . . . 2,500 1,200
--------
5,348
--------

TRANSPORTATION EQUIPMENT - 4.6%
Aftermarket Technology Corp.,
12.000% 08/01/04. . . . . . . . . 6,500 6,695
Fairfield Manufacturing Inc.,
11.375% 07/01/01. . . . . . . . . 3,500 3,290
ICON Health & Fitness, Inc. Units,
13.000%7/15/02 (c) . . . . . . . . . 3,000 2,955
JPS Automotive Products Corp.,
11.125% 06/15/01. . . . . . . . . 3,250 3,120
Motor Wheel Corp., Series B,
11.500% 03/01/00. . . . . . . . . 5,000 4,625
Roadmaster Industries, Inc.,
11.750% 07/15/02. . . . . . . . . 4,000 3,840
Venture Holdings Trust Co.,
9.750% 04/01/04. . . . . . . . . 6,000 5,100
--------
29,625
- ------------------------------------------------------------------------------
MINING - 8.5%
CRUDE PETROLEUM & NATURAL GAS - 1.6%
Triton Energy Corp.:
(b) 11/01/97. . . . . . . . . 10,000 7,350
stepped coupon, (9.750%
12/15/96) 12/15/00 (a). . . . . . . . . . . . 4,500 3,358
--------
10,708
--------

OIL & GAS EXTRACTION - 6.1%
Falcon Drilling Co., Inc., Series B,
9.750% 01/15/01. . . . . . . . . 5,000 4,750
Gulf Canada Resources Ltd.,
9.250% 01/15/04. . . . . . . . . 11,000 10,093
</TABLE>

See notes to investment portfolio.

<PAGE>

INVESTMENT PORTFOLIO - continued
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BONDS & NOTES - CONT. PAR VALUE
- ------------------------------------------------------------------------------
<S> <C> <C>
OIL & GAS EXTRACTION - CONT.
Maxus Energy Corp.,
11.250% 05/01/13. . . . . . . . . $ 353 $ 325
Mesa Capital Corp.,
stepped coupon, (12.750%
06/30/95) 06/30/98 (a) . . . . . . . . . . . 3,500 3,019
Nuevo Energy Co.,
12.500% 06/15/02. . . . . . . . . 2,500 2,562
OPI International, Inc.,
12.875% 07/15/02. . . . . . . . . 3,000 3,240
Plains Resources, Inc.,
12.000% 10/01/99. . . . . . . . . 4,000 3,860
Santa Fe Energy Resources, Inc.,
11.000% 05/15/04. . . . . . . . . 6,500 6,598
TransTexas Gas Corp.,
10.500% 09/01/00. . . . . . . . . 5,000 4,775
--------
39,222
--------

OIL & GAS FIELD SERVICES - 0.8%
Tuboscope Vetco International
Corp.,
10.750% 04/15/03. . . . . . . . . 5,000 4,900
- ------------------------------------------------------------------------------
RETAIL TRADE - 4.9%
FOOD STORES - 3.0%
Homeland Stores, Inc.,
11.750% 03/01/99. . . . . . . . . 4,000 3,880
Pathmark Stores, Inc.:
9.625% 05/01/03. . . . . . . . . 2,000 1,780
stepped coupon, (10.750%
11/01/99) 11/01/03 (a) . . . . . . . . . 9,500 4,845
11.625% 06/15/02. . . . . . . . . 6,500 6,240
Victory Markets, Inc.,
12.500% 03/15/00. . . . . . . . . 4,000 2,680
--------
19,425
--------

HOME FURNISHINGS & EQUIPMENT - 0.4%
Levitz Furniture, Inc.,
12.375% 04/15/97. . . . . . . . . 2,500 2,575

Miscellaneous retail - 1.5%
Barry's Jewelers, Inc.,
12.625% 05/15/96. . . . . . . . . 28 28
Eye Care Centers of America,
12.000% 10/01/03. . . . . . . . . 2,000 1,560
Finlay Fine Jewelry Corp.,
10.625% 05/01/03. . . . . . . . . 4,250 3,995
Thrifty Payless Holdings, Inc.,
11.750% 04/15/03. . . . . . . . . 4,000 3,920
--------
9,503
--------
- ------------------------------------------------------------------------------
SERVICES - 13.3%
AMUSEMENT & RECREATION - 2.6%
Bally's Grand, Inc., Series B,
10.375% 12/15/03. . . . . . . . . 7,000 6,090
Empress River Casino Finance
Corp.,
10.750% 04/01/02. . . . . . . . . 5,500 5,033
Falcon Holdings Group, PIK,
11.000% 09/15/03. . . . . . . . . 2,000 1,680
Grand Casino Resorts, Inc.,
12.500% 02/01/00. . . . . . . . . 4,000 3,760
--------
16,563
--------

BUSINESS SERVICES - 0.0%
Darling Delaware, Inc.,
13.750% 07/15/00. . . . . . . . . 261 239
--------

HEALTH SERVICES - 7.5%
Abbey Healthcare Group, Inc.,
9.500% 11/01/02. . . . . . . . . 5,000 4,500
American Medical International,
13.500% 08/15/01. . . . . . . . . 5,725 6,240
Community Health Systems, Inc.,
10.250% 11/30/03. . . . . . . . . 6,000 5,940
Healthtrust, Inc.,
10.750% 05/01/02. . . . . . . . . 3,000 3,188
Hillhaven Corp.,
10.125% 09/01/01. . . . . . . . . 6,500 6,500
Integrated Health Services, Inc.,
10.750% 07/15/04. . . . . . . . . 7,000 7,000
OrNda Health Corp.:
11.375% 08/15/04. . . . . . . . . 2,500 2,562
12.250% 05/15/02. . . . . . . . . 5,000 5,350
Surgical Health Corp.,
11.500% 07/15/04. . . . . . . . . 3,250 3,250
Wright Medical Technology,
10.750% 07/01/00. . . . . . . . . 3,500 3,378
--------
47,908
--------

HOTELS, CAMPS & LODGING - 2.5%
Bally's Park Place Funding,
9.250% 03/15/04. . . . . . . . . 3,000 2,580
Host Marriott Hospitality, Inc.,
10.500% 05/01/06. . . . . . . . . 4,583 4,560
11.000% 05/01/07. . . . . . . . . 9,000 9,000
--------
16,140
--------
</TABLE>

See notes to investment portfolio.

<PAGE>
INVESTMENT PORTFOLIO - continued
- -------------------------------------------------------------------------------

<TABLE>
<CAPTION>
BONDS & NOTES - CONT. PAR VALUE
- ------------------------------------------------------------------------------
<S> <C> <C>
SERVICES - CONT.
MISCELLANEOUS REPAIR SERVICES - 0.3%
Universal Outdoor, Inc.,
11.000% 11/15/03. . . . . . . . . $ 2,000 $ 1,800
--------

MOTION PICTURES - 0.4%
Plitt Theatres, Inc.,
10.875% 06/15/04. . . . . . . . . 3,000 2,790
- ------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 13.9%
AIR TRANSPORTATION - 0.4%
World Corp., Inc.,
13.875% 08/15/97. . . . . . . . . 2,500 2,450
--------

Communications - 11.7%
Allbritton Communications Co.,
11.500% 08/15/04. . . . . . . . . 6,000 6,030
Bell Cablemedia, stepped
coupon (11.950% 07/15/99)
07/15/04 (a). . . . . . . . . . . . . . . . . 9,000 4,815
Cablevision Industries Corp.,
10.750% 01/30/02. . . . . . . . . 5,000 4,975
Cablevision Systems Corp.,
10.750% 04/01/04. . . . . . . . . 7,000 7,000
Continental Cablevision, Inc.:
9.500% 08/01/13. . . . . . . . . 1,500 1,373
11.000% 06/01/07. . . . . . . . . 7,000 7,105
Diamond Cable Co.,stepped
coupon, (13.250% 09/30/99)
09/30/04 (a). . . . . . . . . . . . . . . . . 4,000 1,960
Marcus Cable Co., stepped
coupon, (13.500% 08/01/99)
08/01/04 (a). . . . . . . . . . . . . . . . 4,000 2,120
MFS Communications Co., Inc.,
stepped coupon, (9.375%
01/15/99) 01/15/04 (a). . . . . . . . . . . . 7,000 4,130
NWCG Holding Corp.,
(b) 06/15/99. . . . . . . . . 6,000 3,060
Nextel Communications, Inc.,
stepped coupon, (11.500%
09/01/98) 09/01/03 (a) . . . . . . . . . . . 5,000 1,950
Pricellular Wireless Corp., stepped
coupon, (5.000% 11/15/97)
11/15/01 (a) . . . . . . . . . . . . . . . . 5,000 3,300
Rogers Cablesystems of America,
9.650% 01/15/14 (d) . . . . . . . . . 3,500 2,072
SCI Television, Inc.,
11.000% 06/30/05. . . . . . . . . 10,500 10,605
Sinclair Broadcast Group, Inc.,
10.000% 12/15/03. . . . . . . . . 5,500 5,115
Southeastern Public Service Co.,
11.875% 02/01/98. . . . . . . . . 1,506 1,491
USA Mobile Communications Holdings,
Inc.:
9.500% 02/01/04. . . . . . . . . 500 405
14.000% 11/01/04. . . . . . . . . 1,500 1,530
Young Broadcasting, Inc.,
11.750% 11/15/04. . . . . . . . . 6,000 6,060
--------
75,096
--------

GAS SERVICES - 0.4%
Midland Funding Corp.,
10.330% 07/23/02. . . . . . . . . 3,029 2,863
--------

TRANSPORTATION - 1.0%
Trism, Inc.,
10.750% 12/15/00. . . . . . . . . 7,000 6,650
--------

WATER TRANSPORTATION - 0.4%
Sea Containers Ltd.,
9.500% 07/01/03. . . . . . . . . 2,500 2,275
- ------------------------------------------------------------------------------
WHOLESALE TRADE - 0.6%
DURABLE GOODS
Waxman Industries:
12.250% 09/01/98. . . . . . . . . 3,000 2,790
stepped coupon, (12.750%
06/01/99) 06/01/04 (a) . . . . . . . . . . . . 1,856 817
--------
3,607
- ------------------------------------------------------------------------------
Total corporate fixed-income bonds & notes
(cost $573,206) 557,048
- ------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS- 9.7%
- ------------------------------------------------------------------------------
Federal National Mortgage Association,
10.600% 11/10/95. . . . . . . . . 5,000 5,130
--------
U. S. Treasury Bonds,
12.625% 05/15/95. . . . . . . . . 6,000 6,136
--------
U. S. Treasury Notes:
8.750% 10/15/97. . . . . . . . . 16,326 16,693
11.250% 05/15/95. . . . . . . . . 34,000 34,590
--------
51,283
- ------------------------------------------------------------------------------
Total U.S. government
& agency obligations (cost $69,156) 62,549
- ------------------------------------------------------------------------------
Total bonds & notes (cost $642,362) 619,597
- ------------------------------------------------------------------------------
</TABLE>

See notes to investment portfolio.

<PAGE>
INVESTMENT PORTFOLIO - CONTINUED
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
PREFERRED STOCKS - 1.1% SHARES VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
FINANCE, INSURANCE & REAL ESTATE - 0.5%
DEPOSITORY INSTITUTIONS - 0.2%
California Federal Bank, 10.625%.................. 15 $ 1,500
-------
HOLDING & OTHER INVESTMENT OFFICES - 0.3%
First Nationwide Bank, 11.500%.................... 20 1,950
- ---------------------------------------------------------------------
MANUFACTURING - 0.6%
PRIMARY METAL - 0.4%
Geneva Steel Company, 14.000%..................... 20 2,240
-------
PRINTING & PUBLISHING - 0.2%
K-III Communications Corp.,
Sr. Exchangeable, $2.85......................... 60 1,515
- ---------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC, GAS
& SANITARY SERVICES - 0.0%
LOCAL & SUBURBAN TRANSIT - 0.0%
Greyhound Lines, Inc., 12.500%
Escrow Receipt (e).............................. 2 (f)
Greyhound Lines, Inc., 13.000%
Escrow Receipt (e).............................. 1 (f)
-------
(f)
- ---------------------------------------------------------------------
Total preferred stocks (cost $5,000) 7,205
- ---------------------------------------------------------------------
COMMON STOCKS - 1.0%
- ---------------------------------------------------------------------
MANUFACTURING - 0.4%
CHEMICALS - 0.0%
UCC Investors
Holdings, Inc. (e) (g).......................... 15 193
-------
FOOD & KINDRED PRODUCTS - 0.2%
Dr. Pepper Bottling Company of Texas,
Series A (g).................................... 80 280
Rymer Foods, Inc.(g).............................. 308 1,002
-------
1,282
-------
MACHINERY & COMPUTER EQUIPMENT - 0.0%
Thermadyne Holdings Corp.(g)...................... 17 189
-------
MEASURING & ANALYZING INSTRUMENTS - 0.2%
Bucyrus-Erie Co.(g)............................... 135 943
- ---------------------------------------------------------------------
RETAIL TRADE - 0.4%
FOOD STORES - 0.2%
National Convenience Stores,
Inc. (g)........................................ 124 1,082
-------
MISCELLANEOUS RETAIL - 0.1%
Barry's Jewelers, Inc. (g)........................ 106 745
Macleod-Stedman, Inc. (e) (g)..................... 425 4
Pharmhouse Corp.(g)............................... 1 (f)
749
-------
RESTAURANTS - 0.1%
Host Marriott Corp................................ 8 72
Marriott International, Inc....................... 8 212
-------
284
- ---------------------------------------------------------------------
SERVICES - 0.1%
Business services - 0.1%
American Buildings Co.(g)......................... 19 308
Darling Delaware Corp. (g)........................ 18 224
GTECH Corp. (g)................................... 7 143
-------
675
- ---------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.1%
GAS SERVICES - 0.0%
United Gas Holdings
Corp. (e) (g)..................................... 22 290
-------
MOTOR FREIGHT & WAREHOUSING - 0.1%
St. Johnsbury Trucking
Co. (e) (g)..................................... 79 472
Sun Carriers, Inc.(e) (g)......................... 326 3
-------
475
- ---------------------------------------------------------------------
Total common stocks (cost $16,718) 6,162
- ---------------------------------------------------------------------
WARRANTS (G)- 0.1%
- ---------------------------------------------------------------------
MANUFACTURING - 0.0%
CHEMICALS - 0.0%
OSI Specialties Holdings Co.,
expires 04/15/99................................ 10 90
-------
RUBBER & PLASTIC - 0.0%
BPC Holdings Corp.,
expires 04/15/04................................ 4 53
- ---------------------------------------------------------------------
MINING - 0.0%
Oil & gas extraction - 0.0%
Forest Oil Corp.,
expires 10/01/96................................ 23 13
- ---------------------------------------------------------------------
RETAIL TRADE - 0.0%
FOOD STORES - 0.0%
National Convenience Stores, Inc.,
expires 03/09/98................................ 68 44
Purity Supreme, Inc.,
expires 08/06/97................................ 9 (f)
Southland Corp.,
expires 03/05/96................................ 34 93
-------
137
- ---------------------------------------------------------------------
</TABLE>

See notes to investment portfolio.

