[Front Cover]
[Background picture of scales]
COLONIAL HIGH YIELD SECURITIES FUND Annual report
December 31, 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 - DECEMBER 31, 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:
[checkmark] High current income and total return potential
[checkmark] Diversification and thorough credit analysis
[checkmark] Management by experienced high yield specialists
Portfolio Manager Commentary: "The high yield market benefited from
well-balanced economic growth coupled with low inflation. As a result of our
value-oriented investment approach and strong market, the Fund delivered
above-average performance relative to its peers with below-average levels of
volatility during the past 12 months. As we look to 1998, we see a favorable
environment of modest interest rates, slowing growth and strong demand for high
yield bonds." -- Andrea Feingold
Colonial High Yield Securities Fund Performance
Class A Class B Class C(1)
Inception dates 10/21/71 6/8/92 1/15/96
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Distributions declared per share $0.612 $0.559 $0.564
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SEC yields on December 31, 1997(2) 7.72% 7.34% 7.49%
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12-month total returns, assuming reinvestment 13.87% 13.03% 13.11%
of all distributions and no sales charge or
contingent deferred sales charge (CDSC)
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Net asset value per share on December 31, 1997 $7.23 $7.23 $7.23
(1) Effective July 1, 1997, Class D shares were redesignated Class C shares.
(2) The 30-day SEC yields on December 31, 1997, reflect the portfolio's earning
power, net of expenses, expressed as an annualized percentage of the public
offering price per share at the end of the period.
Top Five Holdings By Issuer
(as of 12/31/97)
....................................
Cablevision Systems, Corp ..... 3.8%
Nextel Communications ......... 3.4%
Time Warner, Inc. ............. 3.2%
Echostar Communications ....... 3.2%
U.S. Air, Inc. ................ 2.4%
Top Five Bond Sectors
(as of 12/31/97)
....................................
Manufacturing ................ 18.9%
Trans., Elec., Gas
& Sanitation Services ....... 15.0%
Hotels/Gaming ................. 8.3%
Telecommunications ............ 6.9%
Cable ......................... 6.1%
Portfolio holdings and sector breakdowns are calculated as a percentage of total
net assets. Because the Fund is actively managed, there can be no guarantee the
Fund will continue to maintain these portfolio holdings and sector breakdown.
Industry sectors in the following financial statements are based upon the
standard industrial classifications (SIC) as published by the U.S. Office of
Management and Budget. The sector classifications used on this page are based
upon Colonial's defined criteria as used in the investment process.
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2
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[Picture of Harold W. Cogger]
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
I am pleased to present the annual report for Colonial High Yield Securities
Fund. This report reflects on the investment environment for the 12 months ended
December 31, 1997, and on the performance of your Fund.
During the past 12 months, economic growth and low inflation provided a
favorable environment for the equity market and, in turn, the high yield bond
market that derives much of its strength from corporate earnings. In general,
high yield bonds tend to perform better in an environment of economic expansion,
low inflation and low unemployment.
Indeed, the high yield bond market performed extremely well in this favorable
environment. It successfully weathered a correction in the stock market in the
Fall and, at times, was less volatile than government securities. New issues
were readily absorbed, and default rates were at historic lows of less than 2%.
A combination of factors -- rising employment rates, steady growth in personal
income and consumer spending -- continue to provide a firm foundation for a
continuation of the current economic expansion.
Of course, we continue to seek income plus price appreciation through our
value-oriented investment strategy. Our team of analysts meets with the
management of companies whose securities are held in our portfolio on an ongoing
basis to thoroughly review each company's financial position, assess its value
and review its risk/return potential. We focus on earnings momentum and
emphasize the upper end of the quality spectrum. To reduce risk, the portfolio
is broadly diversified in more than 100 issues from a broad range of sectors.
The following pages of this report provide you with a closer look at your Fund's
performance, as well as the portfolio manager's investment strategy.
We appreciate your continued confidence in the Fund and thank you for giving us
the opportunity to serve your investment needs.
Respectfully,
/s/ Harold W. Cogger
-----------------
Harold W. Cogger
President
February 9, 1998
Because market conditions change frequently, there can be no assurance that the
trends described here will continue, come to pass or affect Fund performance.
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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 bonds continued to benefit from the economy
During the past 12 months, high yield corporate bonds benefited from the growing
economy and performed extremely well. Issuing companies were able to refinance
at relatively low interest rates, while the high yield market drew much of its
strength from the resulting cash flow and liquidity of these companies. Credit
quality among high yield bonds remains solid, with default rates at historic
lows of less than 2%.
Fund beats benchmark while keeping volatility low
For the 12 months ended December 31, 1997, the total return for Class A shares,
based on net asset value, was 13.87%. In comparison, the CS First Boston High
Yield Index, an unmanaged benchmark, returned 12.63%. In addition, as of
December 31, 1997, the 30-day SEC yield for Class A shares was 7.72%. The Fund
achieved these attractive returns without undue levels of volatility.
The portfolio remains single B quality
We continued to focus on single B issues -- the mid-quality segment of the high
yield market. Because of the low default rate among high yield securities, we
felt no need to move into the higher quality range of the market. At the same
time, there was little added reward for taking on the increased risk of the
lower end of the high yield market.
Telecommunications offers value
To take advantage of the merger and acquisitions occurring in the
telecommunications industry, 6.1% of the portfolio currently is invested in
bonds in the cable television industry. The market position and strength of many
of our telecommunication holdings makes them likely acquisition targets. Mergers
and acquisitions boost the performance of the Fund because the price of the high
yield bond rises to reflect the stronger financial resources of the new owner.
During the past year, the Fund benefited from mergers and/or acquisitions in the
telecommunications sector including Orion, Brooks Fiber and Shared Technology.
