-----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, E2xnQe8Za587rOoFph1CmEzp1Oml65WTmdSPGWOZSadjr3r1p0+HjVEyZMwkd99A A/4R3INMJeAvbyfeZoxqGQ== 0000891804-05-000396.txt : 20050204 0000891804-05-000396.hdr.sgml : 20050204 20050204163046 ACCESSION NUMBER: 0000891804-05-000396 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20041130 FILED AS OF DATE: 20050204 DATE AS OF CHANGE: 20050204 EFFECTIVENESS DATE: 20050204 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLONIAL INTERMEDIATE HIGH INCOME FUND CENTRAL INDEX KEY: 0000833021 IRS NUMBER: 000000000 FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-05567 FILM NUMBER: 05577543 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-CSR 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) Vincent Pietropaolo, 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: 1-617-772-3698 -------------------- Date of fiscal year end: 11/30/2004 ------------------ Date of reporting period: 11/30/2004 ------------------ 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. Section 3507. ITEM 1. REPORTS TO STOCKHOLDERS. COLONIAL INTERMEDIATE HIGH INCOME FUND ANNUAL REPORT NOVEMBER 30, 2004 [photo of calculator and newspaper] NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE PRESIDENT'S MESSAGE Dear Shareholder: In 2004, Colonial Funds became part of the Bank of America family, one of the largest, most respected financial institutions in the United States. As a direct result of this merger, a number of changes are in the works that we believe offer significant potential benefits for our shareholders. First, some funds may be merged in order to eliminate redundancies, others may be liquidated and fund management teams will be aligned to maximize performance potential. You will receive more detailed information about these changes if your fund is affected and you may be asked to vote on certain fund changes. In this matter, your timely response will enable us to implement the changes in 2005. As a result of these changes, we believe we will offer shareholders an even stronger lineup of investment options. What will not change as we enter this next phase of consolidation is our commitment to the highest standards of performance and our dedication to superior service. Change for the good has another name: it's called improvement. It helps move us forward, and we believe that it represents progress for all our shareholders in their quest for long-term financial success. In the pages that follow, you'll find a detailed report from the fund's manager or managers on key factors that influenced your fund's performance. We hope that you will read the manager reports carefully and discuss any questions you might have with your financial advisor. As always, we thank you for choosing Colonial Funds. We appreciate your continued confidence. And, we look forward to helping you keep your long-term financial goals on target in the years to come. Sincerely, /s/. Christopher L. Wilson Christopher L. Wilson Head of Mutual Funds, Columbia Management Christopher Wilson is Head of Mutual Funds for Columbia Management, responsible for the day-to-day delivery of mutual fund services to the firm's investors. With the exception of distribution, Chris oversees all aspects of the mutual fund services operation, including treasury, investment accounting and shareholder and broker services. Chris serves as Columbia Management's liaison to the mutual fund boards of trustees. Chris joined Bank of America in August 2004. Economic and market conditions change frequently. There is no assurance that trends described in this report will continue or commence. PORTFOLIO MANAGERS' REPORT PRICE PER SHARE AS OF 11/30/04 ($) Net asset value 3.87 - ----------------------------- Market price 3.51 - ----------------------------- 1-YEAR TOTAL RETURN AS OF 11/30/04 (%) Net asset value 17.35 - ----------------------------- Market price 9.24 - ----------------------------- Lipper High Current Yield Funds (Leveraged) Category average 18.65 - ----------------------------- All results shown assume reinvestment of distributions. DISTRIBUTIONS DECLARED PER SHARE 12/01/03-11/30/04 ($) 0.30 - ----------------------------- TOP 5 SECTORS AS OF 11/30/04 (%) Telecommunications 12.2 - ----------------------------- Media 11.7 - ----------------------------- Lodging 6.2 - ----------------------------- Electric 5.8 - ----------------------------- Chemicals 5.0 - ----------------------------- Sector breakdowns are calculated as a percentage of total investments. TOP 10 CORPORATE ISSUERS AS OF 11/30/04 (%) Qwest 2.5 - ----------------------------- El Paso Corp. 1.9 - ----------------------------- Charter Communications 1.4 - ----------------------------- Dex Media 1.2 - ----------------------------- Pinnacle Entertainment 1.2 - ----------------------------- Spanish Broadcasting System 1.1 - ----------------------------- Calpine 1.1 - ----------------------------- D.R. Horton 1.0 - ----------------------------- Tenet Healthcare 0.9 - ----------------------------- Allied Waste North America 0.8 - ----------------------------- Corporate issuers are calculated as a percentage of total 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. For the 12-month period ended November 30, 2004, Colonial Intermediate High Income Fund returned 9.24%, based on its market price. Changes in the market price of the fund's shares reflect investor demand and are not necessarily linked directly to changes in the fund's net asset value. The fund returned 17.35%, based on investment at net asset value. The average return of the Lipper High Current Yield Funds (Leveraged) Category was 18.65%.1 The fund and its peer group benefited from a positive environment for high-yield bonds which are inherently riskier than higher-quality bonds. We believe the fund's slight shortfall relative to its peer group can be attributed to its lower exposure to lower-rated single B and CCC-rated bonds relative to a small number of funds in the group that were positioned more aggressively. We increased the fund's weighting in lower quality high-yield bonds during the year, resulting in full-year performance that was closer to the Lipper average than the results for the first six months. An improving economy and lower default rates resulted in higher prices for the riskiest bonds during the period. High-yield markets extended their two-year run of strong performance, helped by expansion of the US and global economies and declining intermediate- and long-term interest rates. After rising in the spring, rates declined through the end of the period, boosting prices for fixed-income securities in all sectors. SOLID RETURNS FROM DIVERSE SECTORS The fund's investments in utilities, wireless telecommunications, chemicals and the consumer sectors bolstered its results. In particular, expansion in the US cellular industry aided US Unwired, Inc. (0.5% of total investments), a holding that benefited the fund twice: bonds were called away at favorable terms as part of a refinancing, and we purchased a new US Unwired issue that also rose.2 Holdings such as Coastal Corp., Sonat, Inc. and Southern Natural Gas Co. (0.7%, 0.9% and 0.3% of total investments, respectively), all subsidiaries of El Paso Corp., an integrated producer and transporter of oil, gas and electric power, contributed to performance. El Paso's operations stabilized during the period, asset sales were consummated and concerns about its oil and natural gas reserves proved overblown. - ------------- 1 Lipper Inc., a widely respected data provider, calculates an average total return based on net asset value for mutual funds with similar investment objectives. 2 Holdings are disclosed as of November 30, 2004. 1 PORTFOLIO MANAGERS' REPORT (CONTINUED) Bonds of chemical producer Huntsman ICI Holdings LLC (0.9% of total investments) rose as commodity chemical prices trended higher, and in anticipation of a proposed transaction that would retire the bonds at a premium. Among consumer issues, Levi Strauss & Co.'s (0.5% of total investments) fundamental operations continued to strengthen while offers to purchase the Dockers brand highlighted the underlying value of the company. In October, the company announced plans to retain the brand. On the negative side, we reduced exposure to energy companies because of the low yields the sector offered. However, given the staying power of high oil and gas prices, this sector continued to outperform, and the resulting underexposure to energy companies held back the fund's relative return. Sharply higher bills for jet fuel as well as high labor costs drove down bonds of Delta Air Lines, Inc. (0.1% of total investments). We trimmed holdings in Delta when prices recovered somewhat in November. Declining roaming traffic caused bonds of Dobson Communications Corp. (0.4% of total investments) to run counter to the favorable trend among wireless companies. DESPITE SOME CAUTION, A GENERALLY FAVORABLE ENVIRONMENT FOR HIGH-YIELD If the US economy continues to expand and short-term interest rates rise gradually, we believe that lower quality issues have the potential to continue to deliver strong performance. Historically, the high-yield market has benefited from similar economic conditions. As a result, we continued to increase the fund's exposure to lower-rated issues, emphasizing companies where our rigorous credit analysis shows the likelihood of expanding cash flows that may compensate the fund for the higher risk inherent in investing in these issues. However, our enthusiasm for the sector is balanced by an element of caution. Because the high-yield market has absorbed a record volume of new issues in 2004, continued heavy issuance of new bonds could eventually put pressure on prices. /s/ Gregg R. Smalley /s/ Kevin L. Cronk /s/ Thomas A. LaPointe Gregg R. Smalley Kevin L. Cronk 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. 2 PORTFOLIO MANAGERS' REPORT (CONTINUED) 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. 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. Performance data quoted represents past performance and current performance may be lower or higher. Past performance is no guarantee of future results. The values of fixed-income securities generally move inversely with changes in interest rates such that when interest rates rise, bond values fall and vice versa. 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. 