[picture of pen, newspaper and adding machine]
COLONIAL INTERMEDIATE HIGH INCOME FUND Semiannual report
April 30, 1998
<PAGE>
Colonial Intermediate High Income Fund
Highlights
November 1, 1997 - April 30, 1998
Investment Objective: Colonial Intermediate High Income Fund seeks
high current income and total return by investing primarily in lower-rated
corporate debt securities.
The Fund is designed to offer:
[check mark] High monthly income potential
[check mark] Attractive long-term total return potential
[check mark] Broad diversification
Portfolio Manager commentary: "The high yield bond market showed continued
strength during the period as companies posted good earnings in a positive
economic environment. We focused on capturing increased values by investing in
high growth sectors of the market, such as companies providing alternative
telephone services. The Fund also benefited from continued merger and
acquisition activity. Showboat, Inc., a gaming company, was acquired at a
premium by Harrah's, a higher-quality company. The assets and operations of
Marcus Cable were also purchased for a premium price, illustrating that bonds of
traditional cable operators continue to experience price appreciation. This
enabled the Fund to sell its positions of Showboat and Marcus Cable at a gain
which had a positive impact on the value of the Fund. Looking ahead, we think
that the high yield market will continue to be attractive although we are
monitoring potential economic shocks coming out of the Asian turmoil."
-Andrea Feingold
Colonial Intermediate High Income Fund Performance
Distributions declared per share $0.350
- --------------------------------------------------------------------------------
NAV Market Price
Six-month total return, assuming
reinvestment of all distributions 7.20% 5.60%
- --------------------------------------------------------------------------------
Price per share $7.44 $7.63
Top Corporate Issuers* Top Five Sectors*
....................................... ....................................
1. CSC Holding, Inc................2.4% 1. Manufacturing...............19.0%
2. Nextel Communication, Inc.......2.3% 2. Telecommunications..........12.9%
3. Allied Waste Industries.........2.2% 3. Services....................10.3%
4. Young Broadcasting..............2.0% 4. Metals.......................9.1%
5. Time Warner.....................1.8% 5. Broadcasting.................6.3%
*Corporate issuers are calculated as a percent of total investments. Sectors are
calculated as a percent of total portfolio adjusted for leverage. Because the
Fund is actively managed, there can be no guarantee the Fund will continue to
hold securities of these issuers or invest in these sectors in the future.
Industry sectors in the following financial statements are based upon the
standard industrial classifications (SIC) published by the U.S. Office of
Management and Budget. The sector classifications used on this page are based
upon Colonial's defined criteria as used in the investment process.
2
<PAGE>
President's Message
To Fund Shareholders
[Photo of Harold W. Cogger]
I am pleased to present the semiannual report for the Colonial Intermediate High
Income Fund. This report reflects on the investment environment for the six
months ended April 30, 1998.
The U.S. economy continued to generate well-balanced growth without signs of
significant inflation. Negative effects from the Asian economic crisis have yet
to manifest themselves in any meaningful way, although markets were volatile
during the first part of the period as investors sorted through the events and
their potential outcomes. Generally positive economic conditions enabled
companies to produce strong cash flows and post healthy earnings. Corporate
managers took advantage of declining interest rates to refinance debt and lock
in liquidity at attractive rates. New issuance of high yield bonds and stocks
remained robust, providing investment opportunities in many sectors.
The outlook for the high yield bond market is generally positive. However, this
market sector is closely tied to the equity market. Many corporations finance
their growth by issuing both stocks and high yield bonds. A decline in corporate
earnings would have a negative effect on both the stock market and on a
company's ability to pay the interest on their high yield debt. While we are not
expecting any major shocks to the equity market, we may see some volatility in
the months ahead as earnings flatten or decline in some industries.
In addition to providing attractive growth prospects, a high yield bond fund
offers an opportunity to diversify your core portfolio. High yield bonds provide
an attractive combination of current income and potential for long-term price
appreciation.
Thank you for giving us the opportunity to serve your investment needs.
Respectfully,
/s/ Harold W. Cogger
----------------
Harold W. Cogger
President
June 9, 1998
Because market conditions change frequently, there can be no assurance that the
trends described herein will continue.
3
<PAGE>
INVESTMENT PORTFOLIO
APRIL 30, 1998 (UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
CORPORATE FIXED INCOME BONDS &
NOTES (a) - 93.8% PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONSTRUCTION - 1.1%
Building Construction
Kevco, Inc.,
10.375% 12/01/07 $ 500 $ 521
Nortek, Inc.,
9.875% 03/01/04 1,000 1,030
------
1,551
------
................................................................................
