COLONIAL TAX-MANAGED GROWTH FUND ANNUAL REPORT
Managed by Stein Roe & Farnham, Inc.
October 31, 1997
---------------------------------
Not FDIC May Lose Value
Insured No Bank Guarantee
---------------------------------
<PAGE>
- --------------------------------------------------------------------------------
COLONIAL TAX-MANAGED GROWTH FUND HIGHLIGHTS
DECEMBER 30, 1996 - OCTOBER 31, 1997
INVESTMENT OBJECTIVE: Colonial Tax-Managed Growth Fund seeks to maximize
long-term capital growth while reducing shareholder exposure to taxes.
THE FUND IS DESIGNED TO OFFER:
o Premier growth management
o A sensitivity to taxes
o The potential for attractive returns before and after taxes
PORTFOLIO MANAGER COMMENTARY: "Since the Fund's inception on December 30, 1996,
performance has been managed to meet the Fund's investment objective of growth
and tax efficiency. The portfolio has generated attractive returns while
distributing no capital gains to shareholders."
-- Mel Hughes and Steve Berman
COLONIAL TAX-MANAGED GROWTH FUND PERFORMANCE
CLASS A CLASS B CLASS C(1)
Inception date 12/30/96 12/30/96 12/30/96
Since inception total 19.44% 18.65% 18.65%
returns, assuming
reinvestment of all
distributions and no
sales charge or contingent
deferred sales
charge (CDSC)
Since inception total 12.58% 13.65% 17.65%
returns, assuming
public offering price (POP)
and CDSC(2)
Net asset value per $ 12.04 $ 11.96 $ 11.96
share on 10/31/97
TOP FIVE HOLDINGS (as of 10/31/97)(3) TOP FIVE SECTORS (as of 10/31/97)(4)
- ------------------------------------- ------------------------------------
1. Cisco Systems, Inc. .. 3.1% 1. Consumer Non-cyclical ...... 20.4%
2. Service Corp. Intl. .. 3.1% 2. Financial .................. 20.2%
3. L.M. Ericsson ........ 2.9% 3. Consumer Cyclical .......... 16.4%
4. Home Depot, Inc. ..... 2.8% 4. Technology ................. 14.4%
5. Wal-Mart ............. 2.7% 5. Industrial ................. 14.3%
(1) On July 1, 1997, Class D shares were redesignated Class C shares.
(2) POP returns include the maximum sales charge of 5.75% for Class A shares.
The CDSC returns reflect the maximum charge of 5% and 1%, respectively,
for Class B and Class C shares. Past performance cannot predict future
results. Returns and value will fluctuate, resulting in a gain or loss
on sale.
(3) Holdings are calculated as a percentage of total net assets. Sectors are
calculated as a percentage of total equity investments. The sector
classifications used on this page are based upon Stein Roe's defined
criteria.
Because the Fund is actively managed, there can be no guarantee the Fund
will continue to hold these securities or invest in these sectors in the
future.
(4) 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.
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
I am pleased to present the first annual report for
Colonial Tax-Managed Growth Fund. This report offers
information on the investment environment and
discusses the Fund's performance since it commenced
operations in December 1996. [PHOTO HERE]
The Fund generated competitive returns during the
period since its inception despite being launched in a
challenging environment. We entered the stock market
as it was climbing to a record high in mid-February. We
saw market leadership shift from a small number of large, multinational
"blue chip" stocks to a broader selection of mid- and small-cap stocks by
mid-year. The market experienced a seemingly endless string of record highs,
followed by the largest one day decline in history. Despite the market's ups
and downs, the Fund's management team was able to invest in quality companies
with long-term growth potential. Furthermore, the portfolio's tax-managed
strategy was able to turn much of the market's volatility to shareholders'
advantage as selected transactions generated tax losses that were used to
offset current and future capital gains. As a result, the Fund did not realize
any net capital gains during the period.
We are optimistic that growth stocks will continue to provide attractive
growth potential. The Taxpayer Relief Act of 1997 increased the importance of
tax efficiency for many investors by reducing the capital gains tax rate on
securities held longer than 18 months to a maximum of 20%. This compares
favorably with the maximum capital gains rates on securities held between 12-18
months of 28% and the short-term gains rate on securities held under 12 months
of 39.6%. The widening of the gap between short- and long-term capital gains
rates significantly increases the appeal of tax-efficient equity investments.
