<PAGE>
LETTER FROM THE PRESIDENT
Dear Shareholder:
Following is Colonial U.S. Government Fund's semiannual report for
the six months ended February 28, 1995. The Fund continued to meet its
objective of providing as high a level of current income as is consistent
with prudent risk by investing exclusively in U.S. government securities.(1)
<TABLE>
FUND PERFORMANCE (8/31/94 - 2/28/95)(2)
<CAPTION>
CLASS A CLASS B
INCEPTION 10/13/87 6/8/92
- ------------------------------------------------------------
<S> <C> <C>
Distributions declared
per share $0.209 $0.185
- ------------------------------------------------------------
30-day SEC yield 6.10% 5.66%
- ------------------------------------------------------------
Six-month total return, assuming
reinvestment of all distributions
and no sales charge or CDSC 2.71% 2.33%
- ------------------------------------------------------------
Net asset value per share
on 2/28/95 $6.38 $6.38
- ------------------------------------------------------------
</TABLE>
ECONOMIC/MARKET OVERVIEW
Given the continued strength of the U.S. economy, inflation remained
a concern for the Federal Reserve Board at the beginning of the semiannual
period. As a consequence, the Fed continued to raise short-term interest
rates in an effort to restrain growth and keep inflation under control.
Typically, when interest rates rise, bond prices decline, resulting in higher
bond yields.
Early in the period, the central bank's monetary policy resulted in
higher yields for most bonds, regardless of maturity. However, yields peaked
in mid-December and then moved lower through the end of the semiannual period.
In fact, yields in the government bond market recovered almost all of the
ground that had been lost in the first half of the period. The Fund
benefited from its emphasis on mortgage-backed securities, which performed
quite well compared to Treasury securities with similar maturities. Their
relative stability was reflected in the Fund's net asset value. NAV declined
only modestly, from $6.42 on August 31 to $6.38 on February 28.
INVESTMENT STRATEGY
The Fund remains committed to mortgage-backed securities for the
relative value they may offer over time. Your Fund's management has taken
steps to provide some protection should interest rates fall and refinancing
activity increase. Investments are selected for their ability to contribute
good relative value to the portfolio. Many higher coupon securities have
been sold, with the resultant assets invested in current coupon and discount
holdings. Also, older "seasoned" bonds # bonds that have survived several
rounds of interest rate cuts -- have been emphasized.
[PHOTO]
John A. McNeice, Jr.
President
Many investors believe that interest rates have peaked, and recent
statements by Alan Greenspan, the Fed's chairman, have supported this
outlook. Management will, of course, closely monitor economic
developments and adjust the portfolio as appropriate.
Sincerely,
/s/ John A. McNeice, Jr.
John A. McNeice, Jr.
President
April 13, 1995
<TABLE>
AVERAGE ANNUAL TOTAL RETURNS AS OF 2/28/95
<CAPTION>
CLASS A CLASS B
NAV MOP NAV W/CDSC
<S> <C> <C> <C> <C>
1 YEAR 1.58% -3.25% 0.82% -3.94%
5 YEARS 6.52% 5.49% - -
SINCE
INCEPTION 7.44% 6.73% 3.13% 2.16%
<FN>
(1) Refer to the inside back cover.
