-----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, QI++VKEJM9SYf6/1SLXaFccAeNAM2UGQ0EsaxWPFVKnXYfAsXbHAsNG66MV5K52j Y/LrVvxyOykyZ1fMDt2wWQ== 0000891804-04-000046.txt : 20040114 0000891804-04-000046.hdr.sgml : 20040114 20040114165502 ACCESSION NUMBER: 0000891804-04-000046 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20031130 FILED AS OF DATE: 20040114 EFFECTIVENESS DATE: 20040114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLONIAL INTERMEDIATE HIGH INCOME FUND CENTRAL INDEX KEY: 0000833021 FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-05567 FILM NUMBER: 04525418 BUSINESS ADDRESS: STREET 1: ONE FINANCIAL CNTR CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 6174263750 N-CSR 1 file001.txt COLONIAL INTERMEDIATE HIGH INCOME FUND UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSRS CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-5567 -------- Colonial Intermediate High Income Fund ------------------------------------------------------------------------------ (Exact name of registrant as specified in charter) One Financial Center, Boston, Massachusetts 02111 - ------------------------------------------------------------------------------ (Address of principal executive offices) (Zip code) Russell Kane, Esq. Columbia Management Group, Inc. One Financial Center Boston, MA 02111 - ------------------------------------------------------------------------------ (Name and address of agent for service) Registrant's telephone number, including area code: 1-617-772-3363 ------------------- Date of fiscal year end: 11/30/2003 ------------------ Date of reporting period: 11/30/2003 ----------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORTS TO STOCKHOLDERS. COLONIAL INTERMEDIATE HIGH INCOME FUND ANNUAL REPORT NOVEMBER 30, 2003 Photo of: New York Stock Exchange newspaper and 10-key calculator. PRESIDENT'S MESSAGE DEAR SHAREHOLDER: It was another solid year for the US bond market. However, the positive gains reported from all major sectors masked an extremely volatile environment. Most of the gains were actually earned in the first half of the reporting period and they were sufficient to offset losses or declining performance in the second half. From December through mid-June, interest rates generally declined and bond prices rose as the economy struggled to gain a solid footing and the nation prepared to go to war. In June, the yield on the 10-year Treasury note fell to a 45-year low of just over 3.1%. High-yield bonds were the primary beneficiaries of this trend as investors seemed willing to put their fears aside and look to better times ahead. However, after the major military battles of the war were declared over and the economy showed clear signs of picking up, interest rates began to rise and bond prices came down in most sectors. The 10-year yield reached a high of 4.4% in August, then moved within a tight range around 4.0% to 4.2% for the remainder of the period. As the environment changed, high-yield and mortgage bonds held up better than other sectors while Treasury bonds lagged. This reversal of fortune for bonds and a shift of investor enthusiasm back to stocks, which drove equity returns back into double digit territory, serve as a reminder that a diversified portfolio may offer the best opportunity for long-term investment success. Talk to your financial advisor if you're uncertain about the level of diversification of your portfolio. Your advisor can help you keep your investments on track. As always, thank you for investing in Colonial Funds. We look forward to continuing to serve you in the years ahead. Sincerely, /s/ Joseph R. Palombo Joseph R. Palombo President January 12, 2004 - ------------------ Not FDIC Insured May Lose Value No Bank Guarantee - ------------------ Economic and market conditions change frequently. There is no assurance that trends described in this report will continue or commence. PORTFOLIO MANAGERS' REPORT The Board of Trustees for Colonial Intermediate High Income Fund approved the change of the fund's fiscal year end from October 31 to November 30. As a result, this report covers the 13-month period since the last annual report. The next report you receive will be for the six-month period through May 2004. Colonial Intermediate High Income Fund returned 39.19%,1 based on investment at net asset value (NAV), for the 13-month period ended November 30, 2003. The fund underperformed the Lipper High Current Yield Funds (Leveraged) Category average, which returned 47.02%.2 We believe the fund trailed its peers chiefly because of its emphasis on higher quality bonds early in the period. Lower quality issues were the sector's strongest performers. However, our performance was aided during the last six months of the period as we shifted toward selected lower-quality issues. With economic data improving, the yield differential between Treasuries and high-yield issues narrowed significantly and prices of lower-quality bonds moved higher. Default rates fell to 3.1% in November, the lowest figure in three years. And as investors became less risk-averse, cash flows into high-yield bonds exceeded last year's figures by a wide margin. To increase exposure to better-performing sectors, we brought holdings of bonds rated single-B or lower to 75% of the portfolio, a strategy that aided results as the period wore on. The bonds of energy provider, Dynegy, telecom company, Qwest and Charter Communications, a cable operator, (0.5%, 1.8% and 1.5% of total investments, respectively) all rose after refinancing debt.3 Goodyear's bonds (0.3% of total investments), purchased when labor frictions depressed prices, later moved higher. Airline holdings improved as travel volumes grew and financial restructurings were completed. Conversely, our underweight in the rallying financial sector held back results. In another move that benefited the portfolio, we reduced expenses by negotiating lower interest rates on fund borrowings. The fund's policies allow it to borrow money for investment purposes without having to sell current holdings. - --------------- 1 Average annual total return. 2 Lipper Inc., a widely respected data provider, calculates an average total return for mutual funds with similar investment objectives. 3 Holdings are disclosed as of November 30, 2003. PRICE PER SHARE AS OF 11/30/03 ($) Net asset value 3.57 - ----------------------------- Market price 3.50 - ----------------------------- 13-MONTH TOTAL RETURN AS OF 11/30/03 (%) Net asset value 39.19(1) - ----------------------------- Market price 36.15(1) - ----------------------------- Lipper High Current Yield Funds (Leveraged) Category average 47.02(1) - ----------------------------- All results shown assume reinvestment of distributions. DISTRIBUTIONS DECLARED PER SHARE 11/1/02 - 11/30/03 ($) 0.35 - ----------------------------- TOP 5 SECTORS AS OF 11/30/03 (%) Telecommunications 9.2 - ----------------------------- Amusement & recreation 8.7 - ----------------------------- Cable 8.6 - ----------------------------- Chemicals & allied products 8.5 - ----------------------------- Printing & publishing 7.2 - ----------------------------- TOP 10 CORPORATE ISSUERS AS OF 11/30/03 (%) Qwest 1.8 - ----------------------------- Huntsman 1.5 - ----------------------------- Charter Communications 1.5 - ----------------------------- Dex Media 1.3 - ----------------------------- Nextel Communications 1.3 - ----------------------------- QDI LLC 1.3 - ----------------------------- Allied Waste 1.2 - ----------------------------- CSC Holdings 1.2 - ----------------------------- D.R. Horton 1.1 - ----------------------------- Premier International Foods 1.1 - ----------------------------- Sector breakdowns are calculated as a percentage of net assets. Corporate issuers are calculated as a percentage of total investments including short-term investments. Because the fund is actively managed, there can be no guarantee that the fund will continue to hold securities of these issuers in these sectors in the future. 1 PORTFOLIO MANAGERS' REPORT (CONTINUED) As the economy continues to expand, we believe that lower-quality credits have the potential to continue to deliver better returns than higher-grade sectors, although absolute returns may not reach the historical highs of 2003. Many high-yield bonds are being refinanced with lower-coupon instruments, and rising interest rates could have a negative impact on bonds generally. Therefore, we are being especially selective in our choices of longer-maturity, lower-coupon investments. We are also monitoring market conditions with particular regard to the fund's lower-rated holdings, as we continue to emphasize credit selection. /s/ Gregg R. Smalley /s/ Kevin L. Cronk /s/ Thomas A. LaPointe Gregg R. Smalley, CFA, a member of the High Yield Portfolio Management Team at Columbia Management Advisors, Inc. (the "advisor"), has been a portfolio manager of Colonial Intermediate High Income Fund since June 2000. Mr. Smalley joined an affiliate of the advisor in August 1997 as a research analyst specializing in the energy, cable, and telecom industries. Kevin L. Cronk, CFA, a member of the advisor's High Yield Portfolio Management Team, has co-managed the fund since February 2003. Mr. Cronk joined an affiliate of the advisor in August 1999 as a research analyst specializing in the chemicals, healthcare and telecom industries. Prior to joining the advisor, Mr. Cronk was an investment associate in the High Yield Group at Putnam Investments from May 1996 to July 1999. Thomas A. LaPointe, CFA, a member of the advisor's High Yield Portfolio Management Team, has co-managed the fund since February 2003. Mr. LaPointe joined an affiliate of the advisor in February 1999 as a senior member of the Fixed Income Department's research group and has provided high yield analytical support to mutual funds investing in the metals, gaming and European telecom industries. Prior to joining the advisor, Mr. LaPointe was a convertible arbitrage analyst at the Canadian Imperial Bank of Commerce from April 1998 to February 1999. Past performance is no guarantee of future investment results. Current performance may be higher or lower than the performance data quoted. Investing in high-yield bonds involves greater credit risk and other risks not associated with investing in higher-quality bonds. Bond investing also involves interest rate risk, which means that bond prices may change as interest rates increase or decrease. 2
INVESTMENT PORTFOLIO November 30, 2003 CORPORATE FIXED-INCOME BONDS & NOTES - 127.5% PAR VALUE - ---------------------------------------------------------------------------------------------------------- AGRICULTURE - 0.8% AGRICULTURE PRODUCTION - 0.8% Hines Nurseries, Inc., 10.250% 10/01/11 (a) $ 140,000 $ 151,562 Seminis, Inc., 10.250% 10/01/13 (a) 438,000 464,280 ----------- 615,842 ----------- - ---------------------------------------------------------------------------------------------------------- CONSTRUCTION - 4.4% BUILDING CONSTRUCTION - 4.4% Associated Materials, Inc., 9.750% 04/15/12 325,000 351,000 Atrium Companies, Inc., 10.500% 05/01/09 210,000 223,388 D.R. Horton, Inc., 9.750% 09/15/10 955,000 1,126,900 K. Hovnanian Enterprises, Inc.: 8.875% 04/01/12 170,000 185,725 10.500% 10/01/07 340,000 399,075 Nortek Holdings, Inc., (b) 05/15/11 (a) 500,000 355,000 Standard Pacific Corp., 9.250% 04/15/12 415,000 460,650 William Lyon Homes, Inc., 10.750% 04/01/13 210,000 235,200 ----------- 3,336,938 ----------- - ---------------------------------------------------------------------------------------------------------- FINANCE, INSURANCE & REAL ESTATE - 2.0% DEPOSITORY INSTITUTIONS - 0.6% Dollar Financial Group, Inc., 9.750% 11/15/11 (a) 330,000 339,900 Western Financial Bank, 9.625% 05/15/12 65,000 72,800 ----------- 412,700 ----------- FINANCIAL SERVICES - 0.8% FINOVA Group, Inc., 7.500% 11/15/09 585,000 324,675 LaBranche & Co., Inc., 12.000% 03/02/07 310,000 294,500 ----------- 619,175 ----------- REAL ESTATE - 0.6% Forest City Enterprises, Inc., 7.625% 06/01/15 165,000 172,425 Thornburg Mortgage, Inc., 8.000% 05/15/13 250,000 262,500 ----------- 434,925 ----------- - ---------------------------------------------------------------------------------------------------------- MANUFACTURING - 42.1% APPAREL - 1.2% Broder Brothers, 11.250% 10/15/10 (a) 280,000 282,800 Levi Strauss & Co., 12.250% 12/15/12 505,000 363,600 PAR VALUE - ---------------------------------------------------------------------------------------------------------- Perry Ellis International, Inc., 8.875% 09/15/13 (a) $ 40,000 $ 41,600 Warnaco, Inc., 8.875% 06/15/13 (a) 100,000 101,750 William Carter Co., 10.875% 08/15/11 94,000 106,808 ----------- 896,558 ----------- AUTO PARTS & EQUIPMENT - 2.4% Accuride Corp., 9.250% 02/01/08 120,000 121,200 Cummins, Inc., 9.500% 12/01/10 (a) 295,000 339,250 Dana Corp.: 9.000% 08/15/11 210,000 238,875 10.125% 03/15/10 200,000 229,000 Delco Remy International, Inc., 10.625% 08/01/06 115,000 112,700 Goodyear Tire & Rubber Co., 7.857% 08/15/11 380,000 324,900 Metaldyne Corp., 10.000% 11/01/13 (a) 170,000 164,900 Rexnord Corp., 10.125% 12/15/12 130,000 141,700 TRW Automotive, Inc.: 9.375% 02/15/13 (a) 85,000 96,050 11.000% 02/15/13 (a) 45,000 52,875 ----------- 1,821,450 ----------- CHEMICALS & ALLIED PRODUCTS - 8.5% Avecia Group PLC, 11.000% 07/01/09 840,000 722,400 Bio-Rad Laboratories, Inc., 7.500% 08/15/13 340,000 365,500 Equistar Chemicals LP: 10.125% 09/01/08 215,000 227,900 10.625% 05/01/11 (a) 200,000 211,000 FMC Corp., 10.250% 11/01/09 215,000 251,550 Huntsman ICI Holdings LLC, (b) 12/31/09 3,580,000 1,557,300 IMC Global, Inc., 10.875% 08/01/13 (a) 235,000 247,925 Koppers Industries, Inc.: 9.875% 12/01/07 490,000 506,131 9.875% 10/15/13 (a) 360,000 390,600 Lyondell Chemical Co., 9.625% 05/01/07 415,000 426,413 MacDermid, Inc., 9.125% 07/15/11 205,000 229,088 Phibro Animal Health Corp., 13.000% 12/01/07 (a) 320,000 329,600 PolyOne Corp., 10.625% 05/15/10 85,000 81,600 Scotts Co., 6.625% 11/15/13 (a) 40,000 40,300 See notes to investment portfolio. 