<PAGE>
-------------------
THE
COLONIAL FUND
-------------------
SEMIANNUAL REPORT
APRIL 30, 1997
[Graphic Omitted]
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
<PAGE>
- --------------------------------------------------------------------------------
THE COLONIAL FUND HIGHLIGHTS
NOVEMBER 1, 1996 - APRIL 30, 1997
INVESTMENT OBJECTIVE: The Colonial Fund seeks primarily income and capital
growth and, secondarily, capital preservation.
THE FUND IS DESIGNED TO OFFER:
|X| Long-term investment returns
|X| Above-average value for their dollars
|X| Reasonable protection in down markets and broad diversification
|X| Quarterly dividend income
PORTFOLIO MANAGER COMMENTARY: "Today, the old investing 'rules' don't really
apply in the new, worldwide market environment. As value investors, we used to
seek out utility and financial stocks. The value stocks we're researching today
may well be service-oriented firms and franchises, not the former industrial
giants of recent years."
--Portfolio Managers Dan Rie, James P. Haynie and Gordon Johnson
THE COLONIAL FUND PERFORMANCE*
- --------------------------------------------------------------------------------
CLASS A CLASS B
Inception dates 4/30/82* 5/5/92
- --------------------------------------------------------------------------------
Six-month distributions declared per share $0.643 $0.606
- --------------------------------------------------------------------------------
Six-month total returns, assuming 7.71% 7.19%
reinvestment of all distributions
and no sales charge or contingent
deferred sales charge (CDSC)
- --------------------------------------------------------------------------------
Net asset value per share at 4/30/97 $9.54 $9.52
- --------------------------------------------------------------------------------
* Date Fund adopted current investment policies.
For more information about Class Z shares performance, please call Colonial at
1-800-426-3750.
TOP FIVE EQUITY HOLDINGS**
(as of 4/30/97)
- --------------------------------------------------------------------------------
1. Textron, Inc. ................................................... 2.9%
2. Johnson & Johnson Co. ........................................... 2.7%
3. CIGNA Corp. ..................................................... 2.7%
4. American Brands, Inc. ........................................... 2.3%
5. Bristol-Myers Squibb ............................................ 2.3%
TOP FIVE SECTORS**+
(as of 4/30/97)
- --------------------------------------------------------------------------------
1. Financials ...................................................... 21.6%
2. Energy/Natural Resources ........................................ 11.8%
3. Health Care ..................................................... 9.8%
4. Technology ...................................................... 8.5%
5. Capital Goods ................................................... 8.4%
** 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 hold these securities or invest in these sectors in the future.
+ Industry sectors in the following financial statements are based upon the
standard industrial classifications (SIC) published by the U.S. Office of
Management and Budget. The sector classifications used on this page are based
upon Colonial's defined criteria used in the investment process.
<PAGE>
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
I'm pleased to present your Fund's semiannual report, for the six month period
ended April 30, 1997. Even as this is written, the investment environment in the
U.S. remains quite positive.
[PHOTO OF HAROLD W. COGGER]
Putting things in some perspective, U.S. stock markets are now in the midst of
their 12th quarter of increased value. Just over two years ago, in February
1995, the Dow Jones Industrial Average (DJIA) reached the 4,000 level. Now,
we've already surpassed the 7,700 mark. The DJIA is widely quoted and a popular
indicator of the stock market's health. Newer investors, who have never
experienced a down market, may begin to feel that "the ride will never end."
However, though we don't envision any investment shocks, risk always goes
hand-in-hand with the potential for returns.
With Colonial's "New Value" investment strategy, active risk management has
become an integral part of this Fund, as the portfolio management team discusses
in the following pages. The Fund seeks out investments with low volatility and
risk factors. Formerly restrictive investment criteria have been broadened to
increase return potential while better managing risk.
The economic outlook is good -- with inflation under control and economic growth
quite strong, and visible in many areas. Operating in this relatively cloud-free
environment, your Fund's value stocks should continue to provide good returns --
with a well-diversified portfolio that has both domestic and foreign stock and
bond investments.
Now, let's look at the detailed information on your Fund's performance
- --including a talk with your portfolio management team. Your continued
confidence in the Fund is sincerely appreciated. We know you have many choices
- -- and welcome the opportunity of being selected to serve your investment needs.
Respectfully,
/s/ Harold W. Cogger
Harold W. Cogger
President
June 13, 1997
Because market conditions change frequently, there can be no assurance that the
trends described will continue, come to pass or affect Fund performance.
<PAGE>
PORTFOLIO MANAGEMENT REPORT
DANIEL RIE, JAMES P. HAYNIE AND GORDON JOHNSON co-manage The Colonial Fund. Dr.
Rie is Senior Vice President and Director of the Adviser (Colonial Management
Associates, Inc.) and head of Colonial's Equity Group. He has managed or
co-managed the Fund since 1993. Messrs. Haynie and Johnson, Vice Presidents of
the Adviser, have co-managed The Colonial Fund since earlier this year.
"HOW WE LOOK FOR NEW VALUE..."
Your Fund is diversified in two distinct ways: first, we have U.S. stocks,
foreign stocks and U.S. Government bond investments. We search for investments
in three distinct categories:
|X| companies whose current business activities provide dividends or assets that
represent above average value for each dollar invested;
|X| companies whose business activities are concentrated in industries or
business strategies which are expected to provide above average stability or
value in turbulent markets;
|X| companies with anticipated business growth prospects that represent above
average value for each dollar invested.
This is what we call "New Value," and we feel it's a philosophy that adds to the
Fund's stability in uncertain markets. The market may change dramatically, but a
company's inherent value should remain stable and predictable.
Being price-sensitive investment managers also protect us from the natural
inclination to overpay for a "growth stock." Patiently, we search for value and
try to manage the Fund with relatively low risk, through a disciplined stock
market strategy. We know our investors are like us -- conservative, and a bit
defensive.
"WE REALIZE VALUE -- AND SELL WHEN VALUE CHANGES."