MANUFACTURING - 40.4%
Chemicals & Allied Products - 5.8%
ClimaChem, Inc.,
10.750% 12/01/07(b) 500 520
Hydrochem Industrial Services, Inc.,
10.375% 08/01/07 490 507
LaRoche Industries, Inc.,
9.500% 09/15/07 1,000 985
PCI Chemicals Canada, Inc.,
9.250% 10/15/07 1,000 985
Sterling Chemicals, Inc.,
11.750% 08/15/06 1,000 1,007
Texas Petrochemical Corp.,
11.125% 07/01/06 2,000 2,200
Trans-Resources, Inc.:
10.750% 03/15/08(b) 1,000 1,025
stepped coupon,
(12.000% 03/15/03) 03/15/08(b)(c) 1,000 575
------
7,804
------
Electronic & Electrical Equipment - 1.4%
Amphenol Corp.,
9.875% 05/15/07 1,225 1,323
L-3 Communications Corp.,
10.375% 05/01/07 500 552
------
1,875
------
Fabricated Metal - 3.1%
Earle M. Jorgensen Co.,
9.500% 04/01/05(b) 1,000 994
Euramax International, PLC,
11.250% 10/01/06 1,500 1,635
Renco Metals, Inc.,
11.500% 07/01/03 500 536
US Can Corp.,
10.125% 10/15/06 1,000 1,047
------
4,212
------
</TABLE>
4
<PAGE>
Investment Portfolio/April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Food & Kindred Products - 2.9%
Chiquita Brands International, Inc.,
10.250% 11/01/06 $1,000 $ 1,084
Pilgrim's Pride Corp.,
10.875% 08/01/03 450 470
Sun World International Corp.,
11.250% 04/15/04 1,280 1,395
Windy Hill Pet Food Co., Inc.,
9.750% 05/15/07 1,000 1,050
-------
3,999
-------
Machinery & Computer Equipment - 1.1%
IMO Industries, Inc.,
11.750% 05/01/06 1,370 1,562
-------
Measuring & Analyzing Instruments - 0.4%
Intertek Finance PLC,
10.250% 11/01/06 500 530
-------
Miscellaneous Manufacturing - 7.4%
AEI Holding Co.,
10.000% 11/15/07(b) 500 521
Alliance Laundry Systems,
9.625% 05/01/08(b)(d) 1,000 1,014
American Pacific Corp.,
9.250% 03/01/05(b) 500 517
Associated Materials, Inc.,
9.250% 03/01/08 500 515
Clark-Schwebel, Inc.,
10.500% 04/15/06 1,000 1,120
Eagle-Picher Industries, Inc.,
9.375% 03/01/08(b) 875 890
Imperial Home Decor Group, Inc.,
11.000% 03/15/08(b) 750 778
JTM Industries, Inc.,
10.000% 04/15/08(b) 250 252
Newcor, Inc.,
9.875% 03/01/08(b) 1,000 1,015
Polymer Group, Inc.,
9.000% 07/01/07 1,000 1,028
Shop Vac Corp.,
10.625% 09/01/03 1,000 1,098
Tekni-Plex, Inc.,
9.250% 03/01/08(b) 500 504
Werner Holding Co.,
10.000% 11/15/07(b) 750 783
-------
10,035
-------
</TABLE>
5
<PAGE>
Investment Portfolio/April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CORPORATE FIXED INCOME BONDS &
NOTES (a) - CONT. PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MANUFACTURING - CONT.
