<PAGE>
COLONIAL
HIGH YIELD SECURITIES FUND
[Graphic Omitted]
ANNUAL REPORT
DECEMBER 31, 1996
- -------------------------------------
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
- -------------------------------------
<PAGE>
COLONIAL HIGH YIELD SECURITIES FUND HIGHLIGHTS
JANUARY 1, 1996 - DECEMBER 31, 1996
INVESTMENT OBJECTIVE: Colonial High Yield Securities Fund seeks high current
income and total return by investing primarily in lower rated corporate debt
securities.
THE FUND IS DESIGNED TO OFFER:
|X| High current income and total return potential
|X| Diversification and thorough credit analysis
|X| Management by experienced high yield specialists
PORTFOLIO MANAGER COMMENTARY: "We continued to seek value by focusing on the
upper end of the high yield universe. The Fund remained invested in bonds with
higher quality, better liquidity and lower volatility than many of its
competitors. This strategy is designed to produce attractive total returns while
protecting the Fund's shareholders against high levels of risk. We expect that
this portion of the high yield universe will fare well in an economic
environment characterized by moderate growth and low inflation."-- Andrea
Feingold
COLONIAL HIGH YIELD SECURITIES FUND PERFORMANCE
- -------------------------------------------------------------------------------
CLASS A CLASS B CLASS D
Inception dates 11/3/71* 6/8/92 1/15/96
- -------------------------------------------------------------------------------
Distributions declared per share $0.615 $0.564 $0.544**
- -------------------------------------------------------------------------------
SEC yields on December 31, 1996*** 8.27% 7.92% 7.83%
- -------------------------------------------------------------------------------
12-month total returns, assuming reinvestment 12.21% 11.38% --
of all distributions and no sales charge or
contingent deferred sales charge (CDSC)
- -------------------------------------------------------------------------------
Net asset value per share on December
31, 1996 $6.92 $6.92 $6.92
- -------------------------------------------------------------------------------
* Colonial High Yield Securities Fund adopted its current investment policies
on 3/19/80.
** Distributions declared are cumulative since inception.
*** The 30-day SEC yields on December 31, 1996, reflect the portfolio's earning
power, net of expenses, expressed as an annualized percentage of the
maximum offering price per share at the end of the period.
TOP FIVE BOND HOLDINGS TOP FIVE SECTORS
(as of 12/31/96) (as of 12/31/96)
- -------------------------------------------------------------------------------
US Air, Inc. 2.7% Manufacturing 14.6%
Owens - Illinois, Inc. 2.5% Trans., Elec., Gas
Pathmark Stores, Inc. 2.3% & Sanitation Services 11.9%
Cablevision Systems Corp. 2.2% Hotels/Gaming 10.1%
Revlon, Inc. 2.1% Mining & Energy 8.4%
Telecommunications 8.2%
Portfolio holdings and sector breakdowns are calculated as a percentage of total
net assets. Because the Fund is actively managed, there can be no guarantee the
Fund will continue to maintain these portfolio holdings and sector breakdown.
Industry sectors in the following financial statements are based upon the
standard industrial classifications (SIC) as published by the U.S. Office of
Management and Budget. The sector classifications used on this page are based
upon Colonial's defined criteria as used in the investment process.
<PAGE>
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[Photo of Harold W. Cogger]
I am pleased to present your Fund's annual report for the fiscal year ended
December 31, 1996. This report reflects on the investment environment of the
past 12 months and on the performance of your Fund.
While the Federal Reserve Board lowered short-term interest rates early in the
period, stronger than expected economic reports in February 1996 brought the
Fed's easing trend to a halt. As a result, long-term interest rates were rising
during most of the period, having a negative effect on fixed income investments.
However, with recent statistics suggesting an easing pace of economic activity
and a continued benign inflation outlook, we are hopeful that bond market
volatility will be somewhat reduced in the months ahead.
There was some good news for the tax-exempt sector. Low supply and strong retail
market support enabled municipal bonds to outperform Treasury bonds for much of
the year. The post-election conditions should promote a period of stability for
the tax-exempt market as the flat tax initiative is now a receding memory.
In the domestic stock market, generally favorable conditions prevailed until
July, when a price-based correction took place. Since then, the market has
rebounded nicely with the Dow Jones Industrial Average setting several new
records. Internationally, the Tiger countries of the Pacific Rim continue to
offer a good combination of growth and value. In the European markets,
short-term interest rates continue to be much lower than long-term rates. We
expect these conditions to prevail until we see an increase in economic
activity.
Our economic expectations include growth continuing at a slower, but more
sustainable rate, and our outlook for 1997 is relatively bright.
The following report will provide you with specific information on your Fund's
performance as well as an in-depth discussion with your portfolio manager. As
always, we thank you for the opportunity to help you meet your investment goals
through the Colonial family of funds.
Respectfully,
/s/ Harold W. Cogger
Harold W. Cogger
President
February 10, 1997
Because market conditions change frequently, there can be no assurance that the
trends described here will continue, come to pass or affect Fund performance.
<PAGE>
PORTFOLIO MANAGEMENT REPORT
ANDREA FEINGOLD is portfolio manager of Colonial High Yield Securities Fund. Ms.
Feingold is Vice President of Colonial Management Associates, Inc. and is a
Chartered Financial Analyst.
Q. WHAT WAS THE FUND'S INVESTMENT STRATEGY DURING 1996?
A. We retained our value-oriented focus over the course of the year, managing
the Fund with the goal of maximizing total return while protecting against risk
by increasing investments in higher quality, high yield bonds. We believe these
bonds are less volatile, have better liquidity and will retain their value
better than lower quality bonds.