We are always watchful and alert as new information surfaces, companies merge
and outlooks change. Instead of trading for profits, we realize value, and
reduce or sell the holding when it has met its objective.
Today, finding real and continuing value is more important than the industry,
the "name" of the company or its past reputation. Today's value stocks are not
just utilities and financial powerhouses -- they can can be found on NASDAQ or
in the Fortune 500. We search for value in these markets and around the world.
"...VERY GOOD POTENTIAL...U.S. AND WORLDWIDE.."
Though we've cut back somewhat on utility and financial stocks during the
period, we've invested a bit more in technology issues, in anticipation of a
rebound in this area. With the economy itself continuing to demonstrate
strength, we've also moved into additional basic industry and consumer stocks.
Our foreign holdings haven't risen much, though we're keeping an eye on new
values developing in Europe.
Our look ahead shows very good potential for both the U.S. and worldwide
markets. We'll continue to search for new opportunities, wherever they may be.
THE COLONIAL FUND INVESTMENT PERFORMANCE VS.
STANDARD & POOR's 500 INDEX
Change in Value of $10,000 from 4/30/87 - 4/30/97
Based on NAV and MOP for Class A Shares
- --------------------------------------------------------------------------------
NAV MOP S&P 500
- --------------------------------------------------------------------------------
Apr 30, 87 10,000 9,425 10,000
Jul 31, 87 10,644 10,032 11,133
Oct 31, 87 8,787 8,281 8,863
Jan 31, 88 9,366 8,827 9,119
Apr 30, 88 10,109 9,528 9,350
Jul 31, 88 10,450 9,849 9,824
Oct 31, 88 10,860 10,236 10,171
Jan 31, 89 11,375 10,721 10,946
Apr 30, 89 11,942 11,256 11,489
Jul 31, 89 12,908 12,166 12,957
Oct 31, 89 12,724 11,992 12,851
Jan 31, 90 12,350 11,640 12,526
Apr 30, 90 12,445 11,730 12,698
Jul 31, 90 12,114 12,360 13,796
Oct 31, 90 11,301 10,651 11,890
Jan 31, 91 12,674 11,945 13,574
Apr 30, 91 13,788 12,995 14,931
Jul 31, 91 14,460 13,628 15,552
Oct 31, 91 14,831 13,978 15,863
Jan 31, 92 15,570 14,675 16,648
Apr 30, 92 16,170 15,240 17,021
Jul 31, 92 16,531 15,580 17,538
Oct 31, 92 16,262 15,327 17,441
Jan 31, 93 17,703 16,686 18,407
Apr 30, 93 18,169 17,124 18,591
Jul 31, 93 18,706 17,630 19,065
Oct 31, 93 19,548 18,424 20,041
Jan 31, 94 20,454 19,278 20,773
Apr 30, 94 19,470 18,351 19,577
Jul 31, 94 19,513 18,391 20,048
Oct 31, 94 19,694 18,561 20,814
Jan 31, 95 19,554 18,429 20,882
Apr 30, 95 21,432 20,200 22,991
Jul 31, 95 23,426 22,079 25,274
Oct 31, 95 23,972 22,593 26,311
Jan 31, 96 25,653 24,178 28,946
Apr 30, 96 26,444 24,923 29,931
Jul 31, 96 25,465 24,001 29,457
Oct 31, 96 27,834 26,233 32,647
Jan 31, 97 29,884 28,166 36,566
Apr 30, 97 29,978 28,254 37,450
A $10,000 investment in Class B shares made on May 5, 1992 (inception), at net
asset value (NAV) would have been valued at $17,762 on April 30, 1997. The same
investment after deducting the applicable contingent deferred sales charge
(CDSC) would have grown to $17,562 by April 30, 1997. The Standard & Poor's 500
Index is an unmanaged index that tracks the performance of the U.S. stock
market.
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
As of 3/31/97 (Most Recent Quarter End)
- --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
Objective Change 4/30/82* Inception 5/5/92
NAV MOP NAV w/CDSC
- --------------------------------------------------------------------------------
1 YEAR 11.16% 4.77% 10.34% 5.34%
- --------------------------------------------------------------------------------
5 YEARS 12.94 11.61 -- --
- --------------------------------------------------------------------------------
10 YEARS 10.89 10.23 -- --
- --------------------------------------------------------------------------------
SINCE INCEPTION/
OBJECTIVE CHANGE 15.00 14.54 11.56 11.29
- --------------------------------------------------------------------------------
* Date Fund adopted current investment objective.
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). Maximum
offering price (MOP) returns include the maximum sales charge of 5.75%. The CDSC
returns reflect charges 5% for one year; and 2% since inception. Performance for
different share classes will vary based on differences in sales charges and fees
associated with each class.