Paper Products - 4.2%
Gaylord Container Corp.,
9.750% 06/15/07 $1,000 $1,022
Repap New Brunswick, Inc.:
9.875% 07/15/00 740 780
10.625% 04/15/05 1,000 1,050
Riverwood International Corp.,
10.625% 08/01/07 1,500 1,579
Stone Container Corp.,
12.250% 04/01/02 1,250 1,284
------
5,715
------
Petroleum Refining - 0.4%
Chiles Offshore, LLC,
10.000% 05/01/08(b) 500 500
------
Primary Metal - 6.2%
Algoma Steel, Inc.,
12.375% 07/15/05 1,500 1,785
Insilco Corp.,
10.250% 08/15/07 800 872
Keystone Consolidated Industries, Inc.,
9.625% 08/01/07 1,500 1,537
Kaiser Aluminum & Chemical Corp.,
10.875% 10/15/06 2,000 2,180
WCI Steel Inc.,
10.000% 12/01/04 1,000 1,043
WHX Corp.,
10.500% 04/15/05(b) 1,000 1,025
------
8,442
------
Printing & Publishing - 1.6%
American Lawyer Media Holdings,
9.750% 12/15/07(b) 1,000 1,050
Hollinger International Publishing, Inc.,
9.250% 03/15/07 1,000 1,060
------
2,110
------
Rubber & Plastic - 1.2%
Burke Industries, Inc.,
10.000% 08/15/07 1,500 1,564
------
Stone, Clay, Glass & Concrete - 0.4%
Anchor Glass Container Corp.,
11.250% 04/01/05 500 550
------
</TABLE>
6
<PAGE>
Investment Portfolio/April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Textile Mill Products - 0.1%
Collins & Aikman Floorcoverings, Inc.,
10.000% 01/15/07 $ 100 $ 107
------
Transportation Equipment - 4.2%
Aftermarket Technology Corp.,
Series B,
12.000% 08/01/04 860 951
Collins & Aikman Products Co.,
11.500% 04/15/06 2,000 2,240
Johnstown America Industries, Inc.,
11.750% 08/15/05 1,000 1,115
LDM Technologies, Inc.,
10.750% 01/15/07 1,275 1,371
------
5,677
------
................................................................................
MINING & ENERGY - 6.3%
Oil & Gas Extraction - 5.1%
Belden & Blake Corp.,
9.875% 06/15/07 1,000 992
Forcenergy, Inc.,
9.500% 11/01/06 550 566
HS Resources, Inc.,
9.250% 11/15/06 500 515
Magnum Hunter Resources, Inc.,
10.000% 06/01/07 750 761
Ocean Energy Inc.,
10.375% 10/15/05 1,610 1,789
Petsec Energy, Inc.,
9.500% 06/15/07 1,250 1,275
Pool Energy Services Co.,
8.625% 04/01/08(b) 500 498
Pride Petroleum Services, Inc.,
9.375% 05/01/07 500 538
------
6,934
------
Oil & Gas Field Services - 1.2%
Parker Drilling Corp.,
9.750% 11/15/06 1,500 1,594
------
................................................................................
RETAIL TRADE - 3.6%
Apparel & Accessory Stores - 0.7%
Galey & Lord, Inc.,
9.125% 03/01/08(b) 1,000 1,005
------
Food Stores - 2.7%
Pathmark Stores, Inc.,
9.625% 05/01/03 1,500 1,522
Richmont Marketing Specialists, Inc.
10.125% 12/15/07(b) 1,000 1,030
</TABLE>
7
<PAGE>
Investment Portfolio/April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CORPORATE FIXED INCOME BONDS &
NOTES (a) - CONT. PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RETAIL TRADE - CONT.
Food Stores - Cont.
Star Markets Co.,
13.000% 11/01/04 $1,000 $1,130
------
3,682
------
Miscellaneous Retail - 0.2%
Eye Care Centers of America,
9.125% 05/01/08(b) 250 250
------
................................................................................
SERVICES - 10.6%
Amusement & Recreation - 0.8%
Hollywood Casino Corp.,
12.750% 11/01/03 1,000 1,100
------
Business Services - 1.1%
Loomis Fargo & Co.,
10.000% 01/15/04 1,000 1,010
PSINet Inc.,
10.000% 02/15/05(b) 500 515
------
1,525
------
Health Services - 1.3%
Conmed Corp.,
9.000% 03/15/08(b) 500 504
Global Health Sciences,
11.000% 05/01/08(b) 750 735
Hudson Respiratory Care,
9.125% 04/15/08(b) 500 500
------
1,739
------
Hotel, Camps & Lodging - 5.1%
Eldorado Resorts Corp.,
10.500% 08/15/06 2,005 2,201
Harvey Casinos Resorts,
10.625% 06/01/06 1,750 1,949
Horseshoe Gaming, LLC,
9.375% 06/15/07 1,500 1,616
Mohegan Tribal Gaming,
13.500% 11/15/02 1,000 1,275
------
7,041
------
Motion Pictures - 0.4%
United Artists Theatre,
9.750% 04/15/08(b) 500 500
------
</TABLE>
8
<PAGE>
Investment Portfolio/April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Other Services - 1.3%
Borg-Warner Security Corp.,
9.625% 03/15/07 $1,500 $1,707
------
Personal Services - 0.6%
Williams Scotsman, Inc.,
9.875% 06/01/07 750 788
------
................................................................................
