UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-5567
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Colonial Intermediate High Income Fund
--------------------------------------------------
(Exact name of registrant as specified in charter)
One Financial Center, Boston, Massachusetts 02111
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(Address of principal executive offices) (Zip code)
Vincent Pietropaolo, Esq.
Columbia Management Group, Inc.
One Financial Center
Boston, MA 02111
--------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-617-772-3698
--------------------
Date of fiscal year end: 11/30/2004
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Date of reporting period: 11/30/2004
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
COLONIAL INTERMEDIATE HIGH INCOME FUND ANNUAL REPORT
NOVEMBER 30, 2004
[photo of calculator and newspaper]
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
PRESIDENT'S MESSAGE
Dear Shareholder:
In 2004, Colonial Funds became part of the Bank of America family, one of the
largest, most respected financial institutions in the United States. As a direct
result of this merger, a number of changes are in the works that we believe
offer significant potential benefits for our shareholders. First, some funds may
be merged in order to eliminate redundancies, others may be liquidated and fund
management teams will be aligned to maximize performance potential. You will
receive more detailed information about these changes if your fund is affected
and you may be asked to vote on certain fund changes. In this matter, your
timely response will enable us to implement the changes in 2005.
As a result of these changes, we believe we will offer shareholders an even
stronger lineup of investment options. What will not change as we enter this
next phase of consolidation is our commitment to the highest standards of
performance and our dedication to superior service. Change for the good has
another name: it's called improvement. It helps move us forward, and we believe
that it represents progress for all our shareholders in their quest for
long-term financial success.
In the pages that follow, you'll find a detailed report from the fund's manager
or managers on key factors that influenced your fund's performance. We hope that
you will read the manager reports carefully and discuss any questions you might
have with your financial advisor.
As always, we thank you for choosing Colonial Funds. We appreciate your
continued confidence. And, we look forward to helping you keep your long-term
financial goals on target in the years to come.
Sincerely,
/s/. Christopher L. Wilson
Christopher L. Wilson
Head of Mutual Funds, Columbia Management
Christopher Wilson is Head of Mutual Funds for Columbia Management, responsible
for the day-to-day delivery of mutual fund services to the firm's investors.
With the exception of distribution, Chris oversees all aspects of the mutual
fund services operation, including treasury, investment accounting and
shareholder and broker services. Chris serves as Columbia Management's liaison
to the mutual fund boards of trustees.
Chris joined Bank of America in August 2004.
Economic and market conditions change frequently. There is no assurance that
trends described in this report will continue or commence.
PORTFOLIO MANAGERS' REPORT
PRICE PER SHARE
AS OF 11/30/04 ($)
Net asset value 3.87
-----------------------------
Market price 3.51
-----------------------------
1-YEAR TOTAL RETURN AS OF
11/30/04 (%)
Net asset value 17.35
-----------------------------
Market price 9.24
-----------------------------
Lipper High Current
Yield Funds (Leveraged)
Category average 18.65
-----------------------------
All results shown assume
reinvestment of distributions.
DISTRIBUTIONS DECLARED PER
SHARE 12/01/03-11/30/04 ($)
0.30
-----------------------------
TOP 5 SECTORS AS OF
11/30/04 (%)
Telecommunications 12.2
-----------------------------
Media 11.7
-----------------------------
Lodging 6.2
-----------------------------
Electric 5.8
-----------------------------
Chemicals 5.0
-----------------------------
Sector breakdowns are calculated as
a percentage of total investments.
TOP 10 CORPORATE ISSUERS AS OF
11/30/04 (%)
Qwest 2.5
-----------------------------
El Paso Corp. 1.9
-----------------------------
Charter Communications 1.4
-----------------------------
Dex Media 1.2
-----------------------------
Pinnacle Entertainment 1.2
-----------------------------
Spanish Broadcasting
System 1.1
-----------------------------
Calpine 1.1
-----------------------------
D.R. Horton 1.0
-----------------------------
Tenet Healthcare 0.9
-----------------------------
Allied Waste
North America 0.8
-----------------------------
Corporate issuers are calculated as a percentage of total investments.
Because the fund is actively managed, there can be no guarantee that the fund
will continue to hold securities of these issuers in these sectors in the
future.
For the 12-month period ended November 30, 2004, Colonial Intermediate High
Income Fund returned 9.24%, based on its market price. Changes in the market
price of the fund's shares reflect investor demand and are not necessarily
linked directly to changes in the fund's net asset value. The fund returned
17.35%, based on investment at net asset value. The average return of the Lipper
High Current Yield Funds (Leveraged) Category was 18.65%.1 The fund and its peer
group benefited from a positive environment for high-yield bonds which are
inherently riskier than higher-quality bonds. We believe the fund's slight
shortfall relative to its peer group can be attributed to its lower exposure to
lower-rated single B and CCC-rated bonds relative to a small number of funds in
the group that were positioned more aggressively. We increased the fund's
weighting in lower quality high-yield bonds during the year, resulting in
full-year performance that was closer to the Lipper average than the results for
the first six months. An improving economy and lower default rates resulted in
higher prices for the riskiest bonds during the period.
High-yield markets extended their two-year run of strong performance, helped by
expansion of the US and global economies and declining intermediate- and
long-term interest rates. After rising in the spring, rates declined through the
end of the period, boosting prices for fixed-income securities in all sectors.
SOLID RETURNS FROM DIVERSE SECTORS
The fund's investments in utilities, wireless telecommunications, chemicals and
the consumer sectors bolstered its results. In particular, expansion in the US
cellular industry aided US Unwired, Inc. (0.5% of total investments), a holding
that benefited the fund twice: bonds were called away at favorable terms as part
of a refinancing, and we purchased a new US Unwired issue that also rose.2
Holdings such as Coastal Corp., Sonat, Inc. and Southern Natural Gas Co. (0.7%,
0.9% and 0.3% of total investments, respectively), all subsidiaries of El Paso
Corp., an integrated producer and transporter of oil, gas and electric power,
contributed to performance. El Paso's operations stabilized during the period,
asset sales were consummated and concerns about its oil and natural gas reserves
proved overblown.
-------------
1 Lipper Inc., a widely respected data provider, calculates an average total
return based on net asset value for mutual funds with similar investment
objectives.
2 Holdings are disclosed as of November 30, 2004.
1
PORTFOLIO MANAGERS' REPORT (CONTINUED)
Bonds of chemical producer Huntsman ICI Holdings LLC (0.9% of
total investments) rose as commodity chemical prices trended higher, and in
anticipation of a proposed transaction that would retire the bonds at a premium.
Among consumer issues, Levi Strauss & Co.'s (0.5% of total investments)
fundamental operations continued to strengthen while offers to purchase the
Dockers brand highlighted the underlying value of the company. In October, the
company announced plans to retain the brand.
On the negative side, we reduced exposure to energy companies because
of the low yields the sector offered. However, given the staying power of high
oil and gas prices, this sector continued to outperform, and the resulting
underexposure to energy companies held back the fund's relative return. Sharply
higher bills for jet fuel as well as high labor costs drove down bonds of Delta
Air Lines, Inc. (0.1% of total investments). We trimmed holdings in Delta when
prices recovered somewhat in November. Declining roaming traffic caused bonds of
Dobson Communications Corp. (0.4% of total investments) to run counter to the
favorable trend among wireless companies.
DESPITE SOME CAUTION, A GENERALLY FAVORABLE ENVIRONMENT FOR HIGH-YIELD
If the US economy continues to expand and short-term interest rates rise
gradually, we believe that lower quality issues have the potential to continue
to deliver strong performance. Historically, the high-yield market has benefited
from similar economic conditions. As a result, we continued to increase the
fund's exposure to lower-rated issues, emphasizing companies where our rigorous
credit analysis shows the likelihood of expanding cash flows that may compensate
the fund for the higher risk inherent in investing in these issues. However, our
enthusiasm for the sector is balanced by an element of caution. Because the
high-yield market has absorbed a record volume of new issues in 2004, continued
heavy issuance of new bonds could eventually put pressure on prices.
/s/ Gregg R. Smalley /s/ Kevin L. Cronk /s/ Thomas A. LaPointe
Gregg R. Smalley Kevin L. Cronk Thomas A. LaPointe
Gregg R. Smalley, CFA, a member of the High Yield Portfolio Management Team at
Columbia Management Advisors, Inc. (the "advisor"), has been a portfolio manager
of Colonial Intermediate High Income Fund since June 2000. Mr. Smalley joined an
affiliate of the advisor in August 1997 as a research analyst specializing in
the energy, cable and telecom industries.
2
PORTFOLIO MANAGERS' REPORT (CONTINUED)
Kevin L. Cronk, CFA, a member of the advisor's High Yield Portfolio Management
Team, has co-managed the fund since February 2003. Mr. Cronk joined an affiliate
of the advisor in August 1999 as a research analyst specializing in the
chemicals, healthcare and telecom industries.
Thomas A. LaPointe, CFA, a member of the advisor's High Yield Portfolio
Management Team, has co-managed the fund since February 2003. Mr. LaPointe
joined an affiliate of the advisor in February 1999 as a senior member of the
Fixed Income Department's research group and has provided high-yield analytical
support to mutual funds investing in the metals, gaming and European telecom
industries.
Performance data quoted represents past performance and current performance may
be lower or higher. Past performance is no guarantee of future results.
The values of fixed-income securities generally move inversely with changes in
interest rates such that when interest rates rise, bond values fall and vice
versa. Investing in high-yield bonds involves greater credit risk and other
risks not associated with investing in higher-quality bonds. Bond investing also
involves interest rate risk, which means that bond prices may change as interest
rates increase or decrease.
3
INVESTMENT PORTFOLIO
November 30, 2004
CORPORATE FIXED-INCOME
BONDS & NOTES - 122.5% PAR ($) VALUE ($)
-----------------------------------------------------------
BASIC MATERIALS - 12.5% CHEMICALS - 6.7%
AGRICULTURAL CHEMICALS - 1.9%
IMC Global, Inc.,
10.875% 08/01/13 310,000 393,700
Terra Capital, Inc.,
12.875% 10/15/08 475,000 586,625
UAP Holding Corp.,
(a) 07/15/12
(10.750% 01/15/08) (b) 295,000 224,200
United Agri Products,
8.250% 12/15/11
(8.750% 12/15/04) (b)(r) 295,000 314,175
-----------
1,518,700
-----------
CHEMICALS-DIVERSIFIED - 4.6%
BCP Caylux Holdings
Luxembourg S.C.A.,
9.625% 06/15/14 (b) 230,000 258,750
Equistar Chemicals LP,
10.625% 05/01/11 575,000 665,563
HMP Equity Holdings Corp.,
(c) 05/15/08 950,000 624,625
Huntsman ICI Holdings LLC,
(c) 12/31/09 1,725,000 961,688
Lyondell Chemical Co.,
9.625% 05/01/07 660,000 724,350
NOVA Chemicals Corp.,
6.500% 01/15/12 170,000 176,407
Westlake Chemical Corp.,
8.750% 07/15/11 257,000 289,767
-----------
3,701,150
-----------
CHEMICALS-SPECIALTY - 0.2%
Crompton Corp.,
7.670% 08/01/10 (b)(d) 185,000 199,800
-----------
199,800
-----------
Chemicals Total 5,419,650
-----------
FOREST PRODUCTS & PAPER - 2.9%
FORESTRY - 0.5%
Millar Western Forest Products,
7.750% 11/15/13 225,000 240,750
Tembec Industries, Inc.,
8.500% 02/01/11 180,000 180,000
-----------
420,750
-----------
PAPER & RELATED PRODUCTS - 2.4%
Boise Cascade LLC:
5.005% 10/15/12 (b)(d) 175,000 178,500
7.125% 10/15/14 (b) 190,000 199,500
Buckeye Technologies, Inc.:
8.500% 10/01/13 60,000 66,000
9.250% 09/15/08 235,000 235,000
PAR ($) VALUE ($)
-----------------------------------------------------------
Caraustar Industries, Inc.,
9.875% 04/01/11 355,000 381,625
Georgia-Pacific Corp.,
8.000% 01/15/24 200,000 232,000
Neenah Paper, Inc.,
7.375% 11/15/14 (b) 130,000 131,300
Newark Group, Inc.,
9.750% 03/15/14 (b) 270,000 282,825
Norske Skog Canada Ltd.:
7.375% 03/01/14 105,000 110,250
8.625% 06/15/11 150,000 162,000
-----------
1,979,000
-----------
Forest Products & Paper Total 2,399,750
IRON/STEEL - 1.8%
METAL-IRON - 0.5%
Wise Metals Group LLC,
10.250% 05/15/12 (b) 415,000 418,112
-----------
418,112
-----------
STEEL-PRODUCERS - 0.5%
Bayou Steel Corp.,
9.000% 03/31/11 250,000 235,000
Steel Dynamics, Inc.,
9.500% 03/15/09 160,000 177,200
-----------
412,200
-----------
STEEL-SPECIALTY - 0.8%
Oregon Steel Mills, Inc.,
10.000% 07/15/09 195,000 218,400
UCAR Finance, Inc.,
10.250% 02/15/12 355,000 408,250
-----------
626,650
-----------
Iron/Steel Total 1,456,962
-----------
MINING - 1.1%
METAL-ALUMINUM - 0.6%
Kaiser Aluminum & Chemical Corp.,
10.875% 10/15/06 (e) 505,000 434,300
-----------
434,300
-----------
METAL-DIVERSIFIED - 0.5%
Earle M. Jorgensen Co.,
9.750% 06/01/12 380,000 427,500
-----------
427,500
-----------
Mining Total 861,800
-----------
BASIC MATERIALS TOTAL 10,138,162
-----------
-----------------------------------------------------------
COMMUNICATIONS - 27.7%
ADVERTISING - 0.3%
ADVERTISING SERVICES - 0.3%
WDAC Subsidiary Corp.,
8.375% 12/01/14 (b)(f) 290,000 292,900
-----------
292,900
-----------
Advertising Total 292,900
-----------
See Accompanying Notes to Financial Statements.