<PAGE>

INVESTMENT PORTFOLIO - CONTINUED
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>

WARRANTS - CONT. SHARES VALUE
- ----------------------------------------------------------------------
<S> <C> <C>
RETAIL TRADE - CONT.
MISCELLANEOUS RETAIL - 0.0%
Eye Care Centers of America,
expires 10/01/03................................ 2 $ 10
- ----------------------------------------------------------------------
SERVICES - 0.1%
HEALTH SERVICES - 0.1%
Wright Medical Technology,
expires 06/15/03................................ 1 184
--------
Hotels, camps & lodging - 0.0%
Capital Gaming International Corp.,
expires 02/01/99................................ 6 4
- ----------------------------------------------------------------------
WHOLESALE TRADE - 0.0%
DURABLE GOODS - 0.0%
Waxman Industries,
expires 06/01/04................................ 59 15
- ----------------------------------------------------------------------
Total warrants (cost $409) 506
- ----------------------------------------------------------------------
Total investments - 98.5% (cost $664,489) (h) 633,470
- ----------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 1.4% PAR
Repurchase agreement with Lehman Government
Securities, Inc., dated 12/30/94, due 01/03/95
at 5.850%, collateralized by U.S.Treasury notes
with various maturities to 1999, market value
$9,018 (repurchase proceeds $8,837) $ 8,831 8,831
- ----------------------------------------------------------------------
OTHER ASSETS & LIABILITIES - 0.1% 928
- ----------------------------------------------------------------------
NET ASSETS - 100.0% $643,229
- ----------------------------------------------------------------------
</TABLE>

Notes to investment portfolio:
(a) Currently zero coupon. Shown parenthetically is the interest to be paid
and the date the Fund will begin to accruing this rate.
(b) Zero coupon bond.
(c) Each unit consists of one bond and one warrant to purchase shares of Class
A and Class L common stock.
(d) This security is Canadian. Par amount is stated in Canadian dollars.
(e) The value of this security represents fair value as determined in good
faith under the direction of the Trustees.
(f) Rounds to less than one.
(g) Non-income producing.
(h) Cost for federal income tax purposes is $664,751.

Acronym Name
------- ---------------
PIK Payment-In-Kind

See notes to financial statements.

<PAGE>

FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENT OF ASSETS & LIABILITIES
December 31, 1994
(in thousands except for per share amounts and footnote)
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments at value (cost $664,489)............................... $633,470
Short-term obligations............................................. 8,831
--------
642,301
Receivable for:
Interest............................................. $ 14,029
Investments sold..................................... 1,415
Fund shares sold..................................... 1,041
Other.................................................. 66 16,551
-------- --------
Total assets........................................ 658,852

LIABILITIES
Payable for:
Investments purchased................................ 14,486
Fund shares repurchased.............................. 1,076
Accrued:
Deferred Trustees fees............................... 22
Other................................................ 39
--------
Total liabilities................................... 15,623
--------
NET ASSETS $643,229
--------
Net asset value & redemption price per share - Class A
($389,791/61,852)................................................ $6.30
--------
Maximum offering price per share - Class A
($6.30/0.9525)................................................... $6.61*
--------
Net asset value & offering price per share - Class B
($253,438/40,218)................................................ $6.30
--------
COMPOSITION OF NET ASSETS
Capital paid in.................................................. $740,180
Undistributed net investment income.............................. 340
Accumulated net realized loss.................................... (66,269)
Net unrealized depreciation on:
Investments.................................................... (31,019)
Foreign currency transactions.................................. (3)
--------
$643,229
--------
STATEMENT OF OPERATIONS
Year ended December 31, 1994
(in thousands)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Interest........................................................... $ 64,571
Dividends.......................................................... 916
--------
65,487
EXPENSES
Management fee......................................... $ 3,832
Service fee............................................ 1,599
Distribution fee - Class B............................. 1,742
Transfer agent......................................... 1,848
Bookkeeping fee........................................ 233
Trustees fees.......................................... 44
Custodian fee.......................................... 22
Audit fee.............................................. 47
Legal fee.............................................. 9
Reports to shareholders................................ 16
Registration fees...................................... 55
Other.................................................. 149 9,596
-------- --------
Net investment income..................................... 55,891
--------

NET REALIZED & UNREALIZED GAIN (LOSS)
ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments ......................................... (18,758)
Foreign currency transactions........................ (22)
Forward currency contracts........................... 22
--------
Net realized loss.............................................. (18,758)
Net unrealized depreciation
during the period on:
Investments........................................ (40,417)
Foreign currency transactions...................... (3)
--------
Net unrealized depreciation.................................. (40,420)
--------
Net loss................................................... (59,178)
--------
Net decrease in net assets from operations......................... $ (3,287)
--------
</TABLE>

* On sales of $50,000 or more the offering price is reduced.

See notes to financial statements.

<PAGE>

FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------

STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

Year ended
December 31
----------------------
1994 1993
---------- ---------
<S> <C> <C>
Increase (decrease) in net assets
Operations
Net investment income................................ $ 55,891 $ 52,450
Net realized gain (loss)............................. (18,758) 29,401
Net unrealized appreciation (depreciation)........... (40,420) 15,174
--------- --------
Net increase (decrease) from operations........... (3,287) 97,025

Distributions
From net investment income - Class A................. (38,370) (38,958)
From net investment income - Class B................. (20,184) (14,522)
--------- --------
(61,841) 43,545
--------- --------

Fund share transactions
Receipts for shares sold - Class A................... 101,116 119,356
Value of distributions reinvested - Class A.......... 15,346 16,518
Cost of shares repurchased - Class A................. (128,358) (72,816)
--------- --------
(11,896) 63,058
--------- --------

Receipts for shares sold - Class B................... 122,449 137,800
Value of distributions reinvested - Class B.......... 9,440 7,582
Cost of shares repurchased - Class B................. (78,401) (29,385)
--------- --------
53,488 115,997
--------- --------
Net increase from Fund share transactions......... 41,592 179,055
--------- --------

Total increase (decrease)................ (20,249) 222,600
Net assets
Beginning of period ................................. 663,478 440,878
--------- --------
End of period (including undistributed net
investment income of $340 and $2,708, respectively) $ 643,229 $663,478
--------- --------
Number of Fund shares
Sold - Class A....................................... 15,239 17,732
Issued for distributions reinvested - Class A........ 2,325 2,442
Repurchased - Class A................................ (19,165) (10,799)
--------- --------
(1,601) 9,375
--------- --------

Sold - Class B....................................... 18,466 20,467
Issued for distributions reinvested - Class B........ 1,434 1,119
Repurchased - Class B................................ (11,706) (4,346)
--------- --------
8,194 17,240
--------- --------
Net increase in shares outstanding................ 6,593 26,615
Outstanding at
Beginning of period............................... 95,477 68,862
--------- --------
End of period..................................... 102,070 95,477
--------- --------
</TABLE>

See notes to financial statements.

<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 1. ACCOUNTING POLICIES

Colonial High Yield Securities Fund (the Fund), a series of Colonial Trust
I, is a Massachusetts business trust, registered under the Investment Company
Act of 1940, as amended, as a diversified, open-end, manage- ment 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 proportionate- ly on a
daily basis for purposes of determining the net asset value of each class.

Class B ratios are calculated by adjusting the expense and net investment
income ratios for the Fund for the entire period by the distribution fee
applicable to Class B shares only.

- --------------------------------------------------------------------------------
FEDERAL INCOME TAXES

Consistent with the Fund's policy to qualify as a regulated investment
company and to distribute all of its taxable income, no federal income tax has
been accrued.

- --------------------------------------------------------------------------------
INTEREST INCOME, DEBT DISCOUNT AND PREMIUM

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

The value of additional securities received as an interest or dividend
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.
- --------------------------------------------------------------------------------

<PAGE>

NOTES TO FINANCIAL STATEMENTS - CONTINUED
- -------------------------------------------------------------------------------

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 has adopted Statement of Position 93-4, Foreign Currency
Accounting and Financial Statement Presentation for Investment Companies.
Accordingly, 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.

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 or 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.

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

- --------------------------------------------------------------------------------
NOTE 2. 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 0.60% 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 0.25%
annually of the Fund's average net assets, and receives a reimburse- ment for
certain out of pocket expenses.
- --------------------------------------------------------------------------------

<PAGE>

NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------

UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES

The Adviser, through its Colonial Investment Services (the Distributor)
division, (effective March 1, 1995 a separate subsidiary of the Adviser) is the
Fund's principal underwriter. During the year ended December 31, 1994, the
Distributor retained net underwriting discounts of $159,072 on sales of the
Fund's Class A shares and received contingent deferred sales charges (CDSC) of
$684,199 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% 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 ter- minated at any time. Obligations of the plan will be paid solely out
of the Fund's assets.

- --------------------------------------------------------------------------------
NOTE 3. PORTFOLIO INFORMATION

During the year ended December 31, 1994, purchases and sales of
investments, other than short-term obligations, were $765,666,222 and
$730,762,378, respectively, of which $142,881,875 and $93,633,678, respectively,
were U.S. government securities.

Unrealized appreciation (depreciation) at December 31, 1994, based on cost
of investments for federal income tax purposes was:
<TABLE>
<S> <C>

Gross unrealized appreciation......................... $ 4,570,470
Gross unrealized depreciation......................... (35,851,792)
------------
Net unrealized depreciation ....................... $(31,281,322)
------------
</TABLE>

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>
1997................ $ 4,192,000
1998................ 5,104,000
1999................ 38,162,000
2000................ 4,852,000
2002................ 9,495,000
-----------
$61,805,000
-----------
</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

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.

<PAGE>

FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------

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

YEAR ENDED DECEMBER 31
--------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
--------------------------------------------------------------------------------------

CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B(a) CLASS A CLASS A
------- -------- -------- -------- -------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Net asset value - Beginning
of period........................... $ 6.950 $ 6.950 $ 6.400 $ 6.400 $ 5.860 $ 6.360 $ 4.640 $ 6.340
------- -------- -------- -------- -------- ------- -------- ---------
Income (loss) from investment
operations:
Net investment income............... 0.599 0.549 0.634 0.585 0.669 0.332 0.726 0.799
Net realized and unrealized
gain (loss) on investments........ (0.622) (0.622) 0.576 0.576 0.531 0.057 1.207 (1.669)
------- -------- -------- -------- -------- ------- -------- ---------
Total from investment
operations........................ (0.023) (0.073) 1.210 1.161 1.200 0.389 1.933 (0.870)
------- -------- -------- -------- -------- ------- -------- ---------
Less distributions declared
to shareholders:
From net investment income.......... (0.627) (0.577) (0.660) (0.611) (0.660) (0.349) (0.713) (0.830)
------- -------- -------- -------- -------- ------- -------- ---------
Net asset value - End of period........ $ 6.300 $ 6.300 $ 6.950 $ 6.950 $ 6.400 $ 6.400 $ 5.860 $ 4.640
------- -------- -------- -------- -------- ------- -------- ---------
Total return (b)....................... (0.34)% (1.09)% 19.69% 18.83% 21.15% 5.53%(c) 43.88% (14.86)%
------- -------- -------- -------- -------- ------- -------- ---------
Ratios to average net assets
Expenses............................ 1.23% 1.98% 1.23% 1.98% 1.26% 2.01%(d) 1.36% 1.33%
Net investment income............... 9.03% 8.28% 9.55% 8.80% 10.64% 9.89%(d) 13.41% 14.32%
Portfolio turnover..................... 123% 123% 122% 122% 66% 66% 37% 9%
Net assets at end of period
(000)............................... $389,791 $253,438 $440,942 $222,536 $346,225 $94,653 $299,587 $ 233,813
</TABLE>

(a) Class B shares were initially offered on June 8, 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.