Q. WHAT IMPACT DID THE INVESTMENT ENVIRONMENT HAVE ON THE FUND DURING THE YEAR?
A. High yield bonds outperformed most sectors of the fixed income market,
reflecting the volatile investment environment that characterized 1996. Stronger
than expected economic reports early in the year sent interest rates higher and
fostered fears of inflation, a negative factor for many types of bonds whose
performance is closely linked to the level of interest rates. However, prospects
for a stronger economy generated positive expectations for the high yield bond
market, since the high yield market tends to trade on the merits of a companies'
financial performance and future growth prospects rather than on changes in
interest rates. We focused on companies and industries that we believed would
benefit from improving economic conditions such as higher levels of corporate
and consumer spending.
Q. WHAT INVESTMENTS HELPED THE FUND'S PERFORMANCE DURING THE PERIOD?
A. Investments in the telecommunications industries were positive contributors.
The Fund's holdings in satellite communications benefited from both a
strengthening economy and the Telecommunications Reform Act (the Act) signed in
February 1996, that opened the communication delivery market to more
participants. Investments in two satellite-based telecommunications companies,
Echostar and Panamsat, generated positive returns for shareholders. Echostar
benefited from evolving home video delivery channels and was able to capitalize
on new consumer choices resulting from the Act. In addition, the company owns
one of three satellite slots for U.S. communications delivery, and the Fund's
holdings are secured by this valuable asset. Panamsat, the first operational
commercial satellite company, was acquired by G.M. Hughes, an investment grade
company, for $3 billion. This acquisition generated attractive returns for the
Fund's holdings of Panamsat's bonds and preferred stock.
Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR 1997?
A. We expect that the economy will grow at a more moderate pace than in 1996 and
inflation will remain in check. We anticipate that the high yield market will
continue to enjoy attractive returns. However, slower economic growth would be
expected to uncover some weakness in cyclical companies with heavy debt loads
that are typically found in the lower quality spectrum of the high yield
universe. Therefore, we believe that the Fund's focus on higher quality bonds
should position it with the potential to generate attractive returns in the
coming year.
COLONIAL HIGH YIELD SECURITIES FUND INVESTMENT PERFORMANCE
VS. THE CS FIRST BOSTON HIGH YIELD INDEX
Change in Value of $10,000 from 12/31/86 - 12/31/96
Based on NAV and MOP for Class A Shares
- -------------------------------------------------------------------------------
DATE NAV MOP FIRST BOSTON
- -------------------------------------------------------------------------------
Dec 31, 86 10,000 9,525 10,000
Mar 31, 87 10,588.77 10,085.80 10,608
Jun 30, 87 10,510.99 10,011.71 10,455
Sep 30, 87 10,426.01 9,930.775 10,408
Dec 31, 87 10,429.90 9,934.483 10,652
Mar 31, 88 11,043.06 10,518.51 11,258
Jun 30, 88 11,396.17 10,854.85 11,636
Sep 30, 88 11,634.62 11,081.98 11,841
Dec 31, 88 11,785.71 11,225.89 12,107
Mar 31, 89 11,988.88 11,419.41 12,318
Jun 30, 89 12,324.26 11,738.86 12,762
Sep 30, 89 12,179.77 11,601.23 12,498
Dec 31, 89 11,792.58 11,232.43 12,154
Mar 31, 90 11,230.78 10,697.32 11,840
Jun 30, 90 11,785.60 11,225.79 12,519
Sep 30, 90 10,565.87 10,063.99 11,387
Dec 31, 90 10,040.64 9,563.71 11,378
Mar 31, 91 11,573.47 11,023.73 13,486
Jun 30, 91 12,665.63 12,064.01 14,485
Sep 30, 91 13,677.25 13,027.58 15,594
Dec 31, 91 14,446.96 13,760.73 16,358
Mar 31, 92 15,923.26 15,166.90 17,696
Jun 30, 92 16,497.16 15,713.54 18,130
Sep 30, 92 17,243.49 16,424.43 18,785
Dec 31, 92 17,502.35 16,670.99 19,082
Mar 31, 93 18,590.30 17,707.26 20,412
Jun 30, 93 19,566.10 18,636.71 21,205
Sep 30, 93 19,927.46 18,980.90 21,731
Dec 31, 93 20,948.96 19,953.88 22,690
Mar 31, 94 21,000.86 20,003.31 22,448
Jun 30, 94 20,867.25 19,876.06 22,125
Sep 30, 94 20,919.70 19,926.02 22,478
Dec 31, 94 20,877.04 19,885.38 22,469
Mar 31, 95 21,764.39 20,730.58 23,526
Jun 30, 95 22,875.77 21,789.17 24,890
Sep 30, 95 23,655.95 22,532.29 25,638
Dec 31, 95 24,560.84 23,394.20 26,375
Mar 31, 96 24,994.25 23,807.02 26,945
Jun 30, 96 25,331.21 24,127.98 27,370
Sep 30, 96 26,637.23 25,371.96 28,398
Dec 31, 96 27,560.43 26,251.31 29,650
A hypothetical $10,000 investment in Class B shares made on 6/8/92 at net asset
value (NAV) would have been valued at $16,241 on 12/31/96. The same investment
after deducting the applicable contingent deferred sales charge (CDSC) would
have grown to $16,041 on 12/31/96. A $10,000 investment in Class D shares made
on 1/15/96 at NAV would have been valued at $11,056 on 12/31/96. The same
investment after deducting the maximum sales charge and applicable CDSC would be
valued at $10,845 on 12/31/96. The CS First Boston High Yield Index is an
unmanaged index that tracks the performance of high yield income funds. Unlike
mutual funds, indexes are not investments, do not incur fees or expenses and it
is not possible to invest in an index.
AVERAGE ANNUAL TOTAL RETURNS
As of December 31, 1996 (Most Recent Quarter End)
- -------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS D SHARES
INCEPTION 11/3/71* 6/8/92 1/15/96**
NAV MOP NAV W/CDSC NAV MOP W/CDSC
- -------------------------------------------------------------------------------
1 YEAR 12.21% 6.88% 11.38% 6.38% -- --
- -------------------------------------------------------------------------------
5 YEARS 13.79% 12.69% -- -- -- --
- -------------------------------------------------------------------------------
10 YEARS 10.67% 10.13% -- -- -- --
- -------------------------------------------------------------------------------
SINCE INCEPTION/
CHANGE IN POLICY* 12.88% 12.56% 11.20% 10.89% 10.56% 8.45%
- -------------------------------------------------------------------------------
* Colonial High Yield Securities Fund adopted its current investment policies
on 3/19/80.