4
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2004
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
COMMUNICATIONS (CONTINUED)
MEDIA - 12.6%
BROADCAST SERVICES/PROGRAMS - 0.6%
Fisher Communications, Inc.,
8.625% 09/15/14 (b) 190,000 205,200
XM Satellite Radio, Inc.,
7.660% 05/01/09 (d) 250,000 255,000
-----------
460,200
-----------
CABLE TV - 5.8%
Atlantic Broadband Finance LLC,
9.375% 01/15/14 (b) 390,000 378,300
Cablevision Systems Corp.,
6.669% 04/01/09 (b)(d) 290,000 303,050
Charter Communications Holdings LLC:
9.920% 04/01/11 1,660,000 1,365,350
10.250% 09/15/10 190,000 199,500
CSC Holdings, Inc.:
6.750% 04/15/12 (b) 365,000 374,125
7.625% 04/01/11 20,000 21,450
DirecTV Holdings LLC,
8.375% 03/15/13 180,000 202,950
EchoStar DBS Corp.,
6.375% 10/01/11 400,000 412,000
Insight Communications Co., Inc.,
(a) 02/15/11
(12.250% 02/15/06) 185,000 178,525
Insight Midwest LP,
9.750% 10/01/09 195,000 205,481
Northland Cable Television, Inc.,
10.250% 11/15/07 495,000 495,000
Pegasus Satellite Communications, Inc.,
11.250% 01/15/10 (b)(e) 435,000 277,312
Telenet Group Holdings NV,
(a) 06/15/14
(11.500% 12/15/08) (b) 400,000 309,000
-----------
4,722,043
-----------
MULTIMEDIA - 2.0%
Advanstar Communications, Inc.:
(a) 10/15/11
(15.000% 10/15/05) 310,000 261,950
12.000% 02/15/11 345,000 376,050
Haights Cross Communications, Inc.,
(a) 08/15/11
(12.500% 02/15/09) 315,000 203,175
Haights Cross Operating Co.,
11.750% 08/15/11 195,000 222,300
Quebecor Media, Inc.,
11.125% 07/15/11 490,000 562,275
-----------
1,625,750
-----------
PUBLISHING-NEWSPAPERS - 0.4%
Hollinger, Inc.:
11.875% 03/01/11 (b)(q) 122,000 132,038
12.875% 03/01/11 (b) 192,000 209,280
-----------
341,318
-----------
PAR ($) VALUE ($)
-----------------------------------------------------------
PUBLISHING-PERIODICALS - 2.5%
CBD Media Holdings LLC
& Finance, Inc.,
9.250% 07/15/12 (b) 235,000 240,875
Dex Media, Inc.:
(a) 11/15/13
(9.000% 11/15/08) 250,000 191,875
8.000% 11/15/13 320,000 342,400
Dex Media East LLC,
12.125% 11/15/12 367,000 449,575
Dex Media West LLC,
9.875% 08/15/13 274,000 316,470
Yell Finance BV,
10.750% 08/01/11 388,000 452,020
-----------
1,993,215
-----------
TELEVISION - 1.3%
Granite Broadcasting Corp.,
9.750% 12/01/10 575,000 540,500
Paxson Communications Corp.,
10.750% 07/15/08 260,000 267,800
Sinclair Broadcast Group, Inc.,
8.750% 12/15/11 250,000 268,750
-----------
1,077,050
-----------
Media Total 10,219,576
-----------
TELECOMMUNICATIONS - 14.8%
CELLULAR TELECOMMUNICATIONS - 6.5%
American Cellular Corp.,
10.000% 08/01/11 325,000 273,813
Dobson Cellular Systems, Inc.,
8.375% 11/01/11 (b) 95,000 97,375
Dobson Communications Corp.,
8.875% 10/01/13 575,000 388,125
Horizon PCS, Inc.,
11.375% 07/15/12 (b) 230,000 251,850
iPCS Escrow Co.,
11.500% 05/01/12 (b) 170,000 189,550
Nextel Communications, Inc.,
7.375% 08/01/15 500,000 550,000
Nextel Partners, Inc.,
8.125% 07/01/11 610,000 671,000
Rogers Cantel, Inc.,
9.750% 06/01/16 720,000 847,800
Rogers Wireless, Inc.,
8.000% 12/15/12 (b) 225,000 234,562
Rural Cellular Corp.,
8.250% 03/15/12 220,000 229,350
UbiquiTel, Inc.:
9.875% 03/01/11 250,000 274,375
9.875% 03/01/11 (b) 185,000 203,037
US Unwired, Inc.,
10.000% 06/15/12 500,000 555,000
Western Wireless Corp.,
9.250% 07/15/13 500,000 540,000
-----------
5,305,837
-----------
See Accompanying Notes to Financial Statements.
5
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2004
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
COMMUNICATIONS (CONTINUED)
TELECOMMUNICATIONS (CONTINUED)
SATELLITE TELECOMMUNICATIONS - 1.0%
Inmarsat Finance II PLC,
(a) 11/15/12
(10.375% 11/15/08) (b) 140,000 96,950
New Skies Satellites NV,
9.125% 11/01/12 (b) 210,000 214,200
PanAmSat Corp.:
(a) 11/01/14
(10.375% 11/01/09) (b) 455,000 273,000
9.000% 08/15/14 (b) 170,000 182,750
-----------
766,900
-----------
TELECOMMUNICATION EQUIPMENT - 0.4%
Lucent Technologies, Inc.,
6.450% 03/15/29 335,000 287,262
-----------
287,262
-----------
TELECOMMUNICATION SERVICES - 2.0%
Axtel SA de CV,
11.000% 12/15/13 430,000 456,875
Carrier1 International SA,
13.250% 02/15/09 (e) 750,000 67,500
FairPoint Communications, Inc.,
11.875% 03/01/10 175,000 199,063
Securus Technologies, Inc.,
11.000% 09/01/11 (b) 375,000 375,000
Time Warner Telecom, Inc.:
9.750% 07/15/08 320,000 319,200
10.125% 02/01/11 230,000 220,800
-----------
1,638,438
-----------
TELEPHONE-INTEGRATED - 4.1%
Cincinnati Bell, Inc.,
8.375% 01/15/14 475,000 477,375
Qwest Capital Funding, Inc.:
7.250% 02/15/11 1,075,000 1,021,250
7.750% 02/15/31 385,000 329,175
Qwest Services Corp.,
13.500% 12/15/10 (b) 1,125,000 1,338,750
US LEC Corp.,
10.670% 10/01/09 (b)(d) 190,000 189,590
-----------
3,356,140
-----------
WIRELESS EQUIPMENT - 0.8%
American Towers, Inc.,
7.250% 12/01/11 230,000 243,225
SBA Communications, Inc.,
(a) 12/15/11
(9.750% 12/15/07) 140,000 117,950
PAR ($) VALUE ($)
-----------------------------------------------------------
SpectraSite, Inc.,
8.250% 05/15/10 280,000 303,100
-----------
664,275
-----------
Telecommunications Total 12,018,852
-----------
COMMUNICATIONS TOTAL 22,531,328
-----------
-----------------------------------------------------------
CONSUMER, CYCLICAL - 26.7%
AIRLINES - 1.6%
AIRLINES - 1.6%
Continental Airlines, Inc.,
7.568% 12/01/06 450,000 346,500
Delta Air Lines, Inc.,
7.900% 12/15/09 205,000 114,800
Northwest Airlines, Inc.,
9.875% 03/15/07 625,000 543,750
United Air Lines, Inc.,
2.020% 03/02/04 (d)(i) 321,569 257,255
-----------
1,262,305
-----------
Airlines Total 1,262,305
-----------
APPAREL - 1.5%
APPAREL MANUFACTURERS - 1.5%
Broder Brothers Co.:
11.250% 10/15/10 225,000 234,000
11.250% 10/15/10 (b) 135,000 140,400
Levi Strauss & Co.,
12.250% 12/15/12 495,000 522,225
Phillips-Van Heusen Corp.,
7.250% 02/15/11 300,000 316,500
-----------
1,213,125
-----------
Apparel Total 1,213,125
-----------
AUTO MANUFACTURERS - 0.4%
AUTO-MEDIUM & HEAVY DUTY TRUCKS - 0.4%
Navistar International Corp.,
7.500% 06/15/11 320,000 345,600
-----------
345,600
-----------
Auto Manufacturers Total 345,600
-----------
AUTO PARTS & EQUIPMENT - 2.0%
AUTO/TRUCK PARTS & EQUIPMENT - ORIGINAL - 1.1%
Accuride Corp.,
9.250% 02/01/08 155,000 157,713
Affinia Group, Inc.,
9.000% 11/30/14 (b) 45,000 46,350
Delco Remy International, Inc.,
11.000% 05/01/09 315,000 332,325
Dura Operating Corp.,
8.625% 04/15/12 345,000 351,900
-----------
888,288
-----------
AUTO/TRUCK PARTS & EQUIPMENT - REPLACEMENT - 0.3%
Rexnord Corp.,
10.125% 12/15/12 195,000 220,350
-----------
220,350
-----------
See Accompanying Notes to Financial Statements.
6
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2004
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
CONSUMER, CYCLICAL (CONTINUED)
AUTO PARTS & EQUIPMENT (CONTINUED)
RUBBER-TIRES - 0.6%
Goodyear Tire & Rubber Co.,
7.857% 08/15/11 505,000 501,213
-----------
501,213
-----------
Auto Parts & Equipment Total 1,609,851
-----------
ENTERTAINMENT - 3.5%
GAMBLING (NON-HOTEL) - 0.5%
Global Cash Access LLC,
8.750% 03/15/12 390,000 421,200
-----------
421,200
-----------
MUSIC - 0.9%
Steinway Musical Instruments, Inc.,
8.750% 04/15/11 265,000 287,525
Warner Music Group,
7.375% 04/15/14 (b) 380,000 388,550
-----------
676,075
-----------
RESORTS/THEME PARKS - 0.7%
Six Flags, Inc.:
8.875% 02/01/10 415,000 417,075
9.625% 06/01/14 180,000 177,750
-----------
594,825
-----------
THEATERS - 1.4%
LCE Acquisition Corp.,
9.000% 08/01/14 (b) 485,000 521,375
Marquee Holdings, Inc.,
(a) 08/15/14
(12.000% 08/15/09) (b) 980,000 632,100
-----------
1,153,475
-----------
Entertainment Total 2,845,575
-----------
HOME BUILDERS - 2.5%
BUILDING-RESIDENTIAL/COMMERCIAL - 2.5%
D.R. Horton, Inc.,
9.750% 09/15/10 955,000 1,143,613
K. Hovnanian Enterprises, Inc.:
8.875% 04/01/12 170,000 187,000
10.500% 10/01/07 340,000 391,850
Standard Pacific Corp.,
9.250% 04/15/12 275,000 321,063
-----------
2,043,526
-----------
Home Builders Total 2,043,526
-----------
HOME FURNISHINGS - 0.8%
HOME FURNISHINGS - 0.8%
Norcraft Companies,
9.000% 11/01/11 140,000 151,900
WII Components, Inc.,
10.000% 02/15/12 495,000 485,100
-----------
637,000
-----------
Home Furnishings Total 637,000
-----------
PAR ($) VALUE ($)
-----------------------------------------------------------
LEISURE TIME - 2.2%
CRUISE LINES - 0.2%
NCL, Inc.,
10.625% 07/15/14 (b) 140,000 144,200
-----------
144,200
-----------
LEISURE & RECREATIONAL PRODUCTS - 0.8%
Bombardier Recreational Products, Inc.,
8.375% 12/15/13 385,000 415,800
K2, Inc.,
7.375% 07/01/14 (b) 195,000 214,013
-----------
629,813
-----------
RECREATIONAL CENTERS - 1.2%
AMF Bowling Worldwide, Inc.,
10.000% 03/01/10 300,000 321,000
Equinox Holdings, Inc.,
9.000% 12/15/09 405,000 427,275
Town Sports International, Inc.,
(a) 02/01/14
(11.000% 02/01/09) 435,000 242,512
-----------
990,787
-----------
Leisure Time Total 1,764,800
-----------
LODGING - 8.3%
CASINO HOTELS - 8.3%
Ameristar Casinos, Inc.,
10.750% 02/15/09 400,000 449,500
Circus & Eldorado/Silver Legacy
Capital Corp.,
10.125% 03/01/12 225,000 246,375
Hard Rock Hotel, Inc.,
8.875% 06/01/13 400,000 440,000
Hollywood Casino Shreveport,
13.000% 08/01/06 (h) 950,000 836,000
Inn of the Mountain Gods
Resort & Casino,
12.000% 11/15/10 340,000 396,100
MGM Mirage, Inc.,
8.375% 02/01/11 415,000 468,950
Mohegan Tribal Gaming Authority,
7.125% 08/15/14 (b) 70,000 74,725
Park Place Entertainment Corp.,
9.375% 02/15/07 435,000 481,763
Pinnacle Entertainment, Inc.:
8.250% 03/15/12 (f) 270,000 280,800
8.750% 10/01/13 945,000 1,015,875
Premier Entertainment Biloxi LLC,
10.750% 02/01/12 200,000 216,000
River Rock Entertainment,
9.750% 11/01/11 435,000 481,763
Seneca Gaming Corp.,
7.250% 05/01/12 345,000 364,837
See Accompanying Notes to Financial Statements.
7
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2004
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
CONSUMER, CYCLICAL (CONTINUED)
LODGING (CONTINUED)
CASINO HOTELS (CONTINUED)
Station Casinos, Inc.,
6.875% 03/01/16 95,000 99,750
Trump Casino Holdings LLC, PIK,
17.625% 09/15/10 (i) 376,002 391,042
Wynn Las Vegas LLC:
6.625% 12/01/14 (b)(f) 270,000 265,950
12.000% 11/01/10 201,000 253,260
-----------
6,762,690
-----------
Lodging Total 6,762,690
-----------
RETAIL - 3.3%
RETAIL-AUTOMOBILES - 0.4%
Asbury Automotive Group, Inc.,
8.000% 03/15/14 320,000 316,800
-----------
316,800
-----------
RETAIL-DRUG STORES - 0.9%
Jean Coutu Group, Inc., (PJC),
8.500% 08/01/14 (b) 240,000 243,600
Rite Aid Corp.,
9.250% 06/01/13 470,000 485,275
-----------
728,875
-----------
RETAIL-HOME FURNISHINGS - 0.7%
Levitz Home Furnishings, Inc.,
12.000% 11/01/11 (b) 235,000 239,700
Tempur-Pedic, Inc.,
10.250% 08/15/10 322,000 368,690
-----------
608,390
-----------
RETAIL-JEWELRY - 0.4%
Finlay Fine Jewelry Corp.,
8.375% 06/01/12 280,000 305,200
-----------
305,200
-----------
RETAIL-MAJOR DEPARTMENT STORES - 0.1%
Saks, Inc.,
7.000% 12/01/13 83,000 84,452
-----------
84,452
-----------
RETAIL-PROPANE DISTRIBUTORS - 0.4%
Ferrellgas Partners LP,
8.750% 06/15/12 295,000 321,550
-----------
321,550
-----------
RETAIL-RESTAURANTS - 0.4%
Denny's Holdings, Inc.,
10.000% 10/01/12 (b) 280,000 294,700
-----------
294,700
-----------
Retail Total 2,659,967
-----------
PAR ($) VALUE ($)
-----------------------------------------------------------
TEXTILES - 0.6%
TEXTILE-PRODUCTS - 0.6%
Collins & Aikman Floorcovering, Inc.,
9.750% 02/15/10 265,000 284,875
INVISTA,
9.250% 05/01/12 (b) 210,000 233,100
-----------
517,975
-----------
Textiles Total 517,975
-----------
CONSUMER, CYCLICAL TOTAL 21,662,414
-----------
-----------------------------------------------------------
CONSUMER, NON-CYCLICAL - 16.3%
AGRICULTURE - 0.8%
AGRICULTURAL OPERATIONS - 0.6%
Seminis Vegetable Seeds, Inc.,
10.250% 10/01/13 438,000 492,750
-----------
492,750
-----------
TOBACCO - 0.2%
North Atlantic Trading Co., Inc.,
9.250% 03/01/12 225,000 180,000
-----------
180,000
-----------
Agriculture Total 672,750
-----------
BEVERAGES - 0.4%
BEVERAGES-WINE/SPIRITS - 0.4%
Constellation Brands, Inc.,
8.125% 01/15/12 270,000 293,625
-----------
293,625
-----------
Beverages Total 293,625
-----------
BIOTECHNOLOGY - 0.5%
MEDICAL-BIOMEDICAL/GENE - 0.5%
Bio-Rad Laboratories, Inc.,
7.500% 08/15/13 340,000 371,450
-----------
371,450
-----------
Biotechnology Total 371,450
-----------
COMMERCIAL SERVICES - 4.4%
COMMERCIAL SERVICES - 0.8%
Iron Mountain, Inc.,
7.750% 01/15/15 90,000 91,575
Language Line Holdings, Inc.,
11.125% 06/15/12 (b) 480,000 516,000
-----------
607,575
-----------
COMMERCIAL SERVICES-FINANCE - 0.9%
Dollar Financial Group, Inc.,
9.750% 11/15/11 645,000 696,600
-----------
696,600
-----------
FUNERAL SERVICES & RELATED ITEMS - 0.6%
Service Corp. International,
7.700% 04/15/09 450,000 491,625
-----------
491,625
-----------
See Accompanying Notes to Financial Statements.
