COLONIAL
INTERMARKET
INCOME
TRUST I
SEMIANNUAL REPORT
MAY 31, 1996
COLONIAL INTERMARKET INCOME TRUST I HIGHLIGHTS
DECEMBER 1, 1995 - MAY 31, 1996
INVESTMENT OBJECTIVE: Colonial InterMarket Income Trust I seeks to maximize
current income through investments in three sectors of the bond market -- U.S.
government, corporate high yield, and foreign government.
THE FUND IS DESIGNED TO OFFER:
- Potential for higher, more consistent income
- Diversification to help reduce risk and improve price stability
- Monthly distributions to help meet your financial needs
PORTFOLIO MANAGER COMMENTARY: "Over the last six months, increasing concerns
about a recovery in economic growth in the U.S. have resulted in volatile and
lower U.S. government bond prices. To some extent, foreign government bonds have
been less sensitive to concerns of inflation. Corporate high yield bonds have
actually benefited from the improvement in revenues and cash flows of their
corporate issues. The Fund has consequently seen the positive trends in the high
yield corporate market offset some of the weakness in the U.S. government
market."
- Carl Ericson
COLONIAL INTERMARKET INCOME TRUST I PERFORMANCE
Distributions declared per share $0.515
Six-month total return, assuming
reinvestment of all distributions
- NAV 2.81%
- Market Price 7.30%
Price per share
- NAV $11.05
- Market Price $11.00
SECTOR BREAKDOWN TOP FIVE FOREIGN COUNTRIES
- --------------------------------------------------------------------------------
1. High yield corporate........44.2% 1.Denmark.....................9.9%
2. Foreign government..........32.3% 2.Australia...................8.4%
3. U.S. government.............21.1% 3.Spain.......................5.3%
4. Other........................2.4% 4.Finland.....................2.8%
5.Poland......................2.5%
2
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
I am pleased to present your Fund's semiannual report for the period ended May
31, 1996. First, however, I would like to extend my thanks to President John A.
McNeice, Jr., who has retired after a career with Colonial that spanned 40
years. We look forward to his continued involvement on the executive committee
of the board of directors at our parent company, Liberty Financial Companies,
Inc.
[PHOTO]
In my new position, I am directing Colonial's focus on the delivery of superior
investment performance over the long term. To achieve this mission, we will
continue to seek the optimal combination of talented people and effective
investment disciplines.
The receipt of your semiannual report is a good time to reflect on market
conditions and the performance of your Fund during the past 6 months. Falling
interest rates and minimal inflation helped the economy grow at a comfortable
pace throughout 1995 and created a positive environment for financial
investments. The stock market received additional impetus from strong growth of
corporate profits. Currently, while there may be some market volatility, we
expect moderate growth and low inflation to continue. Earnings should continue
to make progress but at a slower pace than in 1995. Opportunities are not
confined to the U.S., as we anticipate growth in certain foreign markets.
With over 12 years of service at Colonial and more than 25 years in the
industry, I am enthusiastic about -- and dedicated to achieving -- Colonial's
mission of providing you with competitive investment returns. In my new role, I
look forward to communicating with you about your Colonial investment. We
appreciate the opportunity to help you meet your investment goals.
Respectfully,
/s/Harold W. Cogger
Harold W. Cogger
President
July 11, 1996
Because market conditions change frequently, there can be no assurance that the
trends described here will continue, come to pass, or affect Fund
performance.