(2) SEC yield on 3/31/95 was 8.31% for Class A shares and 7.98% for Class B
Shares. Return 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) return does not include sales charges or contingent deferred
sales charges. Maximum offering price (MOP) return includes the maximum sales
charge of 4.75%. The CDSC return reflects the applicable contingent deferred
sales charge (one year 5.00%, since inception 3.00%). Performance for different
share classes will vary based on differences in sales charges and fees
associated with each class.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO (UNAUDITED, IN THOUSANDS) FEBRUARY 28, 1995
<CAPTION>
U.S. GOVERNMENT & AGENCY
OBLIGATIONS - 119.3% PAR VALUE
- ------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT AGENCIES - 84.8%
Maturities
Coupon from/to
------ -------
Federal Home Loan Mortgage Corp.:
7.500% 2016 .................. $ 1,646 $ 1,604
8.000% 2009-2016.............. 24,302 24,209
8.500% 2007 .................. 6,215 6,281
8.750% 2008 .................. 2,419 2,441
9.000% 2001-2022.............. 9,039 9,305
9.250% 2008 .................. 8,092 8,299
9.500% 2005-2008.............. 3,220 3,374
9.750% 2016 .................. 146 152
10.000% 2019 .................. 3,959 4,208
10.250% 2009 .................. 721 761
10.500% 2009-2020.............. 365 390
11.250% 2009 .................. 4,666 4,997
12.000% 2014 .................. 2 2
----------
66,023
----------
Federal National Mortgage Association:
6.500% 2008-2050(a)........... 180,683 170,094
7.500% 2009-2010(a)........... 112,638 111,377
8.000% 2008-2009.............. 4,372 4,356
8.250% 2008 .................. 1,421 1,411
8.500% 2011 .................. 12,914 13,111
9.000% 2007-2019.............. 39,624 41,015
9.500% 2010-2025(a)........... 63,661 66,943
10.000% 2001 .................. 19,588 20,640
15.000% 2014 .................. 1,459 1,571
11.000% 2015-2020.............. 20,342 22,084
----------
452,602
----------
Government National Mortgage Association:
6.500% 2050 (a)............... 8,750 7,916
7.500% 2007 .................. 2,223 2,217
8.000% 2004-2007.............. 55,570 56,094
9.000% 2008-2050(a)........... 129,208 133,835
9.500% 2009 .................. 203,979 216,551
10.000% 2001-2009.............. 60,293 64,904
10.250% 2024 .................. 1,403 1,440
10.500% 2010-2025(a)........... 40,134 43,703
10.625% 2010 .................. 110 120
10.750% 2024 .................. 2,444 2,668
11.000% 2009 .................. 14,393 15,846
11.250% 2015 .................. 232 251
11.500% 2010-2016.............. 29,803 32,903
11.750% 2013-2014.............. 645 702
12.000% 2010-2014.............. 25,396 28,260
12.250% 2013-2014.............. 1,479 1,623
12.500% 2010-2014.............. 14,883 16,698
12.750% 2013 .................. $ 157 $ 172
13.000% 2011-2013.............. 7,451 8,416
13.500% 2010-2014.............. 2,965 3,359
14.000% 2011-2014.............. 218 250
14.500% 2012 .................. 96 112
15.000% 2011 .................. 179 210
----------
638,250
- ------------------------------------------------------------------
Total government agencies (cost $1,018,065) 1,156,875
- ------------------------------------------------------------------
GOVERNMENT OBLIGATIONS - 34.5%
U.S. Treasury bonds:
11.500% 11/15/95 (b)........... 46,428 48,039
----------
U.S. Treasury notes:
7.500% 11/15/24 (b)........... 22,245 22,214
8.500% 11/15/95 (b)........... 52,040 52,772
10.375% 11/15/2012 (b)......... 18,954 23,340
10.500% 08/15/95 .............. 219,963 224,259
11.250% 05/15/95 (b)........... 100,000 101,047
----------
423,632
- ------------------------------------------------------------------
Total government obligations (cost $658,001) 471,671
- ------------------------------------------------------------------
Total investments (cost $1,676,066)(c) 1,628,546
- ------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 10.9%
- ------------------------------------------------------------------
Repurchase agreement with Bankers Trust
Securities Corp., dated 2/28/95, due
3/01/95 at 6.05%, collateralized by U.S.
Treasury notes with various maturities to
1997, market value $151,492 (repurchase
proceeds $148,232)................ 148,207
- ------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - (30.2)% (411,751)
- ------------------------------------------------------------------
NET ASSETS - 100.0% $ 1,365,002
- ------------------------------------------------------------------
<FN>
Notes to investment portfolio:
(a) This security, or a portion thereof, has been purchased on a
delayed delivery basis whereby the terms that are fixed are
the purchase price, interest rate and the settlement date.
The exact quantity purchased may be slightly more or less
than the amount shown.
(b) These securities, or a portion thereof, with a total market
value of $247,412, are being used to collateralize the delayed
delivery purchases indicated in note (a) above.