Effective February 28, 1998, Colonial Tax-Managed Growth Fund will be renamed
Stein Roe Advisor Tax-Managed Growth Fund. This new name will not, in any way,
affect the fund's objective or management style, but will more clearly reflect
Stein Roe's position as a premier growth manager. The following report will
provide you with specific information on your Fund's performance as well as an
in-depth report from your portfolio management team. Thank you for giving us
the opportunity to serve your investment needs.
Respectfully,
/s/ Harold W. Cogger
Harold W. Cogger
President
December 10, 1997
Because market conditions change frequently, there can be no assurance that
the trends described in this report will continue.
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT REPORT
[photos Hughes MEL HUGHES and STEVE BERMAN are senior equity
& Berman] analysts at Stein Roe & Farnham, Inc., and members
of the nine-person investment management team
for Colonial Tax-Managed Growth Fund.
GENERALLY FAVORABLE INVESTMENT ENVIRONMENT PRESENTED OPPORTUNITIES
The U.S. stock market rose substantially during the Fund's first ten months of
operation. During the first half of the period, much of the market's performance
was concentrated in a small number of large-cap, multinational "blue chip"
stocks. Diversified funds, such as Colonial Tax-Managed Growth Fund, generally
had their assets invested in a much larger universe of stocks, including smaller
company stocks. This narrow market leadership limited the performance of
diversified funds. However, during the second half of the period, market
leadership shifted and performance was driven by a broader array of stocks. The
Fund benefited from this shift as many of its small- and mid-cap growth stock
holdings realized attractive capital appreciation.
The second half of the period was also more volatile as valuations increased and
stocks sold at higher multiples of future earnings growth. The market became
more sensitive to heightened investor anxiety causing stock prices to move up
and down more sharply. Because the Fund takes a long-term investment approach,
such short-term market volatility did not affect our strategy. We do not sell
into temporary market volatility unless the fundamental investment case for the
stock has changed. Rather, we used stock market weakness as an opportunity to
add to our positions in selected stocks which we want to own over the long term.
QUALITY GROWTH STOCK INVESTMENTS CONTRIBUTE TO PERFORMANCE
We consider a number of factors when making our investment decisions. We seek
out companies that have a leading competitive position in their industry, are
gaining market share and have superior management teams. A large number of
stocks in the portfolio have these characteristics, including Home Depot, which
returned nearly 70% during the period. Home Depot pioneered the concept of home
improvement warehouse stores and is a leader in the home improvement industry.
The company is gaining market share as a result of its superior merchandising
and service, and its management is among the best in the retail sector.
Significant new store expansion combined with good productivity gains in
existing stores lead us to believe that the company should continue to have
exceptional sales and earnings growth.
The Fund's focus on quality growth stocks along with good market conditions
contributed to the Fund's total return since inception of 19.44% for Class A
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
shares, based on net asset value. Like most diversified growth funds, Colonial
Tax-Managed Growth Fund fell short of the S&P 500 Index which generated a total
return of 25.31% for the same period. Going forward, we believe our active
management style will add value in an increasingly volatile market.
TAX-MANAGED STRATEGIES SUCCESSFUL TO DATE
The Fund did not realize any net capital gains for the period. We accomplished
this, in part, because of our growth-oriented, long-term investment strategy.
This approach limits portfolio turnover, including selling stocks -- an action
that generates taxable gains distributions for shareholders. In accordance with
our strategy, we sold stocks for only one of two reasons. First, we sold a stock
if its fundamentals or valuation changed and it no longer fit our investment
strategies. Second, we sold for tax management reasons. For example, we sold an
otherwise attractive stock if it declined in price below the cost at which we
purchased it initially. We did this so we could replace it with another stock
offering with similar or greater appreciation potential. This second strategy
used market volatility to the Fund's advantage -- we were able to sell stocks
selectively to realize capital losses that could offset current or future
capital gains. However, this tax management strategy was only employed in
situations where after-tax advantages could be generated without significantly
diminishing overall pre-tax returns.
During the period both strategies were employed. One example was the sale of
Idexx Labs, a leading manufacturer of veterinarian diagnostic equipment whose
stock suffered from a deteriorating earnings outlook. This fundamental change
led us to conclude that the stock no longer met our criteria for sustainable
growth, so we sold it at a loss. We used this loss to offset capital gains on
other stocks. Another example was a sale of one financial service company at a
loss, and the purchase of another with equal or better upside potential.