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 30.2%
Air Transportation - 2.4%
Trans World Airlines, Inc.,
11.375% 03/01/06(b) 1,000 1,000
U.S. Air, Inc.,
10.375% 03/01/13 2,000 2,270
------
3,270
------
Broadcasting - 6.5%
Allbritton Communications Co.,
9.750% 11/30/07 2,000 2,100
Fox Kids Worldwide, Inc.,
stepped coupon,
(10.250% 11/01/02) 11/01/07(b)(c) 1,000 635
Lin Holding Corp.,
stepped coupon,
(10.000% 03/01/03) 03/01/08(b)(c) 1,000 617
Renaissance Media Group,
stepped coupon,
(10.000% 04/15/03) 04/15/08(b)(c) 875 534
Sullivan Broadcasting, Inc.,
10.250% 12/15/05 2,000 2,160
Young Broadcasting Corp.,
11.750% 11/15/04 2,500 2,769
------
8,815
------
Cable - 5.8%
Adelphia Communications Corp.,
8.375% 02/01/08 1,000 990
Diamond Cable Communication, PLC,
stepped coupon,
(10.750% 02/15/02) 02/15/07(c) 1,000 700
EchoStar Satellite Broadcasting Corp.,
stepped coupon,
(13.125% 03/15/00) 03/15/04(c) 1,000 910
Marcus Cable Co., L.P.,
stepped coupon,
(14.250% 06/15/00) 12/15/05(c) 1,500 1,361
Northland Cable,
10.250% 11/15/07 1,250 1,331
</TABLE>
9
<PAGE>
Investment Portfolio/April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CORPORATE FIXED INCOME BONDS &
NOTES (a) - CONT. PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - CONT.
Cable - Cont.
Shop At Home, Inc.,
11.000% 04/01/05 $ 500 $ 515
Telewest Communication, PLC,
stepped coupon,
(11.000% 10/01/00) 10/01/07(c) 2,500 2,031
------
7,838
------
Communications - 0.8%
FrontierVision Holdings, L.P.,
stepped coupon,
(11.875% 09/15/01) 09/15/07(c) 1,000 770
Orbital Imaging Corp.,
11.625% 03/01/05(b) 250 270
------
1,040
------
Sanitary Services - 2.2%
Allied Waste North America, Inc.,
10.250% 12/01/06(e) 2,000 2,205
Allied Waste Industries, Inc.,
stepped coupon,
(11.3000% 06/01/02) 06/01/07(c) 1,000 738
------
2,943
------
Telecommunications - 12.5%
Clearnet Communications, Inc.,
stepped coupon,
(14.750% 12/15/00) 12/15/05(c) 1,000 840
Comcast Cellular Corp.,
9.500% 05/01/07 1,500 1,556
Esprit Telecom Group, PLC,
11.500% 12/15/07 500 545
GST Telecom/ GST Network,
stepped coupon,
(10.500% 05/01/03) 05/01/08(b)(c) 1,000 610
GST USA, Inc.,
stepped coupon,
(13.875% 12/15/00) 12/15/05(c) 1,000 810
Hyperion Telecommunications, Inc.,
stepped coupon,
(13.000% 04/15/01) 04/15/03(c) 1,000 750
ICG Services, Inc.,
stepped coupon,
(10.000% 02/15/03) 02/15/08(c) 1,500 930
IXC Communications, Inc.,
9.000% 04/15/08(b) 500 501
</TABLE>
10
<PAGE>
Investment Portfolio/April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Intermedia Communications, Inc.,
stepped coupon,
(11.25% 07/15/02) 07/15/07(c) $1,000 $ 735
Level 3 Communications, Inc.,
9.125% 05/01/08(b) 1,500 1,481
McLeodUSA, Inc.,
stepped coupon,
(10.500% 03/01/02) 03/01/07(c) 1,000 750
MetroNet Communications Corp.,
12.000% 08/15/07 250 288
Nextlink Communications, Inc.,
stepped coupon,
(9.450% 04/15/03) 04/15/08(b)(c) 1,000 630
Nextel Communications, Inc.,
stepped coupon,
(9.950% 02/15/03) 02/15/08(b)(c) 2,000 1,285
Nextel International, Inc.,
stepped coupon,
(12.125% 04/15/03) 04/15/08(b)(c) 625 385
Orion Network Systems, Inc.,
stepped coupon,
(12.500% 01/15/02) 01/15/07(c) 1,000 780
RCN Corp.,
stepped coupon,
(11.125% 10/15/02) 10/15/07(c) 1,750 1,168
Sprint Spectrum L.P.,
stepped coupon,
(12.500% 08/15/01) 08/15/06(c) 2,000 1,640
Teligent, Inc.,
11.500% 12/01/07 750 782
Verio, Inc.,
10.375% 04/01/05(b) 500 521
--------
16,987
--------
................................................................................