The portfolio also held a significant position (over 8%) in the gaming and hotel
sectors. We favored gaming establishments in noncompetitive environments. The
large multi-jurisdictional operator Grand Casinos, is a prime example. The Fund
also benefited from Harrah's Entertainment, Inc.'s acquisition of Showboat, Inc.
Outlook is positive for 1998
We expect the economy to continue to grow in the coming year, but the rate of
growth could slow substantially. As a result, we had taken steps to reduce our
exposure to holdings of companies whose success is tied to market cycles, such
as paper companies. At the end of the period, we realized a profit in the energy
sector and enhanced the quality of the limited number of cyclical holdings we
chose to keep in the portfolio. In turn, we increased our holdings in companies
relatively insulated from economic cycles, such as supermarkets, which accounted
for nearly 5% of the portfolio.
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4
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Overall, our outlook for the coming year is extremely positive. We believe the
demand for high yield bonds will be strong as more companies look to refinance
debt. In addition, we see even further demand from insurance companies who now
have access to products that enable them to use high yield debt.
Colonial High Yield Securities Fund Investment Performance
vs. the CS First Boston High Yield Index
Change in Value of $10,000 from 12/31/87 - 12/31/97
Based on NAV and POP for Class A Shares
[Mountain Chart Plot Points]
FIRST BOSTON NAV POP
12/31/87 $10,000 $10,000 $ 9,525
3/31/88 10,569 10,588 10,085
6/30/88 10,924 10,926 10,407
9/30/88 11,116 11,155 10,625
12/31/88 11,365 11,300 10,763
3/31/89 11,564 11,495 10,949
6/30/89 11,981 11,816 11,255
9/30/89 11,733 11,678 11,123
12/31/89 11,410 11,307 10,769
3/31/90 11,115 10,768 10,256
6/30/90 11,753 11,300 10,763
9/30/90 10,690 10,130 9,649
12/31/90 10,682 9,627 9,170
3/31/91 12,660 11,096 10,569
6/30/91 13,599 12,144 11,567
9/30,91 14,640 13,113 12,491
12/31/91 15,356 13,851 13,194
3/31/92 16,613 15,267 14,542
6/30/92 17,021 15,817 15,066
9/30/92 17,635 16,533 15,747
12/31/92 17,914 16,781 15,984
3/31/93 19,163 17,824 16,977
6/30/93 19,907 18,760 17,869
9/30/93 20,401 19,106 18,199
12/31/93 21,301 20,085 19,131
3/31/94 21,074 20,135 19,179
6/30/94 20,770 20,007 19,057
9/30/94 21,102 20,057 19,105
12/31/94 21,093 20,017 19,066
3/31/95 22,086 20,867 19,876
6/30/95 23,366 21,933 20,891
9/30/95 24,068 22,681 21,604
12/31/95 24,760 23,548 22,430
3/31/96 25,296 23,964 22,826
6/30/96 25,695 24,287 23,133
9/30/96 26,660 25,539 24,326
12/31/96 27,835 26,424 25,169
3/31/97 28,246 26,690 25,423
6/30/97 29,465 28,065 26,732
9/30/97 30,851 29,509 28,108
12/31/97 31,350 30,090 28,661
A hypothetical $10,000 investment in Class B shares made at inception, June 8,
1992 at net asset value (NAV) would have been valued at $18,358 on December 31,
1997. The same investment after deducting the applicable contingent deferred
sales charge (CDSC) would have grown to $18,258 on December 31, 1997. A $10,000
investment in Class C shares made at inception, January 15, 1996 at NAV would
have been valued at $12,505 on December 31, 1997. The CS First Boston High Yield
Index is an unmanaged index that tracks the performance of high yield bonds.
Unlike mutual funds, indexes are not investments, do not incur fees or expenses
and it is not possible to invest in an index.
Average Annual Total Returns
As of December 31, 1997
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Class A Shares Class B Shares Class C Shares(1)
Inception 10/21/71(2) 6/8/92 1/15/96
NAV POP NAV w/CDSC NAV w/CDSC
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1 year 13.87% 8.46% 13.03% 8.03% 13.11% 12.11%
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5 years 12.39 11.30 11.56 11.30 -- --
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10 years/Life 11.65 11.10 11.52 11.41 12.05 12.05
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(1) Effective July 1, 1997 Class D shares were redesignated Class C shares.
(2) Colonial High Yield Securities Fund adopted its current investment policies
on 3/31/80.
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 CDSC. Public offering price (POP)
returns include the maximum sales charge of 4.75%. The applicable CDSC for Class
B shares is 5% for one year, 2% for five years and 1% since inception. The CDSC
for Class C shares is 1% for 1 year.
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5
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INVESTMENT PORTFOLIO
DECEMBER 31, 1997 (IN THOUSANDS)
CORPORATE FIXED INCOME BONDS & NOTES - 85.5% PAR VALUE
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CONSTRUCTION - 1.7%
Building Construction
Falcon Building Products Co., Inc.,
stepped coupon, (10.500% 06/15/02)
(a) 06/15/07 $ 8,950 $ 5,929
Kevco, Inc.,
10.375% 12/01/07(b) 1,500 1,530
Nortek, Inc.,
9.875% 03/01/04 11,400 11,656
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19,115
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..............................................................................
MANUFACTURING - 32.8%
Chemicals & Allied Products - 5.4%
Climachem, Inc.,
10.750% 12/01/07(b) 2,000 2,060
Hydrochem Industrial Services, Inc.