POSITIVE INVESTMENT OUTLOOK
We expect that over the next six to twelve months, the economy will continue to
expand along with corporate earnings growth. We think that the overall market
environment will continue to be positive for stocks, although with smaller
relative gains and continuing price volatility.
We believe that the Fund is well positioned for such an environment and we
intend to remain fully invested. We expect that the market will favor the Fund's
growth orientation, as expected slowing profit growth shifts investors'
attention to these companies which are able to sustain attractive earnings gains
on an absolute and relative basis. Shareholders should continue to benefit from
the Fund's tax efficiency as we pursue our objective of long-term capital growth
before and after taxes.
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
COLONIAL TAX-MANAGED GROWTH FUND VS.
THE STANDARD & POOR'S 500 INDEX
Change in Value of $10,000 from 12/31/96 - 10/31/97
CLASS A SHARES BASED ON NAV AND POP
CUMULATIVE TOTAL RETURNS*
Inception 12/30/96 NAV POP
SINCE INCEPTION 23.51% 16.41%
[graphic omitted]
CTMGF Class A
As of Date NAV POP S&P500 Index
12/31/96 10000 9425 10000
10428 9829 10624
10269 9678 10708
9711 9153 10269
10000 9425 10881
10767 10148 11546
11285 10636 12060
12181 11481 13019
11643 10974 12290
12400 11687 12963
10/31/97 11992 11302 12531
CLASS B SHARES BASED ON NAV AND MAXIMUM CDSC
CUMULATIVE TOTAL RETURNS*
Inception 12/30/96 NAV w/CDSC
SINCE INCEPTION 22.82% 17.82%
[graphic omitted]
CTMGF Class B
As of Date NAV POP S&P500 Index
12/31/96 10000 10000 10000
10429 10429 10624
10269 10269 10708
9701 9701 10269
9990 9990 10881
10748 10748 11546
11256 11256 12060
12144 12144 13019
11595 11595 12290
12343 12343 12963
10/31/97 11924 11424 12531
CLASS C SHARES BASED ON NAV AND W/CDSC
CUMULATIVE TOTAL RETURNS*
Inception 12/30/96 NAV w/CDSC
SINCE INCEPTION 22.72% 21.72%
[graphic omitted]
CTMGF Class C
As of Date NAV POP S&P500 Index
12/31/96 10000 10000 10000
10429 10429 10624
10269 10269 10708
9701 9701 10269
9990 9990 10881
10748 10748 11546
11256 11256 12060
12134 12134 13019
11585 11585 12290
12333 12333 12963
10/31/97 11924 11824 12531
*Cumulative total returns are as of 9/30/97, the most recent quarter end.
The Standard & Poor's 500 Index is an unmanaged index that tracks the
performance of U.S. stock market securities. Unlike mutual funds, indexes do not
incur fees or charges, and it is not possible to invest in an index.
Past performance cannot predict future results. Returns and value of an
investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. Net asset value (NAV) returns do not
include sales charges or contingent deferred sales charges (CDSC). Public
offering price (POP) returns include the maximum sales charges of 5.75% for
Class A. The CDSC returns reflect charges of: 5% since inception for Class B and
1% since inception for Class C shares.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
- --------------------------------------------------------------------------------
6
<PAGE>
INVESTMENT PORTFOLIO
OCTOBER 31, 1997 (IN THOUSANDS)
COMMON STOCKS - 93.4% COUNTRY SHARES VALUE
- -----------------------------------------------------------------------------
CONSTRUCTION - 0.2%
HEAVY CONSTRUCTION - NON BUILDING CONSTRUCTION
Fluor Corp. 4 $ 146
------------
.............................................................................
FINANCE, INSURANCE & REAL ESTATE - 21.3%
DEPOSITORY INSTITUTIONS - 9.3%
Banc One Corp. 27 1,407
BankAmerica Corp. 23 1,637
Chase Manhattan Corp. 13 1,500
Citicorp 12 1,488
------------
6,032
------------
INSURANCE CARRIERS - 9.7%
Allstate Corp. 21 1,742
Nationwide Financial Services, Class A 51 1,561
United Healthcare Corp. 33 1,528
Washington Mutual, Inc. 21 1,430
------------
6,261
------------
NONDEPOSITORY CREDIT INSTITUTIONS - 2.3%
Federal National Mortgage Association 30 1,458
------------
.............................................................................
