-----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, COSi2NuuhOi4IwDzrlth2gZdy05qrfOJC/6VJHH3hsv8RDfy4taT3oHBwqqgMNfu aGcqDrdMLn4ikfXKRDJREw== 0000021847-98-000061.txt : 19980702 0000021847-98-000061.hdr.sgml : 19980702 ACCESSION NUMBER: 0000021847-98-000061 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980430 FILED AS OF DATE: 19980701 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: SEC FILE NUMBER: 811-05567 FILM NUMBER: 98658908 BUSINESS ADDRESS: STREET 1: ONE FINANCIAL CNTR CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 6174263750 N-30D 1 COLONIAL INTERMEDIATE HIGH INCOME FUND SEMI REPORT [picture of pen, newspaper and adding machine] COLONIAL INTERMEDIATE HIGH INCOME FUND Semiannual report April 30, 1998 Colonial Intermediate High Income Fund Highlights November 1, 1997 - April 30, 1998 Investment Objective: Colonial Intermediate High Income Fund seeks high current income and total return by investing primarily in lower-rated corporate debt 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: "The high yield bond market showed continued strength during the period as companies posted good earnings in a positive economic environment. We focused on capturing increased values by investing in high growth sectors of the market, such as companies providing alternative telephone services. The Fund also benefited from continued merger and acquisition activity. Showboat, Inc., a gaming company, was acquired at a premium by Harrah's, a higher-quality company. The assets and operations of Marcus Cable were also purchased for a premium price, illustrating that bonds of traditional cable operators continue to experience price appreciation. This enabled the Fund to sell its positions of Showboat and Marcus Cable at a gain which had a positive impact on the value of the Fund. Looking ahead, we think that the high yield market will continue to be attractive although we are monitoring potential economic shocks coming out of the Asian turmoil." -Andrea Feingold Colonial Intermediate High Income Fund Performance Distributions declared per share $0.350 - -------------------------------------------------------------------------------- NAV Market Price Six-month total return, assuming reinvestment of all distributions 7.20% 5.60% - -------------------------------------------------------------------------------- Price per share $7.44 $7.63 Top Corporate Issuers* Top Five Sectors* ....................................... .................................... 1. CSC Holding, Inc................2.4% 1. Manufacturing...............19.0% 2. Nextel Communication, Inc.......2.3% 2. Telecommunications..........12.9% 3. Allied Waste Industries.........2.2% 3. Services....................10.3% 4. Young Broadcasting..............2.0% 4. Metals.......................9.1% 5. Time Warner.....................1.8% 5. Broadcasting.................6.3% *Corporate issuers are calculated as a percent of total investments. Sectors are calculated as a percent of total portfolio adjusted for leverage. Because the Fund is actively managed, there can be no guarantee the Fund will continue to hold securities of 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 [Photo of Harold W. Cogger] I am pleased to present the semiannual report for the Colonial Intermediate High Income Fund. This report reflects on the investment environment for the six months ended April 30, 1998. The U.S. economy continued to generate well-balanced growth without signs of significant inflation. Negative effects from the Asian economic crisis have yet to manifest themselves in any meaningful way, although markets were volatile during the first part of the period as investors sorted through the events and their potential outcomes. Generally positive economic conditions enabled companies to produce strong cash flows and post healthy earnings. Corporate managers took advantage of declining interest rates to refinance debt and lock in liquidity at attractive rates. New issuance of high yield bonds and stocks remained robust, providing investment opportunities in many sectors. The outlook for the high yield bond market is generally positive. However, this market sector is closely