<PAGE>
COLONIAL
INCOME FUND
[GRAPHIC]
SEMIANNUAL REPORT
JUNE 30, 1996
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
<PAGE>
COLONIAL INCOME FUND HIGHLIGHTS
JANUARY 1, 1996 - JUNE 30, 1996
INVESTMENT OBJECTIVE: 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.
THE FUND IS DESIGNED TO OFFER:
- High monthly income
- Opportunity for growth over time
- A portfolio of quality bonds
PORTFOLIO MANAGER COMMENTARY: "Despite a challenging environment for fixed
income investments during the first half of 1996, the Fund continued to provide
very competitive returns for investors who remained committed to investing over
the full interest rate cycle."
COLONIAL INCOME FUND PERFORMANCE
<TABLE>
<CAPTION>
CLASS A CLASS B
<S> <C> <C>
Inception dates 12/1/69 5/15/92
Distributions declared per share $0.228 $0.204
SEC yields on 6/30/96* 6.59% 6.16%
Total returns, assuming reinvestment
of all distributions and no sales charge
or contingent deferred sales charge (CDSC)
6 months (2.45)% (2.82)%
Net asset value per share at 6/30/96 $6.25 $6.25
</TABLE>
*The 30-day SEC yields on June 30, 1996, reflect the portfolio's earnings power,
net of expenses, expressed as an annualized percentage of the maximum offering
price per share at the end of the period.
<TABLE>
<CAPTION>
PORTFOLIO STRUCTURE QUALITY BREAKDOWN
(as of 6/30/96) (as of 6/30/96)
- -------------------------------- -------------------------------
<S> <C> <C> <C>
1. Corporate Bonds ...... 68.8% AAA .................... 23.8%
2. U.S. Government ...... 20.3% AA ..................... 4.1%
3. Cash & Equiv. ........ 5.2% A ...................... 19.8%
4. Preferred Stocks ..... 1.6% BBB .................... 30.8%
5. Other ................ 4.1% BB and below ........... 18.2%
</TABLE>
Because the Fund is actively managed, portfolio structure and quality breakdown
will change. Quality breakdown is based on total net assets.
2
<PAGE>
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
I am pleased to present your Fund's semiannual report for the period ended June
30, 1996. First, however, I would like to extend my thanks to President John A.
McNeice, Jr., who has retired after a career with Colonial that spanned 40
years. We look forward to his continued involvement on the executive committee
of the board of directors at our parent company, Liberty Financial Companies,
Inc.
[PHOTO HAROLD W. COGGER]
In my new position, I am directing Colonial's focus on the delivery of
investment performance over the long term. To achieve this mission, we will
continue to seek the optimal combination of talented people and effective
investment disciplines.
The receipt of your semiannual report is a good time to reflect on market
conditions and the performance of your Fund during the past six months. Interest
rates rose fairly steadily during the first half of 1996. This increase was
caused in part by unemployment statistics that proved to be lower than
anticipated, causing a decline in bond prices.
While there may be some current stock market volatility, we expect corporate
earnings to continue to make progress, but at a slower pace than in 1995. We
also anticipate growth opportunities in certain foreign markets. In the
following pages, you'll find detailed information on your Fund's performance as
well as an in-depth discussion with the portfolio manager.
With over 12 years of service at Colonial and more than 25 years in the
industry, I am enthusiastic about -- and dedicated to achieving -- Colonial's
mission of providing you with superior investment returns. In my new role, I
look forward to communicating with you about your Colonial investment. We
appreciate the opportunity to help you meet your investment goals.
Respectfully,
/s/ Harold W. Cogger
Harold W. Cogger
President
August 12, 1996
Because market conditions change frequently, there can be no assurance that the
trends described here will continue, come to pass of affect Fund performance.
3
<PAGE>
PORTFOLIO MANAGEMENT REPORT
CARL ERICSON and RICHARD STEVENS are co-portfolio managers of Colonial Income
Fund. Mr. Ericson is senior vice president of Colonial Management Associates,
Inc. and Director of the Taxable Fixed Income Department. Mr. Stevens is vice
president of Colonial Management Associates, Inc.
Q: WHAT WAS THE FUND'S INVESTMENT STRATEGY DURING THE FIRST HALF OF 1996?
C.E.: Early in the period, various indicators showed much stronger than expected
economic growth. As a result, interest rates moved suddenly and sharply upwards,
reflecting investors' heightened fears of inflation. We positioned the Fund to
respond to the changing investment environment by aggressively reducing its
duration from 6.2 years to 5.7 years. Duration measures a portfolio's
sensitivity to interest rates; the shorter the duration, the smaller the losses
when interest rates rise. In addition, we diversified away from the volatile
Treasury market by investing in the high yield corporate market, which is less
sensitive to interest rate fluctuations and benefits from stronger economic
activity. We also invested in lower quality investment grade corporate bonds
that did not track the Treasury market sell-off.
Q: HOW DID THE FUND PERFORM OVER THE PAST SIX MONTHS?
R.S.: The Fund underperformed the Lehman Brothers Government/ Corporate Bond
Index, an unmanaged index that tracks the performance of a selection of U.S.
government agency, Treasury and investment-grade corporate bonds. The total
return for Class A shares, based on net asset value, was down 2.45%, while the
Lehman Index posted a negative total return of 1.88%. The Fund underperformed
the Index because early in the period the duration on the Fund was longer and
the move to higher interest rates resulted in weaker returns. Since that time,
however, our focus on lower duration and high yielding corporate and foreign
bonds has helped to restore performance.