<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE TRUSTEES OF COLONIAL TRUST I AND THE SHAREHOLDERS OF COLONIAL HIGH YIELD
SECURITIES FUND

In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations and
of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial High Yield Securities
Fund (a series of Colonial Trust I) at December 31, 1994, the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
These financial statements and the financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of portfolio positions
at December 31, 1994 by correspondence with the custodian and brokers, and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP
Boston, Massachusetts
February 10, 1995

COLONIAL TRUST I

Cross Reference Sheet
(Colonial Income Fund)

Item Number of Form N-1A Statement of Additional
Information Location or
Caption

Part B

10. Cover Page

11. Table of Contents

12. Not Applicable

13. Investment Objective and
Policies;
Fundamental Investment
Policies;
Other Investment Policies;
Portfolio Turnover;
Miscellaneous Investment
Practices

14. Management of the Funds

15. Fund Charges and Expenses

16. Fund Charges and Expenses;
Management of the Funds

17. Fund Charges and Expenses;
Management of the Funds

18. Shareholder Liability

19. How to Buy Shares;
Determination of Net Asset
Value;
Suspension of Redemptions;
Investor Services

20. Taxes

21. Fund Charges and Expenses;
Management of the Funds

22. Fund Charges and Expenses;
Investment Performance;
Performance Measures

23. Independent Accountants

COLONIAL INCOME FUND
Statement of Additional Information
April 28, 1995

This Statement of Additional Information (SAI) contains
information which may be useful to investors but which is not
included in the Prospectus of Colonial Income Fund (Fund). This
SAI is not a prospectus and is only authorized for distribution
when accompanied or preceded by the Prospectus of the Fund dated
April 28, 1995. This SAI should be read together with the
Prospectus. Investors may obtain a free copy of the Prospectus
from Colonial Investment Services, Inc., One Financial Center,
Boston, MA 02111-2621.

Part 1 of this SAI contains specific information about the Fund.
Part 2 includes information about the Colonial funds generally
and additional information about certain securities and
investment techniques described in the Fund's Prospectus.

TABLE OF CONTENTS
Part 1 Page

Part 2

Part 1
COLONIAL INCOME FUND
Statement of Additional Information
April 28, 1995

DEFINITIONS

"Trust" Colonial Trust I
"Fund" Colonial Income Fund
"Colonial" Colonial Management Associates, Inc. the Fund's
investment manager
"CISI" Colonial Investment Services, Inc. the Fund's
distributor
"CISC" Colonial Investors Service Center, Inc. the Fund's
shareholder services and transfer agent

INVESTMENT OBJECTIVE AND POLICIES
The Fund's Prospectus describes its investment objective and
investment policies. Part 1 includes additional information
concerning, among other things, the investment restrictions of
the Fund. Part 2 of this SAI contains additional information
about the following securities and investment techniques:

Short-Term Trading
Securities Loans
Forward Commitments
Repurchase Agreements
Futures Contracts and Related Options (interest rate futures
and related options only)

Except as described below under "Fundamental Investment
Policies," the Fund's investment policies are not fundamental,
and the Trustees may change the policies without shareholder
approval.

FUNDAMENTAL INVESTMENT POLICIES
The Investment Company Act of 1940 (Act) provides that a "vote of
a majority of the outstanding voting securities" means the
affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Fund, or (2) 67% or more of the shares
present at a meeting if more than 50% of the outstanding shares
are represented at the meeting in person or by proxy. The
following fundamental investment policies can not be changed
without such a vote.

Total assets and net assets are determined at current value for
purposes of compliance with investment restrictions and policies.
All percentage limitations will apply at the time of investment
and are not violated unless an excess or deficiency occurs as a
result of such investment. For the purpose of the Act
diversification requirement, an issuer is the entity whose
revenues support the security.

The Fund may:
1. Issue senior securities only through borrowing money from
banks for temporary or emergency purposes up to 10% of its
net assets; however, the Fund will not purchase additional
portfolio securities while borrowings exceed 5% of net
assets;
2. Only own real estate acquired as a result of owning
securities and not more than 5% of total assets;
3. Invest up to 10% of its net assets in illiquid assets;
4. Purchase and sell futures contracts and related options so
long as the total initial margin and premiums on contracts do
not exceed 5% of its total assets;
5. Underwrite securities issued by others only when disposing of
portfolio securities;
6. Make loans through lending of securities not exceeding 30% of
total assets, through the purchase of debt instruments or
similar evidences of indebtedness typically sold privately to
financial institutions and through repurchase agreements; and
7. Not concentrate more than 25% of its total assets in any one
industry, or with respect to 75% of total assets purchase any
security (other than obligations of the U.S. Government and
cash items including receivables) if as a result more than 5%
of its total assets would then be invested in securities of a
single issuer, or purchase voting securities of an issuer if,
as a result of such purchase, the Fund would own more than
10% of the outstanding voting shares of such issuer.

3. Own securities of any company if the Trust knows that
officers and Trustees of the Trust or officers and directors
of Colonial who individually own more than 0.5% of such
securities together own more than 5% of such securities;

4. Invest in interests in oil, gas or other mineral exploration
or development programs, including leases;
5. Purchase any security resulting in the Fund having more than
5% of its total assets invested in securities of companies
(including predecessors) less than three years old;
6. Pledge more than 33% of its total assets;
7. Purchase any security if, as a result of such purchase, more
than 10% of its total assets would then be invested in
securities of issuers which are restricted as to disposition;
and
8. Invest in warrants if, immediately after giving effect to any
such investment, the Fund's aggregate investment in warrants,
valued at the lower of cost or market, would exceed 5% of the
value of the Fund's net assets. Included within that amount,
but not to exceed 2% of the value of the Fund's net assets,
may be warrants which are not listed on the New York Stock
Exchange or the American Stock Exchange. Warrants acquired
by the Fund in units or attached to securities will be deemed
to be without value.

PORTFOLIO TURNOVER

1994 1993
16% 46%

FUND CHARGES AND EXPENSES

Under the Fund's management agreement, the Fund pays Colonial a
monthly fee based on the average daily net assets of the Fund at
the annual rate of 0.50%.

Recent Fees paid to Colonial, CISI and CISC (for the fiscal years
ended December 31) (dollars in thousands)

1994 1993 1992
Management fee $814 $852 $754
Bookkeeping fee 67 69 62
Shareholder services
and transfer agent fee 377 381 485(a)
12b-1 fees:
Service fee 406 426 377
Distribution fee
(Class B)(b) 161 101 13

(a) Under a different fee schedule.
(b) Class B shares were initially offered on May 5, 1992.

Brokerage Commissions
The Fund did not pay brokerage commissions during the fiscal
years ended December 31, 1994, 1993 and 1992.

Trustees Fees
For the year ended December 31, 1994, the Trustees received the
following compensation for serving as Trustees:

Pension or Total
Retirement Compensation
Benefits Estimated from Fund
Accrued Annual and other
Aggregate As Part Benefits Colonial
Compensation of Fund Upon Funds
Trustee From Fund Expense Retirement Complex (d)

Tom Bleasdale $1,748(c) $0 $0 $101,000(e)
Lora S. Collins 1,652 0 0 95,000
William D. Ireland,Jr. 1,911 0 0 110,000
William E. Mayer 1,560 0 0 89,752
John A. McNeice,Jr. 0 0 0 0
James L. Moody, Jr. 1,905 0 0 109,000
John J. Neuhauser 1,652 0 0 95,000
George L. Shinn 1,941 0 0 112,000
Robert L. Sullivan 1,831 0 0 104,561
Sinclair Weeks, Jr. 2,013 0 0 116,000

(c) Included $850 payable as deferred compensation.
(d) At December 31, 1994, the Colonial Funds Complex
consisted of 31 open-end and 5 closed-end management
investment company portfolios advised by Colonial.
(e) Included $49,000 payable as deferred compensation.

The following table sets forth the amount of compensation paid to
Messrs. Birnbaum, Grinnell and Lowry in their capacities as
Trustees of the Liberty All-Star Equity Fund, The Charles Allmon
Trust, Inc., Liberty Financial Trust (now known as Colonial Trust
VII) and LFC Utilities Trust (together, Liberty Funds) for
service during the year ended December 31, 1994:

Pension or
Retirement
Benefits Estimated
Accrued As Annual Total
Aggregate Part of Benefits Compensation
Trustee Compensation Fund Upon From Liberty
From Fund Expense Retirement Funds (f)

Robert J. Birnbaum (g) $0 $0 $0 $ 0
James E. Grinnell (g) 0 0 0 31,032
Richard W. Lowry (g) 0 0 0 31,282

(f) At December 31, 1994, the Liberty Funds consisted of 5
open-end and 2 closed-end management investment company
portfolios, each of which is advised by Stein Roe &
Farnham Incorporated, an indirect wholly-owned subsidiary
of Liberty Financial Companies, Inc., an intermediate
parent of Colonial. On March 27, 1995 four of the
portfolio series in the Liberty Financial Trust (now
known as Colonial Trust VII) were merged into existing
Colonial funds and a fifth was merged into a new
portfolio series of Colonial Trust III.

(g) Elected as a Trustee of the Fund on April 21, 1995.

Ownership of the Fund
At March 31, 1995, the officers and Trustees of the Trust as a
group beneficially owned shares of the Fund, representing of
the then outstanding shares. Messrs. Scoon and Stern, who are
officers of the Fund, held shares of the Fund, representing of
the then outstanding shares. This holding consisted entirely of
shares held by them as co-Trustees of The Colonial Group, Inc.
Profit-Sharing Plan with respect to which they share investment
and voting power.

At March 31, 1995, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Attention Book Entry, 48 Deer Lake Drive E., 3rd Floor,
Jacksonville, FL 32216 owned of the Fund's outstanding Class B
shares.

At March 31, 1995, there were 8,839 Class A and 1,459 Class B
shareholders.

Sales Charges for the fiscal years ended December 31 (dollars in
thousands)
Class A Shares
1994 1993 1992
Aggregate initial sales
charges on Fund share sales $179 $321 $512
Initial sales charges
retained by CISI 22 42 57

Class B Shares
May 15, 1992
(commencement of
investment operations)
through December 31,
1994 1993 1992

Aggregate contingent
deferred sales charges
(CDSC) on Fund redemptions
retained by CISI $60 $23 $1

12b-1 Plans, CDSC and Conversion of Shares
The Fund offers two classes of shares - Class A and Class B. The
Fund may in the future offer other classes of shares. The
Trustees have approved 12b-1 plans pursuant to Rule 12b-1 under
the Act. Under the Plans, the Fund pays CISI a service fee at an
annual rate of 0.25% of average net assets attributed to each
Class of shares and a distribution fee at an annual rate of 0.75%
of average net assets attributed to Class B shares. CISI may use
the entire amount of such fees to defray the costs of commissions
and service fees paid to financial service firms (FSFs) and for
certain other purposes. Since the distribution and service fees
are payable regardless of the amount of CISI's expenses, CISI may
realize a profit from the fees.

The Plans also authorize any other payments by the Fund to CISI
and its affiliates (including Colonial) to the extent that such
payments might be construed to be indirectly financing the
distribution of Fund shares.

The Trustees believe the Plans could be a significant factor in
the growth and retention of Fund assets resulting in a more
advantageous expense ratio and increased investment flexibility
which could benefit each class of Fund shareholders. The Plans
will continue in effect from year to year so long as continuance
is specifically approved at least annually by a vote of the
Trustees, including Trustees who are not interested persons of
the Trust and have no direct or indirect financial interest in
the operation of the Plans or in any agreements related to the
Plans (Independent Trustees), cast in person at a meeting called
for the purpose of voting on the Plans. The Plans may not be
amended to increase materially the fee without approval by vote
of a majority of the outstanding voting securities of the
relevant class of shares and all material amendments of the Plans
must be approved by the Trustees in the manner provided in the
foregoing sentence. The Plans may be terminated at any time by
vote of a majority of the Independent Trustees or by a vote of a
majority of the outstanding voting securities of the relevant
class of shares. The continuance of the Plans will only be
effective if the selection and nomination of the Trustees who are
non-interested Trustees is effected by such non-interested
Trustees.

No CDSC will be imposed on shares derived from reinvestment of
distributions or on amounts representing capital appreciation.
In determining the applicability and rate of any CDSC, it will be
assumed that a redemption is made first of shares representing
capital appreciation, next of shares representing reinvestment of
distributions and finally of other shares held by the shareholder
for the longest period of time.

Eight years after the end of the month in which a Class B share
is purchased, such share and a pro rata portion of any shares
issued on the reinvestment of distributions will be automatically
converted into Class A shares having an equal value, which are
not subject to the distribution fee.

Sales-related expenses (dollars in thousands) of CISI for the
fiscal year ended December 31, 1994 were:

Class A Shares Class B Shares

Fees to FSFs $336 $223
Cost of sales material relating
to the Fund 28 26
Allocated travel, entertainment
and other promotional 29 27

INVESTMENT PERFORMANCE
The Fund's Class A and Class B yields for the month ended
December 31, 1994, were 7.64% and 7.27%, respectively.

The Fund's average annual total returns at December 31, 1994,
were:

Class A Shares
1 year 5 years 10 years

With sales charge of 4.75% (8.65)% 6.32% 8.43%

Without sales charge (4.09)% 7.36% 8.96%

Class B Shares
May 15, 1992
(commence of investment
operations) through
1 year through December 31, 1994

With CDSC of 5.00% (9.24)% 3.48%
Without CDSC (4.82)% 4.48%

The Fund's Class A and Class B distribution rates at December 31,
1994, based on the most recent month's distributions, annualized,
and the maximum offering price (net asset value for Class B) at
the end of the month, were 8.07% and 7.32%, respectively.

See Part 2 of this SAI, "Performance Measures," for how
calculations are made.

CUSTODIAN
Boston Safe Deposit and Trust Company is the Fund's custodian.
The custodian is responsible for safeguarding the Fund's cash and
securities, receiving and delivering securities and collecting
the Fund's interest and dividends.

INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP are the Fund's independent accountants
providing audit and tax return preparation services and
assistance and consultation in connection with the review of
various SEC filings. The financial statements incorporated by
reference in this SAI have been so incorporated, and the schedule
of financial highlights included in the Prospectus has been so
included, in reliance upon the report of Price Waterhouse LLP
given on the authority of said firm as experts in accounting and
auditing.

The financial statements and the Report of Independent
Accountants appearing on pages 3 through 11 of the December 31,
1994 Annual Report, are incorporated in this SAI by reference.

<PAGE>
INVESTMENT PORTFOLIO (IN THOUSANDS) DECEMBER 31, 1994
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
BONDS & NOTES - 93.7% PAR VALUE
- -------------------------------------------------------------------
CORPORATE BONDS & NOTES - 66.3%
- -------------------------------------------------------------------
<S> <C> <C>
CONSTRUCTION - 1.4%
BUILDING CONSTRUCTION - 0.9%
USG Corp.,
9.250% 09/15/01. . . . . . . . $ 1,500 $ 1,425
--------
SPECIAL TRADE CONTRACTORS - 0.5%
Overhead Door, Inc.,
12.250% 02/01/00. . . . . . . . 750 758
- -------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 6.7%
DEPOSITORY INSTITUTIONS - 0.5%
Great Western Financial,
8.600% 02/01/02. . . . . . . . 700 695
--------
INSURANCE CARRIERS - 4.1%
American General Corp.,
9.625% 02/01/18. . . . . . . . 3,000 3,169
Penn Central Corp.,
10.625% 04/15/00. . . . . . . . 3,000 3,136
--------
6,305
--------
NONDEPOSITORY CREDIT INSTITUTIONS - 2.1%
Green Tree Financial,
10.250% 06/01/02. . . . . . . . 3,000 3,201
- -------------------------------------------------------------------
MANUFACTURING - 30.1%
CHEMICALS- 4.0%
Huntsman Corp.,
11.000% 04/15/04. . . . . . . . 1,250 1,300
Methanex Corp.,
8.875% 11/15/01. . . . . . . . 1,000 975
Rohm & Haas Co.,
9.375% 11/15/19. . . . . . . . 2,000 2,070
Union Carbide Corp.,
7.875% 04/01/23. . . . . . . . 2,000 1,749
--------
6,094
--------
ENGINE & TURBINES - 1.7%
McDermott, Inc.,
9.375% 03/15/02. . . . . . . . 2,500 2,537
--------
FABRICATED METAL- 1.3%
Masco Corp.,
9.000% 10/01/01. . . . . . . . 2,000 2,030
--------
FOOD & KINDRED PRODUCTS - 4.3%
Coca-Cola Bottling Co.,
9.000% 11/15/03. . . . . . . . 1,500 1,316
ConAgra, Inc.,
9.750% 03/01/21. . . . . . . . 3,000 3,171
Ralston Purina Co.,
9.300% 05/01/21. . . . . . . . 2,000 2,026
--------
6,513
--------
MACHINERY & COMPUTER EQUIPMENT - 1.4%
Tenneco Corp.,
10.000% 03/15/08. . . . . . . . 2,000 2,189
--------
PAPER PRODUCTS - 3.5%
James River Corp.,
9.250% 11/15/21. . . . . . . . 1,000 1,008
Riverwood International Corp.,
11.250% 06/15/02. . . . . . . . 1,500 1,541
Scott Paper Co.,
10.000% 03/15/05. . . . . . . . 1,200 1,281
Stone Container Corp.,
11.500% 10/01/04. . . . . . . . 1,500 1,508
--------
5,338
--------
PETROLEUM REFINING - 3.8%
Chevron Corp.,
9.750% 07/15/17. . . . . . . . 2,000 2,208
Kerr-McGee Corp.,
7.000% 11/01/11. . . . . . . . 2,000 1,715
Pennzoil Co.,
10.125% 11/15/09. . . . . . . . 525 560
Sun Co., Inc.,
9.375% 06/01/16. . . . . . . . 1,300 1,319
--------
5,802
--------
PRIMARY METAL - 2.8%
International Minerals & Chemical
Corp.,
9.875% 03/15/11. . . . . . . . 2,000 2,126
Magma Copper Co.,
12.000% 12/15/01. . . . . . . . 2,000 2,160
--------
4,286
--------
PRINTING & PUBLISHING - 1.1%
Knight-Ridder, Inc.,
9.875% 04/15/09. . . . . . . . 1,500 1,688
--------
RUBBER & PLASTIC - 2.2%
Armstrong World Industries, Inc.,
9.750% 04/15/08. . . . . . . . 2,050 2,221
Premark International, Inc.,
10.500% 09/15/00. . . . . . . . 1,000 1,054
--------
3,275
--------
STONE, GLASS, CLAY & CONCRETE - 1.3%
Owens-Illinois, Inc.,
10.000% 08/01/02. . . . . . . . 2,000 1.955
--------
</TABLE>

See note to investment portfolio.

<PAGE>
INVESTMENT PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
BONDS & NOTES - CONT. PAR VALUE
- --------------------------------------------------------------
<S> <C> <C>
MANUFACTURING - CONT.
TOBACCO PRODUCTS - 2.7%
American Brands, Inc.,
9.125% 03/01/16. . . . . . $ 2,300 $ 2,275
RJR Nabisco, Inc.,
9.250% 08/15/13. . . . . . 2,000 1,799
--------
4,074
- --------------------------------------------------------------
MINING- 3.8%
CRUDE PETROLEUM & NATURAL GAS - 1.1%
Coastal Corp.,
10.750% 10/01/10. . . . . . 1,500 1,682
--------
METAL MINING - 1.2%
Freeport-McMoRan Resource Partners,
Limited Partnership,
8.750% 02/15/04. . . . . . 2,000 1,790
--------
OIL & GAS EXTRACTION - 1.5%
Occidental Petroleum,
11.125% 08/01/10. . . . . . 2,000 2,328
- --------------------------------------------------------------
RETAIL TRADE - 1.2%
GENERAL MERCHANDISE STORES
May Department Stores Co.,
8.375% 10/01/22. . . . . . 2,000 1,892
- --------------------------------------------------------------
SERVICE - 1.1%
MOTION PICTURES
Paramount Communications, Inc.,
8.250% 08/01/22. . . . . . 2,000 1,655
- --------------------------------------------------------------
TRANSPORTATION, COMMUNICATIONS, ELECTRIC,
GAS & SANITARY SERVICES - 22.0%
AIR TRANSPORTATION - 1.9%
AMR Corp.,
9.880% 06/15/20. . . . . . 1,000 948
United Air Lines, Inc.,
9.760% 05/27/06. . . . . . 1,975 1,869
--------
2,817
--------
COMMUNICATIONS- 8.2%
CBS, Inc.,
8.875% 06/01/22. . . . . . 2,000 1,912
Cablevision Industries Corp.,
10.750% 01/30/02. . . . . . 2,000 1,990
Heritage Media Corp.,
11.000% 06/15/02. . . . . . 1,500 1,522
Jones Intercable, Inc.:
10.500% 03/01/08. . . . . . 1,000 980
11.500% 07/15/04. . . . . . 1,000 1,035
MCI Communications Corp.,
7.750% 03/15/24. . . . . . 2,000 1,762
Rogers Communications, Inc.,
10.875% 04/15/04. . . . . . 1,500 1,523
Tele-Communications, Inc.,
9.250% 01/15/23. . . . . . 2,000 1,814
-------
12,538
-------
ELECTRIC SERVICES - 8.8%
Boston Edison Co.,
9.875% 06/01/20. . . . . . 2,000 2,004
Cincinnati Gas & Electric Co.,
10.200% 12/01/20. . . . . . 2,000 2,181
Commonwealth Edison Co.:
8.000% 04/15/23. . . . . . 1,000 853
9.875% 06/15/20. . . . . . 1,000 1,040
Connecticut Light & Power Co.,
7.500% 07/01/23. . . . . . 1,500 1,290
Houston Lighting & Power Co.,
7.500% 07/01/23. . . . . . 1,100 953
Illinois Power Co.,
8.000% 02/15/23. . . . . . 2,000 1,781
Mississippi Power & Light Co.,
8.650% 01/15/23. . . . . . 2,000 1,849
Utilicorp United, Inc.,
9.000% 11/15/21. . . . . . 1,500 1,446
-------
13,397
-------
GAS SERVICES - 1.3%
Williams Companies, Inc.,
9.375% 11/15/21. . . . . . 2,000 2,031
-------
RAILROAD - 1.8%
Burlington Northern, Inc.,
7.500% 07/15/23. . . . . . 2,000 1,717
Union Pacific Corp.,
8.500% 01/15/17. . . . . . 1,000 969
-------
2,686
- --------------------------------------------------------------
Total corporate bonds & notes (cost $102,741) 100,981
- --------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 27.4%
- --------------------------------------------------------------
GOVERNMENT AGENCIES- 5.9%
Federal Farm Credit Bank,
11.900% 10/20/97. . . . . . 5,000 5,502
-------

See note to investment portfolio.

<PAGE>
INVESTMENT PORTFOLIO - CONTINUED
- -------------------------------------------------------------------------------

</TABLE>
<TABLE>
<CAPTION>
BONDS & NOTES - CONT. PAR VALUE
- -------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - CONT.
GOVERNMENT AGENCIES - CONT.
<S> <C> <C>
Federal National Mortgage Association,
10.350% 12/10/15 . . . . . . . . $ 2,000 $ 2,398
--------
Government National Mortgage Association:
Maturities
Coupon from/to
-------------------------------------
10.000% 2017-2019 . . . . . . . . 68 71
10.500% 2020 . . . . . . . . 303 323
11.500% 2013 . . . . . . . . 126 138
12.500% 2010-2014 . . . . . . . . 474 532
13.000% 2011 . . . . . . . . 58 67
14.000% 2011-2012 . . . . . . . . 16 19
--------
1,150
- -------------------------------------------------------------------
Total government agencies (cost $9,323) 9,050
- -------------------------------------------------------------------
GOVERNMENT BONDS & NOTES- 21.5%
U.S. Treasury bonds:
7.875% 04/15/98 . . . . . . . . 700 701
8.500% 04/15/97 . . . . . . . . 4,133 4,195
10.500% 08/15/95 . . . . . . . . 7,983 8,155
11.875% 11/15/03 . . . . . . . . 2,634 3,294
--------
16,345
U.S. Treasury notes:
8.125% 08/15/19 . . . . . . . . 7,937 8,042
11.500% 11/15/95 . . . . . . . . 3,961 4,106
12.000% 08/15/13 . . . . . . . . 3,167 4,211
--------
16,359
- -------------------------------------------------------------------
Total government bonds & notes (cost $37,713) 32,704
- -------------------------------------------------------------------
Total U.S. government & agency obligations
(cost $47,036) 41,754
- -------------------------------------------------------------------
PREFERRED STOCKS - 0.7% SHARES
- -------------------------------------------------------------------
GAS SERVICE - 0.7%
Enron Corporation, 8.00%
(cost $1,250) . . . . . . . . . . . . . . . . . 50 1,088
- -------------------------------------------------------------------
Total investments - 94.4%
(cost $151,027) (a) 143,823
- -------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 3.3% PAR
- -------------------------------------------------------------------
Repurchase agreement with Lehman
Government Securities, Inc., dated 12/30/94
due 01/03/95 at 5.850% collateralized
by U.S. Treasury notes with various
maturities to 1998, market value $5,058
(repurchase proceeds $4,956) . . . . . . . . $ 4,953 4,953
- -------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - 2.3% 3,589
- -------------------------------------------------------------------
NET ASSETS - 100.0% $152,365
- -------------------------------------------------------------------
</TABLE>
Note to investment portfolio:

(a) Cost for federal income tax purposes is approximately the same.

- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 1. ACCOUNTING POLICIES

Colonial Income Fund (the Fund), a series of Colonial Trust I, 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

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.

<PAGE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

STATEMENT OF ASSETS & LIABILITIES
December 31, 1994
(in thousands except for per share amounts and footnote)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments at value (cost $151,027)................................... $ 143,823
Short-term investments................................................. 4,953
----------
148,776
Receivable for:
Interest............................................. $ 3,531
Fund shares sold..................................... 232
Dividends............................................ 8
Other................................................... 35 3,806
------- ----------
Total assets.................................................. 152,582
LIABILITIES
Payable for Fund shares
repurchased........................................... 200
Accrued:
Deferred Trustees fees............................... 3
Other................................................ 14
-------
Total liabilities............................................. 217
----------
NET ASSETS............................................................. $ 152,365
==========
Net asset value & redemption price per share -
Class A ($129,560/21,776).......................................... $ 5.95
==========
Maximum offering price per share - Class A
($5.95/0.9525)...................................................... $ 6.25*
==========
Net asset value & offering price per share -
Class B ($22,805/3,833)............................................ $ 5.95
==========
COMPOSITION OF NET ASSETS
Capital paid in..................................................... $ 179,403
Undistributed net investment income................................. 253
Accumulated net realized loss....................................... (20,087)
Net unrealized depreciation......................................... (7,204)
==========
$ 152,365
==========
</TABLE>

STATEMENT OF OPERATIONS
Year ended December 31, 1994
(in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
INVESTMENT INCOME
<S> <C>
Interest............................................................... $ 14,397
Dividends.............................................................. 100
----------
14,497
EXPENSES
Management fee.......................................... $ 814
Service fee............................................. 406
Distribution fee - Class B.............................. 161
Transfer agent.......................................... 377
Bookkeeping fee......................................... 67
Trustees fees........................................... 18
Custodian fee........................................... 5
Audit fee............................................... 40
Legal fee............................................... 5
Registration fees....................................... 28
Reports to shareholders................................. 8
Other................................................... 35 1,964
------- ----------
Net investment income.......................................... 12,533
----------
NET REALIZED AND UNREALIZED LOSS
ON PORTFOLIO POSITIONS
Net realized loss...................................................... (1,616)
Net unrealized depreciation
during the period .................................................. (18,562)
----------
Net loss....................................................... (20,178)
----------
Net decrease in net assets from
operations.......................................................... $ (7,645)
==========
</TABLE>

* On sales of $50,000 or more the offering price is reduced.

