<PAGE>
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COLONIAL INTERMEDIATE HIGH INCOME FUND ANNUAL REPORT
- -------------------------------------------------------
OCTOBER 31, 1999
[Graphic Omitted]
<PAGE>
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PRESIDENT'S MESSAGE
- -------------------
[Photo of Stephen E. Gibson]
Dear Shareholder:
The Fund's fiscal year began with domestic economic strength, signs of firming
foreign economies and concerns about inflation. Although inflation remains tame
and fears have calmed, there have been signs of potential inflationary forces.
Commodity prices and raw materials have been strong, manufacturing seems healthy
and consumer spending remains robust. In an attempt to keep the economy and
inflation in check, the Federal Reserve Board (Fed) raised short-term interest
rates by one-quarter point in June, August and again in November -- negating the
three rate cuts last fall.
During the period, faster-than-expected U.S. economic growth and fears of rising
interest rates weighed on all types of bonds. Despite this environment,
high-yield bonds held up relatively well. While economic conditions created a
negative backdrop for U.S. government bonds, high-yield and emerging market
bonds rebounded from their depressed levels of last fall. High levels of income
helped high-yield corporate bonds offset price declines stemming from rising
interest rates. Toward the end of the period, U.S. corporate bonds yielded more
in a market flooded by issuers worried about Year 2000.
Colonial Intermediate High Income Fund actively manages and researches U.S.
corporate high-yield bonds to find attractive opportunities that offer investors
an investment choice that falls between traditional stock and bond funds.
Although past performance cannot guarantee future investment results, the Fund's
pure high-yield strategy has delivered competitive returns for the five-year
period ending 10/31/99.1
The following report provides you with more specific information about your
Fund's performance and investment strategy during the period. As always, we
thank you for choosing Colonial Intermediate High Income Fund and for giving us
the opportunity to serve your investment needs.
Sincerely,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
December 13, 1999
1 Lipper, Inc., a widely respected data provider in the industry, calculates an
average total return for mutual funds with similar investment objectives as
the Fund. The total return calculated for the Lipper High Current Yield Funds
(Leveraged) Category was 5.85% for the one year ended October 31, 1999. The
Fund was ranked in the second quartile for one year (8 out of 26 funds), in
the first quartile for five years (2 out of 17 funds) and in the fourth
quartile for ten years (11 out of 13 funds). Performance for different share
classes will vary with fees associated with each class. Past performance
cannot predict future results.
Because economic and market conditions change frequently, there can be no
assurance that the trends described in this report will continue or come to
pass.
TABLE OF CONTENTS
1 HIGHLIGHTS
2 PORTFOLIO OF
INVESTMENTS
7 FINANCIAL STATEMENTS
10 NOTES TO FINANCIAL STATEMENTS
12 FINANCIAL HIGHLIGHTS
<PAGE>
- ----------
HIGHLIGHTS
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> RESEARCH SUCCEEDS IN CABLE, TELECOMMUNICATIONS AND CYCLICALS.
Among its investments, the Fund continued to emphasize the cable television
sector both in the U. S. and United Kingdom. Other successful holdings
included cyclical industries such as metals, paper and chemicals. Certain
special situations, including a few energy and industrial issues, proved
disappointing. The well-diversified portfolio continued to hold some 140
high-yield issues, earning their income while not losing heavily in
principal values.
-- Scott Richards
Portfolio Manager
> HIGH-YIELD BONDS PROVED MORE RESILIENT THAN OTHER TYPES OF BONDS.
The comparatively high levels of income provided by high-yield bonds helped
cushion them against price declines. Stronger-than-expected economic
strength translated into strong corporate revenues. In this market, the
strength of the economy helped generate strong revenues for many high-yield
bonds.
> FUND OUTPERFORMED DESPITE CHALLENGING BOND ENVIRONMENT.
The Fund returned 7.43% at net asset value, outperforming the Lipper High
Current Yield Funds (Leveraged) Category, which posted a return of 5.85% for
the period.
COLONIAL INTERMEDIATE HIGH INCOME FUND
OUTPERFORMS LIPPER BENCHMARK*
10/31/98 - 10/31/99
Colonial Intermediate High Income Fund 7.43%
Lipper 5.85%
Past performance cannot predict future results. Returns and values of an
investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions.
* Returns are computed at net asset value.