3
INVESTMENT PORTFOLIO
MAY 31, 1996 (UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
BONDS & NOTES - 98.6% PAR VALUE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------
CORPORATE FIXED INCOME BONDS & NOTES - 44.9%
- -----------------------------------------------------------------------------
MANUFACTURING - 11.1%
ELECTRONIC & ELECTRICAL EQUIPMENT - 1.4%
Amphenol Corp.,
12.750% 12/15/02 $1,550 $1,713
------
FOOD & KINDRED PRODUCTS - 1.8%
Gillett Holdings, Inc.,
12.250% 06/30/02 535 559
Van De Kamps, Inc.,
12.000% 09/15/05 1,500 1,601
------
2,160
------
MACHINERY & COMPUTER EQUIPMENT - 0.6%
IMO Industries, Inc.,
11.750% 05/01/06 (a) 750 778
------
MISCELLANEOUS MANUFACTURING - 0.6%
Dade International, Inc.,
11.125% 05/01/06 (a) 750 771
------
PAPER PRODUCTS - 2.8%
Florida Coast Paper,
12.750% 06/01/03 (a) 1,250 1,278
Gaylord Container Corp.,
11.500% 05/15/01 1,250 1,288
Repap Wisconsin, Inc.,
9.875% 05/01/06 1,000 880
------
3,446
------
PRIMARY METAL - 1.8%
A.K. Steel Corp.,
10.750% 04/01/04 1,500 1,633
UCAR Global Enterprises, Inc.,
12.000% 01/15/05 535 614
------
2,247
------
PRINTING & PUBLISHING - 0.9%
K-III Communications Corp.,
10.625% 05/01/02 1,000 1,050
------
RUBBER & PLASTIC - 0.8%
Portola Packaging, Inc.,
10.750% 10/01/05 1,000 1,017
------
</TABLE>
4
Investment Portfolio/May 31,1996
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TRANSPORTATION EQUIPMENT - 0.4%
Aftermarket Technology Corp.,
Series B,
12.000% 08/01/04 $ 500 $ 534
---------
- ---------------------------------------------------------------------------------------------
MINING & ENERGY - 4.1%
OIL & GAS EXTRACTION
Falcon Drilling Co.,
8.875% 03/15/03 250 246
Gulf Canada Resources Ltd.,
9.250% 01/15/04 1,500 1,491
Nuevo Energy Co.:
9.500% 04/15/06 600 600
12.500% 06/15/02 2,000 2,135
Plains Resources, Inc.,
10.250% 03/15/06(a) 450 454
---------
4,926
---------
- ---------------------------------------------------------------------------------------------
RETAIL TRADE- 2.9%
FOOD STORES
Dominick's Finer Foods, Inc.,
10.875% 05/01/05 1,500 1,590
Pathmark Stores, Inc.,
9.625% 05/01/03 1,000 948
Smiths Food & Drug,
11.250% 05/15/07 1,000 1,015
---------
3,553
---------
- ---------------------------------------------------------------------------------------------
SERVICES - 8.8%
AMUSEMENT & RECREATION - 5.9%
Argosy Gaming Co.,
13.250% 06/01/04(a) 500 507
Bally's Grand, Inc.,
Series B,
10.375% 12/15/03 1,000 1,039
Boyd Gaming Corp.,
10.750% 09/01/03 1,000 1,053
Falcon Holdings, PIK,
11.000% 09/15/03 1,372 1,317
Grand Casinos, Inc.,
10.125% 12/01/03 750 769
Harvey Casinos Resorts,
10.625% 06/01/06 1,250 1,259
Trump Atlantic City Associates,
11.250% 05/01/06 1,250 1,272
---------
7,216
---------
</TABLE>
5
Investment Portfolio/May 31,1996
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CORPORATE FIXED INCOME BONDS & NOTES - CONT. PAR VALUE
SERVICES - CONT.
