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[LOGO]
COLONIAL
INTERMEDIATE
HIGH INCOME
FUND
SEMIANNUAL REPORT
APRIL 30, 1997
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COLONIAL INTERMEDIATE HIGH INCOME FUND
HIGHLIGHTS
NOVEMBER 1, 1996 - APRIL 30, 1997
INVESTMENT OBJECTIVE: Colonial Intermediate High Income Fund seeks high current
income and total return by investing primarily in lower rated corporate debt
securities.
The Fund is designed to offer:
o High monthly income potential
o Attractive long-term total return potential
o Broad diversification
PORTFOLIO MANAGER COMMENTARY: "The Fund benefited from a positive environment
for high yield bonds. Several of our holdings were acquired by investment grade
companies, resulting in substantial price increases for those bonds. Our
economic outlook anticipates continued growth in income and earnings for our
companies, although at a slower pace than last year. Because of ongoing interest
rate volatility and a lack of clear economic trends, we have positioned the Fund
more conservatively than at the beginning of the period. We increased our
emphasis on non-cyclical industries such as consumer non-durables and
supermarkets, and decreased our emphasis on commodity based industries such as
paper and forest products." -- Andrea Feingold
COLONIAL INTERMEDIATE HIGH INCOME FUND PERFORMANCE
Distributions declared per share $0.360
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NAV MARKET PRICE
Six-month total return, assuming
reinvestment of all distributions 6.00% 8.87%
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Price per share $6.94 $7.38
TOP CORPORATE ISSUERS* TOP FIVE SECTORS*
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1.Revlon .................... 4.0% 1.Manufacturing ............ 18.2%
2.Mesa, Inc.................. 2.2% 2.Services ................. 14.8%
3.Young Broadcasting......... 2.1% 3.Transportation, Electric,
4.Panamsat L.P. Stp.......... 2.1% Gas, Sanitary Services.... 10.4%
5.Cablevision Systems Corp... 2.1% 4.Mining & Energy .......... 8.8%
5.Retail Trade ............. 8.1%
*Corporate issuers and sector breakdowns are calculated as a percent of total
investments. Because the Fund is actively managed, there can be no guarantee the
Fund will continue to hold these issuers or invest in these sectors in the
future. Industry sectors in the following financial statements are based upon
the standard industrial classifications (SIC) published by the U.S. Office of
Management and Budget. The sector classifications used on this page are based
upon Colonial's defined criteria as used in the investment process.
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2
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PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
I am pleased to present the semiannual report for Colonial [Photo]
Intermediate High Income Fund. This report reflects on the
investment environment for the six months ended April 30, 1997
and on the performance of your Fund.
The economy continued to grow at a healthy pace during the past six months. A
firm job market buoyed consumer confidence, resulting in strong retail sales and
accelerating industrial production. The strength of the economy during the first
quarter of 1997 led the Federal Reserve Board to raise short-term interest rates
in March. This action responded to growing concern for wage and price inflation
in the future. As interest rates rose, both the stock market and the bond market
saw price declines.
Despite the increase in interest rates, the high yield corporate bond market
continued to provide solid results. Prices on these bonds are not as closely
linked to changes in interest rates as Treasury bonds. High yield bonds trade on
companies' financial performance and future growth prospects, factors that tend
to be positive in a strong economic environment. While this market sector
benefited from strong investor demand and ample supply during the period, the
more speculative sectors of the high yield market were volatile and did
experience some price declines. The Fund's assets are concentrated at the higher
quality end of the high yield bond spectrum. These bonds are more easily traded
and are expected to retain their value better than those of lower quality.
In addition to providing attractive growth prospects, a high yield corporate
bond fund offers an opportunity to diversify your portfolio. This market sector
allows investors to participate in the U.S. economy without taking on as much
risk as the stock market or more interest rate sensitive bond market sectors.
The high level of income generated by these bonds results in returns that have
historically outperformed investment grade bonds and Government funds during
periods of rising interest rates.
As always, we thank you for the opportunity to help meet your investment goals
through the Colonial family of funds.
Respectfully,
/s/ Harold W. Cogger
Harold W. Cogger
President
June 13, 1997
Because market conditions change frequently, there can be no assurance that the
trends described herein will continue, come to pass or affect Fund performance.