10.375% 08/01/07 3,225 3,354
LaRoche Industries, Inc.,
9.500% 09/15/07(b) 7,500 7,425
PCI Chemicals Canada, Inc.,
9.250% 10/15/07(b) 1,250 1,256
Revlon Consumer Products Corp.,
10.500% 02/15/03 12,000 12,660
Sterling Chemicals, Inc.:
11.250% 04/01/07 2,000 2,000
11.750% 08/15/06 16,000 16,560
Texas Petrochemical Corp.,
11.125% 07/01/06 11,500 12,363
Trans Resources, Inc.,
11.875% 07/01/02 4,000 4,270
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61,948
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Electronic & Electrical Equipment - 3.4%
Amphenol Corp.,
9.875% 05/15/07 12,080 12,865
L-3 Communications Corp.,
10.375% 05/01/07 2,250 2,436
Unisys Corp.,
11.750% 10/15/04 20,000 22,900
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38,201
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6
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Investment Portfolio/December 31, 1997
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Fabricated Metal - 1.1%
Euramax International PLC,
11.250% 10/01/06(c) $ 9,000 $ 9,743
Renco Metals, Inc.,
11.500% 07/01/03 3,000 3,180
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12,923
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Food & Kindred Products - 0.6%
Pilgrim's Pride Corp.,
10.875% 08/01/03 1,600 1,688
Sun World International Corp.,
11.250% 04/15/04 4,350 4,676
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6,364
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Machinery & Computer Equipment - 0.8%
IMO Industries, Inc.,
11.750% 05/01/06 8,530 9,426
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Measuring & Analyzing Instruments - 0.5%
Intertek Finance PLC,
10.250% 11/01/06 5,625 5,906
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Miscellaneous Manufacturing - 2.5%
AEI Holding Co.,
10.000% 11/15/07(b) 8,650 8,909
Koppers Industries, Inc.,
9.875% 12/01/07(b) 5,975 6,154
Shop Vac Corp.,
10.625% 09/01/03 6,500 7,061
Werner Holding Co.,
10.000% 11/15/07(b) 5,750 5,908
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28,032
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Paper Products - 4.1%
Amscan Holdings, Inc.,
9.875% 12/15/07(b) 3,000 3,068
Gaylord Container Corp.,
9.750% 06/15/07 8,500 8,542
Repap New Brunswick, Inc.:
9.875% 07/15/00 7,240 7,385
10.625% 04/15/05 9,000 8,617
Riverwood International Corp.:
10.625% 08/01/07 9,000 9,090
10.875% 04/01/08 7,000 6,650
Stone Container Corp.,
10.750% 10/01/02 3,000 3,127
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46,479
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7
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Investment Portfolio/December 31, 1997
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CORPORATE FIXED INCOME BONDS &
NOTES - CONT. PAR VALUE
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MANUFACTURING - CONT.
Petroleum Refining - 0.5%
Benton Oil & Gas Co.,
9.375% 11/01/07(b) $ 5,200 $ 5,317
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Primary Metal - 6.5%
Algoma Steel, Inc.,
12.375% 07/15/05 14,640 17,056
Envirosource, Inc.,
9.750% 06/15/03 10,630 10,803
Insilco Corp.,
10.250% 08/15/07 7,150 7,507
Ivaco, Inc.,
11.500% 09/15/05 7,500 8,100
Kaiser Aluminum & Chemical Corp.,
10.875% 10/15/06 500 540
10.875% 10/15/06 15,025 16,227
Keystone Consolidated Industries, Inc.,
9.625% 08/01/07(b) 6,000 6,030
Northwestern Steel & Wire,
9.500% 06/15/01 1,000 975
Weirton Steel Corp.,
11.375% 07/01/04 6,000 6,285
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73,523
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Printing & Publishing - 0.8%
American Lawyer Media Holdings:
9.750% 12/15/07(b) 1,500 1,522
stepped coupon, (12.250% 12/15/02)
(a) 12/15/08(b) 1,500 848
Hollinger International Publishing, Inc.,
9.250% 03/15/07 6,000 6,330
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8,700
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Rubber & Plastic - 1.2%
Applied Extrusion Technologies, Inc.,
11.500% 04/01/02 7,000 7,455
Berry Plastics Corp.,
12.250% 04/15/04 3,500 3,815
Burke Industries, Inc.,
10.000% 08/15/07(b) 2,200 2,291
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13,561
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8
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Investment Portfolio/December 31, 1997
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Stone, Clay, Glass & Concrete - 0.2%
Anchor Glass Container Corp.,
11.250% 04/01/05(b) $ 2,250 $ 2,452
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Textile Mill Products - 0.9%
Collins & Aikman Floor Coverings, Inc.,
10.000% 01/15/07 9,950 10,448
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Transportation Equipment - 4.3%
Aftermarket Technology Corp.,
Series B,
12.000% 08/01/04 4,947 5,491
Collins & Aikman Products Co.,
11.500% 04/15/06 10,000 11,238
Delco Remy International, Inc.,
10.625% 08/01/06(b) 6,975 7,533
Johnstown America Industries, Inc.,
11.750% 08/15/05 7,825 8,568
LDM Technologies, Inc.,
10.750% 01/15/07 9,700 10,573
Venture Holdings Trust,
Series B,
9.500% 07/01/05 5,000 5,075
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48,478
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...............................................................................
