[graphic omitted]
COLONIAL HIGH YIELD SECURITIES FUND SEMIANNUAL REPORT
June 30, 1998
-----------------------------
Not FDIC May Lose Value
Insured No Bank Guarantee
-----------------------------
<PAGE>
COLONIAL HIGH YIELD SECURITIES FUND HIGHLIGHTS
JANUARY 1, 1998 - JUNE 30, 1998
INVESTMENT OBJECTIVE: Colonial High Yield Securities Fund seeks high
current income and total return by investing primarily in lower-rated
corporate debt securities.
THE FUND IS DESIGNED TO OFFER:
|X| High current income and total return potential
|X| Diversification and thorough credit analysis
|X| Management by experienced high-yield specialists
PORTFOLIO MANAGER COMMENTARY: "The Fund benefited from the strength in
the U.S. equity market, as well as from the strong U.S. economy. Our
value-oriented investment approach continued to serve shareholders well, as the
Fund's performance exceeded its Lipper peer group average. With change in
interest rates in our forecast and continued economic growth, we believe the
outlook for the high-yield sector should remain positive through the end of the
year." -- Andrea Feingold
COLONIAL HIGH YIELD SECURITIES FUND PERFORMANCE
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Inception dates 10/21/71(1) 6/8/92 1/15/96
- ------------------------------------------------------------------------------
Distributions declared per share $0.300 $0.273 $0.278
- ------------------------------------------------------------------------------
SEC yields on 6/30/98 7.94% 7.56% 7.72%(2)
- ------------------------------------------------------------------------------
Six-month total returns, assuming reinvestment 4.74% 4.35% 4.43%(3)
of all distributions and no sales charge or
contingent deferred sales charge (CDSC)
- ------------------------------------------------------------------------------
Net asset value per share on 6/30/98 $7.27 $7.27 $7.27
- ------------------------------------------------------------------------------
TOP FIVE HOLDINGS BY ISSUER(4) TOP FIVE BOND SECTORS(4)
(as of 6/30/98) (as of 6/30/98)
- ------------------------------------ ------------------------------------
CSC Holdings, Inc. .............3.8% Manufacturing .................17.9%
Nextel Communications ..........3.1% Telecommunications ............13.8%
Pathmark Stores ................2.6% Cable .........................12.1%
U.S. Air, Inc. .................2.3% Metals .........................9.1%
Echostar Communications ........2.1% Trans., Elec., Gas
& Sanitation Services .........5.6%
(1) Colonial High Yield Securities Fund adopted its current investments policies
on 3/31/80.
(2) The 30-day SEC yields 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. If the Distributor had not waived
certain Fund expenses, the SEC yield for Class C shares would have been
7.56%.
(3) Performance results reflect any voluntary waiver of Fund expenses by the
Distributor. Absent this waiver, performance results would have been lower.
(4) 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 the same portfolio holdings and
sector breakdown in the future. Industry sectors in the following financial
statements are based upon the standard industrial classifications (SIC) as
published by the U.S. Office of Management and Budget. The sector
classifications used on this page are based upon Colonial's defined criteria
as used in the investment process.
<PAGE>
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[Photo of Stephen E. Gibson]
In June 1998, Harold Cogger retired as president of Colonial High Yield
Securities Fund. I would like to take this opportunity to thank him for his
guidance over the past few years and wish him well. As the new president, I am
pleased to present the semiannual report for Colonial High Yield Securities Fund
for the six-month period ended June 30, 1998.
The first six months of the year were marked by low inflation, a decline in
long-term interest rates, and steady economic growth. This favorable combination
of factors helped push the stock market to record highs. In turn, the high-yield
bond market, which derives much of its strength from corporate earnings, turned
in a solid performance. High-yield bonds were also aided by declining interest
rates, which boosted the bond market as a whole. Moreover, inflation, which
influences the bond market, continued to be held in check by increased
productivity, low commodity prices and the growth-restraining effects of Asia's
economic decline.
Capitalizing on the strength of the high-yield market and the success of
our value-oriented investment approach, the Fund performed well relative to its
peers during the six-month period. In fact, I am pleased to report that the Fund
outperformed its Lipper peer group average not only in the current period, but
in the 1-, 3-, 5- and 10-year periods as well.(1)
As we look ahead to the second half of 1998, we see a continuation of current
economic trends, and our outlook for high-yield bonds remains positive. We
believe the Fund is a sensible option for investors seeking a high level of
current income and total return through high-yielding corporate bonds.
Thank you for choosing Colonial High Yield Securities Fund and for giving us the
opportunity to serve your investment needs.
Respectfully,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
August 11, 1998
Because economic and market conditions change frequently, there can be no
assurance that the trends described above or on the following pages will
continue.
(1) For the periods ended 6/30/98, the respective annualized returns and
rankings for the Fund and the Lipper High Current Yield Universe average
were: 4.74% (101st out of 245 funds) and 4.42% for 6 months; 12.30% (70th of
215) and 11.45% for 1 year; 12.85% (45th of 132) and 12.33% for 3 years;
10.93% (15th of 76) and 9.90% for 5 years; and 11.18% (12th of 52) and
10.23% for 10 years.
<PAGE>
PORTFOLIO MANAGEMENT REPORT
ANDREA FEINGOLD is portfolio manager of Colonial High Yield Securities Fund. Ms.
Feingold is vice president of Colonial Management Associates, Inc. and is a
chartered financial analyst.
HIGH-YIELD BONDS CONTINUED TO BENEFIT FROM SUCCESS OF STOCK MARKET
The first six months of the year brought steady levels of growth, low inflation
and low unemployment. The stock market performed well in this environment,
reaching record highs. High-yield bonds also performed well during the period,
as soaring equity prices strengthened corporate balance sheets, and declining
interest rates boosted bond prices across the board.
The market felt the impact of the problems of the Asian markets. However,
overall default rates climbed only slightly from their historical lows of less
than 2%. Through diligent credit analysis -- an integral part of our management
process -- we weeded out the weaker, more speculative issues from our list of
potential candidates for the portfolio and experienced no defaults during the
period. With only a limited number of holdings in companies exposed to the Asian
economy, the Fund was relatively insulated from the economically troubled
region.
FUND OUTPERFORMED PEER AVERAGE
Capitalizing on the strength of the high-yield market, the Fund generated a
total return of 4.74% for Class A shares, based on net asset value for the six
months ended June 30, 1998. This compares favorably with the performance of the
Fund's Lipper group average, which posted a total return of 4.42% for the same
period.