3 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2003 CORPORATE FIXED-INCOME BONDS & NOTES (CONTINUED) PAR VALUE - ---------------------------------------------------------------------------------------------------------- MANUFACTURING (CONTINUED) CHEMICALS & ALLIED PRODUCTS (CONTINUED) Terra Capital, Inc., 12.875% 10/15/08 $ 475,000 $ 552,188 Westlake Chemical Corp., 8.750% 07/15/11 (a) 195,000 210,113 ----------- 6,349,608 ----------- ELECTRONIC & ELECTRICAL EQUIPMENT - 0.4% General Cable Corp., 9.500% 11/15/10 (a) 80,000 84,400 UCAR Finance, Inc., 10.250% 02/15/12 255,000 281,775 ----------- 366,175 ----------- FABRICATED METAL - 0.6% Earle M. Jorgensen Co., 9.750% 06/01/12 425,000 463,250 ----------- FOOD & KINDRED PRODUCTS - 6.1% Bavaria SA, 8.875% 11/01/10 (a) 410,000 406,027 Constellation Brands, Inc., 8.125% 01/15/12 270,000 295,650 Del Monte Corp., 9.250% 05/15/11 500,000 548,750 Dole Food Co., Inc., 8.625% 05/01/09 (c) 415,000 447,163 Merisant Co., 9.500% 07/15/13 (a) 205,000 210,125 Pinnacle Foods, 8.250% 12/01/13 (a) 385,000 396,550 Premier International Foods PLC, 12.000% 09/01/09 1,000,000 1,090,000 Roundy's, Inc., 8.875% 06/15/12 410,000 434,600 Smithfield Foods, Inc., 8.000% 10/15/09 435,000 478,500 Tabletop Holdings, Inc., (d) 05/15/14 (12.250% 11/15/08) (a) 525,000 283,500 ----------- 4,590,865 ----------- FURNITURE & FIXTURES - 1.7% C&A Floor Covering, Inc., 9.750% 02/15/10 225,000 241,313 Congoleum Corp., 8.625% 08/01/08 225,000 135,000 Juno Lighting, Inc., 11.875% 07/01/09 295,000 320,813 Norcraft Companies, 9.000% 11/01/11 (a) 140,000 147,350 Simmons Co., 10.250% 03/15/09 100,000 107,000 Tempur-Pedic, Inc., 10.250% 08/15/10 (a) 265,000 296,138 ----------- 1,247,614 ----------- PAR VALUE - ---------------------------------------------------------------------------------------------------------- MEASURING & ANALYZING INSTRUMENTS - 0.5% Fisher Scientific International, Inc., 8.125% 05/01/12 $ 326,000 $ 349,635 ----------- MISCELLANEOUS MANUFACTURING - 6.2% AGCO Corp., 9.500% 05/01/08 400,000 437,000 Applied Extrusion Technologies, Inc., 10.750% 07/01/11 320,000 248,000 Ball Corp., 6.875% 12/15/12 125,000 131,250 Berry Plastics Corp., 10.750% 07/15/12 (a) 250,000 283,750 Case New Holland, Inc., 9.250% 08/01/11 (a) 245,000 274,400 Crown European Holdings SA, 10.875% 03/01/13 280,000 323,400 Flowserve Corp., 12.250% 08/15/10 361,000 418,760 Owens-Brockway Glass Container, 8.250% 05/15/13 600,000 627,000 Owens-Illinois, Inc.: 7.150% 05/15/05 75,000 76,688 7.500% 05/15/10 75,000 75,000 SPX Corp., 7.500% 01/01/13 250,000 267,500 Tekni-Plex, Inc., 12.750% 06/15/10 455,000 482,300 Terex Corp., 10.375% 04/01/11 320,000 358,400 TriMas Corp., 9.875% 06/15/12 625,000 635,938 ----------- 4,639,386 ----------- PAPER PRODUCTS - 3.6% Buckeye Technologies, Inc.: 8.500% 10/01/13 (a) 60,000 63,750 9.250% 09/15/08 235,000 237,350 Caraustar Industries, Inc., 9.875% 04/01/11 255,000 270,300 Georgia-Pacific Corp., 8.875% 02/01/10 610,000 687,775 Jefferson Smurfit Corp., 8.250% 10/01/12 250,000 266,875 MDP Acquisitions PLC, 9.625% 10/01/12 525,000 582,750 Millar Western Forest Products, 7.750% 11/15/13 (a) 225,000 226,150 Norske Skog Canada Ltd., 8.625% 06/15/11 150,000 153,000 Tembec Industries, Inc., 8.500% 02/01/11 225,000 218,250 ----------- 2,706,200 ----------- See notes to investment portfolio. 4 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2003 CORPORATE FIXED-INCOME BONDS & NOTES (CONTINUED) PAR VALUE - ---------------------------------------------------------------------------------------------------------- MANUFACTURING (CONTINUED) PRIMARY METAL - 1.9% Bayou Steel Corp., 9.500% 05/15/08 (e) $1,000,000 $ 190,000 IMCO Recycling, Inc., 10.375% 10/15/10 (a) 205,000 192,700 Kaiser Aluminum & Chemical Corp., 10.875% 10/15/06 (e) 780,000 674,700 Oregon Steel Mills, Inc., 10.000% 07/15/09 280,000 224,000 Steel Dynamics, Inc.: 9.500% 03/15/09 80,000 87,400 9.500% 03/15/09 (a) 80,000 87,400 ----------- 1,456,200 ----------- PRINTING & PUBLISHING - 7.0% Advanstar Communications, Inc., 12.000% 02/15/11 500,000 512,500 Dex Media, Inc., 8.000% 11/15/13 (a) 320,000 324,000 Dex Media East LLC, 12.125% 11/15/12 565,000 678,000 Dex Media West LLC, 9.875% 08/15/13 (a) 280,000 317,800 Hollinger, Inc., 11.875% 03/01/11 (a) 295,000 321,550 Moore North America Finance, Inc., 7.875% 01/15/11 (a) 165,000 187,275 PriMedia, Inc., 8.875% 05/15/11 560,000 581,000 Quebecor Media, Inc., 11.125% 07/15/11 925,000 1,061,438 Von Hoffmann Corp.: 10.250% 03/15/09 495,000 519,750 10.250% 03/15/09 (a) 125,000 131,250 Yell Finance BV, 10.750% 08/01/11 488,000 573,400 ----------- 5,207,963 ----------- TRANSPORTATION EQUIPMENT - 2.0% BE Aerospace, Inc., 8.875% 05/01/11 375,000 341,250 Dura Operating Corp.: 8.625% 04/15/12 345,000 350,175 9.000% 05/01/09 250,000 231,250 Hexcel Corp., 9.750% 01/15/09 220,000 229,350 Newcor, Inc., 6.000% 01/01/13 (f) 215,562 93,599 Sequa Corp., 8.875% 04/01/08 200,000 217,500 ----------- 1,463,124 ----------- - ---------------------------------------------------------------------------------------------------------- PAR VALUE - ---------------------------------------------------------------------------------------------------------- MINING & ENERGY - 6.6% OIL & GAS EXTRACTION - 5.4% Benton Oil & Gas Co., 9.375% 11/01/07 $ 485,000 $ 480,150 Chesapeake Energy Corp.: 7.750% 01/15/15 280,000 301,000 8.125% 04/01/11 140,000 152,600 Compton Petroleum Corp., 9.900% 05/15/09 325,000 354,250 Denbury Resources, Inc., 7.500% 04/01/13 165,000 171,188 Encore Acquisition Co., 8.375% 06/15/12 325,000 344,500 Energy Partners Ltd., 8.750% 08/01/10 125,000 132,031 Forest Oil Corp., 8.000% 06/15/08 400,000 430,000 Houston Exploration Co., 7.000% 06/15/13 (a) 80,000 81,000 Magnum Hunter Resources, Inc., 9.600% 03/15/12 135,000 151,875 Pioneer Natural Resources Co., 9.625% 04/01/10 10,000 12,265 Pogo Producing Co., 8.250% 04/15/11 965,000 1,068,738 Stone Energy Corp., 8.250% 12/15/11 220,000 235,950 Tom Brown, Inc., 7.250% 09/15/13 180,000 188,100 ----------- 4,103,647 ----------- OIL & GAS FIELD SERVICES - 1.2% J. Ray McDermott SA, 11.000% 12/15/13 (a)(g) 280,000 281,400 Newpark Resources, Inc., 8.625% 12/15/07 290,000 298,700 Premcor Refining Group, Inc., 7.500% 06/15/15 235,000 240,875 Trico Marine Services, Inc., 8.875% 05/15/12 85,000 55,250 ----------- 876,225 ----------- - ---------------------------------------------------------------------------------------------------------- RETAIL TRADE - 3.7% APPAREL & ACCESSORY STORES - 0.6% Gap, Inc., 8.800% 12/15/08 285,000 348,413 Saks, Inc., 8.250% 11/15/08 105,000 119,438 ----------- 467,851 ----------- FOOD STORES - 0.4% Delhaize America, Inc., 8.125% 04/15/11 100,000 113,283 Winn-Dixie Stores, Inc., 8.875% 04/01/08 210,000 207,375 ----------- 320,658 ----------- - ---------------------------------------------------------------------------------------------------------- See notes to investment portfolio. 5 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2003 CORPORATE FIXED-INCOME BONDS & NOTES (CONTINUED) PAR VALUE - ---------------------------------------------------------------------------------------------------------- RETAIL TRADE (CONTINUED) MISCELLANEOUS RETAIL - 2.1% General Nutrition Center, 8.500% 12/01/10 (a)(g) $ 120,000 $ 122,400 Hollywood Entertainment Corp., 9.625% 03/15/11 350,000 376,250 JC Penney Co., Inc., 8.000% 03/01/10 415,000 477,250 Rite Aid Corp., 9.250% 06/01/13 550,000 589,875 ----------- 1,565,775 ----------- RESTAURANTS - 0.6% Domino's, Inc., 8.250% 07/01/11 (a) 80,000 84,300 Yum! Brands, Inc., 7.700% 07/01/12 305,000 349,225 ----------- 433,525 ----------- - ---------------------------------------------------------------------------------------------------------- SERVICES - 20.5% AMUSEMENT & RECREATION - 8.7% Ameristar Casinos, Inc., 10.750% 02/15/09 400,000 458,000 Boyd Gaming Corp., 8.750% 04/15/12 125,000 135,625 Circus-Circus & Eldorado/Silver Legacy, 10.125% 03/01/12 225,000 228,938 Hard Rock Hotel, Inc., 8.875% 06/01/13 (a) 290,000 304,500 Hollywood Casino Shreveport, 13.000% 08/01/06 (h) 670,000 479,050 Mohegan Tribal Gaming Authority, 8.000% 04/01/12 500,000 540,000 Park Place Entertainment Corp., 9.375% 02/15/07 435,000 486,113 Pinnacle Entertainment, Inc., 8.750% 10/01/13 900,000 904,500 Poster Financial Group, Inc., 8.750% 12/01/11 (a)(g) 60,000 61,500 Regal Cinemas, Inc., 9.375% 02/01/12 350,000 397,250 River Rock Entertainment, 9.750% 11/01/11 (a) 290,000 308,850 Royal Caribbean Cruises Ltd., 8.000% 05/15/10 225,000 242,719 Six Flags, Inc., 9.500% 02/01/09 845,000 855,563 Town Sports International, Inc., 9.625% 04/15/11 170,000 181,900 Trump Casino Holdings LLC, 11.625% 03/15/10 260,000 232,700 Venetian Casino Resort LLC, 11.000% 06/15/10 325,000 376,188 Wynn Las Vegas LLC, 12.000% 11/01/10 300,000 346,500 ----------- 6,539,896 ----------- PAR VALUE - ---------------------------------------------------------------------------------------------------------- AUTO EQUIPMENT & RENTAL SERVICES - 1.2% NationsRent, Inc., 9.500% 10/15/10 (a) $ 425,000 $ 440,938 United Rentals, Inc., 10.750% 04/15/08 255,000 284,325 Williams Scotsman, Inc., 9.875% 06/01/07 200,000 197,000 ----------- 922,263 ----------- BUSINESS SERVICES - 1.1% Iron Mountain, Inc., 6.625% 01/01/16 330,000 321,750 Stratus Technologies, Inc., 10.375% 12/01/08 (a) 320,000 327,200 Xerox Corp., 7.125% 06/15/10 160,000 164,800 ----------- 813,750 ----------- FUNERAL SERVICES - 1.5% Service Corp. International, 7.700% 04/15/09 600,000 622,500 Stewart Enterprises, Inc., 10.750% 07/01/08 400,000 450,000 ----------- 1,072,500 ----------- HEALTH SERVICES - 5.6% AmerisourceBergen Corp., 8.125% 09/01/08 175,000 193,813 Coventry Health Care, Inc., 8.125% 02/15/12 525,000 578,813 HCA, Inc., 8.750% 09/01/10 275,000 318,038 IASIS Healthcare Corp., 13.000% 10/15/09 305,000 342,363 InSight Health Services Corp., 9.875% 11/01/11 340,000 357,425 Magellan Health Services, Inc., 9.375% 11/15/07 (a)(e) 385,000 425,425 MedQuest, Inc., 11.875% 08/15/12 500,000 548,125 PacifiCare Health Systems, Inc., 10.750% 06/01/09 500,000 575,000 Tenet Healthcare Corp., 6.375% 12/01/11 450,000 416,250 United Surgical Partners International, Inc., 10.000% 12/15/11 400,000 451,000 ----------- 4,206,252 ----------- HOTELS, CAMPS & LODGING - 1.7% Host Marriott LP, 9.500% 01/15/07 340,000 371,875 Inn of the Mountain Gods Resort & Casino, 12.000% 11/15/10 (a) 200,000 210,500 Starwood Hotels & Resorts Worldwide, Inc., 7.875% 05/01/12 625,000 694,531 ----------- 1,276,906 ----------- See notes to investment portfolio. 6 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2003 CORPORATE FIXED-INCOME BONDS & NOTES (CONTINUED) PAR VALUE - ---------------------------------------------------------------------------------------------------------- SERVICES (CONTINUED) OTHER SERVICES - 0.7% Corrections Corp. of America, 9.875% 05/01/09 $ 300,000 $ 336,000 Wackenhut Corrections Corp., 8.250% 07/15/13 (a) 160,000 168,800 ----------- 504,800 ----------- - ---------------------------------------------------------------------------------------------------------- TRANSPORTATION, COMMUNICATIONS, ELECTRIC, GAS & SANITARY SERVICES - 45.8% AEROSPACE - 0.5% TransDigm, Inc., 8.375% 07/15/11 (a) 200,000 211,000 Vought Aircraft Industries, Inc., 8.000% 07/15/11 (a) 160,000 162,000 ----------- 373,000 ----------- AIR TRANSPORTATION - 1.9% Delta Air Lines, Inc., 7.900% 12/15/09 470,000 376,000 Northwest Airlines, Inc., 9.875% 03/15/07 615,000 547,350 U.S. Airways, Inc., 10.375% 03/01/13 (m) 1,512,096 521,673 ----------- 1,445,023 ----------- BROADCASTING - 4.2% CanWest Media, Inc., 10.625% 05/15/11 585,000 663,975 Corus Entertainment, Inc., 8.750% 03/01/12 200,000 220,000 Emmis Communications Corp., (d) 03/15/11 (12.500% 03/15/06) 561,000 511,913 Sinclair Broadcast Group, Inc., 8.750% 12/15/11 250,000 273,750 Spanish Broadcasting System, Inc., 9.625% 11/01/09 80,000 84,000 TV Azteca SA de CV, 10.500% 02/15/07 745,000 763,625 XM Satellite Radio Holdings, Inc., (d) 12/31/09 (14.000% 12/31/05) 474,415 412,741 Videotron Ltee, 6.875% 01/15/14 (a) 235,000 242,050 ----------- 3,172,054 ----------- CABLE - 6.9% Charter Communications Holdings LLC: (d) 04/01/11 (9.920% 04/01/04) 1,580,000 1,208,700 10.000% 04/01/09 135,000 112,020 10.250% 09/15/10 190,000 193,563 Comcast UK Cable Partners Ltd., 11.200% 11/15/07 750,000 753,750 CSC Holdings, Inc., 7.625% 04/01/11 300,000 303,000 PAR VALUE - ---------------------------------------------------------------------------------------------------------- DirecTV Holdings LLC, 8.375% 03/15/13 $ 300,000 $ 339,375 EchoStar DBS Corp., 6.375% 10/01/11 (a) 600,000 600,000 Insight Communications Co., Inc., (d) 02/15/11 (12.250% 02/15/06) 415,000 328,888 Insight Midwest LP, 9.750% 10/01/09 335,000 354,263 Northland Cable Television, Inc., 10.250% 11/15/07 495,000 490,050 Rogers Cable, Inc., 6.250% 06/15/13 165,000 165,515 Shaw Communications, Inc., 7.500% 11/20/13 400,000 305,520 ----------- 5,154,644 ----------- COMMUNICATION SERVICES - 1.5% Crown Castle International Corp., 10.750% 08/01/11 350,000 388,500 SBA Communications Corp., 10.250% 02/01/09 535,000 490,863 SpectraSite, Inc., 8.250% 05/15/10 (a) 200,000 212,000 ----------- 1,091,363 ----------- ELECTRIC, GAS & SANITARY SERVICES - 2.1% Allied Waste North America, Inc.: 6.500% 11/15/10 (a) 670,000 670,000 8.500% 12/01/08 505,000 552,975 CMS Energy Corp., 8.900% 07/15/08 335,000 355,519 ----------- 1,578,494 ----------- ELECTRIC SERVICES - 6.9% AES Corp.: 9.000% 05/15/15 (a) 570,000 621,300 9.500% 06/01/09 255,000 274,125 Beaver Valley Funding Corp., 9.000% 06/01/17 355,000 405,499 Caithness Coso Funding Corp., 9.050% 12/15/09 534,950 580,421 Calpine Corp.: 8.500% 07/15/10 (a) 315,000 291,375 8.500% 02/15/11 445,000 322,625 8.625% 08/15/10 220,000 159,500 Edison Mission Energy, 9.875% 04/15/11 380,000 381,900 Illinois Power Co., 11.500% 12/15/10 150,000 177,000 MSW Energy Holdings LLC: 7.375% 09/01/10 (a) 170,000 172,550 8.500% 09/01/10 (a) 375,000 402,188 Nevada Power Co.: 9.000% 08/15/13 (a) 185,000 201,881 10.875% 10/15/09 340,000 384,200 Orion Power Holdings, Inc., 12.000% 05/01/10 150,000 175,500 See notes to investment portfolio. 7 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2003 CORPORATE FIXED-INCOME BONDS & NOTES (CONTINUED) PAR VALUE - ---------------------------------------------------------------------------------------------------------- TRANSPORTATION, COMMUNICATIONS, ELECTRIC, GAS & SANITARY SERVICES (CONTINUED) ELECTRIC SERVICES (CONTINUED) PSE&G Energy Holdings, Inc., 8.625% 02/15/08 $ 395,000 $ 419,688 Tiers-Mir-2001-14, 7.200% 06/15/04 (a)(e) 410,000 200,900 ----------- 5,170,652 ----------- MOTOR, FREIGHT & WAREHOUSING - 1.7% QDI LLC: 9.000% 11/15/10 (a) 370,000 383,875 12.000% 06/15/09 (a)(f) 167,717 180,296 12.500% 06/15/08 (f) 685,000 699,248 ----------- 1,263,419 ----------- PIPELINES - 4.1% Coastal Corp., 7.750% 06/15/10 645,000 567,600 Dynegy Holdings, Inc.: 8.750% 02/15/12 300,000 289,500 9.875% 07/15/10 (a) 160,000 174,400 10.125% 07/15/13 (a) 40,000 44,000 GulfTerra Energy Partners LP, 8.500% 06/01/10 275,000 301,125 Northwest Pipeline Corp., 8.125% 03/01/10 130,000 144,300 Sonat, Inc., 7.625% 07/15/11 565,000 485,900 Southern Natural Gas Co., 8.875% 03/15/10 250,000 278,125 Williams Companies, Inc., 8.125% 03/15/12 765,000 826,200 ----------- 3,111,150 ----------- POLLUTION CONTROL - 0.4% EnviroSource, Inc., 14.000% 12/15/08 (f) 273,663 264,401 ----------- RADIOTELEPHONE COMMUNICATIONS - 5.3% ACC Escrow Corp., 10.000% 08/01/11 (a) 225,000 246,375 AirGate PCS, Inc., (d) 10/01/09 (13.500% 10/01/04) 129,000 83,850 Dobson Communications Corp., 8.875% 10/01/13 (a) 440,000 442,750 Nextel Communications, Inc., 9.375% 11/15/09 1,060,000 1,152,750 Nextel Partners, Inc., 11.000% 03/15/10 290,000 320,450 Rogers Cantel, Inc., 9.750% 06/01/16 735,000 867,300 Triton PCS, Inc., 8.750% 11/15/11 125,000 120,000 US Unwired, Inc., (d) 11/01/09 (13.375% 11/01/04) 800,000 532,000 PAR VALUE - ---------------------------------------------------------------------------------------------------------- Western Wireless Corp., 9.250% 07/15/13 $ 200,000 $ 207,000 ----------- 3,972,475 ----------- RAILROAD - 0.9% Kansas City Southern Railway Co., 7.500% 06/15/09 215,000 219,838 TFM SA de CV, 12.500% 06/15/12 380,000 420,850 ----------- 640,688 ----------- TELECOMMUNICATIONS - 7.6% American Towers, Inc., 7.250% 12/01/11 (a) 210,000 210,525 Amkor Technology, Inc.: 9.250% 02/15/08 285,000 319,200 10.500% 05/01/09 270,000 288,900 Avaya, Inc., 11.125% 04/01/09 220,000 258,500 Carrier1 International SA, 13.250% 02/15/09 (e) 750,000 67,500 Cincinnati Bell, Inc., 8.375% 01/15/14 (a) 320,000 336,000 Colt Telecom Group PLC, 12.000% 12/15/06 245,000 244,388 FairPoint Communications, Inc., 11.875% 03/01/10 175,000 205,625 Horizon PCS, Inc., 13.750% 06/15/11 (e) 415,000 93,375 Innova S. de R.L., 9.375% 09/19/13 (a) 100,000 102,375 Level 3 Communications, Inc., (d) 12/01/08 (10.500% 12/01/03) 355,000 331,925 Lucent Technologies, Inc., 6.450% 03/15/29 335,000 253,763 MCI Communications Corp.: 7.125% 06/15/27 (e) 120,000 97,200 7.500% 08/20/04 (e) 465,000 376,650 Qwest Capital Funding, Inc.: 7.250% 02/15/11 810,000 771,525 7.750% 02/15/31 385,000 338,800 Qwest Corp., 13.500% 12/15/10 (a) 595,000 699,125 Time Warner Telecom, Inc.: 9.750% 07/15/08 470,000 479,400 10.125% 02/01/11 203,000 238,050 ----------- 5,712,826 ----------- TRANSPORTATION SERVICES - 1.8% Allied Holdings, Inc., 8.625% 10/01/07 190,000 182,400 Petroleum Helicopters, Inc., 9.375% 05/01/09 530,000 571,075 Stena AB: 7.500% 11/01/13 (g) 160,000 160,504 9.625% 12/01/12 255,000 283,688 See notes to investment portfolio. 