MINING & ENERGY - 4.2%
Crude Petroleum & Natural Gas - 0.4%
TransAmerica Energy Corp.,
11.500% 06/15/02(b) 4,475 4,386
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Oil & Gas Extraction - 3.4%
Forcenergy, Inc.,
9.500% 11/01/06 3,285 3,490
Magnum Hunter Resources, Inc.,
10.000% 06/01/07 11,650 11,970
Mariner Energy Corp.,
10.500% 08/01/06 11,250 11,813
Petsec Energy, Inc.,
9.500% 06/15/07 6,500 6,671
Santa Fe Energy Resources, Inc.,
11.000% 05/15/04 4,000 4,340
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38,284
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Oil & Gas Field Services - 0.4%
Parker Drilling Corp.,
9.750% 11/15/06 4,000 4,300
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9
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Investment Portfolio/December 31, 1997
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CORPORATE FIXED INCOME BONDS &
NOTES - CONT. PAR VALUE
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RETAIL TRADE - 5.1%
Apparel & Accessory Stores - 0.3%
William Carter Co., 10.375% 12/01/06 $ 3,500 $ 3,675
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Food Stores - 4.7%
Friendly Ice Cream Corp.,
10.500% 12/01/07 7,000 7,088
Pathmark Stores, Inc.:
9.625% 05/01/03 17,000 15,640
stepped coupon, (10.750% 11/01/99)
(a) 11/01/03 2,000 1,050
Ralphs Grocery Co.:
10.450% 06/15/04 8,000 8,990
10.450% 06/15/04 4,000 4,495
Richmont Marketing Special,
10.125% 12/15/07(b) 5,000 5,075
Shoppers Food Warehouse Corp.,
9.750% 06/15/04(b) 2,500 2,556
Star Markets Co.,
13.000% 11/01/04 7,600 8,607
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53,501
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Home Furnishings & Equipment - 0.1%
Sealy Mattress Co.,
9.875% 12/15/07(b) 1,000 1,025
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................................................................................
SERVICES - 10.7%
Amusement & Recreation - 1.3%
Grand Casinos,
9.000% 10/15/04(b) 9,000 9,045
Hollywood Casino Corp.,
12.750% 11/01/03 5,445 5,853
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14,898
------------
Business Services - 1.6%
Ameriserv Food Co.,
10.125% 07/15/07 6,500 6,825
DecisionOne Corp.,
9.750% 08/01/07 7,250 7,468
Pierce Leahy Corp.,
11.125% 07/15/06 1,950 2,213
10
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Investment Portfolio/December 31, 1997
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Williams Scotsman, Inc.,
9.875% 06/01/07 $ 1,500 $ 1,545
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18,051
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Hotels, Camps & Lodging - 7.0%
Aztar Corp.,
13.750% 10/01/04 1,500 1,717
Eldorado Resorts Corp.,
10.500% 08/15/06 11,020 12,067
Harvey Casinos Resorts,
10.625% 06/01/06 10,805 11,777
HMH Properties, Inc.,
9.500% 05/15/05 12,000 12,795
Horseshoe Gaming LLC,
9.375% 06/15/07(b) 6,000 6,285
Showboat Marina Partnership,
Series B,
13.500% 03/15/03 5,000 6,050
Showboat, Inc.,
13.000% 08/01/09 11,000 13,530
Wyndham Hotel Corp.,
10.500% 05/15/06 12,500 14,750
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78,971
---------
Other Services - 0.8%
Borg Warner Security Corp.,
9.625% 03/15/07 8,395 8,878
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................................................................................
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 31.0%
Air Transportation - 2.8%
U.S. Air, Inc.,
10.375% 03/01/13 24,154 27,113
ValuJet Airlines, Inc.,
10.500% 04/15/01(b) 4,500 4,433
--------
31,546
--------
Broadcasting - 2.6%
SFX Broadcasting,
10.750% 05/15/06 6,900 7,573
Sinclair Broadcast Group, Inc.,
10.000% 09/30/05 4,055 4,298
Sullivan Broadcasting, Inc.,
10.250% 12/15/05 9,500 10,165
Young Broadcasting Corp.,
10.125% 02/15/05 7,000 7,385
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29,421
--------
11
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Investment Portfolio/December 31, 1997
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CORPORATE FIXED INCOME BONDS &
NOTES - CONT. PAR VALUE
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TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - CONT.
Cable - 10.6%
Comcast UK Cable Partners Ltd.,
stepped coupon, (11.200% 11/15/00)
(a) 11/15/07 $ 10,500 $ 8,531
Diamond Cable Communication PLC,
stepped coupon, (10.750% 02/15/02)
(a) 02/15/07(c) 13,500 9,180
Echostar Communications Corp.,
stepped coupon, (12.875% 06/01/99)
(a) 06/01/04 29,000 26,535
EchoStar Satellite Broadcasting Corp.,
(a) 03/15/04(b) 4,000 3,360
Le Groupe Videotron Ltd.,
10.625% 02/15/05(d) 10,000 11,100
International CableTel, Inc.:
stepped coupon, (12.750% 04/15/00)
(a) 04/15/05 1,500 1,249
stepped coupon, (11.500% 02/01/01)
(a) 02/01/06 13,000 10,205
Marcus Cable Co.:
stepped coupon, (13.500% 08/01/99)
(a) 08/01/04 8,500 7,841
stepped coupon, (14.250% 06/15/00)
(a) 12/15/05 13,000 11,212
Northland Cable,
10.250% 11/15/07(b) 10,325 10,893
Rogers Cablesystems, Inc.,
10.000% 03/15/05 4,485 4,956
Telewest Communication PLC,
stepped coupon, (11.000% 10/01/00)
(a) 10/01/07(c) 6,500 5,054
TCI Satellite Entertainment,
10.875% 02/15/07(b) 9,000 9,495
--------
119,611
--------
Communications - 2.7%
Adelphia Communications Corp.,
9.875% 03/01/07 15,000 15,975
Allbritton Communications Co.,
9.750% 11/30/07 9,500 9,714
Esprit Telecom Group PLC,
11.500% 12/15/07 1,500 1,549
12
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Investment Portfolio/December 31, 1997
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Intermedia Communication of Florida,
stepped coupon, (12.500% 05/15/01)
(a) 05/15/06 $ 5,000 $ 3,925
--------
31,163
--------
Electric, Gas & Sanitary Services - 0.4%
Allied Waste Industries, Inc.,
stepped coupon, (11.300% 06/01/02)
(a) 06/01/07 6,000 4,215
--------
Gas Services - 1.2%
HS Resources, Inc.,
9.250% 11/15/06 11,000
Midland Cogeneration Venture L.P.,
10.330% 07/23/02 2,164
--------
13,622
--------
Sanitary Services - 1.3%
Allied Waste North America, Inc.,
10.250% 12/01/06 13,435 14,745
--------
Telecommunication - 9.4%
Comcast Cellular Corp.,
9.500% 05/01/07 5,000 5,225
GST USA, Inc.,
stepped coupon, (13.875% 12/15/00)
(a) 12/15/05 6,000 4,605
Mcleod, Inc.,
stepped coupon, (10.500% 03/01/02)
(a) 03/01/07 15,105 11,027
MetroNet Communications Corp.,
12.000% 08/15/07(b) 1,250 1,441
Nextel Communications, Inc.,
stepped coupon, (9.750% 02/15/99)
(a) 08/15/04 22,000 19,525
stepped coupon, (9.750% 10/31/02)
(a) 10/31/07(b) 14,500 8,917
Nextel International,
stepped coupon, (13.000% 04/15/02)
(a) 04/15/07 6,000 3,480
Orion Network Systems, Inc.,
stepped coupon, (12.500% 01/15/02)
(a) 01/15/07 12,000 8,910
PriCellular Wireless Corp.,
10.750% 11/01/04 4,000 4,350
14.000% 11/15/01 4,000 4,450
13
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Investment Portfolio/December 31, 1997
- --------------------------------------------------------------------------------
CORPORATE FIXED INCOME BONDS &
NOTES - CONT. PAR VALUE
- --------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - CONT.