WHOLESALE TRADE - 1.6%
Nondurable Goods
AmeriServ Food Co.
10.125% 07/15/07 2,000 2,133
--------
TOTAL CORPORATE FIXED INCOME
BONDS & NOTES (cost of $121,875) 127,124
--------
COMMON STOCKS - 0.2% SHARES
- --------------------------------------------------------------------------------
MINING & ENERGY - 0.2%
Oil & Gas Extraction
Pioneer Natural Resources Co. 8 195
--------
</TABLE>
11
<PAGE>
Investment Portfolio/April 30, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
COMMON STOCKS - CONT. SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.0%
Motor Freight & Warehousing
St. Johnsbury Trucking Co. (f)(g) 79 $ 1
Sun Carriers, Inc. (f)(g) 326 3
------
4
------
Telecommunications
Nextel Communications, Inc. Class A (f) 3 89
------
TOTAL COMMON STOCKS (cost of $1,301) 288
------
PREFERRED STOCKS - 6.0%
- --------------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 0.2%
Depository Institutions
Cal Fed Bancorp, Inc.
9.125%, Series A 9 228
------
................................................................................
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 5.8%
Broadcasting - 0.2%
PriMedia Inc., 9.200% 3 306
------
Cable - 4.3%
Cablevision Systems Corp:
11.125%, Series M, PIK 6 733
11.750%, Series H, PIK 22 2,541
Time Warner, Inc.,
10.250%, Series M 2 2,493
------
5,767
------
Telecommunications - 1.3%
Nextel Communications, Inc.
13.000% PIK, 1 1,241
Nextel Communications, Inc.
11.125% PIK, 1 532
------
1,773
------
TOTAL PREFERRED STOCKS (cost of $7,670) 8,074
------
ADJUSTABLE RATE PREFERRED STOCKS - 0.0%
- --------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES
Telecommunications
Nextlink Communications, Inc.,
14.000% PIK (cost of $10) (h) 12
------
</TABLE>
12
<PAGE>
Investment Portfolio/April 30, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
WARRANTS (f) - 0.0% SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MetroNet Communications Corp. (cost of $0) (h) $ 1
--------
TOTAL INVESTMENTS - 100.0% (cost of $130,856)(i) 135,499
--------
SHORT-TERM OBLIGATIONS PAR
- --------------------------------------------------------------------------------
Fed Home Loan Mortgage Corp.,
5.450% (j) 05/01/98 $1,155 1,155
Fed National Mortgage Assoc.,
5.200% (j) 02/19/99 2,640 2,522
--------
TOTAL SHORT-TERM OBLIGATIONS (cost of $3,684) 3,677
--------
OTHER ASSETS & LIABILITIES, NET (27,828)
- --------------------------------------------------------------------------------
NET ASSETS $111,348
--------
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) Industry classification percentages are based on total investments.
Total investments represents 121.7% of the Fund's net assets.
(b) Security is exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At April 30,
1998, the value of these securities amounted to $25,969 or 23.3% of net
assets.
(c) Currently zero coupon. Shown parenthetically is the next interest rate to
be paid and the date the Fund will begin accruing this rate.
(d) This security has been purchased on a delayed delivery basis for
settlement at a future date beyond the customary settlement time.
(e) This security with a total market value of $1,185, is being used to
collateralize the delayed purchase indicated in note (d) above.
(f) Non-income producing.
(g) Represents fair value as determined in good faith under the direction of
the Trustees.
(h) Rounds to less than one.
(i) Cost for federal income tax purposes is the same.
(j) Rate represents yield at date of purchase.
Acronym Name
----------- ------------
PIK Payment-In-Kind
See notes to financial statements.