A WELL-BALANCED PORTFOLIO BRINGS DIVERSITY
Our portfolio remains broadly diversified in more than 100 issues from a wide
range of sectors. We continue to focus on the mid-quality segment of the
high-yield market, with significant holdings in cable (12.1% of total net
assets), metals and minerals (10.5%) and competitive local exchange carriers
(CLECs) (5%).
During the period, we reduced our exposure to zero-coupon bonds. In particular,
we pared back our holdings in telecommunications. Given the stage of development
and increased competition in this industry, it made sense to realize a profit
before potential price cuts could negatively impact earnings. In turn, we
increased our positions in bonds of companies that rely less on the equity
markets for financing. We found value in areas such as the consolidating markets
for pagers and domestic cable, where companies are able to generate steady cash
flow.
A POSITIVE OUTLOOK GOING FORWARD
In the third quarter, we intend to reduce exposure to cyclical holdings that are
sensitive to a slowdown in the economy, such as in the metals and mining and
auto sectors. While selective opportunities still exist in these industries, we
believe it would be prudent to take advantage of the recent strength in the
equity market and realize profits where possible.
As we look ahead to the second half of 1998, we anticipate a continuation of
current economic trends -- low unemployment, steady growth in personal income
and consumer spending, and low inflation. High-yield bonds typically perform
well in such an environment. Consequently, our outlook for the coming six months
is positive, as we believe high-yield bonds should continue to produce solid
total returns. Moreover, we believe that, as the stock market becomes
increasingly volatile, the historically more stable bond market may become
attractive to investors.
<PAGE>
COLONIAL HIGH YIELD SECURITIES FUND'S INVESTMENT PERFORMANCE
VS. THE CS FIRST BOSTON HIGH YIELD INDEX
Change in Value of $10,000 from 6/30/88 - 6/30/98
DATE NAV POP FIRST BOSTON
- ----------- ------ ------ -------------
Jun. 30, 88 $10,000 $ 9,525 $10,000
Sep. 30, 88 10,209 9,724 10,176
Dec. 30, 88 10,341 9,850 10,404
Mar. 31, 89 10,520 10,020 10,586
Jun. 30, 89 10,814 10,300 10,968
Sep. 29, 89 10,687 10,179 10,741
Dec. 29, 89 10,347 9,856 10,445
Mar. 30, 90 9,854 9,386 10,175
Jun. 29, 90 10,341 9,850 10,759
Sep. 28, 90 9,271 8,831 9,786
Dec. 31, 90 8,810 8,392 9,779
Mar. 28, 91 10,155 9,673 11,590
Jun. 28, 91 11,113 10,586 12,449
Sep. 30, 91 12,001 11,431 13,401
Dec. 31, 91 12,677 12,074 14,058
Mar. 31, 92 13,972 13,308 15,208
Jun. 30, 92 14,476 13,788 15,581
Sep. 30, 92 15,130 14,412 16,144
Dec. 31, 92 15,358 14,628 16,399
Mar. 31, 93 16,312 15,537 17,542
Jun. 30, 93 17,169 16,353 18,224
Sep. 30, 93 17,486 16,655 18,676
Dec. 31, 93 18,382 17,509 19,499
Mar. 31, 94 18,427 17,552 19,292
Jun. 30, 94 18,310 17,441 19,014
Sep. 30, 94 18,356 17,484 19,318
Dec. 30, 94 18,319 17,449 19,309
Mar. 31, 95 19,097 18,190 20,218
Jun. 30, 95 20,073 19,119 21,390
Sep. 29, 95 20,757 19,771 22,033
Dec. 29, 95 21,551 20,528 22,666
Mar. 29, 96 21,932 20,890 23,157
Jun. 28, 96 22,227 21,172 23,522
Sep. 30, 96 23,373 22,263 24,405
Dec. 31, 96 24,183 23,035 25,481
Mar. 31, 97 24,427 23,267 25,857
Jun. 30, 97 25,685 24,465 26,973
Sep. 30, 97 27,007 25,724 28,242
Dec. 31, 97 27,539 26,231 28,699
Mar. 31, 98 28,611 27,252 29,561
Jun. 30, 98 28,845 27,475 29,935
VALUE OF A $10,000 INVESTMENT MADE ON 6/30/88
As of 6/30/98
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
NAV POP NAV w/CDSC NAV w/CDSC
- --------------------------------------------------------------------------------
$28,845 $27,475 $27,601 $27,601 $28,371 $28,371
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
As of 6/30/98
- --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
INCEPTION 10/21/71 6/8/92 1/15/96
NAV POP NAV W/CDSC NAV W/CDSC
- --------------------------------------------------------------------------------
1 YEAR 12.30% 6.97% 11.47% 6.47% 11.63% 10.63%
- --------------------------------------------------------------------------------
5 YEARS 10.93 9.86 10.11 9.84 10.57 10.57
- --------------------------------------------------------------------------------
10 YEARS 11.18 10.64 10.69 10.69 10.99 10.99
- --------------------------------------------------------------------------------
LIFE 12.85 12.55 12.58 12.58 12.75 12.75
- --------------------------------------------------------------------------------
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 charge of 4.75% for Class
A shares. The CDSC returns reflect the maximum charges of 5% for one year and 2%
for five years for Class B shares, and 1% for one year for Class C shares.
Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Advisor or Distributor. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
Class B and Class C share (newer class shares) performance information includes
returns of the Fund's Class A shares (the oldest existing fund class) for
periods prior to the inception of the newer class shares. These Class A share
returns are not restated to reflect any expense differential (e.g., Rule 12b-1
fees) between Class A shares and the newer class shares. Had the expense
differential been reflected, the returns for periods prior to the inception of
the newer class shares would have been lower.
The CS First Boston High Yield Index is a broad-based, unmanaged index that
tracks the performance of high-yield bond funds. Unlike mutual funds, indexes
are not investments and do not incur fees or expenses. It is not possible to
invest directly in an index.