MANUFACTURING - 47.0%
CHEMICALS & ALLIED PRODUCTS - 14.8%
Betzdearborn, Inc. 27 1,738
Ecolab, Inc. 34 1,636
Eli Lilly & Co. 20 1,351
Monsanto Co. 32 1,381
Novartis ADR Sw 17 1,326
Procter & Gamble Co. 11 768
SmithKline Beecham - Sponsored ADR UK 28 1,329
Solutia, Inc. 4 81
------------
9,610
------------
COMMUNICATIONS EQUIPMENT - 5.2%
Motorola, Inc. 25 1,538
Telefonakteibolaget L.M. Ericsson ADR Sw 42 1,859
------------
3,397
------------
ELECTRICAL INDUSTRIAL EQUIPMENT - 1.1%
General Electric Co. 11 684
------------
7
<PAGE>
Investment Portfolio/October 31, 1997
- -----------------------------------------------------------------------------
MANUFACTURING - CONT. COUNTRY SHARES VALUE
- -----------------------------------------------------------------------------
ELECTRONIC COMPONENTS - 3.3%
Analog Devices, Inc. 40 $ 1,219
Intel Corp. 12 940
------------
2,159
------------
FOOD & KINDRED PRODUCTS - 4.6%
Nabisco Holdings Corp. 34 1,415
Philip Morris Co., Inc. 40 1,577
------------
2,992
------------
FURNITURE & FIXTURES - 2.4%
Lear Corp. 33 1,562
------------
LIGHTING EQUIPMENT - 2.4%
Hubbell, Inc., Class B 35 1,542
------------
MACHINERY & COMPUTER EQUIPMENT - 7.4%
Baker Hughes, Inc. 31 1,410
Cisco Systems, Inc. (a) 25 2,018
U.S. Filter Corp. (a) 33 1,340
------------
4,768
------------
MEASURING & ANALYZING INSTRUMENTS - 4.0%
Emerson Electric Co. 12 624
Medtronic, Inc. 26 1,144
Westinghouse Electric Corp. 32 841
------------
2,609
------------
PETROLEUM REFINING - 1.8%
Mobil Corp. 16 1,158
------------
.............................................................................
MINING & ENERGY - 2.0%
CRUDE PETROLEUM & NATURAL GAS
United Meridian Corp. (a) 38 1,273
------------
.............................................................................
RETAIL TRADE - 7.7%
BUILDING, HARDWARE & GARDEN SUPPLY - 2.8%
Home Depot, Inc. 32 1,788
------------
GENERAL MERCHANDISE STORES - 4.9%
Dollar General Corp. 43 1,405
Wal-Mart Stores, Inc. 50 1,767
------------
3,172
------------
8
<PAGE>
Investment Portfolio/October 31, 1997
- -----------------------------------------------------------------------------
SERVICES - 8.1%
AMUSEMENT & RECREATION - 1.8%
Allen Telecom, Inc. (a) 62 $ 1,165
------------
BUSINESS SERVICES - 1.3%
CUC International, Inc. (a) 30 870
------------
HOTELS, CAMPS & LODGING - 1.9%
Hospitality Franchise Systems, Inc. (a) 17 1,198
------------
PERSONAL SERVICES - 3.1%
Service Corp. International 66 2,012
------------
.............................................................................
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 6.9%
COMMUNICATIONS - 4.5%
Clear Channel Communications, Inc. (a) 20 1,294
Worldcom, Inc. 47 1,594
------------
2,888
------------
RAILROAD - 2.3%
Wisconsin Central Transportation Corp. 49 1,516
------------
TRANSPORTATION SERVICES - 0.1%
Avis Rent a Car, Inc. 2 63
------------
.............................................................................
WHOLESALE TRADE - 0.2%
NONDURABLE GOODS
Gillette Co. 1 125
------------
TOTAL COMMON STOCKS (cost of $55,631)(b) 60,448
------------
SHORT-TERM OBLIGATIONS - 2.7% PAR
- -----------------------------------------------------------------------------
Repurchase agreement with Greenwich Capital Markets, Inc.,
dated 10/31/97 due 11/03/97 at 5.625% collateralized
by U.S. Treasury notes with various maturities
to 2016, market value $1,830 (repurchase proceeds
$1,783) $ 1,782 1,782
------------
OTHER ASSETS & LIABILITIES, NET - 3.9% 2,498
- -----------------------------------------------------------------------------
NET ASSETS - 100% $ 64,728
============
9
<PAGE>
Investment Portfolio/October 31, 1997
- -----------------------------------------------------------------------------
(a) Non-income producing.
