[COLONIAL FLAG LOGO]
COLONIAL
INTERMARKET
INCOME
TRUST I
SEMIANNUAL REPORT
MAY 31, 1997
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COLONIAL INTERMARKET INCOME TRUST I HIGHLIGHTS
DECEMBER 1, 1996 - MAY 31, 1997
INVESTMENT OBJECTIVE: Colonial InterMarket Income Trust I seeks as high a level
of current income and total return as is consistent with prudent risk, by
diversifying investments primarily in U.S. and foreign government and
lower-rated corporate debt securities.
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, the Fund has responded
to increasing concerns over stronger economic growth and a return of higher
interest rates. In this difficult environment, the Fund turned in a positive
performance. The high yield corporate bonds and foreign bonds that make up the
majority of its holdings were less sensitive to these market factors than were
U.S. government bonds. While U.S. government bonds experienced greater
volatility and lower prices during the period, we expect their prices to improve
as the economy continues its current trend of moderate growth and modest
inflation." -- Carl Ericson
COLONIAL INTERMARKET INCOME TRUST I PERFORMANCE
Distributions declared per share $0.505
Six-month total return, assuming
reinvestment of all distributions
* NAV 2.14%
* Market Price 7.27%
Price per share
* NAV $11.23
* Market Price $10.88
GOVERNMENT BREAKDOWN
SECURITIES BREAKDOWN TOP FIVE FOREIGN COUNTRIES
(as of 5/31/97) (as of 5/31/97)
- ---------------------------------- ----------------------------------
1. High yield corporate ....40.8% 1. United Kingdom ...........5.0%
2. Foreign government ......28.8% 2. Australia ................4.2%
3. U.S. government .........22.9% 3. Spain ....................3.9%
4. Other ....................7.5% 4. Denmark ..................2.4%
5. Italy ....................2.4%
Securities breakdown and country weightings are calculated as a percentage of
total net assets.
Because the Trust is actively managed, there can be no guarantee the Trust will
continue to maintain these country weightings or invest in these sectors in the
future. Industry sectors in the following financial statements are based upon
the standard industrial classifications (SIC) published by the U.S. Office of
Management and Budget. The sector classifications used on this page are based
upon Colonial's defined criteria as used in the investment process.
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2
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PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
I am pleased to present your Fund's semiannual report
for the six months ended May 31, 1997.
During this period, all financial markets were affected
by concerns that strong economic growth would lead
to higher inflation. In March, the Federal Reserve
Board did raise short-term rates as a preemptive
strike. This action caused some volatility in the bond [PHOTO]
market, especially in the U.S. government sector,
which hindered the performance of mutual funds such as yours holding
long-term, fixed-income securities.
Despite this volatility, your Fund's management policy of diversification helped
to reduce the effect of fluctuating interest rates and bond prices. In the
months to come, all sectors are expected to improve. High yield corporate bonds
are already benefiting from a stronger stock market, and continued low inflation
could mean better prices for both U.S. and foreign government bonds.
Even in the difficult environment of the last six months, your Fund has
continued to provide investors with consistent income generated by stable,
well-researched investments.
We look forward to updating you on the Fund's performance six months from now,
in the annual report.
Respectfully,
/s/ Harold W. Cogger
Harold W. Cogger
President
July 15, 1997
Because market conditions change frequently, there can be no assurance that the
trends described here will continue, come to pass or affect Fund performance.
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3
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INFORMATION ABOUT YOUR FUND'S
INVESTMENT POLICIES
At their meeting April 18, 1997, your Trustees approved a change to the Trust's
investment objective. Previously, the investment objective was to "maximize
current income." Under the restated objective, the Trust will seek as high a
level of current income and total return as is consistent with prudent risk, by
diversifying its investments primarily in securities issued by U.S. and foreign
governments and in lower-rated corporate debt securities.