TOP CORPORATE ISSUERS
AS OF 10/31/99(1)
- ---------------------------------------
NTL, Inc. 3.18%
- ---------------------------------------
CSC Holding 2.85%
- ---------------------------------------
Adelphia
Communications 2.84%
- ---------------------------------------
Nextel Communications 2.67%
- ---------------------------------------
Riverwood International 2.36%
- ---------------------------------------
TOP FIVE SECTOR BREAKDOWNS
AS OF 10/31/99(1)
- ---------------------------------------
Manufacturing 15.4%
- ---------------------------------------
Telecommunications 13.9%
- ---------------------------------------
Cable 11.8%
- ---------------------------------------
Services 8.3%
- ---------------------------------------
Metals 7.5%
- ---------------------------------------
12-MONTH DISTRIBUTIONS DECLARED
PER SHARE AS OF 10/31/99
$0.704
12-MONTH TOTAL RETURNS,
ASSUMING REINVESTMENT OF ALL
DISTRIBUTIONS
Market
NAV Price
--- ------
7.43% (7.89%)
PRICE PER SHARE ON 10/31/99
Market
NAV Price
--- ------
$5.97 $5.63
1 Corporate issuers are calculated as a
percent of total investments including
short-term 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 in these sectors in the
future. Industry sectors in the
following financial statements are
based upon the standard industrial
classifications (SIC) as published by
the U.S. Office of Management and
Budget. The sector classifications
used on this page are based upon the
Advisor's defined criteria as used in
the investment process.
<PAGE>
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INVESTMENT PORTFOLIO
- --------------------
October 31, 1999
CORPORATE FIXED INCOME
BONDS & NOTES - 92.4% PAR VALUE
- -------------------------------------------------------------------------------
CONSTRUCTION - 0.2%
BUILDING CONSTRUCTION
Nortek, Inc.,
8.875% 08/01/08 $ 300 $ 281
--------
- --------------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 0.1%
FINANCIAL SERVICES
Ameriserve Finance Trust & Capital Corp.,
12.000% 09/15/06 250 220
--------
- -------------------------------------------------------------------------------
MANUFACTURING - 38.2%
CHEMICALS & ALLIED PRODUCTS - 6.9%
Agricultural Minerals Co., L.P.,
10.750% 09/30/03 325 176
Allied Waste North America, Inc.,
10.000% 08/01/09 (b) 3,000 2,550
ClimaChem, Inc.,
10.750% 12/01/07 500 400
General Chemical Industries, Inc.,
10.625% 05/01/09 (b) 750 729
Huntsman Corp.,
9.500% 07/01/07 (b) 500 463
HydroChem Industrial Services, Inc.,
10.375% 08/01/07 490 426
Lyondell Chemical Co.,
10.875% 05/01/09 1,000 995
PCI Chemicals Canada, Inc.,
9.250% 10/15/07 1,000 760
Sterling Chemicals, Inc.,
11.750% 08/15/06 1,500 945
Terra Industries, Inc.,
10.500% 06/15/05 750 424
Texas Petrochemical Corp.,
11.125% 07/01/06 2,000 1,620
Trans Resources, Inc.:
10.750% 03/15/08 1,000 905
stepped coupon, (12.000% 03/01/03)
(c) 03/15/08 1,000 500
--------
10,893
--------
ELECTRONIC & ELECTRICAL EQUIPMENT - 1.4%
Amphenol Corp.,
9.875% 05/15/07 1,225 1,225
Gentek, Inc.,
11.000% 08/01/09 (b) 500 502
TransDigm, Inc.,
10.375% 12/01/08 500 448
--------
2,175
--------
FABRICATED METAL - 2.4%
Earle M. Jorgensen & Co.,
9.500% 04/01/05 1,500 1,373
Euramax International, PLC,
11.250% 10/01/06 1,500 1,500
US Can Corp.,
10.125% 10/15/06 1,000 1,015
--------
3,888
--------
FOOD & KINDRED PRODUCTS - 1.3%
Chattem, Inc.,
8.875% 04/01/08 $1,000 $ 890