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3
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INVESTMENT PORTFOLIO
APRIL 30, 1997 (UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
BONDS & NOTES (a) - 97.1% PAR VALUE
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CORPORATE FIXED INCOME BONDS & NOTES - 95.8%
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<S> <C> <C>
MANUFACTURING - 37.9%
CHEMICALS & ALLIED PRODUCTS - 10.2%
Agricultural Minerals Co., L.P.,
10.750% 09/30/03 $2,250 $2,368
Applied Extrusion Technologies, Inc.,
11.500% 04/01/02 1,500 1,556
Imperial Credit Industries, Inc.,
9.875% 01/15/07 333 315
Revlon Consumer Products Corp.,
10.500% 02/15/03 2,250 2,351
Revlon Worldwide Corp.,
(b) 03/15/01(c) 3,975 2,614
Texas Petrochemical Corp.,
11.125% 07/01/06 2,000 2,090
Trans-Resources Corp.,
11.875% 07/01/02 1,500 1,492
------
12,786
------
ELECTRONIC & ELECTRICAL EQUIPMENT - 3.4%
K&F Industries, Inc.,
10.375% 09/01/04 1,835 1,918
L-3 Communications Corp.,
10.375% 05/01/07(c) 500 515
LDM Technologies, Inc.,
10.750% 01/15/07 275 284
Unisys Corp.,
11.750% 10/15/04 1,500 1,573
------
4,290
------
FABRICATED METALS - 2.5%
Euramax International PLC,
11.250% 10/01/06 1,500 1,564
Renco Metals, Inc.,
11.500% 07/01/03 500 520
US Can Corp.,
10.125% 10/15/06 1,000 1,042
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3,126
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FOOD & KINDRED PRODUCTS - 3.9%
Chiquita Brands International, Inc.,
10.250% 11/01/06 1,000 1,052
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4
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Investment Portfolio/April 30, 1997
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<TABLE>
<S> <C> <C>
FoodBrands America, Inc.,
10.750% 05/15/06 $1,750 $2,013
Pilgrim's Pride Corp.,
10.875% 08/01/03 450 464
Sun World International Corp.,
11.250% 04/15/04(c) 1,280 1,318
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4,847
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MACHINERY & COMPUTER EQUIPMENT - 1.1%
IMO Industries,
11.750% 05/01/06 1,370 1,367
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MEASURING & ANALYZING INSTRUMENTS - 0.4%
Intertek Finance PLC,
10.250% 11/01/06(c) 500 513
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MISCELLANEOUS MANUFACTURING - 5.6%
Borg Warner Security Corp.,
9.625% 03/15/07(c) 1,500 1,485
Building Materials Corp. of America,
stepped coupon,
(11.750% 07/01/99) 07/01/04(d) 1,000 887
Clark-Schwebel, Inc.,
10.500% 04/15/06 1,000 1,050
ISP Holdings, Inc.,
9.000% 10/15/03 1,000 1,010
9.750% 02/15/02 1,500 1,558
Shop Vac Corp.,
10.625% 09/01/03 1,000 1,055
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7,045
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PAPER PRODUCTS - 1.0%
Florida Coast Paper Corp.,
12.750% 06/01/03 1,250 1,212
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PETROLEUM REFINING - 0.9%
Flores & Rucks, Inc.,
13.500% 12/01/04 1,000 1,175
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PRIMARY METALS - 3.1%
Algoma Steel, Inc.,
12.375% 07/15/05 1,500 1,657
Kaiser Aluminum & Chemical Corp.,
12.750% 02/01/03 2,000 2,180
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3,837
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5
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<TABLE>
<CAPTION>
Investment Portfolio/April 30, 1997
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CORPORATE FIXED INCOME BONDS & NOTES - CONT. PAR VALUE
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<S> <C> <C>
MANUFACTURING - CONT
PRINTING & PUBLISHING - 0.8%
Hollinger International Publishing,
9.250% 03/15/07 $1,000 $ 995
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STONE, CLAY, GLASS & CONCRETE - 2.1%
Anchor Glass Container Corp.,
11.250% 04/01/05(c) 500 521
Owens-Illinois, Inc.,
10.500% 06/15/02 2,000 2,100
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2,621
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TEXTILE MILL PRODUCTS - 0.4%
Collins & Aikman Floorcoverings,
10.000% 01/15/07(c) 100 98
Synthetic Industries, Inc.,
9.250% 02/15/07(c) 400 400
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498
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TRANSPORTATION EQUIPMENT - 2.5%
Aftermarket Technology Corp.,
Series B,
12.000% 08/01/04 860 944
Collins & Aikman Products Co.,
11.500% 04/15/06 2,000 2,195
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3,139
