[COLONIAL FLAG LOGO]
COLONIAL
HIGH YIELD SECURITIES FUND
SEMIANNUAL REPORT
JUNE 30, 1997
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NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
------------------------------
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COLONIAL HIGH YIELD SECURITIES FUND HIGHLIGHTS
JANUARY 1, 1997 - JUNE 30, 1997
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:
* High current income and total return potential
* Diversification and thorough credit analysis
* Management by experienced high yield specialists
PORTFOLIO MANAGER COMMENTARY: "Our focus on higher, quality high yield bonds
enabled us to achieve attractive returns without some of the volatility that our
competitors experienced." -- Andrea Feingold
<TABLE>
COLONIAL HIGH YIELD SECURITIES FUND PERFORMANCE
<CAPTION>
CLASS A CLASS B CLASS D(1)
<S> <C> <C> <C>
Inception dates 10/21/71(2) 6/8/92 1/15/96
Distributions declared per share $0.300 $0.274 $0.274
SEC yields on June 30, 1997(3) 7.85% 7.47% 7.79%
6-month total returns, assuming reinvestment 6.21% 5.82% 5.82%
of all distributions and no sales charge or
contingent deferred sales charge (CDSC)
Net asset value per share on June 30, 1997 $7.04 $7.04 $7.04
</TABLE>
(1) Effective July 1, 1997, Class D shares were converted to Class C shares.
(2) Colonial High Yield Securities Fund adopted its current investment policies
on 3/31/80.
(3) The 30-day SEC yields 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(4) TOP FIVE SECTORS(4)
(as of 6/30/97) (as of 6/30/97)
- ------------------------------------- --------------------------------------
1. Time Warner ................3.3% 1. Transportation, Electric, Gas
2. Cablevision, Inc. ..........3.2% & Sanitation Services ......15.8%
3. Revlon Consumer Products ...3.1% 2. Manufacturing ..............15.6%
4. Mesa Capital Corp. .........2.9% 3. Retail Trade ................7.1%
5. U.S. Air Inc. ..............2.6% 4. Mining & Energy .............7.0%
5. Telecommunications ..........6.2%
(4) Portfolio holdings by issuer 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 breakdowns. 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.
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2
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PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
I'm pleased to present your Fund's semiannual report
for the six months ended June 30, 1997.
During the first half of 1997, the high yield
corporate bond market was one of the best performing
fixed income markets. This year, U.S. corporate
profits are growing at a double digit rate, [PHOTO]
unemployment is at a 25-year low and inflation
is just 2.5%. It is an environment that's sending
the Dow Jones Industrial Average to record levels,
and making it easier for issuers of high yield bonds to meet their debt
commitments through available liquidity and stronger earnings.
To some extent, high yield bonds are adversely affected by the fear of inflation
and the higher interest rates that result. Like all bonds, they make a fixed
semiannual payment to investors. When the economy was growing at nearly 6% in
the first quarter, many investors assumed inflation was on the way.
Fortunately, by late April, the environment began to improve. Interest rates
eased downward. The economy was slowing, inflation was still low and the Federal
Reserve Board decided against boosting short-term rates a second time in two
months. When the dust settled, interest rates were modestly higher on June 30,
1997 compared to January 1, 1997.
But the value of high yield securities is tied less to interest rate changes and
more to the financial strength of the company issuing the bonds. To reduce risk,
the portfolio is broadly diversified, with more than 100 issues across many
different sectors.
Indeed, because these bonds have lower credit ratings, investing in high yield
corporate bonds puts a special responsibility on our analytical staff to search
for securities that appear undervalued and have the potential for capital
appreciation. We will continue to search for these bonds as well as provide you
with high income consistent with prudent portfolio management.
This report provides you with a closer look at your Fund's performance as well
as the portfolio manager's investment strategy. In addition, the report lists
every security in the portfolio as of June 30, 1997, organized by category such
as manufacturing, mining and energy, retail trade and services.
Thank you for the opportunity to help you meet your investment goals.
Sincerely,
/s/ Harold W. Cogger
Harold W. Cogger
President
August 12, 1997
Because market conditions change frequently, there can be no assurance that the
trends described here will continue.
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3
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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.
HIGH YIELD CORPORATES GET A BOOST FROM THE ECONOMY
The U.S. economy grew at an annual rate of approximately 3.5% during the first
half of 1997, a strong overall performance. A healthy economy helps high yield
issuers stay profitable and meet their debt commitments. Because credit quality
is such an important element in this market, it tends to overshadow other
factors normally associated with bonds. Rising interest rates -- so crucial to
most fixed-income securities --has less of a negative impact on high yield
bonds.
MERGERS HELP PERFORMANCE
This year, we benefited from merger and acquisition activity, as some of our
high yield issuers were acquired by investment grade companies. A few examples
include Mesa, an energy company that merged with Parker & Parsley, an investment
grade company. Greenwich Air and UNC, both aerospace manufacturing and service
companies in the portfolio, were acquired by General Electric Corp., a AAA rated
company. When a top-rated business acquires one of our high yield issuers, the
price of the high yield bond rises to reflect the stronger financial resources
of the new owner.
THE FUND'S TOTAL RETURN OUTPERFORMED ITS BENCHMARK
For the six months ended June 30, 1997, the total return for Class A shares,
based on net asset value, was 6.21%. In comparison, the CS First Boston High
Yield Index, an unmanaged benchmark, showed a total return of 5.86%. As of June
30, 1997, the 30-day SEC yield for Class A shares was 7.85%.