Q: WHAT SECTORS ENHANCED THE FUND'S PERFORMANCE DURING THE PERIOD?
R.S.: We continued to favor the financial and energy sectors. In the financial
sector, the Fund benefited from its investment in surplus notes issued by some
of the nation's major insurance companies, such as John Hancock, Equitable and
The Prudential. These investments offered long bond exposure without the market
swings associated with long Treasury holdings. The energy sector benefited from
improved oil and natural gas prices and strong domestic demand, both of which
helped to improve corporate earnings. Investments in the retail sector, such as
Sears and Dayton-Hudson, also performed well due to consumer spending increases
during the period.
4
<PAGE>
Q: WHAT IS YOUR OUTLOOK FOR THE REMAINDER OF 1996?
C.E.: We do not believe that the economy can sustain its current level of growth
and we expect some weakening during the fourth quarter. Despite stronger than
expected economic growth over the past six months, we have not seen any
appreciable wage and price pressure, which should calm the market's fears of
inflation. While we expect that volatility will continue to be high and that
interest rates will fluctuate, we are hopeful that rates will be lower by year
end.
COLONIAL INCOME FUND INVESTMENT PERFORMANCE VS.
THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX
Change in Value of $10,000 from 6/30/86 - 6/30/96
Based on Net Asset Value (NAV) and
Maximum Offering Price (MOP) for Class A Shares
<TABLE>
<S> <C> <C> <C> <C> <C>
Label A B C D
- -----------------------------------------------------------------------------
Label CIF Pre-load Post-load Lehman Govt/Cp
1 Jun 30, 86 $10,000 $9,525 10000
2 Sep 30, 86 10,152 9,670 10201.55
3 Dec 31, 86 10,476 9,979 10514.44
4 Mar 31, 87 10,766 10,255 10669.86
5 Jun 30, 87 10,662 10,155 10468.31
6 Sep 30, 87 10,418 9,924 10162.47
7 Dec 31, 87 10,527 10,027 10755.65
8 Mar 31, 88 11,046 10,521 11140.52
9 Jun 30, 88 11,314 10,777 11250.4
10 Sep 30, 88 11,607 11,056 11460.46
11 Dec 31, 88 11,838 11,276 11570.93
12 Mar 31, 89 11,962 11,394 11698.73
13 Jun 30, 89 12,610 12,011 12638.88
14 Sep 30, 89 12,756 12,150 12757.58
15 Dec 31, 89 12,740 12,135 13217.96
16 Mar 31, 90 12,654 12,053 13066.66
17 Jun 30, 90 12,928 12,314 13537.32
18 Sep 30, 90 12,617 12,018 13619.29
19 Dec 31, 90 13,078 12,456 14312.94
20 Mar 31, 91 13,790 13,135 14698.07
21 Jun 30, 91 14,194 13,520 14920.81
22 Sep 30, 91 14,868 14,162 15778.99
23 Dec 31, 91 15,536 14,798 16621.01
24 Mar 31, 92 15,587 14,847 16371.57
25 Jun 30, 92 16,159 15,391 17034.67
26 Sep 30, 92 16,849 16,049 17867
27 Dec 31, 92 16,909 16,105 17881.11
28 Mar 31, 93 17,796 16,951 18712.56
29 Jun 30, 93 18,298 17,429 19274.3
30 Sep 30, 93 18,938 18,038 19911.84
31 Dec 31, 93 18,946 18,046 19853.67
32 Mar 31, 94 18,291 17,422 19231.99
33 Jun 30, 94 17,945 17,093 18992.83
34 Sep 30, 94 18,031 17,174 19086.85
35 Dec 31, 94 18,171 17,307 19157.07
36 Mar 31, 95 19,123 18,214 20111.61
37 Jun 30, 95 20,403 19,434 21416.66
38 Sep 30, 95 20,915 19,921 21826.51
39 Dec 31, 95 21,859 20,820 22843.34
40 Mar 31, 96 21,316 20,304 22308.93
41 Jun 30, 96 21,323 20,310 22413.82
</TABLE>
A $10,000 investment in Class B shares made on 5/5/92 (inception), at NAV would
have been valued at $13,024 on 6/30/96. The same investment after deducting the
applicable contingent deferred sales charge (CDSC) would have grown to $12,829
on 6/30/96.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
As of 6/30/96 (Most Recent Quarter End)
- --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
INCEPTION 12/1/69 5/15/92
NAV MOP NAV w/CDSC
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 year 4.51% (0.46)% 3.73% (1.13)%
- --------------------------------------------------------------------------------
5 years 8.48% 7.43% -- --
10 years 7.87% 7.34% -- --
- --------------------------------------------------------------------------------
Since inception -- -- 6.60% 6.21%
</TABLE>
The Lehman Brothers Government/Corporate Bond Index is an unmanaged index that
tracks the performance of a selection of U.S. government agency, Treasury and
investment-grade corporate bonds. The Lehman Mutual Fund General Bond Index
(used previously to track performance) ceased to exist in May 1995. The Lehman
Brothers Government/Corporate Bond Index is the Index that mirrors that Index's
performance. Unlike mutual funds, indexes are not investments, do not incur fees
or expenses and are not professionally managed.
Return and value of an investment will vary, resulting in a gain or loss on
sale. All results shown assume reinvestment of distributions. NAV returns do not
include sales charges or CDSC. MOP returns include the maximum sales charge of
4.75%. The CDSC returns reflect the maximum charge of 5% for one year and 2%
since inception.