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MINING & ENERGY - 11.7%
OIL & GAS EXTRACTION - 9.6%
Forcenergy, Inc.,
9.500% 11/01/06 550 555
Gulf Canada Resources Ltd.,
9.250% 01/15/04 2,500 2,578
HS Resources, Inc.,
9.250% 11/15/06 500 490
Mesa Operating Co.,
stepped coupon,
(11.625% 07/01/01) 07/01/06(d) 2,000 1,440
10.625% 07/01/06 1,250 1,362
Nuevo Energy Co.,
9.500% 04/15/06 1,100 1,127
Santa Fe Energy Resources, Inc.,
11.000% 05/15/04 1,500 1,613
TransTexas Gas Corp.,
11.500% 06/15/02 1,000 1,110
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6
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Investment Portfolio/April 30, 1997
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<TABLE>
<S> <C> <C>
United Meridian Corp.,
10.375% 10/15/05 $1,610 $ 1,723
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11,998
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OIL & GAS FIELD SERVICES - 2.1%
Falcon Drilling Co., Inc.,
Series B,
9.750% 01/15/01 1,000 1,020
Parker Drilling Corp.,
9.750% 11/15/06 1,500 1,545
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2,565
-------
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RETAIL TRADE - 6.2%
FOOD STORES - 5.4%
Pathmark Stores, Inc.,
9.625% 05/01/03 1,000 930
11.625% 06/15/02 1,000 990
Ralphs Grocery Co.,
10.450% 06/15/04 1,475 1,564
Smiths Food & Drug,
11.250% 05/15/07 2,000 2,227
Star Markets Co.,
13.000% 11/01/04 1,000 1,105
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6,816
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HOME FURNISHINGS & EQUIPMENT - 0.8%
Syratech Corp.,
11.000% 04/15/07 1,000 1,028
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SERVICES - 12.6%
AMUSEMENT & RECREATION - 1.2%
E&S Holdings,
10.375% 10/01/06 1,000 1,030
Lodgenet Entertainment,
10.250% 12/15/06 500 490
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1,520
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BUSINESS SERVICES - 2.3%
Loomis Fargo & Co.,
10.000% 01/15/04(c) 1,000 1,015
Pierce Leahy Corp.,
11.125% 07/15/06 1,700 1,845
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2,860
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HOTELS, CAMPS & LODGING - 9.1%
Eldorado Resorts Corp.,
10.500% 08/15/06 2,005 2,110
</TABLE>
7
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Investment Portfolio/April 30, 1997
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<TABLE>
<CAPTION>
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CORPORATE FIXED INCOME BONDS & NOTES - CONT. PAR VALUE
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<S> <C> <C>
SERVICES - CONT
HOTELS, CAMPS & LODGING - CONT
Harvey Casinos Resorts,
10.625% 06/01/06 $1,750 $1,848
HMH Properties, Inc.,
9.500% 05/15/05 1,500 1,524
Mohegan Tribal Gaming,
13.500% 11/15/02 1,000 1,290
Showboat, Inc.,
13.000% 08/01/09 2,250 2,551
Station Casinos, Inc.,
10.125% 03/15/06 1,000 983
Wyndham Hotel Corp.,
10.500% 05/15/06 1,000 1,080
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11,386
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TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 27.4%
AIR TRANSPORTATION - 3.5%
Greenwich Air Services, Inc.,
10.500% 06/01/06 1,500 1,710
UNC, Inc.,
11.000% 06/01/06 500 575
U.S. Air, Inc.,
10.375% 03/01/13 2,000 2,100
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4,385
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BROADCASTING - 5.4%
Allbritton Communications Co.,
11.500% 08/15/04 2,000 2,100
Sullivan Broadcasting, Inc.,
10.250% 12/15/05 2,000 2,005
Young Broadcasting Corp.,
11.750% 11/15/04 2,500 2,694
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6,799
-------
CABLE - 6.4%
Cablevision Systems Corp.,
10.750% 04/01/04 2,000 2,062
Diamond Cable Communications PLC,
stepped coupon,
(10.750% 02/15/02) 02/15/07(c)(d) 1,000 593
Marcus Cable Co., L.P.,
11.875% 10/01/05 1,500 1,568
Rogers Communications, Inc.,
10.875% 04/15/04 2,000 2,085
</TABLE>
8
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Investment Portfolio/April 30, 1997
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<TABLE>
<S> <C> <C>
Telewest Communication PLC,
(b) 10/01/07 $2,500 $1,688
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7,996
-------
GAS SERVICES - 1.1%
California Energy Co., Inc.,
9.875% 06/30/03 1,250 1,313
-------
MOTOR FREIGHT & WAREHOUSING - 1.1%
Ryder Trucks, Inc.,
10.000% 12/01/06(c) 1,400 1,404
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SANITARY SERVICES - 1.7%