New World Pasta Co.,
9.250% 02/15/09 250 230
Pilgrim's Pride Corp.,
10.875% 08/01/03 450 456
Premier International Foods, PLC,
12.000% 09/01/09 (b) 500 502
--------
2,078
--------
MACHINERY & COMPUTER EQUIPMENT - 0.9%
IMO Industries, Inc.,
11.750% 05/01/06 1,370 1,370
--------
MEASURING & ANALYZING INSTRUMENTS - 0.8%
Envirosource, Inc.,
9.750% 06/15/03 2,000 1,220
--------
MISCELLANEOUS MANUFACTURING - 8.6%
Alliance Laundry Systems L.L.C.,
9.625% 05/01/08 1,000 865
Associated Materials, Inc.,
9.250% 03/01/08 500 470
Blount, Inc.,
13.000% 08/01/09 500 514
Eagle-Picher Industries, Inc.,
9.375% 03/01/08 2,000 1,700
ISG Resources, Inc.,
10.000% 04/15/08 1,000 890
Koppers Industries, Inc.,
9.875% 12/01/07 500 435
Moll Industries, Inc.,
10.500% 07/01/08 1,500 900
Newcor, Inc.,
9.875% 03/01/08 1,270 699
Owens-Illinois, Inc.,
7.500% 05/15/10 1,500 1,357
Simmons Co.,
10.250% 03/15/09 750 739
Special Devices, Inc.,
11.375% 12/15/08 1,000 830
Tekni-Plex, Inc.,
9.250% 03/01/08 1,500 1,433
Thermadyne Holdings Corp.,
9.875% 06/01/08 2,000 1,640
Tokheim Corp.,
11.375% 08/01/08 (b) 865 450
Werner Holding Co.,
10.000% 11/15/07 750 728
--------
13,650
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PAPER PRODUCTS - 5.9%
Gaylord Container Corp.,
9.750% 06/15/07 2,000 1,895
Repap New Brunswick, Inc.,
10.625% 04/15/05 2,500 2,225
Riverwood International Corp.:
10.625% 08/01/07 500 506
10.875% 04/01/08 3,500 3,395
Stone Container Corp.,
12.250% 04/01/02 1,250 1,256
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9,277
--------
PRIMARY METAL - 5.4%
Algoma Steel, Inc.,
12.375% 07/15/05 500 430
Bayou Steel Corp.,
9.500% 05/15/08 1,000 930
Kaiser Aluminum & Chemical Corp.,
10.875% 10/15/06 1,600 1,608
Keystone Consolidated Industries, Inc.,
9.625% 08/01/07 1,000 920
Renco Metals, Inc.,
11.500% 07/01/03 500 410
Venture Holdings Trust Co.,
11.000% 06/01/07 (b) 250 243
WCI Steel, Inc.,
10.000% 12/01/04 2,250 2,188
Wheeling-Pittsburgh Corp.,
9.250% 11/15/07 2,000 1,860
--------
8,589
--------
PRINTING & PUBLISHING - 1.6%
American Lawyer Media, Inc.:
9.750% 12/15/07 2,000 1,860
stepped coupon, (12.250% 12/15/02)
(c) 12/15/08 1,000 600
--------
2,460
--------
RUBBER & PLASTIC - 0.6%
Burke Industries, Inc.,
10.000% 08/15/07 2,000 1,000
--------
STONE, CLAY, GLASS & CONCRETE - 0.3%
Anchor Glass Container Corp.,
11.250% 04/01/05 500 494
--------
TEXTILE MILL PRODUCTS - 0.1%
Collins & Aikman Products Co.,
10.000% 01/15/07 100 96
--------
TRANSPORTATION EQUIPMENT - 2.0%
Dura Operating Corp.,
9.000% 05/01/09 500 460
Johnstown America Industries, Inc.,
11.750% 08/15/05 1,000 1,018
LDM Technologies, Inc.,
10.750% 01/15/07 2,000 1,760
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3,238
--------
- -------------------------------------------------------------------------------
MINING & ENERGY - 5.7%
COAL MINING - 0.6%
AEI Resources, Inc.,
10.500% 12/15/05 (b) 1,000 880
--------
OIL & GAS EXTRACTION - 4.5%
Belden & Blake Corp.,
9.875% 06/15/07 1,700 935
HS Resources, Inc.,
9.250% 11/15/06 1,500 1,459
Magnum Hunter Resources, Inc.,
10.000% 06/01/07 750 712
Mariner Energy, Inc.,
10.500% 08/01/06 1,500 1,403
Ocean Energy, Inc.,
10.375% 10/15/05 1,610 1,682
Petsec Energy, Inc.,
9.500% 06/15/07 2,000 1,000
--------
7,191
--------
OIL & GAS FIELD SERVICES - 0.6%
Pool Energy Services Co.,
8.625% 04/01/08 500 495
RBF Finance Corp.,
11.000% 03/15/06 500 525
