<PAGE>
LETTER FROM THE PRESIDENT
Dear Shareholder:
Following is Colonial Adjustable Rate 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 low volatility, through investments primarily in adjustable rate
mortgage-backed securities (ARMs) and other variable rate securities issued by
the U.S. government.
<TABLE>
<CAPTION>
FUND PERFORMANCE (8/31/94 - 2/28/95)1
CLASS A CLASS B CLASS C
INCEPTION 10/1/92 2/1/93 1/4/95
- ---------------------------------------------------------
<S> <C> <C> <C>
Distributions declared
per share $0.236 $0.205 $0.074
- ---------------------------------------------------------
30-day SEC yield 5.34% 4.87% 5.52%
- ---------------------------------------------------------
Six-month total return,
assuming reinvestment
of all distributions
and no sales charge
or CDSC 2.70% 2.37% -
- ---------------------------------------------------------
Net asset value per
share on 2/28/95 $9.69 $9.69 $9.69
- ---------------------------------------------------------
</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.
Early in the period the central bank's monetary policy resulted in
higher yields for most bonds, regardless of maturity. However, later in the
period signs of economic weakness caused yields to decline dramatically. For
example, the yield for a one-year Treasury bill (the security that is used to
reset many of the adjustable rate securities owned by the Fund) rose from 5.5%
on August 31, 1994, to a high of 7.3% on December 13. After peaking in
mid-December, yields 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.
Your Fund benefited from its ability to invest in adjustable rate
securities - securities that have historically been more stable than other
fixed-income investments during periods of interest rate volatility. Net Asset
Value (NAV) fluctuated in a relatively narrow band, despite far more dramatic
swings in interest rates. From the beginning to the end of the period, the
Fund's NAV increased from $9.67 to $9.69, and the Fund's monthly distribution
also moved higher.
INVESTMENT STRATEGY
Management has diversified the Fund's portfolio over a range of reset
dates keyed off of a variety of indexes. Because of their adjustable coupon
rates, these securities may be more stable than comparable Treasury securities
during periods of interest rate volatility. These securities should also
provide price appreciation if interest rates continue to decline.
[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
position. Management will, of course, closely monitor the situation and make
changes 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 CLASS C
NAV MOP NAV W/CDSC NAV
<S> <C> <C> <C> <C> <C>
1 YEAR 2.71% -0.63% 2.05% -1.88% -
SINCE INCEPTION 3.20% 1.80% 2.55% 1.17% 2.24%
<FN>
1 IF THE ADVISER HAD NOT BORNE CERTAIN FUND EXPENSES, TOTAL RETURNS FOR
CLASS A, CLASS B, AND CLASS C SHARES WOULD HAVE BEEN LOWER; YIELDS FOR CLASS A,
CLASS B, AND CLASS C SHARES WOULD HAVE BEEN 4.39%, 3.89%, AND 4.54%,
RESPECTIVELY. THE 30-DAY SEC YIELD ON 3/31/95 WAS 5.28% FOR CLASS A SHARES,
4.81% FOR CLASS B SHARES, AND 5.46% FOR CLASS C SHARES. NET ASSET VALUE (NAV)
RETURN DOES NOT INCLUDE SALES CHARGES OR CONTINGENT DEFERRED SALES CHARGES
(CDSC). MAXIMUM OFFERING PRICE (MOP) RETURN INCLUDES THE MAXIMUM SALES CHARGE
OF 3.25%. THE CDSC RETURN REFLECTS THE APPLICABLE CHARGE (ONE YEAR, 4.00%;
SINCE INCEPTION, 3.00%). PAST PERFORMANCE CANNOT PREDICT FUTURE RESULTS.
RETURN AND VALUE OF AN INVESTMENT WILL VARY, RESULTING IN A GAIN OR LOSS ON
SALE. ALL RESULTS SHOWN ASSUME REINVESTMENT OF DISTRIBUTIONS. PERFORMANCE FOR
DIFFERENT SHARE CLASSES WILL VARY BASED ON DIFFERENCES IN SALES CHARGES AND
FEES ASSOCIATED WITH EACH CLASS.