3 INVESTMENT PORTFOLIO November 30, 2004 CORPORATE FIXED-INCOME BONDS & NOTES - 122.5% PAR ($) VALUE ($) - ----------------------------------------------------------- BASIC MATERIALS - 12.5% CHEMICALS - 6.7% AGRICULTURAL CHEMICALS - 1.9% IMC Global, Inc., 10.875% 08/01/13 310,000 393,700 Terra Capital, Inc., 12.875% 10/15/08 475,000 586,625 UAP Holding Corp., (a) 07/15/12 (10.750% 01/15/08) (b) 295,000 224,200 United Agri Products, 8.250% 12/15/11 (8.750% 12/15/04) (b)(r) 295,000 314,175 ----------- 1,518,700 ----------- CHEMICALS-DIVERSIFIED - 4.6% BCP Caylux Holdings Luxembourg S.C.A., 9.625% 06/15/14 (b) 230,000 258,750 Equistar Chemicals LP, 10.625% 05/01/11 575,000 665,563 HMP Equity Holdings Corp., (c) 05/15/08 950,000 624,625 Huntsman ICI Holdings LLC, (c) 12/31/09 1,725,000 961,688 Lyondell Chemical Co., 9.625% 05/01/07 660,000 724,350 NOVA Chemicals Corp., 6.500% 01/15/12 170,000 176,407 Westlake Chemical Corp., 8.750% 07/15/11 257,000 289,767 ----------- 3,701,150 ----------- CHEMICALS-SPECIALTY - 0.2% Crompton Corp., 7.670% 08/01/10 (b)(d) 185,000 199,800 ----------- 199,800 ----------- Chemicals Total 5,419,650 ----------- FOREST PRODUCTS & PAPER - 2.9% FORESTRY - 0.5% Millar Western Forest Products, 7.750% 11/15/13 225,000 240,750 Tembec Industries, Inc., 8.500% 02/01/11 180,000 180,000 ----------- 420,750 ----------- PAPER & RELATED PRODUCTS - 2.4% Boise Cascade LLC: 5.005% 10/15/12 (b)(d) 175,000 178,500 7.125% 10/15/14 (b) 190,000 199,500 Buckeye Technologies, Inc.: 8.500% 10/01/13 60,000 66,000 9.250% 09/15/08 235,000 235,000 PAR ($) VALUE ($) - ----------------------------------------------------------- Caraustar Industries, Inc., 9.875% 04/01/11 355,000 381,625 Georgia-Pacific Corp., 8.000% 01/15/24 200,000 232,000 Neenah Paper, Inc., 7.375% 11/15/14 (b) 130,000 131,300 Newark Group, Inc., 9.750% 03/15/14 (b) 270,000 282,825 Norske Skog Canada Ltd.: 7.375% 03/01/14 105,000 110,250 8.625% 06/15/11 150,000 162,000 ----------- 1,979,000 ----------- Forest Products & Paper Total 2,399,750 IRON/STEEL - 1.8% METAL-IRON - 0.5% Wise Metals Group LLC, 10.250% 05/15/12 (b) 415,000 418,112 ----------- 418,112 ----------- STEEL-PRODUCERS - 0.5% Bayou Steel Corp., 9.000% 03/31/11 250,000 235,000 Steel Dynamics, Inc., 9.500% 03/15/09 160,000 177,200 ----------- 412,200 ----------- STEEL-SPECIALTY - 0.8% Oregon Steel Mills, Inc., 10.000% 07/15/09 195,000 218,400 UCAR Finance, Inc., 10.250% 02/15/12 355,000 408,250 ----------- 626,650 ----------- Iron/Steel Total 1,456,962 ----------- MINING - 1.1% METAL-ALUMINUM - 0.6% Kaiser Aluminum & Chemical Corp., 10.875% 10/15/06 (e) 505,000 434,300 ----------- 434,300 ----------- METAL-DIVERSIFIED - 0.5% Earle M. Jorgensen Co., 9.750% 06/01/12 380,000 427,500 ----------- 427,500 ----------- Mining Total 861,800 ----------- BASIC MATERIALS TOTAL 10,138,162 ----------- - ----------------------------------------------------------- COMMUNICATIONS - 27.7% ADVERTISING - 0.3% ADVERTISING SERVICES - 0.3% WDAC Subsidiary Corp., 8.375% 12/01/14 (b)(f) 290,000 292,900 ----------- 292,900 ----------- Advertising Total 292,900 ----------- See Accompanying Notes to Financial Statements. 4 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2004 CORPORATE FIXED-INCOME BONDS & NOTES (CONTINUED) PAR ($) VALUE ($) - ----------------------------------------------------------- COMMUNICATIONS (CONTINUED) MEDIA - 12.6% BROADCAST SERVICES/PROGRAMS - 0.6% Fisher Communications, Inc., 8.625% 09/15/14 (b) 190,000 205,200 XM Satellite Radio, Inc., 7.660% 05/01/09 (d) 250,000 255,000 ----------- 460,200 ----------- CABLE TV - 5.8% Atlantic Broadband Finance LLC, 9.375% 01/15/14 (b) 390,000 378,300 Cablevision Systems Corp., 6.669% 04/01/09 (b)(d) 290,000 303,050 Charter Communications Holdings LLC: 9.920% 04/01/11 1,660,000 1,365,350 10.250% 09/15/10 190,000 199,500 CSC Holdings, Inc.: 6.750% 04/15/12 (b) 365,000 374,125 7.625% 04/01/11 20,000 21,450 DirecTV Holdings LLC, 8.375% 03/15/13 180,000 202,950 EchoStar DBS Corp., 6.375% 10/01/11 400,000 412,000 Insight Communications Co., Inc., (a) 02/15/11 (12.250% 02/15/06) 185,000 178,525 Insight Midwest LP, 9.750% 10/01/09 195,000 205,481 Northland Cable Television, Inc., 10.250% 11/15/07 495,000 495,000 Pegasus Satellite Communications, Inc., 11.250% 01/15/10 (b)(e) 435,000 277,312 Telenet Group Holdings NV, (a) 06/15/14 (11.500% 12/15/08) (b) 400,000 309,000 ----------- 4,722,043 ----------- MULTIMEDIA - 2.0% Advanstar Communications, Inc.: (a) 10/15/11 (15.000% 10/15/05) 310,000 261,950 12.000% 02/15/11 345,000 376,050 Haights Cross Communications, Inc., (a) 08/15/11 (12.500% 02/15/09) 315,000 203,175 Haights Cross Operating Co., 11.750% 08/15/11 195,000 222,300 Quebecor Media, Inc., 11.125% 07/15/11 490,000 562,275 ----------- 1,625,750 ----------- PUBLISHING-NEWSPAPERS - 0.4% Hollinger, Inc.: 11.875% 03/01/11 (b)(q) 122,000 132,038 12.875% 03/01/11 (b) 192,000 209,280 ----------- 341,318 ----------- PAR ($) VALUE ($) - ----------------------------------------------------------- PUBLISHING-PERIODICALS - 2.5% CBD Media Holdings LLC & Finance, Inc., 9.250% 07/15/12 (b) 235,000 240,875 Dex Media, Inc.: (a) 11/15/13 (9.000% 11/15/08) 250,000 191,875 8.000% 11/15/13 320,000 342,400 Dex Media East LLC, 12.125% 11/15/12 367,000 449,575 Dex Media West LLC, 9.875% 08/15/13 274,000 316,470 Yell Finance BV, 10.750% 08/01/11 388,000 452,020 ----------- 1,993,215 ----------- TELEVISION - 1.3% Granite Broadcasting Corp., 9.750% 12/01/10 575,000 540,500 Paxson Communications Corp., 10.750% 07/15/08 260,000 267,800 Sinclair Broadcast Group, Inc., 8.750% 12/15/11 250,000 268,750 ----------- 1,077,050 ----------- Media Total 10,219,576 ----------- TELECOMMUNICATIONS - 14.8% CELLULAR TELECOMMUNICATIONS - 6.5% American Cellular Corp., 10.000% 08/01/11 325,000 273,813 Dobson Cellular Systems, Inc., 8.375% 11/01/11 (b) 95,000 97,375 Dobson Communications Corp., 8.875% 10/01/13 575,000 388,125 Horizon PCS, Inc., 11.375% 07/15/12 (b) 230,000 251,850 iPCS Escrow Co., 11.500% 05/01/12 (b) 170,000 189,550 Nextel Communications, Inc., 7.375% 08/01/15 500,000 550,000 Nextel Partners, Inc., 8.125% 07/01/11 610,000 671,000 Rogers Cantel, Inc., 9.750% 06/01/16 720,000 847,800 Rogers Wireless, Inc., 8.000% 12/15/12 (b) 225,000 234,562 Rural Cellular Corp., 8.250% 03/15/12 220,000 229,350 UbiquiTel, Inc.: 9.875% 03/01/11 250,000 274,375 9.875% 03/01/11 (b) 185,000 203,037 US Unwired, Inc., 10.000% 06/15/12 500,000 555,000 Western Wireless Corp., 9.250% 07/15/13 500,000 540,000 ----------- 5,305,837 ----------- See Accompanying Notes to Financial Statements. 5 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2004 CORPORATE FIXED-INCOME BONDS & NOTES (CONTINUED) PAR ($) VALUE ($) - ----------------------------------------------------------- COMMUNICATIONS (CONTINUED) TELECOMMUNICATIONS (CONTINUED) SATELLITE TELECOMMUNICATIONS - 1.0% Inmarsat Finance II PLC, (a) 11/15/12 (10.375% 11/15/08) (b) 140,000 96,950 New Skies Satellites NV, 9.125% 11/01/12 (b) 210,000 214,200 PanAmSat Corp.: (a) 11/01/14 (10.375% 11/01/09) (b) 455,000 273,000 9.000% 08/15/14 (b) 170,000 182,750 ----------- 766,900 ----------- TELECOMMUNICATION EQUIPMENT - 0.4% Lucent Technologies, Inc., 6.450% 03/15/29 335,000 287,262 ----------- 287,262 ----------- TELECOMMUNICATION SERVICES - 2.0% Axtel SA de CV, 11.000% 12/15/13 430,000 456,875 Carrier1 International SA, 13.250% 02/15/09 (e) 750,000 67,500 FairPoint Communications, Inc., 11.875% 03/01/10 175,000 199,063 Securus Technologies, Inc., 11.000% 09/01/11 (b) 375,000 375,000 Time Warner Telecom, Inc.: 9.750% 07/15/08 320,000 319,200 10.125% 02/01/11 230,000 220,800 ----------- 1,638,438 ----------- TELEPHONE-INTEGRATED - 4.1% Cincinnati Bell, Inc., 8.375% 01/15/14 475,000 477,375 Qwest Capital Funding, Inc.: 7.250% 02/15/11 1,075,000 1,021,250 7.750% 02/15/31 385,000 329,175 Qwest Services Corp., 13.500% 12/15/10 (b) 1,125,000 1,338,750 US LEC Corp., 10.670% 10/01/09 (b)(d) 190,000 189,590 ----------- 3,356,140 ----------- WIRELESS EQUIPMENT - 0.8% American Towers, Inc., 7.250% 12/01/11 230,000 243,225 SBA Communications, Inc., (a) 12/15/11 (9.750% 12/15/07) 140,000 117,950 PAR ($) VALUE ($) - ----------------------------------------------------------- SpectraSite, Inc., 8.250% 05/15/10 280,000 303,100 ----------- 664,275 ----------- Telecommunications Total 12,018,852 ----------- COMMUNICATIONS TOTAL 22,531,328 ----------- - ----------------------------------------------------------- CONSUMER, CYCLICAL - 26.7% AIRLINES - 1.6% AIRLINES - 1.6% Continental Airlines, Inc., 7.568% 12/01/06 450,000 346,500 Delta Air Lines, Inc., 7.900% 12/15/09 205,000 114,800 Northwest Airlines, Inc., 9.875% 03/15/07 625,000 543,750 United Air Lines, Inc., 2.020% 03/02/04 (d)(i) 321,569 257,255 ----------- 1,262,305 ----------- Airlines Total 1,262,305 ----------- APPAREL - 1.5% APPAREL MANUFACTURERS - 1.5% Broder Brothers Co.: 11.250% 10/15/10 225,000 234,000 11.250% 10/15/10 (b) 135,000 140,400 Levi Strauss & Co., 12.250% 12/15/12 495,000 522,225 Phillips-Van Heusen Corp., 7.250% 02/15/11 300,000 316,500 ----------- 1,213,125 ----------- Apparel Total 1,213,125 ----------- AUTO MANUFACTURERS - 0.4% AUTO-MEDIUM & HEAVY DUTY TRUCKS - 0.4% Navistar International Corp., 7.500% 06/15/11 320,000 345,600 ----------- 345,600 ----------- Auto Manufacturers Total 345,600 ----------- AUTO PARTS & EQUIPMENT - 2.0% AUTO/TRUCK PARTS & EQUIPMENT - ORIGINAL - 1.1% Accuride Corp., 9.250% 02/01/08 155,000 157,713 Affinia Group, Inc., 9.000% 11/30/14 (b) 45,000 46,350 Delco Remy International, Inc., 11.000% 05/01/09 315,000 332,325 Dura Operating Corp., 8.625% 04/15/12 345,000 351,900 ----------- 888,288 ----------- AUTO/TRUCK PARTS & EQUIPMENT - REPLACEMENT - 0.3% Rexnord Corp., 10.125% 12/15/12 195,000 220,350 ----------- 220,350 ----------- See Accompanying Notes to Financial Statements. 