(c) Cost for federal income tax purposes is $1,676,143.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
STATEMENT OF ASSETS & LIABILITIES (UNAUDITED)
February 28, 1995
(in thousands except for per share amounts and footnote)
- ------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments at value (cost $1,676,066)........... $1,628,546
Short-term obligations......................... 148,207
----------
1,776,753
Receivable for:
Investments sold.......... $74,343
Interest.................. 14,136
Fund shares sold.......... 431
Other........................ 1,407 90,317
------- ----------
Total assets...................... 1,867,070
LIABILITIES
Payable for:
Investments purchased..... 491,182
Distributions............. 7,210
Fund shares repurchased... 3,429
Accrued:
Deferred Trustees fees.... 26
Other..................... 221
-------
Total liabilities................. 502,068
----------
NET ASSETS....................................... $1,365,002
==========
Net asset value & redemption price per share
Class A - ($632,969/99,153)................... $6.38
==========
Maximum offering price per share - Class A
($6.38/0.9525)................................ $6.70 *
==========
Net asset value & offering price per share
Class B - ($732,033/114,672)................... $6.38
==========
COMPOSITION OF NET ASSETS
Capital paid in............................... $1,501,355
Overdistributed net investment income......... (1,439)
Accumulated net realized loss................. (87,394)
Net unrealized depreciation................... (47,520)
----------
$1,365,002
==========
<FN>
* On sales of $50,000 or more the offering price is reduced.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS (UNAUDITED)
Six months ended February 28, 1995
(in thousands)
- ------------------------------------------------------------------
<S> <C> <C>
Investment income
Interest........................................... $68,377
EXPENSES
Management fee....................... $4,252
Service fee.......................... 1,821
Distribution fee - Class B........... 2,892
Transfer agent....................... 1,517
Bookkeeping fee...................... 237
Trustees fees........................ 43
Custodian fee........................ 105
Audit fee............................ 36
Legal fee............................ 9
Registration fees.................... 142
Reports to shareholders.............. 13
Other................................ 76 11,143
------ -------
Net investment income...................... 57,234
-------
NET REALIZED & UNREALIZED LOSS
ON PORTFOLIO POSITIONS
Net realized loss.................................. (21,894)
Net unrealized depreciation
during the period............................... (3,211)
-------
Net loss ................................... (25,105)
-------
Net increase in net assets from operations......... $32,129
=======
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
(unaudited)
Six months
ended Year ended
February 28 August 31
----------- -----------
1995 1994
=========== ===========
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income................................................................... $ 57,234 $ 150,500
Net realized loss....................................................................... (21,894) (96,561)
Net unrealized depreciation............................................................. (3,211) (73,750)
----------- ----------
Net increase (decrease) from operations.............................................. 32,129 (19,811)
----------- ----------
Distributions
From net investment income - Class A.................................................... (22,647) (59,838)
From capital paid in -- Class A......................................................... -- (3,498)
From net investment income - Class B.................................................... (22,627) (50,284)
From capital paid in -- Class B......................................................... -- (2,940)
----------- ----------
(13,145) (136,371)
----------- ----------
Fund share transactions
Receipts for shares sold - Class A...................................................... 11,128 156,635
Value of distributions reinvested - Class A............................................. 12,576 35,774
Cost of shares repurchased - Class A.................................................... (142,006) (566,219)
----------- ----------
(118,302) (373,810)
----------- ----------
Receipts for shares sold - Class B...................................................... 12,045 160,818
Value of distributions reinvested - Class B............................................. 12,360 29,049
Cost of shares repurchased - Class B.................................................... (122,152) (264,656)
----------- ----------
(97,747) (74,789)
----------- ----------
Net decrease from Fund share transactions............................................ (216,049) (448,599)
----------- ----------
Total decrease ............................................................. (229,194) (584,970)
NET ASSETS
Beginning of period..................................................................... 1,594,196 2,179,166
----------- ----------
End of period (including overdistributed net investment
income of $1,439 and $7,986, respectively)............................................. $ 1,365,002 $1,594,196
=========== ==========
NUMBER OF FUND SHARES
Sold - Class A.......................................................................... 1,769 23,127
Issued for distributions reinvested - Class A........................................... 1,994 5,368
Repurchased - Class A................................................................... (22,557) (85,108)
----------- ----------
(18,794) (56,613)
----------- ----------
Sold - Class B.......................................................................... 1,909 23,779
Issued for distributions reinvested - Class B........................................... 1,960 4,369
Repurchased - Class B................................................................... (19,392) (39,973)
----------- ----------
(15,523) (11,825)
----------- ----------
Net decrease in shares outstanding................................................... (34,317) (68,438)
Outstanding at
Beginning of period.................................................................... 248,142 316,580
----------- ----------
End of period.......................................................................... 213,825 248,142
=========== ==========
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1. INTERIM FINANCIAL STATEMENTS
In the opinion of management of Colonial U.S. Government Fund (the
Fund), a series of Colonial Trust II, the accompanying financial statements
contain all normal and recurring adjustments necessary for the fair presentation
of the financial position of the Fund at February 28, 1995, 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
The Fund is a Massachusetts business trust, registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end,
management investment company. The Fund may issue an unlimited number of shares.