8 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2003 CORPORATE FIXED-INCOME BONDS & NOTES (CONTINUED) PAR VALUE - ---------------------------------------------------------------------------------------------------------- TRANSPORTATION, COMMUNICATIONS, ELECTRIC, GAS & SANITARY SERVICES (CONTINUED) TRANSPORTATION SERVICES (CONTINUED) Teekay Shipping Corp., 8.875% 07/15/11 $ 150,000 $ 170,250 ----------- 1,367,917 ----------- - ---------------------------------------------------------------------------------------------------------- WHOLESALE TRADE - 1.6% DURABLE GOODS - 1.6% Kinetic Concepts, Inc., 7.375% 05/15/13 (a) 120,000 123,600 Playtex Products, Inc., 9.375% 06/01/11 500,000 496,250 Steinway Musical Instruments, Inc., 8.750% 04/15/11 550,000 577,500 ----------- 1,197,350 ----------- TOTAL CORPORATE FIXED-INCOME BONDS & NOTES (cost of $95,680,538) 95,597,112 ----------- PREFERRED STOCKS - 3.0% SHARES - ---------------------------------------------------------------------------------------------------------- FINANCE, INSURANCE & REAL ESTATE - 0.8% REAL ESTATE - 0.8% iStar Financial, Inc.: 7.800% 13,000 326,219 7.875% 11,007 282,054 ----------- 608,273 ----------- - ---------------------------------------------------------------------------------------------------------- MANUFACTURING - 0.3% FOOD & KINDRED PRODUCTS - 0.1% Constellation Brands, Inc., 5.750% 2,425 78,206 ----------- PRINTING & PUBLISHING - 0.2% PriMedia, Inc.: 8.625% 30 2,715 9.200% 1,615 149,388 ----------- 152,103 ----------- - ---------------------------------------------------------------------------------------------------------- TRANSPORTATION, COMMUNICATIONS, ELECTRIC, GAS & SANITARY SERVICES - 1.9% BROADCASTING - 0.6% Spanish Broadcasting System, Inc., 10.750% (a) 430 432,150 ----------- CABLE - 1.2% CSC Holdings, Inc.: 11.125% 349 36,907 11.750% 7,979 839,790 ----------- 876,697 ----------- POLLUTION CONTROL - 0.1% EnviroSource, Inc., 7.250% (f) 929 106,835 ----------- TOTAL PREFERRED STOCKS (cost of $2,418,206) 2,254,264 ----------- CONVERTIBLE BONDS - 1.6% PAR VALUE - ---------------------------------------------------------------------------------------------------------- TRANSPORTATION, COMMUNICATIONS, ELECTRIC, GAS & SANITARY SERVICES - 1.6% TELECOMMUNICATIONS - 1.6% Colt Telecom Group PLC: 2.000% 03/29/06 (a) EUR 265,000 $ 337,010 2.000% 12/16/06 (a) 130,000 165,410 Nortel Networks Corp., 4.250% 09/01/08 $ 720,000 682,020 ----------- TOTAL CONVERTIBLE BONDS (cost of $959,452) 1,184,440 ----------- COMMON STOCKS - 1.5% (I) SHARES - ---------------------------------------------------------------------------------------------------------- TRANSPORTATION, COMMUNICATIONS, ELECTRIC, GAS & SANITARY SERVICES - 1.5% CABLE - 0.5% NTL, Inc. 5,942 387,181 Ono Finance PLC 750 1 ----------- 387,182 ----------- POLLUTION CONTROL - 0.8% EnviroSource, Inc. (f) 8,000 576,000 Fairlane Management Corp. (f)(j) 8,000 -- ----------- 576,000 ----------- RADIOTELEPHONE COMMUNICATIONS - 0.2% Nextel Communications, Inc., Class A 6,196 156,944 ----------- TOTAL COMMON STOCKS (cost of $1,081,597) 1,120,126 ----------- WARRANTS - 0.2% (I) UNITS - ---------------------------------------------------------------------------------------------------------- TRANSPORTATION, COMMUNICATIONS, ELECTRIC, GAS & SANITARY SERVICES - 0.2% BROADCASTING - 0.2% XM Satellite Radio Holdings, Inc.: Expires 12/31/09 70 126,000 Expires 03/15/10 (a) 600 12,450 ----------- 138,450 ----------- CABLE - 0.0% Cable Satisfaction International, Inc., Expires 03/01/05 (a) 970 10 Ono Finance PLC, Expires 05/31/09 (a) 175 2 ----------- 12 ----------- COMMUNICATION SERVICES - 0.0% UbiquiTel, Inc., Expires 04/15/10 (a) 525 5 ----------- MOTOR, FREIGHT & WAREHOUSING - 0.0% QDI LLC, Expires 01/15/07 (a)(f) 2,041 31,288 ----------- See notes to investment portfolio. 9 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2003 WARRANTS (CONTINUED) UNITS VALUE - ---------------------------------------------------------------------------------------------------------- TELECOMMUNICATIONS - 0.0% AT&T Canada, Inc., Expires 08/15/07 (a)(f)(j) 250 $ -- Carrier1 International SA, Expires 02/19/09 (a)(e) 347 3 Horizon PCS, Inc., Expires 10/01/10 (a) 665 1 Jazztel PLC, Expires 07/15/10 (a)(j) 350 -- ----------- 4 ----------- TOTAL WARRANTS (cost of $105,737) 169,759 ----------- SHORT-TERM OBLIGATION - 2.7% PAR - ---------------------------------------------------------------------------------------------------------- Federal Home Loan Discount Note, 0.940% 12/01/03 (k) (cost of $2,048,000) $2,048,000 2,048,000 ----------- TOTAL INVESTMENTS - 136.5% (cost of $102,293,530) (l) 102,373,701 ----------- OTHER ASSETS & LIABILITIES, NET - (36.5)% (27,421,703) - ---------------------------------------------------------------------------------------------------------- Net Assets - 100.0% $74,951,998 ===========
NOTES TO INVESTMENT PORTFOLIO: - -------------------------------------------------------------------------------- (a) This security is exempt from registration under Rule 144A of the Securities Act of 1933 and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At November 30, 2003, the value of these securities amounted to $18,779,327, which represents 25.1% of net assets. (b) Zero coupon bond. (c) Interest rates on variable rate securities change periodically. The rate listed is as of November 30, 2003. (d) Stepped coupon bond. Currently accruing at zero. Shown parenthetically is the next interest rate to be paid and the date the Fund will begin accruing this rate. (e) As of November 30, 2003, the Fund held securities of certain issuers that have filed for bankruptcy protection under Chapter 11 representing 2.8% of net assets. This issuer is in default of certain debt covenants. Income is not being accrued. (f) Represents fair value as determined in good faith under the direction of the Board of Trustees. (g) This security has been purchased on a delayed delivery basis. (h) The issuer is in default of certain debt covenants. Income is not being accrued. (i) Non-income producing. (j) Security has no value. (k) Rate represents yield at date of purchase. (l) Cost for federal income tax purposes is $102,213,746. (m) Income is not being accrued on this security. As of November 30, 2003, the Fund had entered into the following forward currency exchange contracts: NET CONTRACTS IN EXCHANGE SETTLEMENT UNREALIZED TO DELIVER FOR DATE DEPRECIATION - ---------------------------------------------------------------- CAD 400,000 USD 306,244 12/15/03 $ (1,843) EUR 398,600 USD 456,796 12/08/03 (21,283) ----------- $ (23,126) ----------- ACRONYM NAME - ---------------------------------------------------------------- CAD Canadian Dollar EUR Euro USD United States Dollar See notes to financial statements. 10
INVESTMENT PORTFOLIO October 31, 2003 CORPORATE FIXED-INCOME BONDS & NOTES - 126.8% PAR VALUE - ---------------------------------------------------------------------------------------------------------- AGRICULTURE - 0.8% AGRICULTURE PRODUCTION - 0.8% Hines Nurseries, Inc., 10.250% 10/01/11 (a) $ 140,000 $ 148,400 Seminis, Inc., 10.250% 10/01/13 (a) 438,000 464,280 ----------- 612,680 ----------- - ---------------------------------------------------------------------------------------------------------- CONSTRUCTION - 4.0% BUILDING CONSTRUCTION - 4.0% Associated Materials, Inc., 9.750% 04/15/12 325,000 349,375 Atrium Companies, Inc., 10.500% 05/01/09 210,000 225,225 D.R. Horton, Inc., 9.750% 09/15/10 955,000 1,105,412 K. Hovnanian Enterprises, Inc.: 8.875% 04/01/12 170,000 185,725 10.500% 10/01/07 340,000 402,475 Standard Pacific Corp., 9.250% 04/15/12 415,000 456,500 William Lyon Homes, Inc., 10.750% 04/01/13 210,000 233,100 ----------- 2,957,812 ----------- - ---------------------------------------------------------------------------------------------------------- FINANCE, INSURANCE & REAL ESTATE - 1.1% DEPOSITORY INSTITUTIONS - 0.1% Western Financial Bank, 9.625% 05/15/12 65,000 71,663 ----------- FINANCIAL SERVICES - 0.4% LaBranche & Co., Inc., 12.000% 03/02/07 310,000 317,750 ----------- REAL ESTATE - 0.6% Forest City Enterprises, Inc., 7.625% 06/01/15 165,000 171,600 Thornburg Mortgage, Inc., 8.000% 05/15/13 250,000 262,500 ----------- 434,100 ----------- - ---------------------------------------------------------------------------------------------------------- MANUFACTURING - 42.5% APPAREL - 1.4% Broder Brothers, 11.250% 10/15/10 (a) 280,000 287,000 Levi Strauss & Co., 12.250% 12/15/12 540,000 445,500 Perry Ellis International, Inc., 8.875% 09/15/13 (a) 40,000 41,400 Warnaco, Inc., 8.875% 06/15/13 (a) 100,000 107,000 William Carter Co., 10.875% 08/15/11 145,000 163,850 ----------- 1,044,750 ----------- AUTO PARTS & EQUIPMENT - 2.8% Accuride Corp., 9.250% 02/01/08 120,000 119,400 PAR VALUE - ---------------------------------------------------------------------------------------------------------- Cummins, Inc., 9.500% 12/01/10 (a) $ 295,000 $ 339,250 Dana Corp.: 9.000% 08/15/11 210,000 233,100 10.125% 03/15/10 200,000 225,000 Delco Remy International, Inc., 10.625% 08/01/06 115,000 109,250 Goodyear Tire & Rubber Co., 7.857% 08/15/11 380,000 323,950 Metaldyne Corp., 10.000% 11/01/13 (a) 170,000 165,750 Rexnord Corp., 10.125% 12/15/12 130,000 144,300 TRW Automotive, Inc., 11.000% 02/15/13 (a) 315,000 371,700 ----------- 2,031,700 ----------- CHEMICALS & ALLIED PRODUCTS - 8.7% Avecia Group PLC, 11.000% 07/01/09 840,000 781,200 Bio-Rad Laboratories, Inc., 7.500% 08/15/13 (a) 340,000 361,250 Equistar Chemicals LP, 10.125% 09/01/08 215,000 225,750 FMC Corp., 10.250% 11/01/09 215,000 248,862 Huntsman ICI Holdings LLC, (b) 12/31/09 3,580,000 1,360,400 IMC Global, Inc., 10.875% 08/01/13 (a) 235,000 239,700 Koppers Industries, Inc.: 9.875% 12/01/07 490,000 512,050 9.875% 10/15/13 (a) 360,000 381,600 Lyondell Chemical Co., 9.625% 05/01/07 770,000 777,700 MacDermid, Inc., 9.125% 07/15/11 205,000 228,575 Phibro Animal Health Corp., 13.000% 12/01/07 (a) 320,000 329,600 PolyOne Corp., 10.625% 05/15/10 165,000 145,200 Scotts Co., 6.625% 11/15/13 (a) 40,000 40,600 Terra Capital, Inc., 12.875% 10/15/08 475,000 548,625 Westlake Chemical Corp., 8.750% 07/15/11 (a) 195,000 205,725 ----------- 6,386,837 ----------- ELECTRONIC & ELECTRICAL EQUIPMENT - 0.4% UCAR Finance, Inc., 10.250% 02/15/12 255,000 282,413 ----------- FABRICATED METAL - 0.6% Earle M. Jorgensen Co., 9.750% 06/01/12 425,000 462,187 ----------- See notes to investment portfolio. 11 INVESTMENT PORTFOLIO (CONTINUED) October 31, 2003 CORPORATE FIXED-INCOME BONDS & NOTES (CONTINUED) PAR VALUE - ---------------------------------------------------------------------------------------------------------- MANUFACTURING (CONTINUED) FOOD & KINDRED PRODUCTS - 5.3% Bavaria SA, 8.875% 11/01/10 (a) $ 410,000 $ 403,866 Constellation Brands, Inc., 8.125% 01/15/12 270,000 295,650 Del Monte Corp., 9.250% 05/15/11 500,000 552,500 Dole Food Co., Inc., 8.625% 05/01/09 (c) 415,000 448,200 Merisant Co., 9.500% 07/15/13 (a) 205,000 221,400 Premier International Foods PLC, 12.000% 09/01/09 1,000,000 1,090,000 Roundy's, Inc., 8.875% 06/15/12 410,000 428,450 Smithfield Foods, Inc., 8.000% 10/15/09 435,000 478,500 ----------- 3,918,566 ----------- FURNITURE & FIXTURES - 1.6% C&A Floor Covering, Inc., 9.750% 02/15/10 225,000 238,500 Congoleum Corp., 8.625% 08/01/08 225,000 90,000 Juno Lighting, Inc., 11.875% 07/01/09 295,000 320,815 Norcraft Companies, 9.000% 11/01/11 (a) 140,000 147,000 Simmons Co., 10.250% 03/15/09 100,000 107,000 Tempur-Pedic, Inc., 10.250% 08/15/10 (a) 265,000 292,163 ----------- 1,195,478 ----------- MEASURING & ANALYZING INSTRUMENTS - 0.6% Fisher Scientific International, Inc., 8.125% 05/01/12 375,000 403,125 ----------- MISCELLANEOUS MANUFACTURING - 6.6% AGCO Corp., 9.500% 05/01/08 400,000 436,000 Applied Extrusion Technologies, Inc., 10.750% 07/01/11 320,000 243,200 Ball Corp., 6.875% 12/15/12 125,000 129,063 Case New Holland, Inc., 9.250% 08/01/11 (a) 245,000 270,725 Crown European Holdings SA, 10.875% 03/01/13 280,000 319,200 Flowserve Corp., 12.250% 08/15/10 361,000 415,150 Owens-Brockway Glass Container, 8.250% 05/15/13 600,000 628,500 Owens-Illinois, Inc., 7.150% 05/15/05 150,000 154,125 Silgan Holdings, Inc., 6.750% 11/15/13 (a)(d) 80,000 80,000 PAR VALUE - ---------------------------------------------------------------------------------------------------------- SPX Corp., 7.500% 01/01/13 $ 250,000 $ 268,125 Tekni-Plex, Inc., 12.750% 06/15/10 915,000 940,162 Terex Corp., 10.375% 04/01/11 320,000 358,400 TriMas Corp., 9.875% 06/15/12 625,000 618,750 ----------- 4,861,400 ----------- PAPER PRODUCTS - 3.4% Buckeye Technologies, Inc.: 8.500% 10/01/13 (a) 60,000 62,775 9.250% 09/15/08 235,000 236,175 Caraustar Industries, Inc., 9.875% 04/01/11 255,000 265,200 Georgia-Pacific Corp., 8.875% 02/01/10 610,000 696,925 Jefferson Smurfit Corp., 8.250% 10/01/12 250,000 263,125 MDP Acquisitions PLC, 9.625% 10/01/12 525,000 582,750 Norske Skog Canada Ltd., 8.625% 06/15/11 150,000 153,000 Tembec Industries, Inc., 8.500% 02/01/11 225,000 218,250 ----------- 2,478,200 ----------- PRIMARY METAL - 1.8% Bayou Steel Corp., 9.500% 05/15/08 (e) 1,000,000 235,000 IMCO Recycling, Inc., 10.375% 10/15/10 (a) 205,000 202,950 Kaiser Aluminum & Chemical Corp., 10.875% 10/15/06 (e) 780,000 592,800 Oregon Steel Mills, Inc., 10.000% 07/15/09 250,000 205,000 Steel Dynamics, Inc., 9.500% 03/15/09 80,000 88,000 ----------- 1,323,750 ----------- PRINTING & PUBLISHING - 7.0% Advanstar Communications, Inc., 12.000% 02/15/11 500,000 500,000 American Greetings Corp., 11.750% 07/15/08 255,000 294,525 Dex Media East LLC, 12.125% 11/15/12 565,000 678,000 Dex Media West LLC, 9.875% 08/15/13 (a) 280,000 318,500 Hollinger, Inc., 11.875% 03/01/11 (a) 295,000 324,500 Moore North America Finance, Inc., 7.875% 01/15/11 (a) 165,000 176,963 PriMedia, Inc., 8.875% 05/15/11 560,000 579,600 Quebecor Media, Inc., 11.125% 07/15/11 925,000 1,066,062 See notes to investment portfolio. 