<PAGE>
INVESTMENT PORTFOLIO
APRIL 30, 1997 (UNAUDITED, IN THOUSANDS)
<TABLE>
COMMON STOCK - 90.9% COUNTRY SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
AGRICULTURE, FORESTRY & FISHING - 0.5%
AGRICULTURE - CROPS - 0.5%
RJR Nabisco Holdings Corp. 191 $5,694
---------
FORESTRY - 0.0%
Deltic Timber Corp. 14 363
---------
- --------------------------------------------------------------------------------
CONSTRUCTION - 1.2%
BUILDING CONSTRUCTION - 1.0%
Centex Corp. 86 3,100
GTM Entrepose SA Fr 8 482
Koninklijke Volker Stevin NV Ne 74 8,439
Lennar Corp. 53 1,424
---------
13,445
---------
HEAVY CONSTRUCTION-NON BUILDING CONSTRUCTION -0.2
Cubiertas y Mzov SA Sp 20 2,012
---------
- --------------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 21.8%
DEPOSITORY INSTITUTIONS - 5.1%
Amsouth Bancorporation 67 3,523
Astoria Financial Corp. 85 3,333
Banco de Santander SA Sp 18 1,355
Bank of Montreal Ca 398 14,442
Banque Nationale de Belgique Be 1 1,716
Canadian Imperial Bank of Commerce Ca 547 12,555
Collective Bancorp, Inc. 27 1,087
First Empire State Corp. 4 1,288
First Financial Corp. 17 452
Greenpoint Financial Corp. 57 3,179
H.F. Ahmanson & Co. 120 4,579
National Australia Bank Ltd. Au 1,000 13,709
Nations Bank Corp. 37 2,246
Standard Federal Bancorporation 20 1,172
Synovus Financial Corp. 29 706
Toronto Dominion Bank Ca 50 1,413
---------
66,755
---------
HOLDING COMPANIES - 1.1%
Fortis Amev NV Ne 247 9,303
Sofina SA Be 8 5,294
---------
14,597
---------
INSURANCE AGENTS & BROKERS - 0.1%
Acordia, Inc. 19 585 585
---------
INSURANCE CARRIERS - 8.5%
Allstate Corp. 261 17,085
American Bankers Insurance Group, Inc. 154 8,143
CNA Financial Corp. (a) 16 1,580
Cigna Corp. 235 35,308
Loews Corp. 220 20,213
Old Republic International Corp. 195 5,513
Orion Capital Corp. 14 900
Providian Corp. 82 4,707
Safeco Corp. 98 3,928
Sunamerica, Inc. 117 5,400
USLife Corp. 157 7,629
---------
110,406
---------
NONDEPOSITORY CREDIT INSTITUTIONS - 1.0%
Aames Financial Corp. 129 1,983
Green Tree Financial Corp. 288 8,544
The Money Store, Inc. 114 2,472
---------
12,999
---------
REAL ESTATE - 0.3%
New World Development Co., Ltd. HK 500 2,885
Societe Francaise d'Investissements
Immobiliers et de Gestion Fr 4 333
Stewart Enterprises, Inc. 23 763
---------
3,981
---------
REAL ESTATE INVESTMENT TRUSTS - 0.0%
Manufactured Home Communities, Inc. 31 641
---------
SECURITY BROKERS & DEALERS - 5.7%
A.G. Edwards, Inc. 432 15,122
Alex Brown, Inc. 303 19,505
Bear Stearns Co., Inc. 89 2,729
Merrill Lynch & Co., Inc. 183 17,450
Paine Webber Group, Inc. 244 8,303
Salomon, Inc. 213 10,660
---------
73,769
---------
- --------------------------------------------------------------------------------
MANUFACTURING - 44.6%
CHEMICALS & ALLIED PRODUCTS - 9.2%
Akzo Nobel NV ADR 63 4,120
American Home Products Corp. 31 2,047
Biomet Inc. (a) 30 456
Bristol-Myers Squibb Co. 449 29,410
Dexter Corp. 21 612
Dura Pharmaceuticals, Inc. (a) 20 580
Ethyl Corp. 190 1,734
International Specialty Products, Inc. (a) 40 520
Johnson & Johnson 579 35,439
Jones Medical Industries, Inc. 71 2,499
Merck & Co., Inc. 240 21,720
Norsk Hydro A.S 30 1,451
Pfizer, Inc. 132 12,691
Rhone-Poulenc Rorer, Inc. 97 7,018
---------
120,297
---------
ELECTRONIC & ELECTRICAL EQUIPMENT - 0.5%
CTS Corp. 21 1,313
Cooper Industries, Inc. 80 3,680
Helen of Troy Ltd. (a) 33 767
Sci Systems Inc. (a) 17 1,074
---------
6,834
---------
FABRICATED METAL - 0.3%
Harsco Corp. 110 4,064
---------
FOOD & KINDRED PRODUCTS - 2.5%
Archer Daniels Midland Co. 862 15,840
Bongrain SA Fr (b) 151
Flowers Industries, Inc. 60 1,455
Heinz (H.J.) Co. 35 1,432
IBP, Inc. 529 12,564
Korn-OG Foderstof Kompagniet AS De 45 1,386
Lancaster Colony Corp. 5 206
---------
33,034
---------
FURNITURE & FIXTURES - 0.1%
Herman Miller, Inc. 20 635
---------
MACHINERY & COMPUTER EQUIPMENT - 4.1%
Bucher Holding Sz 6 5,815
Compaq Computer Corp. (a) 51 4,346
Cummins Engine Co., Inc. 96 5,366
Diebold, Inc. 39 1,290
Gateway 2000, Inc. (a) 28 1,514
Hewlett-Packard Co. 43 2,268
Kaydon Corp. 28 1,217
Pentair, Inc. 10 299
Pitney Bowes, Inc. 19 1,216
Sun Microsystems, Inc. (a) 532 15,328
Tandem Computers, Inc. (a) 5 64
Timken Co. 46 2,697
Tyco International Ltd. 170 10,339
Western Digital Corp. (a) 18 1,134
---------
52,893
---------
MEASURING & ANALYZING INSTRUMENTS - 0.6%
Litton Industries, Inc. (a) 40 1,686
Tektronix, Inc. 120 6,468
---------
8,154
---------
MISCELLANEOUS MANUFACTURING - 1.2%
Callaway Golf Co. 536 16,010
---------
PAPER PRODUCTS - 0.1%
Avery Dennison Corp. 29 1,066
Fort Howard Corp. (a) 25 861
---------
1,927
---------
PETROLEUM REFINING - 11.5%
Amerada Hess Corp. 312 15,161
Amoco Corp. 88 7,376
Atlantic Richfield Co. 160 21,780
British Petroleum Co., PLC 13 1,793
Elcor Corp. 59 1,549
Exxon Corp. 374 21,178
Kerr-McGee Corp. 196 11,840
Mobil Corp. 54 6,981
Murphy Oil Corp. 57 2,484
Pennzoil Co. 99 4,895
Phillips Petroleum Co. 733 28,866
USX-Marathon Group 410 11,329
Unocal Corp. 380 14,503
----------
149,735
----------
PRIMARY METAL - 0.4%
AK Steel Holdings Corp. 43 1,562
Asarco, Inc. 87 2,471
LTV Corp. 70 919
---------
4,952
---------
PRIMARY SMELTING - 2.0%
Phelps Dodge Corp. 341 26,149
---------
PRINTING & PUBLISHING - 0.3%
CSS Industries, Inc. (a) 25 809
New York Times Co., Class A 20 865
Standard Register Co. 74 2,423
---------
4,097
---------
RUBBER & PLASTIC - 1.4%
Cooper Tire & Rubber Co. 60 1,311