STRATEGY: STICK WITH B OR BETTER
The Fund was fully invested during the period, with a focus on single B issues
- -- the mid-quality segment of the high yield market. The higher quality end of
the market tends to trade more closely with Treasurys, and the lower quality end
tends to be more vulnerable to credit risk.
Many of our companies are large household names such as Time Warner, U.S. Air
and Revlon. In general, we want to own the market leaders in a given industry.
Time Warner has valuable diversified media assets and outstanding management
that recognizes the importance of reducing debt. U.S. Air benefited from record
earnings and increased traffic, as well as a favorable change in management with
expectations of successful negotiations with unions. Revlon has reported 12
consecutive quarters of record profits, and recently received a new equity
investment by its largest shareholder.
OUTLOOK: BOOST QUALITY AS THE ECONOMY SLOWS
The current economic growth cycle is more than seven years old. If the economy
slows down substantially, we think it may be prudent to boost the quality -- and
remove the economic cyclicality of the high yield portfolio. Although we
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4
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think the environment remains healthy for high yield companies, we expect to
avoid bonds issued by automakers and other companies whose fortunes depend on
the strength of the economy. We have increased our emphasis on bonds issued by
companies that we expect will probably be less affected by the economic cycle,
such as supermarkets and telecommunications. In general, we still believe that
high yield bonds should continue to be among the better performers in the
fixed-income universe.
<TABLE>
COLONIAL HIGH YIELD SECURITIES FUND INVESTMENT PERFORMANCE
VS. THE CS FIRST BOSTON HIGH YIELD INDEX
Change in Value of $10,000 from 6/30/87 - 6/30/97
Based on NAV and MOP for Class A Shares
<CAPTION>
CHYSFA NAV MOP FIRST BOSTON
<S> <C> <C> <C>
Jun 30, 87 10000 9525 10000
Sep 30, 87 9919.155 9447.995 9955
Dec 31, 87 9922.859 9451.523 10189
Mar 31, 88 10506.2 10007.16 10768
Jun 30, 88 10842.15 10327.15 11130
Sep 30, 88 11069.01 10543.23 11326
Dec 31, 88 11212.76 10680.15 11580
Mar 31, 89 11406.04 10864.26 11782
Jun 30, 89 11725.12 11168.18 12207
Sep 30, 89 11587.66 11037.24 11955
Dec 31, 89 11219.29 10686.38 11625
Mar 31, 90 10684.8 10177.27 11325
Jun 30, 90 11212.65 10680.05 11974
Sep 30, 90 10052.22 9574.737 10892
Dec 31, 90 9552.52 9098.774 10883
Mar 31, 91 11010.83 10487.82 12899
Jun 30, 91 12049.89 11477.52 13855
Sep 30, 91 13012.33 12394.25 14916
Dec 31, 91 13744.63 13091.75 15646
Mar 31, 92 15149.16 14429.57 16926
Jun 30, 92 15695.15 14949.63 17342
Sep 30, 92 16405.21 15625.96 17968
Dec 31, 92 16651.48 15860.54 18251
Mar 31, 93 17686.54 16846.43 19524
Jun 30, 93 18614.91 17730.7 20283
Sep 30, 93 18958.69 18058.15 20786
Dec 31, 93 19930.53 18983.83 21703
Mar 31, 94 19979.91 19030.87 21472
Jun 30, 94 19852.8 18909.79 21162
Sep 30, 94 19902.7 18957.32 21500
Dec 31, 94 19862.11 18918.66 21491
Mar 31, 95 20706.32 19722.77 22502
Jun 30, 95 21763.68 20729.9 23807
Sep 30, 95 22505.93 21436.9 24522
Dec 31, 95 23366.83 22256.9 25277
Mar 31, 96 23779.16 22649.65 25773
Jun 30, 96 24099.75 22955.01 26180
Sep 30, 96 25342.27 24138.52 27162
Dec 31, 96 26220.6 24975.12 28360
Mar 31, 97 26484.52 25226.5 28778
Jun 30, 97 27809.68 26488.72 30021
</TABLE>
A hypothetical $10,000 investment in Class B shares made on 6/8/92 at net asset
value (NAV) would have been valued at $17,186 on 6/30/97. The same investment
after deducting the applicable contingent deferred sales charges (CDSC) would
have grown to $16,986 on 6/30/97. A $10,000 investment in Class D shares made on
1/15/96 at NAV would have been valued at $11,699 on 6/30/97. The same investment
after deducting the maximum sales charge and applicable CDSC would be valued at
$11,582 on 6/30/97. 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 are not actively
managed. It is not possible to invest in an index.
AVERAGE ANNUAL TOTAL RETURNS
As of June 30, 1997 (most recent quarter end)
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CLASS A SHARES CLASS B SHARES CLASS D SHARES
INCEPTION 10/21/71(1) 6/8/92 1/15/96
NAV MOP NAV w/CDSC NAV MOP w/CDSC
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1 year 15.56% 10.07% 14.70% 9.70% 14.70% 12.56%
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5 years 12.15 11.07 11.29 11.03 -- --
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10 years 10.78 10.25 -- -- -- --
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Since inception/
change in policy 12.88 12.57 11.28 11.02 11.34 10.58
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(1) Colonial High Yield Securities Fund adopted its current investment policies
on 3/31/80.