</TABLE>
<PAGE>
FEBRUARY 28, 1995
<TABLE>
<CAPTION>
U.S. GOVERNMENT & AGENCY
OBLIGATIONS -86.7% PAR VALUE
- ---------------------------------------------------------------
<S> <C> <C>
Government agencies - 85.9%
Federal Home Loan Mortgage Corp.,
Adjustable Rate Mortgage: (a)
5.571% 02/01/18 ............... $219 $217
5.608% 11/01/18 ............... 400 397
5.736% 09/01/23 ............... 897 889
5.941% 04/01/23 ............... 317 321
6.115% 11/01/23 ............... 738 735
6.335% 08/01/19 ............... 219 222
6.469% 06/01/22 ............... 365 372
6.510% 07/01/19 ............... 350 349
6.865% 08/01/22 ............... 232 235
7.126% 08/01/22 ............... 293 295
7.145% 07/01/22 ............... 279 281
7.500% 07/01/22 ............... 279 286
7.660% 11/01/22 ............... 208 212
-----
4,811
-----
Federal National Mortgage Association:
Adjustable Rate Mortgage: (a)
5.383% 11/01/23 ............... 371 360
5.617% 07/01/27 ............... 224 222
6.190% 07/01/17 ............... 292 288
6.565% 07/01/22 ............... 114 114
6.729% 07/01/18 ............... 298 306
6.773% 07/01/20 ............... 256 254
6.830% 11/01/19 ............... 260 264
6.860% 06/01/19 ............... 367 379
6.970% 08/01/19 ............... 283 288
6.975% 07/01/21 ............... 353 366
7.105% 12/01/17 ............... 205 204
7.270% 08/01/22 ............... 210 213
7.420% 09/01/22 ............... 255 256
7.625% 12/01/21 ............... 254 259
-----
3,773
-----
Quarterly Floating Note, (a)
4.900% 01/08/96 ............... 1,000 982
-----
Government National Mortgage Association,
Adjustable Rate Mortgage: (a)
5.875% 08/20/22 ............... 91 88
5.875% 09/20/22 ............... 734 714
6.000% 05/20/22 ............... 846 831
6.000% 05/20/24 ............... 920 909
6.000% 06/20/24 ............... 547 540
6.125% 10/20/22 ............... 929 905
6.500% 06/20/23 ............... 696 694
-----
4,681
-----
Student Loan Marketing Association,
Quarterly Floating Note, (a)
6.510% 05/15/95 .................... $2,000 $2,003
- ---------------------------------------------------------------
Total government agencies (cost $16,587) 16,250
- ---------------------------------------------------------------
GOVERNMENT OBLIGATIONS - 0.8%
U.S. Treasury notes,
10.500% 08/15/95 (cost $169)............ 150 153
- ---------------------------------------------------------------
Total investments (cost $16,756) (b) 16,403
- ---------------------------------------------------------------
SHORT-TERM OBLIGATIONS -12.7%
- ---------------------------------------------------------------
Repurchase agreement with Bankers Trust
Securities Corp., dated 02/28/95, due
03/01/95 at 6.050% collateralized by
U.S. Treasury notes with various maturities
to 1997, market value $2,464 (repurchase
proceeds $2,411) ......................... 2,411 2,411
- ---------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET -0.6% 115
- ---------------------------------------------------------------
NET ASSETS -- 100.0% $18,929
- ---------------------------------------------------------------
<FN>
Notes to investment portfolio:
(a) Interest rates on variable rate securities change periodically.
The rates listed are as of February 28, 1995.
(b) Cost for federal income tax purposes is the same.
</TABLE>
See notes to financial statements.