Goodyear Tire & Rubber Co. 253 13,303
Nike, Inc., Class B 6 326
Wynn's International, Inc. 158 3,800
---------
18,740
---------
TEXTILE MILL PRODUCTS - 0.1%
Springs Industries, Inc. 22 1,043
---------
TOBACCO PRODUCTS - 2.3%
American Brands, Inc. 553 29,735
---------
TRANSPORTATION EQUIPMENT - 8.0%
Arvin Industries Inc. 44 1,152
Eaton Corp. 10 749
Ford Motor Co. 99 3,440
General Dynamics Corp. 214 15,262
General Motors Corp. 70 4,045
Harley-Davidson, Inc. 80 3,160
MascoTech, Inc. 5 96
McDonnell Douglas Corp. 125 7,422
Paccar, Inc. 20 1,377
Peugeot SA Fr 20 1,992
TRW, Inc. 320 16,690
Textron, Inc. 335 37,322
Thiokol Corp. 142 9,278
Toyota Motor Corp. ADR Ja 27 1,559
---------
103,544
---------
- --------------------------------------------------------------------------------
MINING & ENERGY - 0.5%
METAL MINING - 0.1%
Cleveland-Cliffs, Inc. 27 1,136
---------
OIL & GAS EXTRACTION - 0.4%
Helmerich & Payne 106 5,081
---------
- --------------------------------------------------------------------------------
RETAIL TRADE - 3.4%
APPAREL & ACCESSORY STORES - 0.0%
DEB Shops, Inc. 14 60
---------
FOOD STORES - 0.2%
Kroger Corp. (a) 85 2,349
---------
GENERAL MERCHANDISE STORES - 3.0%
Family Dollar Stores, Inc. 10 261
Meyer (Fred), Inc. (a) 101 4,137
Sears, Roebuck & Co. 511 24,509
Shopko Stores, Inc. 45 904
Waban, Inc. (a) 343 9,175
---------
38,986
---------
HOME FURNISHINGS & EQUIPMENT - 0.2%
CompUSA, Inc. (a) 166 3,203
---------
- --------------------------------------------------------------------------------
SERVICES - 7.8%
BUSINESS SERVICES - 0.5%
Omnicom Group, Inc. 125 6,646
---------
COMPUTER RELATED SERVICES - 2.6%
BMC Software, Inc. (a) 274 11,833
Cadence Design Systems, Inc. (a) 50 1,600
Cognos, Inc. (a) 184 4,669
Computer Associates International, Inc. 309 16,066
---------
34,168
---------
COMPUTER SOFTWARE - 2.3%
McAfee Associates, Inc. (a) 30 1,672
Oracle Systems Corp. (a) 721 28,652
---------
30,324
---------
ENGINEERING, ACCOUNTING, RESEARCH & MANAGEMENT - 0.7%
Corrections Corp. of America (a) 156 5,080
International-Muller NV Ne 146 4,224
---------
9,304
---------
HEALTH SERVICES - 0.7%
Allegiance Corp. 77 1,704
Lincare Holdings, Inc. (a) 58 2,273
Sun Healthcare Group, Inc. (a) 140 1,976
Universal Health Services, Inc., Class B (a) 83 3,143
---------
9,096
---------
HOTELS, CAMPS & LODGING - 0.0%
Harbour Centre Development HK 416 556
---------
MOTION PICTURES - 0.2%
King World Productions, Inc. 68 2,497
---------
PERSONAL SERVICES - 0.8%
Service Corporation International 297 10,186
---------
- --------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 9.6%
AIR TRANSPORTATION - 1.0%
AMR Corp. (a) 66 6,118
British Airways PLC ADR UK 7 768
Delta Air Lines, Inc. 64 5,924
---------
12,810
---------
ELECTRIC, GAS & SANITARY SERVICES - 1.4%
Enova Corp. 139 3,069
Gas y Electricidad SA Sp 224 11,040
Illinova Corp. 128 2,887
Teco Energy, Inc. 36 864
United Waste Systems, Inc. (a) 22 742
---------
18,602
---------
ELECTRIC SERVICES - 4.0%
Allegheny Power System, Inc. 64 1,680
Carolina Power & Light Co. 151 5,129
DQE, Inc. 79 2,171
Echelon International Corp. (a) 4 74
Florida Progress Corp. 110 3,367
Hawaiian Electric Industries, Inc. 5 168
Houston Industries, Inc. 95 1,902
Nipsco Industries, Inc. 89 3,516
New England Electric System 126 4,286
New York State Electric & Gas Corp. 180 3,780
Northern States Power Co. 60 2,739
Portland General Corp. 95 3,478
Public Service Enterprise Group, Inc. 149 3,592
Texas Utilities Co. 411 13,874
Union Electrica Fenosa SA Sp 177 1,478
---------
51,234
---------
GAS SERVICES - 0.9%
Consolidated Natural Gas Co. 186 9,345
Laclede Gas Co. 47 1,035
Pacific Enterprises 25 765
---------
11,145
---------
RAILROAD - 0.2%
Norfolk Southern Corp. 31 2,795
---------
SANITARY SERVICES - 1.6%
Severn Trent Water PLC UK 403 4,937
United Utilities PLC UK 1,096 12,075
Yorkshire Water PLC UK 742 4,340
---------
21,352
---------
TRANSPORTATION SERVICES - 0.1%
Cross Harbour Tunnel Co. HK 307 648
---------
WATER TRANSPORTATION - 0.4%
APL Ltd. HK 115 3,369
Tidewater, Inc. 48 1,934
---------
5,303
---------
- --------------------------------------------------------------------------------
WHOLESALE TRADE - 1.5%
DURABLE GOODS - 1.0%
Beers NV Ne 213 6,899
Marshall Industries (a) 25 829
Pioneer Standard Electronics, Inc. 399 4,886
---------
12,614
---------
NONDURABLE GOODS - 0.5%
Bergen Brunswig Corp., Class A 107 3,658
Nash-Finch Co. 60 1,048
Richfood Holdings Inc. 66 1,345
---------
6,051
------
TOTAL COMMON STOCKS (cost of $905,470) 1,183,236
---------
MATURITIES
BOND & NOTES - 6.9% COUPON FROM/TO PAR
- --------------------------------------------------------------------------------
US GOVERNMENT AGENCY OBLIGATIONS - 6.8%
GOVERNMENT AGENCIES - 4.1%
Federal National Mortgage Association,
6.500% 2007-2009 $54,328 52,769
------
GOVERNMENT OBLIGATIONS - 2.7%
U.S. Treasury Note,
7.875% 4/15/1998 35,085 35,693
---------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS (cost of $91,166) 88,462
---------
CORPORATE ADJUSTABLE RATE BONDS & NOTES - 0.1% PAR VALUE
- --------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC
GAS & SANITARY SERVICES - 0.1%
PIPELINES
SFP Pipeline Holdings (c)
(cost of $720) 10.420% 08/15/10 600 $ 726
---------
TOTAL BONDS & NOTES (cost of $91,886) 89,188
---------
TOTAL INVESTMENTS - 97.8% (cost of $997,356)(d) 1,272,424
---------
SHORT-TERM OBLIGATIONS - 4.2%