tied to the equity market. Many corporations finance their growth by issuing both stocks and high yield bonds. A decline in corporate earnings would have a negative effect on both the stock market and on a company's ability to pay the interest on their high yield debt. While we are not expecting any major shocks to the equity market, we may see some volatility in the months ahead as earnings flatten or decline in some industries. In addition to providing attractive growth prospects, a high yield bond fund offers an opportunity to diversify your core portfolio. High yield bonds provide an attractive combination of current income and potential for long-term price appreciation. Thank you for giving us the opportunity to serve your investment needs. Respectfully, /s/ Harold W. Cogger ---------------- Harold W. Cogger President June 9, 1998 Because market conditions change frequently, there can be no assurance that the trends described herein will continue. 3 INVESTMENT PORTFOLIO APRIL 30, 1998 (UNAUDITED, IN THOUSANDS)
CORPORATE FIXED INCOME BONDS & NOTES (a) - 93.8% PAR VALUE - -------------------------------------------------------------------------------- CONSTRUCTION - 1.1% Building Construction Kevco, Inc., 10.375% 12/01/07 $ 500 $ 521 Nortek, Inc., 9.875% 03/01/04 1,000 1,030 ------ 1,551 ------ ................................................................................ MANUFACTURING - 40.4% Chemicals & Allied Products - 5.8% ClimaChem, Inc., 10.750% 12/01/07(b) 500 520 Hydrochem Industrial Services, Inc., 10.375% 08/01/07 490 507 LaRoche Industries, Inc., 9.500% 09/15/07 1,000 985 PCI Chemicals Canada, Inc., 9.250% 10/15/07 1,000 985 Sterling Chemicals, Inc., 11.750% 08/15/06 1,000 1,007 Texas Petrochemical Corp., 11.125% 07/01/06 2,000 2,200 Trans-Resources, Inc.: 10.750% 03/15/08(b) 1,000 1,025 stepped coupon, (12.000% 03/15/03) 03/15/08(b)(c) 1,000 575 ------ 7,804 ------ Electronic & Electrical Equipment - 1.4% Amphenol Corp., 9.875% 05/15/07 1,225 1,323 L-3 Communications Corp., 10.375% 05/01/07 500 552 ------ 1,875 ------ Fabricated Metal - 3.1% Earle M. Jorgensen Co., 9.500% 04/01/05(b) 1,000 994 Euramax International, PLC, 11.250% 10/01/06 1,500 1,635 Renco Metals, Inc., 11.500% 07/01/03 500 536 US Can Corp., 10.125% 10/15/06 1,000 1,047 ------ 4,212 ------
4 Investment Portfolio/April 30, 1998 - -------------------------------------------------------------------------------- Food & Kindred Products - 2.9% Chiquita Brands International, Inc., 10.250% 11/01/06 $1,000 $ 1,084 Pilgrim's Pride Corp., 10.875% 08/01/03 450 470 Sun World International Corp., 11.250% 04/15/04 1,280 1,395 Windy Hill Pet Food Co., Inc., 9.750% 05/15/07 1,000 1,050 ------- 3,999 ------- Machinery & Computer Equipment - 1.1% IMO Industries, Inc., 11.750% 05/01/06 1,370 1,562 ------- Measuring & Analyzing Instruments - 0.4% Intertek Finance PLC, 10.250% 11/01/06 500 530 ------- Miscellaneous Manufacturing - 7.4% AEI Holding Co., 10.000% 11/15/07(b) 500 521 Alliance Laundry Systems, 9.625% 05/01/08(b)(d) 1,000 1,014 American Pacific Corp., 9.250% 03/01/05(b) 500 517 Associated Materials, Inc., 9.250% 03/01/08 500 515 Clark-Schwebel, Inc., 10.500% 04/15/06 1,000 1,120 Eagle-Picher Industries, Inc., 9.375% 03/01/08(b) 875 890 Imperial Home Decor Group, Inc., 11.000% 03/15/08(b) 750 778 JTM Industries, Inc., 10.000% 04/15/08(b) 250 252 Newcor, Inc., 9.875% 03/01/08(b) 1,000 1,015 Polymer Group, Inc., 9.000% 07/01/07 1,000 1,028 Shop Vac Corp., 10.625% 09/01/03 1,000 1,098 Tekni-Plex, Inc., 9.250% 03/01/08(b) 500 504 Werner Holding Co., 10.000% 11/15/07(b) 750 783 ------- 10,035 -------
5 Investment Portfolio/April 30, 1998 - --------------------------------------------------------------------------------