--------
1,020
--------
- -------------------------------------------------------------------------------
RETAIL TRADE - 2.0%
FOOD STORES - 1.3%
Pathmark Stores, Inc.,
9.625% 05/01/03 1,500 1,455
Richmont Marketing Specialist, Inc.,
10.125% 12/15/07 1,000 650
--------
2,105
--------
MISCELLANEOUS RETAIL - 0.7%
MTS, Inc.,
9.375% 05/01/05 1,500 1,042
--------
- -------------------------------------------------------------------------------
SERVICES - 9.5.%
AMUSEMENT & RECREATION - 3.5%
Coast Hotels & Casinos, Inc.,
9.500% 04/01/09 1,000 945
Hollywood Casino Corp.,
11.250% 05/01/07 1,000 1,003
Hollywood Casino Shreveport,
13.000% 08/01/06 500 517
Hollywood Park, Inc.,
9.500% 08/01/07 1,000 970
Horseshoe Gaming L.L.C.,
9.375% 06/15/07 500 495
Mohegan Tribal Gaming Authority,
8.750% 01/01/09 635 616
Regal Cinemas, Inc.,
9.500% 06/01/08 1,250 950
--------
5,496
--------
BUSINESS SERVICES - 2.7%
Interep National Radio Sales, Inc.,
10.000% 07/01/08 1,500 1,489
PSINet, Inc.:
10.000% 02/15/05 1,500 1,470
11.000% 08/01/09 (b) 1,250 1,281
--------
4,240
--------
HEALTH SERVICES - 1.0%
Tenet Healthcare Corp.,
8.625% 01/15/07 1,700 1,589
--------
HOTELS, CAMPS & LODGING - 1.6%
CapRock Communications Corp.,
11.500% 05/01/09 500 487
Eldorado Resorts L.L.C.,
10.500% 08/15/06 2,005 2,045
--------
2,532
--------
OTHER SERVICES - 0.3%
Intertek Finance, PLC,
10.250% 11/01/06 500 467
--------
PERSONAL SERVICES - 0.4%
Williams Scotsman, Inc.,
9.875% 06/01/07 750 716
--------
- -------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 36.6%
AIR TRANSPORTATION - 1.3%
Trans World Airlines, Inc.,
11.375% 03/01/06 250 104
U.S. Airways, Inc.,
10.375% 03/01/13 2,000 1,960
--------
2,064
--------
BROADCASTING - 3.8%
Allbritton Communications Co.,
9.750% 11/30/07 2,000 2,010
Fox Family Worldwide, Inc.,
9.250% 11/01/07 1,000 910
LIN Holding Corp.,
stepped coupon, (10.000% 03/01/03)
(c) 03/01/08 2,250 1,462
Young Broadcasting Corp.,
11.750% 11/15/04 1,500 1,564
--------
5,946
--------
CABLE - 13.0%
Adelphia Communications Corp.,
9.875% 03/01/07 3,500 3,570
Avalon Cable Holdings L.L.C.:
9.375% 12/01/08 250 250
stepped coupon, (11.875% 12/01/03)
(c) 12/01/08 2,000 1,275
Charter Communications Holdings L.L.C.,
stepped coupon, (9.920% 04/01/04)
(c) 04/01/11 2,500 1,475
Comcast UK Cable Partners Ltd.,
stepped coupon, (11.200% 11/15/00)
(c) 11/15/07 2,000 1,830
Diamond Cable Co.,
stepped coupon, (10.750% 02/15/02)
(c) 02/15/07 3,000 2,370
EchoStar DBS Corp.,
9.250% 02/01/06 2,000 1,980
FrontierVision Holdings L.P.,
stepped coupon, (11.875% 09/15/01)
(c) 09/15/07 2,000 1,710
NTL, Inc.,
11.500% 10/01/08 1,000 1,070
Northland Cable Television, Inc.,
10.250% 11/15/07 2,250 2,228
Shop At Home, Inc.,
11.000% 04/01/05 500 490
Telewest Communication PLC,
stepped coupon, (11.000% 10/01/00)
(c) 10/01/07 2,500 2,278
--------
20,526
--------
COMMUNICATIONS - 3.0%
Call-Net Enterprises, Inc.,
stepped coupon, (10.800% 05/15/04)
(c) 05/15/09 2,000 1,125
Centennial Cellular Corp.,
10.750% 12/15/08 1,000 1,045
Loral Space & Communications Ltd.,
11.250% 01/15/07 625 463
Metrocall, Inc.,
11.000% 09/15/08 1,000 603
Spectrasite Holdings, Inc.,
stepped coupon, (11.250% 04/15/04)
(c) 04/15/09 850 442
Time Warner Telecom L.L.C.,
9.750% 07/15/08 1,000 1,000
--------
4,678
--------
ELECTRIC SERVICES - 0.5%
AES Corp.,
9.500% 06/01/09 750 748
--------
MOTOR FREIGHT & WAREHOUSING - 0.6%
