-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fh5Wp5pq90QnmOpT2UX8vhUSiAFXe5VaMqKDgVVjVe0derYF1AeVLUBz3xhPbU+D OlHxXFdpNX14/UNo1KZy3g== 0000021847-97-000003.txt : 19970103 0000021847-97-000003.hdr.sgml : 19970103 ACCESSION NUMBER: 0000021847-97-000003 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961031 FILED AS OF DATE: 19970102 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLONIAL INTERMEDIATE HIGH INCOME FUND CENTRAL INDEX KEY: 0000833021 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-05567 FILM NUMBER: 97500287 BUSINESS ADDRESS: STREET 1: ONE FINANCIAL CNTR CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 6174263750 N-30D 1 COLONIAL INTERMEDIATE HIGH INCOME FUND ANN. REPORT Colonial Intermediate High Income Fund Annual Report October 31, 1996 Colonial Intermediate High Income Fund Highlights November 1, 1995 - October 31, 1996 Investment Objective: Colonial Intermediate High Income Fund seeks to provide high current income by investing in high yield fixed-income securities. The Fund is designed to offer: [check mark] High monthly income potential [check mark] Attractive long-term total return potential [check mark] Broad diversification Portfolio Manager commentary: "High yield corporate bond issuers continue to benefit from improved earnings and low interest rates. Growth in the third quarter of 1996 was slower than in the first half of the year. However, it should be sufficient to support solid performance for high yield corporate bonds. The Fund is diversified across many industries and structured so that a downturn in any one industry should not have a major impact on the Fund. On July 15, 1996 the Fund redeemed its Senior Extendible Notes and replaced them with a three-year term loan. As a result of the redemption of the Notes, a number of investment restrictions required under those Notes have been eliminated. This will provide the Fund with added investment flexibility in pursuing high yield investments." - Andrea Feingold Colonial Intermediate High Income Fund Performance Distributions declared per share $0.687 NAV Market Price 12-month total return, assuming reinvestment of all distributions 15.14% 14.62% Price per share $6.89 $7.13 Top Corporate Issuers* Top Five Sectors* 1. Revlon Worldwide 2.6% 2. Pathmark Stores 2.4% 3. Young Broadcasting 2.1% 4. Gulf Canada Resources 2.1% 5. Panamsat L.P. Stp 2.1% 1. Manufacturing 16.2% 2. Services 15.5% 3. Cable 8.7% 4. Mining & Energy 8.1% 5. Chemicals 8.1% *CORPORATE ISSUERS AND SECTOR BREAKDOWNS ARE CALCULATED AS A PERCENT OF TOTAL INVESTMENTS. BECAUSE THE FUND IS ACTIVELY MANAGED, THERE CAN BE NO GUARANTEE THE FUND WILL CONTINUE TO HOLD THESE ISSUERS 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 AS USED IN THE INVESTMENT PROCESS 2 President's Message To Fund Shareholders I am pleased to present your Fund's annual report for the period ended October 31, 1996. This report gives us the opportunity to share our analysis of the investment environment over the past 12 months. [Picture of Harold W. Cogger] The economy grew at a comfortable pace through the last quarter of 1995 and into 1996. A strong second quarter had some investors fearing the Federal Reserve would raise interest rates, and fixed income markets would suffer much as they did in 1994. The economy slowed on its own, however, and the interest rates held steady. With continuing evidence of slowing economic activity, the high yield market is becoming more selective. In this market your management team has sold off some cyclical issues and has focused its purchases on the upper end of the credit spectrum. We expect subdued growth to continue into the first half of 1997, with the economy picking up again in the second half of the year. As always, we appreciate the opportunity to help you meet your investment goals. Respectfully, /s/ Harold W. Cogger Harold W. Cogger President December 10, 1996 Because market conditions change frequently, there can be no assurance that the trends described herein will continue, come to pass or affect Fund performance. 