Colonial
Intermediate
High Income
Fund
Annual Report
October 31, 1996
<PAGE>
Colonial Intermediate High Income Fund
Highlights
November 1, 1995 - October 31, 1996
Investment Objective: Colonial Intermediate High Income Fund seeks to
provide high current income by investing in high yield fixed-income
securities.
The Fund is designed to offer:
[check mark] High monthly income potential
[check mark] Attractive long-term total return potential
[check mark] Broad diversification
Portfolio Manager commentary: "High yield corporate bond issuers continue to
benefit from improved earnings and low interest rates. Growth in the third
quarter of 1996 was slower than in the first half of the year. However, it
should be sufficient to support solid performance for high yield corporate
bonds. The Fund is diversified across many industries and structured so that a
downturn in any one industry should not have a major impact on the Fund. On July
15, 1996 the Fund redeemed its Senior Extendible Notes and replaced them with a
three-year term loan. As a result of the redemption of the Notes, a number of
investment restrictions required under those Notes have been eliminated. This
will provide the Fund with added investment flexibility in pursuing high yield
investments."
- Andrea Feingold
Colonial Intermediate High Income Fund Performance
Distributions declared per share $0.687
NAV Market Price
12-month total return, assuming
reinvestment of all distributions 15.14% 14.62%
Price per share $6.89 $7.13
Top Corporate Issuers*
Top Five Sectors*
1. Revlon Worldwide 2.6%
2. Pathmark Stores 2.4%
3. Young Broadcasting 2.1%
4. Gulf Canada Resources 2.1%
5. Panamsat L.P. Stp 2.1%
1. Manufacturing 16.2%
2. Services 15.5%
3. Cable 8.7%
4. Mining & Energy 8.1%
5. Chemicals 8.1%
*CORPORATE ISSUERS AND SECTOR BREAKDOWNS ARE CALCULATED AS A PERCENT OF TOTAL
INVESTMENTS. BECAUSE THE FUND IS ACTIVELY MANAGED, THERE CAN BE NO GUARANTEE THE
FUND WILL CONTINUE TO HOLD THESE ISSUERS OR INVEST IN THESE SECTORS IN THE
FUTURE. INDUSTRY SECTORS IN THE FOLLOWING FINANCIAL STATEMENTS ARE BASED UPON
THE STANDARD INDUSTRIAL CLASSIFICATIONS (SIC) PUBLISHED BY THE U.S. OFFICE OF
MANAGEMENT AND BUDGET. THE SECTOR CLASSIFICATIONS USED ON THIS PAGE ARE BASED
UPON COLONIAL'S DEFINED CRITERIA AS USED IN THE INVESTMENT PROCESS
2
<PAGE>
President's Message
To Fund Shareholders
I am pleased to present your Fund's annual report for the period ended October
31, 1996. This report gives us the opportunity to share our analysis of the
investment environment over the past 12 months.
[Picture of Harold W. Cogger]
The economy grew at a comfortable pace through the last quarter of 1995 and into
1996. A strong second quarter had some investors fearing the Federal Reserve
would raise interest rates, and fixed income markets would suffer much as they
did in 1994. The economy slowed on its own, however, and the interest rates held
steady.
With continuing evidence of slowing economic activity, the high yield market
is becoming more selective. In this market your management team has sold off
some cyclical issues and has focused its purchases on the upper end of the
credit spectrum. We expect subdued growth to continue into the first half of
1997, with the economy picking up again in the second half of the year. As
always, we appreciate the opportunity to help you meet your investment goals.
Respectfully,
/s/ Harold W. Cogger
Harold W. Cogger
President
December 10, 1996
Because market conditions change frequently, there can be no assurance that the
trends described herein will continue, come to pass or affect Fund performance.