- --------------------------------------------------------------------------------
Repurchase agreement with Chase Securities Inc.,
dated 4/30/97, due 05/01/97 at 5.340%,
collateralized by U.S. Treasury notes with
various maturities to 2016, market value $56,389,
(repurchase proceeds $54,822). 54,814 54,814
---------
OTHER ASSETS & LIABILITIES, NET - (2.0)% (25,661)
- --------------------------------------------------------------------------------
NET ASSETS - 100% $ 1,301,577
-----------
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) Non-income producing.
(b) Rounds to less than one.
(c) Interest rates change quarterly. The rate listed is as of April 30, 1997.
(d) Cost for federal income tax purposes is $997,357.
Summary of Securities by Country Country Value % of Total
- --------------------------------------------------------------------------------------
United States $1,141,384 89.7
Netherlands Ne 28,865 2.3
Canada Ca 28,410 2.2
United Kingdom UK 21,352 1.7
Spain Sp 15,886 1.2
Australia Au 13,709 1.1
Belgium Be 7,010 0.6
Switzerland Sz 5,815 0.5
Hong Kong HK 4,089 0.3
France Fr 2,958 0.2
Japan Ja 1,559 0.1
Denmark De 1,387 0.1
---------- -----
$ 1,272,424 100.0
=========== =====
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
ACRONYM NAME
-------------- -----------
ADR American Depository Receipt
See notes to financial statements
</TABLE>
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
April 30, 1997 (Unaudited)
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $997,356) $1,272,424
Short-term obligations 54,814
----------
1,327,238
Cash held in foreign banks (cost $18) $ 18
Receivable for:
Investments sold 36,909
Dividends 1,579
Fund shares sold 888
Interest 437
Foreign tax reclaims 149
Other 33 40,013
------- ----------
Total Assets 1,367,251
LIABILITIES
Payable for:
Investments purchased 64,157
Fund shares repurchased 1,502
Accrued:
Deferred Trustees fees 9
Other 6
-------
Total Liabilities 65,674
----------
NET ASSETS $1,301,577
==========
Net asset value & redemption price per share -
Class A ($796,755/83,548) $9.54
==========
Maximum offering price per share - Class A
($9.54/0.9425) $10.12(a)
==========
Net asset value & offering price per share -
Class B ($490,697/51,541) $9.52(b)
==========
Net asset value, offering and redemption price
per share - Class Z ($14,125/1,480) $9.54
==========
COMPOSITION OF NET ASSETS
Capital paid in $ 974,264
Undistributed net investment income 930
Accumulated net realized gain 51,352
Net unrealized appreciation (depreciation) on:
Investments 275,068
Foreign currency transactions (37)
----------
$1,301,577
==========
(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 April 30, 1997
(Unaudited)
(in thousands)
INVESTMENT INCOME
Dividends $11,641
Interest 4,877
-------
Total investment income (net of nonrebatable
foreign taxes withheld at source which
amounted to $227) 16,518
EXPENSES
Management fee $ 3,530
Service fee - Class A & B 1,509
Distribution fee - Class B 1,798
Transfer agent 1,892
Bookkeeping fee 215
Registration fee 26
Custodian fee 65
Audit fee 21
Trustees fee 33
Reports to shareholders 15
Legal fee 5
Other 16 9,125
------- -------
Net Investment Income 7,393
-------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments 51,305
Foreign currency transactions (25)
-------
Net Realized Gain 51,280
Net unrealized appreciation (depreciation) during
the period on:
Investments 32,984
Foreign currency transactions (17)
-------
Net Unrealized Appreciation 32,967
-------
Net Gain 84,247
-------
Net Increase in Net Assets from Operations $91,640
=======
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(Unaudited)
Six months
end Year ended
(in thousands) April 30 October 31
----------- ----------
INCREASE (DECREASE) IN NET ASSETS 1997 1996
Operations:
<S> <C> <C>
Net investment income $ 7,393 $ 17,670
Net realized gain 51,280 72,976
Net unrealized appreciation 32,967 74,411
---------- -----------
Net Increase from Operations 91,640 165,057
Distributions:
From net investment income - Class A (6,085) (12,646)
From net realized gains - Class A (45,097) (47,071)
From net investment income - Class B (1,871) (4,191)
From net realized gains - Class B (27,199) (25,891)
From net investment income - Class Z (125) (232)
From net realized gains - Class Z (810) (684)
---------- -----------
10,453 74,342
---------- -----------
Fund Share Transactions:
Receipts for shares sold - Class A 79,481 108,502
Value of distributions reinvested - Class A 46,529 53,915
Cost of shares repurchased - Class A (95,276) (117,196)
---------- -----------
30,734 45,221
---------- -----------
Receipts for shares sold - Class B 44,977 104,995
Value of distributions reinvested - Class B 27,494 28,337
Cost of shares repurchased - Class B (39,072) (60,702)
---------- -----------
33,399 72,630
---------- -----------
Receipts for shares sold - Class Z 276 9,783
Value of distributions reinvested - Class Z 935 916
Cost of shares repurchased - Class Z (652) (1,561)
---------- -----------
559 9,138
---------- -----------
Net Increase from Fund Share
Transactions 64,692 126,989
---------- -----------
Total Increase 75,145 201,331
NET ASSETS
Beginning of period 1,226,432 1,025,101
---------- -----------
End of period (including undistributed net
investment income of $930 and $1,641,
respectively) $1,301,577 $ 1,226,432
========== ===========
Statement of Changes in Net Assets continued on following page.