CORPORATE FIXED INCOME BONDS & NOTES (a) - CONT. PAR VALUE - -------------------------------------------------------------------------------- MANUFACTURING - CONT. Paper Products - 4.2% Gaylord Container Corp., 9.750% 06/15/07 $1,000 $1,022 Repap New Brunswick, Inc.: 9.875% 07/15/00 740 780 10.625% 04/15/05 1,000 1,050 Riverwood International Corp., 10.625% 08/01/07 1,500 1,579 Stone Container Corp., 12.250% 04/01/02 1,250 1,284 ------ 5,715 ------ Petroleum Refining - 0.4% Chiles Offshore, LLC, 10.000% 05/01/08(b) 500 500 ------ Primary Metal - 6.2% Algoma Steel, Inc., 12.375% 07/15/05 1,500 1,785 Insilco Corp., 10.250% 08/15/07 800 872 Keystone Consolidated Industries, Inc., 9.625% 08/01/07 1,500 1,537 Kaiser Aluminum & Chemical Corp., 10.875% 10/15/06 2,000 2,180 WCI Steel Inc., 10.000% 12/01/04 1,000 1,043 WHX Corp., 10.500% 04/15/05(b) 1,000 1,025 ------ 8,442 ------ Printing & Publishing - 1.6% American Lawyer Media Holdings, 9.750% 12/15/07(b) 1,000 1,050 Hollinger International Publishing, Inc., 9.250% 03/15/07 1,000 1,060 ------ 2,110 ------ Rubber & Plastic - 1.2% Burke Industries, Inc., 10.000% 08/15/07 1,500 1,564 ------ Stone, Clay, Glass & Concrete - 0.4% Anchor Glass Container Corp., 11.250% 04/01/05 500 550 ------
6 Investment Portfolio/April 30, 1998 - -------------------------------------------------------------------------------- Textile Mill Products - 0.1% Collins & Aikman Floorcoverings, Inc., 10.000% 01/15/07 $ 100 $ 107 ------ Transportation Equipment - 4.2% Aftermarket Technology Corp., Series B, 12.000% 08/01/04 860 951 Collins & Aikman Products Co., 11.500% 04/15/06 2,000 2,240 Johnstown America Industries, Inc., 11.750% 08/15/05 1,000 1,115 LDM Technologies, Inc., 10.750% 01/15/07 1,275 1,371 ------ 5,677 ------ ................................................................................ MINING & ENERGY - 6.3% Oil & Gas Extraction - 5.1% Belden & Blake Corp., 9.875% 06/15/07 1,000 992 Forcenergy, Inc., 9.500% 11/01/06 550 566 HS Resources, Inc., 9.250% 11/15/06 500 515 Magnum Hunter Resources, Inc., 10.000% 06/01/07 750 761 Ocean Energy Inc., 10.375% 10/15/05 1,610 1,789 Petsec Energy, Inc., 9.500% 06/15/07 1,250 1,275 Pool Energy Services Co., 8.625% 04/01/08(b) 500 498 Pride Petroleum Services, Inc., 9.375% 05/01/07 500 538 ------ 6,934 ------ Oil & Gas Field Services - 1.2% Parker Drilling Corp., 9.750% 11/15/06 1,500 1,594 ------ ................................................................................ RETAIL TRADE - 3.6% Apparel & Accessory Stores - 0.7% Galey & Lord, Inc., 9.125% 03/01/08(b) 1,000 1,005 ------ Food Stores - 2.7% Pathmark Stores, Inc., 9.625% 05/01/03 1,500 1,522 Richmont Marketing Specialists, Inc. 10.125% 12/15/07(b) 1,000 1,030
7 Investment Portfolio/April 30, 1998 - --------------------------------------------------------------------------------
CORPORATE FIXED INCOME BONDS & NOTES (a) - CONT. PAR VALUE - -------------------------------------------------------------------------------- RETAIL TRADE - CONT. Food Stores - Cont. Star Markets Co., 13.000% 11/01/04 $1,000 $1,130 ------ 3,682 ------ Miscellaneous Retail - 0.2% Eye Care Centers of America, 9.125% 05/01/08(b) 250 250 ------ ................................................................................ SERVICES - 10.6% Amusement & Recreation - 0.8% Hollywood Casino Corp., 12.750% 11/01/03 1,000 1,100 ------ Business Services - 1.1% Loomis Fargo & Co., 10.000% 01/15/04 1,000 1,010 PSINet Inc., 10.000% 02/15/05(b) 500 515 ------ 1,525 ------ Health Services - 1.3% Conmed Corp., 9.000% 03/15/08(b) 500 504 Global Health Sciences, 11.000% 05/01/08(b) 750 735 Hudson Respiratory Care, 9.125% 04/15/08(b) 500 500 ------ 1,739 ------ Hotel, Camps & Lodging - 5.1% Eldorado Resorts Corp., 10.500% 08/15/06 2,005 2,201 Harvey Casinos Resorts, 10.625% 06/01/06 1,750 1,949 Horseshoe Gaming, LLC, 9.375% 06/15/07 1,500 1,616 Mohegan Tribal Gaming, 13.500% 11/15/02 1,000 1,275 ------ 7,041 ------ Motion Pictures - 0.4% United Artists Theatre, 9.750% 04/15/08(b) 500 500 ------