The Fund offers Class A shares sold with a front-end sales charge and Class B
shares which 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. The following significant accounting
policies are consistently followed by the Fund in the preparation of its
financial statements and conform to generally accepted accounting principles.
- --------------------------------------------------------------------------------
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.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
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 or sold.
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 distribution fee), realized
and unrealized gains (losses) are allocated to each class proportionately on a
daily basis for purposes of determining the net asset value of each class.
Class B 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 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
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.
- --------------------------------------------------------------------------------
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
<TABLE>
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 based on the Fund's average net assets as follows:
<CAPTION>
Average Net Assets Annual Fee Rate
------------------ ---------------
<S> <C>
First $1 billion.... 0.60%
Next $1 billion..... 0.55%
Over $2 billion..... 0.50%
- --------------------------------------------------------------------------------
</TABLE>
BOOKKEEPING FEE
<TABLE>
The Adviser provides bookkeeping and pricing services for $27,000 per
year plus a percentage of the Fund's average net assets as follows:
<CAPTION>
Average Net Assets Annual Fee Rate
------------------ ---------------
<S> <C>
First $50 million.... No charge
Next $950 million.... 0.035%
Next $1 billion...... 0.025%
Next $1 billion...... 0.015%
- --------------------------------------------------------------------------------
</TABLE>
TRANSFER AGENT
Colonial Investors Service Center, Inc. (the Transfer Agent), an
affiliate of the Adviser, provides shareholder services for a monthly fee equal
to 0.18% annually of the Fund's average net assets and receives a reimbursement
for certain out of pocket expenses.
- --------------------------------------------------------------------------------
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES
The Adviser, through its Colonial Investment Services, Inc. (the
Distributor) division, is the Fund's principal underwriter. During the six
months ended February 28, 1995, the Distributor retained net underwriting
discounts of $20,734 on sales of the Fund's Class A shares and received
contingent deferred sales charges (CDSC) of $2,660,834 on Class B share
redemptions.
The Fund has adopted a 12b-1 plan which requires it to pay the
Distributor a service fee equal to 0.25% annually of the Fund's net assets as of
the 20th of each month. The plan also requires the payment of a distribution fee
to the Distributor equal to 0.75% annually of the average net assets
attributable to Class B shares.
The CDSC and the fees received from the 12b-1 plan are used principally
as repayment to the Distributor for amounts paid by the Distributor to dealers
who sold such shares.
- --------------------------------------------------------------------------------
OTHER
The Fund pays no compensation to its officers, all of whom are employees
of the Adviser.
The Fund's Trustees may participate in a deferred compensation plan
which may be terminated at any time. Obligations of the plan will be paid
solely out of the Fund's assets.
- --------------------------------------------------------------------------------
NOTE 4. PORTFOLIO INFORMATION
During the six months ended February 28, 1995, purchases and sales of
investments, other than short-term obligations, were $2,479,380,847 and
$2,570,968,591, respectively.