<PAGE>
INVESTMENT PORTFOLIO
JUNE 30, 1998 (UNAUDITED, IN THOUSANDS)
CORPORATE FIXED INCOME BONDS & NOTES - 83.8% PAR VALUE
- -------------------------------------------------------------------------------
CONSTRUCTION - 1.8%
BUILDING CONSTRUCTION
Falcon Building Products, Inc.,
stepped coupon, (10.500% 06/15/02)
(a) 06/15/07 $ 12,000 $ 7,980
Kevco, Inc.,
10.375% 12/01/07 1,500 1,560
Nortek, Inc.,
9.875% 03/01/04 11,400 11,685
----------
21,225
----------
- -------------------------------------------------------------------------------
MANUFACTURING - 35.9%
CHEMICALS & ALLIED PRODUCTS - 4.4%
Climachem, Inc.,
10.750% 12/01/07 5,000 5,187
Hydrochem Industrial Services, Inc.,
10.375% 08/01/07 3,225 3,289
LaRoche Industries, Inc.,
9.500% 09/15/07 5,000 4,850
PCI Chemicals Canada, Inc.,
9.250% 10/15/07 4,000 3,900
Sterling Chemicals, Inc.,
11.750% 08/15/06 10,000 10,000
Texas Petrochemical Corp.,
11.125% 07/01/06 11,500 12,477
Trans-Resources, Inc.:
stepped coupon, (12.000% 03/01/03)
(a) 03/15/08 7,000 4,060
10.750% 03/15/08 8,000 8,260
----------
52,023
----------
ELECTRONIC & ELECTRICAL EQUIPMENT - 0.6%
Amphenol Corp.,
9.875% 05/15/07 7,000 7,367
----------
FABRICATED METAL - 1.2%
Earle M. Jorgensen Co.,
9.500% 04/01/05(b) 5,000 4,900
Euramax International, PLC,
11.250% 10/01/06(c) 6,000 6,480
Renco Metals, Inc.,
11.500% 07/01/03 3,000 3,210
----------
14,590
----------
FOOD & KINDRED PRODUCTS - 0.6%
Aurora Foods Inc.,
8.750% 07/01/08 1,250 1,269
Pilgrim's Pride Corp.,
10.875% 08/01/03 1,600 1,660
Sun World International Corp.,
11.250% 04/15/04 4,350 4,763
----------
7,692
----------
MACHINERY & COMPUTER EQUIPMENT - 1.6%
IMO Industries, Inc.,
11.750% 05/01/06 8,530 9,596
Numatics, Inc.,
9.625% 04/01/08(b) 9,435 9,529
----------
19,125
----------
MEASURING & ANALYZING INSTRUMENTS - 1.6%
Envirosource, Inc.,
9.750% 06/15/03 12,501 12,438
Intertek Finance, PLC,
10.250% 11/01/06 5,625 5,878
----------
18,316
----------
MISCELLANEOUS MANUFACTURING - 7.4%
AEI Holding Co.,
10.000% 11/15/07(b) 10,000 9,975
Amscan Holdings, Inc.,
9.875% 12/15/07 7,000 7,070
Compass Aerospace Corp.
10.125% 04/15/05(b) 1,000 1,025
Eagle-Picher Industries, Inc.,
9.375% 03/01/08(b) 8,000 8,080
Holmes Products Corp.,
9.875% 11/15/07 4,290 4,440
Insilco Corp.,
10.250% 08/15/07 7,150 7,472
JTM Industries, Inc.,
10.000% 04/15/08(b) 4,000 4,060
Koppers Industries, Inc.,
9.875% 12/01/07 8,175 8,338
Moll Industries
10.500% 07/01/08 1,500 1,530
MTL Inc.,
10.000% 06/15/06 2,000 1,980
Newcor, Inc.,
9.875% 03/01/08(b) 5,000 5,062
Syratech Corp.,
11.000% 04/15/07 4,000 3,540
Tekni-Plex, Inc.,
9.250% 03/01/08 8,000 8,000
Thermadyne Manufacturing,
9.875% 06/01/08 10,000 10,075
The Imperial Home Decor Group, Inc.,
11.000% 03/15/08(b) 3,000 3,105
Werner Holding Co.,
10.000% 11/15/07 4,000 4,160
----------
87,912
----------
PAPER PRODUCTS - 4.4%
Gaylord Container Corp.:
9.375% 06/15/07 2,000 1,915
9.750% 06/15/07 7,000 6,860
Repap New Brunswick, Inc.,
10.625% 04/15/05 20,000 20,200
Riverwood International Corp.:
10.625% 08/01/07 6,000 6,240
10.875% 04/01/08 16,000 16,160
----------
51,375
----------
PRIMARY METAL - 7.3%
Algoma Steel, Inc.,
12.375% 07/15/05 12,000 13,440
Bayou Steel Corp.,
9.500% 05/15/08(b) 2,500 2,475
Ivaco, Inc.,
11.500% 09/15/05 7,500 8,212
Kaiser Aluminum & Chemical Corp.:
10.875% 10/15/06 15,025 16,227
10.875% 10/15/06 500 540
Keystone Consolidated Industries, Inc.,
9.625% 08/01/07 7,300 7,492
Northwestern Steel & Wire Co.,
9.500% 06/15/01 3,000 3,030
WCI Steel, Inc.,
10.000% 12/01/04 10,000 10,300
WHX Corp.,
10.500% 04/15/05 12,000 12,180
Weirton Steel Corp.,
11.375% 07/01/04 11,029 11,815
----------
85,711
----------
PRINTING & PUBLISHING - 1.1%
American Lawyer Media Holdings,
9.750% 12/15/07(b) 13,000 13,487
----------
RUBBER & PLASTIC - 0.5%
Burke Industries, Inc.,
10.000% 08/15/07 5,615 5,713
----------
STONE, CLAY, GLASS & CONCRETE - 0.2%
Anchor Glass Container Corp.,
11.250% 04/01/05 2,250 2,419
----------
TEXTILE MILL PRODUCTS - 0.9%
Collins & Aikman Floorcoverings, Inc.,
10.000% 01/15/07 9,950 10,448
----------
TRANSPORTATION EQUIPMENT - 4.1%
Collins & Aikman Products Co.,
11.500% 04/15/06 6,000 6,683
Delco Remy International, Inc.,
10.625% 08/01/06 10,000 10,800
Johnstown America Industries, Inc.:
11.750% 08/15/05 7,825 8,666
11.750% 08/15/05 2,000 2,215
LDM Technologies, Inc.,
10.750% 01/15/07 9,700 10,088
Venture Holdings Trust,
Series B,
9.500% 07/01/05 10,000 10,150
----------
48,602
----------
- --------------------------------------------------------------------------------
MINING & ENERGY - 6.1%
CRUDE PETROLEUM & NATURAL GAS - 0.5%
TransAmerican Energy Corp., 11.500% 06/15/02 5,975 5,587