8
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2004
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
CONSUMER, NON-CYCLICAL (CONTINUED)
COMMERCIAL SERVICES (CONTINUED)
PRINTING-COMMERCIAL - 0.9%
American Color Graphics, Inc.,
10.000% 06/15/10 180,000 154,800
Sheridan Group,
10.250% 08/15/11 (b) 250,000 273,125
Vertis, Inc.,
13.500% 12/07/09 (b) 315,000 333,900
-----------
761,825
-----------
PRIVATE CORRECTIONS - 0.2%
GEO Group, Inc.,
8.250% 07/15/13 180,000 191,700
-----------
191,700
-----------
RENTAL AUTO/EQUIPMENT - 1.0%
NationsRent, Inc.,
9.500% 10/15/10 525,000 590,625
Williams Scotsman, Inc.,
9.875% 06/01/07 230,000 228,275
-----------
818,900
-----------
Commercial Services Total 3,568,225
-----------
COSMETICS/PERSONAL CARE - 0.3%
COSMETICS & TOILETRIES - 0.3%
Elizabeth Arden, Inc.,
7.750% 01/15/14 245,000 259,700
-----------
259,700
-----------
Cosmetics/Personal Care Total 259,700
-----------
FOOD - 3.3%
FOOD-CONFECTIONERY - 0.7%
Merisant Co.,
9.500% 07/15/13 (b) 245,000 220,500
Tabletop Holdings, Inc.,
(a) 05/15/14
(12.250% 11/15/08) (b) 755,000 343,525
-----------
564,025
-----------
FOOD-MISCELLANEOUS/DIVERSIFIED - 2.0%
Del Monte Corp.,
9.250% 05/15/11 500,000 547,500
Dole Food Co., Inc.,
8.625% 05/01/09 415,000 457,538
Pinnacle Foods Holding Corp.,
8.250% 12/01/13 (b)(f) 545,000 493,225
Reddy Ice Holdings, Inc.,
(a) 11/01/12
(10.500% 11/01/08) (b) 250,000 173,750
-----------
1,672,013
-----------
PAR ($) VALUE ($)
-----------------------------------------------------------
FOOD-RETAIL - 0.6%
Stater Brothers Holdings,
8.125% 06/15/12 450,000 479,250
-----------
479,250
-----------
Food Total 2,715,288
-----------
HEALTHCARE-SERVICES - 4.8%
MEDICAL-HMO - 0.5%
Coventry Health Care, Inc.,
8.125% 02/15/12 340,000 374,000
-----------
374,000
-----------
MEDICAL-HOSPITALS - 1.8%
Tenet Healthcare Corp.,
9.875% 07/01/14 (b) 960,000 1,029,600
United Surgical Partners
International, Inc.,
10.000% 12/15/11 400,000 457,000
-----------
1,486,600
-----------
MRI/MEDICAL DIAGNOSTIC IMAGING - 2.0%
InSight Health Services Corp.,
9.875% 11/01/11 520,000 527,800
MedQuest, Inc.,
11.875% 08/15/12 450,000 526,500
MQ Associates, Inc.,
(a) 08/15/12
(12.250% 08/15/08) 805,000 563,500
-----------
1,617,800
-----------
PHYSICAL PRACTICE MANAGEMENT - 0.5%
US Oncology, Inc.,
9.000% 08/15/12 (b) 390,000 434,850
-----------
434,850
-----------
Healthcare-Services Total 3,913,250
-----------
HOUSEHOLD PRODUCTS/WARES - 1.8%
CONSUMER PRODUCTS-MISCELLANEOUS - 1.8%
AAC Group Holdings Corp.,
(a) 10/01/12
(10.250% 10/01/08) (b) 95,000 64,125
Amscan Holdings, Inc.,
8.750% 05/01/14 435,000 437,175
Jostens IH Corp.,
7.625% 10/01/12 (b) 280,000 294,000
Playtex Products, Inc.,
9.375% 06/01/11 600,000 636,750
-----------
1,432,050
-----------
Household Products/Wares Total 1,432,050
-----------
CONSUMER, NON-CYCLICAL TOTAL 13,226,338
-----------
-----------------------------------------------------------
See Accompanying Notes to Financial Statements.
9
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2004
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
ENERGY - 7.9%
OIL & GAS - 3.5%
OIL & GAS DRILLING - 0.7%
Oceans Rig Norway AS,
10.250% 06/01/08 325,000 334,750
Pride International, Inc.,
7.375% 07/15/14 (b) 170,000 188,700
-----------
523,450
-----------
OIL COMPANIES-EXPLORATION & PRODUCTION - 2.5%
Chesapeake Energy Corp.,
7.500% 06/15/14 160,000 177,000
Compton Petroleum Corp.,
9.900% 05/15/09 475,000 522,500
Encore Acquisition Co.,
8.375% 06/15/12 325,000 362,375
Energy Partners Ltd.,
8.750% 08/01/10 205,000 225,500
Magnum Hunter Resources, Inc.,
9.600% 03/15/12 283,000 322,620
Whiting Petroleum Corp.,
7.250% 05/01/12 425,000 446,250
-----------
2,056,245
-----------
OIL REFINING & MARKETING - 0.3%
Premcor Refining Group, Inc.,
7.500% 06/15/15 235,000 257,325
-----------
257,325
-----------
Oil & Gas Total 2,837,020
-----------
OIL & GAS SERVICES - 0.4%
OIL-FIELD SERVICES - 0.4%
Hornbeck Offshore Services, Inc.,
6.125% 12/01/14 (b) 90,000 90,000
Newpark Resources, Inc.,
8.625% 12/15/07 270,000 272,700
-----------
362,700
-----------
Oil & Gas Services Total 362,700
-----------
PIPELINES - 4.0%
PIPELINES - 4.0%
Coastal Corp.,
7.750% 06/15/10 695,000 714,981
Dynegy Holdings, Inc.:
6.875% 04/01/11 300,000 288,000
9.875% 07/15/10 (b) 360,000 406,800
Northwest Pipeline Corp.,
8.125% 03/01/10 130,000 144,950
Sonat, Inc.:
6.875% 06/01/05 215,000 217,687
7.625% 07/15/11 795,000 806,925
Southern Natural Gas Co.,
8.875% 03/15/10 250,000 280,625
PAR ($) VALUE ($)
-----------------------------------------------------------
Williams Companies, Inc.,
8.125% 03/15/12 310,000 361,150
-----------
3,221,118
-----------
Pipelines Total 3,221,118
-----------
ENERGY TOTAL 6,420,838
-----------
-----------------------------------------------------------
FINANCIALS - 2.3%
DIVERSIFIED FINANCIAL SERVICES - 1.6%
FINANCE-COMMERCIAL - 0.3%
FINOVA Group, Inc.,
7.500% 11/15/09 (j) 427,050 203,916
-----------
203,916
-----------
FINANCE INVESTMENT BANKER/BROKER - 1.3%
E*Trade Financial Corp.,
8.000% 06/15/11 (b) 275,000 290,813
LaBranche & Co., Inc.,
11.000% 05/15/12 725,000 772,125
-----------
1,062,938
-----------
Diversified Financial Services Total 1,266,854
-----------
REITS - 0.4%
REITS-HOTELS - 0.1%
La Quinta Properties, Inc.,
7.000% 08/15/12 (b) 100,000 107,500
-----------
107,500
-----------
REITS-MORTGAGES - 0.3%
Thornburg Mortgage, Inc.,
8.000% 05/15/13 250,000 268,125
-----------
268,125
-----------
REITS Total 375,625
-----------
SAVINGS & LOANS - 0.3%
SAVINGS & LOANS/THRIFT-WESTERN US - 0.3%
Western Financial Bank,
9.625% 05/15/12 210,000 239,400
-----------
239,400
-----------
Savings & Loans Total 239,400
-----------
FINANCIALS TOTAL 1,881,879
-----------
-----------------------------------------------------------
INDUSTRIALS - 21.5%
AEROSPACE/DEFENSE - 1.8%
AEROSPACE/DEFENSE-EQUIPMENT - 1.8%
Argo-Tech Corp.,
9.250% 06/01/11 240,000 262,200
BE Aerospace, Inc.,
8.875% 05/01/11 375,000 391,875
Sequa Corp.,
8.875% 04/01/08 255,000 279,225
Standard Aero Holdings, Inc.,
8.250% 09/01/14 (b) 265,000 284,875
See Accompanying Notes to Financial Statements.
10
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2004
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
INDUSTRIALS (CONTINUED)
AEROSPACE/DEFENSE (CONTINUED)
AEROSPACE/DEFENSE-EQUIPMENT (CONTINUED)
TransDigm, Inc.,
8.375% 07/15/11 250,000 269,375
-----------
1,487,550
-----------
Aerospace/Defense Total 1,487,550
-----------
BUILDING MATERIALS - 2.0%
BUILDING & CONSTRUCTION PRODUCTS-MISCELLANEOUS - 0.6%
Associated Materials, Inc.,
(a) 03/01/14
(11.250% 03/01/09) 205,000 152,725
Congoleum Corp.,
8.625% 08/01/08 (g) 225,000 175,500
Nortek Holdings, Inc.,
8.500% 09/01/14 (b) 140,000 150,500
-----------
478,725
-----------
BUILDING PRODUCTS-CEMENT/AGGREGATION - 0.8%
RMCC Acquisition Co.,
9.500% 11/01/12 (b) 370,000 370,925
U.S. Concrete, Inc.,
8.375% 04/01/14 310,000 330,925
-----------
701,850
-----------
BUILDING PRODUCTS-DOORS & WINDOWS - 0.6%
Atrium Companies, Inc.,
10.500% 05/01/09 445,000 467,250
-----------
467,250
-----------
Building Materials Total 1,647,825
-----------
ELECTRONIC COMPONENTS & EQUIPMENT - 0.6%
WIRE & CABLE PRODUCTS - 0.6%
Coleman Cable, Inc.,
9.875% 10/01/12 (b) 430,000 452,575
-----------
452,575
-----------
Electronic Components & Equipment Total 452,575
-----------
ELECTRONICS - 0.2%
ELECTRONIC COMPONENTS-MISCELLANEOUS - 0.2%
Flextronics International Ltd.,
6.250% 11/15/14 (b) 135,000 132,975
-----------
132,975
-----------
Electronics Total 132,975
-----------
ENGINEERING & CONSTRUCTION - 0.6%
BUILDING & CONSTRUCTION-MISCELLANEOUS - 0.6%
J. Ray McDermott SA,
11.000% 12/15/13 (b) 445,000 486,163
-----------
486,163
-----------
Engineering & Construction Total 486,163
-----------
PAR ($) VALUE ($)
-----------------------------------------------------------
ENVIRONMENTAL CONTROL - 1.8%
NON-HAZARDOUS WASTE DISPOSAL - 1.6%
Allied Wasten North America, Inc.:
7.875% 04/15/13 495,000 499,950
8.500% 12/01/08 255,000 268,069
Waste Services, Inc.,
9.500% 04/15/14 (b) 560,000 554,400
-----------
1,322,419
-----------
RECYCLING - 0.2%
IMCO Recycling Escrow,
9.000% 11/15/14 (b) 120,000 124,200
-----------
124,200
-----------
Environmental Control Total 1,446,619
-----------
HAND/MACHINE TOOLS - 0.2%
MACHINE TOOLS & RELATED PRODUCTS - 0.2%
Newcor, Inc.,
6.000% 01/31/13 (k) 215,562 137,960
-----------
137,960
-----------
Hand/Machine Tools Total 137,960
-----------
MACHINERY-CONSTRUCTION & MINING - 0.4%
MACHINERY-CONSTRUCTION & MINING - 0.4%
Terex Corp.,
10.375% 04/01/11 320,000 360,800
-----------
360,800
-----------
Machinery-Construction & Mining Total 360,800
METAL FABRICATE/HARDWARE - 2.8%
METAL PROCESSORS & FABRICATION - 2.0%
Altra Industrial Motion, Inc.,
9.000% 12/01/11 (b) 180,000 182,700
Hawk Corp.,
8.750% 11/01/14 (b) 70,000 72,275
Mueller Group, Inc.,
10.000% 05/01/12 225,000 244,125
Mueller Holdings, Inc.,
(a) 04/15/14
(14.750% 04/15/09) 375,000 253,125
TriMas Corp.,
9.875% 06/15/12 865,000 903,925
-----------
1,656,150
-----------
METAL PRODUCTS-FASTENERS - 0.8%
FastenTech, Inc.,
11.500% 05/01/11 (b) 540,000 615,600
-----------
615,600
-----------
Metal Fabricate/Hardware Total 2,271,750
-----------
See Accompanying Notes to Financial Statements.