<TABLE>
Unrealized appreciation (depreciation) at February 28, 1995, based on
cost of investments for federal income tax purposes was:
<S> <C>
Gross unrealized appreciation............... $ 5,876,463
Gross unrealized depreciation............... (53,473,457)
------------
Net unrealized depreciation.............. $(47,596,994)
============
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
CAPITAL LOSS CARRYFORWARD
At August 31, 1994, capital loss carry- forwards available (to the
extent provided in regulations) to offset future realized gains were
approximately as follows:
<CAPTION>
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
---------- ------------
<S> <C>
1995................ $ 2,819,000
1996................ 789,000
1997................ 89,000
1998................ 706,000
1999................ 2,032,000
2000................ 626,000
2001................ 4,374,000
2002................ 2,826,000
-----------
$14,261,000
===========
</TABLE>
The loss carryforward expiring in 1995 and $722,000 of the carryforward
expiring in 1996 were acquired in the merger with Colonial Government Mortgage
Trust. Of the loss carryforwards expiring in 1996, 1997, 1998, and 1999,
$67,000, $25,000, $130,000, and $1,184,000, respectively, were acquired in the
merger with Colonial VIP Federal Securities Fund. Their availability may be
limited in a given year.
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.
- --------------------------------------------------------------------------------
NOTE 5. RESULTS OF SPECIAL SHAREHOLDERS MEETING
On February 15, 1995, a special meeting of shareholders was held and a
new Management Agreement between the Trust and Colonial Management Associates,
Inc. was approved that became effective upon the completion of the merger of The
Colonial Group, Inc. and Apple Merger Corporation, a subsidiary of Liberty
Financial Companies, Inc. on March 24, 1995. Out of the shares of beneficial
interest outstanding on December 9, 1994, 147,129,945 voted for the new
Management Agreement, 1,721,803 voted against and 7,488,077 abstained.
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are as follows:
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
FEBRUARY 28 YEAR ENDED AUGUST 31
------------------- ------------------------------------------
1995 1994 1993
------------------- -------------------- ------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period........ $6.420 $6.420 $6.880 $6.880 $6.980 $6.980
------ ------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income ..................... 0.260 0.236 0.415 0.365 0.541 0.490
Net realized and
unrealized gain (loss).................. (0.091) (0.091) (0.452) (0.452) (0.130) (0.130)
------ ------ ------ ------ ------ ------
Total from investment
operations.............................. 0.169 0.145 (0.037) (0.087) 0.411 0.360
------ ------ ------ ------ ------ ------
Less distributions declared
to shareholders:
From net investment income................. (0.209) (0.185) (0.400) (0.352) (0.511) (0.460)
From capital paid in....................... -- -- (0.023) (0.021) -- --
------ ------ ------ ------ ------ ------
Total distributions
declared to shareholders................ (0.209) (0.185) (0.423) (0.373) (0.511) (0.460)
------ ------ ------ ------ ------ ------
Net asset value - End of period.............. $6.380 $6.380 $6.420 $6.420 $6.880 $6.880
====== ====== ====== ====== ====== ======
Total return (a)............................. 2.71%(b) 2.33%(b) (0.53)% (1.28)% 6.15% 5.36%
====== ====== ====== ====== ====== ======
Ratios to average net assets
Expenses................................... 1.13%(c) 1.88%(c) 1.11% 1.86% 1.10% 1.85%
Net investment income...................... 8.26%(c) 7.51%(c) 8.14% 7.39% 7.85% 7.10%
Portfolio turnover........................... 289%(c) 289%(c) 291% 291% 162% 162%
Net assets at end of period
(in millions).............................. $ 633 $ 732 $ 758 $ 836 $1,202 $ 978
<FN>
(a) Total return at net asset value assuming all distributions reinvested and no initial sales charge or CDSC.
(b) Not annualized.