BUSINESS SERVICES - 0.4%
Heritage Media Services Corp.,
8.750% 02/15/06 $ 500 $ 475
---------
HEALTH SERVICES - 1.7%
GranCare, Inc.,
9.375% 09/15/05 1,000 973
OrNda Health Corp.,
12.250% 05/15/02 1,000 1,085
---------
2,058
---------
HOTELS, CAMPS & LODGING - 0.8%
HMH Properties, Inc.,
9.500% 05/15/05 1,000 968
---------
- ---------------------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 18.0%
BROADCASTING - 4.6%
Allbritton Communications Co.,
11.500% 08/15/04 1,500 1,541
Chancellor Broadcasting Co.,
9.375% 10/01/04 500 470
Heritage Media Corp.,
11.000% 06/15/02 750 801
NWCG Holding Corp.,
(b) 06/15/99 1,400 1,045
Sullivan Broadcasting, Inc.,
10.250% 12/15/05 750 712
Young Broadcasting Corp.,
10.125% 02/15/05 1,000 975
---------
5,544
---------
CABLE - 4.0%
Cablevision Systems Corp.,
10.750% 04/01/04 1,500 1,571
Comcast UK Cable Partners Ltd.,
stepped coupon, (c)
(11.200% 11/15/00) 11/15/07(d) 1,250 744
Continental Cablevision, Inc.,
11.000% 06/01/07 750 840
Telewest Communication PLC,
stepped coupon, (c)
(11.000% 10/01/00) 10/01/07(d) 2,750 1,650
---------
4,805
---------
</TABLE>
6
Investment Portfolio/May 31,1996
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMUNICATIONS - 3.3%
American Radio System,
9.000% 02/01/06 $ 1,650 $ 1,551
Brooks Fiber Properties, Inc.,
stepped coupon, (c)
(10.875% 03/01/01) 03/01/06(a) 1,000 549
CS Wireless System, Inc.,
stepped coupon, (c)
(11.375% 03/01/01) 03/01/06(a) 1,500 791
Mobilemedia Communications, Inc.,
stepped coupon, (c)
(10.500% 12/01/98) 12/01/03 750 557
UNC, Inc.,
11.000% 06/01/06(a) 500 510
---------
3,958
---------
GAS SERVICES - 1.0%
California Energy Co., Inc.,
9.875% 06/30/03 1,250 1,263
---------
TELECOMMUNICATION - 5.1%
CAI Wireless Systems, Inc.,
12.250% 09/15/02 1,000 1,053
Clearnet Communications Units,
stepped coupon, (c)
(14.750% 12/15/00) 12/15/05(e) 750 473
GST Telecommunications Units,
stepped coupon, (c)
(13.875% 12/15/00) 12/15/05(a)(f) 1,500 848
IntelCom Group, Inc.,
stepped coupon, (c)
(13.500% 09/15/00) 09/15/05 1,500 908
MFS Communications, Inc.,
stepped coupon, (c)
(9.375% 01/15/99) 01/15/06 1,000 618
Metrocall, Inc.,
10.375% 10/01/07 500 487
Mobilemedia Corp.,
9.375% 11/01/07 500 473
PanAmSat Corp.,
stepped coupon, (c)
(11.375% 08/01/98) 08/01/03 1,500 1,283
---------
6,143
---------
TOTAL CORPORATE FIXED-INCOME
BONDS & NOTES (cost of $59,097) 54,625
---------
</TABLE>
7
Investment Portfolio/May 31,1996
<TABLE>
<CAPTION>
FOREIGN GOVERNMENT & AGENCY
OBLIGATIONS - 32.5% CURRENCY PAR
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Argentina Par Brady, stepped coupon, (g)
(5.500% 04/01/97) 5.250% 03/31/23 AR 5,100 $ 2,741
Government of Finland Bond,
9.500% 03/15/04 FN 14,000 3,367
Government of Poland,
Past Due Interest, stepped coupon, (g)
(4.000% 10/27/96) 3.750% 10/27/14 PL 4,000 3,010
Kingdom of Denmark,
8.000% 05/15/03 DK 66,419 11,923
Norwegian Government Bond,
9.500% 10/31/02 NO 11,600 2,062
Spanish Government Bonds,
12.250% 03/25/00 SP 727,790 6,374
Victoria Treasury Corp.,
12.500% 10/15/03 A$ 5,806 5,500
Western Australia Treasury,
12.000% 08/01/01 A$ 5,000 4,507
------
TOTAL FOREIGN GOVERNMENT & AGENCY
OBLIGATIONS (cost of $34,324) 39,484
------
</TABLE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 21.2%
- ---------------------------------------------------------------------------------
Maturities
Coupon From/To
-------------- -------------
<S> <C> <C> <C> <C> <C>
Government National Mortgage Association:
9.000% 2016 2,418 2,550
10.500% 2015-2020 531 586
11.000% 2018-2019 1,923 2,148
-------
5,284
-------
U.S. Treasury Bonds:
8.000% 08/15/99 2,600 2,711
11.625% 11/15/04 5,477 7,131
12.000% 08/15/13 6,944 9,694
-------
19,536
-------
U.S. Treasury Notes,
11.875% 11/15/03 785 1,013