MTL, Inc.,
10.000% 06/15/06 1,000 900
--------
TELECOMMUNICATION - 14.4%
AirGate PCS, Inc.,
stepped coupon, (13.500% 10/01/04)
(c) 10/01/09 850 523
Arch Communication Group, Inc.,
12.750% 07/01/07 1,000 700
Carrier1 International
13.250% 02/15/09 750 750
Clearnet Communications, Inc.,
stepped coupon, (14.750% 12/15/00)
(c) 12/15/05 1,750 1,663
Hyperion Telecommunications, Inc.,
stepped coupon, (13.000% 04/15/01)
(c) 04/15/03 (b) 500 431
Intermedia Communications of Florida, Inc.,
stepped coupon, (12.500% 05/15/01)
(c) 05/15/06 1,000 820
Level 3 Communications, Inc.,
9.125% 05/01/08 500 466
McLeodUSA, Inc.,
stepped coupon, (10.500% 03/01/02)
(c) 03/01/07 2,000 1,575
Metrocall, Inc.,
10.375% 10/01/07 1,000 600
Metromedia Fiber Network, Inc.,
10.000% 11/15/08 1,000 994
MetroNet Communications Corp.,
12.000% 08/15/07 250 291
Microcell Telecommunications, Inc.,
stepped coupon, (14.000% 12/01/01)
(c) 06/01/06 1,000 825
Nextel Communications, Inc.:
stepped coupon, (9.750% 10/31/02)
(c) 10/31/07 1,000 720
stepped coupon, (9.950% 02/15/03)
(c) 02/15/08 2,000 1,420
Nextel International, Inc.,
stepped coupon, (12.125% 04/15/03)
(c) 04/15/08 625 325
Nextlink Communications, Inc.,
10.750% 06/01/09 500 509
Ono Finance PLC,
13.000% 05/01/09 750 788
RCN Corp.,
stepped coupon, (11.125% 10/15/02)
(c) 10/15/07 750 519
Rhythms NetConnections, Inc.,
12.750% 04/15/09 500 448
Rogers Cantel, Inc.,
9.750% 06/01/16 2,000 2,260
Sprint Spectrum L.P.,
stepped coupon, (12.500% 08/15/01)
(c) 08/15/06 500 462
Telecorp PCS, Inc.,
stepped coupon, (11.625% 04/15/04)
(c) 04/15/09 (b) 2,150 1,311
Verio, Inc.,
11.250% 12/01/08 1,506 1,572
Viatel, Inc.,
11.500% 03/15/09 1,000 965
Williams Communications Group, Inc.,
10.875% 10/01/09 1,250 1,284
Worldwide Fiber, Inc.,
12.000% 08/01/09 (b) 500 500
--------
22,721
--------
- -------------------------------------------------------------------------------
WHOLESALE TRADE - 0.1%
NONDURABLE GOODS
Revlon Consumer Products Corp.,
9.000% 11/01/06 290 232
--------
TOTAL CORPORATE FIXED INCOME
BONDS & NOTES (cost of $160,941) 146,022
--------
PREFERRED STOCKS - 6.8% SHARES
- -------------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 0.1%
DEPOSITORY INSTITUTIONS
Cal Fed Bancorp, Inc.,
9.125%, Series A 9 189
--------
SHARES VALUE
- -------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 6.7%
BROADCASTING - 0.2%
PriMedia Inc.,
9.200% 3 279
--------
CABLE - 3.7%
Adelphia Communications Corp.,
13.000% 10 1,140
CSC Holdings Limited:
11.125% PIK 18 1,953
11.750% PIK 25 2,760
--------
5,853
--------
ELECTRIC SERVICES - 0.7%
Nextlink Communications, Inc.,
14.000% PIK 22 1,040
--------
TELECOMMUNICATION - 2.1%
Concentric Network Corp.,
13.000% PIK 1 560
Global Crossing Ltd.,
10.500% PIK 8 795
Nextel Communications, Inc.:
11.125% PIK 1 599
13.000% PIK 1 1,406
--------
3,360
--------
TOTAL PREFERRED STOCKS (cost of $10,952) 10,721
--------
COMMON STOCKS - 0.8%
- -------------------------------------------------------------------------------
MINING & ENERGY -
OIL & GAS EXTRACTION
Pioneer Natural Resources Co. 8 76
--------
- -------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.8%
MOTOR FREIGHT & WAREHOUSING - 0.0%
St. Johnsbury Trucking Co. (d)(e) 79 1
Sun Carriers, Inc. (d)(e) 326 3
--------
4
--------
TELECOMMUNICATION - 0.8%
Nextel Communications, Inc., Class A 3 267
Price Communications Corp. 45 986