3 INVESTMENT PORTFOLIO OCTOBER 31, 1996 (IN THOUSANDS) BONDS & NOTES (a) - 99.3% PAR VALUE - -------------------------------------------------------------------------------- CORPORATE FIXED INCOME BONDS & NOTES - 97.4% - -------------------------------------------------------------------------------- AEROSPACE - DEFENSE - 1.5% K&F Industries, Inc., 10.375% 09/01/04 $ 1,835 $ 1,890 - -------------------------------------------------------------------------------- CONSUMER NON-DURABLES - 43.4% Communications & Media - 18.2% Allbritton Communications Co., 11.500% 08/15/04 2,000 2,077 Bell Cablemedia PLC, stepped coupon, (11.950% 07/15/99)(b) 1,500 1,237 Cablevision Systems Corp., 10.750% 04/01/04 2,000 2,030 Comcast Corp., 10.625% 07/15/12 1,500 1,586 Echostar Communications Corp., stepped coupon, (12.875% 06/01/99) 06/01/04(b) 1,500 1,192 Heritage Media Corp., 11.000% 06/15/02 1,000 1,067 Insight Communications Co., 11.250% 03/01/00 2,000 1,980 Marcus Cable Co., L.P., 11.875% 10/01/05 1,500 1,571 NWCG Holding Corp., (c) 06/15/99 2,000 1,635 Nextel Communications, Inc., stepped coupon, .750% 02/15/99) 08/15/04(b) 1,500 952 Rogers Communications, Inc., 10.875% 04/15/04 2,000 2,060 Sullivan Broadcasting, Inc., 10.250% 12/15/05 2,000 2,010 Telewest Communication PLC, (c) 10/01/07 1,000 640 Young Broadcasting Corp., 11.750% 11/15/04 2,500 2,650 ------- 22,687 ------- Consumer Products - 4.9% E&S Holdings Corp., 10.375% 10/01/06 (d) 1,000 1,026 4 Investment Portfolio/October 31, 1996 Gillett Holdings, Inc., 12.250% 06/30/02 $ 267 $ 280 Intertek Finance PLC, 10.250% 11/01/06 (d) 500 500 Revlon Consumer Products Corp., 10.500% 02/15/03 1,000 1,042 Revlon Worldwide Corp., (c) 03/15/98 2,500 2,203 Shop Vac Corp., 10.625% 09/01/03 (d) 1,000 1,030 ------- 6,081 ------- Entertainment & Leisure - 12.2% Casino Magic-Louisiana, Inc., 13.000% 08/15/03 (d) 1,000 1,015 Eldorado Resorts Corp., 10.500% 08/15/06 (d) 1,750 1,829 HMH Properties, Inc., 9.500% 05/15/05 1,500 1,515 Harvey Casinos Resorts, 10.625% 06/01/06 1,750 1,829 Mohegan Tribal Gaming, 13.500% 11/15/02 1,000 1,245 Showboat, Inc., 13.000% 08/01/09 2,250 2,565 Station Casinos, Inc., 10.125% 03/15/06 2,000 1,955 Trump Atlantic City Associates, 11.250% 05/01/06 1,750 1,662 Trump Castle Funding Mortgage, 11.750% 11/15/03 500 477 Wyndham Hotel Corp., 10.500% 05/15/06 1,000 1,052 ------- 15,144 ------- Food, Beverages, & Tobacco - 4.4% Chiquita Brands International, Inc., 10.250% 11/01/06 1,000 1,035 FoodBrands America, Inc., 10.750% 05/15/06 1,750 1,820 Pilgrim's Pride Corp., 10.875% 08/01/03 450 448 Smiths Food & Drug Co., 11.250% 05/15/07 2,000 2,175 ------- 5,478 ------- 5 Investment Portfolio/October 31, 1996 - -------------------------------------------------------------------------------- CORPORATE FIXED INCOME BONDS & NOTES (a) - CONT. PAR VALUE CONSUMER NON-DURABLES - CONT. Health Care - 1.3% OrNda Health Corp., 11.375% 08/15/04 $ 500 $ 569 Tenet Healthcare Corp., 10.125% 03/01/05 1,000 1,095 ------- 1,664 ------- Retail Trade - 2.4% Pathmark Stores, Inc.: 9.625% 05/01/03 1,000 978 11.625% 06/15/02 2,000 2,065 ------- 3,043 - -------------------------------------------------------------------------------- ENERGY - 12.8% Domestic Oil & Gas - 8.7% Costilla Energy, Inc., 10.250% 10/01/06 350 348 Falcon Drilling Co., Inc., Series B, 9.750% 01/15/01 1,000 1,030 Gulf Canada Resources Ltd., 9.250% 01/15/04 2,500 2,594 Mesa Operating Co.: stepped coupon, (11.625% 07/01/01) 07/01/06(b) 1,000 660 10.625% 07/01/06 1,250 1,322 Nuevo Energy Co., 9.500% 04/15/06 2,100 2,168 Santa Fe Energy Resources, Inc., 11.000% 05/15/04 1,500 1,657 TransTexas Gas Corp., 11.500% 06/15/02 1,000 1,055 ------- 10,834 ------- Oil & Gas Services - 4.1% California Energy Co., Inc., 9.875% 06/30/03 1,250 1,287 Flores & Rucks, Inc., 13.500% 12/01/04 1,000 1,177 Forcenergy, Inc., 9.500% 