** Performance is cumulative for fund shares less than one year old.
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% for Class A and 1% for Class D. The CDSC returns reflect the maximum
charge of 5% for one year and 2% since inception for Class B and 1% for Class D.
<PAGE>
INVESTMENT PORTFOLIO
DECEMBER 31, 1996 (IN THOUSANDS)
BONDS & NOTES - 91.4% PAR VALUE
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CORPORATE FIXED INCOME BONDS & NOTES - 91.0%
--------------------------------------------------------------------------
AEROSPACE - 1.0%
UNC, Inc.,
11.000% 06/01/06 $ 8,400 $ 8,988
---------
--------------------------------------------------------------------------
CONSTRUCTION - 1.7%
SPECIAL TRADE CONTRACTORS
Building Materials Corp. of America,
stepped coupon, (11.750% 07/01/99)
(a) 07/01/04 18,500 16,049
---------
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MANUFACTURING - 30.2%
CHEMICALS & ALLIED PRODUCTS - 5.2%
Agricultural Minerals Co.,
10.750% 09/30/03 9,050 9,649
Applied Extrusion Technologies, Inc.,
11.500% 04/01/02 7,000 7,315
Energy Ventures, Inc.,
10.250% 03/15/04 3,850 4,168
Revlon Consumer Products Corp.,
10.500% 02/15/03 12,000 12,600
Revlon Worldwide Corp.,
(b) 03/15/98 8,000 6,880
Sterling Chemicals, Inc.,
11.750% 08/15/06 3,000 3,165
Trans-Resources Corp.,
11.875% 07/01/02 5,000 5,050
---------
48,827
---------
ELECTRONIC & ELECTRICAL EQUIPMENT - 3.5%
Delco Remy International, Inc.,
10.625% 08/01/06(c) 4,765 5,051
K&F Industries, Inc.,
10.375% 09/01/04 12,595 13,288
Unisys Corp.,
11.750% 10/15/04 14,000 14,945
---------
33,284
---------
FABRICATED METAL - 3.3%
Earle M. Jorgensen & Co.,
10.750% 03/01/00 2,750 2,822
Euramax International PLC,
11.250% 10/01/06(c) 12,750 13,196
Ivaco, Inc.,
11.500% 09/15/05 1,500 1,500
Kaiser Aluminum & Chemical Corp.,
10.875% 10/15/06(c) 10,125 10,733
Renco Metals, Inc.,
11.500% 07/01/03 3,000 3,139
---------
31,390
---------
FOOD & KINDRED PRODUCTS - 2.5%
Di Giorgio Corp.,
12.000% 02/15/03 4,000 4,120
FoodBrands America, Inc.,
10.750% 05/15/06 11,760 12,524
Gillett Holdings, Inc.,
12.250% 06/30/02 5,021 5,272
Pilgrim's Pride Corp.,
10.875% 08/01/03 1,600 1,594
---------
23,510
---------
MACHINERY & COMPUTER EQUIPMENT - 1.1%
IMO Industries, Inc.,
11.750% 05/01/06 3,380 3,160
Shop Vac Corp.,
10.625% 09/01/03(c) 6,500 6,841
---------
10,001
---------
MEASURING & ANALYZING INSTRUMENTS - 0.4%
Intertek Finance PLC,
10.250% 11/01/06(c) 3,625 3,770
--------
PAPER PRODUCTS - 4.2%
Florida Coast Paper LLC,
12.750% 06/01/03 7,000 7,595
Gaylord Container Corp.,
12.750% 05/15/05 15,200 16,834
Stone Container Corp.,
10.750% 10/01/02 14,000 14,735
--------
39,164
--------
PETROLEUM REFINING - 1.6%
Flores & Rucks, Inc.,
13.500% 12/01/04 6,000 7,170
Texas Petrochemical Corp.,
11.125% 07/01/06 7,500 8,081
--------
15,251
--------
PRIMARY METAL - 2.9%
Algoma Steel, Inc.,
12.375% 07/15/05 15,640 16,930
Kaiser Aluminum & Chemical Corp.,
12.750% 02/01/03 6,000 6,428
Wheeling-Pittsburgh Steel Corp.,
9.375% 11/15/03 4,000 3,940
--------
27,298
--------
PRINTING & PUBLISHING - 0.1%
Marvel Holdings, Inc.,
(b) 04/15/98(d) 4,100 656
--------
RUBBER & PLASTIC - 0.4%
Berry Plastics Corp.,
12.250% 04/15/04 3,500 3,837
--------
STONE, CLAY, GLASS & CONCRETE - 2.6%
Owens-Illinois, Inc.:
9.950% 10/15/04 13,000 13,747
10.000% 08/01/02 900 946
10.500% 06/15/02 6,000 6,345
11.000% 12/01/03 2,000 2,225
Safelite Glass Corp.,
9.875% 12/15/06(c) 1,350 1,391
--------
24,654
--------
TRANSPORTATION EQUIPMENT - 2.4%
Aftermarket Technology Corp.,
Series B,
12.000% 08/01/04 7,500 8,381
Collins & Aikman Products Co.,
11.500% 04/15/06 13,000 14,235
--------
22,616
--------
--------------------------------------------------------------------------
MINING & ENERGY - 8.3%
OIL & GAS EXTRACTION
Falcon Drilling Co., Inc.,
Series B,
9.750% 01/15/01 5,500 5,761
Forcenergy, Inc.,
9.500% 11/01/06 6,825 7,115
Gulf Canada Resources Ltd.,
9.250% 01/15/04 4,500 4,759
Mariner Energy Corp.,
10.500% 08/01/06(c) 11,250 11,925
Maxus Energy Corp.,
11.250% 05/01/13 353 362
Nuevo Energy Co.,
9.500% 04/15/06 9,850 10,441
Parker Drilling Corp.,
9.750% 11/15/06(c) 8,000 8,400
Santa Fe Energy Resources, Inc.,
11.000% 05/15/04 4,000 4,420
TransTexas Gas Corp.,
11.500% 06/15/02 15,250 16,489
United Meridian Corp.,