----------
METAL MINING - 0.6%
Metallurg, Inc.,
11.000% 12/01/07 6,500 6,793
----------
OIL & GAS EXTRACTION - 4.0%
Belden & Blake Corp.,
9.875% 06/15/07 10,250 10,045
HS Resources, Inc.,
9.250% 11/15/06 9,000 9,090
Magnum Hunter Resources, Inc.,
10.000% 06/01/07 12,850 13,171
Mariner Energy, Inc.,
10.500% 08/01/06 8,000 8,160
Petsec Energy, Inc.,
9.500% 06/15/07 6,500 6,565
----------
47,031
----------
OIL & GAS FIELD SERVICES - 1.0%
Chiles Offshore, LLC,
10.000% 05/01/08(b) 9,000 8,685
Northern Offshore, ASA
10.000% 05/15/05(b)(d) 3,000 2,910
----------
11,595
----------
- --------------------------------------------------------------------------------
RETAIL TRADE - 3.7%
APPAREL & ACCESSORY STORES - 0.3%
William Carter Co.,
10.375% 12/01/06 3,500 3,728
----------
FOOD STORES - 3.3%
Pathmark Stores, Inc.,
stepped coupon, (10.750% 11/01/99)
(a) 11/01/03 10,000 8,425
9.625% 05/01/03 22,000 22,275
Star Markets Co.,
13.000% 11/01/04 7,600 8,503
----------
39,203
----------
HOME FURNISHINGS & EQUIPMENT - 0.1%
Sealy Mattress Co.,
9.875% 12/15/07(b) 1,000 1,020
----------
- --------------------------------------------------------------------------------
SERVICES - 5.7%
AMUSEMENT & RECREATION - 2.3%
Hard Rock Hotel, Inc.,
9.250% 04//01/05(b) 8,500 8,734
Hollywood Casino Corp.,
12.750% 11/01/03 12,445 13,783
Regal Cinemas, Inc.,
9.500% 06/01/08(b) 5,000 5,050
----------
27,567
----------
BUSINESS SERVICES - 0.7%
PSINet, Inc.,
10.000% 02/15/05 7,500 7,669
----------
HEALTH SERVICES - 1.5%
Conmed Corp.,
9.000% 03/15/08 8,000 7,960
Extendicare Health Services,
9.350% 12/15/07 8,000 8,080
Global Health Sciences,
11.000% 05/01/08(b) 2,250 2,228
----------
18,268
----------
OTHER SERVICES - 1.0%
Borg-Warner Security Corp.,
9.625% 03/15/07 8,645 9,682
Williams Scotsman, Inc.,
9.875% 06/01/07 1,500 1,549
----------
11,231
----------
PERSONAL SERVICES - 0.2%
Styling Technology Corp.,
10.875% 07/01/08 2,000 2,005
----------
- --------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 29.0%
AIR TRANSPORTATION - 2.7%
Trans World Airlines, Inc.,
11.375% 03/01/06(b) 5,000 5,013
U.S. Air, Inc.,
10.375% 03/01/13 24,154 27,354
----------
32,367
----------
BROADCASTING - 4.1%
Allbritton Communications Co.,
9.750% 11/30/07 12,000 13,200
Fox Family Worldwide Inc.:
stepped coupon, (10.250% 11/01/02)
(a) 11/01/07 7,000 4,550
9.250% 11/01/07 4,000 4,000
Lin Holding Corp.,
stepped coupon, (10.000% 03/01/03)
(a) 03/01/08(b) 5,500 3,692
Renaissance Media Group
stepped coupon, (10.000% 04/15/03)
(a) 04/15/08(b) 4,000 2,460
SFX Broadcasting, Inc.,
10.750% 05/15/06 4,543 5,009
Sinclair Broadcast Group, Inc.,
10.000% 09/30/05 4,055 4,349
Sullivan Broadcasting, Inc.,
10.250% 12/15/05 9,500 10,831
----------
48,091
----------
CABLE - 5.9%
Adelphia Communications Corp.,
9.875% 03/01/07 12,000 12,990
Comcast UK Cable Partners Ltd.,
stepped coupon, (11.200% 11/15/00)
(a) 11/15/07 11,500 9,603
Diamond Cable Communication, PLC,
stepped coupon, (10.750% 02/15/02)
(a) 02/15/07(c) 12,000 8,820
Diva Systems Corp., Units,
stepped coupon, (12.625% 03/01/03)
(a) 03/01/08(b)(e) 4,000 1,880
International CableTel, Inc.,
stepped coupon, (12.750% 04/15/00)
(a) 04/15/05 1,500 1,320
stepped coupon, (11.500% 02/01/01)
(a) 02/01/06 13,000 10,660
Northland Cable,
10.250% 11/15/07 10,325 11,048
Shop At Home, Inc.,
11.000% 04/01/05 2,750 2,901
Telewest Communication, PLC,
stepped coupon, (11.000% 10/01/00)
(a) 10/01/07(c) 12,000 9,900
----------
69,122
----------
COMMUNICATIONS - 2.5%
Diamond Holdings, PLC,
9.125% 02/01/08(c) 10,000 10,450
EchoStar Satellite Broadcasting Corp.,
stepped coupon, (13.125% 03/15/00)
(a) 03/15/04 10,000 9,200
Frontier Vision Holdings, L.P.,
stepped coupon, (11.875% 09/15/01)
(a) 09/15/07 6,500 5,135
Onepoint Communications Corp., Units,
14.500% 06/01/08(b)(f) 4,000 3,760
Orbital Imaging Corp.,
11.625% 03/01/05(b) 1,000 1,020
----------
29,565
----------
ELECTRIC SERVICES - 0.2%
Wesco Distribution, Inc.,
9.125% 06/01/08(b) 2,000 1,980
----------
GAS SERVICES - 0.0%
Midland Cogeneration Venture L.P.,
10.330% 07/23/02 (g) (g)
----------
SANITARY SERVICES - 0.4%
Allied Waste Industries, Inc.,
stepped coupon, (11.300% 06/01/02)
(a) 06/01/07 6,000 4,395
----------
TELECOMMUNICATION - 12.9%
Arch Communications, Inc.,
12.750% 07/01/07 1,000 1,010
Clearnet Communications, Inc.,
0.00% 12/15/05 8,000 6,720
Esprit Telecom Group, PLC,
11.500% 12/15/07 1,500 1,543
GST Telecom/GST Network,
stepped coupon, (10.500% 05/01/03)
(a) 05/01/08(b) 11,000 6,655
Hyperion Telecommunications, Inc.,
stepped coupon, (13.000% 04/15/01)
(a) 04/15/03 10,500 7,823
Intermedia Communications of Florida, Inc.