11/01/06 550 550 Texas Petrochemical Corp., 11.125% 07/01/06 (d) 2,000 2,105 ------- 5,119 ------- 6 Investment Portfolio/October 31, 1996 - -------------------------------------------------------------------------------- MANUFACTURING - 29.2% Capital Goods - 2.9% Collins & Aikman Products Co., 11.500% 04/15/06 $ 2,000 $ 2,092 Hayes Wheels International, Inc., 11.000% 07/15/06 1,500 1,560 ------- 3,652 ------- Chemicals - 5.6% Agricultural Minerals Co., L.P., 10.750% 09/30/03 2,250 2,374 Applied Extrusion Technologies, Inc., 11.500% 04/01/02 1,500 1,567 N.L. Industries, Inc., 11.750% 10/15/03 2,000 2,067 Trans-Resources Corp., 11.875% 07/01/02 1,000 1,020 ------- 7,028 ------- Computers - 2.1% IMO Industries, Inc., 11.750% 05/01/06 1,500 1,545 Unisys Corp., 11.750% 10/15/04 1,000 1,018 ------- 2,563 ------- Consumer Durables - 2.6% Aftermarket Technology Corp., Series B, 12.000% 08/01/04 1,000 1,100 Owens-Illinois, Inc., 10.500% 06/15/02 2,000 2,105 ------- 3,205 ------- Diversified - 2.0% ISP Holdings, Inc.: 9.000% 10/15/03 (d) 1,000 1,003 9.750% 02/15/02 (d) 1,500 1,541 ------- 2,544 ------- Housing - 1.5% Building Materials Corp. of America, (c) 07/01/04 1,000 825 Clark-Schwebel, Inc., 10.500% 04/15/06 1,000 1,033 ------- 1,858 ------- 7 Investment Portfolio/October 31, 1996 - -------------------------------------------------------------------------------- CORPORATE FIXED INCOME BONDS & NOTES (a) - CONT. PAR VALUE - -------------------------------------------------------------------------------- MANUFACTURING - CONT. Metals & Minerals - 7.7% Algoma Steel, Inc., 12.375% 07/15/05 $ 1,500 $ 1,558 Earle M. Jorgensen & Co., 10.750% 03/01/00 1,665 1,665 Euramax International, PLC., 11.250% 10/01/06 (d) 1,000 1,018 Kaiser Aluminum & Chemical Corp., 12.750% 02/01/03 2,000 2,070 Renco Metals, Inc., 11.500% 07/01/03 500 523 US Can Corp., 10.125% 10/15/06 (d) 1,000 1,033 United Meridian Corp., 10.375% 10/15/05 1,610 1,739 ------- 9,606 ------- Other Manufacturing - 0.4% UNC, Inc., 11.000% 06/01/06 500 528 ------- Paper & Forest Products - 4.4% Florida Coast Paper Corp., 12.750% 06/01/03 1,750 1,846 Repap Wisconsin, Inc., 9.250% 02/01/02 1,500 1,508 Stone Container Corp., 10.750% 10/01/02 2,000 2,075 ------- 5,429 - -------------------------------------------------------------------------------- SERVICES - 1.5% Business Pierce Leahy Corp., 11.125% 07/15/06 (d) 1,700 1,811 - -------------------------------------------------------------------------------- TECHNOLOGY - 6.1% Telecommunications Brooks Fiber Properties, Inc., stepped coupon, (10.875% 03/01/01) 03/01/06 (b) 500 293 ICG Holding, Inc., stepped coupon, (13.500% 09/15/00) 09/15/05 (b) 1,000 660 IntelCom Group (USA), Inc., stepped coupon, (12.500% 05/01/01) 05/01/06 (b) 1,000 601 8 Investment Portfolio/October 31, 1996 - -------------------------------------------------------------------------------- MFS Communications, Inc., stepped coupon, (8.875% 01/15/01) 01/15/06 (b) $ 2,000 $ 1,415 Omnipoint Corp., 11.625% 08/15/06 (d) 500 511 Paging Network, Inc., 8.875% 02/01/06 500 465 PanAmSat Corp., stepped coupon, (11.375% 8/01/98) 08/01/03 (b) 2,800 2,566 Shared Technologies Fairchild, Inc., stepped coupon, (12.250% 03/01/99) 03/01/06 (b) 500 395 WinStar Communications, Inc., stepped coupon, (14.000% 10/15/00) 10/15/05 (b) 1,150 650 ------- 7,556 - -------------------------------------------------------------------------------- TRANSPORTATION - 2.9% Greenwich Air Services, Inc., 10.500% 06/01/06 1,500 1,568 U.S. Air, Inc., 10.375% 03/01/13 2,000 2,000 ------- 3,568 ------- TOTAL CORPORATE FIXED - INCOME BONDS & NOTES (cost of $118,156) 121,288 ------- U.S. GOVERNMENT OBLIGATIONS - 1.9% - -------------------------------------------------------------------------------- U. S. Treasury Bond 6.375% 05/15/99 2,000 2,024 ------- U. S. Treasury Note 7.750% 01/31/00 301 317 ------- TOTAL U.S. GOVERNMENT OBLIGATIONS (cost of $2,330) 2,341 ------- TOTAL BONDS & NOTES (cost of $120,486) 123,629 ------- COMMON STOCKS - 0.2% SHARES - -------------------------------------------------------------------------------- ENERGY - 0.1% Domestic Oil & Gas Mesa Capital Corp. (e) 26 119 - -------------------------------------------------------------------------------- TRANSPORTATION - 0.1% Motor Freight & Warehousing St. Johnsbury Trucking Co. (e)(f) 79 79 9 Investment Portfolio/October 31, 1996 - -------------------------------------------------------------------------------- COMMON STOCKS - CONT. SHARES VALUE - -------------------------------------------------------------------------------- TRANSPORTATION - CONT. Motor Freight & Warehousing - Cont. Sun Carriers, Inc. (e)(f) 326 $ 3 ------- 82 ------- TOTAL COMMON STOCKS (cost of $1,052) 201 ------- PREFERRED STOCKS - 0.5% - -------------------------------------------------------------------------------- CONSUMER NON-DURABLES - 0.4% Communications & Media Cablevision Systems Corp., 11.125% PIK, Series L 5 489 - -------------------------------------------------------------------------------- ENERGY/NATURAL RESOURCES - 0.1% Mesa Inc. 8.000% PIK 24 133 ------- TOTAL PREFERRED STOCKS (cost of $674) 622 ------- TOTAL INVESTMENTS - 100.0% (cost of $122,212)(g) 124,452 ------- SHORT-TERM OBLIGATIONS PAR - -------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp., 5.500% 11/01/96 (h) $ 3,277 3,277 ------- OTHER ASSETS & LIABILITIES, NET (27,804) - -------------------------------------------------------------------------------- NET ASSETS $ 99,925 ------- NOTES TO INVESTMENT PORTFOLIO: - -------------------------------------------------------------------------------- (a) Industry classification percentages are based on total investments. Total investments represents 124.5% of the Fund's net assets. (b) Currently zero coupon. Shown parenthetically is the next interest rate to be paid and the date the Fund will begin accruing this rate. (c) Zero coupon bond. (d) Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At year end, the value of these securities amounted to $14,422 or 14.4% of net assets. (e) Non-income producing. (f) Represents fair value as determined in good faith under the direction of the Trustees. (g) Cost for federal income tax purposes is the same. (h) Rate represents yield at date of purchase. Acronym Name ------- --------------- PIK Payment-In-Kind See notes to financial statements. 10 STATEMENT OF ASSETS & LIABILITIES OCTOBER 31, 1996 (in thousands except for per share amount) ASSETS Investments at value (cost $122,212) $124,452 Short-term obligations 3,277 -------- 127,729 Cash $ 1 Receivable for: Interest 2,908 Investments sold 403 Other 17 3,329 ------- -------- Total Assets 131,058 LIABILITIES Payable for: Investments purchased 2,117 Distributions 827 Interest 770 Accrued: Deferred Trustees fees 2 Other 17 Notes payable 27,400 ------ Total Liabilities 31,133 ------- NET ASSETS at value for 14,506 shares of beneficial interest outstanding $ 99,925 -------- Net asset value per share $ 6.89 -------- COMPOSITION OF NET ASSETS Capital paid in $130,522 Undistributed net investment income 300 Accumulated net realized loss (33,137) Net unrealized appreciation 2,240 -------- $ 99,925 -------- See notes to financial statements. 11 STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 1996 (in thousands) INVESTMENT INCOME Interest $12,728 Dividends 36 ------- 12,764 EXPENSES Management fee $ 631 Transfer agent 53 Bookkeeping fee 43 Trustees fee 18 Custodian fee 3 Audit fee 62 Legal fee 67 Reports to shareholders 7 Other 63 ------ Total operating expenses 947 Interest and amortization of deferred debt issuance expenses 2,008 2,955 ------ ------- Net Investment Income 9,809 NET REALIZED & UNREALIZED GAIN ON PORTFOLIO POSITIONS Net realized gain 2,367 Net unrealized appreciation during the period 1,553 ------- Net Gain 3,920 ------- Net Increase in Net Assets from Operations $13,729 ------- See notes to financial statements. 