3
<PAGE>
INVESTMENT PORTFOLIO
OCTOBER 31, 1996 (IN THOUSANDS)
BONDS & NOTES (a) - 99.3% PAR VALUE
- --------------------------------------------------------------------------------
CORPORATE FIXED INCOME BONDS & NOTES - 97.4%
- --------------------------------------------------------------------------------
AEROSPACE - DEFENSE - 1.5%
K&F Industries, Inc.,
10.375% 09/01/04 $ 1,835 $ 1,890
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES - 43.4%
Communications & Media - 18.2%
Allbritton Communications Co.,
11.500% 08/15/04 2,000 2,077
Bell Cablemedia PLC,
stepped coupon,
(11.950% 07/15/99)(b) 1,500 1,237
Cablevision Systems Corp.,
10.750% 04/01/04 2,000 2,030
Comcast Corp.,
10.625% 07/15/12 1,500 1,586
Echostar Communications Corp.,
stepped coupon,
(12.875% 06/01/99) 06/01/04(b) 1,500 1,192
Heritage Media Corp.,
11.000% 06/15/02 1,000 1,067
Insight Communications Co.,
11.250% 03/01/00 2,000 1,980
Marcus Cable Co., L.P.,
11.875% 10/01/05 1,500 1,571
NWCG Holding Corp.,
(c) 06/15/99 2,000 1,635
Nextel Communications, Inc.,
stepped coupon,
.750% 02/15/99) 08/15/04(b) 1,500 952
Rogers Communications, Inc.,
10.875% 04/15/04 2,000 2,060
Sullivan Broadcasting, Inc.,
10.250% 12/15/05 2,000 2,010
Telewest Communication PLC,
(c) 10/01/07 1,000 640
Young Broadcasting Corp.,
11.750% 11/15/04 2,500 2,650
-------
22,687
-------
Consumer Products - 4.9%
E&S Holdings Corp.,
10.375% 10/01/06 (d) 1,000 1,026
4
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Investment Portfolio/October 31, 1996
Gillett Holdings, Inc.,
12.250% 06/30/02 $ 267 $ 280
Intertek Finance PLC,
10.250% 11/01/06 (d) 500 500
Revlon Consumer Products Corp.,
10.500% 02/15/03 1,000 1,042
Revlon Worldwide Corp.,
(c) 03/15/98 2,500 2,203
Shop Vac Corp.,
10.625% 09/01/03 (d) 1,000 1,030
-------
6,081
-------
Entertainment & Leisure - 12.2%
Casino Magic-Louisiana, Inc.,
13.000% 08/15/03 (d) 1,000 1,015
Eldorado Resorts Corp.,
10.500% 08/15/06 (d) 1,750 1,829
HMH Properties, Inc.,
9.500% 05/15/05 1,500 1,515
Harvey Casinos Resorts,
10.625% 06/01/06 1,750 1,829
Mohegan Tribal Gaming,
13.500% 11/15/02 1,000 1,245
Showboat, Inc.,
13.000% 08/01/09 2,250 2,565
Station Casinos, Inc.,
10.125% 03/15/06 2,000 1,955
Trump Atlantic City Associates,
11.250% 05/01/06 1,750 1,662
Trump Castle Funding Mortgage,
11.750% 11/15/03 500 477
Wyndham Hotel Corp.,
10.500% 05/15/06 1,000 1,052
-------
15,144
-------
Food, Beverages, & Tobacco - 4.4%
Chiquita Brands International, Inc.,
10.250% 11/01/06 1,000 1,035
FoodBrands America, Inc.,
10.750% 05/15/06 1,750 1,820
Pilgrim's Pride Corp.,
10.875% 08/01/03 450 448
Smiths Food & Drug Co.,
11.250% 05/15/07 2,000 2,175
-------
5,478
-------
5
<PAGE>
Investment Portfolio/October 31, 1996
- --------------------------------------------------------------------------------
CORPORATE FIXED INCOME BONDS &
NOTES (a) - CONT. PAR VALUE
CONSUMER NON-DURABLES - CONT.