Telecommunication - Cont.
RCN Corp.,
stepped coupon, (11.125% 10/15/02)
(a) 10/15/07(b) $ 4,750 $ 2,980
Sprint Spectrum L.P.,
stepped coupon, (12.500% 08/15/01)
(a) 08/15/06 24,350 18,993
Teleport Communications Group, Inc.,
stepped coupon, (11.125% 07/01/01)
(a) 07/01/07 11,375 9,342
Teligent, Inc.,
11.500% 12/01/07 3,000 3,008
--------
106,253
--------
TOTAL CORPORATE FIXED INCOME BONDS & NOTES
(cost of $933,811) 967,418
--------
PREFERRED STOCKS - 8.7% SHARES
- --------------------------------------------------------------------------------
RETAIL TRADE - 0.1%
Food Stores
Supermarkets General Holdings, $3.520 60 720
--------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 8.6%
Cable - 7.0%
Cablevision Systems Corp:
11.125%, Series M, PIK 185 21,518
11.750%, Series H, PIK 176 21,040
Time Warner, Inc.,
10.250%, Series M 33 36,542
--------
79,100
--------
Communications - 0.5%
Nextel Communication,
13.000%, PIK 5 5,898
--------
Publishing - 0.2% PriMedia, Inc.:
9.200% (b) 12 1,200
10.000% 15 1,571
--------
2,771
--------
14
<PAGE>
Investment Portfolio/December 31, 1997
- --------------------------------------------------------------------------------
Telecommunication - 0.9%
Adelphia Communication,
13.000%, Series B 35 $ 4,178
EchoStar Communications Corp., 12.125% (b) 6 5,775
--------
9,953
--------
TOTAL PREFERRED STOCKS (cost of $90,884) 98,442
--------
COMMON STOCKS - 0.6%
- -------------------------------------------------------------------------------
MANUFACTURING - 0.1%
Chemicals & Allied Products - 0.0%
Crompton & Knowles Corp. 14 377
--------
Food & Kindred Products - 0.1%
Darling International, Inc. (e) 52 443
Dr. Pepper Bottling Company of Texas,
Series A (e) 40 920
--------
1,363
--------
...............................................................................
MINING & ENERGY - 0.3%
Oil & Gas Extraction - 0.1%
Gulf Canada Resources, Ltd. (e) 150 1,050
Pioneer Natural Resources Co. 7 201
--------
1,251
--------
Oil & Gas Field Services - 0.2%
Dawson Production Services, Inc. (e) 49 843
Parker Drilling Co.(e) 100 1,219
--------
2,062
--------
................................................................................
RETAIL TRADE - 0.1%
Miscellaneous Retail - 0.0%
Macleod-Stedman, Inc.(e)(f) 425 4
Pharmhouse Corp. (e) 1 5
--------
9
--------
Restaurants - 0.0%
Host Marriott Corp. 8 148
--------
................................................................................
SERVICES - 0.1%
Amusement & Recreation - 0.1%
Alliance Gaming Corp. (e) 100 487
--------
15
<PAGE>
Investment Portfolio/December 31, 1997
- --------------------------------------------------------------------------------
COMMON STOCKS - CONT. SHARES VALUE
- --------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICE - CONT.
Communications - 0.1%
EchoStar Communications Corp.
Class A(e) 9 $ 151
Intermedia Communication of Florida, Inc. 1 110
Nextel Communications, Inc.
Class A (e) 19 493
--------
754
--------
Electric Services - 0.0%
BayCorp Holdings, Ltd. (e) (g) (g)
--------
Gas Services - 0.0%
United Gas Holdings Corp. (e) 22 312
--------
Local & Suburban Transit - 0.0%
Greyhound Lines, Inc., 12.500% Escrow
Receipt (e)(f) 2 (g)
Greyhound Lines, Inc., 13.000% Escrow
Receipt (e)(f) 1 (g)
--------
3 (g)
--------
Motor Freight & Warehousing - 0.0%
St. Johnsbury Trucking Co. (e)(f) 79 1
Sun Carriers, Inc. (e)(f) 326 3
--------
4
--------
TOTAL COMMON STOCKS (cost of $6,190) 6,767
--------
WARRANTS (e) - 0.0%
- -----------------------------------------------------------------------------
MANUFACTURING - 0.0%
Rubber & Plastic
BPC Holdings Corp.
expires 04/15/04 4 70
--------
.............................................................................