The Trustees also approved several changes to the Trust's investment policies,
which will:
Eliminate a limit on the Trust's investments in securities rated below CCC
(by Standard & Poor's) or Caa (by Moody's Investors Services); allow the Trust
to invest up to half of 1% of its assets in securities rated below CC (S&P) or
Ca (Moody's) if the Advisor believes the quality of these securities is higher
than that indicated by the rating, and allow the Trust to invest in securities
in the lowest rating categories (S&P:D; Moody's:C).
Allow the Advisor to allocate the Trust's investments among market sectors
based on its expectations and risk evaluation for each type of security,
replacing a policy that required approximately one-third (but no more than
half) of the Fund's assets to generally be invested in each market sector at
any time.
Allow the Trust to invest in debt securities issued by foreign governments
and their political subdivisions that pay fixed, floating or adjustable interest
rates and to invest more then 10% of its assets in zero-coupon securities and
securities that pay interest with more securities (so-called "payment-in-kind"
securities).
Allow the Trust to make temporary cash investments in additional types of
money market securities.
The changes in the Trust's investment policies parallel those that have been
made over time for similar Colonial open-end funds. The Trustees believe these
changes are in the best interests of shareholders.
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4
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<TABLE>
INVESTMENT PORTFOLIO
MAY 31, 1997 (UNAUDITED, IN THOUSANDS)
<CAPTION>
BONDS & NOTES - 92.5% PAR VALUE
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CORPORATE FIXED-INCOME BONDS & NOTES - 40.8%
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MANUFACTURING - 15.8%
ELECTRONIC & ELECTRICAL EQUIPMENT - 2.8%
Advanced Micro Devices, Inc.,
<S> <C> <C> <C> <C>
11.000% 08/01/03 $ 750 $ 833
Amphenol Corp.,
9.875% 05/15/07 250 257
Delco Remy International, Inc.,
10.625% 08/01/06 (a) 400 420
K&F Industries, Inc.,
10.375% 09/01/04 350 368
Unisys Corp.,
11.750% 10/15/04 1,500 1,620
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3,498
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FABRICATED METAL - 1.7%
Euramax International PLC,
11.250% 10/01/06 2,000 2,110
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FOOD & KINDRED PRODUCTS - 2.3%
Chiquita Brands International, Inc.,
10.250% 11/01/06 750 802
Van De Kamps, Inc.,
12.000% 09/15/05 1,500 1,658
Windy Hill Pet Food Co.,
9.750% 05/15/07 (a) 400 403
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2,863
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MACHINERY & COMPUTER EQUIPMENT - 1.9%
IMO Industries, Inc.,
11.750% 05/01/06 750 754
Shop Vac Corp.,
10.625% 09/01/03 1,500 1,594
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2,348
-----------
MEASURING & ANALYZING INSTRUMENT - 0.4%
Intertek Finance PLC,
10.250% 11/01/06 500 520
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MISCELLANEOUS MANUFACTURING - 1.2%
Coleman Escrow Corp.,
(b) 05/15/01 (a) 1,000 649
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5
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<TABLE>
Investment Portfolio/May 31, 1997
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CORPORATE FIXED-INCOME BONDS & NOTES - CONT. PAR VALUE
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MANUFACTURING - CONT.
MISCELLANEOUS MANUFACTURING - CONT.