(b) Cost for federal income tax purposes is $55,650.
Summary of Securities by Country Country Value % of Total
-----------------------------------------------------------------------------
United States $ 55,934 92.5
Sweden Sw 3,185 5.3
United Kingdom UK 1,329 2.2
------------
------------
$ 60,448 100.0
============ ============
Certain securities are listed by country of underlying exposure but may
trade predominantly on other exchanges.
Acronym Name
------- ----
ADR American Depositary Receipt
See notes to financial statements.
10
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
OCTOBER 31, 1997
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $55,631) $ 60,448
Short-term obligations 1,782
------------
62,230
Receivable for:
Investments sold $ 2,619
Fund shares sold 1,521
Dividends 154
Expense reimbursement due
from Adviser/Administrator 73
Other 3 4,370
-------------- ------------
Total Assets 66,600
LIABILITIES
Payable for:
Investments purchased 1,615
Fund shares repurchased 121
Accrued:
Management fee 30
Distribution fee - Class B 23
Distribution fee - Class C 3
Distribution fee - Class H 1
Administration fee 21
Service fee 13
Transfer agent fee 13
Bookkeeping fee 3
Other 29
--------------
Total Liabilities 1,872
------------
NET ASSETS $ 64,728
============
Net asset value & redemption price per share -
Class A ($17,142/1,424) $ 12.04
============
Maximum offering price per share - Class A
($12.04/0.9425) $ 12.77 (a)
============
(a) On sales of $50,000 or more the offering price is reduced.
Continued on next page.
See notes to financial statements.
11
<PAGE>
STATEMENT OF ASSETS & LIABILITIES - CONT.
Net asset value & offering price per share -
Class B ($38,452/3,215) $ 11.96 (b)
============
Net asset value & offering price per share -
Class C ($5,923/495) $ 11.96 (b)
============
Net asset value & redemption price per share -
Class E ($346/29) $ 12.02
============
Maximum offering price per share - Class E
($12.02/0.9500) $ 12.65 (a)
============
Net asset value & offering price per share -
Class F ($421/35) $ 11.97 (b)
============
Net asset value & redemption price
per share - Class G ($1,288/107) $ 12.04
============
Maximum offering price per share - Class G
($12.04/0.9550) $ 12.61 (a)
============
Net asset value & offering price per share -
Class H ($1,156/97) $ 11.96 (b)
============
COMPOSITION OF NET ASSETS
Capital paid in $ 60,489
Accumulated net realized loss (578)
Net unrealized appreciation 4,817
------------
$ 64,728
============
(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.
12
<PAGE>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED OCTOBER 31, 1997 (a)
(in thousands)
INVESTMENT INCOME
Dividends $ 381
Interest 80
------------
Total Investment Income (net of nonrebatable
foreign taxes withheld at source which
amounted to $3) 461
EXPENSES
Management fee $ 142
Administration fee 96
Service fee 58
Distribution fee - Class B 105
Distribution fee - Class C 13
Distribution fee - Class E (b)
Distribution fee - Class F 2
Distribution fee - Class G 1
Distribution fee - Class H 3
Transfer agent fee 65
Bookkeeping fee 24
Trustees fee 2
Custodian fee 14
Audit fee 3
Legal fee 8
Registration fee 177
Reports to shareholders 7
Other 5
--------------
725
Fees and expenses waived or borne
by the Adviser/Administrator (239) 486
-------------- ------------
Net Investment Loss (25)
------------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized loss (578)
Change in net unrealized appreciation
during the period 4,810
--------------
Net Gain 4,232
------------
Increase in Net Assets from Operations $ 4,207
============
(a) The Fund commenced investment operations on December 16, 1996.
The activity shown is from the effective date of registration (December
30, 1996) with the Securities and Exchange Commission.
(b) Rounds to less than one.
See notes to financial statements.