12 INVESTMENT PORTFOLIO (CONTINUED) October 31, 2003 CORPORATE FIXED-INCOME BONDS & NOTES (CONTINUED) PAR VALUE - ---------------------------------------------------------------------------------------------------------- MANUFACTURING (CONTINUED) PRINTING & PUBLISHING (CONTINUED) Von Hoffmann Corp.: 10.250% 03/15/09 $ 495,000 $ 532,125 10.250% 03/15/09 (a) 125,000 134,375 Yell Finance BV, 10.750% 08/01/11 488,000 561,200 ----------- 5,165,850 ----------- TRANSPORTATION EQUIPMENT - 2.3% BE Aerospace, Inc., 8.875% 05/01/11 575,000 517,500 Dura Operating Corp.: 8.625% 04/15/12 345,000 350,175 9.000% 05/01/09 250,000 230,000 Hexcel Corp., 9.750% 01/15/09 220,000 229,350 Newcor, Inc., 6.000% 01/01/13 (f) 215,562 93,599 Sequa Corp., 8.875% 04/01/08 200,000 216,000 Wabtec Corp., 6.875% 07/31/13 (a) 80,000 82,200 ----------- 1,718,824 ----------- - ---------------------------------------------------------------------------------------------------------- MINING & ENERGY - 6.5% OIL & GAS EXTRACTION - 5.5% Benton Oil & Gas Co., 9.375% 11/01/07 485,000 485,000 Chesapeake Energy Corp.: 7.750% 01/15/15 280,000 301,700 8.125% 04/01/11 140,000 152,775 Compton Petroleum Corp., 9.900% 05/15/09 325,000 355,875 Denbury Resources, Inc., 7.500% 04/01/13 165,000 169,950 Encore Acquisition Co., 8.375% 06/15/12 325,000 349,375 Energy Partners Ltd., 8.750% 08/01/10 125,000 128,750 Forest Oil Corp., 8.000% 06/15/08 400,000 428,000 Houston Exploration Co., 7.000% 06/15/13 (a) 80,000 80,600 Magnum Hunter Resources, Inc., 9.600% 03/15/12 135,000 148,500 Pioneer Natural Resources Co., 9.625% 04/01/10 10,000 12,310 Pogo Producing Co., 8.250% 04/15/11 965,000 1,066,325 Stone Energy Corp., 8.250% 12/15/11 220,000 235,400 Tom Brown, Inc., 7.250% 09/15/13 100,000 104,500 ----------- 4,019,060 ----------- PAR VALUE - ---------------------------------------------------------------------------------------------------------- OIL & GAS FIELD SERVICES - 1.0% Newpark Resources, Inc., 8.625% 12/15/07 $ 290,000 $ 296,525 Premcor Refining Group, Inc., 7.500% 06/15/15 235,000 240,875 Tesoro Petroleum Corp., 8.000% 04/15/08 105,000 111,037 Trico Marine Services, Inc., 8.875% 05/15/12 125,000 85,000 ----------- 733,437 ----------- - ---------------------------------------------------------------------------------------------------------- RETAIL TRADE - 3.8% APPAREL & ACCESSORY STORES - 0.6% Gap, Inc., 8.800% 12/15/08 285,000 346,988 Saks, Inc., 8.250% 11/15/08 105,000 119,175 ----------- 466,163 ----------- FOOD STORES - 0.4% Delhaize America, Inc., 8.125% 04/15/11 100,000 110,250 Winn-Dixie Stores, Inc., 8.875% 04/01/08 210,000 205,275 ----------- 315,525 ----------- MISCELLANEOUS RETAIL - 2.0% Hollywood Entertainment Corp., 9.625% 03/15/11 350,000 379,750 JC Penney Co., Inc., 8.000% 03/01/10 415,000 461,687 Rite Aid Corp., 9.250% 06/01/13 550,000 595,375 ----------- 1,436,812 ----------- RESTAURANTS - 0.8% Domino's, Inc., 8.250% 07/01/11 (a) 200,000 211,500 Yum! Brands, Inc., 7.700% 07/01/12 305,000 341,600 ----------- 553,100 ----------- - ---------------------------------------------------------------------------------------------------------- SERVICES - 20.3% AMUSEMENT & RECREATION - 8.2% Ameristar Casinos, Inc., 10.750% 02/15/09 400,000 460,000 Boyd Gaming Corp., 8.750% 04/15/12 125,000 135,625 Circus-Circus & Eldorado/Silver Legacy, 10.125% 03/01/12 375,000 383,906 Hard Rock Hotel, Inc., 8.875% 06/01/13 (a) 290,000 305,225 Hollywood Casino Shreveport, 13.000% 08/01/06 (g) 670,000 479,050 Mohegan Tribal Gaming Authority, 8.000% 04/01/12 500,000 543,750 See notes to investment portfolio. 13 INVESTMENT PORTFOLIO (CONTINUED) October 31, 2003 CORPORATE FIXED-INCOME BONDS & NOTES (CONTINUED) PAR VALUE - ---------------------------------------------------------------------------------------------------------- SERVICES (CONTINUED) AMUSEMENT & RECREATION (CONTINUED) Park Place Entertainment Corp., 9.375% 02/15/07 $ 435,000 $ 483,937 Pinnacle Entertainment, Inc., 8.750% 10/01/13 900,000 897,750 Regal Cinemas, Inc., 9.375% 02/01/12 350,000 395,500 Royal Caribbean Cruises Ltd., 8.000% 05/15/10 225,000 240,750 Six Flags, Inc., 9.500% 02/01/09 845,000 829,156 Town Sports International, Inc., 9.625% 04/15/11 170,000 181,900 Venetian Casino Resort LLC, 11.000% 06/15/10 325,000 373,750 Wynn Las Vegas LLC, 12.000% 11/01/10 300,000 345,000 ----------- 6,055,299 ----------- AUTO EQUIPMENT & RENTAL SERVICES - 1.2% NationsRent, Inc., 9.500% 10/15/10 (a) 425,000 439,875 United Rentals, Inc., 10.750% 04/15/08 255,000 285,600 Williams Scotsman, Inc., 9.875% 06/01/07 200,000 202,000 ----------- 927,475 ----------- BUSINESS SERVICES - 0.7% Iron Mountain, Inc., 6.625% 01/01/16 330,000 321,750 Xerox Corp., 7.125% 06/15/10 160,000 163,600 ----------- 485,350 ----------- FUNERAL SERVICES - 1.5% Service Corp. International, 7.700% 04/15/09 600,000 622,500 Stewart Enterprises, Inc., 10.750% 07/01/08 400,000 452,000 ----------- 1,074,500 ----------- HEALTH SERVICES - 6.3% AmerisourceBergen Corp., 8.125% 09/01/08 175,000 189,438 Coventry Health Care, Inc., 8.125% 02/15/12 525,000 568,312 HCA, Inc., 8.750% 09/01/10 670,000 774,259 IASIS Healthcare Corp., 13.000% 10/15/09 305,000 342,363 InSight Health Services Corp., 9.875% 11/01/11 340,000 364,650 Magellan Health Services, Inc., 9.375% 11/15/07 (a)(e) 385,000 419,650 MedQuest, Inc., 11.875% 08/15/12 500,000 540,000 PAR VALUE - ---------------------------------------------------------------------------------------------------------- PacifiCare Health Systems, Inc., 10.750% 06/01/09 $ 500,000 $ 576,250 Tenet Healthcare Corp., 6.375% 12/01/11 450,000 418,500 United Surgical Partners International, Inc., 10.000% 12/15/11 400,000 444,000 ----------- 4,637,422 ----------- HOTELS, CAMPS & LODGING - 1.7% Host Marriott LP, 9.500% 01/15/07 340,000 375,700 Inn of the Mountain Gods Resort & Casino, 12.000% 11/15/10 (a)(d) 200,000 209,000 Starwood Hotels & Resorts Worldwide, Inc., 7.875% 05/01/12 625,000 690,625 ----------- 1,275,325 ----------- OTHER SERVICES - 0.7% Corrections Corp. of America, 9.875% 05/01/09 300,000 336,000 Wackenhut Corrections Corp., 8.250% 07/15/13 (a) 160,000 169,600 ----------- 505,600 ----------- - ---------------------------------------------------------------------------------------------------------- TRANSPORTATION, COMMUNICATIONS, ELECTRIC, GAS & SANITARY SERVICES - 46.4% AEROSPACE - 0.5% TransDigm, Inc., 8.375% 07/15/11 (a) 200,000 213,500 Vought Aircraft Industries, Inc., 8.000% 07/15/11 (a) 160,000 161,600 ----------- 375,100 ----------- AIR TRANSPORTATION - 2.0% Delta Air Lines, Inc., 7.900% 12/15/09 470,000 385,400 Northwest Airlines, Inc., 9.875% 03/15/07 615,000 538,125 U.S. Airways, Inc., 10.375% 03/01/13 (m) 1,512,000 521,673 ----------- 1,445,198 ----------- BROADCASTING - 4.3% CanWest Media, Inc., 10.625% 05/15/11 585,000 666,900 Corus Entertainment, Inc., 8.750% 03/01/12 200,000 220,000 Emmis Communications Corp., (h) 03/15/11 (12.500% 03/15/06) 561,000 510,510 Sinclair Broadcast Group, Inc., 8.750% 12/15/11 250,000 273,750 Spanish Broadcasting System, Inc., 9.625% 11/01/09 80,000 83,400 TV Azteca SA de CV, 10.500% 02/15/07 745,000 765,487 See notes to investment portfolio. 14 INVESTMENT PORTFOLIO (CONTINUED) October 31, 2003 CORPORATE FIXED-INCOME BONDS & NOTES (CONTINUED) PAR VALUE - ---------------------------------------------------------------------------------------------------------- TRANSPORTATION, COMMUNICATIONS, ELECTRIC, GAS & SANITARY SERVICES (CONTINUED) BROADCASTING (CONTINUED) XM Satellite Radio Holdings, Inc., (h) 12/31/09 (14.000% 12/31/05) $ 474,415 $ 407,997 Videotron Ltee, 6.875% 01/15/14 (a) 235,000 240,875 ----------- 3,168,919 ----------- CABLE - 6.6% Charter Communications Holdings LLC: (h) 04/01/11 (9.920% 04/01/04) 1,580,000 1,192,900 10.000% 04/01/09 325,000 269,750 Comcast UK Cable Partners Ltd., 11.200% 11/15/07 750,000 750,000 CSC Holdings, Inc., 7.625% 04/01/11 300,000 305,250 DirecTV Holdings LLC, 8.375% 03/15/13 300,000 336,750 EchoStar DBS Corp., 6.375% 10/01/11 (a) 600,000 597,750 Insight Communications Co., Inc., (h) 02/15/11 (12.250% 02/15/06) 415,000 291,537 Insight Midwest LP, 9.750% 10/01/09 335,000 343,375 Northland Cable Television, Inc., 10.250% 11/15/07 600,000 597,000 Rogers Cable, Inc., 6.250% 06/15/13 165,000 165,594 ----------- 4,849,906 ----------- COMMUNICATION SERVICES - 1.8% Crown Castle International Corp.: (h) 05/15/11 (10.375% 05/15/04) 250,000 254,375 10.750% 08/01/11 350,000 392,875 Eircom Funding, 8.250% 08/15/13 (a) 75,000 81,751 SBA Communications Corp., 10.250% 02/01/09 440,000 391,600 SpectraSite, Inc., 8.250% 05/15/10 (a) 200,000 212,000 ----------- 1,332,601 ----------- ELECTRIC, GAS & SANITARY SERVICES - 3.3% Allied Waste North America, Inc.: 8.500% 12/01/08 505,000 552,975 10.000% 08/01/09 1,215,000 1,321,312 CMS Energy Corp., 8.900% 07/15/08 415,000 441,975 PG&E Corp., 6.875% 07/15/08 (a) 120,000 126,754 ----------- 2,443,016 ----------- PAR VALUE - ---------------------------------------------------------------------------------------------------------- ELECTRIC SERVICES - 6.8% AES Corp.: 9.000% 05/15/15 (a) $ 330,000 $ 353,513 9.500% 06/01/09 665,000 709,887 Beaver Valley Funding Corp., 9.000% 06/01/17 355,000 406,014 Caithness Coso Funding Corp., 9.050% 12/15/09 534,950 572,397 Calpine Corp.: 8.500% 02/15/11 445,000 315,950 8.625% 08/15/10 220,000 156,200 8.750% 07/15/13 (a) 315,000 287,438 Edison Mission Energy, 9.875% 04/15/11 300,000 277,500 Illinois Power Co., 11.500% 12/15/10 150,000 179,250 MSW Energy Holdings LLC, 8.500% 09/01/10 (a) 375,000 401,250 Nevada Power Co.: 9.000% 08/15/13 (a) 185,000 193,325 10.875% 10/15/09 340,000 377,400 Orion Power Holdings, Inc., 12.000% 05/01/10 150,000 173,250 PSE&G Energy Holdings, Inc., 8.625% 02/15/08 395,000 410,800 Tiers-Mir-2001-14, 7.200% 06/15/04 (a)(e) 410,000 200,900 ----------- 5,015,074 ----------- MOTOR, FREIGHT & WAREHOUSING - 0.6% QDI LLC: 12.000% 06/15/09 (a)(f) 167,717 7,547 12.500% 06/15/08 (f) 685,000 411,000 ----------- 418,547 ----------- PIPELINES - 4.7% Coastal Corp., 7.750% 06/15/10 645,000 543,412 Dynegy Holdings, Inc.: 8.750% 02/15/12 300,000 282,000 9.875% 07/15/10 (a) 160,000 171,200 10.125% 07/15/13 (a) 40,000 43,200 El Paso Production Holding, 7.750% 06/01/13 (a) 245,000 235,200 GulfTerra Energy Partners LP, 8.500% 06/01/10 275,000 299,750 Northwest Pipeline Corp., 8.125% 03/01/10 130,000 144,625 Sonat, Inc., 7.625% 07/15/11 565,000 476,012 Southern Natural Gas Co., 8.875% 03/15/10 250,000 275,000 Williams Companies, Inc.: 8.125% 03/15/12 765,000 822,375 8.625% 06/01/10 180,000 197,100 ----------- 3,489,874 ----------- See notes to investment portfolio. 15 INVESTMENT PORTFOLIO (CONTINUED) October 31, 2003 CORPORATE FIXED-INCOME BONDS & NOTES (CONTINUED) PAR VALUE - ---------------------------------------------------------------------------------------------------------- TRANSPORTATION, COMMUNICATIONS, ELECTRIC, GAS & SANITARY SERVICES (CONTINUED) POLLUTION CONTROL - 0.4% EnviroSource, Inc., 14.000% 12/15/08 (f) $ 273,663 $ 264,402 ----------- RADIOTELEPHONE COMMUNICATIONS - 5.5% ACC Escrow Corp., 10.000% 08/01/11 (a) 225,000 245,250 AirGate PCS, Inc., (h) 10/01/09 (13.500% 10/01/04) 129,000 87,075 Dobson Communications Corp., 8.875% 10/01/13 (a) 440,000 444,400 Nextel Communications, Inc., 9.375% 11/15/09 1,060,000 1,155,400 Nextel Partners, Inc., 11.000% 03/15/10 290,000 321,175 Rogers Cantel, Inc., 9.750% 06/01/16 735,000 858,113 Triton PCS, Inc., 8.750% 11/15/11 205,000 196,800 US Unwired, Inc., (h) 11/01/09 (13.375% 11/01/04) 800,000 532,000 Western Wireless Corp., 9.250% 07/15/13 200,000 208,500 ----------- 4,048,713 ----------- RAILROAD - 0.9% Kansas City Southern Railway Co., 7.500% 06/15/09 215,000 221,450 TFM SA de CV, 12.500% 06/15/12 380,000 418,000 ----------- 639,450 ----------- TELECOMMUNICATIONS - 7.4% Amkor Technology, Inc.: 9.250% 02/15/08 285,000 317,062 10.500% 05/01/09 270,000 290,925 Avaya, Inc., 11.125% 04/01/09 220,000 258,500 Carrier1 International SA, 13.250% 02/15/09 (e) 750,000 22,500 Cincinnati Bell, Inc., 8.375% 01/15/14 (a)(d) 320,000 321,800 Colt Telecom Group PLC, 12.000% 12/15/06 245,000 244,388 FairPoint Communications, Inc., 11.875% 03/01/10 175,000 204,750 Horizon PCS, Inc., 13.750% 06/15/11 (e) 415,000 95,450 Innova S. de R.L., 9.375% 09/19/13 (a) 100,000 99,625 Level 3 Communications, Inc., (h) 12/01/08 (10.500% 12/01/03) 355,000 326,600 PAR VALUE - ---------------------------------------------------------------------------------------------------------- Lucent Technologies, Inc., 6.450% 03/15/29 $ 335,000 $ 261,300 MCI Communications Corp.: 7.125% 06/15/27 (e) 120,000 99,000 7.500% 08/20/04 (e) 465,000 383,625 Qwest Capital Funding, Inc., 7.250% 02/15/11 810,000 747,225 Qwest Corp.: 8.875% 03/15/12 (a) 315,000 355,950 13.500% 12/15/10 (a) 595,000 696,150 Time Warner Telecom, Inc.: 9.750% 07/15/08 470,000 479,400 10.125% 02/01/11 230,000 236,900 ----------- 5,441,150 ----------- TRANSPORTATION SERVICES - 1.6% Allied Holdings, Inc., 8.625% 10/01/07 190,000 178,600 Petroleum Helicopters, Inc., 9.375% 05/01/09 530,000 569,750 Stena AB, 9.625% 12/01/12 255,000 277,950 Teekay Shipping Corp., 8.875% 07/15/11 150,000 167,250 ----------- 1,193,550 ----------- - ---------------------------------------------------------------------------------------------------------- WHOLESALE TRADE - 1.4% DURABLE GOODS - 1.4% Kinetic Concepts, Inc., 7.375% 05/15/13 (a) 120,000 123,300 Playtex Products, Inc., 9.375% 06/01/11 380,000 368,600 Steinway Musical Instruments, Inc., 8.750% 04/15/11 550,000 570,625 ----------- 1,062,525 ----------- TOTAL CORPORATE FIXED-INCOME BONDS & NOTES (cost of $94,293,779) 93,340,178 ----------- PREFERRED STOCKS - 3.1% SHARES - ---------------------------------------------------------------------------------------------------------- FINANCE, INSURANCE & REAL ESTATE - 0.9% REAL ESTATE - 0.9% iStar Financial, Inc.: 7.800% 13,000 336,782 7.875% 11,007 289,278 ----------- 626,060 ----------- - ---------------------------------------------------------------------------------------------------------- MANUFACTURING - 0.3% FOOD & KINDRED PRODUCTS - 0.1% Constellation Brands, Inc., 5.750% 2,425 71,537 ----------- See notes to investment portfolio. 16 INVESTMENT PORTFOLIO (CONTINUED) October 31, 2003 PREFERRED STOCKS (CONTINUED) SHARES VALUE - ---------------------------------------------------------------------------------------------------------- MANUFACTURING (CONTINUED) PRINTING & PUBLISHING - 0.2% PriMedia, Inc., 8.625% 30 2,760 9.200% 1,615 151,810 ----------- 154,570 ----------- - ---------------------------------------------------------------------------------------------------------- TRANSPORTATION, COMMUNICATIONS, ELECTRIC, GAS & SANITARY SERVICES - 1.9% BROADCASTING - 0.6% Spanish Broadcasting System, Inc., 10.750% (a) 430 432,150 ----------- CABLE - 1.2% CSC Holdings, Inc.: 11.125% 349 36,470 11.750% 7,979 831,811 ----------- 868,281 ----------- POLLUTION CONTROL - 0.1% EnviroSource, Inc., 7.250% (f) 929 106,835 ----------- TOTAL PREFERRED STOCKS (cost of $2,418,206) 2,259,433 ----------- CONVERTIBLE BONDS - 1.5% PAR - ---------------------------------------------------------------------------------------------------------- TRANSPORTATION, COMMUNICATIONS, ELECTRIC, GAS & SANITARY SERVICES - 1.5% TELECOMMUNICATIONS - 1.5% Colt Telecom Group PLC: 2.000% 03/29/06 (a) EUR 265,000 313,832 2.000% 12/16/06 (a) 130,000 153,955 Nortel Networks Corp., 4.250% 09/01/08 $ 720,000 682,049 ----------- TOTAL CONVERTIBLE BONDS (cost of $959,452) 1,149,836 ----------- COMMON STOCKS - 1.5% (I) SHARES - ---------------------------------------------------------------------------------------------------------- MANUFACTURING - 0.0% PRIMARY METAL - 0.0% Wheeling-Pittsburgh Corp. (e) 1 4 ----------- - ---------------------------------------------------------------------------------------------------------- TRANSPORTATION, COMMUNICATIONS, ELECTRIC, GAS & SANITARY SERVICES - 1.5% CABLE - 0.5% NTL, Inc. 5,942 366,800 Ono Finance PLC 750 1 ----------- 366,801 ----------- POLLUTION CONTROL - 0.8% EnviroSource, Inc. (f) 8,000 576,000 Fairlane Management Corp. (f)(j) 8,000 -- ----------- 576,000 ----------- SHARES VALUE - ---------------------------------------------------------------------------------------------------------- RADIOTELEPHONE COMMUNICATIONS - 0.2% Nextel Communications, Inc., Class A 6,196 $ 149,943 ----------- TOTAL COMMON STOCKS (cost of $1,266,375) 1,092,748 ----------- WARRANTS - 0.2% (I) UNITS - ---------------------------------------------------------------------------------------------------------- TRANSPORTATION, COMMUNICATIONS, ELECTRIC, GAS & SANITARY SERVICES - 0.2% BROADCASTING - 0.2% XM Satellite Radio Holdings, Inc.: Expires 12/31/09 70 102,550 Expires 03/15/10 (a) 600 12,600 ----------- 115,150 ----------- CABLE - 0.0% Cable Satisfaction International, Inc., Expires 03/01/05 (a) 970 10 Ono Finance PLC, Expires 05/31/09 (a) 175 2 ----------- 12 ----------- COMMUNICATION SERVICES - 0.0% UbiquiTel, Inc., Expires 04/15/10 (a) 525 5 ----------- MOTOR, FREIGHT & WAREHOUSING - 0.0% QDI LLC, Expires 01/15/07 (a)(j) 2,041 -- ----------- TELECOMMUNICATIONS - 0.0% AT&T Canada, Inc., Expires 08/15/07 (a)(f)(j) 250 -- Carrier1 International SA, Expires 02/19/09 (a)(e) 347 3 Horizon PCS, Inc., Expires 10/01/10 (a) 665 1 Jazztel PLC, Expires 07/15/10 (a)(j) 350 -- ----------- 4 ----------- TOTAL WARRANTS (cost of $105,737) 115,171 ----------- SHORT-TERM OBLIGATION - 3.5% PAR - ---------------------------------------------------------------------------------------------------------- Federal National Mortgage Association, 0.950% 11/03/03 (k) (cost of $2,588,863) $2,589,000 2,588,863 ----------- TOTAL INVESTMENTS - 136.6% (cost of $101,632,412) (l) 100,546,229 ----------- OTHER ASSETS & LIABILITIES, NET - (36.6)% (26,923,308) - ---------------------------------------------------------------------------------------------------------- Net Assets - 100.0% $73,622,921 =========== See notes to investment portfolio. 17