stepped coupon, (12.500% 05/15/01)
(a) 05/15/06 7,000 5,740
8.500% 01/15/08 6,000 6,015
KMC Telecom Holdings, Units,
stepped coupon, (12.500% 02/15/03)
(a) 02/15/08(b)(h) 3,000 1,770
Level 3 Communications, Inc.,
9.125% 05/01/08(b) 8,000 7,800
McLeod USA, Inc.,
stepped coupon, (10.500% 03/01/02)
(a) 03/01/07 2,000 1,490
8.375% 03/15/08 20,000 19,950
Metrocall, Inc.,
9.750% 11/01/07 12,000 12,240
MetroNet Communications Corp.,
stepped coupon, (11.875% 09/15/01)
(a) 06/15/08(b) 4,500 2,784
12.000% 08/15/07 1,250 1,406
Nextlink Communications, Inc.,
stepped coupon, (9.450% 04/15/03)
(a) 04/15/08(b) 4,000 2,450
NTL, Inc.,
stepped coupon, (9.750% 04/01/03)
(a) 04/01/08(b) 3,000 1,950
Nextel Communications, Inc.,
stepped coupon, (9.750% 10/31/02)
(a) 10/31/07 15,000 9,750
Nextel International, Inc.,
stepped coupon, (12.125% 04/15/03)
(a) 04/15/08(b) 5,000 2,913
Orion Network Systems, Inc.,
stepped coupon, (12.500% 01/15/02)
(a) 01/15/07 14,450 11,018
Pagemart Wireless, Inc.,
stepped coupon, (11.250% 02/01/03)
(a) 02/01/08 5,000 3,025
Price Communications Wireless, Inc.,
9.125% 12/15/06(b) 2,250 2,250
RCN Corp.,
stepped coupon, (11.125% 10/15/02)
(a) 10/15/07 10,000 6,425
Sprint Spectrum L.P.,
stepped coupon, (12.500% 08/15/01)
(a) 08/15/06 16,850 14,575
Verio, Inc.,
10.375% 04/01/05(b) 10,000 10,300
WinStar Communications, Inc.,
10.000% 03/15/08(b) 5,000 4,975
----------
152,577
----------
WATER TRANSPORTATION - 0.3%
American Communication Lines, LLC,
10.250% 06/30/08 4,000 4,060
----------
- --------------------------------------------------------------------------------
WHOLESALE TRADE - 1.6%
NONDURABLE GOODS
AmeriServ Food Co.,
10.125% 07/15/07 6,500 6,687
Richmont Marketing Specialists, Inc.,
10.125% 12/15/07(b) 9,275 9,414
U.S. Office Products Co.,
9.750% 06/15/08(b) 2,500 2,516
----------
18,617
----------
TOTAL CORPORATE FIXED INCOME BONDS & NOTES
(cost of $976,005) 988,476
----------
- -------------------------------------------------------------------------------
PREFERRED STOCKS - 10.2% SHARES VALUE
- -------------------------------------------------------------------------------
RETAIL TRADE - 0.2%
FOOD STORES
Supermarkets General Holdings, $3.250 69 $ 2,124
----------
- -------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 10.0%
BROADCASTING - 0.4%
PriMedia, Inc.:
9.200% 26 2,652
10.000% 15 1,560
----------
4,212
----------
CABLE - 6.2%
Adelphia Communications Corp. 75 8,963
CSC Holdings Limited, PIK:
11.125% 58 6,659
11.750% 324 37,944
Time Warner, Inc.,
10.250%, Series M 18 19,507
----------
73,073
----------
TELECOMMUNICATION - 3.4%
Concentric Network Corp.,
13.000%, PIK 2 2,023
EchoStar Communications Corp. (i) 12 13,733
Nextel Communications, Inc., PIK:
13.000% 5 6,150
11.125% 17 17,809
----------
39,715
----------
TOTAL PREFERRED STOCKS (cost of $115,481) 119,124
----------
COMMON STOCKS - 0.9%
- -------------------------------------------------------------------------------
MANUFACTURING - 0.3%
CHEMICALS & ALLIED PRODUCTS - 0.0%
Crompton & Knowles Corp. 14 358
----------
COMMUNICATIONS EQUIPMENT - 0.2%
EchoStar Communications Corp.
Class A 100 2,406
----------
FOOD & KINDRED PRODUCTS - 0.1%
Darling International, Inc. (i) 52 384
Dr. Pepper Bottling Company of Texas,
Series A (i) 40 1,240
----------
1,624
----------
- -------------------------------------------------------------------------------
MINING & ENERGY - 0.3%
CRUDE PETROLEUM & NATURAL GAS - 0.0%
Coho Energy, Inc. (i) 30 $ 203
----------
OIL & GAS EXTRACTION - 0.1%
Gulf Canada Resources, Ltd. (i) 150 741
Pioneer Natural Resources Co. 7 166
----------
907
----------
OIL & GAS FIELD SERVICES - 0.2%
Dawson Production Services, Inc. (i) 75 1,125
Parker Drilling Co. (i) 100 706
----------
1,831
----------
- -------------------------------------------------------------------------------
RETAIL TRADE - 0.0%
MISCELLANEOUS RETAIL - 0.0%
Macleod-Stedman, Inc. (i)(j) 425 4
Pharmhouse Corp. (i) 1 3
----------
7
----------
RESTAURANTS - 0.0%
Host Marriott Corp. 8 134
----------
- -------------------------------------------------------------------------------
SERVICES - 0.0%
BUSINESS SERVICES - 0.0%
Iron Mountain, Inc. (i) 1 33
----------
- -------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.3%
CABLE - 0.1%
Century Communications Corp. (i) 80 1,494
----------
ELECTRIC SERVICES - 0.0%
Baycorp Holdings, Ltd. (i) (g) (g)
----------
LOCAL & SUBURBAN TRANSIT - 0.0%
Greyhound Lines, Inc., 12.500% Escrow
Receipt (i)(j) 2 (g)
Greyhound Lines, Inc., 13.000% Escrow
Receipt (i)(j) 1 (g)
----------
(g)
----------
MOTOR FREIGHT & WAREHOUSING - 0.0%
St. Johnsbury Trucking Co. (i)(j) 79 1
Sun Carriers, Inc. (i)(j) 326 3
----------
4
----------
TELECOMMUNICATION - 0.2%
Intermedia Communication of Florida, Inc. (b) 1 155
MetroNet Communications Corp. (b) 1 60
Metrocall, Inc. (i) 100 606
Nextel Communications, Inc., Class A (i) 50 1,244
----------
2,065
----------
TOTAL COMMON STOCKS (cost of $10,656) 11,066
----------
WARRANTS (i) - 0.0%
- -------------------------------------------------------------------------------
MANUFACTURING - 0.0%
RUBBER & PLASTIC
BPC Holdings Corp. (j) 4 70
----------
- -------------------------------------------------------------------------------
SERVICES - 0.0%
HEALTH SERVICES - 0.0%
Wright Medical Technology
expires 06/15/02 (b) 1 144
----------
HOTELS, CAMPS & LODGING - 0.0%
Capital Gaming International
expires 02/01/99 (j) 6 (g)
----------
- -------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.0%
COMMUNICATIONS - 0.0%
Orbital Imaging Corp.