6 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2004 CORPORATE FIXED-INCOME BONDS & NOTES (CONTINUED) PAR ($) VALUE ($) - ----------------------------------------------------------- CONSUMER, CYCLICAL (CONTINUED) AUTO PARTS & EQUIPMENT (CONTINUED) RUBBER-TIRES - 0.6% Goodyear Tire & Rubber Co., 7.857% 08/15/11 505,000 501,213 ----------- 501,213 ----------- Auto Parts & Equipment Total 1,609,851 ----------- ENTERTAINMENT - 3.5% GAMBLING (NON-HOTEL) - 0.5% Global Cash Access LLC, 8.750% 03/15/12 390,000 421,200 ----------- 421,200 ----------- MUSIC - 0.9% Steinway Musical Instruments, Inc., 8.750% 04/15/11 265,000 287,525 Warner Music Group, 7.375% 04/15/14 (b) 380,000 388,550 ----------- 676,075 ----------- RESORTS/THEME PARKS - 0.7% Six Flags, Inc.: 8.875% 02/01/10 415,000 417,075 9.625% 06/01/14 180,000 177,750 ----------- 594,825 ----------- THEATERS - 1.4% LCE Acquisition Corp., 9.000% 08/01/14 (b) 485,000 521,375 Marquee Holdings, Inc., (a) 08/15/14 (12.000% 08/15/09) (b) 980,000 632,100 ----------- 1,153,475 ----------- Entertainment Total 2,845,575 ----------- HOME BUILDERS - 2.5% BUILDING-RESIDENTIAL/COMMERCIAL - 2.5% D.R. Horton, Inc., 9.750% 09/15/10 955,000 1,143,613 K. Hovnanian Enterprises, Inc.: 8.875% 04/01/12 170,000 187,000 10.500% 10/01/07 340,000 391,850 Standard Pacific Corp., 9.250% 04/15/12 275,000 321,063 ----------- 2,043,526 ----------- Home Builders Total 2,043,526 ----------- HOME FURNISHINGS - 0.8% HOME FURNISHINGS - 0.8% Norcraft Companies, 9.000% 11/01/11 140,000 151,900 WII Components, Inc., 10.000% 02/15/12 495,000 485,100 ----------- 637,000 ----------- Home Furnishings Total 637,000 ----------- PAR ($) VALUE ($) - ----------------------------------------------------------- LEISURE TIME - 2.2% CRUISE LINES - 0.2% NCL, Inc., 10.625% 07/15/14 (b) 140,000 144,200 ----------- 144,200 ----------- LEISURE & RECREATIONAL PRODUCTS - 0.8% Bombardier Recreational Products, Inc., 8.375% 12/15/13 385,000 415,800 K2, Inc., 7.375% 07/01/14 (b) 195,000 214,013 ----------- 629,813 ----------- RECREATIONAL CENTERS - 1.2% AMF Bowling Worldwide, Inc., 10.000% 03/01/10 300,000 321,000 Equinox Holdings, Inc., 9.000% 12/15/09 405,000 427,275 Town Sports International, Inc., (a) 02/01/14 (11.000% 02/01/09) 435,000 242,512 ----------- 990,787 ----------- Leisure Time Total 1,764,800 ----------- LODGING - 8.3% CASINO HOTELS - 8.3% Ameristar Casinos, Inc., 10.750% 02/15/09 400,000 449,500 Circus & Eldorado/Silver Legacy Capital Corp., 10.125% 03/01/12 225,000 246,375 Hard Rock Hotel, Inc., 8.875% 06/01/13 400,000 440,000 Hollywood Casino Shreveport, 13.000% 08/01/06 (h) 950,000 836,000 Inn of the Mountain Gods Resort & Casino, 12.000% 11/15/10 340,000 396,100 MGM Mirage, Inc., 8.375% 02/01/11 415,000 468,950 Mohegan Tribal Gaming Authority, 7.125% 08/15/14 (b) 70,000 74,725 Park Place Entertainment Corp., 9.375% 02/15/07 435,000 481,763 Pinnacle Entertainment, Inc.: 8.250% 03/15/12 (f) 270,000 280,800 8.750% 10/01/13 945,000 1,015,875 Premier Entertainment Biloxi LLC, 10.750% 02/01/12 200,000 216,000 River Rock Entertainment, 9.750% 11/01/11 435,000 481,763 Seneca Gaming Corp., 7.250% 05/01/12 345,000 364,837 See Accompanying Notes to Financial Statements. 7 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2004 CORPORATE FIXED-INCOME BONDS & NOTES (CONTINUED) PAR ($) VALUE ($) - ----------------------------------------------------------- CONSUMER, CYCLICAL (CONTINUED) LODGING (CONTINUED) CASINO HOTELS (CONTINUED) Station Casinos, Inc., 6.875% 03/01/16 95,000 99,750 Trump Casino Holdings LLC, PIK, 17.625% 09/15/10 (i) 376,002 391,042 Wynn Las Vegas LLC: 6.625% 12/01/14 (b)(f) 270,000 265,950 12.000% 11/01/10 201,000 253,260 ----------- 6,762,690 ----------- Lodging Total 6,762,690 ----------- RETAIL - 3.3% RETAIL-AUTOMOBILES - 0.4% Asbury Automotive Group, Inc., 8.000% 03/15/14 320,000 316,800 ----------- 316,800 ----------- RETAIL-DRUG STORES - 0.9% Jean Coutu Group, Inc., (PJC), 8.500% 08/01/14 (b) 240,000 243,600 Rite Aid Corp., 9.250% 06/01/13 470,000 485,275 ----------- 728,875 ----------- RETAIL-HOME FURNISHINGS - 0.7% Levitz Home Furnishings, Inc., 12.000% 11/01/11 (b) 235,000 239,700 Tempur-Pedic, Inc., 10.250% 08/15/10 322,000 368,690 ----------- 608,390 ----------- RETAIL-JEWELRY - 0.4% Finlay Fine Jewelry Corp., 8.375% 06/01/12 280,000 305,200 ----------- 305,200 ----------- RETAIL-MAJOR DEPARTMENT STORES - 0.1% Saks, Inc., 7.000% 12/01/13 83,000 84,452 ----------- 84,452 ----------- RETAIL-PROPANE DISTRIBUTORS - 0.4% Ferrellgas Partners LP, 8.750% 06/15/12 295,000 321,550 ----------- 321,550 ----------- RETAIL-RESTAURANTS - 0.4% Denny's Holdings, Inc., 10.000% 10/01/12 (b) 280,000 294,700 ----------- 294,700 ----------- Retail Total 2,659,967 ----------- PAR ($) VALUE ($) - ----------------------------------------------------------- TEXTILES - 0.6% TEXTILE-PRODUCTS - 0.6% Collins & Aikman Floorcovering, Inc., 9.750% 02/15/10 265,000 284,875 INVISTA, 9.250% 05/01/12 (b) 210,000 233,100 ----------- 517,975 ----------- Textiles Total 517,975 ----------- CONSUMER, CYCLICAL TOTAL 21,662,414 ----------- - ----------------------------------------------------------- CONSUMER, NON-CYCLICAL - 16.3% AGRICULTURE - 0.8% AGRICULTURAL OPERATIONS - 0.6% Seminis Vegetable Seeds, Inc., 10.250% 10/01/13 438,000 492,750 ----------- 492,750 ----------- TOBACCO - 0.2% North Atlantic Trading Co., Inc., 9.250% 03/01/12 225,000 180,000 ----------- 180,000 ----------- Agriculture Total 672,750 ----------- BEVERAGES - 0.4% BEVERAGES-WINE/SPIRITS - 0.4% Constellation Brands, Inc., 8.125% 01/15/12 270,000 293,625 ----------- 293,625 ----------- Beverages Total 293,625 ----------- BIOTECHNOLOGY - 0.5% MEDICAL-BIOMEDICAL/GENE - 0.5% Bio-Rad Laboratories, Inc., 7.500% 08/15/13 340,000 371,450 ----------- 371,450 ----------- Biotechnology Total 371,450 ----------- COMMERCIAL SERVICES - 4.4% COMMERCIAL SERVICES - 0.8% Iron Mountain, Inc., 7.750% 01/15/15 90,000 91,575 Language Line Holdings, Inc., 11.125% 06/15/12 (b) 480,000 516,000 ----------- 607,575 ----------- COMMERCIAL SERVICES-FINANCE - 0.9% Dollar Financial Group, Inc., 9.750% 11/15/11 645,000 696,600 ----------- 696,600 ----------- FUNERAL SERVICES & RELATED ITEMS - 0.6% Service Corp. International, 7.700% 04/15/09 450,000 491,625 ----------- 491,625 ----------- See Accompanying Notes to Financial Statements. 8 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2004 CORPORATE FIXED-INCOME BONDS & NOTES (CONTINUED) PAR ($) VALUE ($) - ----------------------------------------------------------- CONSUMER, NON-CYCLICAL (CONTINUED) COMMERCIAL SERVICES (CONTINUED) PRINTING-COMMERCIAL - 0.9% American Color Graphics, Inc., 10.000% 06/15/10 180,000 154,800 Sheridan Group, 10.250% 08/15/11 (b) 250,000 273,125 Vertis, Inc., 13.500% 12/07/09 (b) 315,000 333,900 ----------- 761,825 ----------- PRIVATE CORRECTIONS - 0.2% GEO Group, Inc., 8.250% 07/15/13 180,000 191,700 ----------- 191,700 ----------- RENTAL AUTO/EQUIPMENT - 1.0% NationsRent, Inc., 9.500% 10/15/10 525,000 590,625 Williams Scotsman, Inc., 9.875% 06/01/07 230,000 228,275 ----------- 818,900 ----------- Commercial Services Total 3,568,225 ----------- COSMETICS/PERSONAL CARE - 0.3% COSMETICS & TOILETRIES - 0.3% Elizabeth Arden, Inc., 7.750% 01/15/14 245,000 259,700 ----------- 259,700 ----------- Cosmetics/Personal Care Total 259,700 ----------- FOOD - 3.3% FOOD-CONFECTIONERY - 0.7% Merisant Co., 9.500% 07/15/13 (b) 245,000 220,500 Tabletop Holdings, Inc., (a) 05/15/14 (12.250% 11/15/08) (b) 755,000 343,525 ----------- 564,025 ----------- FOOD-MISCELLANEOUS/DIVERSIFIED - 2.0% Del Monte Corp., 9.250% 05/15/11 500,000 547,500 Dole Food Co., Inc., 8.625% 05/01/09 415,000 457,538 Pinnacle Foods Holding Corp., 8.250% 12/01/13 (b)(f) 545,000 493,225 Reddy Ice Holdings, Inc., (a) 11/01/12 (10.500% 11/01/08) (b) 250,000 173,750 ----------- 1,672,013 ----------- PAR ($) VALUE ($) - ----------------------------------------------------------- FOOD-RETAIL - 0.6% Stater Brothers Holdings, 8.125% 06/15/12 450,000 479,250 ----------- 479,250 ----------- Food Total 2,715,288 ----------- HEALTHCARE-SERVICES - 4.8% MEDICAL-HMO - 0.5% Coventry Health Care, Inc., 8.125% 02/15/12 340,000 374,000 ----------- 374,000 ----------- MEDICAL-HOSPITALS - 1.8% Tenet Healthcare Corp., 9.875% 07/01/14 (b) 960,000 1,029,600 United Surgical Partners International, Inc., 10.000% 12/15/11 400,000 457,000 ----------- 1,486,600 ----------- MRI/MEDICAL DIAGNOSTIC IMAGING - 2.0% InSight Health Services Corp., 9.875% 11/01/11 520,000 527,800 MedQuest, Inc., 11.875% 08/15/12 450,000 526,500 MQ Associates, Inc., (a) 08/15/12 (12.250% 08/15/08) 805,000 563,500 ----------- 1,617,800 ----------- PHYSICAL PRACTICE MANAGEMENT - 0.5% US Oncology, Inc., 9.000% 08/15/12 (b) 390,000 434,850 ----------- 434,850 ----------- Healthcare-Services Total 3,913,250 ----------- HOUSEHOLD PRODUCTS/WARES - 1.8% CONSUMER PRODUCTS-MISCELLANEOUS - 1.8% AAC Group Holdings Corp., (a) 10/01/12 (10.250% 10/01/08) (b) 95,000 64,125 Amscan Holdings, Inc., 8.750% 05/01/14 435,000 437,175 Jostens IH Corp., 7.625% 10/01/12 (b) 280,000 294,000 Playtex Products, Inc., 9.375% 06/01/11 600,000 636,750 ----------- 1,432,050 ----------- Household Products/Wares Total 1,432,050 ----------- CONSUMER, NON-CYCLICAL TOTAL 13,226,338 ----------- - ----------------------------------------------------------- See Accompanying Notes to Financial Statements. 9 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2004 CORPORATE FIXED-INCOME BONDS & NOTES (CONTINUED) PAR ($) VALUE ($) - ----------------------------------------------------------- ENERGY - 7.9% OIL & GAS - 3.5% OIL & GAS DRILLING - 0.7% Oceans Rig Norway AS, 10.250% 06/01/08 325,000 334,750 Pride International, Inc., 7.375% 07/15/14 (b) 170,000 188,700 ----------- 523,450 ----------- OIL COMPANIES-EXPLORATION & PRODUCTION - 2.5% Chesapeake Energy Corp., 7.500% 06/15/14 160,000 177,000 Compton Petroleum Corp., 9.900% 05/15/09 475,000 522,500 Encore Acquisition Co., 8.375% 06/15/12 325,000 362,375 Energy Partners Ltd., 8.750% 08/01/10 205,000 225,500 Magnum Hunter Resources, Inc., 9.600% 03/15/12 283,000 322,620 Whiting Petroleum Corp., 7.250% 05/01/12 425,000 446,250 ----------- 2,056,245 ----------- OIL REFINING & MARKETING - 0.3% Premcor Refining Group, Inc., 7.500% 06/15/15 235,000 257,325 ----------- 257,325 ----------- Oil & Gas Total 2,837,020 ----------- OIL & GAS SERVICES - 0.4% OIL-FIELD SERVICES - 0.4% Hornbeck Offshore Services, Inc., 6.125% 12/01/14 (b) 90,000 90,000 Newpark Resources, Inc., 8.625% 12/15/07 270,000 272,700 ----------- 362,700 ----------- Oil & Gas Services Total 362,700 ----------- PIPELINES - 4.0% PIPELINES - 4.0% Coastal Corp., 7.750% 06/15/10 695,000 714,981 Dynegy Holdings, Inc.: 6.875% 04/01/11 300,000 288,000 9.875% 07/15/10 (b) 360,000 406,800 Northwest Pipeline Corp., 8.125% 03/01/10 130,000 144,950 Sonat, Inc.: 6.875% 06/01/05 215,000 217,687 7.625% 07/15/11 795,000 806,925 Southern Natural Gas Co., 8.875% 03/15/10 250,000 280,625 PAR ($) VALUE ($) - ----------------------------------------------------------- Williams Companies, Inc., 8.125% 03/15/12 310,000 361,150 ----------- 3,221,118 ----------- Pipelines Total 3,221,118 ----------- ENERGY TOTAL 6,420,838 ----------- - ----------------------------------------------------------- FINANCIALS - 2.3% DIVERSIFIED FINANCIAL SERVICES - 1.6% FINANCE-COMMERCIAL - 0.3% FINOVA Group, Inc., 7.500% 11/15/09 (j) 427,050 203,916 ----------- 203,916 ----------- FINANCE INVESTMENT BANKER/BROKER - 1.3% E*Trade Financial Corp., 8.000% 06/15/11 (b) 275,000 290,813 LaBranche & Co., Inc., 11.000% 05/15/12 725,000 772,125 ----------- 1,062,938 ----------- Diversified Financial Services Total 1,266,854 ----------- REITS - 0.4% REITS-HOTELS - 0.1% La Quinta Properties, Inc., 7.000% 08/15/12 (b) 100,000 107,500 ----------- 107,500 ----------- REITS-MORTGAGES - 0.3% Thornburg Mortgage, Inc., 8.000% 05/15/13 250,000 268,125 ----------- 268,125 ----------- REITS Total 375,625 ----------- SAVINGS & LOANS - 0.3% SAVINGS & LOANS/THRIFT-WESTERN US - 0.3% Western Financial Bank, 9.625% 05/15/12 210,000 239,400 ----------- 239,400 ----------- Savings & Loans Total 239,400 ----------- FINANCIALS TOTAL 1,881,879 ----------- - ----------------------------------------------------------- INDUSTRIALS - 21.5% AEROSPACE/DEFENSE - 1.8% AEROSPACE/DEFENSE-EQUIPMENT - 1.8% Argo-Tech Corp., 9.250% 06/01/11 240,000 262,200 BE Aerospace, Inc., 8.875% 05/01/11 375,000 391,875 Sequa Corp., 8.875% 04/01/08 255,000 279,225 Standard Aero Holdings, Inc., 8.250% 09/01/14 (b) 265,000 284,875 See Accompanying Notes to Financial Statements. 