Dade International, Inc.,
<S> <C> <C> <C> <C>
11.125% 05/01/06 $ 750 $ 838
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1,487
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PAPER PRODUCTS - 1.7%
Florida Coast Paper,
12.750% 06/01/03 500 505
Gaylord Container Corp.,
11.500% 05/15/01 1,250 1,314
Stone Container Corp. Units,
12.250% 04/01/02 (c) 250 257
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2,076
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PETROLEUM REFINING - 0.3%
Texas Petrochemical Corp.,
11.125% 07/01/06 400 429
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PRIMARY METAL - 2.3%
Algoma Steel, Inc.,
12.375% 07/15/05 1,500 1,695
WCI Steel, Inc.,
10.000% 12/01/04 1,100 1,137
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2,832
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RUBBER & PLASTIC - 0.8%
Portola Packaging, Inc.,
10.750% 10/01/05 1,000 985
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TRANSPORTATION EQUIPMENT - 0.4%
Aftermarket Technology Corp.,
Series B,
12.000% 08/01/04 430 477
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MINING & ENERGY - 4.2%
OIL & GAS EXTRACTION - 3.6%
Falcon Drilling Co., Inc.,
Series B,
8.875% 03/15/03 250 251
Forcenergy, Inc.,
9.500% 11/01/06 550 568
Mariner Energy Corp.,
10.500% 08/01/06 1,000 1,040
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6
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<TABLE>
<CAPTION>
Investment Portfolio/May 31, 1997
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Nuevo Energy Co.,
<S> <C> <C> <C> <C>
12.500% 06/15/02 $ 2,000 $ 2,080
Parker Drilling Corp.,
9.750% 11/15/06 500 520
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4,459
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OIL & GAS FIELD SERVICES - 0.6%
Magnum Hunter, Inc.,
10.000% 06/01/07 (a) 750 750
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RETAIL TRADE - 3.1%
FOOD STORES - 3.1%
Dominick's Finer Foods, Inc.,
10.875% 05/01/05 1,500 1,668
Pathmark Stores, Inc.,
9.625% 05/01/03 1,000 950
Smiths Food & Drugs,
11.250% 05/15/07 1,000 1,170
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3,788
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SERVICES - 3.3%
AMUSEMENT & RECREATION - 1.1%
Harvey Casinos Resorts,
10.625% 06/01/06 1,250 1,326
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BUSINESS SERVICES - 0.6%
Pierce Leahy,
11.125% 07/15/06 700 768
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HOTELS, CAMPS & LODGING - 1.1%
Eldorado Resorts Limited Liability Corp.,
10.500% 08/15/06 300 321
HMH Properties, Inc.,
9.500% 05/15/05 1,000 1,039
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1,360
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PRIVATE HOUSEHOLDS - 0.5%
Allied Waste North America, Inc,
10.250% 12/01/06 (a) 500 531
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TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 14.4%
AIR TRANSPORTATION - 1.2%
Continental Airlines, Inc.,
9.500% 12/15/01 325 335
</TABLE>
7
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<TABLE>
Investment Portfolio/May 31, 1997
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<CAPTION>
CORPORATE FIXED-INCOME BONDS & NOTES - CONT. PAR VALUE
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TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - CONT.
AIR TRANSPORTATION - CONT.
Greenwich Air Services, Inc.,
<S> <C> <C> <C> <C>
10.500% 06/01/06 $ 1,000 $ 1,145
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1,480
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BROADCASTING - 3.1%
Allbritton Communications Co.,
11.500% 08/15/04 1,500 1,578
NWCG Holding Corp.,
(b) 06/15/99 1,400 1,208
Young Broadcasting Corp.,
10.125% 02/15/05 1,000 1,045
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3,831
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CABLE - 2.0%
Cablevision Systems Corp.,
10.750% 04/1/04 1,500 1,547
Comcast UK Cable Partners Ltd.,
stepped coupon (d)
(11.200% 11/15/00) 11/15/07 (e) 1,250 923
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2,470
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COMMUNICATIONS - 0.9%