Health Care - 1.3%
OrNda Health Corp.,
11.375% 08/15/04 $ 500 $ 569
Tenet Healthcare Corp.,
10.125% 03/01/05 1,000 1,095
-------
1,664
-------
Retail Trade - 2.4%
Pathmark Stores, Inc.:
9.625% 05/01/03 1,000 978
11.625% 06/15/02 2,000 2,065
-------
3,043
- --------------------------------------------------------------------------------
ENERGY - 12.8%
Domestic Oil & Gas - 8.7%
Costilla Energy, Inc.,
10.250% 10/01/06 350 348
Falcon Drilling Co., Inc.,
Series B,
9.750% 01/15/01 1,000 1,030
Gulf Canada Resources Ltd.,
9.250% 01/15/04 2,500 2,594
Mesa Operating Co.:
stepped coupon,
(11.625% 07/01/01) 07/01/06(b) 1,000 660
10.625% 07/01/06 1,250 1,322
Nuevo Energy Co.,
9.500% 04/15/06 2,100 2,168
Santa Fe Energy Resources, Inc.,
11.000% 05/15/04 1,500 1,657
TransTexas Gas Corp.,
11.500% 06/15/02 1,000 1,055
-------
10,834
-------
Oil & Gas Services - 4.1%
California Energy Co., Inc.,
9.875% 06/30/03 1,250 1,287
Flores & Rucks, Inc.,
13.500% 12/01/04 1,000 1,177
Forcenergy, Inc.,
9.500% 11/01/06 550 550
Texas Petrochemical Corp.,
11.125% 07/01/06 (d) 2,000 2,105
-------
5,119
-------
6
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Investment Portfolio/October 31, 1996
- --------------------------------------------------------------------------------
MANUFACTURING - 29.2%
Capital Goods - 2.9%
Collins & Aikman Products Co.,
11.500% 04/15/06 $ 2,000 $ 2,092
Hayes Wheels International, Inc.,
11.000% 07/15/06 1,500 1,560
-------
3,652
-------
Chemicals - 5.6%
Agricultural Minerals Co., L.P.,
10.750% 09/30/03 2,250 2,374
Applied Extrusion Technologies, Inc.,
11.500% 04/01/02 1,500 1,567
N.L. Industries, Inc.,
11.750% 10/15/03 2,000 2,067
Trans-Resources Corp.,
11.875% 07/01/02 1,000 1,020
-------
7,028
-------
Computers - 2.1%
IMO Industries, Inc.,
11.750% 05/01/06 1,500 1,545
Unisys Corp.,
11.750% 10/15/04 1,000 1,018
-------
2,563
-------
Consumer Durables - 2.6%
Aftermarket Technology Corp.,
Series B,
12.000% 08/01/04 1,000 1,100
Owens-Illinois, Inc.,
10.500% 06/15/02 2,000 2,105
-------
3,205
-------
Diversified - 2.0%
ISP Holdings, Inc.:
9.000% 10/15/03 (d) 1,000 1,003
9.750% 02/15/02 (d) 1,500 1,541
-------
2,544
-------
Housing - 1.5%
Building Materials Corp. of America,
(c) 07/01/04 1,000 825
Clark-Schwebel, Inc.,
10.500% 04/15/06 1,000 1,033
-------
1,858
-------
7
<PAGE>
Investment Portfolio/October 31, 1996
- --------------------------------------------------------------------------------
CORPORATE FIXED INCOME BONDS &
NOTES (a) - CONT. PAR VALUE
- --------------------------------------------------------------------------------
MANUFACTURING - CONT.