Returns 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. Maximum offering price (MOP) returns include the
maximum sales charges of 4.75% for Class A and 1% for Class D. The CDSC returns
reflect the maximum charges of 5% for one year, 2% for five years and 2% since
inception for Class B and 1% for Class D. Effective July 1, 1997, Class D shares
were converted to Class C shares.
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5
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<TABLE>
INVESTMENT PORTFOLIO
JUNE 30, 1997 (UNAUDITED, IN THOUSANDS)
<CAPTION>
BONDS & NOTES - 88.6% PAR VALUE
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CORPORATE FIXED INCOME BONDS & NOTES - 88.4%
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CONSTRUCTION - 0.1%
BUILDING CONSTRUCTION
Falcon Building Products
stepped coupon, (10.500% 06/15/02)
<S> <C> <C> <C> <C>
(a) 06/15/07(b) $ 1,500 $ 900
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MANUFACTURING - 34.7%
CHEMICALS & ALLIED PRODUCTS - 8.6%
Agricultural Minerals Co., L.P.,
10.750% 09/30/03 9,050 9,616
Applied Extrusion Technologies Inc.,
11.500% 04/01/02 7,000 7,350
Energy Ventures, Inc.,
10.250% 03/15/04 3,850 4,139
Revlon Consumer Products Corp.,
10.500% 02/15/03 16,000 17,080
Revlon Worldwide
(c) 03/15/01 22,000 14,905
Sterling Chemicals Holdings
13.500% 08/15/08 4,000 2,650
Sterling Chemicals, Inc.:
11.250% 04/01/07(b) 3,000 3,187
11.750% 08/15/06 14,000 15,120
Texas Petrochemical Corp.,
11.125% 07/01/06 9,500 10,165
Trans-Resources Corp.,
11.875% 07/01/02 4,000 4,120
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88,332
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ELECTRONIC & ELECTRICAL EQUIPMENT - 5.8%
Amphenol Corp.,
9.875% 05/15/07 8,900 9,189
Delco Remy International, Inc.,
10.625% 08/01/06(b) 2,765 2,945
K&F Industries, Inc.,
10.375% 09/01/04 12,595 13,539
L-3 Communications Corp.,
10.375% 05/01/07(b) 2,250 2,385
LDM Technologies Inc.,
10.750% 01/15/07 9,700 10,258
Unisys Corp.,
11.750% 10/15/04 20,000 21,700
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60,016
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</TABLE>
6
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<TABLE>
INVESTMENT PORTFOLIO/JUNE 30, 1997
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FABRICATED METAL - 1.6%
Euramax International PLC,
<S> <C> <C> <C> <C>
11.250% 10/01/06(d) $ 12,750 $ 13,706
Renco Metals, Inc.,
11.500% 07/01/03 3,000 3,210
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16,916
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FOOD & KINDRED PRODUCTS - 0.7%
Pilgrim's Pride Corp.,
10.875% 08/01/03 1,600 1,656
Sun World International,
11.250% 04/15/04(b) 5,350 5,577
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7,233
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MACHINERY & COMPUTER EQUIPMENT - 1.0%
IMO Industries,
11.750% 05/01/06 8,530 10,204
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MEASURING & ANALYZING INSTRUMENTS - 0.6%
Intertek Finance PLC,
10.250% 11/01/06 5,625 5,864
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MISCELLANEOUS MANUFACTURING - 3.8%
Borg Warner Security,
9.625% 03/15/07(b) 6,600 6,699
Building Materials Corp. of America,
stepped coupon, (11.750% 07/01/99)
(a) 07/01/04 14,200 12,886
ISP Holdings Inc.,
9.750% 02/15/02 8,492 9,001
Polymer Group Inc.,
9.000% 07/01/07 3,500 3,444
Shop Vac Corp.,
10.625% 09/01/03 6,500 6,923
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38,953
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PAPER PRODUCTS - 2.8%
Florida Coast Paper LLC,
12.750% 06/01/03 2,000 2,070
Gaylord Container Corp.:
9.750% 06/15/07(b) 1,500 1,504
12.750% 05/15/05 7,000 7,656
Ivaco Inc.,
11.500% 09/15/05 7,500 7,988
Stone Container Corp.:
12.250% 04/01/02 4,500 4,635
10.750% 10/01/02 5,000 5,206
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29,059
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</TABLE>
7
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<TABLE>
INVESTMENT PORTFOLIO/JUNE 30, 1997
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<CAPTION>
CORPORATE FIXED INCOME BONDS &
NOTES - CONT. PAR VALUE
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MANUFACTURING - CONT.