Lodgenet Entertainment, Inc.,
10.250% 12/15/06 500 502
UNC, Inc.,
11.000% 06/01/06 500 582
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1,084
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ELECTRIC, GAS & SANITARY SERVICES - 1.6%
Mesa Operating Co.,
10.625% 07/01/06 1,750 1,969
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GAS SERVICES - 1.4%
California Energy Co., Inc.,
9.875% 06/30/03 1,250 1,328
HS Resources, Inc.,
9.250% 11/15/06 400 398
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1,726
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MOTOR FREIGHT & WAREHOUSING - 0.3%
Ryder Trucks, Inc.,
10.000% 12/01/06 400 409
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TELECOMMUNICATION - 3.3%
Brooks Fiber Properties, Inc.,
stepped coupon (d)
(10.875% 03/01/01) 03/01/06 1,000 678
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<TABLE>
Investment Portfolio/May 31, 1997
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<CAPTION>
Clearnet Communications Units,
stepped coupon (d)
(14.750% 12/15/00) 12/15/05 (f) $ 750 $ 488
ICG Holding, Inc.,
stepped coupon (d)
(13.500% 09/15/00) 09/15/05 1,500 1,109
OMNIPOINT Corp.,
11.625% 08/15/06 450 399
PanAmSat Corp.,
stepped coupon (d)
(11.375% 08/01/98) 08/01/03 1,500 1,449
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4,123
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TRANSPORTATION SERVICES - 0.6%
Williams Scotsman, Inc.,
9.875% 06/01/07 (a) 750 752
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TOTAL CORPORATE FIXED-INCOME
BONDS & NOTES (cost of $47,121) 50,451
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FOREIGN GOVERNMENT & AGENCY
OBLIGATIONS - 28.8% CURRENCY
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Argentina Global Bonds:
<S> <C> <C> <C> <C> <C>
8.750% 05/09/02 (g) 625 617
9.250% 02/23/01 (g) 885 921
11.000% 10/09/06 (g) 900 983
11.375% 01/30/17 (g) 700 766
Government of Finland Bonds,
7.250% 04/18/06 FN 11,000 2,282
Government of Poland, Brady Bonds:
Past Due Interest, stepped coupon,
(5.000% 10/27/99) 4.000% 10/27/14 (h) 1,600 1,345
6.938% 10/27/2 (i) 1,320 1,290
Government of Sweden,
10.250% 05/05/03 SK 18,400 2,813
Italian Government Bonds,
10.000% 08/01/03 IL 3,500,000 2,344
Kingdom of Denmark:
8.000% 03/15/06 DK 13,750 2,338
8.000% 05/15/03 DK 3,700 635
Mexican Brady Bonds,
6.250% 12/31/19 (j) 700 528
Mexican Global Bonds:
9.750% 02/06/01 (j) 550 580
11.375% 09/15/16 (j) 1,200 1,316
Republic of Venezuela Par Brady,
6.750% 03/31/20 (k) 750 571
</TABLE>
9
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<TABLE>
Investment Portfolio/May 31, 1997
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<CAPTION>
FOREIGN GOVERNMENT & AGENCY
OBLIGATIONS - CONT. CURRENCY PAR VALUE
- -------------------------------------------------------------------------------------------
Spanish Government Bonds:
<S> <C> <C> <C> <C> <C>
10.000% 02/28/05 SP 290,000 $ 2,428
10.500% 10/30/03 SP 280,000 2,369
United Kingdom Treasury:
9.500% 04/18/05 UK 665 1,240
10.000% 09/08/03 UK 2,670 4,991
Western Australia Treasury Corp.:
12.000% 08/01/01 A$ 3,180 2,876
12.500% 10/15/03 A$ 2,450 2,363
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TOTAL FOREIGN GOVERNMENT & AGENCY
OBLIGATIONS (cost of $32,411) $ 35,596
-----------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 22.9%
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Government National Mortgage Association:
Maturities
Coupon From/To
------------ ----------
9.000% 2016 1,966 2,103
10.500% 2015-2020 386 428
11.000% 2018-2019 1,307 1,471
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4,002
-----------
U.S. Treasury Bonds:
8.750% 05/15/17 (l) 390 463
11.630% 11/15/04 (l) 9,240 11,912
12.000% 08/15/13 (l) 3,944 5,509
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17,884
-----------
U.S. Treasury Notes:
9.130% 05/15/99 (l) 3,892 4,098
11.880% 11/15/03 (l) 1,875 2,389
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6,487
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TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS (cost of $32,934) 28,373
-----------
TOTAL BONDS & NOTES (cost of $112,466) 114,420