2
<PAGE>
<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 $16,756)....................... $16,402
Short-term obligations.................................... 2,411
-------
18,813
Receivable for:
Interest.................................. 117
Investments sold.......................... 21
Fund shares sold.......................... 4
Expense reimbursement due
from adviser............................ 18
Deferred organization expenses............... 42
Other........................................ 3 205
------- -------
Total assets...................................... 19,018
LIABILITIES
Payable for:
Distributions............................. 75
Fund shares repurchased................... 4
Accrued:
Deferred Trustees fees.................... 1
Other........................................ 9
-------
Total liabilities................................. 89
-------
Net assets................................................ $18,929
=======
Net asset value & redemption price per share -
Class A ($13,995/1,445)............................... $ 9.69
=======
Maximum offering price per share - Class A
($9.69/0.9675)......................................... $ 10.02*
=======
Net asset value & offering price per share -
Class B ($4,539/468).................................. $ 9.69
=======
Net asset value & offering price per share -
Class C ($395/41)..................................... $ 9.69
=======
Composition of net assets
Capital paid in........................................ $19,433
Overdistributed net investment income.................. (16)
Accumulated net realized loss.......................... (134)
Net unrealized depreciation............................ (354)
-------
$18,929
=======
<FN>
* On sales of $100,000 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....................................... $ 565
EXPENSES
Management fee..................... $ 54
Distribution fee - Class B......... 15
Distribution fee - Class C......... (a)
Service fee........................ 20
Transfer agent..................... 19
Bookkeeping fee.................... 14
Trustees fees...................... 5
Custodian fee...................... (a)
Audit fee.......................... 9
Legal fee.......................... 4
Registration fees.................. 12
Reports to shareholders............ 1
Amortization of deferred
organization expenses........... 8
Other.............................. 4
-----
165
Fees and expenses waived or
borne by the adviser............ (100) 65
----- -----
Net investment income..................... 500
-----
Net realized and unrealized gain (loss)
on portfolio positions
Net realized loss.................. (47)
Net unrealized appreciation
during the period............... 35
-----
Net loss.................................. (12)
-----
Net increase in net assets from
operations...................................... $ 488
=====
<FN>
(a) Rounds to less than one.
</TABLE>
See notes to financial statements.
3
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
<CAPTION>
(unaudited)
Six months
ended Year ended
February 28 August 31
----------- ----------
INCREASE (DECREASE) IN NET ASSETS 1995(a) 1994
----------- ----------
<S> <C> <C>
Operations
Net investment income................................................... $ 500 $ 856
Net realized loss....................................................... (47) (236)
Net unrealized appreciation (depreciation).............................. 35 (442)
------- -------
Net increase from operations..................................... 488 178
Distributions
From net investment income - Class A.................................... (367) (609)
From net investment income - Class B.................................... (101) (102)
From net investment income - Class C.................................... (2)
------- -------
18 (533)
------- -------
Fund share transactions
Receipts for shares sold - Class A...................................... 1,389 15,991
Value of distributions reinvested - Class A............................. 212 356
Cost of shares repurchased - Class A.................................... (3,776) (7,590)
(2,175) 8,757
Receipts for shares sold - Class B...................................... 1,826 4,317
Value of distributions reinvested - Class B............................. 50 55
Cost of shares repurchased - Class B.................................... (1,525) (1,793)
------- -------
351 2,579
------- -------
Receipts for shares sold - Class C...................................... 390
Value of distributions reinvested - Class C............................. 1
------- -------
391
------- -------
Net increase (decrease) from Fund share transactions............. (1,433) 11,336
(1,415) 10,803
Net assets
Beginning of period..................................................... 20,344 9,541
End of period (including overdistributed net
net investment income of $16 and $46, respectively).................. $18,929 $20,344
======= =======
Number of Fund shares
Sold - Class A.......................................................... 145 1,620
Issued for distributions reinvested - Class A........................... 22 36
Repurchased - Class A................................................... (394) (775)
------- -------
(227) 881
------- -------
Sold - Class B.......................................................... 190 441
Issued for distributions reinvested - Class B........................... 5 6
Repurchased - Class B................................................... (159) (183)
------- -------
36 264
------- -------
Sold - Class C.......................................................... 41
Issued for distributions reinvested - Class C........................... (b)
------- -------
41
------- -------
Net increase (decrease) in shares outstanding.................... (150) 1,145
Outstanding at
Beginning of period................................................ 2,104 959
------- -------
End of period...................................................... 1,954 2,104
======= =======
<FN>
(a) Class C shares were initially offered on January 4, 1995.