PETROLEUM REFINING - 0.3%
Flores & Rucks, Inc.,
<S> <C> <C> <C> <C>
13.500% 12/01/04 $ 3,000 $ 3,593
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PRIMARY METAL - 4.0%
Algoma Steel, Inc.,
12.375% 07/15/05 19,640 21,751
Kaiser Aluminum & Chemical Corp.:
10.875% 10/15/06 12,025 12,927
12.750% 02/01/03 6,000 6,518
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41,196
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PRINTING & PUBLISHING - 0.6%
Hollinger International Publishing,
9.250% 03/15/07 6,000 6,150
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RUBBER & PLASTIC - 0.4%
Berry Plastics Corp.,
12.250% 04/15/04 3,500 3,850
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STONE, CLAY, GLASS & CONCRETE - 1.6%
Anchor Glass Container Corp.,
11.250% 04/01/05(b) 2,250 2,408
Owens-Illinois, Inc.,
9.950% 10/15/04 13,000 13,747
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16,155
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TEXTILE MILL PRODUCTS - 1.0%
Collins & Aikman CKC,
10.000% 01/15/07 9,950 10,074
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TRANSPORTATION EQUIPMENT - 1.9%
Aftermarket Technology Corp.,
Series B,
12.000% 08/01/04 4,947 5,516
Collins & Aikman Products Co.,
11.500% 04/15/06 12,050 13,647
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19,163
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MINING & ENERGY - 10.9%
CRUDE PETROLEUM & NATURAL GAS - 1.3%
TransAmerica Energy Corp.:
11.500% 06/15/02(b) 8,975 8,751
stepped coupon, (13.000% 06/15/99)
(a) 06/15/02(b) 6,750 4,927
------------
13,678
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</TABLE>
8
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<TABLE>
INVESTMENT PORTFOLIO/JUNE 30, 1997
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OIL & GAS EXTRACTION - 7.9%
DI Industries, Inc.,
<S> <C> <C> <C> <C>
8.875% 07/01/07 $ 2,750 $ 2,709
Forcenergy, Inc.,
9.500% 11/01/06 6,285 6,489
HS Resources, Inc.,
9.250% 11/15/06 11,000 11,055
Mariner Energy Corp.,
10.500% 08/01/06 11,250 11,784
Maxus Energy Corp.,
11.250% 05/01/13 353 360
Mesa Operating Co.:
stepped coupon, (11.625% 07/01/01)
(a) 07/01/06 17,150 13,248
10.625% 07/01/06 13,950 15,851
Nuevo Energy Co.,
9.500% 04/15/06 6,850 7,124
Santa Fe Energy Resources, Inc.,
11.000% 05/15/04 4,000 4,350
United Meridian Corp.,
10.375% 10/15/05 8,000 8,660
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81,630
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OIL & GAS FIELD SERVICES - 1.7%
Falcon Drilling Co., Inc.,
Series B,
9.750% 01/15/01 500 517
Magnum Hunter Resources,
10.000% 06/01/07(b) 6,250 6,211
Parker Drilling Corp.,
9.750% 11/15/06 10,000 10,475
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17,203
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RETAIL TRADE - 6.3%
APPAREL & ACCESSORY STORES - 0.4%
William Carter, Inc.,
10.375% 12/01/06 3,500 3,693
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FOOD STORES - 5.6%
Di Giorgio Corp.,
10.000% 06/15/07 1,800 1,782
Grand Union Co.,
12.000% 09/01/04 2,500 1,813
Pathmark Stores, Inc.:
9.625% 05/01/03 17,000 16,363
stepped coupon, (10.750% 11/01/99)
(a) 11/01/03 3,000 2,070
</TABLE>
9
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<TABLE>
INVESTMENT PORTFOLIO/JUNE 30, 1997
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<CAPTION>
CORPORATE FIXED INCOME BONDS &
NOTES - CONT. PAR VALUE
- ----------------------------------------------------------------------------------
RETAIL TRADE - CONT.
FOOD STORES - CONT.
Ralphs Grocery Co.:
<S> <C> <C> <C> <C>
10.450% 06/15/04 $ 4,000 $ 4,290
10.450% 06/15/04 13,000 13,942
Shoppers Food Warehouse,
9.750% 06/15/04(b) 6,750 6,733
Smiths Food & Drug Centers,
11.250% 05/15/07 2,000 2,350
Star Markets Co.,
13.000% 11/01/04 7,000 7,945
------------
57,288
------------
HOME FURNISHINGS & EQUIPMENT - 0.3%
Syratech Corp.,
11.000% 04/15/07 2,500 2,656
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SERVICES - 9.4%
AMUSEMENT & RECREATION - 0.6%
E&S Holdings Corp.,
10.375% 10/01/06 3,475 3,649
Lodgenet Entertainment PP,
10.250% 12/15/06 2,500 2,531
------------
6,180
------------
BUSINESS SERVICES - 0.4%
Pierce Leahy Corp.:
9.125% 07/15/07 1,000 1,000
11.125% 07/15/06 3,000 3,300
------------
4,300
------------
HOTELS, CAMPS & LODGING - 8.3%
Aztar Corp.,
13.750% 10/01/04 1,500 1,718
Casino Magic-Louisiana,
13.000% 08/15/03(b) 4,000 3,420
Eldorado Resorts LLC,
10.500% 08/15/06 11,000 11,825
Harvey Casinos Resorts,
10.625% 06/01/06 8,500 9,137
HMH Properties, Inc.,
9.500% 05/15/05 12,000 12,480
Horseshoe Gaming LLC,
9.375% 06/15/07(b) 6,000 6,053
Showboat, Inc.,
13.000% 08/01/09 14,470 16,640
</TABLE>
10
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<TABLE>
INVESTMENT PORTFOLIO/JUNE 30, 1997
- ----------------------------------------------------------------------------------
Showboat Marina Partnership,
Series B,
<S> <C> <C> <C> <C>
13.500% 03/15/03 $ 5,000 $ 5,725
Station Casinos, Inc.,
10.125% 03/15/06 4,750 4,797
Wyndham Hotel Corp.,
10.500% 05/15/06 12,500 14,125
------------
85,920
------------
OTHER SERVICES - 0.1%
Citadel Broadcasting Co.,
10.250% 07/01/07 1,500 1,500
------------
- ----------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 27.0%
AIR TRANSPORTATION - 3.8%
Greenwich Air Services, Inc.,
10.500% 06/01/06 4,775 5,491
UNC, Inc.,
11.000% 06/01/06 5,400 6,332
U.S. Air, Inc.,
10.375% 03/01/13 24,154 26,751
------------
38,574
------------
BROADCASTING - 2.7%
NWCG Holding Corp.,
(c) 06/15/99 3,725 3,269
SFX Broadcasting,
10.750% 05/15/06 6,900 7,521
Sullivan Broadcasting, Inc.,
10.250% 12/15/05 9,500 9,690
Young Broadcasting Corp.:
10.125% 02/15/05 1,000 1,050
11.750% 11/15/04 6,000 6,630
------------
28,160
------------
CABLE - 5.6%
Comcast UK Cable Partners Ltd.,
stepped coupon, (11.200% 11/15/00)
(a) 11/15/07 10,500 7,981
Diamond Cable Communication PLC,
stepped coupon, (11.750% 12/15/00)
(a) 12/15/05(d) 5,000 3,375
International CableTel, Inc.:
stepped coupon, (12.750% 04/15/00)
(a) 04/15/05 1,500 1,155
stepped coupon, (11.500% 02/01/01)
(a) 02/01/06 12,000 8,250
</TABLE>
11
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<TABLE>
INVESTMENT PORTFOLIO/JUNE 30, 1997
- ----------------------------------------------------------------------------------
<CAPTION>
CORPORATE FIXED INCOME BONDS &
NOTES - CONT. PAR VALUE
- ----------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - CONT.