INVESTMENT PORTFOLIO (CONTINUED) October 31, 2003 NOTES TO INVESTMENT PORTFOLIO: - -------------------------------------------------------------------------------- (a) This security is exempt from registration under Rule 144A of the Securities Act of 1933 and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At October 31, 2003, the value of these securities amounted to $14,762,958, which represents 20.1% of net assets. (b) Zero coupon bond. (c) Interest rates on variable rate securities change periodically. The rate listed is as of October 31, 2003. (d) This security has been purchased on a delayed delivery basis. (e) As of October 31, 2003, the Fund held securities of certain issuers that have filed for bankruptcy protection under Chapter 11 representing 2.8% of net assets. This issuer is in default of certain debt covenants. Income is not being accrued. (f) Represents fair value as determined in good faith under the direction of the Board of Trustees. (g) The issuer is in default of certain debt covenants. Income is not being accrued. (h) Stepped coupon bond. Currently accruing at zero. Shown parenthetically is the next interest rate to be paid and the date the Fund will begin accruing this rate. (i) Non-income producing. (j) Security has no value. (k) Rate represents yield at date of purchase. (l) Cost for federal income tax purposes is $101,531,153. (m) Income is not being accrued on this security. As of October 31, 2003, the Fund had entered into the following forward currency exchange contracts: NET CONTRACTS IN EXCHANGE SETTLEMENT UNREALIZED TO DELIVER FOR DATE APPRECIATION - --------------------------------------------------------------- EUR 398,600 USD 466,692 12/08/03 $ 3,975 ------- ACRONYM NAME - --------------------------------------------------------------- EUR Euro USD United States Dollar See notes to financial statements. 18 STATEMENTS OF ASSETS AND LIABILITIES
NOVEMBER 30, OCTOBER 31, 2003(a) 2003 - ----------------------------------------------------------------------------------------------------------------------------- ASSETS: Investments, at cost $102,293,530 $101,632,412 ------------ ------------ Investments, at value $102,373,701 $100,546,229 Cash 677,763 366,906 Net unrealized appreciation on foreign forward currency contracts -- 3,975 Receivable for: Investments sold 877,355 1,542,884 Investments sold on a delayed delivery basis 1,200 161,250 Interest 2,048,517 2,225,362 Dividends 11,911 3,714 Deferred Trustees' compensation plan 6,011 6,011 Other assets 5,793 6 ------------ ------------ Total Assets 106,002,251 104,856,337 ------------ ------------ LIABILITIES: Net unrealized depreciation on foreign forward currency contracts 23,126 -- Payable for: Interest 258,540 175,359 Investments purchased 979,773 1,190,946 Investments purchased on a delayed delivery basis 611,779 701,800 Distributions 566,640 566,640 Investment advisory fee 50,913 49,560 Pricing and bookkeeping fees -- 7,734 Audit fee 49,852 32,366 Custody fee 3,619 3,000 Deferred Trustees' fees 6,011 6,011 Notes payable - short-term 14,800,000 14,800,000 Notes payable - long-term 13,700,000 13,700,000 ------------ ------------ Total Liabilities 31,050,253 31,233,416 ------------ ------------ NET ASSETS $ 74,951,998 $ 73,622,921 ============ ============ COMPOSITION OF NET ASSETS: Paid-in capital $141,241,495 $141,297,388 Overdistributed net investment income (546,000) (544,368) Accumulated net realized loss (65,801,148) (66,048,265) Net unrealized appreciation (depreciation) on: Investments 80,171 (1,086,183) Foreign currency translations (22,520) 4,349 ------------ ------------ NET ASSETS $ 74,951,998 $ 73,622,921 ============ ============ Shares outstanding 20,986,678 20,986,678 ------------ ------------ Net asset value per share $ 3.57 $ 3.51 ============ ============ (a) The Fund has changed its fiscal year end from October 31 to November 30. See notes to financial statements. 19
STATEMENTS OF OPERATIONS
ONE MONTH ENDED YEAR ENDED NOVEMBER 30, OCTOBER 31, 2003 (a) 2003 - ----------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Interest $ 653,987 $ 8,147,493 Dividends 11,912 156,552 Other income -- 43,944 ------------ ------------ Total Investment Income (net of foreign taxes withheld of $99 and $0, respectively) 665,899 8,347,989 ------------ ------------ EXPENSES: Investment advisory fee 67,195 640,668 Pricing and bookkeeping fees 4,141 45,964 Trustees' fees 604 8,393 Custody fee 1,751 14,026 Audit fee 17,736 42,094 Other expenses 9,271 147,237 ------------ ------------ Total Operating Expenses 100,698 898,382 Custody earnings credit (324) (1,329) ------------ ------------ Net Operating Expenses 100,374 897,053 Interest expense 84,832 1,335,757 ------------ ------------ Net Expenses 185,206 2,232,810 ------------ ------------ Net Investment Income 480,693 6,115,179 ------------ ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: Net realized gain (loss) on: Investments 265,371 (6,254,963) Foreign currency transactions 10,168 (34,862) ------------ ------------ Net realized gain (loss) 275,539 (6,289,825) ------------ ------------ Net change in unrealized appreciation/depreciation on: Investments 1,166,354 21,905,100 Foreign currency translations (26,869) 4,349 ------------ ------------ Net change in unrealized appreciation/depreciation 1,139,485 21,909,449 ------------ ------------ Net Gain 1,415,024 15,619,624 ------------ ------------ Net Increase in Net Assets from Operations $ 1,895,717 $ 21,734,803 ------------ ------------ (a) The Fund has changed its fiscal year end from October 31 to November 30. See notes to financial statements. 20
STATEMENTS OF CHANGES IN NET ASSETS
ONE MONTH ENDED YEAR ENDED OCTOBER 31, NOVEMBER 30, ------------------------------ INCREASE (DECREASE) IN NET ASSETS: 2003 (a) 2003 2002 - ----------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income $ 480,693 $ 6,115,179 $ 7,866,298 Net realized gain (loss) on investments and foreign currency transactions 275,539 (6,289,825) (23,413,598) Net change in unrealized appreciation/depreciation on investments and foreign currency translations 1,139,485 21,909,449 8,437,250 ------------ ------------ ------------ Net Increase (Decrease) from Operations 1,895,717 21,734,803 (7,110,050) ------------ ------------ ------------ DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (566,640) (6,335,103) (7,465,282) Return of capital -- (439,949) (297,562) ------------ ------------ ------------ Total Distributions Declared to Shareholders (566,640) (6,775,052) (7,762,844) ------------ ------------ ------------ SHARE TRANSACTIONS: Distributions reinvested -- 528,920 653,667 ------------ ------------ ------------ Total Increase (Decrease) in Net Assets 1,329,077 15,488,671 (14,219,227) NET ASSETS: Beginning of period 73,622,921 58,134,250 72,353,477 ------------ ------------ ------------ End of period (including overdistributed net investment income of $(546,000), $(544,368) and $(401,061), respectively) $ 74,951,998 $ 73,622,921 $ 58,134,250 ============ ============ ============ CHANGES IN SHARES: Issued for distributions reinvested -- 164,258 184,393 ============ ============ ============ (a) The Fund has changed its fiscal year end from October 31 to November 30. See notes to financial statements. 21
STATEMENTS OF CASH FLOWS
ONE MONTH ENDED YEAR ENDED NOVEMBER 30, OCTOBER 31, INCREASE (DECREASE) IN CASH: 2003 (a) 2003 - ----------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net investment income $ 480,693 $ 6,115,179 Adjustments to reconcile net investment income to net cash provided by operating activities: Purchase of investment securities (8,022,788) (59,155,213) Proceeds from disposition of investment securities 7,108,959 56,964,157 Purchase (sale) of short-term investments, net 543,049 (1,096,956) Net realized gain (loss) due to foreign currency transactions 10,168 (34,862) Decrease in interest and dividend receivable 168,648 172,797 Increase in other assets (5,787) (1,089) Increase (decrease) in receivable for investments sold 825,579 (1,386,759) Increase (decrease) in payable for investments purchased (301,194) 1,459,121 Increase in accrued expenses and other liabilities 11,724 8,550 Net amortization/accretion of income (24,735) (104,775) ----------- ----------- Net cash provided by operating activities 794,316 2,940,150 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase in notes payable -- 4,000,000 Increase (decrease) in interest payable 83,181 (383,125) Distributions paid in cash (566,640) (6,241,697) ----------- ----------- Net cash used by financing activities (483,459) (2,624,822) ----------- ----------- Net increase in cash 310,857 315,328 CASH: Beginning of period 366,906 51,578 ----------- ----------- End of period $ 677,763 $ 366,906 =========== ===========
Supplemental disclosure of cash flow information: Non-cash financing activities not included herein consist of reinvestment of distributions of $0 and $528,920, respectively. (a) The Fund has changed its fiscal year end from October 31 to November 30. See notes to financial statements. 22 NOTES TO FINANCIAL STATEMENTS November 30, 2003 NOTE 1. 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. INVESTMENT GOAL The Fund seeks high current income and total return by investing primarily in high yield fixed income securities in lower-rated categories. FUND SHARES The Fund may issue an unlimited number of shares. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. SECURITY VALUATION Debt securities generally are valued by a pricing service approved by the Fund's Board of Trustees, based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as broker quotes. Certain securities, which tend to be more thinly traded and of lesser quality, are priced based on fundamental analysis of the financial condition of the issuer and the estimated value of any collateral. Valuations developed through pricing techniques may vary from the actual amounts realized upon sale of the securities, and the potential variation may be greater for those securities valued using fundamental analysis. Debt securities for which quotations are readily available are valued at an over-the-counter or exchange bid quotation. Equity securities are valued at the last sale price at the close of the principal exchange on which they trade. Unlisted securities or listed securities for which there were no sales during the day are valued at the closing bid price on such exchanges or over-the-counter markets. Short-term obligations maturing within 60 days are valued at amortized cost, which approximates market value. Forward currency exchange contracts are valued at the prevailing forward exchange rate of the underlying currencies. Foreign securities are generally valued at the closing price on the foreign exchange or market on which they trade. If any foreign share prices are not readily available as a result of limited share activity, the securities are valued at the last sale price of the local shares in the principal market in which such securities are normally traded. Investments for which market quotations are not readily available, which tend to be more thinly traded and of lesser quality, are valued at fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Foreign markets close each day at various times prior to the close of the New York Stock Exchange ("NYSE"). Foreign currency exchange rates are generally determined prior to the close of the NYSE at 12:00 p.m. Eastern (U.S.) time. Occasionally, events affecting the value of a foreign security may occur subsequent to the close of the exchange or market which would not be reflected in the computation of the Fund's net asset value. In such an event, the foreign security will be valued at the fair value. SECURITY TRANSACTIONS Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS Forward foreign currency exchange contracts are agreements to exchange one currency for another at a future date at a specified price. These contracts are used to minimize the exposure to foreign exchange rate fluctuations during the period between trade and settlement date of the contracts. The Fund may utilize forward foreign currency exchange contracts in connection with the settlement of purchases and sales of securities. The Fund may also enter into these contracts to hedge certain other foreign currency denominated assets. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge a Fund's investments against currency fluctuations. Forward currency contracts are valued daily at the current exchange rate of the underlying currency, resulting in unrealized gains (losses) which become realized at the time the foreign currency contracts are closed or mature. Realized and unrealized gains (losses) arising from such transactions are included in net realized and unrealized gains (losses) on foreign currency transactions. The use of forward currency contracts does not eliminate fluctuations in the prices of the Fund's portfolio securities. While the maximum potential loss from such contracts is the aggregate face value in U.S. dollars at the time the contract was opened, exposure is typically limited to the change in value of the contract (in U.S. dollars) over the period it remains open. A fund could also be exposed to risk if the 23 NOTES TO FINANCIAL STATEMENTS (CONTINUED) November 30, 2003 counterparties of the contracts are unable to fulfill the terms of the contracts. The Fund's custodian will set aside cash or liquid portfolio securities equal to the amount of the forward currency contract commitment in a separate account. REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions with institutions that the Fund's investment advisor has determined are creditworthy. The Fund, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral securities are marked-to-market daily to ensure that their market value is at least equal, at all times, to the repurchase price. (In the event that the market value of the collateral securities declines below the repurchase price of the repurchase agreement, additional securities will be required to be segregated.) A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty, including possible delays or restrictions upon a Fund's ability to dispose of the underlying securities, and a possible decline in the value of the underlying securities during the period while the Fund seeks to assert its rights. RESTRICTED SECURITIES Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from registration. In some cases, the issuer of restricted securities has agreed to register such securities for resale at the issuer's expense either upon demand by the Fund or in connection with another registered offering of the securities. Many restricted securities may be resold in the secondary market in transactions exempt from registration. Such restricted securities may be determined to be liquid under criteria established by the Board of Trustees. The Fund will not incur any registration costs upon such resale. DELAYED DELIVERY SECURITIES The Fund may trade securities on other than normal settlement terms, including securities purchased or sold on a "when-issued" basis. 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. The Fund's custodian will set aside cash or liquid portfolio securities equal to the amount of the delayed delivery commitment in a separate account. INCOME RECOGNITION Interest income is recorded on the accrual basis. Premium and discount are amortized and accreted, respectively, on all debt securities. Corporate actions and dividend income are recorded on the ex-date except for certain foreign securities which are recorded as soon after ex-date as the Fund becomes aware of such, net of non-reclaimable tax withholdings. The value of additional securities received as an income payment is recorded as income and as the cost basis of such securities. FOREIGN CURRENCY TRANSACTIONS The values of all assets and liabilities quoted in foreign currencies are translated into U.S. dollars at that day's exchange rates. Net realized and unrealized gains (losses) on foreign currency transactions includes gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes. The Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations are included with the net realized and unrealized gains (losses) on investments. FEDERAL INCOME TAX STATUS The Fund intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended, by distributing substantially all of its taxable or tax-exempt income, if any, for its tax year, and as such will not be subject to federal income taxes. In addition, by distributing in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, the Fund will not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded. DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders are recorded on ex-date. Net realized capital gains, if any, are distributed at least annually. Income and capital gains dividends are determined in accordance with income tax regulations which may differ from GAAP. STATEMENT OF CASH FLOWS The Fund is required to disclose a Statement of Cash Flows due to its average debt outstanding during the year. 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 within the Fund's Statement of Assets and Liabilities and represents cash on hand at its custodian bank and does not include any short-term investments. NOTE 3. FEDERAL TAX INFORMATION The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to a Fund's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the one month ended November 30, 2003 and the year ended October 31, 2003, permanent differences resulting primarily 24 NOTES TO FINANCIAL STATEMENTS (CONTINUED) November 30, 2003 from differing treatments for discount accretion/premium amortization on debt securities, distributions in excess, foreign currency transactions and market discount were identified and reclassified among the components of the Fund's net assets as follows: OVERDISTRIBUTED ACCUMULATED NET INVESTMENT NET REALIZED PAID-IN INCOME LOSS CAPITAL --------------- ------------ ------- November 30, 2003 $84,315 $ (28,422) $ (55,893) October 31, 2003 76,617 2,025,961 (2,102,578) Net investment income and net realized gains (losses), as disclosed on the Statement of Operations, and net assets were not affected by this reclassification. The tax character of distributions paid during the one month ended November 30, 2003 and the years ended October 31, 2003 and October 31, 2002 was as follows: NOVEMBER 30, OCTOBER 31, OCTOBER 31, 2003 2003 2002 ------------- ----------- ---------- Distributions paid from: Ordinary Income* $566,640 $6,335,103 $7,465,282 Tax Return of Capital -- 439,949 297,562 Long-Term Capital Gains -- -- -- * For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. As of November 30, 2003 and October 31, 2003, the components of distributable earnings on a tax basis were as follows: UNDISTRIBUTED UNDISTRIBUTED NET UNREALIZED ORDINARY LONG-TERM APPRECIATION INCOME CAPITAL GAINS (DEPRECIATION)* ------------- ------------- --------------- November 30, 2003 $-- $-- $ 160,563 October 31, 2003 -- -- (984,551) * The difference between book-basis and tax-basis net unrealized appreciation (depreciation) is primarily due to discount accretion/premium amortization on debt securities. Unrealized appreciation (depreciation) at November 30, 2003 and October 31, 2003, based on cost of investments for federal income tax purposes was: NOVEMBER 30, OCTOBER 31, 2003 2003 ----------- ----------- Unrealized appreciation $ 7,459,655 $ 7,343,226 Unrealized depreciation (7,299,700) (8,328,150) ----------- ----------- Net unrealized appreciation (depreciation) $ 159,955 $ (984,924) ----------- ----------- The following capital loss carryforwards are available to reduce taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code: NOVEMBER 30, 2003 - --------------------------------------------------------- YEAR OF CAPITAL LOSS EXPIRATION CARRYFORWARD ----------------- ----------------------- 2006 $ 3,034,960 2007 10,437,671 2008 22,694,029 2009 23,203,433 2010 6,431,055 ----------- $65,801,148 =========== OCTOBER 31, 2003 - --------------------------------------------------------- YEAR OF CAPITAL LOSS EXPIRATION CARRYFORWARD ----------------- ----------------------- 2007 $ 3,282,077 2008 10,437,671 2009 22,694,029 2010 23,203,433 2011 6,431,055 ----------- $66,048,265 =========== Capital loss carryforwards of $247,117 and $2,102,577 were utilized and/or expired during the one month ended November 30, 2003 and the year ended October 31, 2003, respectively, for the Fund. Expired capital loss carryforwards are recorded as a reduction of paid-in capital. NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES On April 1, 2003, Colonial Management Associates, Inc., the previous investment advisor to the Fund, merged into Columbia Management Advisors, Inc. ("Columbia"), formerly known as Columbia Management Co., an indirect, wholly-owned subsidiary of FleetBoston Financial Corporation. As a result of the merger, Columbia now serves as the Fund's investment advisor. The merger did not change the way the Fund is managed, the investment personnel assigned to manage the Fund or the fees paid by the Fund. INVESTMENT ADVISORY FEE Columbia is the investment advisor to the Fund and provides administrative and other services. Columbia receives a monthly fee at the annual rate of 0.65% of the Fund's average weekly net assets. In addition, the Fund shall pay Columbia a monthly fee of 20% of the Fund's monthly "leverage income" (as that term is defined in the management contract). In the event that the Fund's monthly leverage income is less than zero then Columbia shall pay the Fund 20% of the Fund's monthly 25 NOTES TO FINANCIAL STATEMENTS (CONTINUED) November 30, 2003 leverage income. For the one month ended November 30, 2003 and the year ended October 31, 2003, the fees paid to Columbia relating to leverage income amount to $27,251 and $207,576, which represents 0.44% and 0.31%, respectively, annually of the Fund's average daily net assets. PRICING AND BOOKKEEPING FEES Columbia is responsible for providing pricing and bookkeeping services to the Fund under a pricing and bookkeeping agreement. Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated those functions to State Street Corporation ("State Street"). Under its pricing and bookkeeping agreement with the Fund, Columbia receives from the Fund an annual flat fee of $10,000 paid monthly, and in any month that the Fund's average weekly net assets exceed $50 million, an additional monthly fee. The additional fee rate is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. This rate is applied to the average weekly net assets of the Fund for that month. The Fund also pays additional fees for pricing services. For the one month ended November 30, 2003 and the year ended October 31, 2003, the effective annualized pricing and bookkeeping fee rate was 0.07%. Columbia pays the total fees collected to State Street under the Outsourcing Agreement. FEES PAID TO OFFICERS AND TRUSTEES The Fund pays no compensation to its officers, all of whom are employees of Columbia or its affiliates. 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. CUSTODY CREDITS The Fund has an agreement with its custodian bank under which custody fees may be reduced by balance credits. The Fund could have invested a portion of the assets utilized in connection with the expense offset arrangement in an income-producing asset if it had not entered into such an agreement. NOTE 5. PORTFOLIO INFORMATION PURCHASES AND SALES OF SECURITIES For the one month ended November 30, 2003 and the year ended October 31, 2003, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were: PURCHASES SALES ----------- ----------- November 30, 2003 $ 8,022,788 $ 7,108,959 October 31, 2003 59,155,213 56,964,157 NOTE 6. LOAN AGREEMENT At November 30, 2003 and October 31, 2003, the Fund had term loans and a revolving loan outstanding with Bank of America NA, together totaling $28,500,000 for each period. These loans are comprised of a $13,700,000 term loan which bears interest at 3.12% per annum, due August 26, 2005, a $9,700,000 term loan which bears interest at 4.37% per annum, due June 13, 2004, and a $5,100,000 revolving loan, due August 26, 2004. The revolving loan is a floating rate loan which had a weighted average interest rate of 1.97% and 3.59% at November 30, 2003 and October 31, 2003, respectively. At November 30, 2003 and October 31, 2003, the average daily loan balance was $28,500,000 and $26,193,151 at a weighted average interest rate of 3.57% and 5.06%, respectively. The Fund is subject to certain covenants including, but not limited to, requirements with respect to asset coverage, portfolio diversification and liquidity. NOTE 7. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES FOREIGN SECURITIES There are certain additional risks involved when investing in foreign securities that are not inherent with investments in domestic securities. These risks may involve foreign currency exchange rate fluctuations, adverse political and economic developments and the possible prevention of currency exchange or other foreign governmental laws or restrictions. In addition, the liquidity of foreign securities may be more limited than that of domestic securities. HIGH-YIELD SECURITIES Investing in high-yield securities may involve greater credit risk and considerations not typically associated with investing in U.S. Government bonds and other higher quality fixed income securities. These securities are non-investment grade securities, often referred to as "junk bonds." Economic downturns and industry events may disrupt the high yield market and impair the ability of issuers to repay principal and interest. Also, an increase in interest rates would likely have an adverse impact on the value of such obligations. Moreover, high-yield securities may be less liquid due to the extent that there is no established retail secondary market and because of a decline in the value of such securities. 26 FINANCIAL HIGHLIGHTS Selected data for a share outstanding throughout each period is as follows:
ONE MONTH ENDED YEAR ENDED OCTOBER 31, NOVEMBER 30, ----------------------------------------------------------------- 2003 (a) 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 3.51 $ 2.79 $ 3.51 $ 4.83 $ 5.97 $ 6.20 -------- -------- -------- -------- -------- --------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.02(b) 0.29(b) 0.38(b)(c) 0.51(b) 0.67 0.70 Net realized and unrealized gain (loss) on investments and foreign currency 0.07 0.75 (0.73)(c) (1.26) (1.10) (0.23) -------- -------- -------- -------- -------- --------- Total from Investment Operations 0.09 1.04 (0.35) (0.75) (0.43) 0.47 -------- -------- -------- -------- -------- --------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.03) (0.30) (0.36) (0.55) (0.69) (0.70) In excess of net investment income -- -- -- -- (0.02) -- Return of capital -- (0.02) (0.01) (0.02) -- -- -------- -------- -------- -------- -------- --------- Total Distributions Declared to Shareholders (0.03) (0.32) (0.37) (0.57) (0.71) (0.70) ======== ======== ======== ======== ======== ========= NET ASSET VALUE, END OF PERIOD $ 3.57 $ 3.51 $ 2.79 $ 3.51 $ 4.83 $ 5.97 ======== ======== ======== ======== ======== ========= Market price per share $ 3.50 $ 3.65 $ 2.79 $ 3.49 $ 4.63 $ 5.63 ======== ======== ======== ======== ======== ========= Total return -- based on market value (d) (3.40)%(e) 44.56% (10.43)% (14.26)% (6.12)% (7.89)% ======== ======== ======== ======== ======== ========= RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Operating expenses (f) 1.63%(g) 1.35% 1.25% 1.31% 0.92% 0.89% Interest and amortization of deferred debt issuance expenses 1.38%(g) 2.00% 2.73% 2.98% 2.79% 2.48% Total expenses (f) 3.01%(g) 3.35% 3.98% 4.29% 3.71% 3.37% Net investment income (f) 7.82%(g) 9.18% 11.38%(c) 11.96% 11.88% 10.82% Portfolio turnover rate 7%(e) 64% 54% 52% 42% 44% Net assets, end of period (000's) $ 74,952 $ 73,623 $ 58,134 $ 72,353 $ 98,333 $ 121,018
(a) The Fund has changed its fiscal year end from October 31 to November 30. (b) Per share data was calculated using average shares outstanding during the period. (c) Effective November 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and accreting discount on all debt securities. The effect of this change for the year ended October 31, 2002, was to increase the net investment income per share by $0.02, increase the net realized and unrealized loss per share by $0.02 and increase the ratio of net investment income to average net assets from 10.92% to 11.38%. Per share data and ratios for periods prior to October 31, 2002 have not been restated to reflect this change in presentation. (d) Total return at market value assuming all distributions reinvested at prices calculated in accordance with the Dividend Reinvestment Plan. (e) Not annualized. (f) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (g) Annualized. 27 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for a share outstanding throughout each period is as follows:
YEAR ENDED OCTOBER 31, ----------------------------------------------------------------- 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 7.27 $ 6.89 $ 6.62 $ 6.28 $ 6.92 -------- -------- -------- -------- --------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.70 0.70 0.70 0.70 0.69 Net realized and unrealized gain (loss) on investments and foreign currency (1.08) 0.38 0.26 0.34 (0.58) -------- -------- -------- -------- --------- Total from Investment Operations (0.38) 1.08 0.96 1.04 0.11 -------- -------- -------- -------- --------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.69) (0.70) (0.69) (0.70) (0.75) -------- -------- -------- -------- --------- NET ASSET VALUE, END OF PERIOD $ 6.20 $ 7.27 $ 6.89 $ 6.62 $ 6.28 ======== ======== ======== ======== ========= Market price per share $ 6.81 $ 7.56 $ 7.13 $ 6.88 $ 5.75 ======== ======== ======== ======== ========= Total return-- based on market value (a) (0.74)% 16.97% 14.62% 33.00% (2.80)% ======== ======== ======== ======== ========= RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Operating expenses (b) 0.88% 0.89% 0.98% 0.95% 0.97% Interest and amortization of deferred debt issuance expenses 2.11% 1.96% 2.07% 1.94% 1.91% Total expenses (b) 2.99% 2.85% 3.05% 2.89% 2.88% Net investment income (b) 9.70% 9.63% 10.11% 10.76% 10.40% Portfolio turnover rate 69% 92% 92% 92% 160% Net assets, end of period (000's) $124,480 $107,774 $ 99,925 $ 93,984 $ 87,519
(a) Total return at market value assuming all distributions reinvested at prices calculated in accordance with the Dividend Reinvestment Plan. (b) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%, except for the year ended 1997 which had a 0.01% impact. 28 FINANCIAL HIGHLIGHTS (CONTINUED) LOAN AGREEMENT ASSET COVERAGE REQUIREMENTS ASSET COVERAGE TOTAL AMOUNT PER $1,000 OF DATE OUTSTANDING INDEBTEDNESS -------- ----------- ------------ 11/30/03 $28,500,000 $3,630 10/31/03 28,500,000 3,583 10/31/02 24,500,000 3,373 10/31/01 30,500,000 3,372 10/31/00 47,300,000 3,079 10/31/99 47,300,000 3,558 10/31/98 47,300,000 3,632 10/31/97 27,400,000 4,933 10/31/96 27,400,000 4,647 10/31/95 27,400,000 4,430 10/31/94 27,400,000 4,194 29 REPORT OF INDEPENDENT AUDITORS TO THE TRUSTEES AND THE SHAREHOLDERS OF COLONIAL INTERMEDIATE HIGH INCOME FUND In our opinion, the accompanying statements of assets and liabilities, including the investment portfolios, and the related statements of operations, cash flows and changes in net assets, and the financial highlights present fairly, in all material respects, the financial position of Colonial Intermediate High Income Fund (the "Fund") at November 30, 2003 and October 31, 2003, and the results of its operations, its cash flows, the changes in its net assets, and its financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and 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 auditing standards generally accepted in the United States of America, 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 securities at November 30, 2003 and October 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts January 12, 2004 30 RESULTS OF ANNUAL MEETING OF SHAREHOLDERS On May 21, 2003, the Annual Meeting of Shareholders of the Fund was held to conduct a vote for or against the approval of the following Item listed on the Fund's Proxy Statement for said Meeting. On February 28, 2003, the record date for the Meeting, the Fund had 20,867,809 shares outstanding. The votes cast were as follows: PROPOSAL 1. ELECTION OF TRUSTEES: FOR WITHHELD - ----------------------------- --------------- ------------- Douglas A. Hacker 18,228,140 433,268 Janet Langford Kelly 18,250,790 410,618 John J. Neuhauser 18,250,534 410,874 Joseph R. Palombo 18,235,184 426,224 Mr. Hacker, Ms. Kelly, Mr. Neuhauser and Mr. Palombo were elected as Trustees of the Fund. Each will serve for three years or until a successor is elected. The Board of Trustees is divided into the following three classes, each with a term expiring in the indicated year: 2004 2005 2006 ------------ ---------- ------------- Mr. Macera* Mr. Lowry Mr. Hacker Mr. Stitzel Mr. Mayer Ms. Kelly Mr. Theobald Mr. Nelson Mr. Neuhauser Ms. Verville Mr. Palombo *Effective June 18, 2003, Mr. Macera retired from the Board of Trustees. 31 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 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 PFPC Inc., the Plan agent, by mail at P.O. Box 43027, Providence, RI 02940-3027 or by phone at 1-800-331-1710. 32 TRUSTEES Effective October 8, 2003, Patrick J. Simpson and Richard L. Woolworth were appointed to the Board of Trustees of the Fund. Messrs. Simpson and Woolworth had been directors of 15 Columbia Funds and 20 funds in the CMG Fund Trust. Also effective October 8, 2003, the incumbent trustees of the Fund were elected as directors of the 15 Columbia Funds and as trustees of the 20 funds in the CMG Fund Trust. The new combined Board of Trustees/Directors of the Fund now oversees 119 funds in the Columbia Funds Complex (including the former Liberty Funds, former Stein Roe Funds, Columbia Funds and CMG Funds). Several of these trustees/directors also serve on the Boards of other funds in the Columbia Funds Complex. The Trustees/Directors serve terms of indefinite duration. The names, addresses and ages of the Trustees/Directors and officers of the Funds in the Columbia Funds complex, the year each was first elected or appointed to office, their principal business occupations during at least the last five years, the number of portfolios overseen by each Trustee/Director and other directorships they hold are shown below. Each officer listed below serves as an officer of each Fund in the Columbia Funds Complex.
Number of portfolios in Year first Columbia Funds elected or Complex Other Position appointed Principal occupation(s) overseen by directorships Name, address and age with Funds to office1 during past five years Trustee/Director held - ------------------------------------------------------------------------------------------------------------------------------------ Disinterested Trustees - ---------------------- Douglas A. Hacker Trustee 1996 Executive Vice President-Strategy of United Airlines 119 Orbitz (age 48) (airline) since December, 2002 (formerly President (online P.O. Box 66100 of UAL Loyalty Services (airline) from September, travel Chicago, IL 60666 2001 to December, 2002; Executive Vice President company) and Chief Financial Officer of United Airlines from March, 1993 to September, 2001) Janet Langford Kelly Trustee 1996 Chief Administrative Officer and Senior Vice 119 None (age 45) President, Kmart Holding Corporation (consumer goods) 3100 West Beaver Road since September, 2003 (formerly Executive Vice Troy, MI 48084-3163 President-Corporate Development and Administration, General Counsel and Secretary, Kellogg Company (food manufacturer), from September, 1999 to August, 2003; Senior Vice President, Secretary and General Counsel, Sara Lee Corporation (branded, packaged, consumer- products manufacturer) from January, 1995 to September, 1999). Richard W. Lowry Trustee 1995 Private Investor since August, 1987 (formerly 124(3) None (age 67) Chairman and Chief Executive Officer, U.S. Plywood 10701 Charleston Drive Corporation (building products manufacturer)). Vero Beach, FL 32963 Charles R. Nelson Trustee 1981 Professor of Economics, University of Washington, 119 None (age 61) since January, 1976; Ford and Louisa Van Voorhis Department of Economics Professor of Political Economy, University of University of Washington Washington, since September, 1993; Director, Seattle, WA 98195 Institute for Economic Research, University of Washington, since September, 2001; Adjunct Professor of Statistics, University of Washington, since September, 1980; Associate Editor, Journal of Money Credit and Banking, since September, 1993; consultant on econometric and statistical matters. John J. Neuhauser Trustee 1985 Academic Vice President and Dean of Faculties 122(3,4) Saucony, (age 60) since August, 1999, Boston College (formerly Inc. 84 College Road Dean, Boston College School of Management from (athletic Chestnut Hill, MA 02467-3838 footwear); September, 1977 to September, 1999). SkillSoft Corp. (e-learning) Patrick J. Simpson Trustee 2000 Partner, Perkins Coie L.L.P. 119 None (age 58) 1211 S.W. 5th Avenue Suite 1500 Portland, OR 97204 33 TRUSTEES (CONTINUED) Number of portfolios in Year first Columbia Funds elected or Complex Other Position appointed Principal occupation(s) overseen by directorships Name, address and age with Funds to office1 during past five years Trustee/Director held - ------------------------------------------------------------------------------------------------------------------------------------ Disinterested Trustees (continued) - ---------------------------------- Thomas E. Stitzel Trustee 1998 Business Consultant since 1999 (formerly Professor 119 None (age 67) of Finance from 1975 to 1999, College of Business, 2208 Tawny Woods Place Boise State University); Chartered Financial Analyst. Boise, ID 83706 Thomas C. Theobald Trustee 1996 Managing Director, William Blair Capital Partners 119 Anixter (age 66) and (private equity investing) since September, 1994. International 27 West Monroe Street, Chairman of (network Suite 3500 the Board6 support Chicago, IL 60606 equipment distributor), Jones Lang LaSalle (real estate management services) and MONY Group (life insurance) Anne-Lee Verville Trustee 1998 Author and speaker on educational systems needs 120(4) Chairman of (age 58) (formerly General Manager, Global Education the Board of 359 Stickney Hill Road Industry, IBM Corporation (computer and technology) Directors, Hopkinton, NH 03229 from 1994 to 1997, and President, Applications Enesco Group, Solutions Division from 1991 to 1994, IBM Corporation Inc. (global education and global applications)). (designer, importer and distributor of giftware and collectibles) Richard L. Woolworth Trustee 1991 Retired Since December 2003 (formerly Chairman 119 NW Natural (age 62) and Chief Executive Officer, The Regence Group (a natural 100 S.W. Market Street (regional health insurer); Chairman and Chief gas service #1500 Executive Officer, provider) BlueCross BlueShield Portland, OR 97207 of Oregon; Certified Public Accountant, Arthur Young & Company). 34 TRUSTEES (CONTINUED) Number of portfolios in Year first Columbia Funds elected or Complex Other Position appointed Principal occupation(s) overseen by directorships Name, address and age with Funds to office1 during past five years Trustee/Director held - ------------------------------------------------------------------------------------------------------------------------------------ Interested Trustees - ------------------- William E. Mayer2 Trustee 1994 Managing Partner, Park Avenue Equity Partners 121(3) Lee (age 63) (private equity) since February, 1999 (formerly Enterprises 399 Park Avenue Founding Partner, Development Capital LLC from (print Suite 3204 November 1996 to February, 1999; Dean and media), WR New York, NY 10022 Professor, College of Business and Management, Hambrecht + University of Maryland from October, 1992 to Co. November, 1996). (financial service provider) and First Health (healthcare) Joseph R. Palombo2 Trustee 2000 Executive Vice President and Chief Operating 120(5) None (age 50) and Officer of Columbia Management Group, Inc. since One Financial Center President December, 2001 and Director, Executive Vice Boston, MA 02111 President and Chief Operating Officer of Columbia Management Advisors, Inc. (Advisor) since April, 2003 (formerly Chief Operations Officer of Mutual Funds, Liberty Financial Companies, Inc. from August, 2000 to November, 2001; Executive Vice President of Stein Roe & Farnham Incorporated (Stein Roe) from April, 1999 to April, 2003; Director of Colonial Management Associates, Inc. (Colonial) from April, 1999 to April, 2003; Director of Stein Roe from September, 2000 to April, 2003) President of Columbia Funds and Galaxy Funds since February, 2003 (formerly Vice President from September 2002 to February 2003); Manager of Columbia Floating Rate Limited Liability Company since October, 2000; (formerly Vice President of the Columbia Funds from April, 1999 to August, 2000; Chief Operating Officer and Chief Compliance Officer, Putnam Mutual Funds from December, 1993 to March, 1999).
1 In December 2000, the boards of each of the former Liberty Funds and former Stein Roe Funds were combined into one board of trustees responsible for the oversight of both fund groups (collectively, the "Liberty Board"). In October 2003, the trustees on the Liberty Board were elected to the boards of the Columbia Funds (the "Columbia Board") and of the CMG Fund Trust (the "CMG Funds Board"); simultaneous with that election, Patrick J. Simpson and Richard L. Woolworth, who had been directors on the Columbia Board and trustees on the CMG Funds Board, were appointed to serve as trustees of the Liberty Board. The date shown is the earliest date on which a trustee/director was elected or appointed to the board of a Fund in the Columbia Funds complex. 2 Mr. Mayer is an "interested person" (as defined in the Investment Company Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht + Co. Mr. Palombo is an interested person as an employee of the Advisor. 3 Messrs. Lowry, Neuhauser and Mayer each also serve as a director/trustee of the All-Star Funds, currently consisting of 2 funds, which are advised by an affiliate of the Advisor. 4 Mr. Neuhauser and Ms. Verville also serve as disinterested directors of Columbia Management Multi-Strategy Hedge Fund, LLC, which is advised by the Advisor. 5 Mr. Palombo also serves as an interested director of Columbia Management Multi-Strategy Hedge Fund, LLC, which is advised by the Advisor. 6 Mr. Theobald was appointed as Chairman of the Board effective December 10, 2003. Prior to that date, Mr. Palombo was Chairman of the Board. 35 OFFICERS
Year first Position with elected or Columbia appointed Name, address and age funds to office Principal occupation(s) during past five years - ------------------------------------------------------------------------------------------------------------------------------------ Officers Vicki L. Benjamin Chief 2001 Controller of the Columbia Funds and of the Liberty All-Star (Age 42) Accounting Funds since May, 2002; Chief Accounting Officer of the One Financial Center Officer and Columbia Funds and Liberty All-Star Funds since June, 2001; Boston, MA 02111 Controller Controller and Chief Accounting Officer of the Galaxy Funds since September, 2002 (formerly Vice President, Corporate Audit, State Street Bank and Trust Company from May, 1998 to April, 2001). J. Kevin Connaughton Treasurer 2000 Treasurer of the Columbia Funds and of the Liberty All-Star Funds (Age 39) since December, 2000; Vice President of the Advisor since April, One Financial Center 2003 (formerly Controller of the Liberty Funds and of the Liberty Boston, MA 02111 All-Star Funds from February, 1998 to October, 2000); Treasurer of the Galaxy Funds since September 2002; Treasurer, Columbia Management Multi-Strategy Hedge Fund, LLC since December, 2002 (formerly Vice President of Colonial from February, 1998 to October, 2000). David A. Rozenson Secretary 2003 Secretary of the Columbia Funds and of the Liberty All-Star Funds (Age 49) since December, 2003; Senior Counsel, Fleet Boston Financial One Financial Center Corporation since January, 1996; Associate General Counsel, Boston, MA 02111 Columbia Management Group since November, 2002.