Metals & Minerals - 7.7%
Algoma Steel, Inc.,
12.375% 07/15/05 $ 1,500 $ 1,558
Earle M. Jorgensen & Co.,
10.750% 03/01/00 1,665 1,665
Euramax International, PLC.,
11.250% 10/01/06 (d) 1,000 1,018
Kaiser Aluminum & Chemical Corp.,
12.750% 02/01/03 2,000 2,070
Renco Metals, Inc.,
11.500% 07/01/03 500 523
US Can Corp.,
10.125% 10/15/06 (d) 1,000 1,033
United Meridian Corp.,
10.375% 10/15/05 1,610 1,739
-------
9,606
-------
Other Manufacturing - 0.4%
UNC, Inc.,
11.000% 06/01/06 500 528
-------
Paper & Forest Products - 4.4%
Florida Coast Paper Corp.,
12.750% 06/01/03 1,750 1,846
Repap Wisconsin, Inc.,
9.250% 02/01/02 1,500 1,508
Stone Container Corp.,
10.750% 10/01/02 2,000 2,075
-------
5,429
- --------------------------------------------------------------------------------
SERVICES - 1.5%
Business
Pierce Leahy Corp.,
11.125% 07/15/06 (d) 1,700 1,811
- --------------------------------------------------------------------------------
TECHNOLOGY - 6.1%
Telecommunications
Brooks Fiber Properties, Inc.,
stepped coupon,
(10.875% 03/01/01) 03/01/06 (b) 500 293
ICG Holding, Inc.,
stepped coupon,
(13.500% 09/15/00) 09/15/05 (b) 1,000 660
IntelCom Group (USA), Inc.,
stepped coupon,
(12.500% 05/01/01) 05/01/06 (b) 1,000 601
8
<PAGE>
Investment Portfolio/October 31, 1996
- --------------------------------------------------------------------------------
MFS Communications, Inc.,
stepped coupon,
(8.875% 01/15/01) 01/15/06 (b) $ 2,000 $ 1,415
Omnipoint Corp.,
11.625% 08/15/06 (d) 500 511
Paging Network, Inc.,
8.875% 02/01/06 500 465
PanAmSat Corp.,
stepped coupon,
(11.375% 8/01/98) 08/01/03 (b) 2,800 2,566
Shared Technologies Fairchild, Inc.,
stepped coupon,
(12.250% 03/01/99) 03/01/06 (b) 500 395
WinStar Communications, Inc.,
stepped coupon,
(14.000% 10/15/00) 10/15/05 (b) 1,150 650
-------
7,556
- --------------------------------------------------------------------------------
TRANSPORTATION - 2.9%
Greenwich Air Services, Inc.,
10.500% 06/01/06 1,500 1,568
U.S. Air, Inc.,
10.375% 03/01/13 2,000 2,000
-------
3,568
-------
TOTAL CORPORATE FIXED - INCOME
BONDS & NOTES (cost of $118,156) 121,288
-------
U.S. GOVERNMENT OBLIGATIONS - 1.9%
- --------------------------------------------------------------------------------
U. S. Treasury Bond
6.375% 05/15/99 2,000 2,024
-------
U. S. Treasury Note
7.750% 01/31/00 301 317
-------
TOTAL U.S. GOVERNMENT OBLIGATIONS (cost of $2,330) 2,341
-------
TOTAL BONDS & NOTES (cost of $120,486) 123,629
-------
COMMON STOCKS - 0.2% SHARES
- --------------------------------------------------------------------------------
ENERGY - 0.1% Domestic Oil & Gas
Mesa Capital Corp. (e) 26 119
- --------------------------------------------------------------------------------
TRANSPORTATION - 0.1%
Motor Freight & Warehousing
St. Johnsbury Trucking Co. (e)(f) 79 79
9
<PAGE>
Investment Portfolio/October 31, 1996
- --------------------------------------------------------------------------------
COMMON STOCKS - CONT. SHARES VALUE
- --------------------------------------------------------------------------------
TRANSPORTATION - CONT.
Motor Freight & Warehousing - Cont.
Sun Carriers, Inc. (e)(f) 326 $ 3
-------
82
-------
TOTAL COMMON STOCKS (cost of $1,052) 201
-------
PREFERRED STOCKS - 0.5%
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES - 0.4%
Communications & Media
Cablevision Systems Corp.,
11.125% PIK, Series L 5 489
- --------------------------------------------------------------------------------
ENERGY/NATURAL RESOURCES - 0.1%
Mesa Inc. 8.000% PIK 24 133
-------
TOTAL PREFERRED STOCKS (cost of $674) 622
-------
TOTAL INVESTMENTS - 100.0% (cost of $122,212)(g) 124,452
-------
SHORT-TERM OBLIGATIONS PAR
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
5.500% 11/01/96 (h) $ 3,277 3,277
-------
OTHER ASSETS & LIABILITIES, NET (27,804)
- --------------------------------------------------------------------------------
NET ASSETS $ 99,925
-------
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) Industry classification percentages are based on total investments.