-------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS (cost of $26,628) 25,833
-------
TOTAL BONDS & NOTES (cost of $120,049) 119,942
-------
</TABLE>
8
Investment Portfolio/May 31,1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
COMMON STOCKS - 0.0% SHARES
- ---------------------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.0%
MOTOR FREIGHT & WAREHOUSING
St. Johnsbury Trucking Co. (h)(i) 16 $ 16
Sun Carriers, Inc. (a)(h)(i) 65 1
-------
(cost $180) 17
-------
PREFERRED STOCK - 0.0%
- ---------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.0%
COMMUNICATIONS
Cablevision Systems Corp.,
11.125% PIK, Series L, (a)
(cost $7) (j) 7
-------
TOTAL INVESTMENTS - 98.6% (cost of $120,236)(k) 119,966
- ---------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 0.7% PAR
- ---------------------------------------------------------------------------------
Repurchase agreement with Bankers Trust Securities Corp., dated
05/31/96, due 06/03/96 at 5.310%, collateralized by U.S. Treasury
notes with various maturities to 1999, market value
$809 (repurchase proceeds $792) $792 792
-------
FORWARD CURRENCY CONTRACTS - 0.1% (l) 92
- ---------------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - 0.6% 777
- ---------------------------------------------------------------------------------
NET ASSETS - 100.0% $121,627
-------
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
- -------------------------------------------------------------------------------
(a) Securities exempt from registration under Rule 144A of the Securities Act
of 1993. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At May 31, 1996,
the value of these securities amounted to $6,494 or 5.3% of net assets.
(b) Zero coupon bond.
(c) Currently zero coupon. Shown parenthetically is the interest rate to be
paid and the date the Fund will begin accruing this rate.
(d) This is a British security. Par amount is stated in U.S. dollars.
(e) Each unit consists of ten senior discount notes and thirty three warrants.
(f) Each unit consists of eight senior discount notes and one convertible bond.
(g) Shown parenthetically is the interest rate to be paid and the date the Fund
will begin accruing this rate.
(h) Non-income producing.
(i) The value of this security represents fair value as determined in good
faith under the direction of the Trustees.
(j) Rounds to less than one.
(k) Cost for federal income tax purposes is the same.
9
Investment Portfolio/May 31,1996
- --------------------------------------------------------------------------------
(l) As of May 31, 1996, the Fund had entered into the following
forward currency exchange contracts:
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
Contracts In Exchange Settlement (Depreciation)
to Deliver For Date (U.S. $)
---------- --- ---- --------
<S> <C> <C> <C> <C> <C>
DK 15,752 USD 2,697 06/06/96 19
USD 2,659 DK 15,752 06/06/96 20
FF 1,005 USD 195 06/06/96 0
FF 8,875 USD 1,735 06/06/96 14
NK 7,054 USD 1,082 06/06/96 (1)
FF 2,161 USD 421 06/07/96 2
FF 8,875 USD 1,730 06/07/96 9
FF 4,605 USD 898 06/07/96 5
DK 41,117 USD 7,021 06/10/96 29
DK 8,465 USD 1,441 06/11/96 1
DK 8,141 USD 1,387 06/11/96 2
NK 3,602 USD 549 06/11/96 (4)
FM 8,027 USD 1,706 06/24/96 (4)
--
92
--
</TABLE>
<TABLE>
<CAPTION>
Country Currency Value % of Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $ 80,482 67.1
Denmark DK 11,923 9.9
Australia A$ 10,007 8.4
Spain SP 6,374 5.3
Finland FN 3,367 2.8
Poland PL 3,010 2.5
Argentina AR 2,741 2.3
Norway NO 2,062 1.7
-------- -----
$119,966 100.0
-------- -----
</TABLE>
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
Acronym Name
------- ---------------
PIK Payment-In-Kind
See notes to financial statements.