13
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
APRIL 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
(in thousands except for per share amount)
ASSETS
<S> <C> <C>
Investments at value (cost $130,856) $135,499
Short-term obligations (cost $3,684) 3,677
---------
139,176
Cash $ 1
Receivable for:
Interest 2,773
Dividends 7
Other 24 2,805
------- ---------
Total Assets 141,981
LIABILITIES
Payable for:
Investments purchased 1,600
Distributions 853
Interest 775
Accrued:
Deferred Trustees fees 3
Other 2
Notes payable 27,400
-------
Total Liabilities 30,633
---------
NET ASSETS at value for 14,972
shares of beneficial interest outstanding $111,348
=========
Net asset value per share $ 7.44
=========
COMPOSITION OF NET ASSETS
Capital paid in $133,898
Undistributed net investment income 351
Accumulated net realized loss (27,537)
Net unrealized appreciation 4,636
---------
$111,348
=========
</TABLE>
See notes to financial statements.
14
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1998
(UNAUDITED)
<TABLE>
<S> <C> <C>
(in thousands)
INVESTMENT INCOME
Interest $6,199
Dividends 405
------
6,604
EXPENSES
Management fee $ 360
Transfer agent 20
Bookkeeping fee 24
Trustees fee 8
Custodian fee 2
Audit fee 20
Legal fee 15
Reports to shareholders 6
Other 19
-----
Total operating expenses 474
Interest expense 1,010 1,484
----- ------
Net Investment Income 5,120
NET REALIZED & UNREALIZED
GAIN (LOSS) ON PORTFOLIO
POSITIONS
Net realized gain 2,641
Net unrealized depreciation
during the period (129)
------
Net Gain 2,512
-----
Increase in Net Assets from Operations $7,632
======
</TABLE>
See notes to financial statements.
15
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(Unaudited)
Six months Year
ended ended
(in thousands) April 30 October 31
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS 1998 1997
Operations:
Net investment income $ 5,120 $ 10,083
Net realized gain 2,641 3,311
Net unrealized appreciation (depreciation) (129) 2,525
------- --------
Net Increase from Operations 7,632 15,919
Distributions from net investment income (5,210) (10,294)
------- --------
2,422 5,625
Fund share transactions
Value of distributions reinvested 1,152 2,224
------- --------
Total Increase 3,574 7,849
NET ASSETS
Beginning of period 107,774 99,925
------- --------
End of period (including undistributed net
investment income of $351 and $263,
respectively) $111,348 $107,774
------- --------
NUMBER OF FUND SHARES
Issued for distributions reinvested 154 312
Outstanding at
Beginning of period 14,818 14,506
------- --------
End of period 14,972 14,818
------- --------
</TABLE>
See notes to financial statements.
16
<PAGE>
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
Six months
ended
(in thousands) April 30
--------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS 1998
Operations:
Net investment income (a) $ 4,407
Net decrease in cash from investment activity (b) (1,419)
-------
Net Increase from Operations 2,988
Distributions from net investment income (4,049)
-------
(1,061)
Cash
Beginning of period 1,062
-------
End of period $ 1
-------
Notes to statement of cash flows:
a) Reconciliation of net investment income:
Net investment income per books $ 5,120
Net change in assets and liabilities related
to income and expenses, including net
accretion and amortization (713)
---------
Net investment income-cash basis $ 4,407
---------
b) Net decrease in cash from investment
activity
Receipts for investments sold $ 527,281
Cost of investments purchased (528,700)
---------
$ (1,419)
---------
</TABLE>
See notes to financial statements.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998 (UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
...............................................................................
In the opinion of management of Colonial Intermediate High Income Fund (the
Fund), the accompanying financial statements contain all normal and recurring
adjustments necessary for the fair presentation of the financial position of the
Fund at April 30, 1998, and the results of its operations, the changes in its
net assets and the financial highlights for the six months then ended.
NOTE 2. ACCOUNTING POLICIES
...............................................................................
Organization: The Fund is a Massachusetts business trust registered under the
Investment Company Act of 1940, as amended, as a diversified closed-end
management investment company. The Fund's investment objective is to seek high
current income and total return by investing primarily in lower-rated corporate
debt securities. The Fund authorized an unlimited number of shares.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
Security valuation and transactions: Debt securities generally are valued by a
pricing service based upon market transactions for normal, institutional-size
trading units of similar securities. When management deems it appropriate, an
over-the-counter or exchange bid quotation is used.
Equity securities generally are valued at the last sale price or, in the case of
unlisted or listed securities for which there were no sales during the day, at
current quoted bid prices.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
18
<PAGE>
Notes to Financial Statements/April 30, 1998
- --------------------------------------------------------------------------------
Statement of cash flows: Information on financial transactions which have been
settled through the receipt or disbursement of cash is presented in the
Statement of Cash Flows. The cash amount shown in the Statement of Cash Flows is
the amount included in the Fund's Statement of Assets and Liabilities and
represents cash on hand at its custodian bank account and does not include any
short-term investments at April 30, 1998.