Allied Waste North America,
10.250% 12/01/06(c) 2,000 2,105
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TELECOMMUNICATIONS - 8.2%
Brooks Fiber Properties, Inc.,
stepped coupon,
(10.875% 03/01/01) 03/01/06(d) 500 325
Echostar Communications Corp.,
stepped coupon,
(12.875% 06/01/99) 06/01/04(d) 2,000 1,650
ICG Holding, Inc.,
stepped coupon,
(13.500% 09/15/00) 09/15/05(d) 1,000 678
IntelCom Group (USA), Inc.,
stepped coupon,
(12.500% 05/01/01) 05/01/06(d) 1,000 605
Nextel Communications, Inc.,
stepped coupon,
(9.750% 02/15/99) 08/15/04(d) 2,000 1,452
PanAmSat Corp.,
stepped coupon,
(11.375% 08/01/98) 08/01/03(d) 2,800 2,660
Shared Technologies Fairchild, Inc.,
stepped coupon,
(12.250% 03/01/99) 03/01/06(d) 1,000 823
Sprint Spectrum L.P.,
stepped coupon,
(12.500% 08/15/01) 08/15/06(d) 2,000 1,390
</TABLE>
9
<PAGE>
Investment Portfolio/April 30, 1997
<TABLE>
<CAPTION>
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CORPORATE FIXED INCOME BONDS & NOTES - CONT. PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - CONT
TELECOMMUNICATIONS - CONT
WinStar Communications, Inc.,
stepped coupon,
(14.000% 10/15/00) 10/15/05(d) $1,150 $ 633
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10,216
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TOTAL CORPORATE FIXED - INCOME
BONDS & NOTES (cost of $116,170) 119,842
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U.S. GOVERNMENT OBLIGATIONS - 1.3%
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U. S. Treasury Bond,
6.375% 05/15/99 1,395 1,397
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U. S. Treasury Note,
7.750% 01/31/00 301 311
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TOTAL U.S. GOVERNMENT OBLIGATIONS (cost of $1,723) 1,708
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TOTAL BONDS & NOTES (cost of $117,893) 121,550
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</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS - 0.2% SHARES
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<S> <C> <C>
MINING & ENERGY - 0.1%
OIL & GAS EXTRACTION
Mesa Capital Corp. (e) 26 131
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TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.1%
MOTOR FREIGHT & WAREHOUSING
St. Johnsbury Trucking Co. (e)(f) 79 79
Sun Carriers, Inc. (c)(e)(f) 326 3
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82
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TOTAL COMMON STOCKS (cost of $1,052) 213
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PREFERRED STOCKS - 2.5%
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FINANCE, INSURANCE & REAL ESTATE - 0.2%
DEPOSITORY INSTITUTIONS
California Federal Bancorp Inc. 9.125% 9 212
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MINING & ENERGY - 0.1%
OIL & GAS EXTRACTION
Mesa Inc. 8.00% PIK 25 154
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</TABLE>
10
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Investment Portfolio/April 30, 1997
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<TABLE>
<S> <C> <C>
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 2.2%
CABLE
Cablevision Systems Corp.,
11.125% PIK, Series L 6 $ 522
Time Warner
10.25% Series M 2 2,215
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2,737
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TOTAL PREFERRED STOCKS (cost of $3,144) 3,103
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ADJUSTABLE RATE PREFERRED STOCKS - 0.2%
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TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.2%
TELECOMMUNICATIONS
Nextlink Communications 14.00% 5 235
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TOTAL ADJUSTABLE RATE PREFERRED STOCKS (cost of $250) 235
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TOTAL INVESTMENTS - 100.0% (cost of $122,339)(g) 125,101
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</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM OBLIGATIONS PAR
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<S> <C> <C>
Federal Home Loan Mortgage Corp.,
5.280% 05/01/97(h) $2,760 2,760
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OTHER ASSETS & LIABILITIES, NET (26,084)
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NET ASSETS $101,777
========
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
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(a) Industry classification percentages are based on total investments.