5
<PAGE>
INVESTMENT PORTFOLIO
JUNE 30, 1996 (UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
BONDS & NOTES - 93.2% PAR VALUE
- ---------------------------------------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - 68.8%
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONSTRUCTION - 1.1%
HEAVY CONSTRUCTION - NON BUILDING CONSTRUCTION - 1.1%
Foster Wheeler Corp.,
6.750% 11/15/05 $2,000 $1,891
------
- ---------------------------------------------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 22.3%
DEPOSITORY INSTITUTIONS - 4.4%
First Bank System, Inc.,
7.625% 05/01/05 2,000 2,033
Great Western Financial Corp.,
8.600% 02/01/02 3,000 3,203
NCNB Corp.,
9.125% 10/15/01 2,000 2,187
------
7,423
------
FINANCIAL SERVICES - 1.3%
United States Leasing International Inc.,
8.750% 12/01/01 2,000 2,155
------
HOLDING & OTHER INVESTMENT COMPANIES - 3.2%
Countrywide Funding Corp.,
6.875% 09/15/05 3,500 3,354
Keycorp,
6.750% 03/15/06 2,000 1,906
------
5,260
------
INSURANCE CARRIERS - 5.7%
Equitable Life Assurance Co.,
7.700% 12/01/15 3,000 2,909
John Hancock Mutual Life Insurance Co., (a)
7.375% 02/15/24 4,000 3,714
Prudential Insurance Co.,
7.650% 07/01/07 3,000 2,971
------
9,594
------
NONDEPOSITORY CREDIT INSTITUTIONS - 5.2%
General Motors Acceptance Corp.,
8.400% 10/15/99 2,000 2,097
Green Tree Financial Corp.,
10.250% 06/01/02 3,000 3,422
Household Finance Co.,
8.375% 11/15/01 3,000 3,189
------
8,708
------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/June 30, 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SECURITY BROKERS & DEALERS - 2.5%
Goldman Sachs Group,
7.800% 07/15/02 $2,000 $2,064
Lehman Brothers Holdings, Inc.,
8.500% 05/01/07 2,000 2,102
------
4,166
- ---------------------------------------------------------------------------------------------------------------
MANUFACTURING - 15.3%
CHEMICALS - 1.5%
Agricultural Minerals Co., L.P.,
10.750% 09/30/03 1,500 1,575
Revlon Worldwide Corp.,
(b) 03/15/98 1,000 830
------
2,405
------
FABRICATED METAL - 1.3%
Masco Corp.,
9.000% 10/01/01 2,000 2,165
------
FOOD & KINDRED PRODUCTS - 3.6%
Coca-Cola Bottling Co.,
9.000% 11/15/03 1,500 1,470
ConAgra, Inc.,
9.750% 03/01/21 2,000 2,342
Ralston Purina Co.,
9.300% 05/01/21 2,000 2,266
------
6,078
------
MACHINERY & COMPUTER EQUIPMENT - 0.6%
IMO Industries, Inc., (a)
11.750% 05/01/06 1,000 1,020
------
PAPER PRODUCTS - 2.4%
Florida Coast Paper LLC, (a)
12.750% 06/01/03 1,000 1,040
Riverwood International Corp.,
10.250% 04/01/06 1,500 1,489
Stone Container Corp.,
10.750% 10/01/02 1,500 1,513
------
4,042
------
PETROLEUM REFINING - 1.4%
Pennzoil Co.,
10.125% 11/15/09 2,025 2,389
------
RUBBER & PLASTIC - 2.1%
Armstrong World Industries, Inc.,
9.750% 04/15/08 2,050 2,421
Premark International, Inc.,
10.500% 09/15/00 1,000 1,117
------
3,538
------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/June 30, 1996
- ---------------------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - CONT. PAR VALUE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MANUFACTURING - CONT
STONE, CLAY, GLASS & CONCRETE - 1.2%
Owens-Illinois, Inc.,
10.000% 08/01/02 $2,000 $2,030
------
TRANSPORTATION EQUIPMENT - 1.2%
General Motors Corp.,
7.100% 03/15/06 2,000 1,959
- ---------------------------------------------------------------------------------------------
MINING & ENERGY - 10.0%
CRUDE PETROLEUM & NATURAL GAS - 1.2%
Ferrellgas Partners L.P.,
9.375% 06/15/06 2,000 1,935
------
OIL & GAS EXTRACTION - 7.0%
Gulf Canada Resources, Ltd., (c)
9.625% 07/01/05 2,000 1,975
NGC Corp.,
6.750% 12/15/05 2,000 1,906
Nuevo Energy Co.,
9.500% 04/15/06 1,000 980
Occidental Petroleum Corp.,
11.125% 08/01/10 2,500 3,210
Santa Fe Energy Resources, Inc.,
11.000% 05/15/04 1,500 1,612
Union Oil Of California,
7.200% 05/15/05 2,000 1,990
------
11,673
------
OIL & GAS FIELD SERVICES - 1.8%
Enron Corp.,
7.125% 05/15/07 2,000 1,954
United Meridian Corp.,
10.375% 10/15/05 1,000 1,025
------
2,979
- ---------------------------------------------------------------------------------------------
RETAIL TRADE - 2.3%
FOOD STORES - 0.6%
Dominick's Finer Foods, Inc.,
10.875% 05/01/05 1,000 1,055
------
GENERAL MERCHANDISE STORES - 1.7%
Dayton Hudson Corp.,
6.400% 02/15/03 3,000 2,865
- ---------------------------------------------------------------------------------------------
SERVICES - 3.3%
AMUSEMENT & RECREATION - 0.7%
Showboat, Inc.,
13.000% 08/01/09 1,000 1,145
------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/June 30, 1996 PAR VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HEALTH SERVICES - 2.6%
Manor Care, Inc.,
7.500% 06/15/06 $3,000 $3,006
Tenet Healthcare Corp.,
10.125% 03/01/05 1,250 1,316
------
4,322
- ----------------------------------------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 14.5%
BROADCASTING - 1.9%
News America Holding Corp.,
8.625% 02/01/03 2,000 2,129
Sullivan Broadcasting, Inc.,
10.250% 12/15/05 1,000 958
------
3,087
------
CABLE - 1.7%
Cox Communication, Inc.