11
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2004
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
INDUSTRIALS (CONTINUED)
MISCELLANEOUS MANUFACTURERS - 2.2%
ADVANCED MATERIALS/PRODUCTS - 0.4%
Hexcel Corp.,
9.750% 01/15/09 370,000 387,575
-----------
387,575
-----------
DIVERSIFIED MANUFACTURING OPERATORS - 1.4%
J.B. Poindexter & Co.,
8.750% 03/15/14 (b) 335,000 355,100
KI Holdings, Inc.,
(a) 11/15/14
(9.875% 11/15/09) (b) 405,000 257,175
Koppers Industries, Inc.,
9.875% 10/15/13 310,000 351,850
Trinity Industries, Inc.,
6.500% 03/15/14 165,000 163,556
-----------
1,127,681
-----------
FILTRATION/SEPARATION PRODUCTS - 0.4%
Polypore, Inc.,
(a) 10/01/12
(10.500% 10/01/08) (b) 485,000 311,612
-----------
311,612
-----------
Miscellaneous Manufacturers Total 1,826,868
-----------
PACKAGING & CONTAINERS - 4.2%
CONTAINERS-METAL/GLASS - 1.9%
Crown European Holdings SA,
10.875% 03/01/13 480,000 565,200
Owens-Brockway Glass Container,
8.250% 05/15/13 600,000 655,500
Owens-Illinois, Inc.:
7.350% 05/15/08 200,000 208,500
7.500% 05/15/10 75,000 79,031
-----------
1,508,231
-----------
CONTAINERS-PAPER/PLASTIC - 2.3%
Consolidated Container Co. LLC,
(a) 06/15/09
(10.750% 06/15/07) 280,000 235,200
MDP Acquisitions PLC,
9.625% 10/01/12 525,000 593,250
Portola Packaging, Inc.,
8.250% 02/01/12 295,000 230,100
Smurfit-Stone Container Corp.,
8.250% 10/01/12 450,000 492,750
Tekni-Plex, Inc.,
12.750% 06/15/10 365,000 323,025
-----------
1,874,325
-----------
Packaging & Containers Total 3,382,556
-----------
PAR ($) VALUE ($)
-----------------------------------------------------------
TRANSPORTATION - 4.7%
TRANSPORTATION-MARINE - 2.3%
Ship Finance International Ltd.,
8.500% 12/15/13 695,000 714,112
Stena AB:
7.000% 12/01/16 (b) 135,000 132,637
7.500% 11/01/13 455,000 470,925
9.625% 12/01/12 355,000 399,375
Teekay Shipping Corp.,
8.875% 07/15/11 105,000 121,800
-----------
1,838,849
-----------
TRANSPORTATION-RAILROAD - 0.5%
TFM SA de CV,
12.500% 06/15/12 380,000 431,300
-----------
431,300
-----------
TRANSPORTATION-SERVICES - 1.1%
CHC Helicopter Corp.,
7.375% 05/01/14 275,000 290,813
Petroleum Helicopters, Inc.,
9.375% 05/01/09 530,000 572,400
-----------
863,213
-----------
TRANSPORTATION-TRUCKS - 0.8%
Allied Holdings, Inc.,
8.625% 10/01/07 365,000 310,250
QDI Capital Corp.,
9.000% 11/15/10 (b) 370,000 369,075
-----------
679,325
-----------
Transportation Total 3,812,687
-----------
INDUSTRIALS TOTAL 17,446,328
-----------
-----------------------------------------------------------
TECHNOLOGY - 0.6%
SEMICONDUCTORS - 0.6%
ELECTRONIC COMPONENTS-SEMICONDUCTORS - 0.6%
Amkor Technology, Inc.,
9.250% 02/15/08 515,000 505,988
-----------
505,988
-----------
Semiconductors Total 505,988
-----------
TECHNOLOGY TOTAL 505,988
-----------
-----------------------------------------------------------
UTILITIES - 7.0%
ELECTRIC - 7.0%
ELECTRIC-GENERATION - 1.7%
AES Corp.:
9.000% 05/15/15 (b) 110,000 126,500
9.500% 06/01/09 455,000 522,113
Edison Mission Energy,
9.875% 04/15/11 480,000 568,800
Mission Energy Holding,
13.500% 07/15/08 140,000 176,050
-----------
1,393,463
-----------
See Accompanying Notes to Financial Statements.
12
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2004
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------------
UTILITIES (CONTINUED)
ELECTRIC (CONTINUED)
ELECTRIC-INTEGRATED - 1.9%
CMS Energy Corp.,
8.900% 07/15/08 420,000 466,200
Nevada Power Co.:
9.000% 08/15/13 185,000 216,450
10.875% 10/15/09 340,000 397,800
PSE&G Energy Holdings, Inc.,
8.625% 02/15/08 395,000 436,969
-----------
1,517,419
-----------
INDEPENDENT POWER PRODUCERS - 3.4%
Caithness Coso Funding Corp.,
9.050% 12/15/09 477,382 529,894
Calpine Corp.,
8.500% 07/15/10 (b) 465,000 365,025
Calpine Generating Co. LLC:
11.169% 04/01/11 (b)(d) 555,000 525,863
11.500% 04/01/11 (b) 320,000 294,400
MSW Energy Holdings LLC:
7.375% 09/01/10 170,000 179,350
8.500% 09/01/10 375,000 412,500
Orion Power Holdings, Inc.,
12.000% 05/01/10 365,000 463,550
-----------
2,770,582
-----------
Electric Total 5,681,464
-----------
UTILITIES TOTAL 5,681,464
-----------
TOTAL CORPORATE FIXED-INCOME BONDS & NOTES
(cost of $96,759,707) 99,494,739
-----------
MUNICIPAL BOND (TAXABLE) - 0.7%
-----------------------------------------------------------
Cabazon Band Mission
Indians California,
13.000% 10/01/11 (q) 575,000 570,417
-----------
TOTAL MUNICIPAL BOND (TAXABLE)
(cost of $575,000) 570,417
-----------
PREFERRED STOCKS - 3.9% SHARES
-----------------------------------------------------------
COMMUNICATIONS - 2.6%
MEDIA - 2.6%
MULTIMEDIA - 0.2%
Haights Cross Communications, 2,734 144,902
-----------
144,902
-----------
PUBLISHING-PERIODICALS - 0.5%
PriMedia, Inc.:
8.625% 1,715 154,350
9.200% 30 2,640
10.000% 2,300 219,650
-----------
376,640
-----------
SHARES VALUE ($)
-----------------------------------------------------------
RADIO - 1.5%
Spanish Broadcasting System, Inc., PIK,
10.750% 1,090 1,204,450
-----------
1,204,450
-----------
TELEVISION - 0.4%
Paxson Communications Corp., PIK,
14.250% 11/15/06 48 360,000
-----------
360,000
-----------
Media Total 2,085,992
-----------
COMMUNICATIONS TOTAL 2,085,992
-----------
------------------------------------------------------------
FINANCIALS - 0.7%
REITS - 0.7%
REITS-DIVERSIFIED - 0.7%
iStar Financial, Inc.:
7.800% 11,007 281,023
7.875% 13,000 329,062
-----------
610,085
-----------
REITS Total 610,085
-----------
FINANCIALS TOTAL 610,085
-----------
------------------------------------------------------------
UTILITIES - 0.6%
ELECTRIC - 0.6%
ELECTRIC-INTEGRATED - 0.6%
TNP Enterprises, Inc.,
10.250% 04/01/10 429 495,495
-----------
495,495
-----------
Electric Total 495,495
-----------
UTILITIES TOTAL 495,495
-----------
TOTAL PREFERRED STOCKS
(cost of $3,374,681) 3,191,572
-----------
COMMON STOCKS - 2.4% (l)
-----------------------------------------------------------
BASIC MATERIALS - 0.5%
IRON/STEEL - 0.5%
STEEL-PRODUCERS - 0.5%
Bayou Steel Corp.
11,273 394,555
-----------
394,555
-----------
Iron/Steel Total 394,555
-----------
BASIC MATERIALS TOTAL 394,555
-----------
------------------------------------------------------------
COMMUNICATIONS - 1.4%
MEDIA - 0.5%
CABLE TV - 0.5%
NTL, Inc. 5,942 413,444
Ono Finance PLC (k)(m) 750 --
-----------
413,444
-----------
Media Total 413,444
-----------
See Accompanying Notes to Financial Statements.
13
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2004
COMMON STOCKS (CONTINUED) SHARES VALUE ($)
-----------------------------------------------------------
COMMUNICATIONS (CONTINUED)
TELECOMMUNICATIONS - 0.9%
CELLULAR TELECOMMUNICATIONS - 0.6%
AirGate PCS, Inc. 2,841 92,247
Horizon PCS, Inc., Class A 9,257 202,728
Nextel Communications, Inc., Class A 6,196 176,338
-----------
471,313
-----------
WIRELESS EQUIPMENT - 0.3%
SBA Communications Corp. 23,590 226,464
-----------
226,464
-----------
Telecommunications Total 697,777
-----------
COMMUNICATIONS TOTAL 1,111,221
-----------
-----------------------------------------------------------
CONSUMER, CYCLICAL - 0.1%
ENTERTAINMENT - 0.1%
CASINO SERVICES - 0.1%
Alliance Gaming Corp. 5,500 66,495
-----------
66,495
-----------
Entertainment Total 66,495
-----------
CONSUMER, CYCLICAL TOTAL 66,495
-----------
-----------------------------------------------------------
ENERGY - 0.2%
PIPELINES - 0.2%
PIPELINES - 0.2%
Dynegy Holdings, Inc., Class A 23,000 129,950
Hornbeck Offshore Services, Inc. 2,800 56,560
-----------
186,510
-----------
Pipelines Total 186,510
-----------
ENERGY TOTAL 186,510
-----------
-----------------------------------------------------------
INDUSTRIALS - 0.2%
ENVIRONMENTAL CONTROL - 0.2%
NON-HAZARDOUS WASTE DISPOSAL - 0.2%
Allied Waste North America, Inc. 7,250 65,902
Fairlane Management Corp. (k)(m) 8,000 --
Waste Services, Inc. 33,000 121,744
-----------
187,646
-----------
Environmental Control Total 187,646
-----------
INDUSTRIALS TOTAL 187,646
-----------
TOTAL COMMON STOCKS
(cost of $1,768,264) 1,946,427
-----------
CONVERTIBLE BONDS - 1.0% PAR ($)
-----------------------------------------------------------
COMMUNICATIONS - 0.8%
TELECOMMUNICATIONS - 0.8%
TELECOMMUNICATION EQUIPMENT - 0.8%
Nortel Networks Corp.,
4.250% 09/01/08 645,000 618,484
-----------
618,484
-----------
Telecommunications Total 618,484
-----------
COMMUNICATIONS TOTAL 618,484
-----------
PAR ($) VALUE ($)
-----------------------------------------------------------
UTILITIES - 0.2%
ELECTRIC - 0.2%
INDEPENDENT POWER PRODUCERS - 0.2%
Mirant Corp.,
2.500% 06/15/21 (e) 280,000 198,926
-----------
198,926
-----------
Electric Total 198,926
-----------
UTILITIES TOTAL 198,926
-----------
TOTAL CONVERTIBLE BONDS
(cost of $775,437) 817,410
-----------
WARRANTS - 0.1% (L) UNITS
-----------------------------------------------------------
COMMUNICATIONS - 0.1%
MEDIA - 0.1%
BROADCAST SERVICES/PROGRAMS - 0.1%
XM Satellite Radio Holdings, Inc.,
Expires 03/15/10 (b) 600 48,000
-----------
48,000
-----------
-----------------------------------------------------------
CABLE TV - 0.0%
Cable Satisfaction International, Inc.,
Expires 03/01/05 (b)(k)(m) 970 --
Ono Finance PLC,
Expires 03/16/11 (b)(k)(m) 175 --
-----------
--
-----------
MULTIMEDIA - 0.0%
Haights Cross Communications:
Expires 12/10/11 (n) 2 --
Expires 12/10/12 2,707 54
-----------
54
-----------
Media Total 48,054
-----------
TELECOMMUNICATIONS - 0.0%
CELLULAR TELECOMMUNICATIONS - 0.0%
Horizon PCS, Inc.,
Expires 10/01/10 (b)(k)(m) 665 --
UbiquiTel, Inc.,
Expires 04/15/10 (b)(k)(m) 525 --
-----------
--
-----------
TELECOMMUNICATION SERVICES - 0.0%
AT&T Canada, Inc.,
Expires 08/15/07 (b)(k)(m) 250 --
Carrier1 International SA,
Expires 02/19/09 (b)(e)(k)(m) 347 --
Jazztel PLC,
Expires 07/15/10 (b)(k)(m) 350 --
-----------
--
-----------
Telecommunications Total --
-----------
COMMUNICATIONS TOTAL 48,054
-----------
See Accompanying Notes to Financial Statements.
14
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2004
WARRANTS (CONTINUED) UNITS VALUE ($)
-----------------------------------------------------------
INDUSTRIALS - 0.0%
METAL FABRICATED/HARDWARE - 0.0%
METAL PROCESSORS & FABRICATED - 0.0%
Mueller Holdings, Inc.,
Expires 04/15/14 (b) 375 26,250
-----------
26,250
-----------
Metal Fabricated/Hardware Total 26,250
-----------
TRANSPORTATION - 0.0%
TRANSPORTATION-TRUCKS - 0.0%
QDI LLC,
Expires 01/15/07 (b)(k) 2,041 6,348
-----------
6,348
-----------
Transportation Total 6,348
-----------
INDUSTRIALS TOTAL 32,598
-----------
TOTAL WARRANTS
(cost of $105,737) 80,652
-----------
SHORT-TERM OBLIGATION - 4.2% PAR ($)
-----------------------------------------------------------
Federal Home Loan Discount Note,
1.930% 12/01/04 (o)
(cost of $3,384,000) 3,384,000 3,384,000
-----------
TOTAL INVESTMENTS - 134.8%
(cost of $106,742,826)(p) 109,485,217
OTHER ASSETS & LIABILITIES, NET - (34.8)% (28,256,231)
-----------
NET ASSETS - 100.0% 81,228,986
===========
NOTES TO INVESTMENT PORTFOLIO:
--------------------------------------------------------------------------------
(a) Step bond. This security is currently not paying coupon. Shown
parenthetically is the interest rate to be paid and the date the Fund will
begin accruing at this rate.
(b) Security exempt from registration pursuant to Rule 144A under
the Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At
November 30, 2004, these securities amounted to $23,520,205, which
represents 29.0% of net assets.
(c) Zero coupon bond.
(d) Floating rate note. The interest rate shown reflects the rate as of November
30, 2004.
(e) The issuer has filed for bankruptcy protection under Chapter 11, and is in
default of certain debt covenants. Income is not being accrued. As of
November 30, 2004, the value of these securities amounted to $978,038, which
represents 1.2% of net assets.
(f) Security, or a portion thereof, purchased on a delayed delivery basis.
(g) The issuer has filed for bankruptcy protection under Chapter 11, and is in
default of certain debt covenants, however, under the issuer's plan of
reorganization, the issuer has guaranteed all interest due and therefore
income is still being accrued. As of November 30, 2004, the value of this
security represents 0.2% of net assets.
(h) The issuer is in default of certain debt covenants. Income is not being
accrued. As of November 30, 2004, the value of this security represents 1.0%
of net assets.