Total investments represents 122.9% of the Fund's net assets.
(b) Zero coupon bond.
(c) Security is exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At
April 30, 1997, the value of these securities amounted to $12,584 or
12.4% of net assets.
(d) Currently zero coupon. Shown parenthetically is the next interest rate
to be paid and the date the Fund will begin accruing this rate.
(e) Non-income producing.
(f) Represents fair value as determined in good faith under the direction
of the Trustees.
(g) Cost for federal income tax purposes is the same.
(h) Rate represents yield at date of purchase.
Acronym Name
--------- -------------
PIK Payment-In-Kind
See notes to financial statements.
11
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<TABLE>
STATEMENT OF ASSETS & LIABILITIES
APRIL 30, 1997 (UNAUDITED)
(in thousands except for per share amount)
<S> <C> <C>
ASSETS
Investments at value (cost $122,339) $125,101
Short-term obligations 2,760
--------
127,861
Cash $ 5
Receivable for:
Interest 2,911
Other 16 2,932
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Total Assets 130,793
LIABILITIES
Payable for:
Distributions 836
Interest 775
Accrued:
Deferred Trustees fees 3
Other 2
Notes payable 27,400
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Total Liabilities 29,016
--------
NET ASSETS at value for 14,665
shares of beneficial interest outstanding $101,777
========
Net asset value per share $ 6.94
========
COMPOSITION OF NET ASSETS
Capital paid in $131,638
Undistributed net investment income 109
Accumulated net realized loss (32,732)
Net unrealized appreciation 2,762
--------
$101,777
========
</TABLE>
See notes to financial statements.
12
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1997
(UNAUDITED)
(in thousands)
<S> <C> <C>
INVESTMENT INCOME
Interest $6,328
Dividends 92
------
6,420
EXPENSES
Management fee $ 333
Transfer agent 26
Bookkeeping fee 23
Trustees fee 8
Custodian fee 3
Audit fee 21
Legal fee 8
Reports to shareholders 5
Other 16
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Total operating expenses 443
Interest of deferred
debt issuance expenses 1,021 1,464
------ ------
Net Investment Income 4,956
NET REALIZED & UNREALIZED GAIN ON PORTFOLIO POSITIONS
Net realized gain 505
Net unrealized appreciation during
the period 522
------
Net Gain 1,027
------
Net Increase in Net Assets from Operations $5,983
======
</TABLE>
See notes to financial statements.
13
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<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
(Unaudited)
Six months Year
ended ended
(in thousands) April 30 October 31
---------- -----------
INCREASE (DECREASE) IN NET ASSETS 1997 1996
---------- -----------
<S> <C> <C>
Operations:
Net investment income $ 4,956 $ 9,809
Net realized gain 505 2,367
Net unrealized appreciation 522 1,553
-------- -------
Net Increase from Operations 5,983 13,729
Distributions from net investment income (5,247) (9,870)
-------- -------
736 3,859
Fund share transactions
Value of distributions reinvested 1,116 2,082
-------- -------
Total Increase 1,852 5,941
NET ASSETS
Beginning of period 99,925 93,984
-------- -------
End of period (including undistributed net
investment income of $109 and $300,
respectively) $101,777 $99,925
======== =======
NUMBER OF FUND SHARES
Issued for distributions reinvested 159 308
Outstanding at
Beginning of period 14,506 14,198
-------- -------
End of period 14,665 14,506
======== =======
</TABLE>
See notes to financial statements.
14
<PAGE>
<TABLE>
STATEMENT OF CASH FLOWS
<CAPTION>
(Unaudited)
Six months
ended
(in thousands) April 30
-----------
INCREASE (DECREASE) IN NET ASSETS 1997
-----------
<S> <C> <C>
Operations:
Net investment income (a) $4,043
Net increase in cash from investment activity (b) 83
-------
Net Increase from Operations 4,126
Distributions from net investment income (4,122)
-------
4
Cash
Beginning of period 1
-------
End of period $ 5
=======
Notes to statement of cash flows:
a) Reconciliation of net investment income:
Net investment income per books $ 4,956
Net change in assets and liabilities related
to income and expenses, including net
accretion and amortization (913)
---------
Net investment income-cash basis $ 4,043
=========
b) Net increase in cash from investment
activity
Receipts for investments sold $ 519,937
Cost of investments purchased (519,854)
---------
$ 83
=========
</TABLE>
See notes to financial statements.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997 (UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
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In the opinion of management of Colonial Intermediate High Income Fund (the
Fund), the accompanying financial statements contain all normal and recurring
adjustments necessary for the fair presentation of the financial position of the
Fund at April 30, 1997, and the results of its operations, the changes in its
net assets and the financial highlights for the six months then ended.