(b) Rounds to less than one.
</TABLE>
See notes to financial statements.
4
<PAGE>
NOTE 1. INTERIM FINANCIAL STATEMENTS
In the opinion of management of Colonial
Adjustable Rate 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 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 for approximately
eight years. Class C shares are subject to a
continuing annual distribution fee. 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 and Class C distribution fees),
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.
- -------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
The Fund declares and records distributions
daily and pays monthly.
5
<PAGE>
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.
- -------------------------------------------------------
DEFERRED ORGANIZATION EXPENSES
The Fund incurred $80,957 of expenses in
connection with its organization, initial
registration with the Securities and Exchange
Commission and various states, and the initial
public offering of its shares. These expenses
were deferred and are being amortized on a
straight-line basis over five years.
Other
The Fund's custodian takes possession
through the federal book-entry system of
securities collateralizing repurchase agree-
ments. 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
0.035% of the Fund's average net assets
over $50 million.
- -------------------------------------------------------
TRANSFER AGENT
Colonial Investors Service Center, Inc.
(the Transfer Agent), an affiliate of the Adviser,
provides shareholder services for a monthly fee
equal to 0.18% 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 Colonial Investment
Services, Inc. (the Distributor), is the Fund's
principal underwriter. During the six months
ended February 28, 1995, the Distributor
retained net underwriting discounts of $736
on sales of the Fund's Class A shares and
received contingent deferred sales charges
(CDSC) of $20,950 and none, 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 0.20% annually of
Class A and Class B net assets and 0.25%
annually of Class C net assets as of the
20th of each month. The plan also
requires the payment of a distribution
fee to the Distributor equal to 0.65% and
0.15% annually, of the average net assets
attributable to Class B and Class C shares,
respectively.
The CDSC and the fees received from the
12b-1 plan are used principally as repayment
to the Distributor for amounts paid by the
Distributor to dealers who sold such shares.
- -------------------------------------------------------
EXPENSE LIMITS
The Adviser has agreed, until further notice,
to waive fees and bear certain Fund expenses
to the extent that total expenses (exclusive of
service and distribution fees, brokerage
commissions, interest, taxes and extraordi-
nary expenses, if any) exceed 0.30% annually
of the Fund's average net assets.
- -------------------------------------------------------
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 ter-
minated at any time. Obligations of the plan
will be paid solely out of the Fund's assets.
- -------------------------------------------------------
6
<PAGE>
NOTE 4. PORTFOLIO INFORMATION
During the six months ended February 28,
1995, purchases and sales of investments,
other than short-term obligations, were
$2,457,582 and $4,874,214, respectively.
Unrealized appreciation (depreciation) at
February 28, 1995, based on cost of
investments for both financial statement
and federal income tax purposes was:
Gross unrealized appreciation $ 313
Gross unrealized depreciation (354,611)
----------
Net unrealized depreciation $ (354,298)
==========
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, 1,429,271 voted for the
new Management Agreement and 25,459
abstained.