SERVICES - 0.0%
Health Services - 0.0%
Wright Medical Technology,
expires 06/15/03 1 144
--------
Hotels, Camps & Lodging - 0.0%
Capital Gaming International
expires 02/01/99 6 (g)
--------
16
<PAGE>
Investment Portfolio/December 31, 1997
- --------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.0%
Communications - 0.0%
American Telecasting, Inc.
expires 09/10/00 (b) 9 $ 1
Wireless One, Inc.
expires 10/19/00 20 (g)
----------
1
----------
Telecommunications - 0.0%
MetroNet Communication
expires 08/15/07 (b) 1 (g)
Nextel Communication
expires 04/14/07 6 15
Orion Network Systems, Inc.
expires 01/15/07 12 150
----------
165
----------
TOTAL WARRANTS (cost of $602) 380
----------
TOTAL INVESTMENTS - 94.8% (cost of $1,031,487)(h) 1,073,007
----------
SHORT-TERM OBLIGATION - 4.7% PAR
- --------------------------------------------------------------------------------
Repurchase agreement with ABN Amro Chicago Corp.,
dated 12/31/97 due 01/02/98 at 6.60% collateralized
by U.S. Treasury notes with various maturities to 2016,
market value $54,962 (repurchase proceeds $53,743) 53,723 53,723
----------
OTHER ASSETS & LIABILITIES, NET - 0.5% 5,331
- --------------------------------------------------------------------------------
NET ASSETS - 100% $1,132,061
----------
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 144-A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1997 the value of these securities amounted to $139,170 or 12.3% of net
assets.
(c) This is a British security. Par amount is stated in U.S. dollars.
(d) This is a Canadian security. Par amount is stated in U.S. dollars.
(e) Non-income producing.
Notes to investment portfolio continued on following page.
17
<PAGE>
Investment Portfolio/December 31, 1997
- --------------------------------------------------------------------------------
NOTES TO INVESTMENT PORTFOLIO - CONT.
- --------------------------------------------------------------------------------
(f) The value of this security represents fair value as determined in good
faith under the direction of the Trustees.
(g) Rounds to less than one.
(h) Cost for federal income tax purposes is $1,031,622.
Acronym Name
------- ----------------
PIK Payment-In-Kind
See notes to financial statements.
18
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
(in thousands except for per share amounts and footnotes)
<S> <C> <C>
ASSETS
Investments at value (cost $1,031,487) $ 1,073,007
Short-term obligations 53,723
--------------
1,126,730
Receivable for:
Interest $ 19,620
Fund shares sold 1,909
Other 180 21,709
------------- --------------
Total Assets 1,148,439
LIABILITIES
Payable for:
Investments purchased 15,008
Distributions 1,295
Accrued:
Deferred Trustees fees 9
Other 66
-------------
Total Liabilities 16,378
---------------
NET ASSETS $ 1,132,061
==============
Net asset value & redemption price per share -
Class A ($600,107/83,041) $7.23
==============
Maximum offering price per share - Class A
($7.23/0.9525) $7.59(a)
==============
Net asset value & offering price per share -
Class B ($513,977/71,125) $7.23(b)
==============
Net asset value & offering price per share -
Class C ($17,977/2,488) $7.23(b)
==============
COMPOSITION OF NET ASSETS
Capital paid in $ 1,116,551
Undistributed net investment income 1,407
Accumulated net realized loss (27,417)
Net unrealized appreciation 41,520
--------------
$ 1,132,061
==============
</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.
19
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(in thousands)
INVESTMENT INCOME
Interest $ 92,773
Dividends 7,518
--------------
Total investment income 100,291
EXPENSES
Management fee $ 6,182
Service fee 2,593
Distribution fee - Class B 3,424
Distribution fee - Class C 80
Transfer agent 2,915
Bookkeeping fee 366
Trustees fee 55
Custodian fee 69
Audit fee 35
Legal fee 8
Registration fee 149
Reports to shareholders 24
Other 81
----------------
15,981
Custodian credits earned (69) 15,912
---------------- --------------
Net Investment Income 84,379
--------------
NET REALIZED & UNREALIZED GAIN ON PORTFOLIO POSITIONS
Net realized gain 33,243
Net unrealized appreciation during
the period 12,075
----------------
Net Gain 45,318
--------------
Increase in Net Assets from Operations $ 129,697
==============
20
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(in thousands) Year ended December 31
-----------------------------------
1997(a) 1996(b)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 84,379 $ 73,695
Net realized gain 33,243 22,242
Net unrealized appreciation 12,075 2,536
--------------- -------------
Net Increase from Operations 129,697 98,473
Distributions:
From net investment income - Class A (48,571) (43,790)
From net investment income - Class B (36,076) (30,452)
From net investment income - Class C (968) (199)
--------------- -------------
44,082 24,032
--------------- -------------
Fund Share Transactions:
Receipts for shares sold - Class A 256,767 180,185
Value of distributions reinvested - Class A 22,111 19,557
Cost of shares repurchased - Class A (225,980) (156,993)
--------------- -------------
52,898 42,749
--------------- -------------
Receipts for shares sold - Class B 236,653 170,461
Value of distributions reinvested - Class B 16,974 14,258
Cost of shares repurchased - Class B (170,175) (135,147)
--------------- -------------
83,452 49,572
--------------- -------------
Receipts for shares sold - Class C 26,798 7,808
Value of distributions reinvested - Class C 621 146
Cost of shares repurchased - Class C (16,033) (2,037)
--------------- -------------
11,386 5,917
--------------- -------------
Net Increase from Fund Share Transactions 147,736 98,238
--------------- -------------
Total Increase 191,818 122,270
NET ASSETS
Beginning of period 940,243 817,973
--------------- -------------
End of period (including undistributed net
investment income of $1,407 and $1,450,
respectively) $ 1,132,061 $ 940,243
=============== =============
</TABLE>
(a) Class D shares were redesignated Class C shares on July 1, 1997.