CABLE - CONT.
Groupe Videotron Ltd.,
<S> <C> <C> <C> <C>
10.625% 02/15/05(e) $ 10,000 $ 11,150
Marcus Cable Co.:
stepped coupon, (13.500% 08/01/99)
(a) 08/01/04 8,500 7,342
stepped coupon, (14.250% 06/15/00)
(a) 12/15/05 8,100 6,399
Rogers Cablesystems, Inc.,
10.000% 03/15/05 4,485 4,866
Telewest Communication PLC,
stepped coupon, (11.000% 10/01/00)
(a) 10/01/07(d) 9,500 6,887
------------
57,405
------------
COMMUNICATIONS - 6.5%
Allbritton Communications Co.,
9.750% 11/30/07 8,500 8,436
Brooks Fiber Properties, Inc.,
stepped coupon, (11.875% 11/01/01)
(a) 11/01/06 3,000 1,950
Cablevision Systems Corp.,
9.250% 11/01/05 1,500 1,553
Comcast Cellular Corp.,
9.500% 05/01/07(b) 9,250 9,319
Diamond Cable Communications PLC,
stepped coupon, (10.750% 02/15/02)
(a) 02/15/07(b) 6,000 3,540
PriCellular Wireless Corp.:
10.750% 11/01/04 4,000 4,140
stepped coupon, (12.250% 10/01/98)
(a) 10/01/03 3,165 2,967
stepped coupon, (14.000% 11/15/97)
(a) 11/15/01 4,000 4,260
Sprint Spectrum L.P.,
stepped coupon, (12.500% 08/15/01)
(a) 08/15/06 24,700 17,907
Teleport Communications, Inc.,
stepped coupon, (11.125% 07/01/01)
(a) 07/01/07 17,025 12,301
------------
66,373
------------
ELECTRIC, GAS & SANITARY SERVICES - 0.4%
Allied Waste Industries
stepped coupon, (11.300% 06/01/02)
(a) 06/01/07(b) 6,000 3,765
------------
</TABLE>
12
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO/JUNE 30, 1997
- ----------------------------------------------------------------------------------
GAS SERVICES - 0.5%
California Energy Co., Inc.,
<S> <C> <C> <C> <C>
9.875% 06/30/03 $ 2,750 $ 2,943
Midland Cogeneration Venture L.P.,
10.330% 07/23/02 2,355 2,520
------------
5,463
------------
MOTOR FREIGHT & WAREHOUSING - 0.2%
Ryder TRS, Inc.,
10.000% 12/01/06 1,650 1,700
------------
SANITARY SERVICES - 1.4%
Allied Waste North America,
10.250% 12/01/06(b) 13,435 14,359
------------
TELECOMMUNICATION - 5.8%
Brooks Fiber Properties, Inc.,
stepped coupon, (10.875% 03/01/01)
(a) 03/01/06 4,000 2,720
Echostar Communications Corp.,
stepped coupon, (12.875% 06/01/99)
(a) 06/01/04 14,000 11,760
Mcleod Inc.,
stepped coupon, (10.500% 03/01/02)
(a) 03/01/07(b) 10,000 6,350
Nextel Communications, Inc.,
stepped coupon, (9.750% 02/15/99)
(a) 08/15/04 21,500 16,555
Panamsat Corp., L.P.,
stepped coupon, (11.375% 08/01/98)
(a) 08/01/03 16,000 15,520
Shared Technologies Fairchild, Inc.,
stepped coupon, (12.250% 03/01/99)
(a) 03/01/06 7,025 6,305
WinStar Communications, Inc.,
stepped coupon, (14.000% 10/15/00)
(a) 10/15/05 1,100 610
------------
59,820
------------
TRANSPORTATION SERVICES - 0.1%
Williams Scotsman, Inc.,
9.875% 06/01/07 1,500 1,493
------------
TOTAL CORPORATE FIXED INCOME BONDS & NOTES
(cost of $878,795) 908,818
------------
</TABLE>
13
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO/JUNE 30, 1997
- ----------------------------------------------------------------------------------
<CAPTION>
BONDS & NOTES - CONT. PAR VALUE
- ----------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS - 0.2%
- ----------------------------------------------------------------------------------
Republic of Venezuela
<S> <C> <C> <C> <C>
(cost of $1,572) 6.750% 03/31/20(f) $ 2,000 $ 1,575
------------
TOTAL BONDS & NOTES (cost of $880,367) 910,393
------------
PREFERRED STOCKS - 7.1% SHARES
- ----------------------------------------------------------------------------------
MANUFACTURING - 0.2%
PRINTING & PUBLISHING
K-III Communications Corp. 60 1,612
-------------
.................................................................................