8 Investment Portfolio/April 30, 1998 - -------------------------------------------------------------------------------- Other Services - 1.3% Borg-Warner Security Corp., 9.625% 03/15/07 $1,500 $1,707 ------ Personal Services - 0.6% Williams Scotsman, Inc., 9.875% 06/01/07 750 788 ------ ................................................................................ TRANSPORTATION, COMMUNICATION, ELECTRIC, GAS & SANITARY SERVICES - 30.2% Air Transportation - 2.4% Trans World Airlines, Inc., 11.375% 03/01/06(b) 1,000 1,000 U.S. Air, Inc., 10.375% 03/01/13 2,000 2,270 ------ 3,270 ------ Broadcasting - 6.5% Allbritton Communications Co., 9.750% 11/30/07 2,000 2,100 Fox Kids Worldwide, Inc., stepped coupon, (10.250% 11/01/02) 11/01/07(b)(c) 1,000 635 Lin Holding Corp., stepped coupon, (10.000% 03/01/03) 03/01/08(b)(c) 1,000 617 Renaissance Media Group, stepped coupon, (10.000% 04/15/03) 04/15/08(b)(c) 875 534 Sullivan Broadcasting, Inc., 10.250% 12/15/05 2,000 2,160 Young Broadcasting Corp., 11.750% 11/15/04 2,500 2,769 ------ 8,815 ------ Cable - 5.8% Adelphia Communications Corp., 8.375% 02/01/08 1,000 990 Diamond Cable Communication, PLC, stepped coupon, (10.750% 02/15/02) 02/15/07(c) 1,000 700 EchoStar Satellite Broadcasting Corp., stepped coupon, (13.125% 03/15/00) 03/15/04(c) 1,000 910 Marcus Cable Co., L.P., stepped coupon, (14.250% 06/15/00) 12/15/05(c) 1,500 1,361 Northland Cable, 10.250% 11/15/07 1,250 1,331
9 Investment Portfolio/April 30, 1998 - --------------------------------------------------------------------------------
CORPORATE FIXED INCOME BONDS & NOTES (a) - CONT. PAR VALUE - -------------------------------------------------------------------------------- TRANSPORTATION, COMMUNICATION, ELECTRIC, GAS & SANITARY SERVICES - CONT. Cable - Cont. Shop At Home, Inc., 11.000% 04/01/05 $ 500 $ 515 Telewest Communication, PLC, stepped coupon, (11.000% 10/01/00) 10/01/07(c) 2,500 2,031 ------ 7,838 ------ Communications - 0.8% FrontierVision Holdings, L.P., stepped coupon, (11.875% 09/15/01) 09/15/07(c) 1,000 770 Orbital Imaging Corp., 11.625% 03/01/05(b) 250 270 ------ 1,040 ------ Sanitary Services - 2.2% Allied Waste North America, Inc., 10.250% 12/01/06(e) 2,000 2,205 Allied Waste Industries, Inc., stepped coupon, (11.3000% 06/01/02) 06/01/07(c) 1,000 738 ------ 2,943 ------ Telecommunications - 12.5% Clearnet Communications, Inc., stepped coupon, (14.750% 12/15/00) 12/15/05(c) 1,000 840 Comcast Cellular Corp., 9.500% 05/01/07 1,500 1,556 Esprit Telecom Group, PLC, 11.500% 12/15/07 500 545 GST Telecom/ GST Network, stepped coupon, (10.500% 05/01/03) 05/01/08(b)(c) 1,000 610 GST USA, Inc., stepped coupon, (13.875% 12/15/00) 12/15/05(c) 1,000 810 Hyperion Telecommunications, Inc., stepped coupon, (13.000% 04/15/01) 04/15/03(c) 1,000 750 ICG Services, Inc., stepped coupon, (10.000% 02/15/03) 02/15/08(c) 1,500 930 IXC Communications, Inc., 9.000% 04/15/08(b) 500 501
10 Investment Portfolio/April 30, 1998 - -------------------------------------------------------------------------------- Intermedia Communications, Inc., stepped coupon, (11.25% 07/15/02) 07/15/07(c) $1,000 $ 735 Level 3 Communications, Inc., 9.125% 05/01/08(b) 1,500 1,481 McLeodUSA, Inc., stepped coupon, (10.500% 03/01/02) 03/01/07(c) 1,000 750 MetroNet Communications Corp., 12.000% 08/15/07 250 288 Nextlink Communications, Inc., stepped coupon, (9.450% 04/15/03) 04/15/08(b)(c) 1,000 630 Nextel Communications, Inc., stepped coupon, (9.950% 02/15/03) 02/15/08(b)(c) 2,000 1,285 Nextel International, Inc., stepped coupon, (12.125% 04/15/03) 04/15/08(b)(c) 625 385 Orion Network Systems, Inc., stepped coupon, (12.500% 01/15/02) 01/15/07(c) 1,000 780 RCN Corp., stepped coupon, (11.125% 10/15/02) 10/15/07(c) 1,750 1,168 Sprint Spectrum L.P., stepped coupon, (12.500% 08/15/01) 08/15/06(c) 2,000 1,640 Teligent, Inc., 11.500% 12/01/07 750 782 Verio, Inc., 10.375% 04/01/05(b) 500 521 -------- 16,987 -------- ................................................................................ WHOLESALE TRADE - 1.6% Nondurable Goods AmeriServ Food Co. 10.125% 07/15/07 2,000 2,133 -------- TOTAL CORPORATE FIXED INCOME BONDS & NOTES (cost of $121,875) 127,124 -------- COMMON STOCKS - 0.2% SHARES - -------------------------------------------------------------------------------- MINING & ENERGY - 0.2% Oil & Gas Extraction Pioneer Natural Resources Co. 8 195 --------
11 Investment Portfolio/April 30, 1998