Federal income taxes: Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
Interest Income, debt discount and premium: Interest income is recorded on the
accrual basis. Original issue discount is accreted to interest income over the
life of a security with a corresponding increase in the cost basis; premium and
market discount are not amortized or accreted.
The value of additional securities received as an interest payment is recorded
as income and as the cost basis of such securities.
Distributions to shareholders: Distributions to shareholders are
recorded on the ex-date.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforwards) under income tax regulations.
Other: Corporate actions are recorded on the ex-date.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
................................................................................
Management fee: Colonial Management Associates, Inc. (the Adviser) is
the investment adviser of the Fund and furnishes accounting and other
services and office facilities for a monthly fee equal to 0.65% annually of
the Fund's average weekly net assets.
Bookkeeping fee: The Adviser provides bookkeeping and pricing services for
$27,000 per year plus 0.035% of the Fund's average net assets over $50 million.
Other: The Fund pays no compensation to its officers, all of whom are
employees of the Adviser.
19
<PAGE>
Notes to Financial Statements/April 30, 1998
- --------------------------------------------------------------------------------
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES - CONT.
................................................................................
The Fund's Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
Fund's assets.
NOTE 4. PORTFOLIO INFORMATION
................................................................................
Investment activity: During the six months ended April 30, 1998, purchases and
sales of investments, other than short-term obligations, were $61,749,075 and
$60,561,383, respectively.
Unrealized appreciation (depreciation) at April 30, 1998, based on cost of
investments for both financial statement and federal income tax purposes was
approximately:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 6,062,000
Gross unrealized depreciation (1,426,000)
-----------
Net unrealized appreciation $ 4,636,000
</TABLE>
-----------
Capital loss carryforwards: At October 31, 1997, capital loss carryforwards
available (to the extent provided in regulations) to offset future realized
gains were approximately as follows:
<TABLE>
<CAPTION>
Year of Capital loss
expiration carryforward
----------- ------------
<S> <C>
1999 $18,431,000
2000 9,467,000
2003 2,103,000
-----------
$30,001,000
-----------
</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.
NOTE 5. LOAN AGREEMENT
................................................................................
On April 30, 1998, the Fund had a $27,400,00 term loan with Bank of America
Illinois which bears interest at 7.33% per annum, due June 14, 1999. The Fund is
required to maintain certain asset coverage respect to the loan.
20
<PAGE>
Notes to Financial Statements/April 30, 1998
- --------------------------------------------------------------------------------
NOTE 6. RESULTS OF ANNUAL SHAREHOLDER MEETING (UNAUDITED)
................................................................................
On April 29, 1998, the Annual Meeting of Shareholders of the Fund was held to
elect five Trustees and to ratify the selection of Price Waterhouse LLP as
independent accountants for the fiscal year ending October 31, 1998. On February
2, 1998, the record date of the Meeting, the Fund had outstanding 14,897,109
shares of beneficial interest. The votes cast at the Meeting were as follows:
Election of five Trustees:
<TABLE>
<CAPTION>
FOR AGAINST
--- -------
<S> <C> <C>
Robert J. Birnbaum 13,526,325 223,378
James E. Grinnell 13,527,453 222,250
Richard W. Lowry 13,527,453 222,250
William E. Mayer 13,527,453 222,250
Robert L. Sullivan 13,527,453 222,250
</TABLE>
The Board of Trustees also consists of Tom Bleasdale, Lora S. Collins,
James L. Moody, Jr. and John J. Neuhauser.