10 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2004 CORPORATE FIXED-INCOME BONDS & NOTES (CONTINUED) PAR ($) VALUE ($) - ----------------------------------------------------------- INDUSTRIALS (CONTINUED) AEROSPACE/DEFENSE (CONTINUED) AEROSPACE/DEFENSE-EQUIPMENT (CONTINUED) TransDigm, Inc., 8.375% 07/15/11 250,000 269,375 ----------- 1,487,550 ----------- Aerospace/Defense Total 1,487,550 ----------- BUILDING MATERIALS - 2.0% BUILDING & CONSTRUCTION PRODUCTS-MISCELLANEOUS - 0.6% Associated Materials, Inc., (a) 03/01/14 (11.250% 03/01/09) 205,000 152,725 Congoleum Corp., 8.625% 08/01/08 (g) 225,000 175,500 Nortek Holdings, Inc., 8.500% 09/01/14 (b) 140,000 150,500 ----------- 478,725 ----------- BUILDING PRODUCTS-CEMENT/AGGREGATION - 0.8% RMCC Acquisition Co., 9.500% 11/01/12 (b) 370,000 370,925 U.S. Concrete, Inc., 8.375% 04/01/14 310,000 330,925 ----------- 701,850 ----------- BUILDING PRODUCTS-DOORS & WINDOWS - 0.6% Atrium Companies, Inc., 10.500% 05/01/09 445,000 467,250 ----------- 467,250 ----------- Building Materials Total 1,647,825 ----------- ELECTRONIC COMPONENTS & EQUIPMENT - 0.6% WIRE & CABLE PRODUCTS - 0.6% Coleman Cable, Inc., 9.875% 10/01/12 (b) 430,000 452,575 ----------- 452,575 ----------- Electronic Components & Equipment Total 452,575 ----------- ELECTRONICS - 0.2% ELECTRONIC COMPONENTS-MISCELLANEOUS - 0.2% Flextronics International Ltd., 6.250% 11/15/14 (b) 135,000 132,975 ----------- 132,975 ----------- Electronics Total 132,975 ----------- ENGINEERING & CONSTRUCTION - 0.6% BUILDING & CONSTRUCTION-MISCELLANEOUS - 0.6% J. Ray McDermott SA, 11.000% 12/15/13 (b) 445,000 486,163 ----------- 486,163 ----------- Engineering & Construction Total 486,163 ----------- PAR ($) VALUE ($) - ----------------------------------------------------------- ENVIRONMENTAL CONTROL - 1.8% NON-HAZARDOUS WASTE DISPOSAL - 1.6% Allied Wasten North America, Inc.: 7.875% 04/15/13 495,000 499,950 8.500% 12/01/08 255,000 268,069 Waste Services, Inc., 9.500% 04/15/14 (b) 560,000 554,400 ----------- 1,322,419 ----------- RECYCLING - 0.2% IMCO Recycling Escrow, 9.000% 11/15/14 (b) 120,000 124,200 ----------- 124,200 ----------- Environmental Control Total 1,446,619 ----------- HAND/MACHINE TOOLS - 0.2% MACHINE TOOLS & RELATED PRODUCTS - 0.2% Newcor, Inc., 6.000% 01/31/13 (k) 215,562 137,960 ----------- 137,960 ----------- Hand/Machine Tools Total 137,960 ----------- MACHINERY-CONSTRUCTION & MINING - 0.4% MACHINERY-CONSTRUCTION & MINING - 0.4% Terex Corp., 10.375% 04/01/11 320,000 360,800 ----------- 360,800 ----------- Machinery-Construction & Mining Total 360,800 METAL FABRICATE/HARDWARE - 2.8% METAL PROCESSORS & FABRICATION - 2.0% Altra Industrial Motion, Inc., 9.000% 12/01/11 (b) 180,000 182,700 Hawk Corp., 8.750% 11/01/14 (b) 70,000 72,275 Mueller Group, Inc., 10.000% 05/01/12 225,000 244,125 Mueller Holdings, Inc., (a) 04/15/14 (14.750% 04/15/09) 375,000 253,125 TriMas Corp., 9.875% 06/15/12 865,000 903,925 ----------- 1,656,150 ----------- METAL PRODUCTS-FASTENERS - 0.8% FastenTech, Inc., 11.500% 05/01/11 (b) 540,000 615,600 ----------- 615,600 ----------- Metal Fabricate/Hardware Total 2,271,750 ----------- See Accompanying Notes to Financial Statements. 11 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2004 CORPORATE FIXED-INCOME BONDS & NOTES (CONTINUED) PAR ($) VALUE ($) - ----------------------------------------------------------- INDUSTRIALS (CONTINUED) MISCELLANEOUS MANUFACTURERS - 2.2% ADVANCED MATERIALS/PRODUCTS - 0.4% Hexcel Corp., 9.750% 01/15/09 370,000 387,575 ----------- 387,575 ----------- DIVERSIFIED MANUFACTURING OPERATORS - 1.4% J.B. Poindexter & Co., 8.750% 03/15/14 (b) 335,000 355,100 KI Holdings, Inc., (a) 11/15/14 (9.875% 11/15/09) (b) 405,000 257,175 Koppers Industries, Inc., 9.875% 10/15/13 310,000 351,850 Trinity Industries, Inc., 6.500% 03/15/14 165,000 163,556 ----------- 1,127,681 ----------- FILTRATION/SEPARATION PRODUCTS - 0.4% Polypore, Inc., (a) 10/01/12 (10.500% 10/01/08) (b) 485,000 311,612 ----------- 311,612 ----------- Miscellaneous Manufacturers Total 1,826,868 ----------- PACKAGING & CONTAINERS - 4.2% CONTAINERS-METAL/GLASS - 1.9% Crown European Holdings SA, 10.875% 03/01/13 480,000 565,200 Owens-Brockway Glass Container, 8.250% 05/15/13 600,000 655,500 Owens-Illinois, Inc.: 7.350% 05/15/08 200,000 208,500 7.500% 05/15/10 75,000 79,031 ----------- 1,508,231 ----------- CONTAINERS-PAPER/PLASTIC - 2.3% Consolidated Container Co. LLC, (a) 06/15/09 (10.750% 06/15/07) 280,000 235,200 MDP Acquisitions PLC, 9.625% 10/01/12 525,000 593,250 Portola Packaging, Inc., 8.250% 02/01/12 295,000 230,100 Smurfit-Stone Container Corp., 8.250% 10/01/12 450,000 492,750 Tekni-Plex, Inc., 12.750% 06/15/10 365,000 323,025 ----------- 1,874,325 ----------- Packaging & Containers Total 3,382,556 ----------- PAR ($) VALUE ($) - ----------------------------------------------------------- TRANSPORTATION - 4.7% TRANSPORTATION-MARINE - 2.3% Ship Finance International Ltd., 8.500% 12/15/13 695,000 714,112 Stena AB: 7.000% 12/01/16 (b) 135,000 132,637 7.500% 11/01/13 455,000 470,925 9.625% 12/01/12 355,000 399,375 Teekay Shipping Corp., 8.875% 07/15/11 105,000 121,800 ----------- 1,838,849 ----------- TRANSPORTATION-RAILROAD - 0.5% TFM SA de CV, 12.500% 06/15/12 380,000 431,300 ----------- 431,300 ----------- TRANSPORTATION-SERVICES - 1.1% CHC Helicopter Corp., 7.375% 05/01/14 275,000 290,813 Petroleum Helicopters, Inc., 9.375% 05/01/09 530,000 572,400 ----------- 863,213 ----------- TRANSPORTATION-TRUCKS - 0.8% Allied Holdings, Inc., 8.625% 10/01/07 365,000 310,250 QDI Capital Corp., 9.000% 11/15/10 (b) 370,000 369,075 ----------- 679,325 ----------- Transportation Total 3,812,687 ----------- INDUSTRIALS TOTAL 17,446,328 ----------- - ----------------------------------------------------------- TECHNOLOGY - 0.6% SEMICONDUCTORS - 0.6% ELECTRONIC COMPONENTS-SEMICONDUCTORS - 0.6% Amkor Technology, Inc., 9.250% 02/15/08 515,000 505,988 ----------- 505,988 ----------- Semiconductors Total 505,988 ----------- TECHNOLOGY TOTAL 505,988 ----------- - ----------------------------------------------------------- UTILITIES - 7.0% ELECTRIC - 7.0% ELECTRIC-GENERATION - 1.7% AES Corp.: 9.000% 05/15/15 (b) 110,000 126,500 9.500% 06/01/09 455,000 522,113 Edison Mission Energy, 9.875% 04/15/11 480,000 568,800 Mission Energy Holding, 13.500% 07/15/08 140,000 176,050 ----------- 1,393,463 ----------- See Accompanying Notes to Financial Statements. 12 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2004 CORPORATE FIXED-INCOME BONDS & NOTES (CONTINUED) PAR ($) VALUE ($) - ----------------------------------------------------------- UTILITIES (CONTINUED) ELECTRIC (CONTINUED) ELECTRIC-INTEGRATED - 1.9% CMS Energy Corp., 8.900% 07/15/08 420,000 466,200 Nevada Power Co.: 9.000% 08/15/13 185,000 216,450 10.875% 10/15/09 340,000 397,800 PSE&G Energy Holdings, Inc., 8.625% 02/15/08 395,000 436,969 ----------- 1,517,419 ----------- INDEPENDENT POWER PRODUCERS - 3.4% Caithness Coso Funding Corp., 9.050% 12/15/09 477,382 529,894 Calpine Corp., 8.500% 07/15/10 (b) 465,000 365,025 Calpine Generating Co. LLC: 11.169% 04/01/11 (b)(d) 555,000 525,863 11.500% 04/01/11 (b) 320,000 294,400 MSW Energy Holdings LLC: 7.375% 09/01/10 170,000 179,350 8.500% 09/01/10 375,000 412,500 Orion Power Holdings, Inc., 12.000% 05/01/10 365,000 463,550 ----------- 2,770,582 ----------- Electric Total 5,681,464 ----------- UTILITIES TOTAL 5,681,464 ----------- TOTAL CORPORATE FIXED-INCOME BONDS & NOTES (cost of $96,759,707) 99,494,739 ----------- MUNICIPAL BOND (TAXABLE) - 0.7% - ----------------------------------------------------------- Cabazon Band Mission Indians California, 13.000% 10/01/11 (q) 575,000 570,417 ----------- TOTAL MUNICIPAL BOND (TAXABLE) (cost of $575,000) 570,417 ----------- PREFERRED STOCKS - 3.9% SHARES - ----------------------------------------------------------- COMMUNICATIONS - 2.6% MEDIA - 2.6% MULTIMEDIA - 0.2% Haights Cross Communications, 2,734 144,902 ----------- 144,902 ----------- PUBLISHING-PERIODICALS - 0.5% PriMedia, Inc.: 8.625% 1,715 154,350 9.200% 30 2,640 10.000% 2,300 219,650 ----------- 376,640 ----------- SHARES VALUE ($) - ----------------------------------------------------------- RADIO - 1.5% Spanish Broadcasting System, Inc., PIK, 10.750% 1,090 1,204,450 ----------- 1,204,450 ----------- TELEVISION - 0.4% Paxson Communications Corp., PIK, 14.250% 11/15/06 48 360,000 ----------- 360,000 ----------- Media Total 2,085,992 ----------- COMMUNICATIONS TOTAL 2,085,992 ----------- - ------------------------------------------------------------ FINANCIALS - 0.7% REITS - 0.7% REITS-DIVERSIFIED - 0.7% iStar Financial, Inc.: 7.800% 11,007 281,023 7.875% 13,000 329,062 ----------- 610,085 ----------- REITS Total 610,085 ----------- FINANCIALS TOTAL 610,085 ----------- - ------------------------------------------------------------ UTILITIES - 0.6% ELECTRIC - 0.6% ELECTRIC-INTEGRATED - 0.6% TNP Enterprises, Inc., 10.250% 04/01/10 429 495,495 ----------- 495,495 ----------- Electric Total 495,495 ----------- UTILITIES TOTAL 495,495 ----------- TOTAL PREFERRED STOCKS (cost of $3,374,681) 3,191,572 ----------- COMMON STOCKS - 2.4% (l) - ----------------------------------------------------------- BASIC MATERIALS - 0.5% IRON/STEEL - 0.5% STEEL-PRODUCERS - 0.5% Bayou Steel Corp. 11,273 394,555 ----------- 394,555 ----------- Iron/Steel Total 394,555 ----------- BASIC MATERIALS TOTAL 394,555 ----------- - ------------------------------------------------------------ COMMUNICATIONS - 1.4% MEDIA - 0.5% CABLE TV - 0.5% NTL, Inc. 5,942 413,444 Ono Finance PLC (k)(m) 750 -- ----------- 413,444 ----------- Media Total 413,444 ----------- See Accompanying Notes to Financial Statements. 