- -------------------------------------------------------------------------------- COMMON STOCKS - CONT. SHARES VALUE - -------------------------------------------------------------------------------- TRANSPORTATION, COMMUNICATION, ELECTRIC, GAS & SANITARY SERVICES - 0.0% Motor Freight & Warehousing St. Johnsbury Trucking Co. (f)(g) 79 $ 1 Sun Carriers, Inc. (f)(g) 326 3 ------ 4 ------ Telecommunications Nextel Communications, Inc. Class A (f) 3 89 ------ TOTAL COMMON STOCKS (cost of $1,301) 288 ------ PREFERRED STOCKS - 6.0% - -------------------------------------------------------------------------------- FINANCE, INSURANCE & REAL ESTATE - 0.2% Depository Institutions Cal Fed Bancorp, Inc. 9.125%, Series A 9 228 ------ ................................................................................ TRANSPORTATION, COMMUNICATION, ELECTRIC, GAS & SANITARY SERVICES - 5.8% Broadcasting - 0.2% PriMedia Inc., 9.200% 3 306 ------ Cable - 4.3% Cablevision Systems Corp: 11.125%, Series M, PIK 6 733 11.750%, Series H, PIK 22 2,541 Time Warner, Inc., 10.250%, Series M 2 2,493 ------ 5,767 ------ Telecommunications - 1.3% Nextel Communications, Inc. 13.000% PIK, 1 1,241 Nextel Communications, Inc. 11.125% PIK, 1 532 ------ 1,773 ------ TOTAL PREFERRED STOCKS (cost of $7,670) 8,074 ------ ADJUSTABLE RATE PREFERRED STOCKS - 0.0% - -------------------------------------------------------------------------------- TRANSPORTATION, COMMUNICATION, ELECTRIC, GAS & SANITARY SERVICES Telecommunications Nextlink Communications, Inc., 14.000% PIK (cost of $10) (h) 12 ------
12 Investment Portfolio/April 30, 1998
- -------------------------------------------------------------------------------- WARRANTS (f) - 0.0% SHARES VALUE - -------------------------------------------------------------------------------- MetroNet Communications Corp. (cost of $0) (h) $ 1 -------- TOTAL INVESTMENTS - 100.0% (cost of $130,856)(i) 135,499 -------- SHORT-TERM OBLIGATIONS PAR - -------------------------------------------------------------------------------- Fed Home Loan Mortgage Corp., 5.450% (j) 05/01/98 $1,155 1,155 Fed National Mortgage Assoc., 5.200% (j) 02/19/99 2,640 2,522 -------- TOTAL SHORT-TERM OBLIGATIONS (cost of $3,684) 3,677 -------- OTHER ASSETS & LIABILITIES, NET (27,828) - -------------------------------------------------------------------------------- NET ASSETS $111,348 --------
NOTES TO INVESTMENT PORTFOLIO: - -------------------------------------------------------------------------------- (a) Industry classification percentages are based on total investments. Total investments represents 121.7% of the Fund's net assets. (b) Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 1998, the value of these securities amounted to $25,969 or 23.3% of net assets. (c) Currently zero coupon. Shown parenthetically is the next interest rate to be paid and the date the Fund will begin accruing this rate. (d) This security has been purchased on a delayed delivery basis for settlement at a future date beyond the customary settlement time. (e) This security with a total market value of $1,185, is being used to collateralize the delayed purchase indicated in note (d) above. (f) Non-income producing. (g) Represents fair value as determined in good faith under the direction of the Trustees. (h) Rounds to less than one. (i) Cost for federal income tax purposes is the same. (j) Rate represents yield at date of purchase. Acronym Name ----------- ------------ PIK Payment-In-Kind See notes to financial statements. 13 STATEMENT OF ASSETS & LIABILITIES APRIL 30, 1998 (UNAUDITED)
(in thousands except for per share amount) ASSETS Investments at value (cost $130,856) $135,499 Short-term obligations (cost $3,684) 3,677 --------- 139,176 Cash $ 1 Receivable for: Interest 2,773 Dividends 7 Other 24 2,805 ------- --------- Total Assets 141,981 LIABILITIES Payable for: Investments purchased 1,600 Distributions 853 Interest 775 Accrued: Deferred Trustees fees 3 Other 2 Notes payable 27,400 ------- Total Liabilities 30,633 --------- NET ASSETS at value for 14,972 shares of beneficial interest outstanding $111,348 ========= Net asset value per share $ 7.44 ========= COMPOSITION OF NET ASSETS Capital paid in $133,898 Undistributed net investment income 351 Accumulated net realized loss (27,537) Net unrealized appreciation 4,636 --------- $111,348 =========