10
STATEMENT OF ASSETS & LIABILITIES
MAY 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
(in thousands except for per share amount)
ASSETS
<S> <C> <C>
Investments at value (cost $120,236) $119,966
Short-term obligations 792
--------
120,758
Receivable for:
Interest 1,979
Investments sold 207
Unrealized appreciation on forward
currency contracts 92
Other 3 2,281
----- --------
Total Assets 123,039
LIABILITIES
Payable for:
Distributions 881
Investments purchased 500
Accrued:
Deferred Trustees fees 2
Other 29
-----
Total Liabilities 1,412
--------
NET ASSETS at value for 11,009
shares of beneficial interest outstanding $121,627
--------
Net asset value per share $ 11.05
--------
COMPOSITION OF NET ASSETS
Capital paid in $122,287
Undistributed net investment income 587
Accumulated net realized loss (1,118)
Net unrealized appreciation (depreciation) on:
Investments (270)
Foreign currency transactions 141
--------
$121,627
--------
</TABLE>
See notes to financial statements.
11
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
(in thousands)
INVESTMENT INCOME
<S> <C> <C>
Interest $ 5,705
EXPENSES
Management fee $ 464
Transfer agent 23
Bookkeeping fee 18
Trustees fee 12
Custodian fee 15
Audit fee 22
Legal fee 7
Reports to shareholders 7
Other 35 603
------- -------
Net Investment Income 5,102
-------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain on:
Investments 2,258
Foreign currency transactions 586
-------
Net Realized Gain 2,844
Net unrealized appreciation (depreciation) during
the period on:
Investments (4,899)
Foreign currency transactions 152
-------
Net Unrealized Depreciation (4,747)
-------
Net Loss (1,903)
-------
Net Increase in Net Assets from Operations $ 3,199
-------
</TABLE>
See notes to financial statements.
12
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(Unaudited)
Six months
ended Year ended
(in thousands) May 31 November 30
----------- -----------
INCREASE (DECREASE) IN NET ASSETS 1996 1995
----------- -----------
Operations:
<S> <C> <C>
Net investment income $ 5,102 $ 10,413
Net realized gain (loss) 2,844 (57)
Net unrealized appreciation (depreciation) (4,747) 9,608
--------- ---------
Net Increase from Operations 3,199 19,964
Distributions:
From net investment income (5,284) (10,435)
From net realized gains (385)
--------- ---------
Total Increase (Decrease) (2,470) 9,529
NET ASSETS
Beginning of period 124,097 114,568
--------- ---------
End of period (including undistributed net investment
income of $587 and $571, respectively) $ 121,627 $ 124,097
--------- ---------
NUMBER OF FUND SHARES
Outstanding at end of period 11,009 11,009
--------- ---------
</TABLE>
See notes to financial statements.
13
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996 (UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
In the opinion of management of Colonial Intermarket Income Trust I (the
Fund), the accompanying financial statements contain all normal and
recurring adjustments necessary for the fair presentation of the
financial position of the Fund at May 31, 1996, and the results of its
operations, the changes in its net assets and the financial highlights
for the six months then ended.
NOTE 2. ACCOUNTING POLICIES
ORGANIZATION: The Fund is a Massachusetts business trust registered
under the Investment Company Act of 1940, as amended, as a diversified,
closed-end, management investment company. The Fund's objective is to
provide high current income. The Fund may issue an unlimited number of
shares.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. The following is a summary of significant accounting policies
that are consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION AND TRANSACTIONS: Debt securities are valued by a
pricing service based upon market transactions for normal,
institutional-size trading units of similar securities. When management
deems it appropriate, an over-the-counter or exchange bid quotation is
used.
Equity securities are valued at the last sale price or, in the case of
unlisted or listed securities for which there were no sales during the
day, at current quoted bid prices.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Portfolio positions which cannot be valued as set forth above are valued
at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income
tax purposes.
14
Notes to Financial Statements/May 31, 1996
------------------------------------------------------------------------
The Fund may trade securities on other than normal settlement terms.
This may increase the risk if the other party to the transaction fails
to deliver and causes the Fund to subsequently invest at less
advantageous prices.
FEDERAL INCOME TAXES: Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable
income, no federal income tax has been accrued.