12 STATEMENT OF CHANGES IN NET ASSETS Year ended (in thousands) October 31 ---------------------- INCREASE (DECREASE) IN NET ASSETS 1996 1995 - ------------------------------------------------------------------------------- Operations: Net investment income $ 9,809 $ 9,734 Net realized gain (loss) 2,367 (2,047) Net unrealized appreciation 1,553 6,871 ------- ------- Net Increase from Operations 13,729 14,558 Distributions from net investment income (9,870) (9,784) ------- ------- 3,859 4,774 Fund share transactions Value of distributions reinvested 2,082 1,691 ------- ------- Total Increase 5,941 6,465 NET ASSETS Beginning of period 93,984 87,519 ------- ------- End of period (including undistributed net investment income of $300 and $131, respectively) $99,925 $93,984 ------- ------- NUMBER OF FUND SHARES Issued for distributions reinvested 308 260 Outstanding at Beginning of period 14,198 13,938 ------- ------- End of period 14,506 14,198 ------- ------- See notes to financial statements. 13 STATEMENT OF CASH FLOWS Year ended (in thousands) October 31 ----------- INCREASE (DECREASE) IN NET ASSETS 1996 ----------- Operations: Net investment income (a) $ 8,423 Net decrease in cash from investment activity (b) (637) -------- Net Increase from Operations 7,786 Distributions from net investment income (7,785) -------- 1 Cash Beginning of period 0 -------- End of period $ 1 -------- Notes to statement of cash flows: a) Reconciliation of net investment income: Net investment income per books $ 9,809 Net change in assets and liabilities related to income and expenses, including net accretion and amortization (1,386) ---------- Net investment income-cash basis $ 8,423 ---------- b) Net decrease in cash from investment activity Receipts for investments sold 1,347,928 Cost of investments purchased (1,348,565) ---------- (637) ---------- See notes to financial statements. 14 NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1996 NOTE 1. ACCOUNTING POLICIES - -------------------------------------------------------------------------------- Organization: Colonial Intermediate High Income Fund (the Fund), is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as a diversified, closed-end, management investment company. The Fund's investment objective is to provide high current income by investing in high yield fixed-income securities. The Fund may issue an unlimited number of shares. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. Security valuation and transactions: Debt securities are valued by a pricing service based upon market transactions for normal, institutional-size trading units of similar securities. When management deems it appropriate, an over-the-counter or exchange bid quotation is used. Equity securities are valued at the last sale price or, in the case of unlisted or listed securities for which there were no sales during the day, at current quoted bid prices. Short-term obligations with a maturity of 60 days or less are valued at amortized cost. 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. Statement of cash flows: Information on financial transactions which have been settled through the receipt or disbursement of cash is presented in the Statement of Cash Flows. The cash amount shown in the 15 Notes to Financial Statements/October 31, 1996 - -------------------------------------------------------------------------------- NOTE 1. ACCOUNTING POLICIES - CONT. - -------------------------------------------------------------------------------- Statement of cash flows - cont. Statement of Cash Flows is the amount included in the Fund's Statement of Assets and Liabilities and represents cash on hand at its custodian bank account and does not include any short-term investments at October 31, 1996. Federal income taxes: Consistent with the Fund's policy to qualify as a regulated investment company and to distribute all of its taxable income, no federal income tax has been accrued. Interest Income, debt discount and premium: Interest income is recorded on the accrual basis. Original issue discount is accreted to interest income over the life of a security with a corresponding increase in the cost basis; premium and market discount are not amortized or accreted. The value of additional securities received as an interest payment is recorded as income and as the cost basis of such securities. 