13 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2004 COMMON STOCKS (CONTINUED) SHARES VALUE ($) - ----------------------------------------------------------- COMMUNICATIONS (CONTINUED) TELECOMMUNICATIONS - 0.9% CELLULAR TELECOMMUNICATIONS - 0.6% AirGate PCS, Inc. 2,841 92,247 Horizon PCS, Inc., Class A 9,257 202,728 Nextel Communications, Inc., Class A 6,196 176,338 ----------- 471,313 ----------- WIRELESS EQUIPMENT - 0.3% SBA Communications Corp. 23,590 226,464 ----------- 226,464 ----------- Telecommunications Total 697,777 ----------- COMMUNICATIONS TOTAL 1,111,221 ----------- - ----------------------------------------------------------- CONSUMER, CYCLICAL - 0.1% ENTERTAINMENT - 0.1% CASINO SERVICES - 0.1% Alliance Gaming Corp. 5,500 66,495 ----------- 66,495 ----------- Entertainment Total 66,495 ----------- CONSUMER, CYCLICAL TOTAL 66,495 ----------- - ----------------------------------------------------------- ENERGY - 0.2% PIPELINES - 0.2% PIPELINES - 0.2% Dynegy Holdings, Inc., Class A 23,000 129,950 Hornbeck Offshore Services, Inc. 2,800 56,560 ----------- 186,510 ----------- Pipelines Total 186,510 ----------- ENERGY TOTAL 186,510 ----------- - ----------------------------------------------------------- INDUSTRIALS - 0.2% ENVIRONMENTAL CONTROL - 0.2% NON-HAZARDOUS WASTE DISPOSAL - 0.2% Allied Waste North America, Inc. 7,250 65,902 Fairlane Management Corp. (k)(m) 8,000 -- Waste Services, Inc. 33,000 121,744 ----------- 187,646 ----------- Environmental Control Total 187,646 ----------- INDUSTRIALS TOTAL 187,646 ----------- TOTAL COMMON STOCKS (cost of $1,768,264) 1,946,427 ----------- CONVERTIBLE BONDS - 1.0% PAR ($) - ----------------------------------------------------------- COMMUNICATIONS - 0.8% TELECOMMUNICATIONS - 0.8% TELECOMMUNICATION EQUIPMENT - 0.8% Nortel Networks Corp., 4.250% 09/01/08 645,000 618,484 ----------- 618,484 ----------- Telecommunications Total 618,484 ----------- COMMUNICATIONS TOTAL 618,484 ----------- PAR ($) VALUE ($) - ----------------------------------------------------------- UTILITIES - 0.2% ELECTRIC - 0.2% INDEPENDENT POWER PRODUCERS - 0.2% Mirant Corp., 2.500% 06/15/21 (e) 280,000 198,926 ----------- 198,926 ----------- Electric Total 198,926 ----------- UTILITIES TOTAL 198,926 ----------- TOTAL CONVERTIBLE BONDS (cost of $775,437) 817,410 ----------- WARRANTS - 0.1% (L) UNITS - ----------------------------------------------------------- COMMUNICATIONS - 0.1% MEDIA - 0.1% BROADCAST SERVICES/PROGRAMS - 0.1% XM Satellite Radio Holdings, Inc., Expires 03/15/10 (b) 600 48,000 ----------- 48,000 ----------- - ----------------------------------------------------------- CABLE TV - 0.0% Cable Satisfaction International, Inc., Expires 03/01/05 (b)(k)(m) 970 -- Ono Finance PLC, Expires 03/16/11 (b)(k)(m) 175 -- ----------- -- ----------- MULTIMEDIA - 0.0% Haights Cross Communications: Expires 12/10/11 (n) 2 -- Expires 12/10/12 2,707 54 ----------- 54 ----------- Media Total 48,054 ----------- TELECOMMUNICATIONS - 0.0% CELLULAR TELECOMMUNICATIONS - 0.0% Horizon PCS, Inc., Expires 10/01/10 (b)(k)(m) 665 -- UbiquiTel, Inc., Expires 04/15/10 (b)(k)(m) 525 -- ----------- -- ----------- TELECOMMUNICATION SERVICES - 0.0% AT&T Canada, Inc., Expires 08/15/07 (b)(k)(m) 250 -- Carrier1 International SA, Expires 02/19/09 (b)(e)(k)(m) 347 -- Jazztel PLC, Expires 07/15/10 (b)(k)(m) 350 -- ----------- -- ----------- Telecommunications Total -- ----------- COMMUNICATIONS TOTAL 48,054 ----------- See Accompanying Notes to Financial Statements. 14 INVESTMENT PORTFOLIO (CONTINUED) November 30, 2004 WARRANTS (CONTINUED) UNITS VALUE ($) - ----------------------------------------------------------- INDUSTRIALS - 0.0% METAL FABRICATED/HARDWARE - 0.0% METAL PROCESSORS & FABRICATED - 0.0% Mueller Holdings, Inc., Expires 04/15/14 (b) 375 26,250 ----------- 26,250 ----------- Metal Fabricated/Hardware Total 26,250 ----------- TRANSPORTATION - 0.0% TRANSPORTATION-TRUCKS - 0.0% QDI LLC, Expires 01/15/07 (b)(k) 2,041 6,348 ----------- 6,348 ----------- Transportation Total 6,348 ----------- INDUSTRIALS TOTAL 32,598 ----------- TOTAL WARRANTS (cost of $105,737) 80,652 ----------- SHORT-TERM OBLIGATION - 4.2% PAR ($) - ----------------------------------------------------------- Federal Home Loan Discount Note, 1.930% 12/01/04 (o) (cost of $3,384,000) 3,384,000 3,384,000 ----------- TOTAL INVESTMENTS - 134.8% (cost of $106,742,826)(p) 109,485,217 OTHER ASSETS & LIABILITIES, NET - (34.8)% (28,256,231) ----------- NET ASSETS - 100.0% 81,228,986 =========== NOTES TO INVESTMENT PORTFOLIO: - -------------------------------------------------------------------------------- (a) Step bond. This security is currently not paying coupon. Shown parenthetically is the interest rate to be paid and the date the Fund will begin accruing at this rate. (b) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At November 30, 2004, these securities amounted to $23,520,205, which represents 29.0% of net assets. (c) Zero coupon bond. (d) Floating rate note. The interest rate shown reflects the rate as of November 30, 2004. (e) The issuer has filed for bankruptcy protection under Chapter 11, and is in default of certain debt covenants. Income is not being accrued. As of November 30, 2004, the value of these securities amounted to $978,038, which represents 1.2% of net assets. (f) Security, or a portion thereof, purchased on a delayed delivery basis. (g) The issuer has filed for bankruptcy protection under Chapter 11, and is in default of certain debt covenants, however, under the issuer's plan of reorganization, the issuer has guaranteed all interest due and therefore income is still being accrued. As of November 30, 2004, the value of this security represents 0.2% of net assets. (h) The issuer is in default of certain debt covenants. Income is not being accrued. As of November 30, 2004, the value of this security represents 1.0% of net assets. (i) The issuer has filed for bankruptcy protection under Chapter 11, and is in default of certain debt covenants. Income is being accrued. As of November 30, 2004, the value of these securities amounted to $648,297, which represents 0.8% of net assets. (j) Issued as part of a bankruptcy reorganization. (k) Represents fair value as determined in good faith under procedures approved by the Board of Trustees. (l) Non-income producing security. (m) Security has no value. (n) Rounds to less than $1. (o) The rate shown represents the annualized yield at the date of purchase. (p) Cost for federal income tax purposes is $106,704,740. (q) Illiquid security. (r) Step bond. Shown parenthetically is the next interest rate to be paid and the date the Fund will begin accruing at this rate. At November 30, 2004, the Fund held investments in the following sectors: % OF HOLDINGS BY REVENUE SOURCE (UNAUDITED) NET ASSETS - ------------------------------------------------------------ Communications 32.6 Consumer, Cyclical 26.8 Industrials 21.7 Consumer, Non-Cyclical 16.3 Basic Materials 13.0 Energy 8.1 Utilities 7.8 Financials 3.0 Municipal Bond 0.7 Technology 0.6 Short-Term Obligation 4.2 Other Assets &Liabilities, Net (34.8) ----- 100.0 ----- ACRONYM NAME - --------------------------------------------------------- PIK Payment-In-Kind REIT Real Estate Investment Trust See Accompanying Notes to Financial Statements. 15 STATEMENT OF ASSETS AND LIABILITIES November 30, 2004 ASSETS: Investments, at cost $106,742,826 ------------ Investments, at value $109,485,217 Cash 94,056 Receivable for: Investments sold 671,247 Interest 2,180,516 Dividends 11,755 Deferred Trustees' compensation plan 8,392 ------------ Total Assets 112,451,183 ------------ LIABILITIES: Payable for: Interest 49,723 Investments purchased 313,288 Investments purchased on a delayed delivery basis 635,651 Distributions 504,084 Investment advisory fee 57,069 Transfer agent fee 11,880 Pricing and bookkeeping fees 17,199 Trustees' fees 660 Audit fee 37,160 Custody fee 1,892 Deferred Trustees' fees 8,392 Notes payable - short-term 15,800,000 Notes payable - long-term 13,700,000 Other liabilities 85,199 ------------ Total Liabilities 31,222,197 ------------ NET ASSETS $ 81,228,986 ============ COMPOSITION OF NET ASSETS: Paid-in capital $141,303,724 Undistributed net investment income 359,322 Accumulated net realized loss (63,176,451) Net unrealized appreciation/depreciation on investments 2,742,391 ------------ NET ASSETS $ 81,228,986 ============ Shares outstanding 21,003,496 ------------ Net asset value per share $ 3.87 ============ STATEMENT OF OPERATIONS For the Year Ended November 30, 2004 INVESTMENT INCOME: Interest $ 8,941,089 Dividends 280,304 ------------ Total Investment Income 9,221,393 ------------ EXPENSES: Investment advisory fee 818,086 Transfer agent fee 62,043 Pricing and bookkeeping fees 90,860 Trustees' fees 10,080 Custody fee 20,512 Other expenses 145,568 ------------ Total Operating Expenses 1,147,149 Interest expense 912,550 ------------ Total Expenses 2,059,699 Custody earnings credit (2,101) ------------ Net Expenses 2,057,598 ------------ Net Investment Income 7,163,795 ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: Net realized gain (loss) on: Investments 2,744,452 Foreign currency transactions (15,529) ------------ Net realized gain 2,728,923 ------------ Net change in unrealized appreciation/depreciation on: Investments 2,662,220 Foreign currency translations 22,520 ------------ Net change in unrealized appreciation/depreciation 2,684,740 ------------ Net Gain 5,413,663 ------------ Net Increase in Net Assets from Operations $ 12,577,458 ------------ See Accompanying Notes to Financial Statements. 16 STATEMENTS OF CHANGES IN NET ASSETS
YEAR ONE MONTH YEAR ENDED ENDED ENDED NOVEMBER 30, NOVEMBER 30, OCTOBER 31, INCREASE (DECREASE) IN NET ASSETS: 2004 2003 (a) 2003 - ------------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income $ 7,163,795 $ 480,693 $ 6,115,179 Net realized gain (loss) on investments and foreign currency transactions 2,728,923 275,539 (6,289,825) Net change in unrealized appreciation/depreciation on investments and foreign currency transactions 2,684,740 1,139,485 21,909,449 ------------ ------------ ------------ Net Increase from Operations 12,577,458 1,895,717 21,734,803 DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (6,362,697) (566,640) (6,335,103) Return of capital -- -- (439,949) ------------ ------------ ------------ Total Distributions Declared to Shareholders (6,362,697) (566,640) (6,775,052) ------------ ------------ ------------ SHARE TRANSACTIONS: Distributions reinvested 62,227 -- 528,920 ------------ ------------ ------------ Total Increase in Net Assets 6,276,988 1,329,077 15,488,671 NET ASSETS: Beginning of period 74,951,998 73,622,921 58,134,250 ------------ ------------ ------------ End of period $ 81,228,986 $ 74,622,921 $ 73,622,921 ------------ ------------ ------------ Undistributed/overdistributed net investment income at end of period $ 359,322 $ (546,000) $ (544,368) ============ ============ ============ CHANGES IN SHARES: Issued for distributions reinvested 16,818 -- 164,258 ============ ============ ============ (a) The Fund changed its fiscal year end from October 31 to November 30.