(i) The issuer has filed for bankruptcy protection under Chapter 11, and is in
default of certain debt covenants. Income is being accrued. As of November
30, 2004, the value of these securities amounted to $648,297, which
represents 0.8% of net assets.
(j) Issued as part of a bankruptcy reorganization.
(k) Represents fair value as determined in good faith under procedures approved
by the Board of Trustees.
(l) Non-income producing security.
(m) Security has no value.
(n) Rounds to less than $1.
(o) The rate shown represents the annualized yield at the date of purchase.
(p) Cost for federal income tax purposes is $106,704,740.
(q) Illiquid security.
(r) Step bond. Shown parenthetically is the next interest rate to be paid and
the date the Fund will begin accruing at this rate.
At November 30, 2004, the Fund held investments in the following sectors:
% OF
HOLDINGS BY REVENUE SOURCE (UNAUDITED) NET ASSETS
------------------------------------------------------------
Communications 32.6
Consumer, Cyclical 26.8
Industrials 21.7
Consumer, Non-Cyclical 16.3
Basic Materials 13.0
Energy 8.1
Utilities 7.8
Financials 3.0
Municipal Bond 0.7
Technology 0.6
Short-Term Obligation 4.2
Other Assets &Liabilities, Net (34.8)
-----
100.0
-----
ACRONYM NAME
---------------------------------------------------------
PIK Payment-In-Kind
REIT Real Estate Investment Trust
See Accompanying Notes to Financial Statements.
15
STATEMENT OF ASSETS AND LIABILITIES
November 30, 2004
ASSETS:
Investments, at cost $106,742,826
------------
Investments, at value $109,485,217
Cash 94,056
Receivable for:
Investments sold 671,247
Interest 2,180,516
Dividends 11,755
Deferred Trustees' compensation plan 8,392
------------
Total Assets 112,451,183
------------
LIABILITIES:
Payable for:
Interest 49,723
Investments purchased 313,288
Investments purchased on a delayed
delivery basis 635,651
Distributions 504,084
Investment advisory fee 57,069
Transfer agent fee 11,880
Pricing and bookkeeping fees 17,199
Trustees' fees 660
Audit fee 37,160
Custody fee 1,892
Deferred Trustees' fees 8,392
Notes payable - short-term 15,800,000
Notes payable - long-term 13,700,000
Other liabilities 85,199
------------
Total Liabilities 31,222,197
------------
NET ASSETS $ 81,228,986
============
COMPOSITION OF NET ASSETS:
Paid-in capital $141,303,724
Undistributed net investment income 359,322
Accumulated net realized loss (63,176,451)
Net unrealized appreciation/depreciation
on investments 2,742,391
------------
NET ASSETS $ 81,228,986
============
Shares outstanding 21,003,496
------------
Net asset value per share $ 3.87
============
STATEMENT OF OPERATIONS
For the Year Ended November 30, 2004
INVESTMENT INCOME:
Interest $ 8,941,089
Dividends 280,304
------------
Total Investment Income 9,221,393
------------
EXPENSES:
Investment advisory fee 818,086
Transfer agent fee 62,043
Pricing and bookkeeping fees 90,860
Trustees' fees 10,080
Custody fee 20,512
Other expenses 145,568
------------
Total Operating Expenses 1,147,149
Interest expense 912,550
------------
Total Expenses 2,059,699
Custody earnings credit (2,101)
------------
Net Expenses 2,057,598
------------
Net Investment Income 7,163,795
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain (loss) on:
Investments 2,744,452
Foreign currency transactions (15,529)
------------
Net realized gain 2,728,923
------------
Net change in unrealized
appreciation/depreciation on:
Investments 2,662,220
Foreign currency translations 22,520
------------
Net change in unrealized
appreciation/depreciation 2,684,740
------------
Net Gain 5,413,663
------------
Net Increase in Net Assets from Operations $ 12,577,458
------------
See Accompanying Notes to Financial Statements.
16
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ONE MONTH YEAR
ENDED ENDED ENDED
NOVEMBER 30, NOVEMBER 30, OCTOBER 31,
INCREASE (DECREASE) IN NET ASSETS: 2004 2003 (a) 2003
-------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 7,163,795 $ 480,693 $ 6,115,179
Net realized gain (loss) on investments and foreign currency transactions 2,728,923 275,539 (6,289,825)
Net change in unrealized appreciation/depreciation
on investments and foreign currency transactions 2,684,740 1,139,485 21,909,449
------------ ------------ ------------
Net Increase from Operations 12,577,458 1,895,717 21,734,803
DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (6,362,697) (566,640) (6,335,103)
Return of capital -- -- (439,949)
------------ ------------ ------------
Total Distributions Declared to Shareholders (6,362,697) (566,640) (6,775,052)
------------ ------------ ------------
SHARE TRANSACTIONS:
Distributions reinvested 62,227 -- 528,920
------------ ------------ ------------
Total Increase in Net Assets 6,276,988 1,329,077 15,488,671
NET ASSETS:
Beginning of period 74,951,998 73,622,921 58,134,250
------------ ------------ ------------
End of period $ 81,228,986 $ 74,622,921 $ 73,622,921
------------ ------------ ------------
Undistributed/overdistributed net investment income at end of period $ 359,322 $ (546,000) $ (544,368)
============ ============ ============
CHANGES IN SHARES:
Issued for distributions reinvested 16,818 -- 164,258
============ ============ ============
(a) The Fund changed its fiscal year end from October 31 to November 30.
See Accompanying Notes to Financial Statements.
17
STATEMENT OF CASH FLOWS
For the Year Ended November 30, 2004
INCREASE (DECREASE) IN CASH
--------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net investment income $ 7,163,795
Adjustments to reconcile net investment income
to net cash provided by operating activities:
Purchase of investment securities (82,522,556)
Proceeds from disposition of investment securities 82,934,929
Purchase of short-term investments, net (1,301,901)
Net realized loss due to foreign currency transactions (15,529)
Increase in dividend and interest receivable (131,843)
Decrease in other assets 3,412
Decrease in receivable for investments sold 207,308
Decrease in payable for investments purchased (642,613)
Increase in accrued expenses and other liabilities 109,056
Net amortization/accretion of income (815,922)
------------
Net cash provided by operating activities 4,988,136
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes payable 1,000,000
Decrease in interest payable (208,817)
Distributions paid in cash (6,363,026)
------------
Net cash used by financing activities (5,571,843)
------------
Net decrease in cash (583,707)
CASH:
Beginning of period 677,763
------------
End of period $ 94,056
============
Supplemental disclosure of cash flow information:
Non-cash financing activities not included herein consist of reinvestment of
distributions of $62,227.
See Accompanying Notes to Financial Statements.
18
NOTES TO FINANCIAL STATEMENTS
November 30, 2004
NOTE 1. ORGANIZATION
Colonial Intermediate High Income Fund (the "Fund") is a Massachusetts business
trust registered under the Investment Company Act of 1940, as amended, as a
diversified, closed-end management investment company.
INVESTMENT GOAL
The Fund seeks high current income and total return by investing primarily in
high yield fixed income securities in lower-rated categories.
FUND SHARES
The Fund may issue an unlimited number of shares.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America ("GAAP") requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements.
SECURITY VALUATION
Debt securities generally are valued by pricing services approved by the Fund's
Board of Trustees, based upon market transactions for normal, institutional-size
trading units of similar securities. The services may use various pricing
techniques which take into account appropriate factors such as yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other data, as
well as broker quotes. Debt securities for which quotations are readily
available are valued at an over-the-counter or exchange bid quotation. Certain
debt securities, which tend to be more thinly traded and of lesser quality, are
priced based on fundamental analysis of the financial condition of the issuer
and the estimated value of any collateral. Valuations developed through pricing
techniques may vary from the actual amounts realized upon sale of the
securities, and the potential variation may be greater for those securities
valued using fundamental analysis.
Equity securities are valued at the last sale price on the principal exchange on
which they trade, except for securities traded on the NASDAQ, which are valued
at the NASDAQ official close price. Unlisted securities or listed securities for
which there were no sales during the day are valued at the closing bid price on
such exchanges or over-the-counter markets.
Short-term debt obligations maturing within 60 days are valued at amortized
cost, which approximates market value.
Forward currency exchange contracts are valued at the prevailing forward
exchange rate of the underlying currencies.
Foreign securities are generally valued at the last sale price on the foreign
exchange or market on which they trade. If any foreign share prices are not
readily available as a result of limited share activity, the securities are
valued at the last sale price of the local shares in the principal market in
which such securities are normally traded.
Generally, trading in foreign securities is substantially completed each day at
various times prior to the close of the New York Stock Exchange ("NYSE"). The
values of such securities used in computing the net asset value of the Fund's
shares are determined as of such times. Foreign currency exchange rates are
generally determined at 2:00 p.m. Eastern (U.S.) time. Occasionally, events
affecting the values of such foreign securities and such exchange rates may
occur between the times at which they are determined and the close of the
customary trading session of the NYSE, which would not be reflected in the
computation of the Fund's net asset value. If events materially affecting the
values of such foreign securities occur and it is determined that market
quotations are not reliable, then these foreign securities will be valued at
their fair value using procedures approved by the Board of Trustees.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value under
procedures approved by the Board of Trustees.
SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date. Cost is determined
and gains (losses) are based upon the specific identification method for both
financial statement and federal income tax purposes.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Forward foreign currency exchange contracts are agreements to exchange
one currency for another at a future date at a specified price. These contracts
are used to minimize the exposure to foreign exchange rate fluctuations during
the period between trade and settlement date of the contracts. The Fund may
utilize forward foreign currency exchange contracts in connection with the
settlement of purchases and sales of securities. The Fund may also enter into
these contracts to hedge certain other foreign currency denominated assets.
Contracts to buy generally are used to acquire exposure to foreign currencies,
while contracts to sell are used to hedge the Fund's investments against
currency fluctuations. Forward currency contracts are valued daily at the
current exchange rate of the underlying currency, resulting in unrealized gains
(losses) which become realized at the time the foreign currency contracts are
closed or mature. Realized and unrealized gains (losses) arising from such
transactions are included in net realized and unrealized gains (losses) on
foreign currency
19
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
November 30, 2004
transactions. The use of forward currency contracts does not eliminate
fluctuations in the prices of the Fund's portfolio securities. While the maximum
potential loss from such contracts is the aggregate face value in U.S. dollars
at the time the contract was opened, exposure is typically limited to the change
in value of the contract (in U.S. dollars) over the period it remains open. The
Fund could also be exposed to risk if the counterparties of the contracts are
unable to fulfill the terms of the contracts.
DELAYED DELIVERY SECURITIES
The Fund may trade securities on other than normal settlement terms, including
securities purchased or sold on a "when-issued" basis. This may increase the
risk if the other party to the transaction fails to deliver and causes the Fund
to subsequently invest at less advantageous prices. The Fund identifies cash or
liquid portfolio securities as segregated with the custodian in an amount equal
to the delayed delivery commitment.
INCOME RECOGNITION
Interest income is recorded on the accrual basis. Premium and discount are
amortized and accreted, respectively, on all debt securities. Corporate actions
and dividend income are recorded on the ex-date, except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware
of such, net of non-reclaimable tax withholdings. The value of additional
securities received as an income payment is recorded as income and as the cost
basis of such securities.
FOREIGN CURRENCY TRANSACTIONS
The values of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates. Net realized and
unrealized gains (losses) on foreign currency transactions include gains
(losses) arising from the fluctuation in exchange rates between trade and
settlement dates on securities transactions, gains (losses) arising from the
disposition of foreign currency and currency gains (losses) between the accrual
and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes, the Fund does not distinguish that portion of
gains (losses) on investments which is due to changes in foreign exchange rates
from that which is due to changes in market prices of the investments. Such
fluctuations are included with the net realized and unrealized gains (losses) on
investments.
FEDERAL INCOME TAX STATUS
The Fund intends to qualify each year as a "regulated investment company" under
Subchapter M of the Internal Revenue Code, as amended, and will distribute
substantially all of its taxable income, if any, for its tax year, and as such
will not be subject to federal income taxes. In addition, the Fund intends to
distribute in each calendar year substantially all of its net investment income,
capital gains and certain other amounts, if any, such that the Fund should not
be subject to federal excise tax. Therefore, no federal income or excise tax
provision is recorded.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-date. Net realized capital
gains, if any, are distributed at least annually.
STATEMENT OF CASH FLOWS
Information on financial transactions which have been settled through the
receipt or disbursement of cash is presented in the Statement of Cash Flows. The
cash amount shown in the Statement of Cash Flows is the amount included within
the Fund's Statement of Assets and Liabilities and includes cash on hand at its
custodian bank and does not include any short-term investments.
NOTE 3. FEDERAL TAX INFORMATION
The timing and character of income and capital gain distributions are determined
in accordance with income tax regulations, which may differ from GAAP.
Reclassifications are made to the Fund's capital accounts for permanent tax
differences to reflect income and gains available for distribution (or available
capital loss carryforwards) under income tax regulations.
For the year ended November 30, 2004, permanent book and tax basis differences
resulting primarily from differing treatments for discount accretion/premium
amortization on debt securities, foreign currency transactions and market
discount reclassification adjustments were identified and reclassified among the
components of the Fund's net assets as follows:
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED PAID-IN
INCOME LOSS CAPITAL
------------- ------------- -------------
$104,224 $(104,226) $2
Net investment income and net realized gains (losses), as disclosed on the
Statement of Operations, and net assets were not affected by this
reclassification.
The tax character of distributions paid during the years ended November 30,
2004 and November 30, 2003 was as follows:
NOVEMBER 30, NOVEMBER 30, OCTOBER 31,
2004 2003 2003
---------- ---------- ----------
Distributions paid from:
Ordinary Income $6,362,697 $566,640 $6,335,103
Tax Return of Capital -- -- 439,949
Long-Term Capital Gains -- -- --
20
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
November 30, 2004
As of November 30, 2004, the components of distributable earnings on a tax basis
were as follows:
UNDISTRIBUTED UNDISTRIBUTED NET
ORDINARY LONG-TERM UNREALIZED
INCOME CAPITAL GAINS APPRECIATION*
------------- ------------- -------------
$873,142 $-- $2,780,477
* The differences between book-basis and tax-basis net unrealized appreciation
are primarily due to deferral of losses from wash sales and discount
accretion/premium amortization on debt securities.
Unrealized appreciation and depreciation at November 30, 2004, based on cost of
investments for federal income tax purposes, and excluding any unrealized
appreciation and depreciation from changes in the value of other assets and
liabilities resulting from changes in exchange rates, was:
Unrealized appreciation $6,821,287
Unrealized depreciation (4,040,810)
----------
Net unrealized appreciation $2,780,477
The following capital loss carryforwards, determined as of November 30, 2004,
may be available to reduce taxable income arising from future net realized gains
on investments, if any, to the extent permitted by the Internal Revenue Code:
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
----------------- -----------------------
2006 $ 410,216
2007 10,437,671
2008 22,694,029
2009 23,203,433
2010 6,431,055
-----------
$63,176,404
===========
Capital loss carryforwards of $2,624,744 were utilized during the year ended
November 30, 2004 for the Fund.
NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES
Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the
Fund. Prior to April 1, 2004, Columbia was an indirect, wholly owned subsidiary
of FleetBoston Financial Corporation ("FleetBoston"). Effective April 1, 2004,
FleetBoston, including the Fund's investment advisor, was acquired by Bank of
America Corporation ("BOA"). The acquisition did not change the way the Fund is
managed, the investment personnel assigned to manage the Fund or the fees paid
by the Fund.
INVESTMENT ADVISORY FEE
Columbia provides administrative and other services to the Fund in addition to
investment advisory services. Columbia receives a monthly investment advisory
fee at the annual rate of 0.65% of the Fund's average weekly net assets.
In addition, the Fund shall pay Columbia a monthly fee of 20% of the Fund's
monthly "leverage income" (as that term is defined in the management contract).
In the event that the Fund's monthly leverage income is less than zero, then
Columbia shall pay the Fund 20% of the Fund's monthly leverage income. For the
year ended November 30, 2004, the Fund paid fees of $313,565 to Columbia under
this agreement, which represents 0.41% annually of the Fund's average daily net
assets. This amount is included in "Investment advisory fee" on the Statement
of Operations.
PRICING AND BOOKKEEPING FEES
Columbia is responsible for providing pricing and bookkeeping services to the
Fund under a pricing and bookkeeping agreement. Under a separate agreement (the
"Outsourcing Agreement"), Columbia has delegated those functions to State Street
Corporation ("State Street"). As a result, Columbia pays the total fees received
to State Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Fund, Columbia receives
from the Fund an annual flat fee of $10,000 paid monthly, and in any month that
the Fund's average weekly net assets exceed $50 million, an additional monthly
fee. The additional fee rate is calculated by taking into account the fees
payable to State Street under the Outsourcing Agreement. This rate is applied to
the average weekly net assets of the Fund for that month. The Fund also pays
additional fees for pricing services based on the number of securities held by
the Fund. For the year ended November 30, 2004, the Fund's effective pricing and
bookkeeping fee rate, inclusive of out-of-pocket expenses, was 0.117%.
CUSTODY CREDITS
The Fund has an agreement with its custodian bank under which custody fees may
be reduced by balance credits. These credits are recorded as a reduction of
total expenses on the Statement of Operations. The Fund could have invested a
portion of the assets utilized in connection with the expense offset arrangement
in an income producing asset if it had not entered into such an agreement.
FEES PAID TO OFFICERS AND TRUSTEES
With the exception of one officer, all officers of the Fund
are employees of Columbia or its affiliates and receive no compensation from the
Fund. Effective August 23, 2004, the Board of Trustees appointed a Chief
Compliance Officer to the Fund in accordance with federal securities
regulations. The Fund, along with other affiliated funds, will pay its pro-rata
share of the expenses associated with the Office of the Chief Compliance
Officer. The Fund's fee will not exceed $15,000 per year.
The Fund's Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
Fund's assets.
21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
November 30, 2004
OTHER
Columbia provides certain services to the Fund related to Sarbanes-Oxley
compliance. For the year ended November 30, 2004, the Fund paid $1,398 to
Columbia for such services. This amount is included in "Other expenses" on the
Statement of Operations.
NOTE 5. PORTFOLIO INFORMATION
For the year ended November 30, 2004, the cost of purchases and proceeds from
sales of securities, excluding short-term obligations, were $82,522,556 and
$82,934,929, respectively.
NOTE 6. LOAN AGREEMENT
On August 24, 2004, the credit agreement dated August 26, 2003 between the Fund,
BOA and State Street was amended and State Street replaced BOA as Administrative
Agent and lender. At November 30, 2004, the Fund had term loans and a revolving
loan outstanding with State Street, totaling $29,500,000. The terms loans are
comprised of a $13,700,000 loan which bears interest at 3.12% per annum, due
August 26, 2005 and a $2,000,000 loan which bears interest at 3.13% per annum,
due August 26, 2005. The revolving loan is a $13,800,000 floating rate loan,
maturing on August 23, 2005. At November 30, 2004, the average daily loan
balance was $29,428,962 at a weighted average interest rate of 3.05%. The Fund
is subject to certain covenants including, but not limited to, requirements
with respect to asset coverage, portfolio diversification and liquidity.
NOTE 7. DISCLOSURE OF SIGNIFICANT RISKS
AND CONTINGENCIES
FOREIGN SECURITIES
There are certain additional risks involved when investing in foreign securities
that are not inherent with investments in domestic securities. These risks may
involve foreign currency exchange rate fluctuations, adverse political and
economic developments and the possible prevention of currency exchange or other
foreign governmental laws or restrictions. In addition, the liquidity of foreign
securities may be more limited than that of domestic securities.
HIGH-YIELD SECURITIES
Investing in high-yield securities may involve greater credit risk and
considerations not typically associated with investing in U.S. government bonds
and other higher quality fixed income securities. These securities are
non-investment grade securities, often referred to as "junk bonds." Economic
downturns and industry events may disrupt the high yield market and impair the
ability of issuers to repay principal and interest. Also, an increase in
interest rates would likely have an adverse impact on the value of such
obligations. Moreover, high-yield securities may be less liquid to the extent
there is no established secondary market.
INDUSTRY FOCUS
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
LEGAL PROCEEDINGS
Columbia, Columbia Funds Distributor, Inc. ("CFDI"), and certain of their
affiliates (collectively, "the Columbia Group") have received information
requests and subpoenas from various regulatory and law enforcement authorities
in connection with their investigations of late trading and market timing in
mutual funds as well as other industry wide issues. The Columbia Group has not
uncovered any instances where Columbia or CFDI were knowingly involved in late
trading of mutual fund shares.
On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a
civil complaint in the United States District Court for the District of
Massachusetts against Columbia and CFDI, alleging that they had violated certain
provisions of the federal securities laws in connection with trading activity in
mutual fund shares. Also on February 24, 2004, the New York Attorney General
("NYAG") filed a civil complaint in New York Supreme Court, County of New York
against Columbia and CFDI alleging that Columbia and CFDI had violated certain
New York anti-fraud statutes. If either Columbia or CFDI is unsuccessful in its
defense of these proceedings, it could be barred from serving as an investment
advisor or distributor for any investment company registered under the
Investment Company Act of 1940, as amended (a "registered investment company").
Such results could prevent Columbia, CFDI or any company that is an affiliated
person of Columbia and CFDI from serving as an investment advisor or distributor
for any registered investment company, including your fund. Your fund has been
informed by Columbia and CFDI that, if these results occur, they will seek
exemptive relief from the SEC to permit them to continue to serve as your fund's
investment advisor and distributor. There is no assurance that such exemptive
relief will be granted. On March 15, 2004, Columbia and CFDI entered into
agreements in principle with the SEC Division of Enforcement and NYAG in
settlement of the charges. Under the agreements, Columbia and CFDI agreed, among
other things, to the following conditions: payment of $70 million in
disgorgement; payment of $70 million in civil penalties; an order requiring
Columbia and CFDI to cease and desist from violations of the antifraud
provisions and other provisions of the federal securities laws; governance
changes designed to maintain the independence of the mutual fund boards of
trustees and ensure compliance with securities laws and their fiduciary duties;
and retention of an independent consultant to review Columbia's and CFDI's
compliance policies and procedures. The agreement requires the final approval of
the SEC. In a separate agreement with the NYAG, the Columbia Group and its
affiliate Banc of America Capital Management, LLC have agreed to collectively
reduce mutual fund fees by $160 million over a five-year period.
22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
November 30, 2004
In connection with the events described in detail above, various parties have
filed suit against certain funds, their Boards and/or FleetBoston (and
affiliated entities). More than 300 cases (including those filed against
entities unaffiliated with the funds, their Boards and/or FleetBoston and its
affiliated entities) have been consolidated in a multi-district proceeding and
transferred to the Federal District Court in Maryland. Recently, certain
Columbia funds and affiliated entities have been named as defendants in several
derivative actions under various sections of the Investment Company Act of 1940,
as amended, alleging, among other things, that the fees and expenses paid by
those funds are excessive. The funds and the other defendants to these actions,
including Columbia and various of its affiliates, certain other mutual funds
advised by Columbia and its affiliates, and various directors of such funds,
have denied these allegations and are contesting the plaintiffs' claims. These
suits and certain regulatory investigations are ongoing, however, based on
currently available information, Columbia believes that these lawsuits are
without merit, that the likelihood they will have a material adverse impact on
any fund is remote, and that the lawsuits are not likely to materially affect
its ability to provide investment management services to its clients, including
the funds.
NOTE 8. COMPARABILITY OF FINANCIAL STATEMENTS
Effective November 30, 2003, the fiscal year end of the Fund was changed from
October 31 to November 30.
23
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period is as follows:
ONE MONTH
YEAR ENDED ENDED YEAR ENDED OCTOBER 31,
NOVEMBER 30, NOVEMBER 30, -------------------------------------------------
2004 2003 (a) 2003 2002 2001 2000
--------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 3.57 $ 3.51 $ 2.79 $ 3.51 $ 4.83 $ 5.97
----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.34(b) 0.02(b) 0.29(b) 0.38(b)(c) 0.51(b) 0.67
Net realized and unrealized gain
(loss) on investments and
foreign currency 0.26 0.07 0.75 (0.73)(c) (1.26) (1.10)
----------- ----------- ----------- ----------- ----------- -----------
Total from Investment
0.60 0.09 1.04 (0.35) (0.75) (0.43)
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS:
From net investment income (0.30) (0.03) (0.30) (0.36) (0.55) (0.69)
In excess of net investment income -- -- -- -- -- (0.02)
Return of capital -- -- (0.02) (0.01) (0.02) --
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions Declared
to Shareholders (0.30) (0.03) (0.32) (0.37) (0.57) (0.71)
----------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 3.87 $ 3.57 $ 3.51 $ 2.79 $ 3.51 $ 4.83
=========== =========== =========== =========== =========== ===========
Market price per share $ 3.51 $ 3.50 $ 3.65 $ 2.79 $ 3.49 $ 4.63
=========== =========== =========== =========== =========== ===========
Total return -- based on
market value (d) 9.24% (3.40)%(e) 44.56% (10.43)% (14.26)% (6.12)%
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Operating expenses (f) 1.48% 1.63%(g) 1.35% 1.25% 1.31% 0.92%
Interest and amortization of
deferred debt issuance expenses 1.18% 1.38%(g) 2.00% 2.73% 2.98% 2.79%
Total expenses (f) 2.66% 3.01%(g) 3.35% 3.98% 4.29% 3.71%
Net investment income (f) 9.25% 7.82%(g) 9.18% 11.38%(c) 11.96% 11.88%
Portfolio turnover rate 80% 7%(e) 64% 54% 52% 42%
Net assets, end of period (000's) $ 81,229 $ 74,952 $ 73,623 $ 58,134 $ 72,353 $ 98,333
(a) The Fund changed its fiscal year end from October 31 to November 30.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Effective November 1, 2001, the Fund adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began amortizing
premium and accreting discount on all debt securities. The effect of this
change for the year ended October 31, 2002 was to increase the net
investment income per share by $0.02, increase the net realized and
unrealized loss per share by $0.02 and increase the ratio of net investment
income to average net assets from 10.92% to 11.38%. Per share data and
ratios for periods prior to October 31, 2002 have not been restated to
reflect this change in presentation.
(d) Total return at market value assuming all distributions reinvested at
prices calculated in accordance with the Dividend Reinvestment Plan.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(g) Annualized.
24
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share outstanding throughout each period is as follows:
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.20 $ 7.27 $ 6.89 $ 6.62 $ 6.28
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.70 0.70 0.70 0.70 0.70
Net realized and unrealized gain (loss) on investments
and foreign currency (0.23) (1.08) 0.38 0.26 0.34
----------- ----------- ----------- ----------- -----------
Total from Investment Operations 0.47 (0.38) 1.08 0.96 1.04
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.70) (0.69) (0.70) (0.69) (0.70)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 5.97 $ 6.20 $ 7.27 $ 6.89 $ 6.62
=========== =========== =========== =========== ===========
Market price per share $ 5.63 $ 6.81 $ 7.56 $ 7.13 $ 6.88
=========== =========== =========== =========== ===========
Total return -- based on market value (a) (7.89)% (0.74)% 16.97% 14.62% 33.00%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Operating expenses (b) 0.89% 0.88% 0.89% 0.98% 0.95%
Interest and amortization of deferred
debt issuance expenses 2.48% 2.11% 1.96% 2.07% 1.94%
Total expenses (b) 3.37% 2.99% 2.85% 3.05% 2.89%
Net investment income (b) 10.82% 9.70% 9.63% 10.11% 10.76%
Portfolio turnover rate 44% 69% 92% 92% 92%
Net assets, end of period (000's) $ 121,018 $ 124,480 $ 107,774 $ 99,925 $ 93,984
(a) Total return at market value assuming all distributions reinvested at
prices calculated in accordance with the Dividend Reinvestment Plan.
(b) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%, except for
the year ended October 31, 1997 which had a 0.01% impact.
25
FINANCIAL HIGHLIGHTS (CONTINUED)
LOAN AGREEMENT ASSET COVERAGE REQUIREMENTS
ASSET COVERAGE
TOTAL AMOUNT PER $1,000 OF
DATE OUTSTANDING INDEBTEDNESS
--------- ----------- ------------
11/30/04 $29,500,000 $3,754
11/30/03 28,500,000 3,630
10/31/03 28,500,000 3,583
10/31/02 24,500,000 3,373
10/31/01 30,500,000 3,372
10/31/00 47,300,000 3,079
10/31/99 47,300,000 3,558
10/31/98 47,300,000 3,632
10/31/97 27,400,000 4,933
10/31/96 27,400,000 4,647
10/31/95 27,400,000 4,430
26
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE TRUSTEES AND THE SHAREHOLDERS OF COLONIAL INTERMEDIATE HIGH INCOME FUND
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations, cash flows
and changes in net assets, and the financial highlights present fairly, in all
material respects, the financial position of Colonial Intermediate High Income
Fund (the "Fund") at November 30, 2004, and the results of its operations, its
cash flows, the changes in its net assets, and its financial highlights for the
periods indicated, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States), which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at November 30, 2004 by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 19, 2005
27
DIVIDEND REINVESTMENT PLAN
The Fund generally distributes net investment income monthly and capital gains
annually. Under the Fund's Dividend Reinvestment Plan (the "Plan") all
distributions will be reinvested automatically in additional shares of the Fund,
unless the shareholder elects to receive cash or the shares are held in broker
or nominee name and a reinvestment service is not provided by the broker or
nominee. All cash distributions will be mailed by check directly to the record
holder by the dividend paying agent.