10.375% 10/15/05 8,000 8,780
--------
78,452
--------
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RETAIL TRADE - 7.1%
APPAREL & ACCESSORY STORES - 0.7%
William Carter, Inc.,
10.375% 12/01/06(c) 6,525 6,851
--------
BUILDING, HARDWARE & GARDEN SUPPLIES - 1.4%
ISP Holdings, Inc.,
9.750% 02/15/02(c) 12,492 13,070
--------
FOOD STORES - 5.0%
Pathmark Stores, Inc.:
9.625% 05/01/03 12,000 11,490
11.625% 06/15/02 4,950 5,049
stepped coupon, (10.750% 11/01/99)
(a) 11/01/03 7,150 4,648
Ralphs Grocery Co.,
10.450% 06/15/04 12,000 12,750
Smiths Food & Drug Centers,
11.250% 05/15/07 8,000 8,840
Star Markets Co.,
13.000% 11/01/04 4,000 4,510
--------
47,287
--------
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SERVICES - 12.9%
AMUSEMENT & RECREATION - 1.1%
Alliance Gaming Corp.,
12.875% 06/30/03 6,000 6,405
E&S Holdings Corp.,
10.375% 10/01/06(c) 3,475 3,640
---------
10,045
---------
BUSINESS SERVICES - 0.6%
Darling International, Inc.,
11.000% 07/15/00 261 256
Figgie International, Inc.,
9.875% 10/01/99 1,800 1,872
Pierce Leahy Corp.,
11.125% 07/15/06 3,000 3,285
---------
5,413
---------
HEALTH SERVICES - 1.4%
OrNda Health Corp.,
11.375% 08/15/04 11,250 13,022
---------
HOTELS, CAMPS & LODGING - 9.0%
Aztar Corp.,
13.750% 10/01/04 3,000 3,210
Eldorado Resorts LLC,
10.500% 08/15/06(c) 11,000 11,605
HMH Properties, Inc.
9.500% 05/15/05 8,500 8,872
Harvey Casinos Resorts,
10.625% 06/01/06 9,250 9,874
Majestic Star Casino LLC,
12.750% 05/15/03 5,125 5,509
Showboat, Inc.,
13.000% 08/01/09 14,470 16,007
Showboat Marina Partnership,
Series B,
13.500% 03/15/03 3,000 3,300
Station Casinos, Inc.,
10.125% 03/15/06 13,000 13,033
Wyndham Hotel Corp.,
10.500% 05/15/06 12,500 13,312
---------
84,722
---------
PRIVATE HOUSEHOLDS - 0.8%
Allied Waste North America,
10.250% 12/01/06(c) 6,750 7,087
---------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 29.8%
AIR TRANSPORTATION - 3.9%
Continental Airlines, Inc.,
9.500% 12/15/01 1,500 1,530
Greenwich Air Services, Inc.,
10.500% 06/01/06 9,500 10,165
U.S. Air, Inc.,
10.375% 03/01/13 24,154 25,181
---------
36,876
---------
BROADCASTING - 4.4%
Allbritton Communications Co.,
11.500% 08/15/04 8,500 8,967
NWCG Holding Corp.,
(b) 06/15/99 17,725 14,756
Sullivan Broadcasting, Inc.,
10.250% 12/15/05 9,500 9,619
Young Broadcasting Corp.,
10.125% 02/15/05 1,000 1,035
11.750% 11/15/04 6,000 6,600
---------
40,977
---------
CABLE - 6.4%
Cablevision Systems Corp.,
9.875% 04/01/23 8,250 8,147
Comcast UK Cable Partners Ltd.,
stepped coupon, (11.200% 11/15/00)
(a) 11/15/07 4,250 3,007
Diamond Cable Communication PLC,
stepped coupon, (11.750% 12/15/00)
(a) 12/15/05 3,000 2,130
Groupe Videotron Ltd.,
10.625% 02/15/05(e) 10,000 11,000
Insight Communications Co.,
11.250% 03/01/00 5,350 5,517
International CableTel, Inc.:
stepped coupon, (12.750% 04/15/00)
(a) 04/15/05 1,500 1,121
stepped coupon, (11.500% 02/01/01)
(a) 02/01/06 7,000 4,742
Marcus Cable Co.:
stepped coupon, (13.500% 08/01/99)
(a) 08/01/04 5,000 4,088
stepped coupon, (14.250% 06/15/00)
(a) 12/15/05 2,000 1,435
11.875% 10/01/05 6,500 6,971
Rogers Cablesystems, Inc.,
10.000% 03/15/05 4,485 4,788
Telewest Communication PLC,
stepped coupon, (11.000% 10/01/00)
(a) 10/01/07 9,000 6,221
Videotron Holding PLC,
stepped coupon, (11.125% 07/01/99)
(a) 07/01/04 1,250 1,094
---------
60,261
---------
COMMUNICATIONS - 2.3%
Brooks Fiber Properties, Inc.,
stepped coupon, (11.875% 11/01/01)
(a) 11/01/06(c) 4,000 2,550
Intermedia Communications of Florida, Inc.,
stepped coupon, (12.500% 05/15/01)
(a) 05/15/06 3,000 1,973
Lodgenet Entertainment Corp.,
10.250% 12/15/06(c) 2,000 2,000
Sprint Spectrum L.P.,
stepped coupon, (12.500% 08/15/01)
(a) 08/15/06 12,500 8,438
Teleport Communications, Inc.,
stepped coupon, (11.125% 07/01/01)
(a) 07/01/07 9,750 6,703
---------
21,664
---------
ELECTRIC, GAS & SANITARY SERVICES - 1.4%
Mesa Operating Co.,
stepped coupon, (11.625% 07/01/01)
(a) 07/01/06 19,000 13,158
---------
ELECTRIC SERVICES - 0.2%
California Energy Co., Inc.,
9.500% 09/15/06 2,000 2,055
---------
GAS SERVICES - 1.9%
California Energy Co., Inc.,
9.875% 06/30/03 5,750 5,980
HS Resources, Inc.,
9.250% 11/15/06(c) 9,000 9,247
Midland Cogeneration Venture L.P.,
10.330% 07/23/02 2,483 2,647
---------
17,874
---------
MOTOR FREIGHT & WAREHOUSING - 0.4%