(b) Class C shares (formerly Class D) were initially offered on January 15,
1996.
Statement of Changes in Net Assets continued on following page.
See notes to financial statements.
21
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS - CONT.
<TABLE>
<CAPTION>
Year ended December 31
-----------------------------------
1997(a) 1996(b)
<S> <C> <C>
NUMBER OF FUND SHARES
Sold - Class A 36,392 26,664
Issued for distributions reinvested - Class A 3,122 2,883
Repurchased - Class A (32,029) (23,201)
--------------- -------------
7,485 6,346
--------------- -------------
Sold - Class B 33,503 25,190
Issued for distributions reinvested - Class B 2,396 2,102
Repurchased - Class B (24,160) (19,949)
--------------- -------------
11,739 7,343
--------------- -------------
Sold - Class C 3,789 1,153
Issued for distributions reinvested - Class C 87 21
Repurchased - Class C (2,263) (299)
--------------- -------------
1,613 875
--------------- -------------
</TABLE>
(a) Class D shares were redesignated Class C shares on July 1, 1997.
(b) Class C shares (formerly Class D) were initially offered on January 15,
1996.
See notes to financial statements.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 1. ACCOUNTING POLICIES
................................................................................
Organization: Colonial High Yield Securities Fund (the Fund), a series of
Colonial Trust I, is a diversified portfolio of a Massachusetts business trust,
registered under the Investment Company Act of 1940, as amended, as an open-end,
management investment company. The Fund's investment objective is to seek high
current income and total return by investing primarily in lower rated corporate
debt securities. The Fund may issue an unlimited number of shares. The Fund
offers three classes of shares: Class A, Class B and Class C. 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.
Class C shares are subject to a contingent deferred sales charge on redemptions
made within one year after purchase and an annual distribution fee.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following significant
accounting policies are consistently followed by the Fund in the preparation of
its financial statements.
Security valuation and transactions: Debt securities generally are valued by a
pricing service based upon market transactions for normal, institutional- size
trading units of similar securities. When management deems it appropriate, an
over-the-counter or exchange bid quotation is used.
Equity securities 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.
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Portfolio positions which cannot be valued as set forth above are valued at fair
value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, 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.
23
<PAGE>
Notes to Financial Statements/December 31, 1997
- --------------------------------------------------------------------------------
NOTE 1. ACCOUNTING POLICIES - CONT.
................................................................................
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 C distribution fee), 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.
Class B and Class C 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 C shares
only.
Federal income taxes: Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
Interest income, debt discount and premium: Interest income is recorded on the
accrual basis. Original issue discount is accreted to interest income over the
life of a security with a corresponding increase in the cost basis; premium and
market discount are not amortized or accreted.
The value of additional securities received as an interest or dividend payment
is recorded as income and as the cost basis of such securities.
Distributions to shareholders: The Fund declares and records distributions daily
and pays monthly.
The character of income and gains to be distributed are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. Reclassifications are made to the Fund's capital accounts to reflect
income and gains available for distribution (or available capital loss
carryforwards) under income tax regulations.
Foreign currency transactions: Net realized and unrealized gain (loss) on
foreign currency transactions includes gains (losses) arising from the
fluctuation in exchange rates between trade and settlement dates on securities
transactions, gains (losses) arising from the disposition of foreign currency
and currency gains (losses) between the accrual and payment dates on dividend
and interest income and foreign withholding taxes.
The Fund does not distinguish that portion of gains (losses) on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included with
the net realized and unrealized gains (losses) from investments.
Other: Corporate actions are recorded on the ex-date (except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware of
such), net of nonrebatable tax withholdings. Where a high
24
<PAGE>
Notes to Financial Statements/December 31, 1997
- --------------------------------------------------------------------------------
level of uncertainty as to collection exists, income on securities is recorded
net of all tax withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-
market daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES
................................................................................
Management fee: Colonial Management Associates, Inc. (the Adviser) is the
investment Adviser of the Fund and furnishes accounting and other services and
office facilities for a monthly fee equal to 0.60% annually of the Fund's
average net assets.
Bookkeeping fee: The Adviser provides bookkeeping and pricing services for
$27,000 per year plus 0.035% of the Fund's average net assets over $50 million.
Transfer agent: Colonial Investors Service Center, Inc. (the Transfer Agent), an
affiliate of the Adviser, provides shareholder services for a monthly fee equal
to 0.25% annually of the Fund's average net assets and receives reimbursement
for certain out of pocket expenses.
Underwriting discounts, service and distribution fees: Liberty Financial
Investments, Inc. formerly Colonial Investment Services, Inc. (the Distributor),
an affiliate of the Adviser, is the Fund's principal underwriter. For the year
ended December 31, 1997, the Fund has been advised that the Distributor retained
net underwriting discounts of $170,991 on sales of the Fund's Class A shares and
received contingent deferred sales charges (CDSC) of $1,089,053 and $13,303 on
Class B and Class C share redemptions, respectively.
The Fund has adopted a 12b-1 plan which requires it to pay the Distributor a
service fee equal to 0.25% annually of the Fund's net assets as of the 20th of
each month. The plan also requires the payment of a distribution fee to the
Distributor equal to 0.75% annually of the average net assets attributable to
Class B and Class C shares. The Distributor has voluntarily agreed to waive a
portion of the Class C share distribution fee so that it will not exceed 0.60%
annually.
The CDSC and the fees received from the 12b-1 plan are used principally as
repayment to the Distributor for amounts paid by the Distributor to dealers who
sold such shares.
Other: The Fund pays no compensation to its officers, all of whom are employees
of the Adviser.
The Fund's Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
Fund's assets.
25
<PAGE>
Notes to Financial Statements/December 31, 1997
- --------------------------------------------------------------------------------
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES - CONT.