(c) Annualized.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS - CONTINUED
Selected data for a share of each class outstanding throughout each period are as follows:
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED AUGUST 31
--------------------------------------------------
1992 1991 1990
------------------------- ------- -------
CLASS A CLASS B (B) CLASS A CLASS A
------- ----------- ------- -------
<S> <C> <C> <C> <C>
Net asset value - Beginning of period........ $7.020 $6.950 $6.950 $7.130
------ ------ ------ ------
Income (loss) from investment operations:
Net investment income (a)................. 0.614 0.122 0.699 0.711
Net realized and
unrealized gain (loss)................. (0.043) 0.029 0.069 (0.171)
------ ------ ------ ------
Total from investment
operations............................. 0.571 0.151 0.768 0.540
------ ------ ------ ------
Less distributions declared
to shareholders:
From net investment income................ (0.611) (c) (0.121) (c) (0.698) (0.720) (c)
From capital paid in...................... -- -- -- --
------ ------ ------ ------
Total distributions
declared to shareholders............... (0.611) (0.121) (0.698) (0.720)
------ ------ ------ ------
Net asset value - End of period.............. $6.980 $6.980 $7.020 $6.950
====== ====== ====== ======
Total return (d)............................. 8.46% 2.19% (e) 11.54% 7.95% (f)
====== ====== ====== ======
Ratios to average net assets
Expenses.................................. 1.09% 1.84% (g) 1.16% 1.25%
Fees and expenses waived or
borne by the adviser.................... -- -- -- 0.15%
Net investment income..................... 8.55% 7.80% (g) 9.68% 10.09%
Portfolio turnover........................... 132% 132% 129% 82%
Net assets at end of period
(in millions)............................. $1,102 $ 343 $ 444 $ 95
<FN>
(a) Net of fees and expenses waived or borne
by the adviser which amounted to......... -- -- -- $0.010
(b) Class B shares were initially offered on June 8, 1992. Per share amounts reflect activity
from that date.
(c) Because of differences between book and tax basis accounting, approximately $0.056 and $0.014 in 1992,
and $0.044 in 1990 of the distributions were a return of capital for federal income tax purposes.
(d) Total return at net asset value assuming all distributions reinvested and no initial sales charge
or CDSC.
(e) Not annualized.
(f) Had the adviser not waived or reimbursed a portion of expenses total return would have been reduced.
(g) Annualized.
</TABLE>
<PAGE>
TRUSTEES
- --------------------------------------------------------------------------------
TOM BLEASDALE
Trustee (formerly Chairman of the Board and Chief Executive
Officer, Shore Bank & Trust Company)
LORA S. COLLINS
Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
WILLIAM D. IRELAND, JR.
Trustee (formerly Chairman of the Board, Bank of New England - Worcester)
WILLIAM E. MAYER
Dean, College of Business and Management, University of Maryland (formerly
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)
JOHN A. MCNEICE, JR.
Chairman of the Board, Chief Executive Officer and Director, The Colonial
Group, Inc. and Colonial Management Associates, Inc.
JAMES L. MOODY, JR.
Chairman of the Board, Hannaford Bros. Co. (formerly 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
Management Consultant
SINCLAIR WEEKS, JR.
Chairman of the Board, Reed &Barton Corporation
<PAGE>
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[PICTURE OF THE ABOUT OUR COVER...
AMERICAN FLAG]
The symbol on the cover of this
Report represents the Fund's primary
investment focus on U.S. government
securities.
- -------------------------------------------------------
Colonial U.S. Government Fund mails one
shareholder report to each shareholder address. If you
would like more than one report, please call our
Literature Department at 1-800-248-2828 and additional
reports will be sent to you.
SHAREHOLDER SERVICES AND TRANSFER AGENT
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
This material may be used with potential investors if it
is preceded or accompanied by a current Fund prospectus
containing more complete information including fees, risks,
and expenses.
The Fund's Trustees approved modifications to the wording of your
Fund's objective to more precisely describe the Fund's investment
approach. No Fund policies or practices were changed. As of
12/29/94, the Fund's objective is to pursue as high a level of
current income as is consistent with prudent risk by investing
exclusively in U.S. government securities.
<PAGE>
[LOGO] COLONIAL
MUTUAL FUNDS
[PICTURE OF THE
AMERICAN FLAG]
COLONIAL
U.S. GOVERNMENT FUND
-----------------------------
SEMIANNUAL REPORT
FEBRUARY 28, 1995
[LOGO] COLONIAL
MUTUAL FUNDS]
COLONIAL INVESTMENT SERVICES Copy Rights 1995
ONE FINANCIAL CENTER, BOSTON, MASSACHUSETTS 02111-2621
PRINTED ON RECYCLED PAPER
UG-03/817A-0295