6.875% 06/15/05 3,000 2,906
------
COMMUNICATIONS - 1.5%
Brooks Fiber Properties, Inc.,
(b) 03/01/06 1,500 799
Shared Technologies Fairchild, Inc., (a)
stepped coupon,
(12.250% 03/01/99) (d) 03/01/06 1,000 755
UNC Inc., (a)
11.000% 06/01/06 1,000 1,010
------
2,564
------
ELECTRIC, GAS & SANITARY SERVICES - 0.8%
Mesa Operating Co.,
10.625% 07/01/06 1,250 1,269
------
ELECTRIC SERVICES - 2.3%
Commonwealth Edison Co.,
7.000% 07/01/05 2,000 1,922
Pacificorp Holdings,
7.200% 04/01/06 2,000 1,944
------
3,866
------
MOTOR FREIGHT & WAREHOUSING - 1.3%
Consolidated Freightways, Inc.,
9.125% 08/15/99 2,000 2,092
------
PIPELINES - 1.6%
McDermott, Inc.,
9.375% 03/15/02 2,500 2,688
------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/June 30, 1996
- ---------------------------------------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - CONT. PAR VALUE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - CONT
RAILROAD - 1.2%
Union Pacific Corp.,
7.600% 05/01/05 $2,000 $2,023
-------
TELECOMMUNICATIONS - 2.2%
Echostar Communications Corp.,
stepped coupon,
(12.875% 06/01/99) (d) 06/01/04 1,000 735
IntelCom Group, Inc.,
stepped coupon,
(13.500% 06/01/00) (d) 09/15/05 1,000 600
MFS Communications Co., Inc.,
stepped coupon,
(9.375% 06/01/99) (d) 01/15/04 1,500 1,131
Nextel Communications, Inc.,
stepped coupon,
(9.375% 01/15/99) (d) 08/15/04 2,000 1,185
-------
3,651
-------
TOTAL CORPORATE FIXED-INCOME
BONDS & NOTES (cost of $112,913) 114,943
-------
<CAPTION>
US GOVERNMENT AGENCIES
& AGENCY OBLIGATIONS - 20.3%
- ------------------------------------------------------------------------------------------------------
Maturities
Coupon From/To
------ -------
<S> <C> <C> <C> <C>
Federal Farm Credit Bank:
11.900% 1997 5,000 5,359
-------
Federal National Mortgage Association:
11.000% 2016 1,907 2,135
-------
Government National Mortgage Association:
10.000% 2017-2019 56 62
10.500% 2016-2020 359 396
11.500% 2013 82 93
12.500% 2010-2014 338 392
13.000% 2011 57 67
14.000% 2011 5 6
-------
1,016
-------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/June 30, 1996
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Treasury Bonds:
8.750% 2017 $4,000 $ 4,746
8.500% 2000 6,217 6,702
11.625% 2002 4,000 5,042
-------
16,490
-------
U.S. Treasury Note,
10.375% 2012 7,000 8,887
-------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS (cost of $36,827) 33,887
-------
<CAPTION>
FOREIGN GOVERNMENT &
AGENCY OBLIGATIONS - 4.1% CURRENCY
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Spanish Government Bonds,
11.300% 01/15/02 Sp 333 2,930
Treasury Corp. of Victoria,
12.500% 10/15/03 Au 4,163 3,906
-------
TOTAL FOREIGN GOVERNMENT &
AGENCY OBLIGATIONS (cost of $6,907) 6,836
-------
TOTAL BONDS & NOTES (cost of $156,647) 155,666
-------
<CAPTION>
PREFERRED STOCKS - 1.6% SHARES
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 1.6%
COMMUNICATIONS - 0.9%
Cablevision Systems Corp., 11.75% PIK 16 1,534
-------
GAS SERVICES - 0.7%
Enron Corp., 8.00% 50 1,206
-------
TOTAL PREFERRED STOCKS (cost of $2,958) 2,740
-------
<CAPTION>
WARRANTS - 0.0%
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
COMMUNICATIONS - 0.0%
American Telecasting, Inc. (a) (cost of $30) 1 25
-------
TOTAL INVESTMENTS (cost of $159,635)(e) 158,431
-------
SHORT-TERM OBLIGATIONS - 3.6% PAR
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase agreement with Chase Securities, Inc., dated 6/28/96, due
07/01/96 at 5.400%, collateralized by U.S. Treasury notes with various
maturities to 1998, market value $6,076
(repurchase proceeds $5,946) $ 5,943 5,943
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/June 30,1996
- ----------------------------------------------------------------------------------
<S> <C>
FORWARD CURRENCY CONTRACTS - (0.0)% (f) $ (13)
- ----------------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - 1.6% 2,645
- ----------------------------------------------------------------------------------
NET ASSETS - 100.0% $ 167,006
----------
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
- ------------------------------------------------------------------------------
(a) Securities exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At June 30, 1996, the value of these
securities amounted to $7,564 or 4.5% of net assets.