Blue Bird Body Co.,
10.750% 11/15/06 1,375 1,437
Ryder TRS, Inc.,
10.000% 12/01/06(c) 2,500 2,600
---------
4,037
---------
TELECOMMUNICATIONS - 8.9%
Brooks Fiber Properties, Inc.,
stepped coupon, (10.875% 03/01/01)
(a) 03/01/06 2,000 1,335
EchoStar Satellite Broadcasting Corp.,
stepped coupon, (13.125% 03/15/00)
(a) 03/15/04 7,500 5,662
EchoStar Communications Corp.,
stepped coupon, (12.875% 06/01/99)
(a) 06/01/04 15,500 12,865
ICG Holding, Inc.,
stepped coupon, (13.500% 09/15/00)
(a) 09/15/05 10,900 7,821
IntelCom Group (USA), Inc.,
stepped coupon, (12.500% 05/01/01)
(a) 05/01/06 2,000 1,335
MFS Communications, Inc.,
stepped coupon, (8.875% 01/15/01)
(a) 01/15/06 7,000 5,119
Nextel Communications, Inc.,
stepped coupon, (9.750% 02/15/99)
(a) 08/15/04 8,000 5,450
Omnipoint Corp.,
11.625% 08/15/06 4,000 4,170
Panamsat Corp., L.P.,
stepped coupon, (11.375% 08/01/98)
(a) 08/01/03 16,000 14,840
PriCellular Wireless Corp.,
stepped coupon, (14.000% 11/15/97)
(a) 11/15/01 4,000 3,960
stepped coupon, (12.250% 10/01/98)
(a) 10/01/03 3,165 2,722
10.750% 11/01/04(c) 4,000 4,165
Shared Tech Fairchild, Inc.,
stepped coupon, (12.250% 03/01/99)
(a) 03/01/06 11,000 9,185
USA Mobile Communications Holdings, Inc.,
14.000% 11/01/04 1,500 1,697
WinStar Communications, Inc.,
stepped coupon, (14.000% 10/15/00)
(a) 10/15/05 5,600 3,423
---------
83,749
---------
TOTAL CORPORATE FIXED INCOME BONDS & NOTES
(cost of $826,638) 855,895
---------
FOREIGN GOVERNMENT OBLIGATIONS - 0.4%
--------------------------------------------------------------------------
Argentina Global Bonds,
(cost of $3,734) 11.000% 10/09/06(f) 3,750 3,930
---------
TOTAL BONDS & NOTES (cost of $830,372) 859,825
---------
PREFERRED STOCKS - 4.3% SHARES
--------------------------------------------------------------------------
MANUFACTURING - 0.2%
PRINTING & PUBLISHING
K-III Communications, Corp.,
Sr. Exchangeable $2.850 60 1,613
---------
--------------------------------------------------------------------------
RETAIL TRADE - 0.2%
RESTAURANTS
Supermarkets General Holdings, $3.520 60 1,605
---------
--------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 3.9%
CABLE
Cablevision Systems Corp.:
11.75% PIK, Series G 49 4,576
11.125% Series M, PIK 90 8,084
K-III Communications Corp.,
10.000% 15 1,463
PanAmSat Corp.,
Series 12.75% 2 2,461
Time Warner Inc., 10.25%, Series M 18 19,064
---------
35,648
---------
TOTAL PREFERRED STOCKS (cost of $39,516) 38,866
---------
COMMON STOCKS - 0.5% SHARES VALUE
--------------------------------------------------------------------------
MANUFACTURING - 0.2%
CHEMICALS - 0.0%
Crompton & Knowles Corp. 14 274
---------
FOOD & KINDRED PRODUCTS - 0.2%
Darling International, Inc. (g) 18 518
Dr. Pepper Bottling Company of Texas,
Series A (g) 80 1,040
---------
1,558
---------
--------------------------------------------------------------------------
MINING & ENERGY - 0.1%
OIL & GAS EXTRACTION - 0.0%
Mesa, Inc. (g) 74 387
---------
OIL & GAS FIELD SERVICES - 0.1%
Parker Drilling Co. (g) 100 963
---------
--------------------------------------------------------------------------
RETAIL TRADE -0.0%
MISCELLANEOUS RETAIL - 0.0%
Macleod-Stedman, Inc. (g)(h) 425 4
Pharmhouse Corp. (g) 1 6
---------
10
---------
RESTAURANTS - 0.0%
Host Marriott Corp. 8 120
---------
--------------------------------------------------------------------------
SERVICES - 0.2%
AMUSEMENT & RECREATION - 0.1%
Alliance Gaming Corp. (g) 200 875
---------
ELECTRIC SERVICES - 0.1%
Gulf Canada Resources Ltd. (g) 150 1,106
Great Bay Power Co. (g) (i)
---------
1,106
---------
GAS SERVICES - 0.0%
United Gas Holdings Corp. (g)(h) 22 312
---------
LOCAL & SUBURBAN TRANSIT - 0.0%
Greyhound Lines, Inc., 12.50% Escrow
Receipt (g)(h) 2 (i)
Greyhound Lines, Inc., 13% Escrow
Receipt (g)(h) 1 (i)
---------
(i)
---------
MOTOR FREIGHT & WAREHOUSING - 0.0%
St. Johnsbury Trucking Co. (g)(h) 79 79
Sun Carriers, Inc. (g)(h) 326 3
---------
82
---------
--------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.0%
COMMUNICATIONS
EchoStar Communications Corp. (g) 9 198
---------
TOTAL COMMON STOCKS (cost of $5,165) 5,885
---------
WARRANTS (f) - 0.0%
--------------------------------------------------------------------------
MANUFACTURING - 0.0%
RUBBER & PLASTIC
BPC Holdings Corp.