See Accompanying Notes to Financial Statements. 17 STATEMENT OF CASH FLOWS For the Year Ended November 30, 2004 INCREASE (DECREASE) IN CASH - -------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net investment income $ 7,163,795 Adjustments to reconcile net investment income to net cash provided by operating activities: Purchase of investment securities (82,522,556) Proceeds from disposition of investment securities 82,934,929 Purchase of short-term investments, net (1,301,901) Net realized loss due to foreign currency transactions (15,529) Increase in dividend and interest receivable (131,843) Decrease in other assets 3,412 Decrease in receivable for investments sold 207,308 Decrease in payable for investments purchased (642,613) Increase in accrued expenses and other liabilities 109,056 Net amortization/accretion of income (815,922) ------------ Net cash provided by operating activities 4,988,136 CASH FLOWS FROM FINANCING ACTIVITIES: Increase in notes payable 1,000,000 Decrease in interest payable (208,817) Distributions paid in cash (6,363,026) ------------ Net cash used by financing activities (5,571,843) ------------ Net decrease in cash (583,707) CASH: Beginning of period 677,763 ------------ End of period $ 94,056 ============ Supplemental disclosure of cash flow information: Non-cash financing activities not included herein consist of reinvestment of distributions of $62,227. See Accompanying Notes to Financial Statements. 18 NOTES TO FINANCIAL STATEMENTS November 30, 2004 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 pricing services 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. Debt securities for which quotations are readily available are valued at an over-the-counter or exchange bid quotation. Certain debt 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. Equity securities are valued at the last sale price on the principal exchange on which they trade, except for securities traded on the NASDAQ, which are valued at the NASDAQ official close price. 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 debt 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 last sale 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. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the New York Stock Exchange ("NYSE"). The values of such securities used in computing the net asset value of the Fund's shares are determined as of such times. Foreign currency exchange rates are generally determined at 2:00 p.m. Eastern (U.S.) time. Occasionally, events affecting the values of such foreign securities and such exchange rates may occur between the times at which they are determined and the close of the customary trading session of the NYSE, which would not be reflected in the computation of the Fund's net asset value. If events materially affecting the values of such foreign securities occur and it is determined that market quotations are not reliable, then these foreign securities will be valued at their fair value using procedures approved by the Board of Trustees. Investments for which market quotations are not readily available, or quotations which management believes are not appropriate, are valued at fair value under procedures approved by the Board of Trustees. 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 the 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 19 NOTES TO FINANCIAL STATEMENTS (CONTINUED) November 30, 2004 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. The Fund could also be exposed to risk if the counterparties of the contracts are unable to fulfill the terms of the contracts. 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 identifies cash or liquid portfolio securities as segregated with the custodian in an amount equal to the delayed delivery commitment. 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 include 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. For financial statement purposes, 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, and will distribute substantially all of its taxable income, if any, for its tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, such that the Fund should 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 the ex-date. Net realized capital gains, if any, are distributed at least annually. STATEMENT OF CASH FLOWS Information on financial transactions which have been settled through the receipt or disbursement of cash is presented in the Statement of Cash Flows. The cash amount shown in the Statement of Cash Flows is the amount included within the Fund's Statement of Assets and Liabilities and includes 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 the 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 year ended November 30, 2004, permanent book and tax basis differences resulting primarily from differing treatments for discount accretion/premium amortization on debt securities, foreign currency transactions and market discount reclassification adjustments were identified and reclassified among the components of the Fund's net assets as follows: UNDISTRIBUTED ACCUMULATED NET INVESTMENT NET REALIZED PAID-IN INCOME LOSS CAPITAL ------------- ------------- ------------- $104,224 $(104,226) $2 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 years ended November 30, 2004 and November 30, 2003 was as follows: NOVEMBER 30, NOVEMBER 30, OCTOBER 31, 2004 2003 2003 ---------- ---------- ---------- Distributions paid from: Ordinary Income $6,362,697 $566,640 $6,335,103 Tax Return of Capital -- -- 439,949 Long-Term Capital Gains -- -- -- 20 NOTES TO FINANCIAL STATEMENTS (CONTINUED) November 30, 2004 As of November 30, 2004, the components of distributable earnings on a tax basis were as follows: UNDISTRIBUTED UNDISTRIBUTED NET ORDINARY LONG-TERM UNREALIZED INCOME CAPITAL GAINS APPRECIATION* ------------- ------------- ------------- $873,142 $-- $2,780,477 * The differences between book-basis and tax-basis net unrealized appreciation are primarily due to deferral of losses from wash sales and discount accretion/premium amortization on debt securities. Unrealized appreciation and depreciation at November 30, 2004, based on cost of investments for federal income tax purposes, and excluding any unrealized appreciation and depreciation from changes in the value of other assets and liabilities resulting from changes in exchange rates, was: Unrealized appreciation $6,821,287 Unrealized depreciation (4,040,810) ---------- Net unrealized appreciation $2,780,477 The following capital loss carryforwards, determined as of November 30, 2004, may be available to reduce taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code: YEAR OF CAPITAL LOSS EXPIRATION CARRYFORWARD ----------------- ----------------------- 2006 $ 410,216 2007 10,437,671 2008 22,694,029 2009 23,203,433 2010 6,431,055 ----------- $63,176,404 =========== Capital loss carryforwards of $2,624,744 were utilized during the year ended November 30, 2004 for the Fund. NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the Fund. Prior to April 1, 2004, Columbia was an indirect, wholly owned subsidiary of FleetBoston Financial Corporation ("FleetBoston"). Effective April 1, 2004, FleetBoston, including the Fund's investment advisor, was acquired by Bank of America Corporation ("BOA"). The acquisition 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 provides administrative and other services to the Fund in addition to investment advisory services. Columbia receives a monthly investment advisory 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 leverage income. For the year ended November 30, 2004, the Fund paid fees of $313,565 to Columbia under this agreement, which represents 0.41% annually of the Fund's average daily net assets. This amount is included in "Investment advisory fee" on the Statement of Operations. 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"). As a result, Columbia pays the total fees received to State Street under the Outsourcing Agreement. 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 based on the number of securities held by the Fund. For the year ended November 30, 2004, the Fund's effective pricing and bookkeeping fee rate, inclusive of out-of-pocket expenses, was 0.117%. CUSTODY CREDITS The Fund has an agreement with its custodian bank under which custody fees may be reduced by balance credits. These credits are recorded as a reduction of total expenses on the Statement of Operations. 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. FEES PAID TO OFFICERS AND TRUSTEES With the exception of one officer, all officers of the Fund are employees of Columbia or its affiliates and receive no compensation from the Fund. Effective August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Fund in accordance with federal securities regulations. The Fund, along with other affiliated funds, will pay its pro-rata share of the expenses associated with the Office of the Chief Compliance Officer. The Fund's fee will not exceed $15,000 per year. 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. 21 NOTES TO FINANCIAL STATEMENTS (CONTINUED) November 30, 2004 OTHER Columbia provides certain services to the Fund related to Sarbanes-Oxley compliance. For the year ended November 30, 2004, the Fund paid $1,398 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations. NOTE 5. PORTFOLIO INFORMATION For the year ended November 30, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $82,522,556 and $82,934,929, respectively. NOTE 6. LOAN AGREEMENT On August 24, 2004, the credit agreement dated August 26, 2003 between the Fund, BOA and State Street was amended and State Street replaced BOA as Administrative Agent and lender. At November 30, 2004, the Fund had term loans and a revolving loan outstanding with State Street, totaling $29,500,000. The terms loans are comprised of a $13,700,000 loan which bears interest at 3.12% per annum, due August 26, 2005 and a $2,000,000 loan which bears interest at 3.13% per annum, due August 26, 2005. The revolving loan is a $13,800,000 floating rate loan, maturing on August 23, 2005. At November 30, 2004, the average daily loan balance was $29,428,962 at a weighted average interest rate of 3.05%. 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 to the extent there is no established secondary market. INDUSTRY FOCUS The Fund may focus its investments in certain industries, subjecting it to greater risk than a fund that is more diversified. LEGAL PROCEEDINGS Columbia, Columbia Funds Distributor, Inc. ("CFDI"), and certain of their affiliates (collectively, "the Columbia Group") have received information requests and subpoenas from various regulatory and law enforcement authorities in connection with their investigations of late trading and market timing in mutual funds as well as other industry wide issues. The Columbia Group has not uncovered any instances where Columbia or CFDI were knowingly involved in late trading of mutual fund shares. On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a civil complaint in the United States District Court for the District of Massachusetts against Columbia and CFDI, alleging that they had violated certain provisions of the federal securities laws in connection with trading activity in mutual fund shares. Also on February 24, 2004, the New York Attorney General ("NYAG") filed a civil complaint in New York Supreme Court, County of New York against Columbia and CFDI alleging that Columbia and CFDI had violated certain New York anti-fraud statutes. If either Columbia or CFDI is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor or distributor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could prevent Columbia, CFDI or any company that is an affiliated person of Columbia and CFDI from serving as an investment advisor or distributor for any registered investment company, including your fund. Your fund has been informed by Columbia and CFDI that, if these results occur, they will seek exemptive relief from the SEC to permit them to continue to serve as your fund's investment advisor and distributor. There is no assurance that such exemptive relief will be granted. On March 15, 2004, Columbia and CFDI entered into agreements in principle with the SEC Division of Enforcement and NYAG in settlement of the charges. Under the agreements, Columbia and CFDI agreed, among other things, to the following conditions: payment of $70 million in disgorgement; payment of $70 million in civil penalties; an order requiring Columbia and CFDI to cease and desist from violations of the antifraud provisions and other provisions of the federal securities laws; governance changes designed to maintain the independence of the mutual fund boards of trustees and ensure compliance with securities laws and their fiduciary duties; and retention of an independent consultant to review Columbia's and CFDI's compliance policies and procedures. The agreement requires the final approval of the SEC. In a separate agreement with the NYAG, the Columbia Group and its affiliate Banc of America Capital Management, LLC have agreed to collectively reduce mutual fund fees by $160 million over a five-year period. 22 NOTES TO FINANCIAL STATEMENTS (CONTINUED) November 30, 2004 In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or FleetBoston (and affiliated entities). More than 300 cases (including those filed against entities unaffiliated with the funds, their Boards and/or FleetBoston and its affiliated entities) have been consolidated in a multi-district proceeding and transferred to the Federal District Court in Maryland. Recently, certain Columbia funds and affiliated entities have been named as defendants in several derivative actions under various sections of the Investment Company Act of 1940, as amended, alleging, among other things, that the fees and expenses paid by those funds are excessive. The funds and the other defendants to these actions, including Columbia and various of its affiliates, certain other mutual funds advised by Columbia and its affiliates, and various directors of such funds, have denied these allegations and are contesting the plaintiffs' claims. These suits and certain regulatory investigations are ongoing, however, based on currently available information, Columbia believes that these lawsuits are without merit, that the likelihood they will have a material adverse impact on any fund is remote, and that the lawsuits are not likely to materially affect its ability to provide investment management services to its clients, including the funds. NOTE 8. COMPARABILITY OF FINANCIAL STATEMENTS Effective November 30, 2003, the fiscal year end of the Fund was changed from October 31 to November 30. 23 FINANCIAL HIGHLIGHTS Selected data for a share outstanding throughout each period is as follows:
ONE MONTH YEAR ENDED ENDED YEAR ENDED OCTOBER 31, NOVEMBER 30, NOVEMBER 30, ------------------------------------------------- 2004 2003 (a) 2003 2002 2001 2000 - -------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 3.57 $ 3.51 $ 2.79 $ 3.51 $ 4.83 $ 5.97 ----------- ----------- ----------- ----------- ----------- ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.34(b) 0.02(b) 0.29(b) 0.38(b)(c) 0.51(b) 0.67 Net realized and unrealized gain (loss) on investments and foreign currency 0.26 0.07 0.75 (0.73)(c) (1.26) (1.10) ----------- ----------- ----------- ----------- ----------- ----------- Total from Investment 0.60 0.09 1.04 (0.35) (0.75) (0.43) LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.30) (0.03) (0.30) (0.36) (0.55) (0.69) In excess of net investment income -- -- -- -- -- (0.02) Return of capital -- -- (0.02) (0.01) (0.02) -- ----------- ----------- ----------- ----------- ----------- ----------- Total Distributions Declared to Shareholders (0.30) (0.03) (0.32) (0.37) (0.57) (0.71) ----------- ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, END OF PERIOD $ 3.87 $ 3.57 $ 3.51 $ 2.79 $ 3.51 $ 4.83 =========== =========== =========== =========== =========== =========== Market price per share $ 3.51 $ 3.50 $ 3.65 $ 2.79 $ 3.49 $ 4.63 =========== =========== =========== =========== =========== =========== Total return -- based on market value (d) 9.24% (3.40)%(e) 44.56% (10.43)% (14.26)% (6.12)% RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Operating expenses (f) 1.48% 1.63%(g) 1.35% 1.25% 1.31% 0.92% Interest and amortization of deferred debt issuance expenses 1.18% 1.38%(g) 2.00% 2.73% 2.98% 2.79% Total expenses (f) 2.66% 3.01%(g) 3.35% 3.98% 4.29% 3.71% Net investment income (f) 9.25% 7.82%(g) 9.18% 11.38%(c) 11.96% 11.88% Portfolio turnover rate 80% 7%(e) 64% 54% 52% 42% Net assets, end of period (000's) $ 81,229 $ 74,952 $ 73,623 $ 58,134 $ 72,353 $ 98,333
(a) The Fund 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. 24 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for a share outstanding throughout each period is as follows:
YEAR ENDED OCTOBER 31, ------------------------------------------------------------------ 1999 1998 1997 1996 1995 - --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 6.20 $ 7.27 $ 6.89 $ 6.62 $ 6.28 ----------- ----------- ----------- ----------- ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.70 0.70 0.70 0.70 0.70 Net realized and unrealized gain (loss) on investments and foreign currency (0.23) (1.08) 0.38 0.26 0.34 ----------- ----------- ----------- ----------- ----------- Total from Investment Operations 0.47 (0.38) 1.08 0.96 1.04 LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.70) (0.69) (0.70) (0.69) (0.70) ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, END OF PERIOD $ 5.97 $ 6.20 $ 7.27 $ 6.89 $ 6.62 =========== =========== =========== =========== =========== Market price per share $ 5.63 $ 6.81 $ 7.56 $ 7.13 $ 6.88 =========== =========== =========== =========== =========== Total return -- based on market value (a) (7.89)% (0.74)% 16.97% 14.62% 33.00% RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Operating expenses (b) 0.89% 0.88% 0.89% 0.98% 0.95% Interest and amortization of deferred debt issuance expenses 2.48% 2.11% 1.96% 2.07% 1.94% Total expenses (b) 3.37% 2.99% 2.85% 3.05% 2.89% Net investment income (b) 10.82% 9.70% 9.63% 10.11% 10.76% Portfolio turnover rate 44% 69% 92% 92% 92% Net assets, end of period (000's) $ 121,018 $ 124,480 $ 107,774 $ 99,925 $ 93,984
(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 October 31, 1997 which had a 0.01% impact. 25 FINANCIAL HIGHLIGHTS (CONTINUED) LOAN AGREEMENT ASSET COVERAGE REQUIREMENTS ASSET COVERAGE TOTAL AMOUNT PER $1,000 OF DATE OUTSTANDING INDEBTEDNESS --------- ----------- ------------ 11/30/04 $29,500,000 $3,754 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 26 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE TRUSTEES AND THE SHAREHOLDERS OF COLONIAL INTERMEDIATE HIGH INCOME FUND In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations, 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, 2004, 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 the standards of the Public Company Accounting Oversight Board (United States), 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, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts January 19, 2005 27 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 1-800-730-6001. 28 ADDITIONAL INFORMATION On August 3, 2004, the Board of Trustees approved the use of interest rate swaps (and options on those swaps) for hedging purposes. The Fund may enter into swap agreements to manage its exposure to the financial markets. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into interest rate swaps and options on those swaps to manage its exposure to interest rates. Interest rate swap agreements involve the exchange by the Fund with another party of their respective commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal. These financial instruments are not actively traded on financial markets. Entering into these agreements involves, to varying degrees, elements of credit, legal, market and documentation risk. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreement may default on its obligation to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in interest rates. 29 TRUSTEES AND OFFICERS 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.
NAME, ADDRESS AND AGE, POSITION WITH FUNDS, YEAR FIRST ELECTED OR PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN COLUMBIA FUNDS APPOINTED TO OFFICE(1) COMPLEX OVERSEEN BY TRUSTEE/DIRECTOR, OTHER DIRECTORSHIPS HELD - -------------------------------------------------------------------------------------------------------------------------------- DISINTERESTED TRUSTEES DOUGLAS A. HACKER (age 49) Executive Vice President-Strategy of United Airlines (airline) since December 2002 (formerly P.O. Box 66100 President of UAL Loyalty Services (airline) from September 2001 to December 2002; Executive Vice Chicago, IL 60666 President and Chief Financial Officer of United Airlines from March 1999 to September 2001; Senior Trustee (since 1996) Vice President-Finance from March 1993 to July 1999). Oversees 118, None JANET LANGFORD KELLY (age 47) Adjunct Professor of Law, Northwestern University, since September 2004; Private Investor since 9534 W. Gull Lake Drive March 2004 (formerly Chief Administrative Officer and Senior Vice President, Kmart Holding Richland, MI 49083-8530 Corporation (consumer goods), from September 2003 to March 2004; Executive Vice President-Corporate Trustee (since 1996) 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). 118, None RICHARD W. LOWRY (age 68) Private Investor since August 1987 (formerly Chairman and Chief Executive Officer, U. S. Plywood 10701 Charleston Drive Corporation (building products manufacturer)). Oversees 120(3), None Vero Beach, FL 32963 Trustee (since 1995) CHARLES R. NELSON (age 62) Professor of Economics, University of Washington, since January 1976; Ford and Louisa Van Voorhis Department of Economics Professor of Political Economy, University of Washington, since September 1993 (formerly Director, University of Washington Institute for Economic Research, University of Washington from September 2001 to June 2003) Adjunct Seattle, WA 98195 Professor of Statistics, University of Washington, since September 1980; Associate Editor, Journal Trustee (since 1981) of Money Credit and Banking, since September 1993; consultant on econometric and statistical matters. Oversees 118, None JOHN J. NEUHAUSER (age 61) Academic Vice President and Dean of Faculties since August 1999, Boston College (formerly Dean, 84 College Road Boston College School of Management from September 1977 to September 1999). Oversees 121(3), (4), Chestnut Hill, MA 02467-3838 Saucony, Inc. (athletic footwear) Trustee (since 1985) PATRICK J. SIMPSON (age 60) Partner, Perkins Coie LLP (law firm). Oversees 118, None 1120 N.W. Couch Street Tenth Floor Portland, OR 97209-4128 Trustee (since 2000)
30 TRUSTEES AND OFFICERS (CONTINUED)
NAME, ADDRESS AND AGE, POSITION WITH FUNDS, YEAR FIRST ELECTED OR PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN COLUMBIA FUNDS APPOINTED TO OFFICE(1) COMPLEX OVERSEEN BY TRUSTEE/DIRECTOR, OTHER DIRECTORSHIPS HELD - -------------------------------------------------------------------------------------------------------------------------------- DISINTERESTED TRUSTEES (continued) THOMAS E. STITZEL (age 68) Business Consultant since 1999 (formerly Professor of Finance from 1975 to 1999, College of 2208 Tawny Woods Place Business, Boise State University); Chartered Financial Analyst. Oversees 118, None. Boise, ID 83706 Trustee (since 1998) THOMAS C. THEOBALD (age 67) Partner and Senior Advisor, Chicago Growth Partners (private equity investing) since September 2004 303 W. Madison (formerly Managing Director, William Blair Capital Partners (private equity investing) from Suite 2500 September 1994 to September 2004). Oversees 118, Anixter International (network support equipment Chicago, IL 60606 distributor); Ventas, Inc. (real estate investment trust); Jones Lang LaSalle (real estate Trustee and Chairman management services) and Ambac Financial Group (financial guaranty insurance) of the Board(5) (since 1996) ANNE-LEE VERVILLE (age 59) Retired since 1997 (formerly General Manager, Global Education Industry, IBM Corporation (computer 359 Stickney Hill Road and technology) from 1994 to 1997). Oversees 119(4), Chairman of the Board of Directors, Enesco Hopkinton, NH 03229 Group, Inc. (designer, importer and distributor of giftware and collectibles) Trustee (since 1998) RICHARD L. WOOLWORTH (age 63) Retired since December 2003 (formerly Chairman and Chief Executive Officer, The Regence Group 100 S.W. Market Street #1500 (regional health insurer); Chairman and Chief Executive Officer, BlueCross BlueShield of Oregon; Portland, OR 97207 Certified Public Accountant, Arthur Young & Company). Oversees 118, Northwest Natural Gas Co. Trustee (since 1991) (natural gas service provider) INTERESTED TRUSTEE WILLIAM E. MAYER(2) (age 64) Partner, Park Avenue Equity Partners (private equity) since February 1999 (formerly Partner, 399 Park Avenue Development Capital LLC from November 1996 to February 1999). Oversees 120(3), Lee Enterprises Suite 3204 (print media), WR Hambrecht + Co. (financial service provider); First Health (healthcare); Reader's New York, NY 10022 Digest (publishing); OPENFIELD Solutions (retail industry technology provider) Trustee (since 1994)
(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. (3) Messrs. Lowry, Neuhauser and Mayer also serve as directors/trustees of the Liberty 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. Theobald was appointed as Chairman of the Board effective December 10, 2003. 31 TRUSTEES AND OFFICERS (CONTINUED)
NAME, ADDRESS AND AGE, POSITION WITH COLUMBIA FUNDS, YEAR FIRST ELECTED OR APPOINTED TO OFFICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS - ------------------------------------------------------------------------------------------------------------------- OFFICERS CHRISTOPHER L. WILSON (age 47) Head of Mutual Funds for the Advisor since August 2004; President of the Columbia Funds since One Financial Center October 2004 (formerly President and Chief Executive Officer, CDC IXIS Asset Management Services, Boston, MA 02111 Inc. from September 1998 to August 2004). President (since 2004) J. KEVIN CONNAUGHTON (age 40) Treasurer of the Columbia Funds and of the Liberty All-Star Funds since December 2000; Vice One Financial Center President of the Advisor since April 2003 (formerly President of the Columbia Funds from February Boston, MA 02111 2004 to October 2004; Chief Accounting Officer and Controller of the Liberty Funds and of the Treasurer (since 2000) Liberty All-Star Funds from February 1998 to October 2000); Treasurer of the Galaxy Funds since September 2002; (formerly Treasurer from December 2002 to December 2004 and President from February 2004 to December 2004 of the Columbia Management Multi-Strategy Hedge Fund, LLC; Vice President of Colonial Management Associates, Inc. from February 1998 to October 2000). MARY JOAN HOENE (age 54) Senior Vice President and Chief Compliance Officer of the Columbia Funds and of the Liberty All-Star 40 West 57th Street Funds since August 2004 (formerly Partner, Carter, Ledyard & Milburn LLP from January 2001 to August New York, NY 10019 2004; Counsel, Carter, Ledyard & Milburn LLP from November 1999 to December 2000; Vice President and Senior Vice President and Counsel, Equitable Life Assurance Society of the United States from April 1998 to November 1999). Chief Compliance Officer (since 2004) MICHAEL G. CLARKE (age 34) Chief Accounting Officer of the Columbia Funds and of the Liberty All-Star Funds since October 2004 One Financial Center (formerly Controller of the Columbia Funds and of the Liberty All-Star Funds from May 2004 to Boston, MA 02111 October 2004; Assistant Treasurer from June, 2002 to May 2004; Vice President, Product Strategy & Chief Accounting Officer Development of the Liberty Funds Group from February 2001 to June 2002; Assistant Treasurer of the (since 2004) Liberty Funds and of the Liberty All-Star Funds from August 1999 to February 2001; Audit Manager, Deloitte & Touche LLP from May 1997 to August 1999). JEFFREY R. COLEMAN (age 35) Controller of the Columbia Funds and of the Liberty All-Star Funds since October 2004 (formerly Vice One Financial Center President of CDC IXIS Asset Management Services, Inc. and Deputy Treasurer of the CDC Nvest Funds Boston, MA 02111 and Loomis Sayles Funds from February 2003 to September 2004; Assistant Vice President of CDC IXIS Controller (since 2004) Asset Management Services, Inc. and Assistant Treasurer of the CDC Nvest Funds from August 2000 to February 2003; Tax Manager of PFPC Inc. from November 1996 to August 2000). R. SCOTT HENDERSON (age 45) Secretary of the Columbia Funds since December 2004 (formerly Of Counsel, Bingham McCutchen from One Financial Center April 2001 to September 2004; Executive Director and General Counsel, Massachusetts Pension Reserves Boston, MA 02111 Investment Management Board from September 1997 to March 2001). Secretary (since 2004)