--------
1,253
--------
TOTAL COMMON STOCKS (cost of $1,876) 1,333
--------
WARRANTS(D) - 0.0%
- -------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.0%
TELECOMMUNICATION
Carrier1 International 1 15
MetroNet Communications Corp., (b) (f) 22
--------
TOTAL WARRANTS (cost of $15) 37
--------
TOTAL INVESTMENTS - 100% (cost of $173,784) (g) 158,113
--------
SHORT-TERM OBLIGATIONS PAR VALUE
- -------------------------------------------------------------------------------
Federal Farm Credit Bank,
5.160% 11/1/99 (h) 4,579 4,579
Federal National Mortgage Association,
5.250% 6/16/00 (h) 3,000 2,899
--------
TOTAL SHORT TERM OBLIGATIONS (cost of $7,479) 7,478
--------
OTHER ASSETS & LIABILITIES, NET (44,573)
- -------------------------------------------------------------------------------
NET ASSETS $121,018
========
NOTES TO INVESTMENT PORTFOLIO
- -------------------------------------------------------------------------------
(a) Industry classification percentages are based on total investments. Total
investments represent 130.7% of the Fund's net assets.
(b) Securities are 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 October 31,
1999, the value of these securities amounted to $9,864 or 8.2% 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) Non-income producing.
(e) Represents fair value as determined in good faith under the direction of the
Trustees.
(f) Rounds to less than one.
(g) Cost for federal income tax purposes is the same.
(h) Rate represents yield at date of purchase.
ACRONYM NAME
------------------ ------------------
PIK Payment-In-Kind
<PAGE>
- -----------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- -----------------------------------
October 31, 1999
(In thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $173,784) $158,113
Short-term obligations (cost of $7,479) 7,478
--------
165,591
--------
Cash 2
Receivable for:
Interest 3,977
Investments sold 1,325
Dividends 131
Other 10
--------
5,445
========
Total assets 171,036
LIABILITIES
Payable for:
Interest 1,397
Distributions 1,175
Accrued:
Management fee 67
Bookkeeping fee 4
Deferred Trustees fees 4
Other 71
Notes payable 47,300
--------
Total liabilities 50,018
========
Net assets at value for 20,268 shares of beneficial interest
outstanding $121,018
--------
Net asset value per share $ 5.97
========
COMPOSITION OF NET ASSETS
Capital paid in $151,020
Undistributed net investment income 521
Accumulated net realized loss (14,851)
Net unrealized depreciation (15,672)
--------
$121,018
========
See notes to financial statements.
<PAGE>
- -----------------------
STATEMENT OF OPERATIONS
- -----------------------
For the Year Ended October 31, 1999
(In thousands)
INVESTMENT INCOME
Interest $ 17,359
Dividends 1,088
--------
18,447
========
EXPENSES
Management fee $ 846
Transfer agent fee 50
Bookkeeping fee 55
Trustees fees 11
Custodian fee 5
Audit fee 68
Legal fee 10
Registration fee 24
Reports to shareholders 19
Other 71
--------
Total operating expenses 1,159
Interest expense 3,220
--------
Total expenses 4,379
--------
Net Investment Income 14,068
--------
NET REALIZED AND UNREALIZED LOSS ON PORTFOLIO POSITIONS
Net Realized Loss (3,133)
Net Change in Unrealized Appreciation/Depreciation (1,305)
--------
Net Loss (4,438)
--------
INCREASE IN NET ASSETS FROM OPERATIONS $ 9,630
========
See notes to financial statements.