13
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
Period ended
(in thousands) October 31
--------------
INCREASE (DECREASE) IN NET ASSETS 1997 (A)
Operations:
Net investment loss $ (25)
Net realized loss (578)
Net unrealized appreciation 4,810
--------------
Net Increase from Operations 4,207
--------------
Fund Share Transactions: (b)
Receipts for shares sold - Class A 16,100
Cost of shares repurchased - Class A (615)
--------------
15,485
--------------
Receipts for shares sold - Class B 36,603
Cost of shares repurchased - Class B (747)
--------------
35,856
--------------
Receipts for shares sold - Class C 5,703
Cost of shares repurchased - Class C (90)
--------------
5,613
--------------
Receipts for shares sold - Class E 224
--------------
Receipts for shares sold - Class F 277
--------------
Receipts for shares sold - Class G 1,067
--------------
Receipts for shares sold - Class H 991
--------------
Net Increase from Fund Share
Transactions 59,513
--------------
Total Increase 63,720
NET ASSETS
Beginning of period 1,008
--------------
End of period (net of accumulated net
investment loss of $0) $ 64,728
==============
NUMBER OF FUND SHARES
Sold - Class A 1,437
Repurchased - Class A (53)
--------------
1,384
--------------
Sold - Class B 3,269
Repurchased - Class B (64)
--------------
3,205
--------------
Sold - Class C 493
Repurchased - Class C (8)
--------------
485
--------------
Sold - Class E 19
--------------
Sold - Class F 25
--------------
Sold - Class G 97
--------------
Sold - Class H 87
--------------
(a) The Fund commenced investment operations on December 16, 1996.
The activity shown is from the effective date of registration (December
30, 1996) with the Securities and Exchange Commission.
(b) Effective July 1, 1997, Class D shares were redesignated Class C shares.
See notes to financial statements.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997
NOTE 1. ACCOUNTING POLICIES
........................................................................
ORGANIZATION: Colonial Tax-Managed Growth 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
maximize long-term capital growth while reducing shareholder exposure to taxes.
The Fund may issue an unlimited number of shares. The Fund offers seven classes
of shares: Class A, Class B, Class C Class E, Class F, Class G and Class H.
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. Effective July 1, 1997, Class D shares were
redesignated Class C shares which are subject to a contingent deferred sales
charge on redemptions made within one year after purchase and a continuing
distribution fee. Class E, Class F, Class G and Class H shares are trust shares.
Class E and Class G shares are sold with a front-end sales charge and are
subject to an annual distribution fee and Class F and Class H shares are subject
to an annual distribution fee and a contingent deferred sales charge. Class F
and Class H shares will convert to Class E and Class G shares, respectively,
after they have been outstanding approximately eight years.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates. The activity reflected in these financial
statements is from the effective date of registration (December 30, 1996) with
the Securities and Exchange Commission through the period ended October 31,
1997. 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: Equity securities generally are valued at
the last sale price or, in the case of unlisted or listed securities for which
there were no sales during the day, at current quoted bid prices.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions for which market quotations are not readily available 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.
15
<PAGE>
Notes to Financial Statements/October 31, 1997
- --------------------------------------------------------------------------
NOTE 1. ACCOUNTING POLICIES - CONT.
........................................................................
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: All income,
expenses (other than applicable 12b-1 fees) (see Note 2: Underwriting discounts,
service and distribution fees) and 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.
Per share data was calculated using the average shares outstanding during the
period. Net investment income per share data reflects the distribution fee per
share where applicable.
Ratios are calculated by adjusting the expense and net investment income ratios
for the Fund for the entire period by the distribution fee where applicable.
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.
DISTRIBUTIONS TO SHAREHOLDERS: Distributions to shareholders are recorded on the
ex-date.
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.
OTHER: Corporate actions are recorded on the ex-date. Interest income is
recorded on the accrual basis.
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: Stein Roe & Farnham, Inc. (the Adviser) is the the investment
Adviser of the Fund and receives a monthly fee equal to 0.60% annually of the
Fund's average daily net assets.
ADMINISTRATION FEE: Colonial Management Associates, Inc. (the Administrator), an
affiliate of the Adviser, provides accounting and other services for a monthly
fee equal to 0.40% annually of the Fund's average daily net assets.
16
<PAGE>
Notes to Financial Statements/October 31, 1997
- --------------------------------------------------------------------------
BOOKKEEPING FEE: The Administrator 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 Administrator, 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.
Effective October 1, 1997 and continuing through September 1998, the Transfer
Agent fee will be reduced by .0012% in cumulative monthly increments, resulting
in a decrease in the fee from 0.25% to 0.236% annually.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Liberty Financial
Investments, Inc., formerly Colonial Investment Services, Inc., (the
Distributor), an affiliate of the Administrator, is the Fund's principal
underwriter. For the period ended October 31, 1997, the Fund has been advised
that the Distributor retained net underwriting discounts of $69,316 on sales of
the Fund's Class A shares and received contingent deferred sales charges (CDSC)
of $25,095, $371, none and none on Class B, Class C, Class F and Class H share
redemptions, respectively.