NOTE 2. ACCOUNTING POLICIES
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ORGANIZATION: The Fund is a Massachusetts business trust registered under the
Investment Company Act of 1940, as amended, as a diversified, closed-end
management investment company. The Fund's investment objective is to seek high
current income and total return by investing primarily in lower rated corporate
debt securities. The Fund authorized an unlimited number of shares.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS: Debt securities are valued by a pricing
service based upon market transactions for normal, institutional-size trading
units of similar securities. When management deems it appropriate, an
over-the-counter or exchange bid quotation is used.
Equity securities are valued at the last sale price or, in the case of unlisted
or listed securities for which there were no sales during the day, at current
quoted bid prices.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions which cannot be valued as set forth above are valued at fair
value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
The Fund may trade securities on other than normal settlement terms.
16
<PAGE>
Notes to Financial Statements/April 30, 1997
- --------------------------------------------------------------------------------
This may increase the risk if the other party to the transaction fails to
deliver and causes the Fund to subsequently invest at less advantageous prices.
STATEMENT OF CASH FLOWS: Information on financial transactions which have been
settled through the receipt or disbursement of cash is presented in the
Statement of Cash Flows. The cash amount shown in the Statement of Cash Flows is
the amount included in the Fund's Statement of Assets and Liabilities and
represents cash on hand at its custodian bank account and does not include any
short-term investments at April 30, 1997.
FEDERAL INCOME TAXES: Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
INTEREST INCOME, DEBT DISCOUNT AND PREMIUM: Interest income is recorded on the
accrual basis. Original issue discount is accreted to interest income over the
life of a security with a corresponding increase in the cost basis; premium and
market discount are not amortized or accreted.
The value of additional securities received as an interest payment is recorded
as income and as the cost basis of such securities.
DISTRIBUTIONS TO SHAREHOLDERS: Distributions to shareholders are recorded on the
ex-date.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforwards) under income tax regulations.
OTHER: Corporate actions are recorded on the ex-date.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
- --------------------------------------------------------------------------------
MANAGEMENT FEE: Colonial Management Associates, Inc. (the Adviser) is the
investment adviser of the Fund and furnishes accounting and other services and
office facilities for a monthly fee equal to 0.65% annually of the Fund's
average weekly net assets.
17
<PAGE>
- --------------------------------------------------------------------------------
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES - CONT.
- --------------------------------------------------------------------------------
BOOKKEEPING FEE: The Adviser provides bookkeeping and pricing services for
$27,000 per year plus 0.035% of the Fund's average net assets over $50 million.
OTHER: The Fund pays no compensation to its officers, all of whom are employees
of the Adviser.
The Fund's Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
the Fund's assets.
NOTE 4. PORTFOLIO INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT ACTIVITY: During the six months ended April 30, 1997, purchases and
sales of investments, other than short-term obligations, were $44,483,220 and
$45,751,724, respectively, of which none and $607,481, respectively, were U.S.
government securities.
<TABLE>
Unrealized appreciation (depreciation) at April 30, 1997, based on cost of
investments for both financial statement and federal income tax purposes was:
<S> <C>
Gross unrealized appreciation $ 4,442,593
Gross unrealized depreciation (1,680,846)
-----------
Net unrealized appreciation $ 2,761,747
===========
</TABLE>
<TABLE>
CAPITAL LOSS CARRYFORWARDS: At October 31, 1996, capital loss carryforwards
available (to the extent provided in regulations) to offset future realized
gains were approximately as follows:
<CAPTION>
Year of Capital loss
expiration carryforward
---------- ------------
<S> <C>
1998 $ 2,892,000
1999 18,676,000
2000 9,467,000
2003 2,103,000
-----------
$33,138,000
===========
</TABLE>
Expired capital loss carryforwards, if any, are recorded as a reduction of
capital paid in.