expires 03/01/05 (b) 1 45
American Telecasting, Inc.
expires 08/01/00 (j) 9 (g)
Wireless One, Inc.
expires 10/19/00 (j) 20 (g)
----------
45
----------
TELECOMMUNICATIONS - 0.0%
Loral Orion Network
expires 01/15/07 12 192
----------
TOTAL WARRANTS (cost of $638) 451
----------
TOTAL INVESTMENTS - 94.8% (cost of $1,102,780)(k) 1,119,117
----------
SHORT-TERM OBLIGATIONS - 4.0% PAR VALUE
- -------------------------------------------------------------------------------
Repurchase agreement with ABN AMRO Chicago Corp.,
dated 06/30/98 due 07/01/98 at 6.100% collateralized
by U.S. Treasury notes and bills with various
maturities to 2027, market value $47,960
(repurchase proceeds $46,951) $ 46,943 $ 46,943
----------
OTHER ASSETS & LIABILITIES, NET - 1.1% 13,493
- -------------------------------------------------------------------------------
NET ASSETS - 100% $1,179,553
----------
NOTES TO INVESTMENT PORTFOLIO:
- -------------------------------------------------------------------------------
(a) Currently zero coupon. Shown parenthetically is the interest to be paid and
the date the Fund will begin accruing this rate.
(b) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 1998
the value of these securities amounted to $166,311 or 14.1% of net assets.
(c) This is a British security. Par amount is stated in U.S. dollars.
(d) This is a Norwegian security. Par amount is stated in U.S. dollars.
(e) Each unit consists of one senior discount note and three warrants to
purchase common stock.
(f) Each unit consists of one senior note and one warrant to purchase common
stock.
(g) Rounds to less than one.
(h) Each unit consists of one senior discount note and one warrant to purchase
common stock.
(i) Non-income producing.
(j) The value of this security represents fair value as determined in good faith
under the direction of the Trustees.
(k) Cost for federal income tax purposes is $1,102,871.
Acronym Name
------------ ------------
PIK Payment-In-Kind
See notes to financial statements.
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 1998 (UNAUDITED)
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $1,102,780) $1,119,117
Short-term obligations 46,943
----------
1,166,060
Receivable for:
Interest $19,199
Investments sold 8,853
Fund shares sold 2,581
Dividends 693
Other 184 31,510
------- ----------
Total Assets 1,197,570
LIABILITIES
Payable for:
Investments purchased 5,079
Distributions to shareholders 7,775
Fund shares repurchased 5,112
Accrued:
Deferred Trustees fees 11
Other 40
-------
Total Liabilities 18,017
----------
NET ASSETS $1,179,553
----------
Net asset value & redemption price per share -
Class A ($606,807/83,463) $7.27
----------
Maximum offering price per share - Class A
($7.27/0.9525) $7.63(a)
----------
Net asset value & offering price per share -
Class B ($546,838/75,216) $7.27(b)
----------
Net asset value & offering price per share -
Class C ($25,908/3,564) $7.27(b)
----------
COMPOSITION OF NET ASSETS
Capital paid in $1,157,606
Undistributed net investment income 4,576
Accumulated net realized gain 1,034
Net unrealized appreciation 16,337
----------
$1,179,553
----------
(a) On sales of $50,000 or more the offering price is reduced.
(b) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
See notes to financial statements.
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
(in thousands)
INVESTMENT INCOME
Interest $ 50,696
Dividends 6,526
--------
Total Investment Income 57,222
EXPENSES
Management fee $ 3,515
Service fee 1,470
Distribution fee - Class B 2,024
Distribution fee - Class C 68
Transfer agent 1,701
Bookkeeping fee 201
Trustees fee 36
Custodian fee 72
Audit fee 16
Legal fee (a)
Registration fee 49
Reports to shareholders 10
Other 18
-------
9,180
Custodian credits earned (72) 9,108
------- --------
Net Investment Income 48,114
--------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain 29,415
Net unrealized depreciation during the period (25,183)
-------
Net Gain 4,232
--------
Increase in Net Assets from Operations $ 52,346
--------
(a) Rounds to less than one.
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
Six months
ended Year ended
(in thousands) June 30 December 31
----------- -----------
INCREASE (DECREASE) IN NET ASSETS 1998 1997(a)
Operations:
Net investment income $ 48,114 $ 84,379
Net realized gain 29,415 33,243
Net unrealized appreciation (depreciation) (25,183) 12,075
---------- ----------
Net Increase from Operations 52,346 129,697
Distributions:
From net investment income - Class A (24,973) (48,571)
From net investment income - Class B (20,074) (36,076)
From net investment income - Class C (862) (968)
---------- ----------
6,437 44,082
---------- ----------
Fund Share Transactions:
Receipts for shares sold - Class A 123,350 256,767
Value of distributions reinvested - Class A 9,685 22,111
Cost of shares repurchased - Class A (129,880) (225,980)
---------- ----------
3,155 52,898
---------- ----------
Receipts for shares sold - Class B 94,553 236,653
Value of distributions reinvested - Class B 8,021 16,974
Cost of shares repurchased - Class B (72,566) (170,175)
---------- ----------
30,008 83,452
---------- ----------
Receipts for shares sold - Class C 19,313 26,798
Value of distributions reinvested - Class C 441 621
Cost of shares repurchased - Class C (11,862) (16,033)
---------- ----------
7,892 11,386
---------- ----------
Net Increase from Fund Share Transactions 41,055 147,736
---------- ----------
Total Increase 47,492 191,818
NET ASSETS
Beginning of period 1,132,061 940,243
---------- ----------
End of period (including undistributed net
investment income of $4,576 and $1,407,
respectively) $1,179,553 $1,132,061
---------- ----------
(a) Class D shares were redesignated Class C shares on July 1, 1997.