expires 04/15/04
4 70
---------
--------------------------------------------------------------------------
SERVICES - 0.0%
HEALTH SERVICES - 0.0%
Wright Medical Technology
expires 06/15/03
1 187
---------
HOTELS, CAMPS & LODGING - 0.0%
Capital Gaming International,
Inc.,
expires 02/01/99
6 (i)
---------
--------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.0%
COMMUNICATIONS
American Telecasting, Inc.
expires 08/10/00 (c) 9 78
Intermedia Communications, Inc.
expires 06/01/00 1 35
Wireless One Inc.
expires 10/19/00 20 20
---------
133
---------
TOTAL WARRANTS (cost of $468) 390
---------
TOTAL INVESTMENTS - 96.2% (cost of $875,521)(j) 904,966
---------
SHORT-TERM OBLIGATIONS - 2.5% PAR
- ----------------------------------------------------------------------------
Repurchase agreement with Lehman Brothers,
Inc., dated 12/31/96, due 01/02/97 at
6.900%, collateralized by U.S. Treasury
notes with various maturities to 2022,
market value $23,617 (repurchase proceeds
$23,306) $ 23,297 23,297
OTHER ASSETS & LIABILITIES, NET - 1.3% 11,980
- ----------------------------------------------------------------------------
NET ASSETS - 100.0% $ 940,243
---------
NOTES TO INVESTMENT PORTFOLIO:
- ----------------------------------------------------------------------------
(a) Currently zero coupon. Shown parenthetically is the interest to be paid and
the date the Fund will begin accruing this rate.
(b) Zero coupon bond.
(c) Security is 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 December 31,
1996, the value of these securities amounted to $124,201 or 13.2% of net
assets.
(d) This issuer is in default of certain debt covenants.
(e) This security is Canadian. Par amount is stated in U.S. dollars.
(f) This security is Argentinean. Par amount is stated in U.S. dollars.
(g) Non-income producing.
(h) The value of this security represents fair value as determined in good faith
under the direction of the Trustees.
(i) Rounds to less than one.
(j) Cost for federal income tax purposes is $876,116.
Acronym Name
------- ---------------
PIK Payment-In-Kind
See notes to financial statements.
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
DECEMBER 31, 1996
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $875,521) $ 904,966
Short-term obligations 23,297
----------
928,263
Receivable for:
Interest $ 17,159
Fund shares sold 4,233
Dividends 66
Other 28 21,486
-------- ----------
Total Assets 949,749
LIABILITIES
Payable for:
Investments purchased 7,814
Fund shares repurchased 1,581
Accrued:
Deferred Trustees fees 7
Other 104
--------
Total Liabilities 9,506
----------
NET ASSETS 940,243
----------
Net asset value & redemption price per share -
Class A ($523,065/75,556) $6.92
----------
Maximum offering price per share - Class A
($6.92/0.9525) $7.27 (a)
----------
Net asset value & offering price per share -
Class B ($411,124/59,386) $6.92 (b)
----------
Net asset value & redemption price per share -
Class D ($6,054/875) $6.92 (b)
----------
Maximum offering price per share - Class D
($6.92/0.9900) $6.99
----------
COMPOSITION OF NET ASSETS
Capital paid in 968,819
Undistributed net investment income 1,450
Accumulated net realized loss (59,471)
Net unrealized appreciation 29,445
----------
$ 940,243
==========
(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.
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(in thousands)
INVESTMENT INCOME
Interest $ 82,916
Dividends 3,746
-----------
Total investment income 86,662
EXPENSES
Management fee $ 5,087
Service fee 2,120
Distribution fee - Class B 2,735
Distribution fee - Class D 18
Transfer agent 2,425
Bookkeeping fee 306
Trustees fee 53
Custodian fee 43
Audit fee 50
Legal fee 11
Registration fee 118
Reports to shareholders 31
Other 13
-----------
13,010
Custodian credits earned (43) 12,967
----------- -----------
Net Investment Income 73,695
-----------
NET REALIZED & UNREALIZED GAIN ON PORTFOLIO POSITIONS
Net realized gain 22,242
Net unrealized appreciation during
the period 2,536
-----------
Net Gain 24,778
-----------
Net Increase in Net Assets from Operations $ 98,473
===========
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED
(in thousands) DECEMBER 31
-----------------------------
INCREASE (DECREASE) IN NET ASSETS 1996 1995
Operations:
Net investment income $ 73,695 $ 65,171
Net realized gain (loss) 22,242 (6,731)
Net unrealized appreciation 2,536 57,931
----------- ---------
Net Increase from Operations 98,473 116,371
Distributions:
From net investment income - Class A (43,790) (40,139)
From net investment income - Class B (30,452) (25,372)
From net investment income - Class D (199) --
In excess of net investment income - Class A -- (922)
In excess of net investment income - Class B -- (583)
----------- ---------
24,032 49,355
----------- ---------
Fund Share Transactions (a):
Receipts for shares sold - Class A 180,185 125,401
Value of distributions reinvested - Class A 19,557 18,081
Cost of shares repurchased - Class A (156,993) (95,780)
----------- ---------
42,749 47,702
----------- ---------
Receipts for shares sold - Class B 170,461 112,679
Value of distributions reinvested - Class B 14,258 13,181
Cost of shares repurchased - Class B (135,147) (48,173)
----------- ---------
49,572 77,687
----------- ---------
Receipts for shares sold - Class D 7,808 --
Value of distributions reinvested - Class D 146 --
Cost of shares repurchased - Class D (2,037) --
----------- ---------
5,917 --
----------- ---------
Net Increase from Fund Share Transactions 98,238 125,389
----------- ---------
Total Increase 122,270 174,744
NET ASSETS
Beginning of period 817,973 643,229
----------- ---------
End of period (including undistributed net
investment income of $1,450 and $99,
respectively) $ 940,243 $ 817,973
=========== =========
(a) Class D shares were initially offered on January 15, 1996.