INTEREST INCOME, DEBT DISCOUNT AND PREMIUM: Interest income is recorded
on the accrual basis. Original issue discount is accreted to interest
income over the life of a security with a corresponding increase in the
cost basis; premium and market discount are not amortized or accreted.
The value of additional securities received as an interest payment is
recorded as income and as the cost basis of such securities.
DISTRIBUTIONS TO SHAREHOLDERS: Distributions to shareholders are
recorded on the ex-date.
The amount and character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ
from generally accepted accounting principles. Reclassifications are
made to the Fund's capital accounts to reflect income and gains
available for distribution (or available capital loss carryforwards)
under income tax regulations.
FOREIGN CURRENCY TRANSACTIONS: Net realized and unrealized gains
(losses) on foreign currency transactions include the fluctuation in
exchange rates on gains (losses) 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 and interest income and foreign withholding
taxes.
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.
FORWARD CURRENCY CONTRACTS: The Fund may enter into forward currency
contracts to purchase or sell foreign currencies at predetermined
exchange rates in connection with the settlement of purchases and sales
of securities. The Fund may also enter into forward currency contracts
to hedge certain other foreign currency denominated assets. The
contracts are used to minimize the exposure to foreign exchange rate
fluctuations during the period between trade and settlement date of the
contracts. All contracts are marked-to-market daily, resulting in
unrealized gains and losses which become realized at the time the
forward currency contracts are closed or mature. Realized and unrealized
gains (losses) arising from such
15
Notes to Financial Statements/May 31, 1996
------------------------------------------------------------------------
NOTE 2. ACCOUNTING POLICIES - CONT.
transactions are included in net realized and unrealized gains (losses)
on foreign currency transactions. Forward currency contracts do 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. Risks may also arise if
counterparties fail to perform their obligations under the contracts.
OTHER: Corporate actions 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 nonrebatable tax withholdings. Where a
high level of uncertainty as to collection exists, income on securities
is recorded net of all tax withholdings with any rebates recorded when
received.
The Fund's custodian takes possession through the federal book-entry
system of securities collateralizing repurchase agreements. Collateral
is marked-to-market daily to ensure that the market value of the
underlying assets remains sufficient to protect the Fund. The Fund may
experience costs and delays in liquidating the collateral if the issuer
defaults or enters bankruptcy.
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT FEE: Colonial Management Associates, Inc. (the Adviser)
is the investment adviser of the Fund and furnishes accounting and other
services and office facilities for a monthly fee equal to 0.75% annually
of the Fund's average weekly net assets.
BOOKKEEPING FEE: The Adviser provides bookkeeping and pricing services
for $18,000 per year plus 0.0233% of the Fund's average net assets over
$50 million.
OTHER: The Fund pays no compensation to its officers, all of whom are
employees of the Adviser.
The Fund's Trustees may participate in a deferred compensation plan
which may be terminated at any time. Obligations of the plan will be
paid solely out of the Fund's assets.
NOTE 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY: During the six months ended May 31, 1996, purchases
and sales of investments, other than short-term obligations, were
$73,490,707 and $71,395,340, respectively, of which $7,222,719 and
$6,681,942 respectively, were U.S. government securities.
16
Notes to Financial Statements/May 31, 1996
------------------------------------------------------------------------
Unrealized appreciation (depreciation) at May 31, 1996, based on cost of
investments for both financial statement and federal income tax purposes
was approximately:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 2,908,320
Gross unrealized depreciation (3,177,996)
-----------
Net unrealized depreciation $ (269,676)
-----------
</TABLE>
CAPITAL LOSS CARRYFORWARDS: At November 30, 1995, capital loss
carryforwards available (to the extent provided in regulations) to
offset future realized gains were approximately as follows:
<TABLE>
<CAPTION>
Year of Capital loss
expiration carryforward
---------- ------------
<S> <C>
2002 $ 2,887,000
2003 529,000
-----------
$ 3,416,000
-----------
</TABLE>
Expired capital loss carryforwards, if any, are recorded as a reduction
of capital paid in.