(b) Zero coupon bond.
(c) This is a Canadian security. Par amount is stated in U.S. dollars.
(d) Currently zero coupon. Shown parenthetically is the interest rate to be
paid and the date the Fund will begin accruing this rate.
(e) Cost for federal income tax purposes is $159,990.
(f) As of June 30, 1996, the Fund had entered into the following forward
currency exchange contracts:
<TABLE>
<CAPTION>
Net Unrealized
Contracts In Exchange Settlement Depreciation
to Deliver For Date (U.S. $)
---------- --- ---- --------
<S> <C> <C> <C>
FF 11,575,505 USD 2,234,653 07/10/96 (13)
</TABLE>
<TABLE>
<CAPTION>
Summary of Securities
by Currency Currency Value % of Total
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $151,595 95.7
Australia Au 2,930 1.8
Spain Sp 3,906 2.5
-------- -----
158,431 100.0
-------- -----
</TABLE>
Acronym Name
--------------------- --------------------
PIK Payment-In-Kind
See notes to financial statements.
12
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 1996 (UNAUDITED)
(in thousands except for per share amounts and footnotes)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value (cost $159,635) $ 158,431
Short-term obligations 5,943
---------
164,374
Receivable for:
Investments sold $ 8,605
Interest 2,840
Fund shares sold 129
Dividends 8
Other 24 11,606
-------- ---------
Total Assets 175,980
LIABILITIES
Unrealized depreciation on forward
currency contracts 13
Payable for:
Investments bought 7,786
Fund shares repurchased 203
Distributions 969
Accrued:
Deferred Trustees fees 2
Other 1
--------
Total Liabilities 8,974
---------
NET ASSETS $ 167,006
---------
Net asset value & redemption price per share -
Class A ($132,037/21,129) $ 6.25
---------
Maximum offering price per share - Class A
($6.25/0.9425) $ 6.63(a)
---------
Net asset value & offering price per share -
Class B ($34,969/5,596) $ 6.25(b)
---------
COMPOSITION OF NET ASSETS
Capital paid in $ 186,575
Undistributed net investment income 12
Accumulated net realized loss (18,363)
Net unrealized depreciation on:
Investments (1,204)
Foreign currency transactions (14)
---------
$ 167,006
---------
</TABLE>
(a) On sales of $50,000 or more the offering price is reduced.
(b) Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
See notes to financial statements.
13
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C> <C>
(in thousands)
INVESTMENT INCOME
Interest $ 6,965
Dividends 139
--------
7,104
EXPENSES
Management fee $ 435
Service fee 217
Distribution fee - Class B 138
Transfer agent 204
Bookkeeping fee 35
Trustees fee 9
Custodian fee 4
Audit fee 19
Legal fee 6
Registration fee 16
Reports to shareholders 5
Other 13 1,101
-------- --------
Net Investment Income 6,003
--------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain on:
Investments 880
Foreign currency transactions 13
--------
Net Realized Gain 893
Net unrealized depreciation during the period on:
Investments (11,487)
Foreign currency transactions (14)
--------
Net Unrealized Depreciation (11,501)
--------
Net Loss (10,608)
--------
Net Decrease in Net Assets from Operations $ (4,605)
--------
</TABLE>
See notes to financial statements.
14
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(Unaudited)
Six Months Year Ended
(in thousands) Ended June 30 December 31
-------------- -------------
INCREASE (DECREASE) IN NET ASSETS 1996 1995
<S> <C> <C>
Operations:
Net investment income $ 6,003 $ 12,430
Net realized gain 893 847
Net unrealized appreciation (depreciation) (11,501) 17,487
--------- ---------
Net Increase from Operations (4,605) 30,764
Distributions:
From net investment income - Class A (4,898) (10,607)
From net investment income - Class B (1,169) (2,027)
--------- ---------
(10,672) 18,130
--------- ---------
Fund Share Transactions:
Receipts for shares sold - Class A 5,994 25,742
Value of distributions reinvested - Class A 2,105 5,505
Cost of shares repurchased - Class A (11,499) (31,959)
--------- ---------
(3,400) (712)
--------- ---------
Receipts for shares sold - Class B 8,486 20,614
Value of distributions reinvested - Class B 549 1,165
Cost of shares repurchased - Class B (9,994) (9,525)
--------- ---------
(959) 12,254
--------- ---------
Net Increase (Decrease) from
Fund Share Transactions (4,359) 11,542
--------- ---------
Total Increase (Decrease) (15,031) 29,672
NET ASSETS
Beginning of period 182,037 152,365
--------- ---------
End of period (including undistributed
net investment income of $12 and
$56, respectively) $ 167,006 $ 182,037
--------- ---------
NUMBER OF FUND SHARES
Sold - Class A 938 4,064
Issued for distributions reinvested - Class A 330 864
Repurchased - Class A (1,810) (5,033)
--------- ---------
(542) (105)
--------- ---------
Sold - Class B 1,312 3,230
Issued for distributions reinvested - Class B 86 182
Repurchased - Class B (1,558) (1,489)
--------- ---------
(160) 1,923
--------- ---------
</TABLE>
See notes to financial statements.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 (UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
In the opinion of management of Colonial Income Fund (the Fund), a
series of Colonial Trust I, the accompanying financial statements
contain all normal and recurring adjustments necessary for the fair
presentation of the financial position of the Fund at June 30, 1996, and
the results of its operations, the changes in its net assets and the
financial highlights for the six months then ended.