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COMMON STOCKS - 0.0% SHARES
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MANUFACTURING - 0.0%
MOTOR FREIGHT & WAREHOUSING - 0.0%
St. Johnsbury Trucking Co. (m)(n) 16 16
Sun Carriers, Inc. (a)(m)(n) 65 1
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TOTAL COMMON STOCKS (cost of $180) 17
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</TABLE>
10
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<TABLE>
Investment Portfolio/May 31, 1997
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<CAPTION>
PREFERRED STOCKS - 1.3%
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FINANCE, INSURANCE & REAL ESTATE - 0.2%
DEPOSITORY INSTITUTIONS - 0.2%
California Federal Preferred Capital
<S> <C> <C>
9.125%, Series A $ 9 $ 216
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TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 1.1%
COMMUNICATIONS - 1.1%
Nextlink Communications
14.000% Preferred, Series M 5 259
Time Warner, Inc.,
10.250% Preferred, Series M 1 1,130
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1,389
TOTAL PREFERRED STOCKS (cost of $1,612) 1,605
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WARRANTS (0) - 0.0%
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PUBLIC ADMINISTRATION - 0.0%
GENERAL GOVERNMENT - 0.0%
Mexican Government Rights W/ Series A&B
(expires 6/30/03) 700 (o)
Venezuela Government Rights W/ Series A&B
(expires 4/15/20) 4 (o)
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TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.0%
COMMUNICATIONS - 0.0%
Clearnet Communications
(expires 9/15/05) 2 10
Nextlink Communications
(expires 9/15/05) 5 (o)
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TOTAL WARRANTS (cost of $15) 10
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TOTAL INVESTMENTS - 93.8% (cost of $114,273)(p) 116,052
============================================================================================
SHORT-TERM OBLIGATIONS - 5.7% PAR
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Repurchase agreement with Greenwich Capital Markets
Corp., dated 05/30/96, due 06/02/97 at 5.50%,
collateralized by U.S. Treasury notes with various
maturities to 2026, market value
$7,895 (repurchase proceeds $7,068) $ 7,065 7,065
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FORWARD CURRENCY CONTRACTS - 0.1% (q) 129
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OTHER ASSETS & LIABILITIES, NET - 0.4% 411
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NET ASSETS - 100.0% $ 123,657
===========
</TABLE>
11
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Investment Portfolio/May 31, 1997
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NOTES TO INVESTMENT PORTFOLIO:
(a) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At May 31, 1997,
the value of these securities amounted to $3,506 or 2.8% of net assets.
(b) Zero coupon bond.
(c) Each unit consists of Series B, 10 3/4% senior subordinated debentures due
2002 and 1 1/2% supplemental interest certificates..
(d) Currently zero coupon. Shown parenthetically is the interest rate to be
paid and the date the Fund will begin accruing this rate.
(e) This is a British security. Par amount is stated in U.S. dollars.
(f) Each unit consists of ten senior discount notes and thirty three warrants.
(g) These are Argentinean securities. Par amount is stated in U.S. dollars.
(h) This is a Polish security. Shown parenthetically is the interest rate to be
paid and the date the Fund will begin accruing this rate. Par amount is
stated in U.S. dollars.
(i) This is a Polish security. Par amount is stated in U.S. dollars.
(j) These are Mexican securities. Par amount is stated in U.S. dollars.
(k) This is a Venezuelan security. Par amount is stated in U.S. dollars.
(l) These securities with a total market value of $24,371 are being used to
collateralize the forward currency contracts shown below.
(m) Non-income producing.
(n) The value of this security represents fair value as determined under
procedures approved by the Trustees.
(o) Rounds to less than one.
(p) Cost for federal income tax purposes is $114,807.