To the extent loss carryforwards are used to offset any future realized
gains, it is unlikely that such gains would be distributed since they
may be taxable to shareholders as ordinary income.
OTHER: 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 the imposition of other
foreign governmental laws or restrictions.
The Fund may focus its investments in certain industries, subjecting it
to greater risk than a fund that is more diversified.
NOTE 5. RESULTS OF ANNUAL SHAREHOLDER MEETING
On April 30, 1996, the Annual Meeting of Shareholders was held to elect
five Trustees and to ratify the selection of Price Waterhouse LLP as
independent accountants for the fiscal year ending November 30, 1996. On
March 4, 1996, the record date of the Meeting, the Fund had outstanding
11,009,000 shares of beneficial interest. The votes cast at the Meeting
were as follows:
17
Notes to Financial Statements/May 31, 1996
------------------------------------------------------------------------
Election of five Trustees:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C> <C>
Robert J. Birnbaum 9,914,349 145,844 948,807
James E. Grinnell 9,913,192 147,001 948,807
James L. Moody, Jr. 9,915,938 144,254 948,807
George L. Shinn 9,903,329 156,864 948,807
Robert L. Sullivan 9,908,838 151,355 948,807
</TABLE>
The Board of Trustees also consists of Tom Bleasdale, Lora S. Collins,
William D. Ireland, Richard W. Lowry, William E. Mayer, John J.
Neuhauser, and Sinclair Weeks, Jr.
Ratification of the selection of Price Waterhouse LLP as independent
accountants:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C> <C>
9,915,352 28,108 116,732
</TABLE>
18
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
(Unaudited)
Six months
ended May 31 Year ended November 30
------------ -------------------------------------------
1996 1995 1994 1993
------------ -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 11.270 $ 10.410 $ 12.010 $ 11.220
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.481 0.986 0.980 1.093
Net realized and
unrealized gain (loss) (0.186) 0.822 (1.271) 0.777
-------- -------- -------- --------
Total from Investment
Operations 0.295 1.808 (0.291) 1.870
-------- -------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.480) (0.948) (0.970) (1.080)
From net realized gains (0.035) -- (0.339) --
-------- -------- -------- --------
Total Distributions
Declared to Shareholders (0.515) (0.948) (1.309) (1.080)
-------- -------- -------- --------
Net asset value -
End of period $ 11.050 $ 11.270 $ 10.410 $ 12.010
-------- -------- -------- --------
Market price per share $ 11.000 $ 10.750 $ 10.000 $ 11.875
-------- -------- -------- --------
Total return - based on market
value (a) 7.30%(b) 17.67% (5.42)% 16.87%
-------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.97%(c)(d) 0.97%(c) 0.98% 1.02%
Net investment income 8.25%(c)(d) 8.73%(c) 8.84% 9.27%
Portfolio turnover 120%(d) 77% 99% 179%
Net assets at end
of period (000) $121,627 $124,097 $114,568 $132,272
</TABLE>
(a) Total return at market value assuming all distributions reinvested and
excluding brokerage commissions.
(b) Not annualized.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(d) Annualized.
19
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
Year ended November 30
------------------------
1992 1991
-------- --------
<S> <C> <C>
Net asset value -
Beginning of period $ 11.330 $ 10.640
-------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 1.152 1.229
Net realized and
unrealized gain (loss) (0.132) 0.696
-------- --------
Total from Investment
Operations 1.020 1.925
-------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (1.130) (1.229)
From net realized gains -- (0.006)
-------- --------
Total Distributions
Declared to Shareholders (1.130) (1.235)
-------- --------
Net asset value -
End of period $ 11.220 $ 11.330
-------- --------
Market price per share $ 11.125 $ 11.000
-------- --------
Total return - based on market
value (a) 11.57% 28.24%
-------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.04% 1.07%
Net investment income 10.08% 11.23%
Portfolio turnover 129% 109%
Net assets at end
of period (000) $123,560 $124,778
</TABLE>
(a) Total return at market value assuming all distributions reinvested and
excluding brokerage commissions.