Total investments represents 124.5% of the Fund's net assets.
(b) Currently zero coupon. Shown parenthetically is the next interest rate
to be paid and the date the Fund will begin accruing this rate.
(c) Zero coupon bond.
(d) Security is exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At year end,
the value of these securities amounted to $14,422 or 14.4% of net assets.
(e) Non-income producing.
(f) Represents fair value as determined in good faith under the direction of
the Trustees.
(g) Cost for federal income tax purposes is the same.
(h) Rate represents yield at date of purchase.
Acronym Name
------- ---------------
PIK Payment-In-Kind
See notes to financial statements.
10
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
OCTOBER 31, 1996
(in thousands except for per share amount)
ASSETS
Investments at value (cost $122,212) $124,452
Short-term obligations 3,277
--------
127,729
Cash $ 1
Receivable for:
Interest 2,908
Investments sold 403
Other 17 3,329
------- --------
Total Assets 131,058
LIABILITIES
Payable for:
Investments purchased 2,117
Distributions 827
Interest 770
Accrued:
Deferred Trustees fees 2
Other 17
Notes payable 27,400
------
Total Liabilities 31,133
-------
NET ASSETS at value for 14,506
shares of beneficial interest outstanding $ 99,925
--------
Net asset value per share $ 6.89
--------
COMPOSITION OF NET ASSETS
Capital paid in $130,522
Undistributed net investment income 300
Accumulated net realized loss (33,137)
Net unrealized appreciation 2,240
--------
$ 99,925
--------
See notes to financial statements.
11
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1996
(in thousands)
INVESTMENT INCOME
Interest $12,728
Dividends 36
-------
12,764
EXPENSES
Management fee $ 631
Transfer agent 53
Bookkeeping fee 43
Trustees fee 18
Custodian fee 3
Audit fee 62
Legal fee 67
Reports to shareholders 7
Other 63
------
Total operating expenses 947
Interest and amortization of deferred
debt issuance expenses 2,008 2,955
------ -------
Net Investment Income 9,809
NET REALIZED & UNREALIZED GAIN ON PORTFOLIO POSITIONS
Net realized gain 2,367
Net unrealized appreciation during
the period 1,553
-------
Net Gain 3,920
-------
Net Increase in Net Assets from Operations $13,729
-------
See notes to financial statements.
12
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
Year ended
(in thousands) October 31
----------------------
INCREASE (DECREASE) IN NET ASSETS 1996 1995
- -------------------------------------------------------------------------------
Operations:
Net investment income $ 9,809 $ 9,734
Net realized gain (loss) 2,367 (2,047)
Net unrealized appreciation 1,553 6,871
------- -------
Net Increase from Operations 13,729 14,558
Distributions from net investment income (9,870) (9,784)
------- -------
3,859 4,774
Fund share transactions
Value of distributions reinvested 2,082 1,691
------- -------
Total Increase 5,941 6,465
NET ASSETS
Beginning of period 93,984 87,519
------- -------
End of period (including undistributed net
investment income of $300 and $131,
respectively) $99,925 $93,984
------- -------
NUMBER OF FUND SHARES
Issued for distributions reinvested 308 260
Outstanding at
Beginning of period 14,198 13,938
------- -------
End of period 14,506 14,198
------- -------
See notes to financial statements.