To the extent loss carryforwards are used to offset any future realized gains,
it is unlikely that such gains would be distributed since they may be taxable to
shareholders as ordinary income.
OTHER: The Fund may focus its investments in certain industries, subjecting it
to greater risk than a fund that is more diversified.
18
<PAGE>
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NOTE 5. LOAN AGREEMENT
- --------------------------------------------------------------------------------
At April 30, 1997, the Fund had a $27,400,000 term loan with Bank of America
Illinois which bears interest at 7.33% per annum, due June 12, 1999. The Fund is
required to maintain certain asset coverage with respect to the loan.
NOTE 6. RESULTS OF ANNUAL SHAREHOLDER MEETING (UNAUDITED)
- --------------------------------------------------------------------------------
On April 30, 1997, the Annual Meeting of Shareholders of the Fund was held to
elect three Trustees and to ratify the selection of Price Waterhouse LLP as
independent accountants for the fiscal year ending October 31, 1997. On February
3, 1997, the record date of the Meeting, the Fund had outstanding 14,587,959
shares of beneficial interest. The votes cast at the Meeting were as follows:
Election of three Trustees:
WITHHOLD
FOR AUTHORITY
--- ---------
James L. Moody, Jr. 9,416,406 191,393
George L. Shinn 9,413,626 194,173
Sinclair Weeks, Jr. 9,411,926 195,873
The Board of Trustees also consists of Robert J. Birnbaum, Tom Bleasdale, Lora
S. Collins, James E. Grinnell, William D. Ireland, Jr., Richard W. Lowry,
William E. Mayer, John J. Neuhauser and Robert L. Sullivan.
Ratification of the selection of Price Waterhouse LLP as independent
accountants:
FOR AGAINST ABSTAIN
--- ------- -------
9,445,864 59,201 102,734
19
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
Selected per share data, total return, ratios and supplemental data throughout
each period are as follows:
<CAPTION>
(Unaudited)
Six months
ended
April 30 Year ended October 31
----------- ------------------------
1997 1996 1995
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 6.890 $ 6.620 $ 6.280
-------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.346 0.699 0.696
Net realized and
unrealized gain (loss) 0.064 0.258 0.340
-------- ------- -------
Total from Investment
Operations 0.410 0.957 1.036
-------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.360) (0.687) (0.696)
-------- ------- -------
Net asset value -
End of period $ 6.940 $ 6.890 $ 6.620
======== ======= =======
Market price per share $ 7.375 $ 7.125 $ 6.875
======== ======= =======
Total return - based on market
value (a) 8.87%(d) 14.62% 33.00%
======== ======= =======
RATIOS TO AVERAGE NET ASSETS
Operating expenses 0.87%(b)(c) 0.98%(b) 0.95%(b)
Interest of deferred
debt issuance expenses 1.99%(c) 2.07% 1.94%
Net investment income 9.68%(b)(c) 10.11%(b) 10.76%(b)
Portfolio turnover 36%(d) 92% 92%
Net assets at end
of period (000) $101,777 $99,925 $93,984
</TABLE>
(a) Total return at market value assuming all distributions reinvested and
excluding brokerage commissions.
(b) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(c) Annualized.
(d) Not annualized.
20
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS - CONT.
Selected per share data, total return, ratios and supplemental data throughout
each period are as follows:
<CAPTION>
Year ended October 31
----------------------------------------
1994 1993 1992
<S> <C> <C>
$ 6.920 $ 6.430 $ 6.290
------- ------- -------
0.693 0.709 0.773
(0.587) 0.497 0.142
------- ------- -------
0.106 1.206 0.915
------- ------- -------
(0.746) (0.716) (0.775)
------- ------- -------
$ 6.280 $ 6.920 $ 6.430
======= ======= =======
$ 5.750 $ 6.625 $ 6.625
======= ======= =======
(2.80%) 17.89% 17.39%
======= ======= =======
0.97% 1.00% 1.00%
1.91% 2.66% 3.24%
10.40% 10.62% 11.98%
160% 135% 78%
$87,519 $95,164 $87,149
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
SENIOR SECURITIES OF COLONIAL INTERMEDIATE HIGH INCOME FUND: (UNAUDITED)
<CAPTION>
Involuntary
Total Asset liquidating Approximate
amount coverage preference market value
Year outstanding per share per unit per unit
- ---- ----------- --------- -------- --------
<S> <C> <C> <C> <C>
1997 $27,400,000 371% NA 100
1996 $27,400,000 365% NA 100
1995 $27,400,000 354% NA 100
1994 $27,400,000 343% NA 100
1993 $27,400,000 319% NA 100
1992 $27,400,000 347% NA 100
</TABLE>
21
<PAGE>
================================================================================
DIVIDEND REINVESTMENT PLAN
As a shareholder in the Fund you are eligible to participate in the Dividend
Reinvestment Plan.