See notes to financial statements.

<PAGE>
FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
- -----------------------------------------------------------------------------------------------------
Year ended December 31
-------------------------
1994 1993
--------- ---------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income................................................ $ 12,533 $ 12,611
Net realized gain (loss)............................................. (1,616) 2,087
Net unrealized appreciation (depreciation)........................... (18,562) 4,128
-------- --------
Net increase (decrease) from operations........................ (7,645) 18,826
Distributions
From net investment income - Class A................................. (11,213) (11,715)
From net investment income - Class B................................. (1,553) (888)
-------- --------
(20,411) 6,223
-------- --------
Fund share transactions
Receipts for shares sold - Class A................................... 10,341 22,295
Value of distributions reinvested - Class A.......................... 5,653 5,810
Cost of shares repurchased - Class A................................. (24,102) (27,912)
-------- --------
(8,108) 193
-------- --------
Receipts for shares sold - Class B................................... 9,212 16,261
Value of distributions reinvested - Class B.......................... 834 522
Cost of shares repurchased - Class B................................. (4,402) (3,360)
-------- --------
5,644 13,423
-------- --------
Net increase (decrease) from Fund share transactions........... (2,464) 13,616
-------- --------
Total increase (decrease)................................ (22,875) 19,839

NET ASSETS
Beginning of period.................................................. 175,240 155,401
-------- --------
End of period (including undistributed
net investment income of $253 and $471, respectively)............... $152,365 $175,240
======== ========
NUMBER OF FUND SHARES
Sold - Class A....................................................... 1,620 3,287
Issued for distributions reinvested - Class A........................ 914 863
Repurchased - Class A................................................ (3,874) (4,129)
-------- --------
(1,340) 21
-------- --------
Sold - Class B....................................................... 1,470 2,415
Issued for distributions reinvested - Class B........................ 135 77
Repurchased - Class B................................................ (714) (493)
-------- --------
891 1,999
-------- --------
Net increase (decrease) in shares outstanding.................. (449) 2,020
Outstanding at
Beginning of period............................................... 26,058 24,038
-------- --------
End of period..................................................... 25,609 26,058
======== ========
</TABLE>

See notes to financial statements.

<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------

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.

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

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 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.

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

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.

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

OTHER

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

NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES

MANAGEMENT FEE

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

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.

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

<PAGE>

NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------

UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES

The Adviser, through its Colonial Investment Services (the Distributor)
division (effective March 1, 1995, a separate subsidiary of the Adviser), is the
Fund's principal underwriter. During the year ended December 31, 1994, the
Distributor retained net underwriting discounts of $22,077 on sales of the
Fund's Class A shares and received contingent deferred sales charges (CDSC) of
$60,499 on Class B share redemptions.

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 3. PORTFOLIO INFORMATION

During the year ended December 31, 1994, purchases and sales of
investments, other than short-term obligations, were $25,724,404 and
$33,074,082, respectively, of which $5,230,273 and $2,022,728, respectively,
were U.S. government securities.

Unrealized appreciation (depreciation) at December 31, 1994, based on cost
of investments for both financial statement and federal income tax purposes was:

<TABLE>
<S> <C>
Gross unrealized appreciation.... $ 2,495,055
Gross unrealized depreciation.... $ (9,699,230)
-------------
Net unrealized depreciation... $ (7,204,175)
=============
</TABLE>

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

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.............. $ 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.

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

<PAGE>
FINANCIAL HIGHLIGHTS

Selected data for a share of each class outstanding throughout each period are
as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
- ------------------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
-------------------- -------------------- -------------------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B (a) CLASS A CLASS A
-------- -------- --------- ------- -------- ------- -------- --------
Net asset value - Beginning
of period....................... $ 6.720 $ 6.720 $ 6.460 $ 6.460 $ 6.460 $ 6.390 $ 5.970 $ 6.430
-------- -------- --------- ------- -------- ------- -------- --------
Income (loss) from investment
operations:
Net investment income ......... 0.487 0.440 0.501 0.451 0.546 0.290 0.587 0.632
Net realized and
unrealized gain (loss)
on investments................. (0.761) (0.761) 0.261 0.261 0.001 0.088 0.487 (0.477)
-------- -------- --------- ------- -------- ------- -------- --------
Total from investment
operations..................... (0.274) (0.321) 0.762 0.712 0.547 0.378 1.074 0.155
-------- -------- --------- ------- -------- ------- -------- --------
Less distributions declared
to shareholders:
From net investment income...... (0.496) (0.449) (0.502) (0.452) (0.547) (0.308) (0.584) (0.615)
-------- -------- --------- ------- -------- ------- -------- --------
Net asset value - End of period.. $ 5.950 $ 5.950 $ 6.720 $ 6.720 $ 6.460 $ 6.460 $ 6.460 $ 5.970
======== ======== ========= ======= ======== ======= ======== ========
Total return (b)................. (4.09)% (4.82)% 12.05% 11.23% 8.83% 6.00%(c) 18.80% 2.65%
======== ======== ========= ======= ======== ======= ======== ========
Ratios to average net assets:
Expenses........................ 1.11% 1.86% 1.10% 1.85% 1.24% 1.99%(d) 1.25% 1.23%
Net investment income........... 7.80% 7.05% 7.45% 6.70% 8.49% 7.74%(d) 9.46% 10.30%
Portfolio turnover............... 16% 16% 46% 46% 68% 68% 44% 29%
Net assets at end of period
(000)........................... $129,560 $22,805 $155,543 $19,787 $149,309 $ 6,092 $146,905 $141,467
</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.

<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------

TO THE TRUSTEES OF COLONIAL TRUST I AND THE SHAREHOLDERS OF COLONIAL INCOME FUND

In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations and
of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial Income Fund (a series of
Colonial Trust I) at December 31, 1994, the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and the financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of portfolio positions
at December 31, 1994 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.

PRICE WATERHOUSE LLP
Boston, Massachusetts
February 10, 1995

COLONIAL TRUST I

Cross Reference Sheet
(Colonial Strategic Income Fund)

Item Number of Form N-1A Statement of Additional
Information Location or
Caption

Part B

10. Cover Page

11. Table of Contents

12. Not Applicable

13. Investment Objective and
Policies;
Fundamental Investment
Policies;
Other Investment Policies;
Portfolio Turnover;
Miscellaneous Investment
Practices

14. Management of the Funds

15. Fund Charges and Expenses

16. Fund Charges and Expenses;
Management of the Funds

17. Fund Charges and Expenses;
Management of the Funds

18. Shareholder Liability

19. How to Buy Shares;
Determination of Net Asset
Value;
Suspension of Redemptions;
Investor Services

20. Taxes

21. Fund Charges and Expenses;
Management of the Funds

22. Fund Charges and Expenses;
Investment Performance;
Performance Measures

23. Independent Accountants

COLONIAL STRATEGIC INCOME FUND
Statement of Additional Information
April 28, 1995

This Statement of Additional Information (SAI) contains
information which may be useful to investors but which is not
included in the Prospectus of Colonial Strategic Income Fund
(Fund). This SAI is not a prospectus and is authorized for
distribution only when accompanied or preceded by the Prospectus
of the Fund dated April 30, 1995. This SAI should be read
together with the Prospectus. Investors may obtain a free copy
of the Prospectus from Colonial Investment Services, Inc., One
Financial Center, Boston, MA 02111-2621.

Part 1 of this SAI contains specific information about the Fund.
Part 2 includes information about the Colonial funds generally
and additional information about certain securities and
investment techniques described in the Fund's prospectus.

TABLE OF CONTENTS

Part 1 Page

Part 2

SI-

Part 1

COLONIAL STRATEGIC INCOME FUND
Statement of Additional Information
April 28, 1995

DEFINITIONS:

"Fund" Colonial Strategic Income Fund
"Trust" Colonial Trust I
"Colonial" Colonial Management Associates, Inc., the Fund's
investment manager
"CISI" Colonial Investment Services, Inc., the Fund's
distributor
"CISC" Colonial Investors Service Center, Inc., the Fund's
shareholder services and transfer agent

INVESTMENT OBJECTIVE AND POLICIES

The Fund's Prospectus describes its investment objective and
policies. Part I includes additional information concerning,
among other things, fundamental investment policies of the Fund.
Part 2 of this SAI contains additional information about the
following securities and investment techniques :

Short-Term Trading
Foreign Securities
Zero Coupon Securities
Step Coupon Bonds
Pay-In-Kind Securities
Forward Commitments
Repurchase Agreements
Options on Securities
Futures Contracts and Related Options
Foreign Currency Transactions

Except as described below under "Fundamental Investment
Policies", the Fund's investment policies are not fundamental,
and the Trustees may change the policies without shareholder
approval.

FUNDAMENTAL INVESTMENT POLICIES
The Investment Company Act of 1940 (Act) provides that a "vote of
a majority of the outstanding voting securities" means the
affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Fund, or (2) 67% or more of the shares
present at a meeting if more than 50% of the outstanding shares
are represented at the meeting in person or by proxy. The
following fundamental investment policies can not be changed
without such a vote.

Total assets and net assets are determined at current value for
purposes of compliance with investment restrictions and policies.
All percentage limitations will apply at the time of investment
and are not violated unless an excess or deficiency occurs as a
result of such investment. For the purpose of the Act
diversification requirement, an issuer is the entity whose
revenues support the security.

The Fund may:
1. Issue senior securities only through borrowing money from
banks for temporary or emergency purposes up to 10% of its
net assets; however, the Fund will not purchase additional
portfolio securities while borrowings exceed 5% of net assets;
2. Only own real estate acquired as a result of owning
securities and not more than 5% of total assets;
3. Purchase and sell futures contracts and related options so
long as the total initial margin and premiums on contracts
do not exceed 5% of its total assets;
4. Underwrite securities issued by others only when disposing
of portfolio securities;
5. Make loans through lending of securities not exceeding 30%
of total assets, through the purchase of debt instruments
or similar evidences of indebtedness typically sold
privately to financial institutions and through repurchase
agreements; and
6. Not concentrate more than 25% of its total assets in any
one industry or, with respect to 75% of total assets,
purchase any security (other than obligations of the U.S.
Government and cash items including receivables) if as a
result more than 5% of its total assets would then be
invested in securities of a single issuer or purchase the
voting securities of an issuer if, as a result of such
purchases, the Fund would own more than 10% of the
outstanding voting shares of such issuer.

OTHER INVESTMENT POLICIES
As non-fundamental investment policies which may be changed
without a shareholder vote, the Fund may not:
1. Purchase securities on margin, but the Fund may receive
short-term credit to clear securities transactions and may
make initial or maintenance margin deposits in connection
with futures transactions;
2. Have a short securities position, unless the Fund owns, or
owns rights (exercisable without payment) to acquire, an
equal amount of such securities;
3. Own securities of any company if the Trust knows that
officers and Trustees of the Trust or officers and
directors of Colonial who individually own more than 0.5%
of such securities together own more than 5% of such
securities;
4. Invest in interests in oil, gas or other mineral
exploration or development programs, including leases;
5. Purchase any security resulting in the Fund having more
than 5% of its total assets invested in securities of
companies (including predecessors) less than three years old;
6. Pledge more than 33% of its total assets;
7. Purchase any security if, as a result of such purchase,
more than 10% of its total assets would be invested in
securities which are restricted as to disposition;
8. Invest more than 15% of its net assets in illiquid assets;
and
9. Invest in warrants if, immediately after giving effect to
any such investment, the Fund's aggregate investment in
warrants, valued at the lower of cost or market, would
exceed 5% of the value of the Fund's net assets. Included
within that amount, but not to exceed 2% of the value of
the Fund's net assets, may be warrants which are not listed
on the New York Stock Exchange or the American Stock
Exchange. Warrants acquired by the Fund in units or
attached to securities will be deemed to be without value.

PORTFOLIO TURNOVER

1994 1993
78% 138%

FUND CHARGES AND EXPENSES

Under the Fund's management agreement, the Fund pays Colonial a
monthly fee based on the average net assets of the Fund,
determined at the close of each business day during the month, at
the following annual rates: 0.65% on the first $1 billion and
0.60% of any excess over $1 billion.

Recent Fees paid to Colonial, CISI and CISC (for the fiscal years
ended December 31)(in thousands)

1994 1993 1992
Management fee $8,132 $4,606 $2,893
Bookkeeping fee 428 257 165
Shareholder service and transfer
agent fee 3,065 1,726 1,625(a)
12b-1 fees:
Service fee 2,862 1,280 ---
Distribution fee (Class B) (b) 4,501 1,433 81

(a) Under a prior fee schedule.
(b) Class B shares were initially offered on May 15, 1992.