(q) As of May 31, 1997, the Fund had entered into the following forward
currency contracts:
Net Unrealized
Appreciation
Contracts In Exchange Settlement (Depreciation)
to Deliver For Date (U.S.$)
---------- ----------- ---------- --------------
A$ 5,350 US$ 4,069 06/27/97 $ 104
DK 9,140 US$ 1,418 06/19/97 10
DM 2,052 US$ 1,210 07/02/97 5
FF 14,300 US$ 2,511 06/20/97 28
FM 5,900 US$ 1,157 06/24/97 9
UK 2,865 US$ 4,635 07/02/97 (65)
SK 16,300 US$ 2,144 06/23/97 38
==============
$ 129
==============
12
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Investment Portfolio/May 31, 1997
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Summary of Securities by
Country/Currency Currency Value % of Total
---------------- -------- ----- ----------
United States $ $ 89,373 77.0
United Kingdom UK 6,231 5.4
Australia A$ 5,239 4.5
Spain SP 4,797 4.1
Denmark DK 2,973 2.6
Sweden SK 2,813 2.4
Italy IL 2,344 2.0
Finland FN 2,282 2.0
========== =======
$ 116,052 100.0
========== =======
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
See notes to financial statements.
13
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STATEMENT OF ASSETS & LIABILITIES
MAY 31, 1997 (UNAUDITED)
(in thousands except for per share amount)
ASSETS
Investments at value (cost $114,273) $ 116,052
Short-term obligations 7,065
------------
123,117
Receivable for:
Interest $ 2,094
Investments sold 1,315
Unrealized appreciation on forward
currency contracts 129
Other 1 3,539
--------- ------------
Total Assets 126,656
LIABILITIES
Payable for:
Investments purchased 1,321
Distributions 858
Payable to custodian bank 807
Accrued:
Deferred Trustees fees 2
Other 11
---------
Total Liabilities 2,999
------------
NET ASSETS at value for 11,009
shares of beneficial interest outstanding $ 123,657
============
Net asset value per share $ 11.23
============
COMPOSITION OF NET ASSETS
Capital paid in $ 122,284
Undistributed net investment income 687
Accumulated net realized loss (1,222)
Net unrealized appreciation on:
Investments 1,779
Foreign currency transactions 129
------------
$ 123,657
============
See notes to financial statements.
14
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 1997
(UNAUDITED)
(in thousands)
INVESTMENT INCOME
Interest $ 5,589
Dividends 41
------------
5,630
EXPENSES
Management fee $ 465
Transfer agent 22
Bookkeeping fee 18
Trustees fee 11
Custodian fee 14
Audit fee 20
Legal fee 8
Reports to shareholders 1
Other 38 597
--------- ------------
Net Investment Income 5,033
------------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments (439)
Foreign currency transactions 1,546
--------------
Net Realized Gain 1,107
Net unrealized appreciation (depreciation)
during the period on:
Investments (3,760)
Foreign currency transactions 1
--------------
Net Unrealized Depreciation (3,759)
------------
Net Loss (2,652)
------------
Net Increase in Net Assets from Operations $ 2,381
============
See notes to financial statements.
15
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
Six months Year ended
(in thousands) ended May 31 November 30
------------ -----------
INCREASE IN NET ASSETS 1997 1996
------------ -----------
Operations:
Net investment income $ 5,033 $ 10,275
Net realized gain 1,107 2,367
Net unrealized appreciation (depreciation) (3,759) 1,049
------------ -----------
Net Increase from Operations 2,381 13,691
Distributions:
From net investment income (5,559) (10,953)
------------ -----------
Total Increase (Decrease) (3,178) 2,738
------------ -----------
NET ASSETS
Beginning of period 126,835 124,097
------------ -----------
End of period (including undistributed net investment
income of $687 and $656, respectively $ 123,657 $ 126,835
============ ===========
NUMBER OF FUND SHARES
Outstanding at end of period 11,009 11,009
============ ===========
See notes to financial statements.