<PAGE>
<TABLE>
- ----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------
(In thousands)
<CAPTION>
YEARS ENDED OCTOBER 31,
-------------------------
INCREASE (DECREASE) IN NET ASSETS 1999 1998
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 14,068 $ 11,572
Net realized gain (loss) (3,133) 1,756
Net change in unrealized appreciation/depreciation (1,305) (19,132)
-------- --------
Net Increase (Decrease) from Operations 9,630 (5,804)
DISTRIBUTIONS
From net investment income (14,199) (11,513)
-------- --------
(4,569) (17,317)
FUND SHARE TRANSACTIONS
Receipts for shares issued in rights offering -- 32,310
Value of distributions reinvested 1,107 1,713
-------- --------
Net Increase from Fund Share Transactions 1,107 34,023
-------- --------
Total Increase (Decrease) (3,462) 16,706
NET ASSETS
Beginning of period 124,480 107,774
-------- --------
End of period (including undistributed net investment income
of $521 and $503, respectively) $121,018 $124,480
======== ========
NUMBER OF FUND SHARES
Shares issued in rights offering -- 5,010
Issued for distributions reinvested 201 239
Outstanding at Beginning of period 20,067 14,818
-------- --------
End of period 20,268 20,067
-------- --------
See notes to financial statements.
</TABLE>
<PAGE>
YEAR
INCREASE (DECREASE) IN NET ASSETS ENDED
OCTOBER 31,
---------
1999
---------
OPERATIONS
Net investment income (a) $ 10,750
Net increase in cash from investment activity (b) 2,114
---------
Net increase from Operations 12,864
---------
Distributions from net investment income (12,866)
---------
(2)
Cash
Beginning of period 4
---------
End of period $ 2
---------
Notes to statement of cash flows:
(a) Reconciliation of net investment income:
Net investment income per books $ 14,068
Net change in assets and liabilities related to
income and expenses, including net accretion
and amortization (3,318)
---------
Net investment income-cash basis $ 10,750
---------
(b) Net increase in cash from investment activity
Receipts for investments sold $ 982,917
Cost of investments purchased (980,803)
---------
$ 2,114
---------
See notes to financial statements.
<PAGE>
- -----------------------------
NOTES TO FINANCIAL STATEMENTS
- -----------------------------
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 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.
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 October 31, 1999.
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 Advisor) is the investment advisor
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 Advisor provides bookkeeping and pricing services for a monthly fee equal
to $27,000 annually 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 Advisor.
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, 1999, purchases and sales of investments,
other than short-term obligations, were $73,989,572 and $74,325,028
respectively.
Unrealized appreciation (depreciation) at October 31, 1999, based on cost of
investments for both financial statement and federal income tax purposes was:
Gross unrealized appreciation $ 1,947,642
Gross unrealized depreciation (17,619,595)
------------
Net unrealized depreciation $(15,671,953)
============
CAPITAL LOSS CARRYFORWARDS
At October 31, 1999, 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
---------- ------------
2000 $ 9,467,000
2003 2,102,000
2007 3,282,000
-----------
$14,851,000
===========
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, subjecting it to
greater risk than a fund that is more diversified.
NOTE 4. LOAN AGREEMENT
At October 31, 1999, the Fund had four term loans outstanding with Bank of
America Illinois, totaling $47,300,000, comprised of a $13,700,000 term loan
which bears interest at 6.17% per annum, due June 13, 2000, a $6,900,000 term
loan which bears interest at 6.37% per annum, due May 21, 2001, a $3,800,000
revolving loan which bears interest at 6.29375% per annum, due June 26, 2001,
a $9,200,000 term loan which bears interest at 6.26% per annum, due June 29,
2001, and a $13,700,000 term loan which bears interest at 6.84% per annum, due
June 13, 2002. The Fund is required to maintain certain asset coverage with
respect to the loans.
NOTE 5. RIGHTS OFFERING
In a rights offering commencing May 26, 1998, shareholders exercised rights to
purchase 5,010,532 shares at $6.50 per share for proceeds, net of expenses, of
approximately $32,310,000.