RETAIL TRADE - 0.1%
FOOD STORES
Supermarkets General Holdings, $3.520 60 1,230
------------
- ----------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 6.8%
CABLE - 6.4%
Cablevision Systems Corp.:
11.125%, Series M, PIK 155 15,600
11.750%, Series H, PIK 151 15,683
Time Warner, Inc.,
10.250%, Series M 31 34,259
------------
65,542
------------
COMMUNICATIONS - 0.4%
K-III Communications Corp.,
10.000% 15 1,519
PanAmSat Corp.,
Series 12.750% 2 2,679
------------
4,198
------------
TOTAL PREFERRED STOCKS (cost of $70,081) 72,582
------------
COMMON STOCKS - 0.5%
- ----------------------------------------------------------------------------------
MANUFACTURING - 0.1%
CHEMICALS & ALLIED PRODUCTS - 0.0%
Crompton & Knowles Corp. 14 317
------------
FOOD & KINDRED PRODUCTS - 0.1%
Darling International, Inc. (g) 17 434
Dr. Pepper Bottling Company of Texas,
Series A (g) 40 720
------------
1,154
------------
</TABLE>
14
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO/JUNE 30, 1997
- ----------------------------------------------------------------------------------
MINING & ENERGY - 0.3%
OIL & GAS EXTRACTION - 0.2%
<S> <C> <C>
Gulf Canada Resources, Ltd. (g) 15 $ 1,247
Mesa, Inc. (g) 49 280
------------
1,527
------------
OIL & GAS FIELD SERVICES - 0.1%
Parker Drilling Co. (g) 100 1,113
------------
- ----------------------------------------------------------------------------------
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. 8 134
------------
- ----------------------------------------------------------------------------------
SERVICES - 0.1%
AMUSEMENT & RECREATION
Alliance Gaming Corp. (g) 175 656
-------------
- ----------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.0%
COMMUNICATIONS - 0.0%
EchoStar Communications Corp. (g) 9 141
------------
ELECTRIC SERVICES - 0.0%
Baycorp Holdings, Ltd. (g) (i) (i)
------------
GAS SERVICES - 0.0%
United Gas Holdings Corp. (g)(h) 22 312
------------
LOCAL & SUBURBAN TRANSIT - 0.0%
Greyhound Lines, Inc., 12.500% Escrow
Receipt (g)(h) 2 (i)
Greyhound Lines, Inc., 13.000% 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
------------
TOTAL COMMON STOCKS (cost of $4,952) 5,446
------------
</TABLE>
15
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO/JUNE 30, 1997
- ----------------------------------------------------------------------------------
<CAPTION>
RIGHTS & WARRANTS (g) - 0.0% SHARES VALUE
- ----------------------------------------------------------------------------------
MANUFACTURING - 0.0%
RUBBER & PLASTIC
BPC Holdings Corp.
<S> <C> <C>
expires 04/15/04 4 $ 70
------------
- ----------------------------------------------------------------------------------
PUBLIC ADMINISTRATION - 0.0%
GENERAL GOVERNMENT
Venezuela Government Rights W/ Series A&B (h) 10 (i)
------------
- ----------------------------------------------------------------------------------
SERVICES - 0.0%
HEALTH SERVICES - 0.0%
Wright Medical Technology
expires 06/15/03 1 144
------------
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(b) 9 1
Intermedia Communications, Inc.
expires 06/01/00 1 40
Wireless One Inc.
expires 10/19/00 20 (i)
------------
41
------------
TOTAL RIGHTS & WARRANTS (cost of $468) 255
------------
TOTAL INVESTMENTS - 96.2% (cost of $955,868)(j) 988,676
------------
SHORT-TERM OBLIGATIONS - 4.6% PAR
- ----------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.
(cost of $47,361) 6.000% (k) 07/01/97 $ 47,361 47,361
------------
OTHER ASSETS & LIABILITIES, NET - (0.8)% (7,996)
- ----------------------------------------------------------------------------------
NET ASSETS - 100.0% $ 1,028,041
============
</TABLE>
16
<PAGE>
INVESTMENT PORTFOLIO/JUNE 30, 1997
- --------------------------------------------------------------------------------
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) 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 June 30,
1997, the value of these securities amounted to $107,470 or 10.5% of net
assets.
(c) Zero coupon bond.
(d) This is a British security. Par amount is stated in U.S. dollars.
(e) This is a Canadian security. Par amount is stated in U.S. dollars.
(f) This is a Venezuelan security. 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 of total investments and
short-term obligations is $1,003,662.
(k) Rate represents yield at date of purchase.