16
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NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997 (UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
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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, 1997, and the results of its operations, the changes in its net
assets and the financial highlights for the six months then ended.
NOTE 2. ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
ORGANIZATION: The Fund is a Massachusetts business trust registered under the
Investment Company Act of 1940, as amended, as a diversified, closed-end,
management investment company. The Fund's investment objective is to seek as
high a level of current income and total return as is consistent with prudent
risk, by diversifying investments primarily in U.S. and foreign government and
lower-rated corporate debt securities. The Fund authorized an unlimited number
of shares.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies 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.
17
<PAGE>
Notes to Financial Statements/May 31, 1997
- --------------------------------------------------------------------------------
NOTE 2. ACCOUNTING POLICIES - CONT.
- --------------------------------------------------------------------------------
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, 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 transactions are included in net realized and
unrealized gains (losses) on
18
<PAGE>
Notes to Financial Statements/May 31, 1997
- --------------------------------------------------------------------------------
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, 1997, purchases and
sales of investments, other than short-term obligations, were $73,402,284, and
$76,558,261, respectively, of which $6,516,156 and $6,118,426, respectively,
were U.S. government securities.
Unrealized appreciation (depreciation) at May 31, 1997, based on cost of
investments for federal income tax purposes was:
Gross unrealized appreciation $ 3,700,331
Gross unrealized depreciation (2,454,843)
-------------
Net unrealized appreciation $ 1,245,488
=============
19
<PAGE>
Notes to Financial Statements/May 31, 1997
- --------------------------------------------------------------------------------
NOTE 4. PORTFOLIO INFORMATION- CONT.
- --------------------------------------------------------------------------------
CAPITAL LOSS CARRYFORWARDS: At November 30, 1996, capital loss carryforwards
available (to the extent provided in regulations) to offset future realized
gains were approximately as follows:
Year of Capital loss
expiration carryforward
---------- ------------
2002 $ 712,000
2003 529,000
------------
$ 1,241,000
============
Expired capital loss carryforwards, if any, are recorded as a reduction of
capital paid in.
To the extent loss carryforwards are used to offset any future realized gains,
it is unlikely that such gains would be distributed since they may be taxable to
shareholders as ordinary income.
OTHER: 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 May 30, 1997, the Annual Meeting of Shareholders was held to elect four
Trustees and to ratify the selection of Price Waterhouse LLP as independent
accountants for the fiscal year ending November 30, 1997. On March 3, 1997, the
record date for the Meeting, the Fund had outstanding 11,009,000 shares of
beneficial interest. The votes cast at the Meeting were as follows:
Election of four Trustees:
AUTHORITY
FOR WITHHELD
--- --------
Tom Bleasdale 9,107,531 133,781
Lora S. Collins 9,108,190 133,122
John J. Neuhauser 9,111,661 129,651
Sinclair Weeks, Jr. 9,086,147 155,165
The Board of Trustees also consists of Robert J. Birnbaum, James E. Grinnell,
William D. Ireland, Jr., Richard W. Lowry, William E. Mayer, James L. Moody,
Jr., George L. Shinn and Robert L. Sullivan.
Ratification of the selection of Price Waterhouse LLP as independent
accountants:
FOR AGAINST ABSTAIN
--- ------- -------
9,062,496 53,390 125,425
20
<PAGE>
FINANCIAL HIGHLIGHTS
Selected per share data, total return, ratios and supplemental data throughout
each period are as follows:
(Unaudited)
Six months Year ended
ended May 31 November 30
-----------------------------------------
1997 1996 1995
------------ ------------ -----------
Net asset value -
Beginning of period $ 11.520 $ 11.270 $ 10.410
------------ ------------ -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.507 0.968 0.986
Net realized and
unrealized gain (loss) (0.292) 0.277 0.822
------------ ------------ -----------
Total from Investment
Operations 0.215 1.245 1.808
------------ ------------ -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.505) (0.995) (0.948)
------------ ------------ -----------
Net asset value -
End of period $ 11.230 $ 11.520 $ 11.270
============ ============ ===========
Market Price per share -
End of period $ 10.875 $ 10.625 $ 10.750
============ ============ ===========
Total return - based on
market value (a) 7.27% (b) 8.30% 17.67%
============ ============ ===========
RATIOS TO AVERAGE NET ASSETS:
Expenses (c) 0.96%(d) 0.95% 0.97%
Net investment income (c) 8.12%(d) 8.33% 8.73%
Portfolio turnover 63%(b) 117% 77%
Net assets at end
of period (000) $ 123,657 $ 126,835 $ 124,097
(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.