13
<PAGE>
STATEMENT OF CASH FLOWS
Year ended
(in thousands) October 31
-----------
INCREASE (DECREASE) IN NET ASSETS 1996
-----------
Operations:
Net investment income (a) $ 8,423
Net decrease in cash from investment activity (b) (637)
--------
Net Increase from Operations 7,786
Distributions from net investment income (7,785)
--------
1
Cash
Beginning of period 0
--------
End of period $ 1
--------
Notes to statement of cash flows:
a) Reconciliation of net investment income:
Net investment income per books $ 9,809
Net change in assets and liabilities related
to income and expenses, including net
accretion and amortization (1,386)
----------
Net investment income-cash basis $ 8,423
----------
b) Net decrease in cash from investment
activity
Receipts for investments sold 1,347,928
Cost of investments purchased (1,348,565)
----------
(637)
----------
See notes to financial statements.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1996
NOTE 1. ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Organization: Colonial Intermediate High Income Fund (the Fund), is a
Massachusetts business trust registered under the Investment Company
Act of 1940, as amended, as a diversified, closed-end, management
investment company. The Fund's investment objective is to provide high
current income by investing in high yield fixed-income securities. The
Fund may issue an unlimited number of shares.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates. The following is a summary of significant
accounting policies consistently followed by the Fund in the
preparation of its financial statements.
Security valuation and transactions: Debt securities are valued by a
pricing service based upon market transactions for normal,
institutional-size trading units of similar securities. When management
deems it appropriate, an over-the-counter or exchange bid quotation is
used.
Equity securities are valued at the last sale price or, in the case of
unlisted or listed securities for which there were no sales during the
day, at current quoted bid prices.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions which cannot be valued as set forth above are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income
tax purposes.
The Fund may trade securities on other than normal settlement terms.
This may increase the risk if the other party to the transaction fails
to deliver and causes the Fund to subsequently invest at less
advantageous prices.
Statement of cash flows: Information on financial transactions which
have been settled through the receipt or disbursement of cash is
presented in the Statement of Cash Flows. The cash amount shown in the
15
<PAGE>
Notes to Financial Statements/October 31, 1996
- --------------------------------------------------------------------------------
NOTE 1. ACCOUNTING POLICIES - CONT.
- --------------------------------------------------------------------------------
Statement of cash flows - cont.
Statement of Cash Flows is the amount included in the Fund's Statement
of Assets and Liabilities and represents cash on hand at its custodian
bank account and does not include any short-term investments at October
31, 1996.
Federal income taxes: Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable
income, no federal income tax has been accrued.
Interest Income, debt discount and premium: Interest income is recorded
on the accrual basis. Original issue discount is accreted to interest
income over the life of a security with a corresponding increase in the
cost basis; premium and market discount are not amortized or accreted.
The value of additional securities received as an interest payment is
recorded as income and as the cost basis of such securities.
Distributions to shareholders: Distributions to shareholders are
recorded on the ex-date.
The amount and character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ
from generally accepted accounting principles. Reclassifications are
made to the Fund's capital accounts to reflect income and gains
available for distribution (or available capital loss carryforwards)
under income tax regulations.
Other: Corporate actions are recorded on the ex-date.
The Fund's custodian takes possession through the federal book-entry
system of securities collateralizing repurchase agreements. Collateral
is marked-to-market daily to ensure that the market value of the
underlying assets remains sufficient to protect the Fund. The Fund may
experience costs and delays in liquidating the collateral if the issuer
defaults or enters bankruptcy.
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES
- --------------------------------------------------------------------------------
Management fee: Colonial Management Associates, Inc. (the Adviser) is
the investment adviser of the Fund and furnishes accounting and other
services and office facilities for a monthly fee equal to 0.65% annually of
the Fund's average weekly net assets.
Bookkeeping fee: The Adviser provides bookkeeping and pricing services
for $27,000 per year plus 0.035% of the Fund's average net assets over
$50 million.
16
<PAGE>
Notes to Financial Statements/October 31, 1996
- --------------------------------------------------------------------------------
Other: The Fund pays no compensation to its officers, all of whom are
employees of the Adviser.
The Fund's Trustees may participate in a deferred compensation plan
which may be terminated at any time. Obligations of the plan will be
paid solely out of the the Fund's assets.