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS - CONT.
(Unaudited)
Six months
ended Year ended
June 30 December 31
----------- -----------
1998 1997
NUMBER OF FUND SHARES
Sold - Class A 16,840 36,392
Issued for distributions reinvested - Class A 1,320 3,122
Repurchased - Class A (17,738) (32,029)
---------- ----------
422 7,485
---------- ----------
Sold - Class B 12,919 33,503
Issued for distributions reinvested - Class B 1,094 2,396
Repurchased - Class B (9,922) (24,160)
---------- ----------
4,091 11,739
---------- ----------
Sold - Class C 2,637 3,789
Issued for distributions reinvested - Class C 60 87
Repurchased - Class C (1,621) (2,263)
---------- ----------
1,076 1,613
---------- ----------
(a) Class D shares were redesignated Class C shares on July 1, 1997.
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 (UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
In the opinion of management of Colonial High Yield Securities Fund (the Fund),
a series of Colonial Trust I, the accompanying financial statements contain all
normal and recurring adjustments necessary for the fair presentation of the
financial position of the Fund at June 30, 1998, and the results of its
operations, the changes in its net assets and the financial highlights for the
six months then ended.
NOTE 2. ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
ORGANIZATION: The Fund is a diversified portfolio of a Massachusetts business
trust, registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. The Fund's investment objective is to
seek high current income and total return by investing primarily in lower rated
corporate debt securities. The Fund may issue an unlimited number of shares. The
Fund offers three classes of shares: Class A, Class B and Class 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. 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 is a summary of
significant accounting policies that are consistently followed by the Fund in
the preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS: Debt securities generally are valued by a
pricing service based upon market transactions for normal, institutional-size
trading units of similar securities. When management deems it appropriate, an
over-the-counter or exchange bid quotation is used.
Equity securities 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 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.
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: All income,
expenses (other than the Class B and Class C 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.
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 amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforwards) under income tax regulations.
FOREIGN CURRENCY TRANSACTIONS: Net realized and unrealized gains (losses) on
foreign currency transactions includes the fluctuation in exchange rates on
gains (losses) between trade and settlement dates on securities transactions,
gains (losses) arising from the disposition of foreign currency and currency
gains (losses) between the accrual and payment dates on dividends and interest
income and foreign withholding taxes.
The Fund does not distinguish that portion of gains (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 nonreclaimable tax withholdings. Where a high level of uncertainty
as to collection exists, income on securities is recorded net of all tax
withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
The Fund had an agreement with its custodian bank under which $72,431 of
custodian fees were reduced by the balance credits applied during the six months
ended June 30, 1998. 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 an agreement.
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
- -------------------------------------------------------------------------------
MANAGEMENT FEE: Colonial Management Associates, Inc. (the Adviser) is the
investment Adviser of the Fund and furnishes accounting and other services and
office facilities for a monthly fee equal to 0.60% annually of the Fund's
average net assets.
BOOKKEEPING FEE: The Adviser provides bookkeeping and pricing services for
$27,000 per year plus a percentage of the Fund's average net assets as follows:
Average Net Assets Annual Fee Rate
------------------ ----------------
First $50 million No charge
Next $950 million 0.035%
Next $1 billion 0.025%
Next $1 billion 0.015%
Over $3 billion 0.001%
TRANSFER AGENT FEE: Colonial Investors Service Center, Inc., (the Transfer
Agent), an affiliate of the Adviser, provides shareholder services for a monthly
fee equal to 0.25% annually of the Fund's average net assets and receives
reimbursement for certain out of pocket expenses.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Liberty Funds
Distributor, Inc., formerly Liberty Financial Investments, Inc. (the
Distributor), a subsidiary of the Adviser, is the Fund's principal underwriter.
During the six months ended June 30, 1998, the Fund has been advised that the
Distributor retained net underwriting discounts of $93,977 on sales of the
Fund's Class A shares and received contingent deferred sales charges (CDSC) of
$573,891 and $7,711 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% 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.
NOTE 4. PORTFOLIO INFORMATION
- -------------------------------------------------------------------------------
INVESTMENT ACTIVITY: During the six months ended June 30, 1998, purchases and
sales of investments, other than short-term obligations were $732,103,336 and
$703,342,507, respectively.
Unrealized appreciation (depreciation) at June 30, 1998, based on cost of
investments for federal income tax purposes was:
Gross unrealized appreciation $ 30,195,100
Gross unrealized depreciation (13,949,451)
------------
Net unrealized appreciation $ 16,245,649
------------
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 5. LINE OF CREDIT
- -------------------------------------------------------------------------------
The Fund may borrow up to 33 1/3% of its net assets under a line of credit for
temporary or emergency purposes. Any borrowings bear interest at one of the
following options determined at the inception of the loan: (1) federal funds
rate plus 1/2 of 1%, (2) the lending bank's base rate or (3) IBOR offshore loan
rate plus 1/2 of 1%. There were no borrowings under the line of credit during
the six months ended June 30, 1998.
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
(Unaudited)
Six months ended
June 30
---------------------------------
1998
Class A Class B Class C
------- ------- -------
Net asset value -
Beginning of period $ 7.230 $ 7.230 $ 7.230
------- ------- -------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.319 0.292 0.297(a)
Net realized and
unrealized gain 0.021 0.021 0.021
------- ------- -------
Total from Investment
Operations 0.340 0.313 0.318
------- ------- -------
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment income (0.300) (0.273) (0.278)
------- ------- -------
Net asset value - End of period $ 7.270 $ 7.270 $ 7.270
------- ------- -------
Total return (b)(c) 4.74% 4.35% 4.43%
------- ------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses (d)(e) 1.20% 1.95% 1.80%(a)
Net investment income (d)(e) 8.56% 7.81% 7.96%(a)
Portfolio turnover (c) 62% 62% 62%
Net assets at end
of period (000) $606,807 $546,838 $ 25,908
(a) Net of fees waived by the Distributor which amounted to $0.006 per share and
0.15%.