The Fund has adopted a 12b-1 plan which requires the payment of a service fee
to the Distributor 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, Class C, Class F and Class H shares; 0.10% of the
average net assets attributable to Class E shares; and up to 0.25% of
average net assets attributable to Class G shares. The actual fee with respect
to Class G shares will be 0.10% on Class G assets attributable to shares
outstanding for less than five years and 0.25% on Class G assets attributable
to shares outstanding five years or more.
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.
EXPENSE LIMITS: The Adviser/Administrator have agreed, until further notice, to
waive fees and bear certain Fund expenses to the extent that total expenses
(exclusive of service fees and distribution fees, brokerage commissions,
interest, taxes and extraordinary expenses, if any) exceed 1.25% annually of the
first $100 million of the Fund's average net assets and 1.50% annually
thereafter.
OTHER: The Fund pays no compensation to its officers, all of whom are employees
of the Adviser or Administrator.
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.
17
<PAGE>
Notes to Financial Statements/October 31, 1997
- --------------------------------------------------------------------------
NOTE 3. PORTFOLIO INFORMATION
........................................................................
INVESTMENT ACTIVITY: During the period December 30, 1996 through October 31,
1997, purchases and sales of investments, other than short-term obligations,
were $68,900,597 and $13,644,649, respectively.
Unrealized appreciation (depreciation) at October 31, 1997, based on cost of
investments for federal income tax purposes was
Gross unrealized appreciation $ 6,561,081
Gross unrealized depreciation (1,762,709)
-------------
Net unrealized appreciation $ 4,798,372
=============
CAPITAL LOSS CARRYFORWARDS: At October 31, 1997, capital loss carry-forwards
available (to the extent provided in regulations) to offset future realized
gains were approximately as follows:
Year of Capital loss
expiration carryforward
----------- ---------------
2005 $ 559,000
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: The Fund may focus its investments in certain industries, subjecting
it to greater risk than a fund that is more diversified.
NOTE 4. OTHER OPERATIONAL AND CAPITAL ACTIVITY
........................................................................
For the period December 16, 1996 through December 30, 1996, the Fund had net
investment income of $1,054 and unrealized appreciation of $6,829. The following
is a summary of capital activity from December 16, 1996 through December 30,
1996.
Shares
Receipts for shares sold - Class A $ 400,000 40,000
Receipts for shares sold - Class B $ 100,000 10,000
Receipts for shares sold - Class C $ 100,000 10,000
Receipts for shares sold - Class E $ 100,000 10,000
Receipts for shares sold - Class F $ 100,000 10,000
Receipts for shares sold - Class G $ 100,000 10,000
Receipts for shares sold - Class H $ 100,000 10,000
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 period ended October 31, 1997.
18
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout the period
is as follows:
<TABLE>
<CAPTION>
Period ended October 31
-------------------------------------------------
1997 (B)
Class A Class B Class C (c) Class E
--------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 10.080 $ 10.080 $ 10.080 $ 10.080
--------- --------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(loss) (a)(d) 0.040 (0.032) (0.032) 0.030
Net realized and
unrealized gain (d) 1.920 1.912 1.912 1.910
--------- --------- ---------- ----------
Total from Investment
Operations 1.960 1.880 1.880 1.940
--------- --------- ---------- ----------
Net asset value -
End of period $ 12.040 $ 11.960 $ 11.960 $ 12.020
========= ========= ========== ==========
Total return (e)(f)(g) 19.44% 18.65% 18.65% 19.25%
========= ========= ========== ==========
RATIOS TO AVERAGE NET ASSETS
Expenses (h)(i) 1.50% 2.25% 2.25% 1.60%
Net investment income(loss) (h)(i) 0.39% (0.36)% (0.36)% 0.29%
Fees and expenses
waived or borne by the
Adviser/Administrator (h)(i) 0.98% 0.98% 0.98% 0.98%
Portfolio turnover (g) 51% 51% 51% 51%
Average commission rate $ 0.0564 $ 0.0564 $ 0.0564 $ 0.0564
Net assets at end
of period (000) $ 17,142 $ 38,452 $ 5,923 $ 346
(a) Net of fees and expenses waived or borne by the Adviser/Administrator
which amounted to: $ 0.096 $ 0.096 $ 0.096 $ 0.096
(b) The Fund commenced investment operations on December 16, 1996. The
activity shown is from the effective date of registration (December 30, 1996)
with the Securities and Exchange Commission.