If the market price of the shares on the distribution payment date is equal to
or greater than the net asset value, Plan participants will be issued shares at
the higher of net asset value or 95% of the market price. The aggregate market
value of the shares may constitute income to shareholders for federal income tax
purposes. However, if the market price of the shares is less than the net asset
value, shares will be bought as soon as practicable (but no more than 30 days
after the distribution, except as may be required to comply with federal
securities laws) in the open market for the accounts of Plan participants. If,
during this purchase period, the market price surpasses the net asset value, the
average per share price paid may exceed the asset value of the shares, resulting
in the acquisition of fewer shares than if the distribution had been in
newly-issued shares.
All Plan accounts receive written confirmations of all transactions. Shares
purchased under the Plan are held in uncertificated form. Each shareholder's
proxy includes shares purchased pursuant to the Plan. The automatic reinvestment
of distributions does not relieve participants of any income tax payable on the
distributions.
Fees and expenses of the Plan other than brokerage charges will be paid by the
Fund. No brokerage charges are incurred on shares issued directly by the Fund.
Participants will bear a pro-rata share of brokerage charges incurred on open
market purchases.
A Plan participant may terminate his or her participation by written notice to
the Plan agent. The Plan may be amended or terminated on 90 days written notice
to the Plan participants. All correspondence concerning the Plan should be
directed to PFPC Inc., the Plan agent, by mail at P.O. Box 43027, Providence, RI
02940-3027 or by phone at 1-800-730-6001.
28
ADDITIONAL INFORMATION
On August 3, 2004, the Board of Trustees approved the use of interest rate swaps
(and options on those swaps) for hedging purposes. The Fund may enter into swap
agreements to manage its exposure to the financial markets. A swap is an
agreement to exchange the return generated by one instrument for the return
generated by another instrument. The Fund may enter into interest rate swaps and
options on those swaps to manage its exposure to interest rates. Interest rate
swap agreements involve the exchange by the Fund with another party of their
respective commitments to pay or receive interest, e.g., an exchange of floating
rate payments for fixed rate payments with respect to a notional amount of
principal.
These financial instruments are not actively traded on financial markets.
Entering into these agreements involves, to varying degrees, elements of credit,
legal, market and documentation risk. Such risks involve the possibility that
there will be no liquid market for these agreements, that the counterparty to
the agreement may default on its obligation to perform or disagree as to the
meaning of contractual terms in the agreements, or that there may be unfavorable
changes in interest rates.
29
TRUSTEES AND OFFICERS
The Trustees/Directors serve terms of indefinite duration. The names, addresses
and ages of the Trustees/Directors and officers of the Funds in the Columbia
Funds Complex, the year each was first elected or appointed to office, their
principal business occupations during at least the last five years, the number
of portfolios overseen by each Trustee/Director and other directorships they
hold are shown below. Each officer listed below serves as an officer of each
Fund in the Columbia Funds Complex.
NAME, ADDRESS AND AGE,
POSITION WITH FUNDS,
YEAR FIRST ELECTED OR PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN COLUMBIA FUNDS
APPOINTED TO OFFICE(1) COMPLEX OVERSEEN BY TRUSTEE/DIRECTOR, OTHER DIRECTORSHIPS HELD
--------------------------------------------------------------------------------------------------------------------------------
DISINTERESTED TRUSTEES
DOUGLAS A. HACKER (age 49) Executive Vice President-Strategy of United Airlines (airline) since December 2002 (formerly
P.O. Box 66100 President of UAL Loyalty Services (airline) from September 2001 to December 2002; Executive Vice
Chicago, IL 60666 President and Chief Financial Officer of United Airlines from March 1999 to September 2001; Senior
Trustee (since 1996) Vice President-Finance from March 1993 to July 1999). Oversees 118, None
JANET LANGFORD KELLY (age 47) Adjunct Professor of Law, Northwestern University, since September 2004; Private Investor since
9534 W. Gull Lake Drive March 2004 (formerly Chief Administrative Officer and Senior Vice President, Kmart Holding
Richland, MI 49083-8530 Corporation (consumer goods), from September 2003 to March 2004; Executive Vice President-Corporate
Trustee (since 1996) Development and Administration, General Counsel and Secretary, Kellogg Company (food manufacturer),
from September 1999 to August 2003; Senior Vice President, Secretary and General Counsel, Sara Lee
Corporation (branded, packaged, consumer-products manufacturer) from January 1995 to September
1999). 118, None
RICHARD W. LOWRY (age 68) Private Investor since August 1987 (formerly Chairman and Chief Executive Officer, U. S. Plywood
10701 Charleston Drive Corporation (building products manufacturer)). Oversees 120(3), None
Vero Beach, FL 32963
Trustee (since 1995)
CHARLES R. NELSON (age 62) Professor of Economics, University of Washington, since January 1976; Ford and Louisa Van Voorhis
Department of Economics Professor of Political Economy, University of Washington, since September 1993 (formerly Director,
University of Washington Institute for Economic Research, University of Washington from September 2001 to June 2003) Adjunct
Seattle, WA 98195 Professor of Statistics, University of Washington, since September 1980; Associate Editor, Journal
Trustee (since 1981) of Money Credit and Banking, since September 1993; consultant on econometric and statistical
matters. Oversees 118, None
JOHN J. NEUHAUSER (age 61) Academic Vice President and Dean of Faculties since August 1999, Boston College (formerly Dean,
84 College Road Boston College School of Management from September 1977 to September 1999). Oversees 121(3), (4),
Chestnut Hill, MA 02467-3838 Saucony, Inc. (athletic footwear)
Trustee (since 1985)
PATRICK J. SIMPSON (age 60) Partner, Perkins Coie LLP (law firm). Oversees 118, None
1120 N.W. Couch Street
Tenth Floor
Portland, OR 97209-4128
Trustee (since 2000)
30
TRUSTEES AND OFFICERS (CONTINUED)
NAME, ADDRESS AND AGE,
POSITION WITH FUNDS,
YEAR FIRST ELECTED OR PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN COLUMBIA FUNDS
APPOINTED TO OFFICE(1) COMPLEX OVERSEEN BY TRUSTEE/DIRECTOR, OTHER DIRECTORSHIPS HELD
--------------------------------------------------------------------------------------------------------------------------------
DISINTERESTED TRUSTEES (continued)
THOMAS E. STITZEL (age 68) Business Consultant since 1999 (formerly Professor of Finance from 1975 to 1999, College of
2208 Tawny Woods Place Business, Boise State University); Chartered Financial Analyst. Oversees 118, None.
Boise, ID 83706
Trustee (since 1998)
THOMAS C. THEOBALD (age 67) Partner and Senior Advisor, Chicago Growth Partners (private equity investing) since September 2004
303 W. Madison (formerly Managing Director, William Blair Capital Partners (private equity investing) from
Suite 2500 September 1994 to September 2004). Oversees 118, Anixter International (network support equipment
Chicago, IL 60606 distributor); Ventas, Inc. (real estate investment trust); Jones Lang LaSalle (real estate
Trustee and Chairman management services) and Ambac Financial Group (financial guaranty insurance)
of the Board(5)
(since 1996)
ANNE-LEE VERVILLE (age 59) Retired since 1997 (formerly General Manager, Global Education Industry, IBM Corporation (computer
359 Stickney Hill Road and technology) from 1994 to 1997). Oversees 119(4), Chairman of the Board of Directors, Enesco
Hopkinton, NH 03229 Group, Inc. (designer, importer and distributor of giftware and collectibles)
Trustee (since 1998)
RICHARD L. WOOLWORTH (age 63) Retired since December 2003 (formerly Chairman and Chief Executive Officer, The Regence Group
100 S.W. Market Street #1500 (regional health insurer); Chairman and Chief Executive Officer, BlueCross BlueShield of Oregon;
Portland, OR 97207 Certified Public Accountant, Arthur Young & Company). Oversees 118, Northwest Natural Gas Co.
Trustee (since 1991) (natural gas service provider)
INTERESTED TRUSTEE
WILLIAM E. MAYER(2) (age 64) Partner, Park Avenue Equity Partners (private equity) since February 1999 (formerly Partner,
399 Park Avenue Development Capital LLC from November 1996 to February 1999). Oversees 120(3), Lee Enterprises
Suite 3204 (print media), WR Hambrecht + Co. (financial service provider); First Health (healthcare); Reader's
New York, NY 10022 Digest (publishing); OPENFIELD Solutions (retail industry technology provider)
Trustee (since 1994)
(1) In December 2000, the boards of each of the former Liberty Funds and former
Stein Roe Funds were combined into one board of trustees responsible for
the oversight of both fund groups (collectively, the "Liberty Board"). In
October 2003, the trustees on the Liberty Board were elected to the boards
of the Columbia Funds (the "Columbia Board") and of the CMG Fund Trust (the
"CMG Funds Board"); simultaneous with that election, Patrick J. Simpson and
Richard L. Woolworth, who had been directors on the Columbia Board and
trustees on the CMG Funds Board, were appointed to serve as trustees of the
Liberty Board. The date shown is the earliest date on which a
trustee/director was elected or appointed to the board of a Fund in the
Columbia Funds Complex.
(2) Mr. Mayer is an "interested person" (as defined in the Investment Company
Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht +
Co.
(3) Messrs. Lowry, Neuhauser and Mayer also serve as directors/trustees of the
Liberty All-Star Funds, currently consisting of 2 funds, which are advised
by an affiliate of the Advisor.
(4) Mr. Neuhauser and Ms. Verville also serve as disinterested directors of
Columbia Management Multi-Strategy Hedge Fund, LLC, which is advised by the
Advisor.
(5) Mr. Theobald was appointed as Chairman of the Board effective December 10,
2003.
31
TRUSTEES AND OFFICERS (CONTINUED)
NAME, ADDRESS AND AGE,
POSITION WITH COLUMBIA FUNDS,
YEAR FIRST ELECTED OR
APPOINTED TO OFFICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
-------------------------------------------------------------------------------------------------------------------
OFFICERS
CHRISTOPHER L. WILSON (age 47) Head of Mutual Funds for the Advisor since August 2004; President of the Columbia Funds since
One Financial Center October 2004 (formerly President and Chief Executive Officer, CDC IXIS Asset Management Services,
Boston, MA 02111 Inc. from September 1998 to August 2004).
President (since 2004)
J. KEVIN CONNAUGHTON (age 40) Treasurer of the Columbia Funds and of the Liberty All-Star Funds since December 2000; Vice
One Financial Center President of the Advisor since April 2003 (formerly President of the Columbia Funds from February
Boston, MA 02111 2004 to October 2004; Chief Accounting Officer and Controller of the Liberty Funds and of the
Treasurer (since 2000) Liberty All-Star Funds from February 1998 to October 2000); Treasurer of the Galaxy Funds since
September 2002; (formerly Treasurer from December 2002 to December 2004 and President from February
2004 to December 2004 of the Columbia Management Multi-Strategy Hedge Fund, LLC; Vice President of
Colonial Management Associates, Inc. from February 1998 to October 2000).
MARY JOAN HOENE (age 54) Senior Vice President and Chief Compliance Officer of the Columbia Funds and of the Liberty All-Star
40 West 57th Street Funds since August 2004 (formerly Partner, Carter, Ledyard & Milburn LLP from January 2001 to August
New York, NY 10019 2004; Counsel, Carter, Ledyard & Milburn LLP from November 1999 to December 2000; Vice President and
Senior Vice President and Counsel, Equitable Life Assurance Society of the United States from April 1998 to November 1999).
Chief Compliance Officer
(since 2004)
MICHAEL G. CLARKE (age 34) Chief Accounting Officer of the Columbia Funds and of the Liberty All-Star Funds since October 2004
One Financial Center (formerly Controller of the Columbia Funds and of the Liberty All-Star Funds from May 2004 to
Boston, MA 02111 October 2004; Assistant Treasurer from June, 2002 to May 2004; Vice President, Product Strategy &
Chief Accounting Officer Development of the Liberty Funds Group from February 2001 to June 2002; Assistant Treasurer of the
(since 2004) Liberty Funds and of the Liberty All-Star Funds from August 1999 to February 2001; Audit Manager,
Deloitte & Touche LLP from May 1997 to August 1999).
JEFFREY R. COLEMAN (age 35) Controller of the Columbia Funds and of the Liberty All-Star Funds since October 2004 (formerly Vice
One Financial Center President of CDC IXIS Asset Management Services, Inc. and Deputy Treasurer of the CDC Nvest Funds
Boston, MA 02111 and Loomis Sayles Funds from February 2003 to September 2004; Assistant Vice President of CDC IXIS
Controller (since 2004) Asset Management Services, Inc. and Assistant Treasurer of the CDC Nvest Funds from August 2000 to
February 2003; Tax Manager of PFPC Inc. from November 1996 to August 2000).
R. SCOTT HENDERSON (age 45) Secretary of the Columbia Funds since December 2004 (formerly Of Counsel, Bingham McCutchen from
One Financial Center April 2001 to September 2004; Executive Director and General Counsel, Massachusetts Pension Reserves
Boston, MA 02111 Investment Management Board from September 1997 to March 2001).
Secretary (since 2004)
32
TRANSFER AGENT
--------------------------------------------------------------------------------
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Intermediate High Income Fund is:
PFPC, Inc.
P.O. Box 8030
Boston, MA 02266-8030
The fund mails one shareholder report to each shareholder address. Shareholders
can order additional reports by calling 800-730-6001. In addition,
representatives at that number can provide shareholders information about the
fund.
Financial advisors who want additional information about the fund may speak to a
representative at 800-426-3750.
A description of the fund's proxy voting policies and procedures is available
(i) at www.columbiamanagement.com; (ii) on the Securities and Exchange
Commission's website at www.sec.gov, and (iii) without charge, upon request, by
calling 800-730-6001. Information regarding how the fund voted proxies relating
to portfolio securities during the 12-month period ended June 30, 2004 is
available from the SEC's website. Information regarding how the fund voted
proxies relating to portfolio securities is also available at
www.columbiamanagement.com .
The fund files a complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is
available on the SEC's website at www.sec.gov and may be reviewed and copied at
the SEC's Public Reference Room in Washington, DC. Information on the operation
of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
This report has been prepared for shareholders of Colonial Intermediate High
Income Fund.
COLONIAL INTERMEDIATE HIGH INCOME FUND ANNUAL REPORT
110-02/739T-1104 (01/05) 05/3934
ITEM 2. CODE OF ETHICS.
(a) The registrant has, as of the end of the period covered by this
report, adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party.
(b) During the period covered by this report, there were not any
amendments to a provision of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, there were not any waivers
or implicit waivers to a provision of the code of ethics adopted in
2(a) above.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Trustees has determined that Douglas A. Hacker, Thomas
E. Stitzel, Anne-Lee Verville and Richard L. Woolworth, each of whom are members
of the registrant's Board of Trustees and Audit Committee, each qualify as an
audit committee financial expert. Mr. Hacker, Mr. Stitzel, Ms. Verville and Mr.