7
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are as follows:
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
(unaudited)
Six months ended Year ended
February 28 August 31
---------------------------------- -------------------
1995 1994
---------------------------------- -------------------
Class A Class B Class C (b) Class A Class B
------- ------- ---------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value - Beginning of period............ $ 9.670 $9.670 $9.550 $9.950 $9.950
------- ------ ------ ------ ------
Income from investment operations:
Net investment income (a)....................... 0.250 0.219 0.077 0.473 0.409
Net realized and unrealized gain (loss)......... 0.006 0.006 0.137 (0.356) (0.356)
------- ------ ------ ------ ------
Total from investment operations........... 0.256 0.225 0.214 0.117 0.053
------- ------ ------ ------ ------
Less distributions declared to shareholders:
From net investment income...................... (0.236) (0.205) (0.074) (0.397) (0.333)
In excess of net investment income.............. --- --- --- --- ---
From net realized gains......................... --- --- --- --- ---
------- ------ ------ ------ ------
Total distributions declared to shareholders... (0.236) (0.205) (0.074) (0.397) (0.333)
------- ------ ------ ------ ------
Net asset value - End of period.................. $ 9.690 $9.690 $9.690 $9.670 $9.670
======= ====== ====== ====== ======
Total return (e) (f)............................. 2.70%(g) 2.37%(g) 2.24%(g) 1.20% 0.55%
======= ====== ====== ====== ======
Ratios to average net assets
Expenses ....................................... 0.50%(h) 1.15%(h) 0.70%(h) 0.50% 1.15%
Net investment income .......................... 5.24%(h) 4.59%(h) 5.04%(h) 4.84% 4.19%
Fees and expenses waived or borne
by the adviser................................ 1.02%(h) 1.02%(h) 1.02%(h) 1.16% 1.16%
Portfolio turnover............................... 32%(h) 32%(h) 32%(h) 69% 69%
Net assets at end of period (000)................ $13,995 $4,539 $ 395 $ 16,168 $4,176
<CAPTION>
Period ended
August 31
-----------------------
1993 (c)
-----------------------
Class A Class B (d)
------- -----------
<S> <C> <C>
Net asset value - Beginning of period............ $ 10.000 $9.940
-------- ------
Income from investment operations:
Net investment income (a)....................... 0.434 0.237
Net realized and unrealized gain (loss)......... (0.061) (0.003)
-------- ------
Total from investment operations........... 0.373 0.234
-------- ------
Less distributions declared to shareholders:
From net investment income...................... (0.406) (0.215)
In excess of net investment income.............. (0.015) (0.008)
From net realized gains......................... (0.002) (0.001)
-------- ------
Total distributions declared to shareholders... (0.423) (0.224)
-------- ------
Net asset value - End of period.................. $9.950 $9.950
======== ======
Total return (e) (f)............................. 3.82%(g) 2.38%(g)
======== ======
Ratios to average net assets
Expenses ....................................... 0.50%(h) 1.15%(h)
Net investment income .......................... 4.70%(h) 4.05%(h)
Fees and expenses waived or borne
by the adviser................................ 1.68%(h) 1.68%(h)
Portfolio turnover............................... 25%(h) 25%(h)
Net assets at end of period (000)................ $7,866 $1,675
<FN>
(a) Net of fees and expenses waived or borne
by the adviser which amounted to............. $0.155 $0.092
(b) Class C shares were initially offered on January 4, 1995. Per share amounts reflect activity from that date.
(c) The Fund commenced investment operations on October 1, 1992. Per share amounts reflect activity from that date.
(d) Class B shares were initially offered on February 1, 1993. Per share amounts reflect activity from that date.
(e) Total return at net asset value assuming all distributions reinvested and no initial sales charge or CDSC.
(f) Had the adviser not waived or reimbursed a portion of expenses total return would have been reduced.
(g) Not annualized.
(h) Annualized.
</TABLE>
8
<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
9
<PAGE>
- --------------------------------------------------------------------------------
- -------------------------------------------------------
[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 Adjustable Rate 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.
10
<PAGE>
THIS PAGE LEFT BLANK INTENTIONALLY
11
<PAGE>
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AMERICAN FLAG]
COLONIAL
ADJUSTABLE RATE
U.S. GOVERNMENT FUND
-----------------------------
SEMIANNUAL REPORT
FEBRUARY 28, 1995
[LOGO] COLONIAL
MUTUAL FUNDS]
[RECYCLE PRINTED WITH
LOGO] SOY INK
COLONIAL INVESTMENT SERVICES Copy Rights 1995
ONE FINANCIAL CENTER, BOSTON, MASSACHUSETTS 02111-2621
PRINTED ON RECYCLED PAPER
AF-03/816A-0295