(c) Effective July 1, 1997, Class D shares were redesignated Class C shares.
(d) Per share data was calculated using average shares outstanding during the
period.
(e) Total return at net asset value assuming no initial sales charge or
contingent deferred sales charge.
(f) Had the Adviser/Administrator not waived or reimbursed a portion of
expenses, total return would have been reduced.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage arrange-
ments had no impact.
(i) Annualized.
</TABLE>
19
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Period ended October 31
------------------------------------------
1997 (B)
Class F Class G Class H
---------- ---------- -----------
Net asset value -
Beginning of period $ 10.080 $ 10.080 $ 10.080
---------- ---------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(loss) (a)(d) (0.032) 0.030 (0.032)
Net realized and
unrealized gain (d) 1.922 1.930 1.912
---------- ---------- -----------
Total from Investment
Operations 1.890 1.960 1.880
---------- ---------- -----------
Net asset value -
End of period $ 11.970 $ 12.040 $ 11.960
========== ========== ===========
Total return (e)(f)(g) 18.75% 19.44% 18.65%
========== ========== ===========
RATIOS TO AVERAGE NET ASSETS
Expenses (h)(i) 2.25% 1.60% 2.25%
Net investment income(loss)(h)(i) (0.36)% 0.29% (0.36)%
Fees and expenses
waived or borne by the
Adviser/Administrator (h)(i) 0.98% 0.98% 0.98%
Portfolio turnover (g) 51% 51% 51%
Average commission rate $ 0.0564 $ 0.0564 $ 0.0564
Net assets at end
of period (000) $ 421 $ 1,288 $ 1,156
$ 0.096 $ 0.096 $ 0.096
20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
T0 THE TRUSTEES OF COLONIAL TRUST I AND THE SHAREHOLDERS OF
COLONIAL TAX-MANAGED GROWTH 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 Tax-Managed Growth Fund (a
series of Colonial Trust I) at October 31, 1997, the results of its operations,
the changes in its net assets and the financial highlights for the period from
December 30, 1996 (effective date of registration) through October 31, 1997 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 audit. 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
audit, which included confirmation of portfolio positions at October 31, 1997 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provides
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
December 10, 1997
21
<PAGE>
SHAREHOLDER SERVICES
TO MAKE INVESTING EASIER
Your fund has one of the most extensive selections of shareholder services
available. Your financial advisor can help you arrange for any of these
services, or you can call Colonial Investors Service Center 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(1): Exchange all or part of your account into the same share
class of another fund distributed by Liberty Financial Investments, by phone
or mail.
EASY ACCESS TO YOUR MONEY(1): 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 within one year, you can reinvest in any fund distributed by
Liberty Financial Investments 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 Fund 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 calendar day of each month unless the 10th falls on a
non-business day or the first business day of the week. If this occurs, the
processing date will be the previous business day. Dividends and capital gains
must be reinvested.
AUTOMATED DOLLAR COST AVERAGING: Transfer money on a monthly basis from any fund
with a balance of $5,000 into the same share class of up to four other funds
distributed by Liberty Financial Investments. Minimum for each transfer is $100.
RETIREMENT PLANS: Choose from a broad range of retirement plans, including IRAs.
(1) Redemptions and exchanges are made at the next determined net asset value
after the request is received by the Transfer Agent. 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 C shares, or $1 million or more of Class A shares, may be subject to a
contingent deferred sales charge.
22
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Tax-Managed Growth Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial Tax-Managed Growth Fund mails one shareholder report to each
shareholder address. If you would like more than one report, please call
1-800-426-3750 and additional reports will be sent to you.
This report has been prepared for shareholders of Colonial Tax-Managed Growth
Fund. This report may also be used as sales literature when preceded or
accompanied by the current prospectus which provides details of sales charges,
investment objectives and operating policies of the Fund.
23
<PAGE>
- --------------------------------------------------------------------------------
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.
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
[Liberty Logo] LIBERTY FINANCIAL INVESTMENTS, INC. (copyright)1997
Distributor for Colonial Funds, Stein Roe Advisor Funds
and Newport Funds
One Financial Center, Boston, MA 02111-2621
MG-02/399E-1097 (12/97)
- --------------------------------------------------------------------------------