Continued on next page.
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS - CONT.
YEAR ENDED
DECEMBER 31
-----------------------------
1996 1995
NUMBER OF FUND SHARES (a)
Sold - Class A 26,664 19,185
Issued for distributions reinvested - Class A 2,883 2,749
Repurchased - Class A (23,201) (14,576)
------- -------
6,346 7,358
------- -------
Sold - Class B 25,190 17,179
Issued for distributions reinvested - Class B 2,102 2,003
Repurchased - Class B (19,949) (7,357)
------- -------
7,343 11,825
------- -------
Sold - Class D 1,153 --
Issued for distributions reinvested - Class D 21 --
Repurchased - Class D (299) --
------- -------
875 --
------- -------
(a) Class D shares were initially offered on January 15, 1996.
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1. ACCOUNTING POLICIES
................................................................................
ORGANIZATION: Colonial High Yield Securities Fund (the Fund), a series of
Colonial Trust I, 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 high
current income and total return by investing primarily in lower rated corporate
debt securities. The Fund may issue an unlimited number of shares. The Fund
offers three classes of shares: Class A, Class B and Class D. Class A shares are
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. Class D shares are subject to a reduced front-end sales charge, a
contingent deferred sales charge on redemptions made within one year after
purchase, and a continuing distribution fee.
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 significant
accounting policies are 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.
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 rate.
Portfolio positions which cannot be valued as set forth above are valued at fair
value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: All income,
expenses (other than the Class B and Class D 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 and Class D 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 and Class D 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 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 gain (loss) 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 dividend and interest
income and foreign withholding taxes.
The Fund does not distinguish that portion of gains (losses) on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included with
the net realized and unrealized gains (losses) from investments.
OTHER: Corporate actions are recorded on the ex-date (except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware of
such), net of nonrebatable tax withholdings. Where a high level of uncertainty
as to collection exists, income on securities is recorded net of all tax
withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 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 reimbursement
for certain out of pocket expenses.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Colonial Investment
Services, Inc. (the Distributor), an affiliate of the Adviser, is the Fund's
principal underwriter. For the year ended December 31, 1996, the Fund has been
advised that the Distributor retained net underwriting discounts of $139,836 on
sales of the Fund's Class A shares and received contingent deferred sales
charges (CDSC) of $1,044,584 and $18,117 on Class B and Class D share
redemptions, respectively.
The Fund has adopted a 12b-1 plan which requires it to pay the Distributor a
service fee equal to 0.25% annually of the Fund's net assets as of the 20th of
each month. The plan also requires the payment of a distribution fee to the
Distributor equal to 0.75% annually of the average net assets attributable to
Class B and Class D shares only.
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.
The Fund has an agreement with its custodian bank under which $42,952 of
custodian fees have been reduced by balance credits applied during the year
ended December 31, 1996. The Fund could have invested a portion of the assets
utilized in connection with the expense offset arrangements in an income
producing asset if it had not entered into such agreements.
NOTE 3. PORTFOLIO INFORMATION
................................................................................
INVESTMENT ACTIVITY: During the year ended December 31, 1996, purchases and
sales of investments, other than short-term obligations, were $1,243,305,579 and
$1,173,577,221, respectively, of which $16,675,000 and $65,771,484,
respectively, were U.S. government securities.
Unrealized appreciation (depreciation) at December 31, 1996, based on cost of
investments for federal income tax purposes was:
Gross unrealized appreciation $37,848,537
Gross unrealized depreciation (8,998,539)
-----------
Net unrealized appreciation $28,849,998
===========
CAPITAL LOSS CARRYFORWARDS: At December 31, 1996, capital loss carryforwards
available (to the extent provided in regulations) to offset future realized
gains were approximately as follows:
Year of Capital loss
expiration carryforward
------------ ------------
1999 $28,008,000
2000 4,852,000
2002 9,495,000
2003 16,521,000
-----------
$58,876,000
===========
Expired capital loss carryforwards, if any, are recorded as a reduction of
capital paid in.
To the extent loss carryforwards are used to offset any future realized gains,
it is unlikely that such gains would be distributed since they may be taxable to
shareholders as ordinary income.
OTHER: There are certain additional risks involved when investing in foreign
securities that are not inherent with investments in domestic securities. These
risks may involve foreign currency exchange rate fluctuations, adverse political
and economic developments and the possible prevention of currency exchange or
other foreign governmental laws or restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
NOTE 4. 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 year ended December 31, 1996.
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
Year ended December 31
------------------------------------
1996
Class A Class B Class D (a)
------- ------- -------
Net asset value -
Beginning of period $ 6.750 $ 6.750 $ 6.780
------- ------- --------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.625 0.574 0.554
Net realized and unrealized
gain (loss) 0.160 0.160 0.130
------- ------- --------
Total from Investment
Operations 0.785 0.734 0.684
------- ------- --------
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment income (0.615) (0.564) (0.544)
------- ------- --------
Net asset value - End of period $ 6.920 $ 6.920 $ 6.920
------- ------- --------
Total return (b) 12.21% 11.38% 10.56%(c)
------- ------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.20%(d) 1.95%(d) 1.95%(d)(e)
Net investment income 9.02%(d) 8.27%(d) 8.27%(d)(e)
Portfolio turnover 145% 145% 145%
Net assets at end of period (000) $ 523,065 $ 411,124 $ 6,054
(a) Class D shares were initially offered on January 15, 1996. 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) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(e) Annualized.