Ratification of the selection of Price Waterhouse LLP as independent
accountants:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C>
13,575,656 39,700 134,347
</TABLE>
21
<PAGE>
FINANCIAL HIGHLIGHTS
Selected per share data, total return, ratios and supplemental data throughout
each period are as follows:
<TABLE>
<CAPTION>
(Unaudited)
Six months
ended
April 30 Year ended October 31
---------- --------------------------
1998 1997 1996
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 7.270 $ 6.890 $ 6.620
-------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.355 0.699(c) 0.699
Net realized and
unrealized gain (loss) 0.165 0.383 0.258
-------- -------- -------
Total from Investment
Operations 0.520 1.082 0.957
-------- -------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.350) (0.702) (0.687)
-------- -------- -------
Net asset value -
End of period $ 7.440 $ 7.270 $ 6.890
======== ======== =======
Market price per share $ 7.625 $ 7.562 $ 7.125
======== ======== =======
Total return - based on market value (a)
5.60%(b) 16.97% 14.62%
======== ======== =======
RATIOS TO AVERAGE NET ASSETS
Operating expenses 0.86%(c)(d) 0.89%(c) 0.98%(c)
Interest and amortization of
deferred debt issuance expenses 1.82%(d) 1.96% 2.07%
Total expenses 2.68%(d) 2.85% 3.05%
Net investment income 9.26%(c)(d) 9.63%(c) 10.11%(c)
Portfolio turnover 46%(b) 92% 92%
Net assets at end
of period (000) $111,348 $107,774 $99,925
</TABLE>
(a) Total return at market value assuming all distributions reinvested and
excluding brokerage commissions.
(b) Not annualized.
(c) The benefits derived from custody credits and directed brokerage
arrangements had an impact of 0.01% and $0.001 per share in 1997 only.
Prior years' ratios are net of benefits received, if any.
(d) Annualized.
22
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected per share data, total return, ratios and supplemental data throughout
each period are as follows:
<TABLE>
<CAPTION>
Year ended October 31
----------------------------------------------------------------------
1995 1994 1993
<S> <C> <C>
$ 6.280 $ 6.920 $ 6.430
------- ------- -------
0.696 0.693 0.709
0.340 (0.587) 0.497
------- ------- -------
1.036 0.106 1.206
------- ------- -------
(0.696) (0.746) (0.716)
------- ------- -------
$ 6.620 $ 6.280 $ 6.920
------- ------- -------
$ 6.875 $ 5.750 $ 6.625
------- ------- -------
33.00% (2.80)% 17.89%
------- ------- -------
0.95%(c) 0.97% 1.00%
1.94% 1.91% 2.66%
2.89% 2.88% 3.66%
10.76%(c) 10.40% 10.62%
92% 160% 135%
$93,984 $87,519 $95,164
</TABLE>
- --------------------------------------------------------------------------------
SENIOR SECURITIES OF COLONIAL INTERMEDIATE HIGH INCOME FUND: (UNAUDITED)
<TABLE>
<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 $27,400,000 393% NA 100
1996 $27,400,000 365% NA 100
1995 $27,400,000 343% NA 100
1994 $27,400,000 319% NA 100
1993 $27,400,000 347% NA 100
</TABLE>
23
<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 30 days written notice
to the Plan participants. All correspondence concerning the Plan should be
directed to First Data Investor Services Group, Inc., the Plan agent, by mail at
P.O. Box 8030, Boston, MA 02266-8030 or by phone at 1-800-331-1710.
24
<PAGE>
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25
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
26
<PAGE>
Important Information About This Report
The Transfer Agent for Colonial Intermediate High Income Fund is:
First Data Investor Services Group, Inc.
P.O. Box 8030
Boston, MA 02266-8030
1-800-331-1710
Colonial Intermediate High Income Fund mails one shareholder report to each
shareholder address. If you would like more than one report, please call
1-800-426-3750 and additional reports will be sent to you.
This report has been prepared for shareholders of Colonial Intermediate High
Income Fund.
27
<PAGE>
Trustees
Robert J. Birnbaum
Consultant (formerly Special Counsel, Dechert, Price & Rhoads; President and
Chief Operating Officer, New York Stock Exchange, Inc.; President, American
Stock Exchange, Inc.)
Tom Bleasdale
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
Lora S. Collins
Attorney (formerly Attorney, Kramer, Levin, Naftalis & Frankel)
James E. Grinnell
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
Richard W. Lowry
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
William E. Mayer
Partner, Development Capital, L.L.C. (formerly Dean, College of Business and
Management, University of Maryland; Dean, Simon Graduate School of Business,
University of Rochester; Chairman and Chief Executive Officer, CS First Boston
Merchant Bank; and President and Chief Executive Officer, The First Boston
Corporation)
James L. Moody, Jr.
Retired (formerly Chairman of the Board and Chief Executive Officer, Hannaford
Bros. Co.)
John J. Neuhauser
Dean, Boston College School of Management
Robert L. Sullivan
Retired Partner, KPMG Peat Marwick LLP (formerly Management Consultant, Saatchi
and Saatchi Consulting Ltd. and Principal and International Practice Director,
Management Consulting, Peat Marwick Main & Co.)
IH-03/322F-0498 (6/98) 98/582