NOTE 2. ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
ORGANIZATION: The Fund is a diversified portfolio of a Massachusetts
business trust registered under the Investment Company Act of 1940, as
amended, as an open-end, management investment company. The Fund's
investment objective is to seek as high a level of current income and
total return, as is consistent with prudent risk. 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 preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements.
Security valuation and transactions: 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.
16
<PAGE>
Notes to Financial Statements/June 30, 1996
- -------------------------------------------------------------------------------
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income
tax purposes.
The Fund may trade securities on other than normal settlement terms.
This may increase the risk if the other party to the transaction fails
to deliver and causes the Fund to subsequently invest at less
advantageous prices.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: All
income, expenses (other than the Class 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 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; 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. Reclassifications are
made to the Fund's capital accounts to reflect income and gains
available for distribution (or available capital loss carryforwards)
under income tax regulations.
FOREIGN CURRENCY TRANSACTIONS: Net realized and unrealized gains
(losses) on foreign currency transactions includes the fluctuation in
exchange rates on gains (losses) between trade and settlement dates on
securities transactions, gains (losses) arising from the disposition of
foreign currency and currency gains (losses) between the accrual and
payment dates on dividends and interest income and foreign withholding
taxes.
The Fund does not distinguish that portion of gains and losses on
investments which is due to changes in foreign exchange rates from that
which is
17
<PAGE>
Notes to Financial Statements/June 30, 1996
- -------------------------------------------------------------------------------
NOTE 2. ACCOUNTING POLICIES - CONT.
- -------------------------------------------------------------------------------
due to changes in market prices of the investments. Such fluctuations are
included with the net realized gains (losses) on investments.
FORWARD CURRENCY CONTRACTS: The Fund may enter into forward currency
contracts to purchase or sell foreign currencies at predetermined
exchange rates in connection with the settlement of purchases and sales
of securities. The Fund may also enter into forward currency contracts
to hedge certain other foreign currency denominated assets. The
contracts are used to minimize the exposure to foreign exchange rate
fluctuations during the period between trade and settlement date of the
contracts. All contracts are marked-to-market daily, resulting in
unrealized gains or losses which become realized at the time the forward
currency contracts are closed or mature. Realized and unrealized gains
(losses) arising from such transactions are included in net realized and
unrealized gains (losses) on foreign currency transactions. Forward
currency contracts do not eliminate fluctuations in the prices of the
Fund's portfolio securities. While the maximum potential loss from such
contracts is the aggregate face value in U.S. dollars at the time the
contract was opened, exposure is typically limited to the change in
value of the contract (in U.S. dollars) over the period it remains open.
Risks may also arise if counterparties fail to perform their obligations
under the contracts.
OTHER: The Fund's custodian takes possession through the federal
book-entry system of securities collateralizing repurchase agreements.
Collateral is marked-to-market daily to ensure that the market value of
the underlying assets remains sufficient to protect the Fund. The Fund
may experience costs and delays in liquidating the collateral if the
issuer defaults or enters bankruptcy.
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
- -------------------------------------------------------------------------------
MANAGEMENT FEE: Colonial Management Associates, Inc. (the Adviser)
is the investment Adviser of the Fund and furnishes accounting and other
services and office facilities for a monthly fee equal to 0.50% annually of the
Fund's average net assets.
BOOKKEEPING FEE: The Adviser provides bookkeeping and pricing services
for $27,000 per year plus 0.035% of the Fund's average net assets over
$50 million.
TRANSFER AGENT: Colonial Investors Service Center, Inc. (the Transfer
Agent), an affiliate of the Adviser, provides shareholder services for a
monthly fee equal to 0.18% annually of the Fund's average net assets and
receives a reimbursement for certain out of pocket expenses.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Colonial
Investment Services, Inc. (the Distributor), an affiliate of the Adviser, is
18
<PAGE>
Notes to Financial Statements/June 30, 1996
- -------------------------------------------------------------------------------
the Fund's principal underwriter. For the six months ended June 30,
1996, the Fund has been advised that the Distributor retained net
underwriting discounts of $13,072 on sales of the Fund's Class A shares
and received contingent deferred sales charges (CDSC) of $62,270 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 terminated at any time. Obligations of the plan will be
paid solely out of the Fund's assets.
NOTE 4. PORTFOLIO INFORMATION
- -------------------------------------------------------------------------------
Investment activity: During the six months ended June 30, 1996,
purchases and and sales of investments, other than short-term
obligations, were $225,915,622, and $231,375,743, respectively, of which
none and $16,026,276, respectively, were U.S. government securities.
Unrealized appreciation (depreciation) at June 30, 1996, based on cost
of investments for federal income tax purposes was:
Gross unrealized appreciation $ 2,944,357
Gross unrealized depreciation (4,503,564)
-----------
Net unrealized depreciation $(1,559,207)
-----------
Capital loss carryforwards: At December 31, 1995, 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 $ 248,000
1997 2,834,000
1998 4,686,000
1999 10,466,000
2002 1,007,000
-----------
$19,241,000
-----------
</TABLE>
19
<PAGE>
Notes to Financial Statements/June 30, 1996
- -------------------------------------------------------------------------------
NOTE 4. PORTFOLIO INFORMATION - CONT.