Brokerage Commissions (for the fiscal years ended December 31)
(in thousands)

1994 1993 1992
Total commissions $0 $0 $1
Directed transactions (c) 0 0 0
Commissions on directed transactions 0 0 0

Trustees Fees

For the year ended December 31, 1994, the Trustees received the
following compensation for serving as Trustees:

Pension or
Retirement Estimated Total
Benefits Annual Compensation
Aggregate Accrued As Benefits From Fund and
Compensation Part of Upon Other Colonial
Trustee From Fund Fund Expense Retirement Funds(e)

Tom Bleasdale $6,629(d) $0 $0 $101,000(f)
Lora S. Collins 6,226 0 0 95,000
William D. Ireland, Jr. 7,208 0 0 110,000
William E. Mayer 5,898 0 0 89,752
John A. McNeice, Jr. 0 0 0 0
James L. Moody, Jr. 7,178 0 0 109,000
John J. Neuhauser 6,223 0 0 95,000
George L. Shinn 7,356 0 0 112,000
Robert L. Sullivan 6,874 0 0 104,561
Sinclair Weeks, Jr. 7,626 0 0 116,000

(d) Included $3,181 payable as deferred compensation.
(e) At December 31, 1994, the Colonial Funds consisted of 31
open-end and 5 closed-end management investment company
portfolios advised by Colonial.
(f) Included $49,000 payable as deferred compensation.

The following table sets forth the amount of compensation paid to
Messrs. Birnbaum, Grinnell and Lowry in their capacities as
Trustees of the Liberty All-Star Equity Fund, The Charles Allmon
Trust, Inc., Liberty Financial Trust (now known as Colonial Trust
VII) and LFC Utilities Trust (together, Liberty Funds) for
service during the year ended December 31, 1994:

Pension or
Retirement Estimated
Benefits Annual Total
Aggregate Accrued As Benefits Compensation
Compensation Part of Upon From Liberty
Trustee From Fund Fund Expense Retirement Funds(g)

Robert J. Birnbaum(h) $0 $0 $0 $ 0
James E. Grinnell(h) 0 0 0 31,032
Richard W. Lowry(h) 0 0 0 31,282

(g) At December 31, 1994, the Liberty Funds consisted of 5
open-end and 2 closed-end management investment company
portfolios, each advised by Stein Roe & Farnham
Incorporated, an indirect wholly-owned subsidiary of Liberty
Financial, an intermediate parent of Colonial. On
March 27, 1995, four of the portfolio series in the Liberty
Financial Trust (now known as Colonial Trust VII) were
merged into existing Colonial Funds and a fifth was merged
into a new portfolio series of Colonial Trust III.
(h) Elected as Trustee to the Fund on April 21, 1995.

Ownership of the Fund

At March 31, 1995 the officers and Trustees of the Trust as a
group owned less than 1% of the outstanding shares of the Fund.
Merrill Lynch, Pierce Fenner & Smith, Inc., Attn. Book Entry,
4800 Deer Lake Drive E., 3rd Floor, Jacksonville, FL 33216, owned
6.41% of outstanding Class B shares of the Fund.

At March 31, 1995, there were 59,206 Class A and 39,497 Class B
shareholders.

Sales Charges (for the fiscal years ended December 31)
(in thousands)

Class A Shares
1994 1993 1992
Aggregate initial sales charges on Fund
share sales $3,118 $8,126 $1,611
Initial sales charges retained by CISI $348 $570 $176

Class B Shares
May 15, 1992
(commencement of
investment
operations)
through
1994 1993 December 31, 1992
Aggregate contingent deferred sales
charges (CDSC) on Fund redemptions
retained by CISI $2,267 $270 $22

12b-1 Plans, CDSCs and Conversion of Shares

The Fund offers three classes of shares - Class A, Class B and
Class D. The Fund may in the future offer other classes of
shares. The Trustees have approved 12b-1 Plans pursuant to Rule
12b-1 under the Act. Under the Plans, the Fund pays CISI a
service fee at an annual rate of 0.15% of the Fund's average net
assets attributed to shares issued on or before January 1, 1993,
a service fee of 0.25% of the Fund's average net assets
attributed to shares issued and outstanding thereafter. Class B
pays CISI a distribution fee at an annual rate of 0.75% of
average net assets attributed to Class B shares. Class D shares
pay CISI a distribution fee at an annual rate of 0.50% of average
net assets attributed to Class D shares. CISI may use the entire
amount of such fees to defray the costs of commissions and
service fees paid to financial service firms (FSFs) and for
certain other purposes. Since the distribution and service fees
are payable regardless of the amount of CISI's expenses, CISI may
realize a profit from the fees.

The Plans authorize any other payments by the Fund to CISI and
its affiliates (including Colonial) to the extent that such
payments might be construed to be indirect financing of the
distribution of Fund shares.

The Trustees believe the Plans could be a significant factor in
the growth and retention of Fund assets resulting in a more
advantageous expense ratio and increased investment flexibility
which could benefit each class of Fund shareholders. The Plans
will continue in effect from year to year so long as continuance
is specifically approved at least annually by a vote of the
Trustees, including the Trustees who are not interested persons
of the Trust and have no direct or indirect financial interest in
the operation of the Plans or in any agreements related to the
Plans (independent Trustees), cast in person at a meeting called
for the purpose of voting on the Plans. The Plans may not be
amended to increase the fee materially without approval by vote
of a majority of the outstanding voting securities of the
relevant class of shares and all material amendments of the Plans
must be approved by the Trustees in the manner provided in the
foregoing sentence. The Plans may be terminated at any time by
vote of a majority of the independent Trustees or by vote of a
majority of the outstanding voting securities of the relevant
class of shares. The continuance of the Plans will only be
effective if the selection and nomination of the Trustees who are
non-interested Trustees is effected by such non-interested
Trustees.

Class A shares are offered at net asset value plus varying sales
charges which may include a CDSC. Class B shares are offered at
net asset value subject to a CDSC if redeemed within six years
after purchase. Class D shares are offered at net asset value
plus a 1.00% initial sales charge and subject to a 1.00% CDSC on
redemptions within one year after purchase. The CDSCs are
described in the Prospectus.

No CDSC will be imposed on shares derived from reinvestment of
distributions or on amounts representing capital appreciation.
In determining the applicability and rate of any CDSC, it will be
assumed that a redemption is made first of shares representing
capital appreciation, next of shares representing reinvestment of
distributions and finally of other shares held by the shareholder
for the longest period of time.

Eight years after the end of the month in which a Class B share
is purchased, such share and a pro rata portion of any shares
issued on the reinvestment of distributions will be automatically
converted into Class A shares having an equal value, which are
not subject to the distribution fee.

Sales-related expenses (for the fiscal year ended
December 31, 1994) (in thousands) of CISI were:

Class A Shares Class B Shares
Fees to FSFs $1,125 $8,552
Cost of sales material relating to the Fund 202 440
Allocated travel, entertainment and other
promotional 425 929

INVESTMENT PERFORMANCE

The Fund's Class A and Class B yields for the month ended
December 31, 1994, were 8.70% and 8.39%, respectively.

The Fund's average annual total returns at December 31, 1994, were:

Class A Shares
1 year 5 years 10 years

Without sales charge (8.25)% 6.68% 8.76%
With sales charge of 4.75% (3.67)% 7.73% 9.29%

Class B Shares
May 15, 1992
(commencement
of investment
operations)
through
1 year December 31, 1994

With CDSC of 5.00% (8.82)% 4.14%
Without CDSC (4.40)% 5.11%

The Fund's Class A and Class B distribution rates at
December 31, 1994, which are based on the most recent
quarter's distribution, annualized, and the maximum
offering price (net asset value for Class B) at the
end of the quarter, were 9.00% and 8.25%, respectively.

See Part 2 of this SAI, "Performance Measures," for how
calculations are made.

CUSTODIAN
Boston Safe Deposit and Trust Company is the Fund's custodian.
The custodian is responsible for safeguarding the Fund's cash and
securities, receiving and delivering securities and collecting
the Fund's interest and dividends.

INDEPENDENT ACCOUNTANTS

Price Waterhouse LLP are the Fund's independent accountants
providing audit and tax return preparation services and
assistance and consultation in connection with the review of
various SEC filings. The financial statements incorporated by
reference in this SAI have been so incorporated, and the schedule
of financial highlights included in the Prospectus has been so
included in reliance upon the report of Price Waterhouse LLP
given on the authority of said firm as experts in accounting and
auditing.

The financial statements and Report of Independent Accountants
appearing on pages 3 through 17 of the December 31, 1994 Annual
Report are incorporated in this SAI by reference.

<PAGE>
INVESTMENT PORTFOLIO (in thousands) DECEMBER 31, 1994
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>

CURRENCY
BONDS & NOTES(a)-95.7% ABBREV. PAR VALUE
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE FIXED-INCOME BONDS
& NOTES - 43.9%
- ----------------------------------------------------------------------------

CONSTRUCTION - 1.7%
BUILDING CONSTRUCTION - 1.3%
Hovnanian Enterprises, Inc.,
11.250% 04/15/02 $ 1,000 835
Nortek, Inc.,
9.875% 03/01/04 $ 3,500 3,115
Toll Corp.,
10.500% 03/15/02 $ 3,000 2,760
U.S. Home Corp.,
9.750% 06/15/03 $ 4,500 3,893
USG Corp.,
9.250% 09/15/01 $ 6,000 5,700
------
16,303
------
SPECIAL TRADE CONTRACTORS - 0.4%
Overhead Door, Inc.,
12.250% 02/01/00 $ 5,000 5,050
- ----------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 1.2%
FINANCIAL SERVICES - 0.6%
Comdata Network, Inc.,
13.250% 12/15/02 $ 7,000 7,700
------
HOLDING & OTHER INVESTMENT OFFICES - 0.0%
Iroquois Brands Ltd.,
12.000% 09/15/99(b) $ 1,000 10
INSURANCE CARRIERS - 0.4% ------
Reliance Group Holdings Co.,
9.750% 11/15/03 $ 6,000 5,250
------
NONDEPOSITORY CREDIT INSTITUTION - 0.0%
Drum Financial Corp.,
12.875% 09/15/99(b) $ 1,000 10(c)
------
REAL ESTATE - 0.2%
Residential Trust Co.,
10.500% 10/15/03 $ 2,500 2,366
- ----------------------------------------------------------------------------
MANUFACTURING - 19.1%
CHEMICALS - 3.1%
Agricultural Minerals and Chemicals Co.,
Limited Partnership,
10.750% 09/30/03 $ 7,200 7,272
Energy Ventures, Inc.,
10.250% 03/15/04 $ 2,500 2,350
Georgia Gulf Co.,
15.000% 04/15/00 $ 346 355
Huntsman Corp.,
11.000% 04/15/04 $ 7,000 7,280
N.L. Industries, Inc.,
11.750% 10/15/03 $ 6,340 6,340
OSI Special Holding Co.,
stepped-coupon, (11.500%
04/15/99) 04/15/04 (d) $ 6,000 3,660
Polymer Group, Inc.,
12.250% 07/15/02 $ 3,500 3,360
Revlon Consumer Products Corp.,
Series B,
9.375% 04/01/01 $ 2,000 1,790
Rexene Corp.,
11.750% 12/01/04 $ 2,000 2,000
UCC Investors Holdings, Inc.,
11.000% 05/01/03 $ 4,000 3,940
------
38,347
------
ELECTRONIC & ELECTRICAL EQUIPMENT - 1.6%
Amphenol Corp.:
10.450% 11/01/01 $ 6,000 6,360
12.750% 12/15/02 $ 2,500 2,800
Exide Corp.,
10.750% 12/15/02 $ 3,500 3,500
International Semi-Tech Microelectronics,
Inc., stepped-coupon, (11.500%
08/15/00) 08/15/03 (d) $ 12,000 5,160
Lamson & Sessions Co.,
14.000% 06/01/97 $ 1,500 1,526
------
19,346
------
FABRICATED METAL - 0.1%
Haynes International, Inc.,
13.500% 08/15/99 $ 3,000 1,770
------
FOOD & KINDRED PRODUCTS - 0.8%
Pilgrim's Pride Corp.,
10.875% 08/01/03 $ 6,000 5,655
Specialty Foods Corp., Series B,
11.250% 08/15/03 $ 5,000 4,350
------
10,005
------
LUMBER & WOOD PRODUCTS - 0.7%
Southwest Forest Industries,
12.125% 09/15/01 $ 3,000 3,015
Triangle Pacific Corp.,
10.500% 08/01/03 $ 6,000 5,745
------
8,760
------
MACHINERY & COMPUTER EQUIPMENT - 0.3%
SPX, Inc.,
11.750% 06/01/02 $ 4,000 3,980
------
Measuring & analyzing instruments - 0.3%
Sola Group Ltd., stepped-coupon,
6.000% (9.625% 12/15/98)
12/15/03(e) $ 5,000 3,875
-----
MISCELLANEOUS MANUFACTURING - 1.4%
American Standard Co.:
9.875% 06/01/01 $ 1,500 1,455
stepped-coupon, (10.500%
06/01/98) 06/01/05 (d) $ 3,250 2,088
11.375% 05/15/04 $ 2,500 2,562

</TABLE>

See notes to investment portfolio.