21
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS - CONTINUED
Selected per share data, total return, ratios and supplemental data throughout
each period are as follows:
<CAPTION>
Year ended November 30
------------------------------------------------
1994 1993 1992
---------- ---------- ----------
Net asset value -
<S> <C> <C> <C>
Beginning of period $ 12.010 $ 11.220 $ 11.330
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.980 1.093 1.152
Net realized and
unrealized gain (loss) (1.271) 0.777 (0.132)
---------- ---------- ----------
Total from Investment
Operations (0.291) 1.870 1.020
---------- ---------- ----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.970) (1.080) (1.130)
From net realized gains (0.339) ---- ----
---------- ---------- ----------
Total Distributions
Declared to Shareholders (1.309) (1.080) (1.130)
---------- ---------- ----------
Net asset value -
End of period $ 10.410 $ 12.010 $ 11.220
========== ========== ==========
Market Price per share -
End of period $ 10.000 $ 11.875 $ 11.125
========== ========== ==========
Total return - based on
market value (a) (5.42)% 16.87% 11.57%
========== ========== ==========
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.98% 1.02% 1.04%
Net investment income 8.84% 9.27% 10.08%
Portfolio turnover 99% 179% 129%
Net assets at end
of period (000) $ 114,568 $ 132,272 $ 123,560
</TABLE>
(a) Total return at market value assuming all distributions reinvested and
excluding brokerage commissions.
22
<PAGE>
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
Colonial at 1-800-426-3750 and additional reports will be sent to you.
This report has been prepared for shareholders of Colonial InterMarket
Income Trust I.
23
<PAGE>
[COLONIAL FLAG LOGO]
- --------------------------------------------------------------------------------
DIVIDEND REINVESTMENT PLAN
As as shareholder in the Fund you are eligible to participate in the 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 will be mailed by check 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.
- --------------------------------------------------------------------------------
CI-43/992D-0797
<PAGE>
[FLAG LOGO] COLONIAL
MUTUAL FUNDS
Mutual funds for
Planned Portfolios
- --------------------------------------------------------------------------------
TRUSTEES
ROBERT J. BIRNBAUM
Retired (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief
Operating Officer, New York Stock Exchange, Inc.)
TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
LORA S. COLLINS
Attorney (formerly Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel)
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
WILLIAM D. IRELAND, JR.
Retired (formerly Chairman of the Board, Bank of New England-Worcester)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
WILLIAM E. MAYER
Partner, Development Capital, L.L.C. (formerly Dean, College of Business and
Management, University of Maryland; Dean, Simon Graduate School of Business,
University of Rochester; Chairman and Chief Executive Officer, C. S. First
Boston Merchant Bank; and President and Chief Executive Officer, The
First Boston Corporation)
JAMES L. MOODY, JR.
Retired (formerly Chairman of the Board and Chief Executive Officer, Hannaford
Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
GEORGE L. SHINN
Financial Consultant (formerly Chairman, Chief Executive Officer and Consultant,
The First Boston Corporation)
ROBERT L. SULLIVAN
Retired Partner, Peat Marwick Main & Co. (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) 1997
One of the Liberty Financial Companies (NYSE:L)
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
CI-03/804D-0597 M (7/97)
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