Woolworth are each independent trustees, as defined in paragraph (a)(2) of this
Item's instructions and collectively constitute the entire Audit Committee.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Effective November 30, 2003, the registrant changed its fiscal year from October
31, 2003. Fee information for the fiscal year ended October 31, 2003 is also
included below.
(a) Aggregate Audit Fees billed by the principal accountant for professional
services rendered during the fiscal years/periods ended November 30, 2004,
November 30, 2003 and October 31, 2003 are approximately as follows:
November 30, 2004 November 30, 2003 October 31, 2003
$32,860 $17,485 $34,970
Audit Fees include amounts related to the audit of the registrant's annual
financial statements or services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements for those fiscal
years.
(b) Aggregate Audit-Related Fees billed by the principal accountant for
professional services rendered during the fiscal years/periods ended November
30, 2004, November 30, 2003 and October 31, 2003 are approximately as follows:
November 30, 2004 November 30, 2003 October 31, 2003
$3,700 $0 $4,000
Audit-Related Fees include amounts for assurance and related services by the
principal accountant that are reasonably related to the performance of the audit
of the registrant's financial statements and are not reported in Audit Fees
above. In both fiscal years/periods 2004 and 2003, Audit-Related Fees include
certain agreed-upon procedures performed for semi-annual shareholder reports.
(c) Aggregate Tax Fees billed by the principal accountant for professional
services rendered during the fiscal years/periods ended November 30, 2004,
November 30, 2003 and October 31, 2003 are approximately as follows:
November 30, 2004 November 30, 2003 October 31, 2003
$2,710 $2,600 $2,600
Tax Fees during the fiscal years/periods ended November 30, 2004, November 30,
2003 and October 31, 2003 consist primarily of the review of annual tax returns
and include amounts for professional services by the principal accountant for
tax compliance, tax advice and tax planning.
(d) Aggregate All Other Fees billed by the principal accountant for professional
services rendered during the fiscal years/periods ended November 30, 2004,
November 30, 2003 and October 31, 2003 are as follows:
November 30, 2004 November 30, 2003 October 31, 2003
$0 $0 $0
All Other Fees include amounts for products and services provided by the
principal accountant, other than the services reported in paragraphs (a) through
(c) above.
None of the amounts described in paragraphs (a) through (d) above were approved
pursuant to the "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01
of Regulation S-X.
(e)(1) AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
I. GENERAL OVERVIEW
The Audit Committee of the registrant has adopted a formal policy (the "Policy")
which sets forth the procedures and the conditions pursuant to which the Audit
Committee will
pre-approve (i) all audit and non-audit (including audit related, tax and all
other) services provided by the registrant's independent auditor to the
registrant and individual funds (collectively "Fund Services"), and (ii) all
non-audit services provided by the registrant's independent auditor to the
funds' adviser or a control affiliate of the adviser, that relate directly to
the funds' operations and financial reporting (collectively "Fund-related
Adviser Services"). A "control affiliate" is an entity controlling, controlled
by, or under common control with the adviser that provides ongoing services to
the funds, and the term "adviser" is deemed to exclude any unaffiliated
sub-adviser whose role is primarily portfolio management and is sub-contracted
or overseen by another investment adviser. The adviser and control affiliates
are collectively referred to as "Adviser Entities."
The Audit Committee uses a combination of specific (on a case-by-case basis as
potential services are contemplated) and general (pre-determined list of
permitted services) pre-approvals. Unless a type of service has received general
pre-approval, it will require specific pre-approval by the Audit Committee if it
is to be provided by the independent auditor.
The Policy does not delegate the Audit Committee's responsibilities to
pre-approve services performed by the independent auditor to management.
II. GENERAL PROCEDURES
On an annual basis, the Fund Treasurer and/or Director of Trustee Administration
shall submit to the Audit Committee a schedule of the types of Fund Services and
Fund-related Adviser Services that are subject to general pre-approval.
These schedules will provide a description of each type of service that is
subject to general pre-approval and, where possible, will provide estimated fees
for each instance of providing each service. This general pre-approval and
related fees (where provided) will generally cover a one-year period (for
example, from June 1 through May 31 of the following year). The Audit
Committee will review and approve the types of services and review the projected
fees for the next one-year period and may add to, or subtract from, the list of
general pre-approved services from time to time, based on subsequent
determinations. This approval acknowledges that the Audit Committee is in
agreement with the specific types of services that the independent auditor will
be permitted to perform. The fee amounts will be updated to the extent necessary
at other regularly scheduled meetings of the Audit Committee.
In addition to the fees for each individual service, the Audit Committee has the
authority to implement a fee cap on the aggregate amount of non-audit services
provided to an individual fund.
If, subsequent to general pre-approval, a fund, its investment adviser or a
control affiliate determines that it would like to engage the independent
auditor to perform a service that requires pre-approval and that is not included
in the general pre-approval list, the specific pre-approval procedure shall be
as follows:
o A brief written request shall be prepared by management detailing the
proposed engagement with explanation as to why the work is proposed to
be performed by the independent auditor;
o The request should be addressed to the Audit Committee with copies to
the Fund Treasurer and/or Director of Trustee Administration;
o The Fund Treasurer and/or Director of Trustee Administration will
arrange for a discussion of the service to be included on the agenda
for the next regularly scheduled Audit Committee meeting, when the
Committee will discuss the proposed engagement and approve or deny the
request.
o If the timing of the project is critical and the project needs to
commence before the next regularly scheduled meeting, the Chairperson
of the Audit Committee may approve or deny the request on behalf of
the Audit Committee, or, in the Chairperson's discretion, determine to
call a special meeting of the Audit Committee for the purpose of
considering the proposal. Should the Chairperson of the Audit
Committee be unavailable, any other member of the Audit Committee may
serve as an alternate for the purpose of approving or denying the
request. Discussion with the Chairperson (or alternate, if necessary)
will be arranged by the Fund Treasurer and/or Director of Trustee
Administration. The independent auditor will not commence any such
project unless and until specific approval has been given.
III. CERTAIN OTHER SERVICES PROVIDED TO ADVISER ENTITIES
The Audit Committee recognizes that there are cases where services proposed to
be provided by the independent auditor to the adviser or control affiliates are
not Fund-related Adviser Services within the meaning of the Policy, but
nonetheless may be relevant to the Audit Committee's ongoing evaluation of the
auditor's independence and objectivity with respect to its audit services to the
funds. As a result, in all cases where an Adviser Entity engages the independent
auditor to provide audit or non-audit services that are not Fund Services or
Fund-related Adviser Services, were not subject to pre-approval by the Audit
Committee, and the projected fees for any such engagement (or the aggregate of
all such engagements during the period covered by the Policy) exceeds a
pre-determined threshold established by the Audit Committee; the independent
auditor, Fund Treasurer and/or Director of Trustee Administration will notify
the Audit Committee not later than its next meeting. Such notification shall
include a general description of the services provided, the entity that is to be
the recipient of such services, the timing of the engagement, the entity's
reasons for selecting the independent auditor, and the projected fees. Such
information will allow the Audit Committee to consider whether non-audit
services provided to the adviser and Adviser Entities, which were not subject to
Audit Committee pre-approval, are compatible with maintaining the auditor's
independence with respect to the Funds.
IV. REPORTING TO THE AUDIT COMMITTEE
The Fund Treasurer or Director of Trustee Administration shall report to the
Audit Committee at each of its regular meetings regarding all Fund Services or
Fund-related Adviser Services initiated since the last such report was rendered,
including:
o A general description of the services, and
o Actual billed and projected fees, and
o The means by which such Fund Services or Fund-related Adviser Services
were pre-approved by the Audit Committee.
In addition, the independent auditor shall report to the Audit Committee
annually, and no more than 90 days prior to the filing of audit reports with the
SEC, all non-audit services provided to entities in the funds' "investment
company complex," as defined by SEC rules, that did not require pre-approval
under the Policy.
V. AMENDMENTS; ANNUAL APPROVAL BY AUDIT COMMITTEE
The Policy may be amended from time to time by the Audit Committee. Prompt
notice of any amendments will be provided to the independent auditor, Fund
Treasurer and Director of Trustee Administration. The Policy shall be reviewed
and approved at least annually by the Audit Committee.
*****
(e)(2) The percentage of services described in paragraphs (b) through (d) of
this Item approved pursuant to the "de minimis" exception under paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X during both fiscal years/periods
ended November 30, 2004, November 30, 2003 and October 31, 2003 was zero.
(f) Not applicable.
(g) All non-audit fees billed by the registrant's accountant for services
rendered to the registrant for the fiscal years/periods ended November 30, 2004,
November 30, 2003 and October 31, 2003 are disclosed in (b) through (d) of this
Item.
During the fiscal years/periods ended November 30, 2004, November 30, 2003 and
October 31, 2003, there were no Audit-Related Fees, Tax Fees or All Other Fees
that were approved for services to the investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser) and any entity controlling,
controlled by, or under common control with the adviser that provides ongoing
services to the registrant under paragraph (c)(7)(ii) of Rule 2-01 of Regulation
S-X.
The percentage of Audit-Related Fees, Tax Fees and All Other Fees required to be
approved under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X that were
approved under the "de minimis" exception during the fiscal years/periods ended
November 30, 2004, November 30, 2003 and October 31, 2003 was zero.
(h) The registrant's Audit Committee of the Board of Directors has considered
whether the provision of non-audit services that were rendered to the
registrant's adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under common control
with the investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X, is compatible with maintaining the principal accountant's
independence. The Audit Committee determined that the provision of such services
is compatible with maintaining the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately-designated standing audit committee established
in accordance with Section 3(a)(58)(A) of the Exchange Act (15 U.S.C.
78c(a)(58)(A)). Douglas A. Hacker, Thomas E. Stitzel, Anne-Lee Verville and
Richard L. Woolworth are each independent trustees and collectively constitute
the entire Audit Committee.
ITEM 6. SCHEDULE OF INVESTMENTS
The registrant's "Schedule I - Investments in securities of unaffiliated
issuers" (as set forth in 17 CFR 210.12-12) is included in Item 1 of this Form
N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The Fund has delegated to Columbia Management Advisors, Inc. (the "Advisor") the
responsibility to vote proxies relating to portfolio securities held by the
Fund. In deciding to delegate this responsibility to the Advisor, the Board of
Trustees of the Trust reviewed and approved the policies and procedures adopted
by the Advisor. These included the procedures that the Advisor follows when a
vote presents a conflict between the interests of the Fund and its shareholders
and the Advisor, its affiliates, its other clients or other persons.
The Advisor's policy is to vote all proxies for Fund securities in a manner
considered by the Advisor to be in the best interest of the Fund and its
shareholders without regard to any benefit to the Advisor, its affiliates, its
other clients or other persons. The Advisor examines each proposal and votes
against the proposal, if, in its judgment, approval or adoption of the proposal
would be expected to impact adversely the current or potential market value of
the issuer's securities. The Advisor also examines each proposal and votes the
proxies against the proposal, if, in its judgment, the proposal would be
expected to affect adversely the best interest of the Fund. The Advisor
determines the best interest of the Fund in light of the potential economic
return on the Fund's investment.
The Advisor addresses potential material conflicts of interest by having
predetermined voting guidelines. For those proposals that require special
consideration or in instances where special circumstances may require varying
from the predetermined guideline, the Advisor's Proxy Committee determines the
vote in the best interest of the Fund, without consideration of any
benefit to the Advisor, its affiliates, its other clients or other persons. The
Advisor's Proxy Committee is composed of representatives of the Advisor's equity
investments, equity research, compliance, legal and fund administration
functions. In addition to the responsibilities described above, the Proxy
Committee has the responsibility to review, on a semi-annual basis, the
Advisor's proxy voting policies to ensure consistency with internal policies and
regulatory agency policies and to develop additional voting guidelines to assist
in the review of proxy proposals.
The Proxy Committee may vary from the predetermined guideline if it determines
that voting on the proposal according to the predetermined guideline would be
expected to impact adversely the current or potential market value of the
issuer's securities or to affect adversely the best interest of the client.
References to the best interest of a client refer to the interest of the client
in terms of the potential economic return on the client's investment. In
determining the vote on any proposal, the Proxy Committee does not consider any
benefit other than benefits to the owner of the securities to be voted. A member
of the Proxy Committee is prohibited from voting on any proposal for which he or
she has a conflict of interest by reason of a direct relationship with the
issuer or other party affected by a given proposal. Persons making
recommendations to the Proxy Committee or its members are required to disclose
to the Committee any relationship with a party making a proposal or other matter
known to the person that would create a potential conflict of interest.
The Advisor has retained Institutional Shareholder Services ("ISS"), a third
party vendor, to implement its proxy voting process. ISS provides proxy
analysis, record keeping services and vote disclosure services.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not yet applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Registrant Purchases of Equity Securities*
(a) (b) (c) (d)
Total Number of Maximum Number of
Shares Purchased as Shares that May Yet
Period Total Number Average Price Part of Publically Be Purchased Under
of Shares Paid Per Share Announced Plans the Plans or Programs
------------------------------------------------------------------------------------------------------------------------------------
06/01/04 through 06/30/04 16,436 $3.30 16,436 N/A
07/01/04 through 07/31/04 16,231 $3.34 16,231 N/A
08/01/04 through 08/31/04 15,531 $3.44 15,531 N/A
09/01/04 through 09/30/04 15,059 $3.54 15,059 N/A
10/01/04 through 10/31/04 14,936 $3.53 14,936 N/A
11/01/04 through 11/30/04 14,684 $3.57 14,684 N/A
------------------------------------------------------------------------------------------------------------------------------------
Total 92,877 $3.45 92,877 N/A
------------------------------------------------------------------------------------------------------------------------------------
* Includes shares purchased by the Dividend Reinvestment Agent pursuant to
the Registrant's Dividend Reinvestment Plan.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have not been any material changes to the procedures by which shareholders
may recommend nominees to the registrant's board of directors, since those
procedures were last disclosed in response to the requirements of Item
7(d)(2)(ii)(G) of Schedule 14A or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officers, based on their evaluation of the registrant's disclosure
controls and procedures as of a
date within 90 days of the filing of this report, have concluded that
such controls and procedures are adequately designed to ensure that
information required to be disclosed by the registrant in Form N-CSR
is accumulated and communicated to the registrant's management,
including the principal executive officer and principal financial
officer, or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure.
(b) There were no changes in the registrant's internal control over
financial reporting that occurred during the registrant's second
fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR
attached hereto as Exhibit 99.CODE ETH.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT.
(a)(3) Not applicable.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of
1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) Colonial Intermediate High Income Fund
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By (Signature and Title) /S/ Christopher L. Wilson
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Christopher L. Wilson, President
Date January 26, 2005
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title) /S/ Christopher L. Wilson
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Christopher L. Wilson, President
Date January 26, 2005
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By (Signature and Title) /S/ J. Kevin Connaughton
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J. Kevin Connaughton, Treasurer
Date January 26, 2005
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