See notes to financial statements.
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS - CONT.
<TABLE>
<CAPTION>
(Unaudited)
Six months
ended Year ended
(in thousands) April 30 October 31
------------ -----------
NUMBER OF FUND SHARES 1997 1996
<S> <C> <C>
Sold - Class A 8,362 12,023
Issued for distributions reinvested - Class A 5,156 6,267
Repurchased - Class A (9,986) (12,967)
------ -------
3,532 5,323
------ -------
Sold - Class B 4,740 11,645
Issued for distributions reinvested - Class B 3,055 3,308
Repurchased - Class B (4,112) (6,730)
------ -------
3,683 8,223
------ -------
Sold - Class Z 29 1,084
Issued for distributions reinvested - Class Z 104 106
Repurchased - Class Z (80) (172)
53 1,018
------ -------
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997 (UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
In the opinion of management of The Colonial Fund (the Fund), a series of
Colonial Trust III, the accompanying financial statements contain all normal and
recurring adjustments necessary for the fair presentation of the financial
position of the Fund at April 30, 1997, and the results of its operations, the
changes in its net assets and the financial highlights for the six months then
ended.
NOTE 2. ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
ORGANIZATION: The Fund is a diversified portfolio of a Massachusetts business
trust registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. The Fund seeks primarily income and
capital growth and, secondarily, capital preservation. The Fund may issue an
unlimited number of shares. The Fund offers three classes of shares: Class A,
Class B and Class Z. Class A shares are sold with a front-end sales charge;
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 Z shares are offered
continuously at net asset value. There are certain restrictions on the purchase
of Class Z shares, please refer to a prospectus.
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 revenue and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS: Equity securities are valued at the last
sale price or, in the case of unlisted or listed securities for which there were
no sales during the day, at current quoted bid prices.
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.
Forward currency contracts are valued based on the weighted value of the
exchange traded contracts with similar durations.
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.
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 A and Class B service fee and Class B
distribution fee), realized and unrealized gains (losses) are allocated to each
class proportionately on a daily basis for purposes of determining the net asset
value of each class.
Class A, Class B and Class Z per share data was calculated using the average
shares outstanding during the period. In addition, net investment income per
share data reflects the service fee applicable to both Class A and Class B
shares and the distribution fee applicable to Class B shares only.
Class A and Class B ratios are calculated by adjusting the expense and net
investment income ratios for the Fund for the entire period by the service fee
applicable to both Class A and Class B shares and by the distribution fee
applicable to Class B 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.
DISTRIBUTIONS TO SHAREHOLDERS: Distributions to shareholders are recorded on the
ex-date.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforwards) under income tax regulations.
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) on investments.
FORWARD CURRENCY CONTRACTS: The Fund may enter into forward currency contracts
to purchase or sell foreign currencies at predetermined exchange rates in
connection with the settlement of purchases and sales of securities. The Fund
may also enter into forward currency contracts to hedge certain other foreign
currency denominated assets. The contracts are used to minimize the exposure to
foreign exchange rate fluctuations during the period between trade and
settlement date of the contracts. All contracts are marked-to-market daily,
resulting in unrealized gains or losses which become realized at the time the
forward currency contracts are closed or mature. Realized and unrealized gains
(losses) arising from such transactions are included in net realized and
unrealized gains (losses) on foreign currency transactions. Forward currency
contracts do not eliminate fluctuations in the prices of the Fund's portfolio
securities. While the maximum potential loss from such contracts is the
aggregate face value in U.S. dollars at the time the contract was opened,
exposure is typically limited to the change in value of the contract (in U.S.
dollars) over the period it remains open. Risks may also arise if counterparties
fail to perform their obligations under the contracts.
OTHER: Corporate actions are recorded on the ex-date (except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware of
such), net of nonrebatable tax withholdings. Where a high level of uncertainty
as to collection exists, income on securities is recorded net of all tax
withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
...............................................................................
MANAGEMENT FEE: Colonial Management Associates, Inc. (the Adviser) is the
investment Adviser of the Fund and furnishes accounting and other services and
office facilities for a monthly fee equal to 0.55% 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: Colonial Investors Service Center, Inc. (the Transfer Agent), an
affiliate of the Adviser, provides shareholder services for a monthly fee equal
to 0.25% annually of the Fund's average net assets and receives reimbursement
for certain out-of-pocket expenses.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Colonial Investment
Services, Inc. (the Distributor), an affiliate of the Adviser, is the Fund's
principal underwriter. For the six months ended April 30, 1997, the Fund has
been advised that the Distributor retained net underwriting discounts of $92,268
on sales of the Fund's Class A shares and received contingent deferred sales
charges (CDSC) of $488,883 on Class B share redemptions.