- -------------------------------------------------------------------------------
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 foreign currency exchange or the imposition of
other foreign governmental laws or restrictions.
The Fund may focus its investments in certain industries, subjecting it
to greater risk than a fund that is more diversified.
NOTE 5. LINE OF CREDIT
- -------------------------------------------------------------------------------
The Fund may borrow up to 10% of its net assets under a line of credit
for temporary or emergency purposes. Any borrowings bear interest at one
of the following options determined at the inception of the loan: (1)
federal funds rate plus 1/2 of 1%, (2) the lending bank's base rate or
(3) IBOR offshore loan rate plus 1/2 of 1%. There were no borrowings
under the line of credit during the six months ended June 30, 1996.
20
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each
period are as follows:
<TABLE>
<CAPTION>
(Unaudited)
Six months ended
June 30 Year ended December 31
---------------------------------- --------------------------------
1996 1995
Class A Class B Class A Class B
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 6.640 $ 6.640 $ 5.950 $ 5.950
------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.226 0.202 0.472 0.425
Net realized and
unrealized gain (loss) (0.388) (0.388) 0.698 0.698
------------ ------------ ------------ ------------
Total from Investment
Operations (0.162) (0.186) 1.170 1.123
------------ ------------ ------------ ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net
investment income (0.228) (0.204) (0.480) (0.433)
------------ ------------ ------------ ------------
Net asset value -
End of period $ 6.250 $ 6.250 $ 6.640 $ 6.640
------------ ------------ ------------ ------------
Total return (a) (2.45)%(b) (2.82)%(b) 20.30% 19.42%
------------ ------------ ------------ ------------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.11%(c)(d) 1.86%(c)(d) 1.09%(d) 1.84%(d)
Net investment income 7.07%(c)(d) 6.32%(c)(d) 7.45%(d) 6.70%(d)
Portfolio turnover 136%(b) 136%(b) 85% 85%
Net assets at end
of period (000) $ 132,037 $ 34,969 $ 143,834 $ 38,203
</TABLE>
(a) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(b) Not annualized.
(c) Annualized.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
21
<PAGE>
FINANCIAL HIGHLIGHTS - CONTINUED
Selected data for a share of each class outstanding throughout each
period are as follows:
<TABLE>
<CAPTION>
Year ended December 31
-----------------------------------------------------------------------
1994 1993
Class A Class B Class A Class B
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 6.720 $ 6.720 $ 6.460 $ 6.460
------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.487 0.440 0.501 0.451
Net realized and
unrealized gain (loss) (0.761) (0.761) 0.261 0.261
------------ ------------ ------------ ------------
Total from Investment
Operations (0.274) (0.321) 0.762 0.712
------------ ------------ ------------ ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.496) (0.449) (0.502) (0.452)
------------ ------------ ------------ ------------
Net asset value -
End of period $ 5.950 $ 5.950 $ 6.720 $ 6.720
------------ ------------ ------------ ------------
Total return (b) (4.09%) (4.82%) 12.05% 11.23%
------------ ------------ ------------ ------------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.11% 1.86% 1.10% 1.85%
Net investment income 7.80% 7.05% 7.45% 6.70%
Portfolio turnover 16% 16% 46% 46%
Net assets at end of period (000) $ 129,560 $ 22,805 $ 155,543 $ 19,787
</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 contingent deferred sales charge.
(c) Not annualized.
(d) Annualized.
22
<PAGE>
FINANCIAL HIGHLIGHTS - CONTINUED
Selected data for a share of each class outstanding throughout each
period are as follows:
<TABLE>
<CAPTION>
Year ended December 31
-----------------------------------------------------
1992 1991
Class A Class B (a) Class A
------------ ------------ ------------
<S> <C> <C>
Net asset value -
Beginning of period $ 6.460 $ 6.390 $ 5.97
------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.546 0.290 0.587
Net realized and
unrealized gain (loss) 0.001 0.088 0.487
------------ ------------ ------------
Total from Investment
Operations 0.547 0.378 1.074
------------ ------------ ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.547) (0.308) (0.584)
Net asset value -
End of period $ 6.460 $ 6.460 $ 6.46
------------ ------------ ------------
Total return (b) 8.83% 6.00%(c) 18.80%
------------ ------------ ------------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.24% 1.99%(d) 1.25%
Net investment income 8.49% 7.74%(d) 9.46%
Portfolio turnover 68% 68% 44%
Net assets at end of period (000) $ 149,309 $ 6,092 $ 146,905
</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 contingent deferred sales charge.
(c) Not annualized.
(d) Annualized.
23
<PAGE>
SHAREHOLDER SERVICES
TO MAKE INVESTING EASIER
Colonial has one of the most extensive selections of shareholder services
available. Your financial adviser can help you arrange for any of these
services, or you can call Colonial directly at 1-800-345-6611.
AFFORDABLE ADDITIONAL INVESTMENTS: Add to your account with as little as $50;
$25 for an IRA account.
FREE EXCHANGES*: Exchange all or part of your account into the same share class
of another Colonial fund, by phone or mail, as your needs change over time.
EASY ACCESS TO YOUR MONEY*: Make withdrawals from your account by phone, by mail
or, for certain funds, by check.
ONE-YEAR REINSTATEMENT PRIVILEGE: If you need access to your money, but then
choose to return it to Colonial within one year, you can reinvest in any
Colonial fund of the same share class without any penalty or sales charge.