See notes to financial statements. 14 STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED) (in thousands) INVESTMENT INCOME Interest $6,199 Dividends 405 ------ 6,604 EXPENSES Management fee $ 360 Transfer agent 20 Bookkeeping fee 24 Trustees fee 8 Custodian fee 2 Audit fee 20 Legal fee 15 Reports to shareholders 6 Other 19 ----- Total operating expenses 474 Interest expense 1,010 1,484 ----- ------ Net Investment Income 5,120 NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS Net realized gain 2,641 Net unrealized depreciation during the period (129) ------ Net Gain 2,512 ----- Increase in Net Assets from Operations $7,632 ======
See notes to financial statements. 15 STATEMENT OF CHANGES IN NET ASSETS
(Unaudited) Six months Year ended ended (in thousands) April 30 October 31 ----------- ----------- INCREASE (DECREASE) IN NET ASSETS 1998 1997 Operations: Net investment income $ 5,120 $ 10,083 Net realized gain 2,641 3,311 Net unrealized appreciation (depreciation) (129) 2,525 ------- -------- Net Increase from Operations 7,632 15,919 Distributions from net investment income (5,210) (10,294) ------- -------- 2,422 5,625 Fund share transactions Value of distributions reinvested 1,152 2,224 ------- -------- Total Increase 3,574 7,849 NET ASSETS Beginning of period 107,774 99,925 ------- -------- End of period (including undistributed net investment income of $351 and $263, respectively) $111,348 $107,774 ------- -------- NUMBER OF FUND SHARES Issued for distributions reinvested 154 312 Outstanding at Beginning of period 14,818 14,506 ------- -------- End of period 14,972 14,818 ------- --------
See notes to financial statements. 16 STATEMENT OF CASH FLOWS
(Unaudited) Six months ended (in thousands) April 30 -------------- INCREASE (DECREASE) IN NET ASSETS 1998 Operations: Net investment income (a) $ 4,407 Net decrease in cash from investment activity (b) (1,419) ------- Net Increase from Operations 2,988 Distributions from net investment income (4,049) ------- (1,061) Cash Beginning of period 1,062 ------- End of period $ 1 ------- Notes to statement of cash flows: a) Reconciliation of net investment income: Net investment income per books $ 5,120 Net change in assets and liabilities related to income and expenses, including net accretion and amortization (713) --------- Net investment income-cash basis $ 4,407 --------- b) Net decrease in cash from investment activity Receipts for investments sold $ 527,281 Cost of investments purchased (528,700) --------- $ (1,419) ---------
See notes to financial statements. 17 NOTES TO FINANCIAL STATEMENTS APRIL 30, 1998 (UNAUDITED) NOTE 1. INTERIM FINANCIAL STATEMENTS ............................................................................... In the opinion of management of Colonial Intermediate High Income Fund (the Fund), the accompanying financial statements contain all normal and recurring adjustments necessary for the fair presentation of the financial position of the Fund at April 30, 1998, and the results of its operations, the changes in its net assets and the financial highlights for the six months then ended. NOTE 2. ACCOUNTING POLICIES ............................................................................... Organization: The Fund is a 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 seek high current income and total return by investing primarily in lower-rated corporate debt securities. The Fund authorized 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 generally are valued by a pricing service based upon market transactions for normal, institutional-size trading units of similar securities. When management deems it appropriate, an over-the-counter or exchange bid quotation is used. Equity securities generally are valued at the last sale price or, in the case of unlisted or listed securities for which there were no sales during the day, at current quoted bid prices. Short-term obligations with a maturity of 60 days or less are valued at amortized cost. Portfolio positions for which market quotations are not readily available are valued at fair value under procedures approved by the Trustees. Security transactions are accounted for on the date the securities are purchased, sold or mature. Cost is determined and gains and losses are based upon the specific identification method for both financial statement and federal income tax purposes. The Fund may trade securities on other than normal settlement terms. This may increase the risk if the other party to the transaction fails to deliver and causes the Fund to subsequently invest at less advantageous prices. 