The Fund has adopted a 12b-1 plan which requires the payment of a distribution
fee to the Distributor equal to 0.75% annually of the average net assets
attributable to Class B shares. The plan also requires the payment to the
Distributor of a service fee on Class A and Class B shares as follows:
Value of shares Annual
outstanding on the 20th of Fee
each month which were issued Rate
- ---------------------------------------- -------------
Prior to April 1, 1989 0.15%
On or after April 1, 1989 0.25%
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 April 30, 1997, purchases and
sales of investments, other than short-term obligations, were $285,791,209 and
$257,746,862, of which none and $3,286,231, respectively, were U.S. government
securities.
Unrealized appreciation (depreciation) at April 30, 1997, based on cost of
investments for federal income tax purposes was:
Gross unrealized appreciation $298,789,981
Gross unrealized depreciation (23,722,600)
------------
Net unrealized appreciation $275,067,381
============
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 foreign currency
exchange or the imposition of 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 10% of its net assets under a line of credit for
temporary or emergency purposes. Any borrowings bear interest at one of the
following options determined at the inception of the loan: (1) federal funds
rate plus 1/2 of 1%, (2) the lending bank's base rate or (3) IBOR offshore loan
rate plus 1/2 of 1%. There were no borrowings under the line of credit during
the six months ended April 30, 1997.
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
(Unaudited)
Six months ended
April 30
------------------------------------------------------------------
1997
Class A Class B Class Z
----------- ----------- ----------
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 9.490 $ 9.480 $ 9.500
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income(a) 0.068 0.032 0.079
Net realized and
unrealized gain (loss)(a) 0.625 0.614 0.615
-------- -------- --------
Total from Investment
Operations 0.693 0.646 0.694
-------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment
income (0.075) (0.038) (0.086)
From net
realized gains (0.568) (0.568) (0.568)
-------- -------- --------
Total Distributions
Declared to
Shareholders (0.643) (0.606) (0.654)
-------- -------- --------
Net asset value -
End of period $ 9.540 $ 9.520 $ 9.540
======== ======== ========
Total return(c) 7.71%(d) 7.19%(d) 7.72%(d)
======== ======== ========
RATIOS TO AVERAGE NET ASSETS
Expenses(e) 1.15%(f) 1.90%(f) 0.91%(f)
Net investment
income(e) 1.43%(f) 0.68%(f) 1.67%(f)
Portfolio turnover 21%(d) 21%(d) 21%(d)
Average commission rate (g) $ 0.0413 $ 0.0413 $ 0.0413
Net assets at end
of period (000) $796,755 $490,697 $14,125
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Class Z shares were initially offered on July 31, 1995. 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.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period
<TABLE>
<CAPTION>
Year ended October 31
------------------------------------------------------------------------------------------------------------------
1996 1995
Class A Class B Class Z Class A Class B Class Z (b)
---------------- ----------------- --------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
$ 8.940 $ 8.930 $ 8.940 $ 8.060 $ 8.050 $ 8.780
-------- -------- -------- -------- -------- --------
0.165 0.097 0.186 0.200 0.137 0.041
1.183 1.182 1.192 1.393 1.395 0.167
-------- -------- -------- -------- -------- --------
1.348 1.279 1.378 1.593 1.532 0.208
-------- -------- -------- -------- -------- --------
(0.162) (0.093) (0.182) (0.212) (0.151) (0.048)
(0.636) (0.636) (0.636) (0.501) (0.501) -
-------- -------- -------- -------- -------- --------
(0.798) (0.729) (0.818) (0.713) (0.652) (0.048)
-------- -------- -------- -------- -------- --------
$ 9.490 $ 9.480 $ 9.500 $ 8.940 $ 8.930 $ 8.940
======== ======== ======== ======== ======== ========
16.11% 15.27% 16.50% 21.72% 20.84% 2.02%(d)
======== ======== ======== ======== ======== ========
1.15% 1.90% 0.91% 1.16% 1.93% 0.93%(f)
1.82% 1.07% 2.06% 2.43% 1.66% 2.66%(f)
38% 38% 38% 66% 66% 66%
$ 0.0347 $ 0.0347 $ 0.0347 - - -
$759,409 $453,468 $ 13,555 $667,611 $353,831 $ 3,659
(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.
(g) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades
on which commissions are charged.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended October 31
-------------------------------------------------------------------------------------------
1994 1993(b)
Class A Class B Class A Class B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 8.410 $ 8.400 $ 7.390 $ 7.390
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.171 0.109 0.156 0.104
Net realized and
unrealized gain (loss)(a) (0.116) (0.111) 1.293 1.282
-------- -------- -------- --------
Total from Investment Operations 0.055 (0.002) 1.449 1.386
-------- -------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.160) (0.103) (0.147) (0.094)
From net realized gains (0.245) (0.245) (0.282) (0.282)
-------- -------- -------- --------
Total Distributions
Declared to Shareholders (0.405) (0.348) (0.429) (0.376)
-------- -------- -------- --------
Net asset value -
End of period $ 8.060 $ 8.050 $ 8.410 $ 8.400
======== ======== ======== ========
Total return (d) 0.74% (0.04)% 20.21% 19.38%
======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS
Expenses 1.14% 1.89% 1.10% 1.85%
Net investment income 2.07% 1.32% 1.94% 1.19%
Portfolio turnover 54% 54% 14% 14%
Net assets at end of period (000) $555,275 $264,122 $520,706 $124,161
(a) Per share data was calculated using average shares outstanding during the period.
(b) All per share amounts have been restated to reflect the 3 for 1 stock split effective December 10, 1993.
(c) Class B shares initially offered on May 5, 1992. Per share amounts reflect activity from that date.
(d) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent
deferred sales charge.
(e) Not annualized.
(f) Annualized.