FUNDAMATIC: Make periodic investments as low as $50 from your checking account
to your Colonial account.
SYSTEMATIC WITHDRAWAL PLAN (SWP): Receive monthly, quarterly, or semiannual
payments via check or bank transmission. There is a $5,000 account value
required, but no minimum for the payment amount. The maximum annual withdrawal
is 12% of account balance at time SWP is established. SWPs by check are
processed on the 10th of each month.
AUTOMATED DOLLAR COST AVERAGING: Transfer money on a monthly basis from any
Colonial fund with a balance of $5,000 into the same share class of up to four
other Colonial funds. Minimum for each transfer is $100.
LOW COST IRAs: Choose from a broad range of retirement plans, including IRAs.
* Redemptions and exchanges are made at the next determined net asset value
after the request is received by Colonial. Proceeds may be more or less than
your original cost. The exchange privilege may be terminated at any time.
Investors who purchase Class B or Class D shares (for applicable funds), or $1
million or more of Class A shares, may be subject to a contingent deferred sales
charge.
24
<PAGE>
HOW TO REACH COLONIAL
BY PHONE OR BY MAIL
BY TELEPHONE
COLONIAL CUSTOMER CONNECTION - 1-800-345-6611
For 24-hour account information, call from your touch-tone phone. (Rotary
callers will be automatically connected to a representative during business
hours.) A recorded message will guide you through the menu:
For fund prices, dividends, and capital gains information press 1
For account information press 2
To speak to a Colonial representative press 3
For yield and total return information press 4
For duplicate statements or new supply of checks press 5
To order duplicate tax forms and year-end statements press 6
(February through May)
To review your options at any time during your call press 7
To speak with a shareholder services representative about your account, call
Monday to Friday, 8:00 am to 8:00 pm ET, and Saturdays from February through
mid-April, 10:00 am to 2:00 pm ET.
COLONIAL TELEPHONE TRANSACTION DEPARTMENT - 1-800-422-3737
To purchase, exchange, or sell shares by telephone, call Monday to Friday, 9:00
am to 8:00 pm ET. Transactions received after the close of the New York Stock
Exchange will receive the next business day's closing price.
COLONIAL LITERATURE DEPARTMENT - 1-800-248-2828
To request literature on any Colonial fund, call Monday to Friday, 8:30 am to
6:30 pm ET.
BY MAIL
COLONIAL INVESTORS SERVICE CENTER, INC.
P.O. BOX 1722
BOSTON, MA 02105-1722
25
<PAGE>
SHAREHOLDER COMMUNICATIONS
TO KEEP YOU INFORMED
To make recordkeeping easy and keep you up-to-date on the performance of your
investments, you can expect to receive the following information about your
Colonial account:
TRANSACTION CONFIRMATIONS: Each time you make a purchase, sale, or exchange, you
receive a confirmation statement within just a few days.
QUARTERLY STATEMENTS: Every three months, if any transactions are made that
affect your share balance, this statement reports on your account activity
during the quarter (including any reinvestment of dividends). This statement
also provides year-to-date information.
COLONIAL SHAREHOLDER NEWS: Mailed with your quarterly account statements, this
newsletter highlights timely investment strategies, portfolio manager
commentary, and shareholder service updates.
TAX FORMS AND YEAR-END TAX GUIDE: Easy-to-use forms and timely information are
designed to make tax reporting simpler. (Usually mailed in January.)
AVERAGE COST BASIS STATEMENTS: If you sold or exchanged shares during the year,
this statement may help you calculate your gain/loss for tax purposes. (Usually
mailed in February.)
26
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Income Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial Income Fund mails one shareholder report to each shareholder address.
If you would like more than one report, please call our Literature Department at
1-800-248-2828 and additional reports will be sent to you.
This report has been prepared for shareholders of Colonial Income Fund. This
report may also be used as sales literature when preceded or accompanied by the
current prospectus which provides details of sales charges, investment
objectives and operating policies of the Fund.
27
<PAGE>
[COLONIAL LOGO]
Mutual Funds for
Planned Portfolios
TRUSTEES
ROBERT J. BIRNBAUM
Trustee (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief
Operating Officer, New York Stock Exchange, Inc.)
TOM BLEASDALE
Trustee (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
LORA S. COLLINS
Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
WILLIAM D. IRELAND, JR.
Trustee (formerly Chairman of the Board, Bank of New England-Worcester)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
WILLIAM E. MAYER
Dean, College of Business and Management, University of Maryland (formerly Dean,
Simon Graduate School of Business, University of Rochester; Chairman and Chief
Executive Officer, C.S. First Boston Merchant Bank; and President and Chief
Executive Officer, The First Boston Corporation)
JAMES L. MOODY, JR.
Chairman of the Board, Hannaford Bros. Co. (formerly Chief Executive Officer,
Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
GEORGE L. SHINN
Financial Consultant (formerly Chairman, Chief Executive Officer and Consultant,
The First Boston Corporation)
ROBERT L. SULLIVAN
Management Consultant (formerly Management Consultant, Saatchi and Saatchi
Consulting Ltd. and Principal and International Practice Director, Management
Consulting, Peat Marwick Main & Co.)
SINCLAIR WEEKS, JR.
Chairman of the Board, Reed & Barton Corporation
COLONIAL INVESTMENT SERVICES, INC., Distributor (C) 1996
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
IF-03/503C-0696 M (8/96)