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. Other: Corporate actions are recorded on the ex-date. The Fund's custodian takes possession through the federal book-entry system of securities collateralizing repurchase agreements. Collateral is marked-to-market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund. The Fund may experience costs and delays in liquidating the collateral if the issuer defaults or enters bankruptcy. NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES - -------------------------------------------------------------------------------- Management fee: Colonial Management Associates, Inc. (the Adviser) is the investment adviser of the Fund and furnishes accounting and other services and office facilities for a monthly fee equal to 0.65% annually of the Fund's average weekly 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. 16 Notes to Financial Statements/October 31, 1996 - -------------------------------------------------------------------------------- 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 the Fund's assets. NOTE 3. PORTFOLIO INFORMATION - -------------------------------------------------------------------------------- Investment activity: During the year ended October 31, 1996, purchases and sales of investments, other than short-term obligations, were $114,055,123 and $109,128,791, respectively, of which $4,041,328 and $5,347,659, respectively, were U.S. government securities. Unrealized appreciation (depreciation) at October 31, 1996, based on cost of investments for both financial statement and federal income tax purposes was: Gross unrealized appreciation $ 3,890,945 Gross unrealized depreciation (1,651,003) ----------- Net unrealized appreciation $2,239,942 ----------- Capital loss carryforwards: At October 31, 1996, capital loss carryforwards available (to the extent provided in regulations) to offset future realized gains were approximately as follows: Year of Capital loss expiration carryforward ---------- ------------ 1998 $ 2,892,000 1999 18,676,000 2000 9,467,000 2003 2,103,000 ----------- $33,138,000 ----------- Expired capital loss carryforwards, if any, are recorded as a reduction of capital paid in. To the extent loss carryforwards are used to offset any future realized gains, it is unlikely that such gains would be distributed since they may be taxable to shareholders as ordinary income. Other: The Fund may focus its investments in certain industries, sub- jecting it to greater risk than a fund that is more diversified. NOTE 4. LOAN AGREEMENT - -------------------------------------------------------------------------------- On July 15, 1996, the Fund redeemed its Senior Extendible Notes and replaced them with a three-year, $27,400,000 term loan with Bank of America Illinois which bears interest at 7.33% annually. The Fund is required to maintain certain asset coverage with respect to the loan. 17 Notes to Financial Statements/October 31, 1996 - -------------------------------------------------------------------------------- NOTE 5. RESULTS OF ANNUAL SHAREHOLDER MEETING (UNAUDITED) - -------------------------------------------------------------------------------- On June 28, 1996, the Annual Meeting of Shareholders of the Fund was held to elect four Trustees and to ratify the selection of Price Waterhouse LLP as independent accountants for the fiscal year ending October 31, 1996. On May 8, 1996, the record date of the Meeting, the Fund had outstanding 14,354,229 shares of beneficial interest. The votes cast at the