<PAGE>

INVESTMENT PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CURRENCY
BONDS & NOTES(a)-CONT. ABBREV. PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
MANUFACTURING - CONT.
MISCELLANEOUS MANUFACTURING - CONT.
Coleman Holdings Co., Series B,
(f) 05/27/98 $ 6,000 $ 4,035
Eagle Industries, Inc., stepped-
coupon, (10.500% 07/15/98)
07/15/03 (d) $ 11,250 7,313
---------
17,453
---------
PAPER PRODUCTS - 3.4%
Container Corporation of America,
Series A,
11.250% 05/01/04 $ 7,500 7,687
Domtar, Inc.,
12.000% 04/15/01 $ 1,500 1,560
Fort Howard Corp.:
9.000% 02/01/06 $ 3,000 2,580
10.000% 03/15/03 $ 2,000 1,870
Gaylord Container Corp., stepped-
coupon, (12.750% 05/15/96)
05/15/05 (d) $ 3,000 2,655
Repap Wisconsin, Inc.,
9.875% 05/01/06 $ 7,000 6,107
Riverwood International Corp.,
11.250% 06/15/02 $ 3,000 3,082
SD Warren Co.,
12.000% 12/15/04 $ 3,500 3,588
Stone Container Corp.:
9.875% 02/01/01 $ 7,000 6,580
11.500% 10/01/04 $ 2,000 2,010
11.875% 12/01/98 $ 3,750 3,881
12.625% 07/15/98 $ 1,000 1,048
---------
42,648
---------
PETROLEUM REFINING - 0.2%
Flores & Rucks, Inc.,
13.500% 12/01/04 $ 3,000 3,008
---------
Primary metal - 0.9%
A.K. Steel Corp.,
10.750% 04/01/04 $ 5,000 4,950
Jorgensen, Earle M. Co.,
10.750% 03/01/00 $ 6,000 5,760
---------
10,710
---------
PRINTING & PUBLISHING - 1.2%
Affiliated Newspaper,
stepped-coupon, (13.250%
07/01/99) 07/01/06 (d) $ 5,000 2,500
American Media Operations, Inc.,
11.625% 11/15/04 $ 2,000 2,050
K-III Communications Corp.,
10.625% 05/01/02 $ 5,000 4,850

Marvel Entertainment Group, Inc.,
(f) 04/15/98 $ 8,250 5,074
---------
14,474
---------
RUBBER & PLASTIC - 0.7%
Atlantis Group, Inc.,
11.000% 02/15/03 $ 6,300 6,111
Berry Plastics Corp.,
12.250% 04/15/04 $ 3,000 2,895
---------
9,006
---------
TEXTILE MILL PRODUCTS - 1.2%
Bibb Co.,
14.000% 10/01/99 $ 1,250 663
Consoltex Group, Inc., Series B,
11.000% 10/01/03 $ 3,500 3,220
Fieldcrest Cannon, Inc.,
11.250% 06/15/04 $ 3,000 3,000
NTC/BIBB Group, Inc.,
13.875% 08/01/99 $ 4,800 2,304
Westpoint Stevens, Inc.,
9.375% 12/15/05 $ 6,850 6,199
---------
15,386
---------
TOBACCO PRODUCTS - 0.1%
Consolidated Cigar Corp.,
10.500% 03/01/03 $ 1,000 900
---------
Transportation equipment - 3.1%
Aftermarket Technology Corp.,
12.000% 08/01/04 $ 2,500 2,575
Fairfield Manufacturing, Inc.,
11.375% 07/01/01 $ 7,000 6,580
ICON Health & Fitness, Inc., Unit,
13.000% 07/15/02 (g) $ 3,500 3,448
JPS Automotive Products Corp.,
11.125% 06/15/01 $ 3,500 3,360
Lear Seating Corp.,
11.250% 07/15/00 $ 1,500 1,530
Motor Wheel Corp., Series B,
11.500% 03/01/00 $ 4,500 4,162
PMI Acquisition Corp.,
10.250% 09/01/03 $ 1,750 1,610
Roadmaster Industries, Inc.,
11.750% 07/15/02 $ 5,500 5,280
UNC, Inc.,
9.125% 07/15/03 $ 5,000 4,450
Venture Holdings Trust Co.,
9.750% 04/01/04 $ 6,000 5,100
---------
38,095
- ----------------------------------------------------------------------------
MINING - 4.8%
Crude petroleum & natural gas - 0.6%
Triton Energy Corp.:
stepped-coupon, (9.750%
12/15/96) 12/15/00 (d) $ 4,500 3,358
(f) 11/01/97 $ 5,000 3,675
---------
7,033
---------
</TABLE>

See notes to investment portfolio.

<PAGE>
INVESTMENT PORTFOLIO - CONTINUED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>

CURRENCY
BONDS & NOTES(a)-CONT. ABBREV. PAR VALUE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
MINING - CONT.
METAL MINING - 0.3%
Freeport-McMoRan Resource
Partners, Limited Partnership,
8.750% 02/15/04 $ 3,500 $ 3,133
----------
Oil & gas extraction - 3.6%
Dual Drilling Co.,
9.875% 01/15/04 $ 3,500 3,115
Falcon Drilling Co., Inc.,
9.750% 01/15/01 $ 5,000 4,750
Global Marine, Inc.,
12.75 12/15/99 $ 3,000 3,225
Gulf Canada Resources Ltd.,
9.250% 01/15/04 $ 7,000 6,423
Maxus Energy Corp.,
9.875% 10/15/02 $ 3,000 2,610
Mesa Capital Corp., stepped-
coupon, (12.750% 06/30/95)
06/30/98 (d) $ 4,000 3,450
Occidental Petroleum Corp.,
11.75 03/15/11 $ 1,000 1,082
Plains Resources, Inc.,
12.00 10/01/99 $ 4,000 3,860
Rowan Companies, Inc.,
11.87 12/01/01 $ 4,000 4,120
Santa Fe Energy Resources, Inc.,
11.00 05/15/04 $ 7,000 7,105
TransTexas Gas Corp.,
10.50 09/01/00 $ 3,000 2,865
Trident NGL, Inc.,
10.25 04/15/03 $ 2,500 2,506
---------
45,111
---------
OIL & GAS FIELD SERVICES - 0.3%
Tuboscope Vetco International
Corp.,
10.75 04/15/03 $ 4,000 3,920
- -----------------------------------------------------------------------------
RETAIL TRADE - 2.8%
FOOD STORES - 0.7%
Pathmark Stores, Inc.:
9.625% 05/01/03 $ 2,250 2,003
stepped-coupon, (10.750%
11/01/99) 11/01/03 (d) $ 13,500 6,885
---------
8,888
---------
HOME FURNISHINGS & EQUIPMENT - 0.4%
Levitz Furniture, Inc.:
9.625% 07/15/03 $ 4,000 3,200
12.37 04/15/97 $ 1,500 1,545
---------
4,745
---------
MISCELLANEOUS RETAIL - 1.7%
Barry's Jewelers, Inc.,
12.62 05/15/96 $ 10 10(c)
10(c) Brylane Capital Corp.,
Series B,
10.00 09/01/03 $ 7,000 6,860
Eye Care Centers of America,
12.00 10/01/03 $ 2,000 1,560
Ferrellgas Limited Partnership/
Finance Corp.,
10.00 08/01/01 $ 2,500 2,463
Finlay Fine Jewelry Corp.,
10.62 05/01/03 $ 5,000 4,700
Thrifty Payless Holdings, Inc.,
11.75 04/15/03 $ 6,000 5,880
---------
21,473
- -----------------------------------------------------------------------------
SERVICES - 5.7%
Amusement & recreation - 1.0%
Bally's Grand, Inc., Series B,
10.37 12/15/03 $ 7,500 6,525
Empress River Casino Finance Corp.,
10.75 04/01/02 $ 4,000 3,660
Harrah's Jazz Co.,
14.25 11/15/01 $ 2,000 2,092
---------
12,277
---------
BUSINESS SERVICES - 0.0%
Darling International, Inc., stepped-
coupon, 13.750% (11.000%
01/01/95) 07/15/00 (e) $ 401 368
---------
HEALTH SERVICES - 3.0%
Abbey Health Care Group, Inc.,
9.500% 11/01/02 $ 7,000 6,300
American Medical International, Inc.,
9.500% 11/15/01 $ 400 400
Community Health Systems, Inc.,
10.25 11/30/03 $ 6,000 5,940
HealthSouth Rehabilitation Corp.,
9.500% 04/01/01 $ 3,500 3,369
Hillhaven Corp.,
10.12 09/01/01 $ 3,500 3,500
Integrated Health Services, Inc.,
10.75 07/15/04 $ 3,000 3,000
Mediplex Group, Inc.,
11.75 10/01/02 $ 1,500 1,680
OrNda Health Corp.:
11.37 08/15/04 $ 2,500 2,562
12.25 05/15/02 $ 3,000 3,210
Surgical Health Corp.,
11.50 07/15/04 $ 3,250 3,250

</TABLE>

See notes to investment portfolio.

<PAGE>
INVESTMENT PORTFOLIO - CONTINUED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CURRENCY
BONDS & NOTES(a)-CONT. ABBREV. PAR VALUE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
SERVICES - CONT.
HEALTH SERVICES - CONT.
Total Renal Care, Inc., Unit, stepped-
coupon, (12.000% 08/15/97)
08/15/04 (d)(g) $ 5,500 $ 4,125
---------
37,336
---------
HOTELS, CAMPS & LODGING - 1.3%
California Hotel Finance Corp.,
11.000% 12/01/02 $ 5,000 4,600
Host Marriott Hospitality, Inc.:
10.500% 05/01/06 $ 3,698 3,680
11.000% 05/01/07 $ 4,000 4,000
MGM Grand Hotels Finance Corp.,
12.000% 05/01/02 $ 2,000 2,160
Santa Fe Hotel, Inc.,
11.000% 12/15/00 $ 2,000 1,800
---------
16,240
---------
MISCELLANEOUS REPAIR SERVICES - 0.1%
Universal Outdoor, Inc.,
11.000% 11/15/03 $ 1,500 1,350
---------
MOTION PICTURES - 0.3%
Plitt Theatres, Inc.,
10.875% 06/15/04 $ 4,500 4,185
- -------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 8.6%
AIR TRANSPORTATION - 0.2%
Pan American World Airways, Inc.,
15.000% 04/15/04(h) $ 1,000 5
World Corporation, Inc.,
13.875% 08/15/97 $ 2,500 2,450
---------
2,455
---------
COMMUNICATIONS - 7.3%
Adelphia Communications Corp.:
9.500% 02/15/04,PIK $ 5,231 3,766
9.875% 03/01/05 $ 4,000 3,200
Allbritton Communications Co.,
11.500% 08/15/04 $ 7,000 7,035
Cablevision Systems Corp.,
10.750% 04/01/04 $ 5,000 5,000
Cencall Communications Corp.,
stepped-coupon, (10.125%
01/15/99) 01/15/04 (d) $ 6,000 2,100
Continental Cablevision, Inc.,
11.000% 06/01/07 $ 6,000 6,090
Diamond Cable Co., stepped-
coupon, (13.250% 09/30/99)
09/30/04 (d) $ 7,250 3,552
Falcon Holdings Group, PIK,
11.000% 09/15/03 $ 4,093 3,438
Heritage Media Corp.,
11.000% 06/15/02 $ 1,500 1,522

Jones Intercable, Inc.:
10.500% 03/01/08 $ 2,500 2,450
11.500% 07/15/04 $ 2,500 2,587
MFS Communications Co., Inc.,
stepped-coupon, (9.375% 01/15/99)
01/15/04 (d) $ 7,750 4,572
Mobilemedia Communications, Inc.,
stepped-coupon, (10.500% 12/01/98)
12/01/03 (d) $ 3,500 1,995
NWCG Holding Corp.,
(f) 06/15/99 $ 6,000 3,060
Paging Network, Inc.:
8.875% 02/01/06 $ 2,000 1,560
11.750% 05/15/02 $ 2,500 2,475
Panamsat Limited Partnership,
9.750% 08/01/00 $ 1,750 1,649
Pricellular Wireless Corp., stepped-
coupon, (14.000% 11/15/97)
11/15/01 (d) $ 6,000 3,960
Rogers Communications, Inc.,
10.875% 04/15/04 $ 3,000 3,045
SCI Television, Inc.,
11.000% 06/30/05 $ 5,000 5,050
Sinclair Broadcast Group, Inc.,
10.000% 12/15/03 $ 2,975 2,767
USA Mobile Communications
Holdings, Inc.:
9.500% 02/01/04 $ 3,000 2,430
14.000% 11/01/04 $ 3,000 3,060
Viacom International, Inc.,
8.000% 07/07/06 $ 4,000 3,430
Videotron Holdings Co., stepped-
coupon, (11.125% 01/01/99)
07/01/04 (d) $ 13,000 6,825
Young Broadcasting, Inc.,
11.750% 11/15/04 $ 4,000 4,040
---------
90,658
---------
ELECTRIC SERVICES - 0.1%
System Energy Resources, Inc.,
11.375% 09/01/16 $ 1,123 1,185
---------
GAS SERVICES - 0.3%
Transco Energy Co.,
11.250% 07/01/99 $ 3,500 3,723
---------
MOTOR FREIGHT & WAREHOUSING - 0.4%
Trism, Inc.,
10.750% 12/15/00 $ 5,500 5,225
---------
WATER TRANSPORTATION - 0.3%
Sea Containers Ltd.,
9.500% 07/01/03 $ 4,000 3,640
- -------------------------------------------------------------------------------
Total corporate fixed-income bonds & notes
(cost $633,465) 547,397
- -------------------------------------------------------------------------------
</TABLE>

See notes to investment portfolio.