NOTE 3. PORTFOLIO INFORMATION
- --------------------------------------------------------------------------------
Investment activity: During the year ended October 31, 1996, purchases
and sales of investments, other than short-term obligations, were
$114,055,123 and $109,128,791, respectively, of which $4,041,328 and
$5,347,659, respectively, were U.S. government securities.
Unrealized appreciation (depreciation) at October 31, 1996, based on
cost of investments for both financial statement and federal income tax
purposes was:
Gross unrealized appreciation $ 3,890,945
Gross unrealized depreciation (1,651,003)
-----------
Net unrealized appreciation $2,239,942
-----------
Capital loss carryforwards: At October 31, 1996, capital loss
carryforwards available (to the extent provided in regulations) to
offset future realized gains were approximately as follows:
Year of Capital loss
expiration carryforward
---------- ------------
1998 $ 2,892,000
1999 18,676,000
2000 9,467,000
2003 2,103,000
-----------
$33,138,000
-----------
Expired capital loss carryforwards, if any, are recorded as a reduction
of capital paid in.
To the extent loss carryforwards are used to offset any future realized
gains, it is unlikely that such gains would be distributed since they
may be taxable to shareholders as ordinary income.
Other: The Fund may focus its investments in certain industries, sub-
jecting it to greater risk than a fund that is more diversified.
NOTE 4. LOAN AGREEMENT
- --------------------------------------------------------------------------------
On July 15, 1996, the Fund redeemed its Senior Extendible Notes and
replaced them with a three-year, $27,400,000 term loan with Bank of
America Illinois which bears interest at 7.33% annually. The Fund is
required to maintain certain asset coverage with respect to the loan.
17
<PAGE>
Notes to Financial Statements/October 31, 1996
- --------------------------------------------------------------------------------
NOTE 5. RESULTS OF ANNUAL SHAREHOLDER MEETING (UNAUDITED)
- --------------------------------------------------------------------------------
On June 28, 1996, the Annual Meeting of Shareholders of the Fund was
held to elect four Trustees and to ratify the selection of Price
Waterhouse LLP as independent accountants for the fiscal year ending
October 31, 1996. On May 8, 1996, the record date of the Meeting, the
Fund had outstanding 14,354,229 shares of beneficial interest. The
votes cast at the Meeting were as follows:
Election of four Trustees:
FOR AGAINST
--- -------
Tom Bleasdale 11,365,543 232,362
Lora S. Collins 11,362,951 234,954
William D. Ireland, Jr. 11,353,816 244,089
John J. Neuhauser 11,368,893 229,012
The Board of Trustees also consists of Robert J. Birnbaum, James E.
Grinnell, Richard W. Lowry, William E. Mayer, James L. Moody, Jr.,
George L. Shinn, Robert L. Sullivan and Sinclair Weeks, Jr.
Ratification of the selection of Price Waterhouse LLP as independent
accountants:
FOR AGAINST ABSTAIN
--- ------- -------
11,259,645 89,978 248,282
18
<PAGE>
FINANCIAL HIGHLIGHTS
Selected per share data, total return, ratios and supplemental data throughout
each period are as follows:
Year ended October 31
----------------------------------
1996 1995 1994
Net asset value -
Beginning of period $6.620 $6.280 $6.920
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.699 0.696 0.693
Net realized and unrealized gain (loss) 0.258 0.340 (0.587)
------ ------ ------
Total from Investment Operations 0.957 1.036 0.106
------ ------ ------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS:
From net investment income (0.687) (0.696) (0.746)
------ ------ ------
Net asset value -
End of period $6.890 $6.620 $6.280
------ ------ ------
Market price per share $7.125 $6.875 $5.750
------ ------ ------
Total return - based on market value (a) 14.62% 33.00% (2.80)%
------ ------ ------
RATIOS TO AVERAGE NET ASSETS
Operating expenses 0.98%(b) 0.95%(b) 0.97%
Interest and amortization of
deferred debt issuance expenses 2.07% 1.94% 1.91%
Net investment income 10.11%(b) 10.76%(b) 10.40%
Portfolio turnover 92% 92% 160%
Net assets at end of period (000) $99,925 $93,984 $87,519
(a) Total return at market value assuming all distributions reinvested and
excluding brokerage commissions.