Meeting were as follows: Election of four Trustees: FOR AGAINST --- ------- Tom Bleasdale 11,365,543 232,362 Lora S. Collins 11,362,951 234,954 William D. Ireland, Jr. 11,353,816 244,089 John J. Neuhauser 11,368,893 229,012 The Board of Trustees also consists of Robert J. Birnbaum, James E. Grinnell, Richard W. Lowry, William E. Mayer, James L. Moody, Jr., George L. Shinn, Robert L. Sullivan and Sinclair Weeks, Jr. Ratification of the selection of Price Waterhouse LLP as independent accountants: FOR AGAINST ABSTAIN --- ------- ------- 11,259,645 89,978 248,282 18 FINANCIAL HIGHLIGHTS Selected per share data, total return, ratios and supplemental data throughout each period are as follows: Year ended October 31 ---------------------------------- 1996 1995 1994 Net asset value - Beginning of period $6.620 $6.280 $6.920 ------ ------ ------ INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.699 0.696 0.693 Net realized and unrealized gain (loss) 0.258 0.340 (0.587) ------ ------ ------ Total from Investment Operations 0.957 1.036 0.106 ------ ------ ------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.687) (0.696) (0.746) ------ ------ ------ Net asset value - End of period $6.890 $6.620 $6.280 ------ ------ ------ Market price per share $7.125 $6.875 $5.750 ------ ------ ------ Total return - based on market value (a) 14.62% 33.00% (2.80)% ------ ------ ------ RATIOS TO AVERAGE NET ASSETS Operating expenses 0.98%(b) 0.95%(b) 0.97% Interest and amortization of deferred debt issuance expenses 2.07% 1.94% 1.91% Net investment income 10.11%(b) 10.76%(b) 10.40% Portfolio turnover 92% 92% 160% Net assets at end of period (000) $99,925 $93,984 $87,519 (a) Total return at market value assuming all distributions reinvested and excluding brokerage commissions. (b) The benefits derived from custody credits and directed brokerage arrangements had no impact. Prior years' ratios are net of benefits received, if any. 19 FINANCIAL HIGHLIGHTS - CONT. Selected per share data, total return, ratios and supplemental data throughout each period are as follows: Year ended October 31 --------------------------- 1993 1992 Net asset value - Beginning of period $ 6.430 $ 6.290 ------- ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.709 0.773 Net realized and unrealized gain 0.497 0.142 ------- ------- Total from Investment Operations 1.206 0.915 ------- ------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.716) (0.775) ------- ------- Net asset value - End of period $ 6.920 $ 6.430 ------- ------- Market price per share $ 6.625 $ 6.250 ------- ------- Total return - based on market value (a) 17.89% 17.39% ------- ------- RATIOS TO AVERAGE NET ASSETS Operating expenses 1.00% 1.00% Interest and amortization of deferred debt issuance expenses 2.66% 3.24% Net investment income 10.62% 11.98% Portfolio turnover 135% 78% Net assets at end of period (000) $95,164 $87,149 (a) Total return at market value assuming all distributions reinvested and excluding brokerage commissions. - ------------------------------------------------------------------------------ SENIOR SECURITIES OF COLONIAL INTERMEDIATE HIGH INCOME FUND: (UNAUDITED) Involuntary Total Asset liquidating Approximate amount coverage preference market value Year outstanding per share per unit per unit - ---- ----------- --------- ----------- ------------ 1996 $27,400,000 365% NA 100 1995 $27,400,000 354% NA 100 1994 $27,400,000 343% NA 100 1993 $27,400,000 319% NA 100 1992 $27,400,000 347% NA 100 1991 $27,400,000 318% NA 100 20 REPORT OF INDEPENDENT ACCOUNTANTS TO THE TRUSTEES AND THE SHAREHOLDERS OF COLONIAL INTERMEDIATE HIGH INCOME FUND In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations, of cash flows and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Colonial Intermediate High Income Fund at October 31, 1996, the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with generally accepted accounting principles. These financial statements