- --------------------------------------------------------------------------------
The Fund has an agreement with its custodian bank under which $69,772 of
custodian fees have been reduced by balance credits applied during the year
ended December 31, 1997. The Fund could have invested a portion of the assets
utilized in connection with the expense offset arrangements in an income
producing asset if it had not entered into such agreements.
NOTE 3. PORTFOLIO INFORMATION
................................................................................
Investment activity: During the year ended December 31, 1997, purchases
and sales of investments, other than short-term obligations, were
$1,223,218,213 and $1,124,645,274, respectively.
Unrealized appreciation (depreciation) at December 31, 1997, based on cost
of investments for federal income tax purposes was:
Gross unrealized appreciation $ 48,726,474
Gross unrealized depreciation (7,341,659)
-------------------
Net unrealized appreciation $ 41,384,815
===================
Capital loss carryforwards: At December 31, 1997, 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
------------ ------------
2000 $1,267,000
2002 9,495,000
2003 16,521,000
------------
$27,283,000
------------
Expired capital loss carryforwards, if any, are recorded as a reduction of
capital paid in.
To the extent loss carryforwards are used to offset any future realized gains,
it is unlikely that such gains would be distributed since they may be taxable to
shareholders as ordinary income.
Other: There are certain additional risks involved when investing in foreign
securities that are not inherent with investments in domestic securities. These
risks may involve foreign currency exchange rate fluctuations, adverse political
and economic developments and the possible prevention of currency exchange or
other foreign governmental laws or restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
NOTE 4. LINE OF CREDIT
................................................................................
The Fund may borrow up to 10% of its net assets under a line of credit for
temporary or emergency purposes. Any borrowings bear interest at one of the
following options determined at the inception of the loan: (1) federal funds
rate plus 1/2 of 1%, (2) the lending bank's base rate or (3) IBOR offshore loan
rate plus 1/2 of 1%. There were no borrowings under the line of credit during
the year ended December 31, 1997.
26
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
Year ended December 31
--------------------------------
1997
Class A Class B Class C (a)
-------- -------- ------------
Net asset value -
Beginning of period $ 6.920 $ 6.920 $ 6.920
-------- -------- --------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.610 0.557 0.562
Net realized and
unrealized gain 0.312 0.312 0.312
------- -------- --------
Total from Investment
Operations 0.922 0.869 0.874
------- -------- --------
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment income (0.612) (0.559) (0.564)
------- -------- --------
Net asset value - End of period $ 7.230 $ 7.230 $ 7.230
======= ======== ========
Total return (b) 13.87% 13.03% 13.11%
======= ======== ========
RATIOS TO AVERAGE NET ASSETS
Expenses (c) 1.20% 1.95% 1.85%
Net investment income (c) 8.53% 7.78% 7.88%
Portfolio turnover 115% 115% 115%
Net assets at end
of period (000) $ 600,107 $ 513,977 $ 17,977
(a) Class D shares were redesignated Class C shares on July 1, 1997.
(b) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(c) The benefits derived from custody credits and directed brokerage
arrangements had an impact of 0.01%. Prior years' ratios are net of
benefits received, if any.
27
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are
as follows:
Year ended December 31
--------------------------------
1996
Class A Class B Class C (a)
-------- -------- ------------
Net asset value -
Beginning of period $ 6.750 $ 6.750 $ 6.780
-------- -------- --------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.625 0.574 0.554
Net realized and
unrealized gain (loss) 0.160 0.160 0.130
-------- -------- --------
Total from Investment
Operations 0.785 0.734 0.684
-------- -------- --------
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment income (0.615) (0.564) (0.544)
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
(a) Class C 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>
FINANCIAL HIGHLIGHTS - CONT.
Year ended December 31
------------------------------------------------------------------------
1995 1994 1993
Class A Class B Class A Class B Class A Class B
- --------- ------- ------- ------- ------- -------
$6.300 $6.300 $6.950 $6.950 $6.400 $6.400
- --------- ------- ------- ------- ------- -------
0.615 0.566 0.599 0.549 0.634 0.585
0.452 0.452 (0.622) (0.622) 0.576 0.576
- --------- ------- ------- ------- ------- -------
1.067 1.018 (0.023) (0.073) 1.210 1.161
- --------- ------- ------- ------- ------- -------
(0.603) (0.555) (0.627) (0.577) (0.660) (0.611)
(0.014) (0.013) -- -- -- --
- --------- ------- ------- ------- ------- -------
(0.617) (0.568) (0.627) (0.577) (0.660) (0.611)
- --------- ------- ------- ------- ------- -------
$6.750 $6.750 $6.300 $6.300 $6.950 $6.950
========= ======= ======= ======= ======= =======
17.65% 16.78% (0.34)% (1.09)% 19.69% 18.83%
========= ======= ======= ======= ======= =======
1.21%(d) 1.96%(d) 1.23% 1.98% 1.23% 1.98%
9.14%(d) 8.39%(d) 9.03% 8.28% 9.55% 8.80%
95% 95% 123% 123% 122% 122%
$ 466,905 $ 351,068 $ 389,791 $ 253,438 $ 440,942 $ 222,536
29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES OF COLONIAL TRUST I AND THE SHAREHOLDERS OF
COLONIAL HIGH YIELD SECURITIES FUND
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations and
of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial High Yield Securities Fund
(a series of Colonial Trust I) at December 31, 1997, the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
These financial statements and the financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of portfolio positions
at December 31, 1997 by correspondence with the custodian and brokers, and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 9, 1998
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>
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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 Shield Logo]
LIBERTY FINANCIAL INVESTMENTS, INC. (c) 1998
Distributor for Colonial Funds, Stein Roe Advisor Funds and Newport Funds
One Financial Center, Boston, MA 02111-2621
HY-02/669E-1297 98/154 M (2/98)
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