<PAGE>
INVESTMENT PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CURRENCY
BONDS & NOTES(a)-CONT. ABBREV. PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE CONVERTIBLE BONDS & NOTES- 0.6%
- --------------------------------------------------------------------------------
MANUFACTURING - 0.2%
ELECTRONIC & ELECTRICAL EQUIPMENT - 0.1%
Kollmorgen Corp.,
8.750% 05/01/09 $ 622 $ 529
M/A-Communications, Inc.,
9.250% 05/15/06 $ 650 603
---------
1,132
---------
Machinery & computer equipment - 0.0%
Kulicke & Soffa Industries, Inc.,
8.000% 03/01/08 $ 300 321
---------
TEXTILE MILL PRODUCTS - 0.1%
Guilford Mills, Inc.,
6.000% 09/15/12 $ 700 606
- --------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.4%
COMMUNICATIONS - 0.4%
Bell Cablemedia, stepped-coupon,
(11.950% 07/15/99)
07/15/04 (d) $ 10,000 5,350
- --------------------------------------------------------------------------------
Total corporate convertible bonds & notes
(cost $2,205) 7,409
- --------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 21.0%
FEDERAL HOME LOAN MORTGAGE CORPORATION:
7.500% 03/01/16 $ 428 402
8.000% with various maturities
to 2016 $ 2,216 2,125
8.500% with various maturities
to 2010 $ 2,365 2,320
8.750% with various maturities
to 2008 $ 936 916
9.000% with various maturities
to 2022 $ 2,371 2,382
9.250% with various maturities
to 2016 $ 2,373 2,374
9.500% with various maturities
to 2016 $ 787 805
9.750% with various maturities
to 2016 $ 188 191
10.000% 11/01/19 $ 457 477
10.500% 01/01/20 $ 85 90
10.750% with various maturities
to 2013 $ 1,995 2,123
11.250% with various maturities
to 2015 $ 1,761 1,875
Federal National Mortgage Association:
7.500% with various maturities
to 2011 $ 1,318 1,239
8.000% with various maturities
to 2009 $ 1,865 1,811
8.250% with various maturities
to 2009 $ 548 526
8.500% with various maturities
to 2021 $ 4,447 4,431
9.000% with various maturities
to 2021 $ 6,080 6,118
10.000% with various maturities
to 2016 $ 2,166 2,271
10.500% 03/01/14 $ 57 61
11.700% 05/10/95 $ 10,000 10,169
Government National Mortgage Association:
8.500% 02/15/06 $ 83 84
9.000% with various maturities
to 2009 $ 1,564 1,594
9.500% with various maturities
to 2009 $ 6,574 6,845
10.000% with various maturities
to 2021 $ 4,012 4,216
10.500% with various maturities
to 2021 $ 1,272 1,357
11.750% with various maturities
to 2015 $ 259 283
12.000% with various maturities
to 2014 $ 62 69
U.S. Treasury Bonds:
9.875% 11/15/15 $ 27,430 32,578
12.00 08/15/13 $ 5,591 7,434
13.12 05/15/01 $ 5,455 6,888
U.S. Treasury Notes:
7.875% 04/15/98 $ 39,000 39,037
8.500% 04/15/97 $ 28,055 28,475
9.250% 01/15/96 $ 48,405 49,328
11.25 05/15/95 $ 14,545 14,797
11.87 11/15/03 $ 20,517 25,659
- --------------------------------------------------------------------------------
Total U.S. government & agency obligations
(cost $285,038) 261,350
- --------------------------------------------------------------------------------
FOREIGN GOVERNMENT & AGENCY OBLIGATIONS - 30.2%
- --------------------------------------------------------------------------------
Argentina Par Brady,
4.250% 03/31/23(h) AP 80,000 34,600
Kingdom of Denmark,
9.000% 11/15/00 DK 765,835 126,250
Spanish Government Bonds,(i)
12.25 03/25/00 SP 6,131,000 47,786
Treasury Corp. of Victoria:
12.00 10/22/98 A$ 80,926 65,994
12.00 09/22/01 A$ 28,485 23,682
United Kingdom Treasury,
9.750% 08/27/02 UK 46,966 77,113
- --------------------------------------------------------------------------------
Total foreign government & agency obligations
(cost $346,629) 375,425
- --------------------------------------------------------------------------------
Total bonds & notes (cost $1,267,337) 1,191,581
- --------------------------------------------------------------------------------
</TABLE>
See notes to investment portfolio.

<PAGE>
INVESTMENT PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

PREFERRED STOCKS - 0.8% SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
FINANCE, INSURANCE & REAL ESTATE - 0.8%
DEPOSITORY INSTITUTIONS - 0.4%
California Federal Bank, 10.625% 45 $ 4,500
Guardian Savings Bank,
Series A, PIK (b)(c) 4,337 43
---------
4,543
---------
HOLDING & OTHER INVESTMENT OFFICES - 0.4%
First Nationwide Bank, 11.500% (b) 55 5,363
Riggs National Corp., 10.750% 19 474
---------
5,837
- ------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (COST $12,846) 10,380
- ------------------------------------------------------------------------------
COMMON STOCKS - 0.7%
- ------------------------------------------------------------------------------
CONSTRUCTION - 0.1%
BUILDING CONSTRUCTION
Calton, Inc. (b) 356 356
U.S. Home Corp. (b) 31 503
---------
859
- ------------------------------------------------------------------------------
MANUFACTURING - 0.2%
FOOD & KINDRED PRODUCTS - 0.1%
Doskocil Companies, Inc. (b) 14 104
Spreckels Industries, Inc. (b) 164 1,371
---------
1,475
---------
MACHINERY & COMPUTER EQUIPMENT - 0.0%
Thermadyne Holdings Corp. (b) 2 22
---------
PRIMARY METAL - 0.1%
LTV Corp. (b) 38 616
Texas Industries, Inc. 15 513
---------
1,129
---------
PRINTING & PUBLISHING - 0.0%
Affiliated Newspapers, Class B (b) 5 125
---------
TOBACCO PRODUCTS - 0.0%
RJR Nabisco Holdings Corp. (b) 5 29
- ------------------------------------------------------------------------------
MINING - 0.0%
Oil & gas extraction
Mesa, Inc. (b) 70 342
- ------------------------------------------------------------------------------
RETAIL TRADE - 0.2%
FOOD STORES - 0.0%
National Convenience Stores, Inc. (b) (j) 2
---------
GENERAL MERCHANDISE STORES - 0.0%
Federated Department Stores, Inc. (b) 30 583
---------
MISCELLANEOUS RETAIL - 0.2%
Hanover Direct, Inc. (b) 568 2,129
Pharmhouse Corp. (b) 4 2
---------
2,131
- ------------------------------------------------------------------------------
SERVICES - 0.1%
BUSINESS SERVICES - 0.0%
Darling International, Inc. (b) 27 344
---------
HEALTH SERVICES - 0.1%
Continental Health Affiliates, Inc. (b) 530 729
- ------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.0%
GAS SERVICES - 0.0%
United Gas Holdings Corp. (b)(c) 30 386
---------
LOCAL & SUBURBAN TRANSIT - 0.0%
Greyhound Lines, Inc., 12.50% Escrow
Receipt (b)(c) 1 (j)
---------
MOTOR FREIGHT & WAREHOUSING - 0.0%
St. Johnsbury Trucking Co. (b)(c) 31 189
Sun Carriers, Inc. (b)(c) 130 1
---------
190
- ------------------------------------------------------------------------------
Total common stocks (cost $12,135) 8,346
- ------------------------------------------------------------------------------
WARRANTS (b) - 0.0%
- ------------------------------------------------------------------------------
BPC Holdings Corp., expires 04/15/04 3 45
Capital Gaming International,
expires 02/01/99 6 4
Eye Care Centers of America,
expires 10/01/03 2 10
Forest Oil Corp., expires 10/01/96 82 46
National Convenience Stores, Inc.,
expires 03/09/98 (j) (j)
OSI Specialties Holdings Co.,
expires 04/15/99 10 90
- ------------------------------------------------------------------------------
Total warrants (cost $157) 195
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS - 97.2%
(cost $1,292,475) (k) 1,210,502
- ------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 0.6% PAR
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 0.6%
Repurchase agreement with Lehman Government
Securities, Inc., dated 12/30/94, due 01/03/95
at 5.850% collateralized by U.S. Treasury
notes with various maturities to 1999,
market value $7,016 (repurchase
proceeds $6,875) $6,871 6,871
- ------------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET 2.2% 27,799
- ------------------------------------------------------------------------------
NET ASSETS - 100.0% $1,245,172
- ------------------------------------------------------------------------------
<FN>
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) Non-income producing.
(c) Represents fair value as determined in good faith under the direction of
the Trustees.
(d) Currently zero coupon. Shown parenthetically is the interest rate to be
paid and the date the Fund will begin accruing this rate.
</TABLE>

See notes to investment portfolio.

<PAGE>
INVESTMENT PORTFOLIO - CONTINUED
- --------------------------------------------------------------------------------

Notes to investment portfolio - cont.

(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) The interest rate shown is the average rate over the life of the security.
(i) Par shown in millions.
(j) Rounds to less than one.
(k) Cost for federal income tax purposes is $1,292,578.

Acronym Name
------- ---------------
PIK Payment-In-Kind

SUMMARY OF SECURITIES BY COUNTRY/CURRENCY

<TABLE>
<CAPTION>
% OF TOTAL
CURRENCY SECURITIES
COUNTRY ABBREV. VALUE AT VALUE
- -------------- -------- ---------- ----------
<S> <C> <C> <C>
United States $ $ 835,077 69.0
Denmark DK 126,250 10.4
Australia A$ 89,676 7.4
United Kingdom UK 77,113 6.4
Spain SP 47,786 3.9
Argentina AP 34,600 2.9
---------- -----
$1,210,502 100.0
========== =====
</TABLE>

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

See notes to financial statements.

<PAGE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENT OF ASSETS & LIABILITIES
December 31, 1994
(in thousands except for per share amounts and footnote)
- ------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments at value (cost $1,292,475)................................. $1,210,502
Short-term obligations................................................. 6,871
----------
1,217,373
Receivable for:
Interest............................................. $28,602
Fund shares sold..................................... 2,119
Dividends............................................ 239
Other................................................... 154 31,114
------- ----------
Total assets.................................................. 1,248,487

LIABILITIES
Payable for:
Fund shares repurchased.............................. 3,109
Investments purchased................................ 108
Accrued:
Deferred Trustees fees............................... 7
Other................................................ 91
-------
Total liabilities............................................. 3,315
----------
NET ASSETS............................................................. $1,245,172
==========
Net asset value & redemption price per share -
Class A ($636,824/97,473).......................................... $ 6.53
==========
Maximum offering price per share - Class A
($6.53/0.9525)...................................................... $ 6.86*
==========
Net asset value & offering price per share -
Class B ($608,348/93,118).......................................... $ 6.53
==========
COMPOSITION OF NET ASSETS
Capital paid in..................................................... $1,644,034
Overdistributed net investment income............................... (23)
Accumulated net realized loss....................................... (316,751)
Net unrealized depreciation on:
Investments........................................................ (81,973)
Foreign currency transactions...................................... (115)
==========
$1,245,172
==========
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year ended December 31, 1994
(in thousands)
- ------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest............................................................... $ 120,983
Dividends.............................................................. 974
----------
Total investment income (net of nonrebatable
foreign taxes withheld at source which
amounted to $377)................................................... 121,957

EXPENSES
Management fee.......................................... $ 8,132
Service fee............................................. 2,862
Distribution fee - Class B.............................. 4,501
Transfer agent.......................................... 3,065
Bookkeeping fee......................................... 428
Trustees fees........................................... 62
Custodian fee........................................... 295
Audit fee............................................... 68
Legal fee............................................... 10
Reports to shareholders................................. 34
Registration fees....................................... 311
Other................................................... 93 19,861
------- ----------
Net investment income.......................................... 102,096
----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments........................................... (52,852)
Foregin currency transactions......................... 783
----------
Net realized loss.................................................. (52,069)
Net unrealized depreciation
during the period on:
Investments......................................... (104,137)
Foreign currency transactions....................... (115)
----------
Net unrealized depreciation.................................... (104,252)
----------
Net loss....................................................... (156,321)
----------
Net decrease in net assets from operations............................. $ (54,225)
==========
<FN>
* On sales of $50,000 or more the offering price is reduced.
</TABLE>

See notes to financial statements.

<PAGE>
FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------

Distributions
From net investment income - Class A................................. (56,419) (41,462)
From capital paid in - Class A....................................... (1,168) (3,420)
In excess of net investment income - Class A......................... (13) (4)
From net investment income - Class B................................. (45,965) (13,456)
From capital paid in - Class B....................................... (951) (1,110)
In excess of net investment income - Class B......................... (10) (1)
---------- ----------
(158,751) 32,039
---------- ----------
Fund share transactions
Receipts for shares sold - Class A................................... 139,735 235,716
Value of distributions reinvested - Class A.......................... 29,165 23,087
Cost of shares repurchased - Class A................................. (109,086) (61,069)
---------- ----------
59,814 197,734
---------- ----------

Receipts for shares sold - Class B................................... 285,091 439,633
Value of distributions reinvested - Class B.......................... 22,255 6,883
Cost of shares repurchased - Class B................................. (99,032) (15,809)
---------- ----------
208,314 430,707
---------- ----------
Net increase from Fund share transactions...................... 268,128 628,441
---------- ----------

Total increase........................................... 109,377 660,480

NET ASSETS
Beginning of period.................................................. 1,135,795 475,315
---------- ----------
End of period (net of overdistributed net
investment income of $23 and $5, respectively)...................... $1,245,172 $1,135,795
---------- ----------
NUMBER OF FUND SHARES
Sold - Class A....................................................... 19,709 32,242
Issued for distributions reinvested - Class A........................ 4,270 3,164
Repurchased - Class A................................................ (15,921) (8,401)
---------- ----------
8,058 27,005
---------- ----------

Sold - Class B....................................................... 40,112 60,117
Issued for distributions reinvested - Class B........................ 3,267 938
Repurchased - Class B................................................ (14,569) (2,160)
---------- ----------
28,810 58,895
---------- ----------
Net increase in shares outstanding............................. 36,868 85,900
Outstanding at
Beginning of period............................................... 153,723 67,823
---------- ----------
End of period..................................................... 190,591 153,723
---------- ----------
</TABLE>

See notes to financial statements.

<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------

NOTE 1. ACCOUNTING POLICIES

Colonial Strategic Income Fund (the Fund), a series of Colonial Trust I, 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

Equity securities are valued at the last sale price or, in the case of
unlisted or listed secur- ities for which there were no sales during the day, at
current quoted bid prices.