32 TRANSFER AGENT - -------------------------------------------------------------------------------- IMPORTANT INFORMATION ABOUT THIS REPORT The Transfer Agent for Colonial Intermediate High Income Fund is: PFPC, Inc. 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 800-730-6001. 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 fund's proxy voting policies and procedures is available (i) at www.columbiamanagement.com; (ii) on the Securities and Exchange Commission's website at www.sec.gov, and (iii) without charge, upon request, by calling 800-730-6001. Information regarding how the fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2004 is available from the SEC's website. Information regarding how the fund voted proxies relating to portfolio securities is also available at www.columbiamanagement.com . The fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. This report has been prepared for shareholders of Colonial Intermediate High Income Fund. COLONIAL INTERMEDIATE HIGH INCOME FUND ANNUAL REPORT 110-02/739T-1104 (01/05) 05/3934 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. Effective November 30, 2003, the registrant changed its fiscal year from October 31, 2003. Fee information for the fiscal year ended October 31, 2003 is also included below. (a) Aggregate Audit Fees billed by the principal accountant for professional services rendered during the fiscal years/periods ended November 30, 2004, November 30, 2003 and October 31, 2003 are approximately as follows: November 30, 2004 November 30, 2003 October 31, 2003 $32,860 $17,485 $34,970 Audit Fees include amounts related to the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. (b) Aggregate Audit-Related Fees billed by the principal accountant for professional services rendered during the fiscal years/periods ended November 30, 2004, November 30, 2003 and October 31, 2003 are approximately as follows: November 30, 2004 November 30, 2003 October 31, 2003 $3,700 $0 $4,000 Audit-Related Fees include amounts for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported in Audit Fees above. In both fiscal years/periods 2004 and 2003, Audit-Related Fees include certain agreed-upon procedures performed for semi-annual shareholder reports. (c) Aggregate Tax Fees billed by the principal accountant for professional services rendered during the fiscal years/periods ended November 30, 2004, November 30, 2003 and October 31, 2003 are approximately as follows: November 30, 2004 November 30, 2003 October 31, 2003 $2,710 $2,600 $2,600 Tax Fees during the fiscal years/periods ended November 30, 2004, November 30, 2003 and October 31, 2003 consist primarily of the review of annual tax returns and include amounts for professional services by the principal accountant for tax compliance, tax advice and tax planning. (d) Aggregate All Other Fees billed by the principal accountant for professional services rendered during the fiscal years/periods ended November 30, 2004, November 30, 2003 and October 31, 2003 are as follows: November 30, 2004 November 30, 2003 October 31, 2003 $0 $0 $0 All Other Fees include amounts for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) above. None of the amounts described in paragraphs (a) through (d) above were approved pursuant to the "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (e)(1) AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES I. GENERAL OVERVIEW The Audit Committee of the registrant has adopted a formal policy (the "Policy") which sets forth the procedures and the conditions pursuant to which the Audit Committee will pre-approve (i) all audit and non-audit (including audit related, tax and all other) services provided by the registrant's independent auditor to the registrant and individual funds (collectively "Fund Services"), and (ii) all non-audit services provided by the registrant's independent auditor to the funds' adviser or a control affiliate of the adviser, that relate directly to the funds' operations and financial reporting (collectively "Fund-related Adviser Services"). A "control affiliate" is an entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the funds, and the term "adviser" is deemed to exclude any unaffiliated sub-adviser whose role is primarily portfolio management and is sub-contracted or overseen by another investment adviser. The adviser and control affiliates are collectively referred to as "Adviser Entities." The Audit Committee uses a combination of specific (on a case-by-case basis as potential services are contemplated) and general (pre-determined list of permitted services) pre-approvals. Unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee if it is to be provided by the independent auditor. The Policy does not delegate the Audit Committee's responsibilities to pre-approve services performed by the independent auditor to management. II. GENERAL PROCEDURES On an annual basis, the Fund Treasurer and/or Director of Trustee Administration shall submit to the Audit Committee a schedule of the types of Fund Services and Fund-related Adviser Services that are subject to general pre-approval. These schedules will provide a description of each type of service that is subject to general pre-approval and, where possible, will provide estimated fees for each instance of providing each service. This general pre-approval and related fees (where provided) will generally cover a one-year period (for example, from June 1 through May 31 of the following year). The Audit Committee will review and approve the types of services and review the projected fees for the next one-year period and may add to, or subtract from, the list of general pre-approved services from time to time, based on subsequent determinations. This approval acknowledges that the Audit Committee is in agreement with the specific types of services that the independent auditor will be permitted to perform. The fee amounts will be updated to the extent necessary at other regularly scheduled meetings of the Audit Committee. In addition to the fees for each individual service, the Audit Committee has the authority to implement a fee cap on the aggregate amount of non-audit services provided to an individual fund. If, subsequent to general pre-approval, a fund, its investment adviser or a control affiliate determines that it would like to engage the independent auditor to perform a service that requires pre-approval and that is not included in the general pre-approval list, the specific pre-approval procedure shall be as follows: o A brief written request shall be prepared by management detailing the proposed engagement with explanation as to why the work is proposed to be performed by the independent auditor; o The request should be addressed to the Audit Committee with copies to the Fund Treasurer and/or Director of Trustee Administration; o The Fund Treasurer and/or Director of Trustee Administration will arrange for a discussion of the service to be included on the agenda for the next regularly scheduled Audit Committee meeting, when the Committee will discuss the proposed engagement and approve or deny the request. o If the timing of the project is critical and the project needs to commence before the next regularly scheduled meeting, the Chairperson of the Audit Committee may approve or deny the request on behalf of the Audit Committee, or, in the Chairperson's discretion, determine to call a special meeting of the Audit Committee for the purpose of considering the proposal. Should the Chairperson of the Audit Committee be unavailable, any other member of the Audit Committee may serve as an alternate for the purpose of approving or denying the request. Discussion with the Chairperson (or alternate, if necessary) will be arranged by the Fund Treasurer and/or Director of Trustee Administration. The independent auditor will not commence any such project unless and until specific approval has been given. III. CERTAIN OTHER SERVICES PROVIDED TO ADVISER ENTITIES The Audit Committee recognizes that there are cases where services proposed to be provided by the independent auditor to the adviser or control affiliates are not Fund-related Adviser Services within the meaning of the Policy, but nonetheless may be relevant to the Audit Committee's ongoing evaluation of the auditor's independence and objectivity with respect to its audit services to the funds. As a result, in all cases where an Adviser Entity engages the independent auditor to provide audit or non-audit services that are not Fund Services or Fund-related Adviser Services, were not subject to pre-approval by the Audit Committee, and the projected fees for any such engagement (or the aggregate of all such engagements during the period covered by the Policy) exceeds a pre-determined threshold established by the Audit Committee; the independent auditor, Fund Treasurer and/or Director of Trustee Administration will notify the Audit Committee not later than its next meeting. Such notification shall include a general description of the services provided, the entity that is to be the recipient of such services, the timing of the engagement, the entity's reasons for selecting the independent auditor, and the projected fees. Such information will allow the Audit Committee to consider whether non-audit services provided to the adviser and Adviser Entities, which were not subject to Audit Committee pre-approval, are compatible with maintaining the auditor's independence with respect to the Funds. IV. REPORTING TO THE AUDIT COMMITTEE The Fund Treasurer or Director of Trustee Administration shall report to the Audit Committee at each of its regular meetings regarding all Fund Services or Fund-related Adviser Services initiated since the last such report was rendered, including: o A general description of the services, and o Actual billed and projected fees, and o The means by which such Fund Services or Fund-related Adviser Services were pre-approved by the Audit Committee. In addition, the independent auditor shall report to the Audit Committee annually, and no more than 90 days prior to the filing of audit reports with the SEC, all non-audit services provided to entities in the funds' "investment company complex," as defined by SEC rules, that did not require pre-approval under the Policy. V. AMENDMENTS; ANNUAL APPROVAL BY AUDIT COMMITTEE The Policy may be amended from time to time by the Audit Committee. Prompt notice of any amendments will be provided to the independent auditor, Fund Treasurer and Director of Trustee Administration. The Policy shall be reviewed and approved at least annually by the Audit Committee. ***** (e)(2) The percentage of services described in paragraphs (b) through (d) of this Item approved pursuant to the "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X during both fiscal years/periods ended November 30, 2004, November 30, 2003 and October 31, 2003 was zero. (f) Not applicable. (g) All non-audit fees billed by the registrant's accountant for services rendered to the registrant for the fiscal years/periods ended November 30, 2004, November 30, 2003 and October 31, 2003 are disclosed in (b) through (d) of this Item. During the fiscal years/periods ended November 30, 2004, November 30, 2003 and October 31, 2003, there were no Audit-Related Fees, Tax Fees or All Other Fees that were approved for services to the investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. The percentage of Audit-Related Fees, Tax Fees and All Other Fees required to be approved under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X that were approved under the "de minimis" exception during the fiscal years/periods ended November 30, 2004, November 30, 2003 and October 31, 2003 was zero. (h) The registrant's Audit Committee of the Board of Directors has considered whether the provision of non-audit services that were rendered to the registrant's adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, is compatible with maintaining the principal accountant's independence. The Audit Committee determined that the provision of such services is compatible with maintaining the principal accountant's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. The registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act (15 U.S.C. 78c(a)(58)(A)). Douglas A. Hacker, Thomas E. Stitzel, Anne-Lee Verville and Richard L. Woolworth are each independent trustees and collectively constitute the entire Audit Committee. ITEM 6. SCHEDULE OF INVESTMENTS The registrant's "Schedule I - Investments in securities of unaffiliated issuers" (as set forth in 17 CFR 210.12-12) is included in Item 1 of this Form N-CSR. 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. The Advisor's Proxy Committee is composed of representatives of the Advisor's equity investments, equity research, compliance, legal and fund administration functions. In addition to the responsibilities described above, the Proxy Committee has the responsibility to review, on a semi-annual basis, the Advisor's proxy voting policies to ensure consistency with internal policies and regulatory agency policies and to develop additional voting guidelines to assist in the review of proxy proposals. 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. 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 retained 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. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not yet applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Registrant Purchases of Equity Securities* (a) (b) (c) (d) Total Number of Maximum Number of Shares Purchased as Shares that May Yet Period Total Number Average Price Part of Publically Be Purchased Under of Shares Paid Per Share Announced Plans the Plans or Programs - ------------------------------------------------------------------------------------------------------------------------------------ 06/01/04 through 06/30/04 16,436 $3.30 16,436 N/A 07/01/04 through 07/31/04 16,231 $3.34 16,231 N/A 08/01/04 through 08/31/04 15,531 $3.44 15,531 N/A 09/01/04 through 09/30/04 15,059 $3.54 15,059 N/A 10/01/04 through 10/31/04 14,936 $3.53 14,936 N/A 11/01/04 through 11/30/04 14,684 $3.57 14,684 N/A - ------------------------------------------------------------------------------------------------------------------------------------ Total 92,877 $3.45 92,877 N/A - ------------------------------------------------------------------------------------------------------------------------------------
* Includes shares purchased by the Dividend Reinvestment Agent pursuant to the Registrant's Dividend Reinvestment Plan. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have not been any material changes to the procedures by which shareholders may recommend nominees to the registrant's board of directors, since those procedures were last disclosed in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A or this Item. ITEM 11. CONTROLS AND PROCEDURES. (a) The registrant's principal executive officer and principal financial officers, 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 second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. 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/ Christopher L. Wilson -------------------------------------------------------- Christopher L. Wilson, President Date January 26, 2005 ---------------------------------------------------------------------------- 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/ Christopher L. Wilson -------------------------------------------------------- Christopher L. Wilson, President Date January 26, 2005 ---------------------------------------------------------------------------- By (Signature and Title) /S/ J. Kevin Connaughton -------------------------------------------------------- J. Kevin Connaughton, Treasurer Date January 26, 2005 ---------------------------------------------------------------------------- EX-99.CODE ETH 2 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 3 file003.txt CERTIFICATIONS I, Christopher L. Wilson, 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) and internal control over financial reporting (as defined in Rule 30a-3(d) 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) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) 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 (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal quarter of the period covered by this 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 26, 2005 /S/ Christopher L. Wilson ---------------------------------- Christopher L. Wilson, 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) and internal control over financial reporting (as defined in Rule 30a-3(d) 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) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) 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 (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal quarter of the period covered by this 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 26, 2005 /S/ J. Kevin Connaughton ------------------------------------ J. Kevin Connaughton, Treasurer EX-99.906CERT 4 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 "Trust") on Form N-CSR for the period ending November 30, 2004, as filed with the Securities and Exchange Commission on the date hereof ("the Report"), 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 26, 2005 /S/ Christopher L. Wilson ----------------------------------- Christopher L. Wilson, President Date: January 26, 2005 /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-----