(b) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
19
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected per share data, total return, ratios and supplemental data throughout
each period are as follows:
Year ended October 31
---------------------------
1993 1992
Net asset value -
Beginning of period $ 6.430 $ 6.290
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.709 0.773
Net realized and unrealized gain 0.497 0.142
------- -------
Total from Investment Operations 1.206 0.915
------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.716) (0.775)
------- -------
Net asset value -
End of period $ 6.920 $ 6.430
------- -------
Market price per share $ 6.625 $ 6.250
------- -------
Total return - based on market value (a) 17.89% 17.39%
------- -------
RATIOS TO AVERAGE NET ASSETS
Operating expenses 1.00% 1.00%
Interest and amortization of
deferred debt issuance expenses 2.66% 3.24%
Net investment income 10.62% 11.98%
Portfolio turnover 135% 78%
Net assets at end of period (000) $95,164 $87,149
(a) Total return at market value assuming all distributions reinvested and
excluding brokerage commissions.
- ------------------------------------------------------------------------------
SENIOR SECURITIES OF COLONIAL INTERMEDIATE HIGH INCOME FUND: (UNAUDITED)
Involuntary
Total Asset liquidating Approximate
amount coverage preference market value
Year outstanding per share per unit per unit
- ---- ----------- --------- ----------- ------------
1996 $27,400,000 365% NA 100
1995 $27,400,000 354% NA 100
1994 $27,400,000 343% NA 100
1993 $27,400,000 319% NA 100
1992 $27,400,000 347% NA 100
1991 $27,400,000 318% NA 100
20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES AND THE SHAREHOLDERS OF COLONIAL INTERMEDIATE
HIGH INCOME FUND
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations,
of cash flows and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Colonial
Intermediate High Income Fund at October 31, 1996, the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
These financial statements and the financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of portfolio positions at October 31, 1996 by correspondence with
the custodian and brokers and the application of alternative auditing
procedures where confirmations from brokers were not received, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
December 10, 1996
21
<PAGE>
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
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>
[Graphic of the US flag]
Colonial
Mutual Funds
Mutual Funds for
Planned Portfolios
Trustees
Robert J. Birnbaum
Retired (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief
Operating Officer, New York Stock Exchange, Inc.)
Tom Bleasdale
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore
Bank & Trust Company)
Lora S. Collins
Attorney (formerly Attorney, Kramer, Levin, Naftalis, Nessen, Kamin &
Frankel)
James E. Grinnell
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
William D. Ireland, Jr.
Retired (formerly Chairman of the Board, Bank of New England-Worcester)
Richard W. Lowry
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
William E. Mayer
Dean, College of Business and Management, University of Maryland (formerly Dean,
Simon Graduate School of Business, University of Rochester; Chairman and Chief
Executive Officer, CS First Boston Merchant Bank; and President and Chief
Executive Officer, The First Boston Corporation)
James L. Moody, Jr.
Chairman of the Board, Hannaford Bros. Co. (formerly Chief Executive Officer,
Hannaford Bros. Co.)
John J. Neuhauser
Dean, Boston College School of Management
George L. Shinn
Financial Consultant (formerly Chairman, Chief Executive Officer and
Consultant, The First Boston Corporation)
Robert L. Sullivan
Management Consultant (formerly Management Consultant, Saatchi and Saatchi
Consulting Ltd. and Principal and International Practice Director, Management
Consulting, Peat Marwick Main & Co.)
Sinclair Weeks, Jr.
Chairman of the Board, Reed & Barton Corporation
[Recycle Logo] PRINTED ON RECYCLED PAPER
Colonial Investment Services, Inc., Distributor Copy Rights 1996
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
IH-02/977C-1096 M (12/96)