20
THIS PAGE INTENTIONALLY LEFT BLANK
21
DIVIDEND REINVESTMENT PLAN
The Trust generally distributes net investment income and net short-term capital
gains monthly and net long-term capital gains annually. Under the Trust's
Dividend Reinvestment Plan (the "Plan") all distributions are reinvested
automatically in additional shares of the Trust, 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 are by check mailed directly to the record holder by the dividend
paying agent.
Shares issued under the Plan are purchased in the open market for the
participants' accounts commencing five business days before the payment date for
each distribution. Shares are credited to each account based on the average
price paid including brokerage commissions. All Plan accounts receive monthly
written confirmations of all transactions. Shares purchased under the Plan
ordinarily are held in uncertificated form, although each participant has the
right to receive certificates for whole shares owned by the participant. 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. Participants may recognize capital
gains or ordinary income for federal income tax purposes in an amount equal to
the market value of shares received under the Plan.
There is no charge to Plan participants for reinvesting distributions. Fees and
expenses of the Plan other than brokerage charges are paid by the Trust.
Participants bear a pro-rata share of brokerage charges incurred on open market
purchases of shares issued under the Plan.
A shareholder may elect not to participate or terminate his or her participation
in the Plan by written notice to the Plan administrator. Such notice must be
received by the Plan administrator before the dividend record date in order to
be effective with respect to that dividend. The Plan may be amended or
terminated on 90 days' written notice to the Plan participants. Upon withdrawal
by any participant or any termination of the Plan, certificates for whole shares
will be issued and cash payments will be made for any fractional shares. All
correspondence concerning the Plan should be directed to State Street Bank and
Trust Company, the Trust's dividend disbursing agent and administrator of the
Plan, at P.O. Box 8200, Boston, Massachusetts 02266-8200.
22
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial InterMarket Income Trust I is:
State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
1-800-426-5523
Colonial InterMarket Income Trust I mails one shareholder report to each
shareholder address. If you would like more than one report, please call our
Literature Department at 1-800-248-2828 and additional reports will be sent to
you.
This report has been prepared for shareholders of Colonial InterMarket Income
Trust I.
This Fund may purchase foreign currencies on a spot or forward basis in
conjunction with its investments in foreign securities and to hedge against
fluctuation in foreign currencies. The precise matching of foreign currency
exchange transactions and portfolio securities generally will not be possible
since the future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities and it is
impossible to forecast with precision the change in market value of portfolio
securities. Currency hedging does not eliminate fluctuations in the underlying
prices of the securities, but rather establishes a rate of exchange at some
future point in time. Additionally, although these techniques tend to minimize
the risk of loss due to a decline in the value of the hedged currency, they tend
to limit any potential gain which might result from the increase in value of
such currency.
23
[COLONIAL FUNDS LOGO]
Mutual Funds for
Planned Portfolios
TRUSTEES
ROBERT J. BIRNBAUM
Trustee (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief
Operating Officer, New York Stock Exchange, Inc.)
TOM BLEASDALE
Trustee (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
LORA S. COLLINS
Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
WILLIAM D. IRELAND, JR.
Trustee (formerly Chairman of the Board, Bank of New England-Worcester)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
WILLIAM E. MAYER
Dean, College of Business and Management, University of Maryland (formerly Dean,
Simon Graduate School of Business, University of Rochester; Chairman and Chief
Executive Officer, C.S. First Boston Merchant Bank; and President and Chief
Executive Officer, The First Boston Corporation)
JAMES L. MOODY, JR.
Chairman of the Board, Hannaford Bros. Co. (formerly Chief Executive Officer,
Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
GEORGE L. SHINN
Financial Consultant (formerly Chairman, Chief Executive Officer and Consultant,
The First Boston Corporation)
ROBERT L. SULLIVAN
Management Consultant (formerly Management Consultant, Saatchi and Saatchi
Consulting Ltd. and Principal and International Practice Director, Management
Consulting, Peat Marwick Main & Co.)
SINCLAIR WEEKS, JR.
Chairman of the Board, Reed & Barton Corporation
COLONIAL INVESTMENT SERVICES, INC., Distributor (C) 1996
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
CI-03/336C-0596 M (7/96)