and the financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of portfolio positions at October 31, 1996 by correspondence with the custodian and brokers and the application of alternative auditing procedures where confirmations from brokers were not received, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Boston, Massachusetts December 10, 1996 21 Dividend Reinvestment Plan The Fund generally distributes net investment income monthly and capital gains annually. Under the Fund's Dividend Reinvestment Plan (the "Plan") all distributions will be reinvested automatically in additional shares of the Fund, unless the shareholder elects to receive cash or the shares are held in broker or nominee name and a reinvestment service is not provided by the broker or nominee. All cash distributions will be mailed by check directly to the record holder by the dividend paying agent. If the market price of the shares on the distribution payment date is equal to or greater than the net asset value, Plan participants will be issued shares at the higher of net asset value or 95% of the market price. The aggregate market value of the shares may constitute income to shareholders for federal income tax purposes. However, if the market price of the shares is less than the net asset value, shares will be bought as soon as practicable (but no more than 30 days after the distribution, except as may be required to comply with federal securities laws) in the open market for the accounts of Plan participants. If, during this purchase period, the market price surpasses the net asset value, the average per share price paid may exceed the net asset value of the shares, resulting in the acquisition of fewer shares than if the distribution had been in newly-issued shares. All Plan accounts receive written confirmations of all transactions. Shares purchased under the Plan are held in uncertificated form. Each shareholder's proxy includes shares purchased pursuant to the Plan. The automatic reinvestment of distributions does not relieve participants of any income tax payable on the distributions. Fees and expenses of the Plan other than brokerage charges will be paid by the Fund. No brokerage charges are incurred on shares issued directly by the Fund. Participants will bear a pro-rata share of brokerage charges incurred on open market purchases. A Plan participant may terminate his or her participation by written notice to the Plan agent. The Plan may be amended or terminated on 90 days written notice to the Plan participants. All correspondence concerning the Plan should be directed to First Data Investors Services Group, the Plan agent, by mail at P.O. Box 1376, Boston, MA 02104 or by phone at 1-800-331-1710. 22 Important Information About This Report The Transfer Agent for Colonial Intermediate High Income Fund is: First Data Investors Services Group P.O. Box 1376 Boston, MA 02104 1-800-331-1710 Colonial Intermediate High Income Fund mails one shareholder report to each shareholder address. If you would like more than one report, please call 1-800-426-3750 and additional reports will be sent to you. This report has been prepared for shareholders of Colonial Intermediate High Income Fund. 23 [Graphic of the US flag] Colonial Mutual Funds 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 Dean, College of Business and Management, University of Maryland (formerly Dean, Simon Graduate School of Business, University of Rochester; Chairman and Chief Executive Officer, CS First Boston Merchant Bank; and President and Chief Executive Officer, The First Boston Corporation) James L. Moody, Jr. 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 (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 [Recycle Logo] PRINTED ON RECYCLED PAPER Colonial Investment Services, Inc., Distributor Copy Rights 1996 One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750 IH-02/977C-1096 M (12/96) -----END PRIVACY-ENHANCED MESSAGE-----