(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 an impact of 0.01%.
(e) Annualized.
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are as follows:
<CAPTION>
Year ended December 31
-------------------------------------------------------------------------
1997 1996
Class A Class B Class C(a) Class A Class B Class C(b)
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 6.920 $ 6.920 $ 6.920 $ 6.750 $ 6.750 $ 6.780
------- ------- ------- ------- ------- -------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.610 0.557 0.562 0.625 0.574 0.554
Net realized and
unrealized gain (loss) 0.312 0.312 0.312 0.160 0.160 0.130
------- ------- ------- ------- ------- -------
Total from Investment
Operations 0.922 0.869 0.874 0.785 0.734 0.684
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment income (0.612) (0.559) (0.564) (0.615) (0.564) (0.544)
In excess of net investment
income -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Total Distributions
Declared to Shareholders (0.612) (0.559) (0.564) (0.615) (0.564) (0.544)
------- ------- ------- ------- ------- -------
Net asset value - End
of period $ 7.230 $ 7.230 $ 7.230 $ 6.920 $ 6.920 $ 6.920
------- ------- ------- ------- ------- -------
Total return (c) 13.87% 13.03% 13.11% 12.21% 11.38% 10.56%(d)
------- ------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.20%(e) 1.95%(e) 1.85%(e) 1.20%(e) 1.95%(e) 1.95%(e)(f)
Net investment income 8.53%(e) 7.78%(e) 7.88%(e) 9.02%(e) 8.27%(e) 8.27%(e)(f)
Portfolio turnover 115% 115% 115% 145% 145% 145%
Net assets at end
of period (000) $600,107 $513,977 $ 17,977 $523,065 $411,124 $ 6,054
(a) Class D shares were redesignated Class C shares on July 1, 1997.
(b) Class C shares were initially offered on January 15, 1996. Per share amounts reflect activity from that
date.
(c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or
contingent deferred sales charge.
(d) Not annualized.
(e) The benefits derived from custody credits and directed brokerage arrangements had no impact. Prior years'
ratios are net of benefits received, if any.
(f) Annualized.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are as follows:
<CAPTION>
Year ended December 31
------------------------------------------------------------
1995 1994 1993
Class A Class B Class A Class B Class A Class B
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$ 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%(e) 1.96%(e) 1.23% 1.98% 1.23% 1.98%
9.14%(e) 8.39%(e) 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
</TABLE>
<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 Funds Distributor, Inc. 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 Funds Distributor 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 Funds Distributor. 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.
<PAGE>
HOW TO REACH COLONIAL
BY PHONE OR BY MAIL
BY TELEPHONE
CUSTOMER CONNECTION - 1-800-345-6611
For 24-hour account information, call from your touch-tone phone. (Rotary
callers will be automatically connected to a representative during business
hours.) A recorded message will guide you through the menu:
For fund prices, dividends and capital gains information .......... press [1]
For account information ........................................... press [2]
To speak to a service representative .............................. press [3]
For yield and total return information ............................ press [4]
For duplicate statements or new supply of checks .................. press [5]
To order duplicate tax forms and year-end statements .............. press [6]
(February through May)
To review your options at any time during your call ............... press [*]
To speak with a shareholder services representative about your account, call
Monday to Friday, 8:00 a.m. to 8:00 p.m. ET, and Saturdays from February through
mid-April, 10:00 a.m. to 2:00 p.m. ET.
COLONIAL TELEPHONE TRANSACTION DEPARTMENT - 1-800-422-3737
To purchase, exchange or sell shares by telephone, call Monday to Friday, 9:00
a.m. to 7:00 p.m. ET. Transactions received after the close of the New York
Stock Exchange will receive the next business day's closing price.
LITERATURE - 1-800-426-3750
To request literature on any fund distributed by Liberty Financial Investments,
call Monday to Friday, 8:30 a.m. to 6:30 p.m. ET.
BY MAIL
COLONIAL INVESTORS SERVICE CENTER, INC.
P.O. BOX 1722
BOSTON, MA 02105-1722
<PAGE>
SHAREHOLDER COMMUNICATIONS
TO KEEP YOU INFORMED
To make recordkeeping easy and keep you up-to-date on the performance of your
investments, you can expect to receive the following information about your
account:
TRANSACTION CONFIRMATIONS: Each time you make a purchase, sale or exchange, you
receive a confirmation statement within just a few days.
QUARTERLY STATEMENTS: Every three months, if any transactions are made that
affect your share balance, this statement reports on your account activity
during the quarter (including any reinvestment of dividends). This statement
also provides year-to-date information.
LIBERTY FUNDS DISTRIBUTOR INVESTOR OPPORTUNITIES: Mailed with your quarterly
account statements, this newsletter highlights timely investment strategies,
portfolio manager commentary and shareholder service updates.
TAX FORMS AND YEAR-END TAX GUIDE: Easy-to-use forms and timely information are
designed to make tax reporting simpler. (Usually mailed in January.)
AVERAGE COST BASIS STATEMENTS: If you sold or exchanged shares during the year,
this statement may help you calculate your gain/loss for tax purposes. (Usually
mailed in February.)
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
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
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 objectives and operating policies of the Fund and the most recent
copy of Liberty Funds Distributor's Performance Update.
<PAGE>
TRUSTEES
ROBERT J. BIRNBAUM
Consultant (formerly Special Counsel, Dechert, Price & Rhoads; President and
Chief Operating Officer, New York Stock Exchange, Inc.; President, American
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, & Frankel)
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
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, Chief Executive Officer and Director,
Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
ROBERT L. SULLIVAN
Retired Partner, KPMG Peat Marwick LLP (formerly Management Consultant, Saatchi
and Saatchi Consulting Ltd. and Principal and International Practice Director,
Management Consulting, Peat Marwick Main & Co.)
[logo] L I B E R T Y
COLONIAL FUNDS o STEIN ROE ADVISOR FUNDS o NEWPORT FUNDS
Liberty Funds distributor, Inc. (C)1998
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
Visit us at www.libertyfunds.com
HY-03/638F-0698 (8/98) 98/841