Acronym Name
--------- -----------------
PIK Payment-In-Kind
See notes to financial statements.
17
<PAGE>
<TABLE>
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 1997 (UNAUDITED)
(in thousands except for per share amounts and footnotes)
ASSETS
<S> <C> <C>
Investments at value (cost $955,868) $ 988,676
Short-term obligations (cost $47,361) 47,361
--------------
1,036,037
Receivable for:
Investments sold $ 21,657
Interest 17,644
Fund shares sold 3,967
Other 14 43,282
------------ --------------
Total Assets 1,079,319
LIABILITIES
Payable for:
Investments purchased 39,352
Distributions to shareholders 6,973
Fund shares repurchased 4,716
Accrued:
Deferred Trustees fees 8
Other 229
------------
Total Liabilities 51,278
--------------
NET ASSETS $ 1,028,041
==============
Net asset value & redemption price per share -
Class A ($562,357/79,935) $7.04
==============
Maximum offering price per share - Class A
($7.04/0.9525) $7.39 (a)
==============
Net asset value & offering price per share -
Class B ($453,575/64,472) $7.04 (b)
==============
Net asset value & redemption price per share -
Class D ($12,109/1,721) $7.04 (b)
==============
Maximum offering price per share - Class D
($7.04/0.9900) $7.11
==============
COMPOSITION OF NET ASSETS
Capital paid in $ 1,040,428
Undistributed net investment income 2,294
Accumulated net realized loss (47,489)
Net unrealized appreciation 32,808
--------------
$ 1,028,041
==============
</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.
18
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
(in thousands)
INVESTMENT INCOME
<S> <C> <C>
Interest $ 45,250
Dividends 2,945
--------------
Total investment income 48,195
EXPENSES
Management fee $ 2,921
Service fee 1,221
Distribution fee - Class B 1,603
Distribution fee - Class D 33
Transfer agent 1,395
Bookkeeping fee 175
Trustees fee 25
Custodian fee 2
Audit fee 23
Legal fee 6
Registration fee 61
Reports to shareholders 15
Other 22 7,502
------------ --------------
Net Investment Income 40,693
--------------
NET REALIZED & UNREALIZED GAIN ON PORTFOLIO POSITIONS
Net realized gain 12,513
Net unrealized appreciation during
the period 3,363
------------
Net Gain 15,876
--------------
Net Increase in Net Assets from Operations $ 56,569
==============
</TABLE>
See notes to financial statements.
19
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
(Unaudited)
Six months
ended Year ended
(in thousands) June 30 December 31
============ ==============
INCREASE (DECREASE) IN NET ASSETS 1997 1996
Operations:
<S> <C> <C>
Net investment income $ 40,693 $ 73,695
Net realized gain 12,513 22,242
Net unrealized appreciation 3,363 2,536
------------ --------------
Net Increase from Operations 56,569 98,473
Distributions:
From net investment income - Class A (23,190) (43,790)
From net investment income - Class B (16,847) (30,452)
From net investment income - Class D (345) (199)
------------ --------------
16,187 24,032
------------ --------------
Fund Share Transactions (a):
Receipts for shares sold - Class A 137,282 180,185
Value of distributions reinvested - Class A 8,634 19,557
Cost of shares repurchased - Class A (115,477) (156,993)
------------ --------------
30,439 42,749
------------ --------------
Receipts for shares sold - Class B 122,514 170,461
Value of distributions reinvested - Class B 6,550 14,258
Cost of shares repurchased - Class B (93,771) (135,147)
------------ --------------
35,293 49,572
------------ --------------
Receipts for shares sold - Class D 11,896 7,808
Value of distributions reinvested - Class D 184 146
Cost of shares repurchased - Class D (6,201) (2,037)
------------ --------------
5,879 5,917
------------ --------------
Net Increase from Fund Share Transactions 71,611 98,238
------------ --------------
Total Increase 87,798 122,270
NET ASSETS
Beginning of period 940,243 817,973
------------ --------------
End of period (including undistributed net
investment income of $2,294 and $1,450,
respectively) $ 1,028,041 $ 940,243
============ ==============
</TABLE>
(a) Class D shares were initially offered on January 15, 1996.
Continued on next page.
See notes to financial statements.
20
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS - CONT.
<CAPTION>
(Unaudited)
Six months
ended Year ended
June 30 December 31
============ ==============
1997 1996
NUMBER OF FUND SHARES (a)
<S> <C> <C>
Sold - Class A 19,791 26,664
Issued for distributions reinvested - Class A 1,247 2,883
Repurchased - Class A (16,659) (23,201)
------------ --------------
4,379 6,346
------------ --------------
Sold - Class B 17,666 25,190
Issued for distributions reinvested - Class B 946 2,102
Repurchased - Class B (13,526) (19,949)
------------ --------------
5,086 7,343
------------ --------------
Sold - Class D 1,713 1,153
Issued for distributions reinvested - Class D 26 21
Repurchased - Class D (893) (299)
------------ --------------
846 875
------------ --------------
</TABLE>
(a) Class D shares were initially offered on January 15, 1996.
See notes to financial statements.
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 (UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In the opinion of management of Colonial High Yield Securities 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, 1997, 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 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 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 is a summary of significant accounting policies that 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.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS/JUNE 30, 1997
- --------------------------------------------------------------------------------
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 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
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS/JUNE 30, 1997
- --------------------------------------------------------------------------------
NOTE 2. ACCOUNTING POLICIES - CONT.