The Fund generally distributes net investment income monthly and capital gains
annually. Under the Fund's Dividend Reinvestment Plan (the "Plan") all
distributions will be reinvested automatically in additional shares of the Fund,
unless the shareholder elects to receive cash or the shares are held in broker
or nominee name and a reinvestment service is not provided by the broker or
nominee. All cash distributions will be mailed by check directly to the record
holder by the dividend paying agent.
If the market price of the shares on the distribution payment date is equal to
or greater than the net asset value, Plan participants will be issued shares at
the higher of net asset value or 95% of the market price. The aggregate market
value of the shares may constitute income to shareholders for federal income tax
purposes. However, if the market price of the shares is less than the net asset
value, shares will be bought as soon as practicable (but no more than 30 days
after the distribution, except as may be required to comply with federal
securities laws) in the open market for the accounts of Plan participants. If,
during this purchase period, the market price surpasses the net asset value, the
average per share price paid may exceed the net asset value of the shares,
resulting in the acquisition of fewer shares than if the distribution had been
in newly-issued shares.
All Plan accounts receive written confirmations of all transactions. Shares
purchased under the Plan are held in uncertificated form. Each shareholder's
proxy includes shares purchased pursuant to the Plan. The automatic reinvestment
of distributions does not relieve participants of any income tax payable on the
distributions.
Fees and expenses of the Plan other than brokerage charges will be paid by the
Fund. No brokerage charges are incurred on shares issued directly by the Fund.
Participants will bear a pro-rata share of brokerage charges incurred on open
market purchases.
A Plan participant may terminate his or her participation by written notice to
the Plan agent. The Plan may be amended or terminated on 90 days written notice
to the Plan participants. All correspondence concerning the Plan should be
directed to First Data Investors Services Group, the Plan agent, by mail at P.O.
Box 1376, Boston, MA 02104 or by phone at 1-800-331-1710.
================================================================================
22
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Intermediate High Income Fund is:
First Data Investors Services Group
P.O. Box 1376
Boston, MA 02104
1-800-331-1710
Colonial Intermediate High Income Fund mails one shareholder report to each
shareholder address. If you would like more than one report, please call
Colonial at 1-800-426-3750 and additional reports will be sent to you.
This report has been prepared for shareholders of Colonial Intermediate High
Income Fund.
23
<PAGE>
[Logo]
COLONIAL
MUTUAL FUNDS
Mutual Funds for
Planned Portfolios
- --------------------------------------------------------------------------------
TRUSTEES
ROBERT J. BIRNBAUM
Retired (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief
Operating Officer, New York Stock Exchange, Inc.)
TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
LORA S. COLLINS
Attorney (formerly Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel)
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
WILLIAM D. IRELAND, JR.
Retired (formerly Chairman of the Board, Bank of New England-Worcester)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
WILLIAM E. MAYER
Partner, Development Capital, L.L.C. (formerly Dean, College of Business and
Management, University of Maryland; Dean, Simon Graduate School of Business,
University of Rochester; Chairman and Chief Executive Officer, C. S. First
Boston Merchant Bank; and President and Chief Executive Officer, The First
Boston Corporation)
JAMES L. MOODY, JR.
Retired (formerly Chairman of the Board and Chief Executive Officer, Hannaford
Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
GEORGE L. SHINN
Financial Consultant (formerly Chairman, Chief Executive Officer and Consultant,
The First Boston Corporation)
ROBERT L. SULLIVAN
Retired Partner, Peat Marwick Main & Co. (formerly Management Consultant,
Saatchi and Saatchi Consulting Ltd. and Principal and International Practice
Director, Management Consulting, Peat Marwick Main & Co.)
SINCLAIR WEEKS, JR.
Chairman of the Board, Reed & Barton Corporation
COLONIAL INVESTMENT SERVICES, INC., Distributor Copy Rights 1997
A Liberty Financial Company (NYSE: L)
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
IH-03/730D-0497 M (6/97)
- --------------------------------------------------------------------------------