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
<TABLE>
Year ended December 31
------------------------------------------------------------------------------------
1995 1994 1993 1992
Class A Class B Class A Class B Class A Class B Class A Class B (a)
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 6.300 $ 6.300 $ 6.950 $ 6.950 $ 6.400 $ 6.400 $ 5.860 $ 6.360
------- ------- ------- ------- ------- ------- ------- -------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.615 0.566 0.599 0.549 0.634 0.585 0.669 0.332
Net realized and unrealized
gain (loss) 0.452 0.452 (0.622) (0.622) 0.576 0.576 0.531 0.057
------- ------- ------- ------- ------- ------- ------- -------
Total from Investment Operations 1.067 1.018 (0.023) (0.073) 1.210 1.161 1.200 0.389
------- ------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment income (0.603) (0.555) (0.627) (0.577) (0.660) (0.611) (0.660) (0.349)
In excess of net investment income (0.014) (0.013) --- --- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Total from Distributions
Declared to Shareholders (0.617) (0.568) (0.627) (0.577) (0.660) (0.611) (0.660) (0.349)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value - End of period $ 6.750 $ 6.750 $ 6.300 $ 6.300 $ 6.950 $ 6.950 $ 6.400 $ 6.400
------- ------- ------- ------- ------- ------- ------- -------
Total return (b) 17.65% 16.78% (0.34)% (1.09)% 19.69% 18.83% 21.15% 5.53%(c)
------- ------- ------- ------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.21%(d) 1.96%(d) 1.23% 1.98% 1.23%(e) 1.98%(e) 1.26% 2.01%(e)
Net investment income 9.14%(d) 8.39%(d) 9.03% 8.28% 9.55%(e) 8.80%(e) 10.64% 9.89%(e)
Portfolio turnover 95% 95% 123% 123% 122% 122% 66% 66%
Net assets at end of period (000) $ 466,905 $ 351,068 $ 389,791 $ 253,438 $440,942 $222,536 $346,225 $ 94,653
</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.
(c) Not 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.
(e) 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
(the "Fund") (a series of Colonial Trust I) at December 31, 1996, 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, 1996 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, 1997
<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 on
most funds; $25 for an IRA account.
FREE EXCHANGES*: Exchange all or part of your account into the same share class
of another Colonial fund, by phone or mail.
EASY ACCESS TO YOUR MONEY*: Make withdrawals from your account by phone, by mail
or, for certain funds, by check.
ONE-YEAR REINSTATEMENT PRIVILEGE: If you need access to your money, but then
choose to return it to Colonial within one year, you can reinvest in any
Colonial fund of the same share class without any penalty or sales charge.
FUNDAMATIC: Make periodic investments as low as $50 from your checking account
to your Colonial account.
SYSTEMATIC WITHDRAWAL PLAN (SWP): Receive monthly, quarterly or semiannual
payments via check or bank transmission. There is a $5,000 account value
required, but no minimum for the payment amount. The maximum annual withdrawal
is 12% of account balance at time SWP is established. SWPs by check are
processed on the 10th of each month. Dividends and capital gains must be
reinvested.
AUTOMATED DOLLAR COST AVERAGING: Transfer money on a monthly basis from any
Colonial fund with a balance of $5,000 into the same share class of up to four
other Colonial funds. Minimum for each transfer is $100.
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.
Exchanges are not available on all funds. Investors who purchase Class B or D
shares (for applicable funds), or $1 million or more of Class A shares, may be
subject to a contingent deferred sales charge.
<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 [*]
To speak with a shareholder services representative about your account, call
Monday to Friday, 8:00 a.m. to 8:00 p.m. ET, and Saturdays from February through
mid-April, 10:00 a.m. to 2:00 p.m. ET.
COLONIAL TELEPHONE TRANSACTION DEPARTMENT - 1-800-422-3737
To purchase, exchange, or sell shares by telephone, call Monday to Friday,
9:00 a.m. to 7:00 p.m. ET. Transactions received after the close of the New York
Stock Exchange will receive the next business day's closing price.
LITERATURE - 1-800-426-3750
To request literature on any Colonial fund, call Monday to Friday, 8:30 a.m. to
6:30 p.m. ET.
BY MAIL
COLONIAL INVESTORS SERVICE CENTER, INC.
P.O. BOX 1722
BOSTON, MA 02105-1722
<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.)
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SHAREHOLDER SERVICES AND TRANSFER AGENT
The Transfer Agent for Colonial High Yield Securities Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial High Yield Securities Fund mails one shareholder report to each
shareholder address. If you would like more than one report, please call
Colonial at 1-800-426-3750 and additional reports will be sent to you.
This report has been prepared for shareholders of Colonial High Yield Securities
Fund. This report may also be used as sales literature when preceded or
accompanied by the current prospectus which provides details of sales charges,
investment objective and operating policies of the Fund.
<PAGE>
[LOGO]
COLONIAL
Mutual Funds
Mutual Funds for
Planned Portfolios
TRUSTEES
ROBERT J. BIRNBAUM
Retired (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief
Operating Officer, New York Stock Exchange, Inc.)
TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
LORA S. COLLINS
Attorney (formerly Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel)
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
WILLIAM D. IRELAND, JR.
Retired (formerly Chairman of the Board, Bank of New England-Worcester)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
WILLIAM E. MAYER
Partner, Development Capital, L.L.C. (formerly Dean, College of Business and
Management, University of Maryland; Dean, Simon Graduate School of Business,
University of Rochester; Chairman and Chief Executive Officer, CS 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) 1997
A Liberty Financial Company (NYSE: L)
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
HY-02/235D-1296 M (2/97)