36 TRANSFER AGENT - -------------------------------------------------------------------------------- IMPORTANT INFORMATION ABOUT THIS REPORT The Transfer Agent for Colonial Intermediate High Income Fund is: PFPC P.O. Box 8030 Boston, MA 02266-8030 The fund mails one shareholder report to each shareholder address. Shareholders can order additional reports by calling 800-331-1710. In addition, representatives at that number can provide shareholders information about the fund. Financial advisors who want additional information about the fund may speak to a representative at 800-426-3750. A description of the policies and procedures that the fund uses to determine how to vote proxies relating to its portfolio securities is available (i) without charge, upon request, by calling 800-331-1710 and (ii) on the Securities and Exchange Commission's website at http:/www.sec.gov. This report has been prepared for shareholders of Colonial Intermediate High Income Fund. COLONIAL INTERMEDIATE HIGH INCOME FUND ANNUAL REPORT 110-02/573Q-1103 (01/04) 03/3843 Item 2. Code of Ethics. (a) The registrant has, as of the end of the period covered by this report, adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. (b) During the period covered by this report, there were not any amendments to a provision of the code of ethics adopted in 2(a) above. (c) During the period covered by this report, there were not any waivers or implicit waivers to a provision of the code of ethics adopted in 2(a) above. Item 3. Audit Committee Financial Expert. The registrant's Board of Trustees has determined that Douglas A. Hacker, Thomas E. Stitzel, Anne-Lee Verville and Richard L. Woolworth, each of whom are members of the registrant's Board of Trustees and Audit Committee, each qualify as an audit committee financial expert. Mr. Hacker, Mr. Stitzel, Ms. Verville and Mr. Woolworth are each independent trustees, as defined in paragraph (a)(2) of this item's instructions and collectively constitute the entire Audit Committee. Item 4. Principal Accountant Fees and Services. Not applicable at this time. Item 5. Audit Committee of Listed Registrants. Not applicable at this time. Item 6. Reserved. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. The Fund has delegated to Columbia Management Advisors, Inc. (the "Advisor") the responsibility to vote proxies relating to portfolio securities held by the Fund. In deciding to delegate this responsibility to the Advisor, the Board of Trustees of the Trust reviewed and approved the policies and procedures adopted by the Advisor. These included the procedures that the Advisor follows when a vote presents a conflict between the interests of the Fund and its shareholders and the Advisor, its affiliates, its other clients or other persons. The Advisor's policy is to vote all proxies for Fund securities in a manner considered by the Advisor to be in the best interest of the Fund and its shareholders without regard to any benefit to the Advisor, its affiliates, its other clients or other persons. The Advisor examines each proposal and votes against the proposal, if, in its judgment, approval or adoption of the proposal would be expected to impact adversely the current or potential market value of the issuer's securities. The Advisor also examines each proposal and votes the proxies against the proposal, if, in its judgment, the proposal would be expected to affect adversely the best interest of the Fund. The Advisor determines the best interest of the Fund in light of the potential economic return on the Fund's investment. The Advisor addresses potential material conflicts of interest by having predetermined voting guidelines. For those proposals that require special consideration or in instances where special circumstances may require varying from the predetermined guideline, the Advisor's Proxy Committee determines the vote in the best interest of the Fund, without consideration of any benefit to the Advisor, its affiliates, its other clients or other persons. A member of the Proxy Committee is prohibited from voting on any proposal for which he or she has a conflict of interest by reason of a direct relationship with the issuer or other party affected by a given proposal. Persons making recommendations to the Proxy Committee or its members are required to disclose to the Committee any relationship with a party making a proposal or other matter known to the person that would create a potential conflict of interest. The Advisor has three classes of proxy proposals. The first two classes are predetermined guidelines to vote for or against specific proposals, unless otherwise directed by the Proxy Committee. The third class is for proposals given special consideration by the Proxy Committee. In addition, the Proxy Committee considers requests to vote on proposals in the first two classes other than according to the predetermined guidelines. The Advisor generally votes in favor of proposals related to the following matters: selection of auditors (unless the auditor receives more than 50% of its revenues from non-audit activities from the company and its affiliates), election of directors (unless the proposal gives management the ability to alter the size of the board without shareholder approval), different persons for chairman of the board /chief executive officer (unless, in light of the size of the company and the nature of its shareholder base, the role of chairman and CEO are not held by different persons), compensation (if provisions are consistent with standard business practices), debt limits (unless proposed specifically as an anti-takeover action), indemnifications (unless for negligence and or breaches of fiduciary duty), meetings, name of company, principal office (unless the purpose is to reduce regulatory or financial supervision), reports and accounts (if the certifications required by Sarbanes-Oxley Act of 2002 have been provided), par value, shares (unless proposed as an anti-takeover action), share repurchase programs, independent committees, and equal opportunity employment. The Advisor generally votes against proposals related to the following matters: super majority voting, cumulative voting, preferred stock, warrants, rights, poison pills, reclassification of common stock and meetings held by written consent. The Advisor gives the following matters special consideration: new proposals, proxies of investment company shares (other than those covered by the predetermined guidelines), mergers/acquisitions (proposals where a hostile merger/acquisition is apparent or where the Advisor represents ownership in more than one of the companies involved), shareholder proposals (other than those covered by the predetermined guidelines), executive/director compensation (other than those covered by the predetermined guidelines), pre-emptive rights and proxies of international issuers which block securities sales between submission of a proxy and the meeting (proposals for these securities are voted only on the specific instruction of the Proxy Committee and to the extent practicable in accordance with predetermined guidelines). In addition, if a portfolio manager or other party involved with a client of the Advisor or Fund account concludes that the interest of the client or Fund requires that a proxy be voted on a proposal other than according to the predetermined guidelines, he or she may request that the Proxy Committee consider voting the proxy differently. If any person (or entity) requests the Proxy Committee (or any of its members) to vote a proxy other than according to a predetermined guideline, that person must furnish to the Proxy Committee a written explanation of the reasons for the request and a description of the person's (or entity's) relationship with the party proposing the matter to shareholders or any other matter known to the person (or entity) that would create a potential conflict of interest. The Proxy Committee may vary from the predetermined guideline if it determines that voting on the proposal according to the predetermined guideline would be expected to impact adversely the current or potential market value of the issuer's securities or to affect adversely the best interest of the client. References to the best interest of a client refer to the interest of the client in terms of the potential economic return on the client's investment. In determining the vote on any proposal, the Proxy Committee does not consider any benefit other than benefits to the owner of the securities to be voted. The Advisor's Proxy Committee is composed of operational and investment representatives of its regional offices as well as senior representatives of the Advisor's equity investments, equity research, compliance and legal functions. During the first quarter of each year, the Proxy Committee reviews all guidelines and establishes guidelines for expected new proposals. In addition to these reviews and its other responsibilities described above, its functions include annual review of its Proxy Voting Policy and Procedures to ensure consistency with internal policies and regulatory agency policies, and development and modification of voting guidelines and procedures as it deems appropriate or necessary. The Advisor uses Institutional Shareholder Services ("ISS"), a third party vendor, to implement its proxy voting process. ISS provides proxy analysis, record keeping services and vote disclosure services. Item 8. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable at this time. Item 9. Submission of Matters to a Vote of Security Holders. Not applicable at this time. Item 10. Controls and Procedures. (a) The registrant's principal executive officer and principal financial officer, based on their evaluation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing of this report, have concluded that such controls and procedures are adequately designed to ensure that information required to be disclosed by the registrant in Form N-CSR is accumulated and communicated to the registrant's management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 11. Exhibits. (a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR attached hereto as Exhibit 99.CODE ETH (a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT. (a)(3) Not applicable. (b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) Colonial Intermediate High Income Fund ------------------------------------------------------------------ By (Signature and Title) /s/ Joseph R. Palombo ------------------------------------------------------ Joseph R. Palombo, President Date January 14, 2004 -------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title) /s/ Joseph R. Palombo ------------------------------------------------------ Joseph R. Palombo, President Date January 14, 2004 -------------------------------------------------------------------------- By (Signature and Title) /s/ J. Kevin Connaughton ------------------------------------------------------ J. Kevin Connaughton, Treasurer Date January 14, 2004 -------------------------------------------------------------------------- EX-99.CODE ETH 3 file002.txt CODE OF ETHICS COLUMBIA MANAGEMENT GROUP FAMILY OF FUNDS CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS I. COVERED OFFICERS/PURPOSE OF THE CODE This Code of Ethics (the "Code") for the investment companies within the Columbia Management Group fund complex (collectively the "Funds" and each, a "Fund") applies to the Funds' Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, and Director of Trustee Administration (the "Covered Officers") for the purpose of promoting: o honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o full, fair, accurate, timely and understandable disclosure in reports and documents that a Fund files with, or submits to, the Securities and Exchange Commission ("SEC"), and in other public communications made by a Fund; o compliance with applicable laws and governmental rules and regulations; o the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and o accountability for adherence to the Code. Each Covered Officer shall adhere to a high standard of business ethics and shall be sensitive to situations that may give rise to actual or apparent conflicts of interest. II. ADMINISTRATION OF THE CODE The Boards of Trustees and Boards of Directors of the Funds (collectively, the "Board") shall designate an individual to be primarily responsible for the administration of the Code (the "Code Officer"). The Code shall be administered by the Columbia Management Group Compliance Department. In the absence of the Code Officer, his or her designee shall serve as the Code Officer, but only on a temporary basis. Each Fund has designated a chief legal officer (the "Chief Legal Officer") for purposes of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder. The Chief Legal Officer of a Fund shall assist the Fund's Code Officer in administration of this Code. The Chief Legal Officer shall be responsible for applying this Code to specific situations in which questions are presented under it (in consultation with Fund counsel, where appropriate) and has the authority to interpret this Code in any particular situation. However, any waivers sought by a Covered Officer must be approved by each Audit Committee of the Funds (collectively, the "Audit Committee"). III. MANAGING CONFLICTS OF INTEREST OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his/her service to, a Fund. For example, a conflict of interest would arise if a Covered Officer, or a family member, receives improper personal benefits as a result of the Covered Officer's position with a Fund. Certain conflicts of interest arise out of the relationships between Covered Officers and a Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940 (the "Company Act") and the Investment Advisers Act of 1940 (the "Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with a Fund because of their status as "affiliated persons" of the Fund. A Fund's and its investment adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of those provisions. This Code does not, and is not intended to, repeat or replace those programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts may arise from, or as a result of, the contractual relationship between a Fund and its investment adviser, administrator, principal underwriter, pricing and bookkeeping agent and/or transfer agent (each, a "Service Provider") of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for a Fund or for a Service Provider, or for both), be involved in establishing policies and implementing decisions that will have different effects on the Service Provider and a Fund. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Fund and the Service Provider and is consistent with the performance by the Covered Officers of their duties as officers of a Fund. In addition, it is recognized by the Board that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions of the Company Act and the Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of a Fund. Each Covered Officer must: o not use personal influence or personal relationships improperly to influence investment decisions or financial reporting by a Fund whereby the Covered Officer or an immediate family member would benefit personally to the detriment of a Fund; and o not cause a Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer or an immediate family member rather than the benefit of the Fund.1. There are some conflict of interest situations that must be approved by the Code Officer, after consultation with the Chief Legal Officer. Those situations include, but are not limited to,: o service as director on the board of any public or private company; o the receipt of any gifts in excess of $100 in the aggregate from a third party that does or seeks to do business with the Funds during any 12-month period; o the receipt of any entertainment from any company with which a Fund has current or prospective business dealings, unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; o any material ownership interest in, or any consulting or employment relationship with, any Fund service providers, other than its investment adviser, principal underwriter, administrator or any affiliated person thereof; o a direct or indirect material financial interest in commissions, transaction charges or spreads paid by a Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. IV. DISCLOSURE AND COMPLIANCE Each Covered Officer shall: o be familiar with the disclosure requirements generally applicable to the Funds; - ---------------------- 1 For purposes of this Code, personal trading activity of the Covered Officers shall be monitored in accordance with the Columbia Management Group Code of Ethics. Each Covered Officer shall be considered an "Access Person" under such Code. The term "immediate family" shall have the same meaning as provided in such Code. o not knowingly misrepresent, or cause others to misrepresent, facts about any Fund to others, whether within or outside the Fund, including to the Fund's trustees and auditors, and to governmental regulators and self-regulatory organizations; o to the extent appropriate within his/her area of responsibility, consult with other officers and employees of the Funds and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and o promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. V. REPORTING AND ACCOUNTABILITY Each Covered Officer must: o upon adoption of the Code (or after becoming a Covered Officer), affirm in writing to the Board that he/she has received, read and understands the Code; o annually affirm to the Board compliance with the requirements of the Code; o not retaliate against any other Covered Officer or any employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith; o notify the Chief Legal Officer and the Code Officer promptly if he/she knows of any violation of this Code; and o respond to the trustee and officer questionnaires circulated periodically in connection with the preparation of disclosure documents for the Funds. The Code Officer shall maintain records of all activities related to this Code. The Funds will follow the procedures set forth below in investigating and enforcing this Code: o The Chief Legal Officer and/or the Code Officer will take all appropriate action to investigate any potential violation reported to him/her; o If, after such investigation, the Chief Legal Officer and the Code Officer believes that no violation has occurred, the Code Officer will notify the person(s) reporting the potential violation, and no further action is required; o Any matter that the Chief Legal Officer and/or the Code Officer believes is a violation will be reported to the Audit Committee; o If the Audit Committee concurs that a violation has occurred, it will inform and make a recommendation to the Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to the Chief Executive Officer of Columbia Management Group; or a recommendation to sanction or dismiss the Covered Officer; o The Audit Committee will be responsible for granting waivers in its sole discretion; o Any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. The Chief Legal Officer shall: o report to the Audit Committee quarterly any approvals provided in accordance with Section III of this Code; and o report to the Audit Committee quarterly any violations of, or material issues arising under, this Code. VI. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Funds for the purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other polices or procedures of the Funds or the Funds' Service Providers govern or purport to govern the behavior or activities (including, but not limited to, personal trading activities) of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Funds' and their investment advisers' and principal underwriter's codes of ethics under Rule 17j-1 under the Company Act and any policies and procedures of the Service Providers are separate requirements applicable to the Covered Officers and are not part of this Code. VII. AMENDMENTS All material amendments to this Code must be approved or ratified by the Board, including a majority of independent directors. VIII. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Board, the Covered Officers, the Chief Legal Officer, the Code Officer, outside audit firms and legal counsel to the Funds, and senior management of Columbia Management Group. IX. INTERNAL USE The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Fund, as to any fact, circumstance, or legal conclusion. EX-99.CERT 4 file003.txt CERTIFICATIONS I, Joseph R. Palombo, certify that: 1. I have reviewed this report on Form N-CSR of Colonial Intermediate High Income Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: January 14, 2004 /s/ Joseph R. Palombo --------------------------- Joseph R. Palombo, President I, J. Kevin Connaughton, certify that: 1. I have reviewed this report on Form N-CSR of Colonial Intermediate High Income Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: January 14, 2004 /s/ J. Kevin Connaughton ----------------------------------- J. Kevin Connaughton, Treasurer EX-99.906CERT 5 file004.txt CERTIFICATIONS CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Certified Shareholder Report of Colonial Intermediate High Income Fund (the "Fund") on Form N-CSR for the period ending November 30, 2003, as filed with the Securities and Exchange Commission on the date hereof ("the Report"), each of the undersigned hereby certifies that, to his knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Trust. Date: January 14, 2004 /s/ Joseph R. Palombo ---------------------------------- Joseph R. Palombo, President Date: January 14, 2004 /s/ J. Kevin Connaughton ---------------------------------- J. Kevin Connaughton, Treasurer A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission (the "Commission") or its staff upon request. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. ss.1350 and is not being filed as part of the Form N-CSR with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----