</TABLE>
<PAGE>
Year ended October 31
--------------------------------
1992 (b)
Class A Class B(c)
------- ----------
$ 7.050 $ 7.440
--------- ---------
0.173 0.052
0.489 (0.044)
--------- ---------
0.662 0.008
--------- ---------
(0.185) (0.058)
(0.137) --
--------- ---------
(0.322) (0.058)
--------- ---------
$ 7.390 $ 7.390
========= =========
9.65% (0.31)%(e)
========= =========
1.09% 1.84%(f)
2.52% 177%(f)
37% 37%
$413,228 $ 15,582
<PAGE>
HOW TO REACH COLONIAL
BY PHONE OR BY MAIL
BY TELEPHONE
COLONIAL CUSTOMER CONNECTION - 1-800-345-6611
For 24-hour account information, call from your touch-tone phone. (Rotary
callers will be automatically connected to a representative during business
hours.) A recorded message will guide you through the menu:
For fund prices, dividends, and capital gains information ............. press 1
For account information ............................................... press 2
To speak to a Colonial representative ................................. press 3
For yield and total return information ................................ press 4
For duplicate statements or new supply of checks ...................... press 5
To order duplicate tax forms and year-end statements .................. press 6
(February through May)
To review your options at any time during your call ................... press *
To speak with a shareholder services representative about your account, call
Monday to Friday, 8:00 am to 8:00 pm ET, and Saturdays from February through
mid-April, 10:00 am to 2:00 pm ET.
COLONIAL TELEPHONE TRANSACTION DEPARTMENT - 1-800-422-3737
To purchase, exchange, or sell shares by telephone, call Monday to Friday, 9:00
am to 7:00 pm ET. Transactions received after the close of the New York Stock
Exchange will receive the next business day's closing price.
LITERATURE - 1-800-426-3750
To request literature on any Colonial fund, call Monday to Friday, 8:30 am to
6:30 pm ET.
BY MAIL
COLONIAL INVESTORS SERVICE CENTER, INC.
P.O. BOX 1722
BOSTON, MA 02105-1722
<PAGE>
SHAREHOLDER COMMUNICATIONS
TO KEEP YOU INFORMED
To make recordkeeping easy and keep you up-to-date on the performance of your
investments, you can expect to receive the following information about your
Colonial account:
TRANSACTION CONFIRMATIONS: Each time you make a purchase, sale, or exchange, you
receive a confirmation statement within just a few days.
QUARTERLY STATEMENTS: Every three months, if any transactions are made that
affect your share balance, this statement reports on your account activity
during the quarter (including any reinvestment of dividends). This statement
also provides year-to-date information.
COLONIAL SHAREHOLDER NEWS: Mailed with your quarterly account statements, this
newsletter highlights timely investment strategies, portfolio manager
commentary, and shareholder service updates.
TAX FORMS AND YEAR-END TAX GUIDE: Easy-to-use forms and timely information are
designed to make tax reporting simpler. (Usually mailed in January.)
AVERAGE COST BASIS STATEMENTS: If you sold or exchanged shares during the year,
this statement may help you calculate your gain/loss for tax purposes. (Usually
mailed in February.)
<PAGE>
SHAREHOLDER SERVICES
TO MAKE INVESTING EASIER
Colonial has one of the most extensive selections of shareholder services
available. Your financial adviser can help you arrange for any of these
services, or you can call Colonial directly at 1-800-345-6611.
AFFORDABLE ADDITIONAL INVVESTMENTS: Add to your account with as little as $50 on
most funds; $25 for an IRA account.
FREE EXCHANGES*: Exchange all or part of your account into the same share class
of another Colonial fund, by phone or mail.
EASY ACCESS TO YOUR MONEY*: Make withdrawals from your account by phone, by mail
or, for certain funds, by check.
ONE-YEAR REINSTATEMENT PRIVILEGE: If you need access to your money, but then
choose to return it to Colonial within one year, you can reinvest in any
Colonial fund of the same share class without any penalty or sales charge.
FUNDAMATIC: Make periodic investments as low as $50 from your checking account
to your Colonial account.
SYSTEMATIC WITHDRAWAL PLAN (SWP): Receive monthly, quarterly or semiannual
payments via check or bank transmission. There is a $5,000 account value
required, but no minimum for the payment amount. The maximum annual withdrawal
is 12% of the account balance at the 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
payable 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
Colonial fund with a balance of $5,000 into the same share class of up to four
other Colonial funds. Minimum for each transfer is $100.
COLONIAL RETIREMENT PLANS: Choose from a broad range of retirement plans,
including IRAs.
* Redemptions and exchanges are made at the next determined net asset value
after the request is received by Colonial. Proceeds may be more or less than
your original cost. The exchange privilege may be terminated at any time.
Exchanges are not available on all funds. Investors who purchase Class B or D
shares (for applicable funds), or $1 million or more of Class A shares, may be
subject to a contingent deferred sales charge.
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for The Colonial Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
The Colonial 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 The Colonial Fund. This report
may also be used as sales literature when preceded or accompanied by the current
prospectus which provides details of sales charges, investment objective and
operating policies of the Fund.
<PAGE>
[LOGO]
Mutual Funds for
Planned Portfolios
TRUSTEES
ROBERT J. BIRNBAUM
Retired (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief
Operating Officer, New York Stock Exchange, Inc.)
TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
LORA S. COLLINS
Attorney (formerly Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel)
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
WILLIAM D. IRELAND, JR.
Retired (formerly Chairman of the Board, Bank of New England-Worcester)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
WILLIAM E. MAYER
Partner, Development Capital, L.L.C. (formerly Dean, College of Business and
Management, University of Maryland; Dean, Simon Graduate School of Business,
University of Rochester; Chairman and Chief Executive Officer, C. S. 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
COLONIAL INVESTMENT SERVICES, INC., Distributor (C) 1997
A Liberty Financial Company (NYSE: L)
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
TF-03/660D-0497 M (6/97)