- --------------------------------------------------------------------------------
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 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 0.60%
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 FEE: 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. During the six months ended June 30,
1997, the Fund has been advised that the Distributor retained net
underwriting discounts of $78,700 on sales of the Fund's Class A
shares and received contingent deferred sales charges (CDSC) of $538,683
and $5,091 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
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS/JUNE 30, 1997
- --------------------------------------------------------------------------------
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 the Fund's assets.
NOTE 4. PORTFOLIO INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT ACTIVITY: During the six months ended June 30, 1997,
purchases and sales of investments, other than short-term obligations were
$766,296,224 and $659,243,996, respectively, of which $178,269,638 and
$130,938,000, respectively, were U.S. government securities.
Unrealized appreciation (depreciation) at June 30, 1997, based on cost of
investments for federal income tax purposes was:
Gross unrealized appreciation $ 38,182,731
Gross unrealized depreciation (5,807,537)
---------------
Net unrealized appreciation $ 32,375,194
===============
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.
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS/JUNE 30, 1997
- --------------------------------------------------------------------------------
NOTE 4. PORTFOLIO INFORMATION - CONT.
- --------------------------------------------------------------------------------
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, 1997.
26
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period
are as follows:
<CAPTION>
(Unaudited)
Six months
ended
June 30
=================================================
1997
Class A Class B Class D
----------- ----------- ------------
Net asset value -
<S> <C> <C> <C>
Beginning of period $ 6.920 $ 6.920 $ 6.920
----------- ----------- ------------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.305 0.279 0.279
Net realized and
unrealized gain 0.115 0.115 0.115
----------- ----------- ------------
Total from Investment
Operations 0.420 0.394 0.394
----------- ----------- ------------
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment income (0.300) (0.274) (0.274)
----------- ----------- ------------
Net asset value - End of period $ 7.040 $ 7.040 $ 7.040
=========== =========== ============
Total return (a)(b) 6.21% 5.82% 5.82%
=========== =========== ============
RATIOS TO AVERAGE NET ASSETS
Expenses (c)(d) 1.21% 1.96% 1.96%
Net investment income (c)(d) 8.70% 7.95% 7.95%
Portfolio turnover (b) 58% 58% 58%
Net assets at end
of period (000) $ 562,357 $ 453,575 $ 12,109
</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) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(d) Annualized.
27
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period
are as follows:
<CAPTION>
Year ended December 31
===================================================
1996
Class A Class B Class D (a)
----------- ----------- -------------
Net asset value -
<S> <C> <C> <C>
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)
In excess of net investment income --- --- ---
----------- ----------- -------------
Total Distributions
Declared to Shareholders (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
</TABLE>
(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.
28
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS - CONT.
<CAPTION>
Year ended December 31
=============================================================
1995 1994
Class A Class B Class A Class B
============ ============ =============================
<S> <C> <C> <C> <C>
$ 6.300 $ 6.300 $ 6.950 $ 6.950
------------ ------------ ------------ ------------
0.615 0.566 0.599 0.549
0.452 0.452 (0.622) (0.622)
------------ ------------ ------------ ------------
1.067 1.018 (0.023) (0.073)
------------ ------------ ------------ ------------
(0.603) (0.555) (0.627) (0.577)
(0.014) (0.013) -- --
------------ ------------ ------------ ------------
(0.617) (0.568) (0.627) (0.577)
------------ ------------ ------------ ------------
$ 6.750 $ 6.750 $ 6.300 $ 6.300
============ ============ ============ ============
17.65% 16.78% (0.34)% (1.09)%
============ ============ ============ ============
1.21% (d) 1.96% (d) 1.23% 1.98%
9.14% (d) 8.39% (d) 9.03% 8.28%
95% 95% 123% 123%
$ 466,905 $ 351,068 $ 389,791 $ 253,438
</TABLE>
29
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period
are as follows:
<CAPTION>
Year ended December 31
======================================================
1993 1992
Class A Class B Class A Class B (a)
---------- ---------- ----------- -------------
Net asset value -
<S> <C> <C> <C> <C>
Beginning of period $ 6.400 $ 6.400 $ 5.860 $ 6.360
---------- ---------- ----------- -------------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.634 0.585 0.669 0.332
Net realized and
unrealized gain 0.576 0.576 0.531 0.057
---------- ---------- ----------- -------------
Total from Investment
Operations 1.210 1.161 1.200 0.389
---------- ---------- ----------- -------------
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment income (0.660) (0.611) (0.660) (0.349)
---------- ---------- ----------- -------------
Net asset value - End of period $ 6.950 $ 6.950 $ 6.400 $ 6.400
========== ========== =========== =============
Total return (b) 19.69% 18.83% 21.15% 5.53% (c)
========== ========== =========== =============
RATIOS TO AVERAGE NET ASSETS
Expenses 1.23% 1.98% 1.26% 2.01% (d)
Net investment income 9.55% 8.80% 10.64% 9.89% (d)
Portfolio turnover 122% 122% 66% 66%
Net assets at end
of period (000) $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) Annualized.
30
<PAGE>
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.
31
<PAGE>
[FLAG 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 Bank
Corporation)
JAMES L. MOODY, JR.
Retired (formerly Chairman of the Board and 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
Retired Partner, Peat Marwick Main & Co. (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-03/903D-0697 M (8/97)
- --------------------------------------------------------------------------------