18 Notes to Financial Statements/April 30, 1998 - -------------------------------------------------------------------------------- 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 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 April 30, 1998. 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 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 0.65% 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. Other: The Fund pays no compensation to its officers, all of whom are employees of the Adviser. 19 Notes to Financial Statements/April 30, 1998 - -------------------------------------------------------------------------------- NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES - CONT. ................................................................................ The Fund's Trustees may participate in a deferred compensation plan which may be terminated at any time. Obligations of the plan will be paid solely out of the Fund's assets. NOTE 4. PORTFOLIO INFORMATION ................................................................................ Investment activity: During the six months ended April 30, 1998, purchases and sales of investments, other than short-term obligations, were $61,749,075 and $60,561,383, respectively. Unrealized appreciation (depreciation) at April 30, 1998, based on cost of investments for both financial statement and federal income tax purposes was approximately: Gross unrealized appreciation $ 6,062,000 Gross unrealized depreciation (1,426,000) ----------- Net unrealized appreciation $ 4,636,000
----------- Capital loss carryforwards: At October 31, 1997, capital loss carryforwards available (to the extent provided in regulations) to offset future realized gains were approximately as follows:
Year of Capital loss expiration carryforward ----------- ------------ 1999 $18,431,000 2000 9,467,000 2003 2,103,000 ----------- $30,001,000 -----------
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, subjecting it to greater risk than a fund that is more diversified. NOTE 5. LOAN AGREEMENT ................................................................................ On April 30, 1998, the Fund had a $27,400,00 term loan with Bank of America Illinois which bears interest at 7.33% per annum, due June 14, 1999. The Fund is required to maintain certain asset coverage respect to the loan. 20 Notes to Financial Statements/April 30, 1998 - -------------------------------------------------------------------------------- NOTE 6. RESULTS OF ANNUAL SHAREHOLDER MEETING (UNAUDITED) ................................................................................ On April 29, 1998, the Annual Meeting of Shareholders of the Fund was held to elect five Trustees and to ratify the selection of Price Waterhouse LLP as independent accountants for the fiscal year ending October 31, 1998. On February 2, 1998, the record date of the Meeting, the Fund had outstanding 14,897,109 shares of beneficial interest. The votes cast at the Meeting were as follows: Election of five Trustees:
FOR AGAINST --- ------- Robert J. Birnbaum 13,526,325 223,378 James E. Grinnell 13,527,453 222,250 Richard W. Lowry 13,527,453 222,250 William E. Mayer 13,527,453 222,250 Robert L. Sullivan 13,527,453 222,250
The Board of Trustees also consists of Tom Bleasdale, Lora S. Collins, James L. Moody, Jr. and John J. Neuhauser. Ratification of the selection of Price Waterhouse LLP as independent accountants:
FOR AGAINST ABSTAIN --- ------- ------- 13,575,656 39,700 134,347
21 FINANCIAL HIGHLIGHTS Selected per share data, total return, ratios and supplemental data throughout each period are as follows:
(Unaudited) Six months ended April 30 Year ended October 31 ---------- -------------------------- 1998 1997 1996 Net asset value - Beginning of period $ 7.270 $ 6.890 $ 6.620 -------- -------- ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.355 0.699(c) 0.699 Net realized and unrealized gain (loss) 0.165 0.383 0.258 -------- -------- ------- Total from Investment Operations 0.520 1.082 0.957 -------- -------- ------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.350) (0.702) (0.687) -------- -------- ------- Net asset value - End of period $ 7.440 $ 7.270 $ 6.890 ======== ======== ======= Market price per share $ 7.625 $ 7.562 $ 7.125 ======== ======== ======= Total return - based on market value (a) 5.60%(b) 16.97% 14.62% ======== ======== ======= RATIOS TO AVERAGE NET ASSETS Operating expenses 0.86%(c)(d) 0.89%(c) 0.98%(c) Interest and amortization of deferred debt issuance expenses 1.82%(d) 1.96% 2.07% Total expenses 2.68%(d) 2.85% 3.05% Net investment income 9.26%(c)(d) 9.63%(c) 10.11%(c) Portfolio turnover 46%(b) 92% 92% Net assets at end of period (000) $111,348 $107,774 $99,925
(a) Total return at market value assuming all distributions reinvested and excluding brokerage commissions. (b) Not annualized. (c) The benefits derived from custody credits and directed brokerage arrangements had an impact of 0.01% and $0.001 per share in 1997 only. Prior years' ratios are net of benefits received, if any. (d) Annualized. 22 FINANCIAL HIGHLIGHTS - CONT. Selected per share data, total return, ratios and supplemental data throughout each period are as follows:
Year ended October 31 ---------------------------------------------------------------------- 1995 1994 1993 $ 6.280 $ 6.920 $ 6.430 ------- ------- ------- 0.696 0.693 0.709 0.340 (0.587) 0.497 ------- ------- ------- 1.036 0.106 1.206 ------- ------- ------- (0.696) (0.746) (0.716) ------- ------- ------- $ 6.620 $ 6.280 $ 6.920 ------- ------- ------- $ 6.875 $ 5.750 $ 6.625 ------- ------- ------- 33.00% (2.80)% 17.89% ------- ------- ------- 0.95%(c) 0.97% 1.00% 1.94% 1.91% 2.66% 2.89% 2.88% 3.66% 10.76%(c) 10.40% 10.62% 92% 160% 135% $93,984 $87,519 $95,164
- -------------------------------------------------------------------------------- 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 - ---- ----------- --------- -------- -------- 1997 $27,400,000 393% NA 100 1996 $27,400,000 365% NA 100 1995 $27,400,000 343% NA 100 1994 $27,400,000 319% NA 100 1993 $27,400,000 347% NA 100
23 Dividend Reinvestment Plan As a shareholder in the Fund you are eligible to participate in the 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 30 days written notice to the Plan participants. All correspondence concerning the Plan should be directed to First Data Investor Services Group, Inc., the Plan agent, by mail at P.O. Box 8030, Boston, MA 02266-8030 or by phone at 1-800-331-1710. 24 THIS PAGE INTENTIONALLY LEFT BLANK 25 THIS PAGE INTENTIONALLY LEFT BLANK 26 Important Information About This Report The Transfer Agent for Colonial Intermediate High Income Fund is: First Data Investor Services Group, Inc. P.O. Box 8030 Boston, MA 02266-8030 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. 27 Trustees Robert J. Birnbaum Consultant (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief Operating Officer, New York Stock Exchange, Inc.; President, American Stock Exchange, Inc.) Tom Bleasdale Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank & Trust Company) Lora S. Collins Attorney (formerly Attorney, Kramer, Levin, Naftalis & Frankel) James E. Grinnell Private Investor (formerly Senior Vice President-Operations, The Rockport Company) Richard W. Lowry Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood Corporation) William E. Mayer Partner, Development Capital, L.L.C. (formerly Dean, College of Business and Management, University of Maryland; Dean, Simon Graduate School of Business, University of Rochester; Chairman and Chief Executive Officer, CS First Boston Merchant Bank; and President and Chief Executive Officer, The First Boston Corporation) James L. Moody, Jr. Retired (formerly Chairman of the Board and Chief Executive Officer, Hannaford Bros. Co.) John J. Neuhauser Dean, Boston College School of Management Robert L. Sullivan Retired Partner, KPMG Peat Marwick LLP (formerly Management Consultant, Saatchi and Saatchi Consulting Ltd. and Principal and International Practice Director, Management Consulting, Peat Marwick Main & Co.) IH-03/322F-0498 (6/98) 98/582 -----END PRIVACY-ENHANCED MESSAGE-----