<PAGE>
<TABLE>
- --------------------
FINANCIAL HIGHLIGHTS
- --------------------
Selected data for a share of each class outstanding
throughout each period are as follows:
<CAPTION>
YEARS ENDED OCTOBER 31,
----------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.200 $ 7.270 $ 6.890 $ 6.620 $ 6.280
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.705 0.699 0.699(b) 0.699 0.696
Net realized and unrealized gain
(loss) (0.231) (1.077) 0.383 0.258 0.340
-------- -------- -------- -------- --------
Total from Investment Operations 0.474 (0.378) 1.082 0.957 1.036
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income (0.704) (0.692) (0.702) (0.687) (0.696)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 5.970 $ 6.200 $ 7.270 $ 6.890 $ 6.620
-------- -------- -------- -------- --------
Market price per share $ 5.625 $ 6.812 $ 7.562 $ 7.125 $ 6.875
-------- -------- -------- -------- --------
Total return - based on market value (a) (7.89)% (0.74)% 16.97% 14.62% 33.00%
-------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS
Operating expenses (b) 0.89% 0.88% 0.89% 0.98% 0.95%
Interest and amortization of deferred debt
issuance expenses 2.48% 2.11% 1.96% 2.07% 1.94%
Total expenses 3.37% 2.99% 2.85% 3.05% 2.89%
Net investment income (b) 10.82% 9.70% 9.63% 10.11% 10.76%
Portfolio turnover 44% 69% 92% 92% 92%
Net assets at end of period (000) $121,018 $124,480 $107,774 $ 99,925 $ 93,984
(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 an impact of 0.01% and $0.001 per
share in 1997 only.
</TABLE>
- ------------------------------------------------------------------------------
SENIOR SECURITIES OF COLONIAL INTERMEDIATE HIGH INCOME FUND: (UNAUDITED)
INVOLUNTARY APPROXIMATE
TOTAL AMOUNT ASSET COVERAGE LIQUIDATING MARKET VALUE
YEAR OUTSTANDING PER SHARE PREFERENCE PER UNIT PER UNIT
---- ----------- --------- ------------------- --------
1999 $47,300,000 256% NA 100
1998 $47,300,000 263% NA 100
1997 $27,400,000 393% NA 100
1996 $27,400,000 365% NA 100
1995 $27,400,000 343% NA 100
<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, 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, 1999, the results of its
operations and cash flows, 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,
1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 13, 1999
<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.
<PAGE>
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<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Transfer Agent
- --------------------------------------------------------------------------------
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
The 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.
<PAGE>
TRUSTEES
ROBERT J. BIRNBAUM WILLIAM E. MAYER
Consultant (formerly Special Counsel, Partner, Development Capital, LLC
Dechert, Price & Rhoads; President (formerly Dean, College of Business
and Chief Operating Officer, New York and Management, University of
Stock Exchange, Inc.; President, Maryland; Dean, Simon Graduate School
American Stock Exchange Inc.) of Business, University of Rochester;
Chairman and Chief Executive Officer,
TOM BLEASDALE CS First Boston Merchant Bank; and
Retired (formerly Chairman of the President and Chief Executive
Board and Chief Executive Officer, Officer, The First Boston
Shore Bank & Trust Company) Corporation)
JOHN V. CARBERRY JAMES L. MOODY, JR.
Senior Vice President of Liberty Retired (formerly Chairman of the
Financial Companies, Inc. (formerly Board, Chief Executive Officer and
Managing Director, Salomon Brothers) Director Hannaford Bros. Co.)
LORA S. COLLINS JOHN J. NEUHAUSER
Attorney (formerly Attorney, Kramer, Academic Vice President and Dean of
Levin, Naftalis & Frankel) Faculties, Boston College (former
Dean, Boston College School of
JAMES E. GRINNELL Management)
Private Investor (formerly Senior
Vice President-Operations, The THOMAS E. STITZEL
Rockport Company) Professor of Finance, College of
Business, Boise State University;
RICHARD W. LOWRY Business Consultant and Author
Private Investor (formerly Chairman
and Chief Executive Officer, U.S. ROBERT L. SULLIVAN
Plywood Corporation) Retired Partner, KPMG LLP (formerly
Management Consultant, Saatchi and
SALVATORE MACERA Saatchi Consulting Ltd. and Principal
Private Investor (formerly Executive and International Practice Director,
Vice President of Itek Corp. and Management Consulting, Peat Marwick
President of Itek Optical & Main & Co.)
Electronic Industries, Inc.)
ANNE-LEE VERVILLE
Consultant (formerly General Manager,
Global Education Industry, and
President, Applications Solutions
Division, IBM Corporation)
- -------------------------------------------------------
COLONIAL INTERMEDIATE HIGH INCOME FUND ANNUAL REPORT>
- -------------------------------------------------------
IH-02/084I-1099 (12/99) 99/1540
