<PAGE>
[BITMAP GRAPHICS]
COLONIAL
INTERMARKET
INCOME
TRUST I
[BITMAP GRAPHICS]
ANNUAL REPORT
NOVEMBER 30, 1996
<PAGE>
- --------------------------------------------------------------------------------
COLONIAL INTERMARKET INCOME TRUST I HIGHLIGHTS
DECEMBER 1, 1995 - NOVEMBER 30, 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 course of the last year, we've seen some
dramatic swings in U.S. government bond prices. Investors' concerns about
acceleration in economic growth in the first half of 1996 produced declines in
U.S. government bond prices. In fact, the moderate growth over the course of the
year permitted some recovery in that market later in 1996. During these
fluctuations in the U.S. government market, corporate high yield bonds continued
to benefit from increasing revenues and cash flows. Foreign government bonds
generally had been less sensitive to concerns of inflation because their
economies have been slower. Over the past year, the volatility of one sector of
the Fund, the U.S. government sector, has been offset by stronger performances
in the other two sectors of the Fund. It's a period in which the strategy of
investing in three different bond markets has proven itself." - Carl Ericson
<TABLE>
COLONIAL INTERMARKET INCOME TRUST I PERFORMANCE
<CAPTION>
<S> <C>
Distributions declared per share $0.995
12-month total return, assuming
reinvestment of all distributions
- NAV 11.94%
- Market Price 8.30%
Price per share
- NAV $11.52
- Market Price $10.63
</TABLE>
SECTOR BREAKDOWN TOP FIVE FOREIGN COUNTRIES
1. High yield corporate ...... 42.0% 1. Australia ........... 7.5%
2. Foreign government ........ 31.7% 2. Spain ............... 5.5%
3. U.S. government ........... 23.3% 3. Denmark ............. 5.2%
4. Other ..................... 3.0% 4. Sweden .............. 5.1%
5. Finland ............. 4.3%
Sector breakdowns are calculated as a percent of total net assets. Country
weightings are calculated as a percent of total investments. 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.
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
I am pleased to present your Fund's annual report for
the fiscal year ended November 30, 1996. This report [PHOTOGRAPH]
provides us with the opportunity to reflect on
the investment environment of the past 12 months.
The economy grew at a comfortable pace through the end of 1995 and into 1996.
The Federal Reserve Board lowered short-term interest rates in December 1995 and
again in January 1996, but stronger-than-expected economic indicators in
February 1996 brought the Fed easing trend to a halt. However, recently released
economic data confirm that economic growth has slowed to a pace well within the
"comfort zone" of the Federal Reserve Board, lessening the market's fears of a
Fed tightening. We are hopeful that the volatility that has characterized the
fixed income market during the past year will be somewhat reduced in the months
ahead.
While the U.S. government market had been experiencing fluctuations in interest
rates that resulted in price declines, other sectors of the bond market
performed well in this environment. The corporate high yield bonds and foreign
government bonds were able to offset the weaker performance of the U.S.
government market.
Our economic expectations include growth continuing at a slower, but more
sustainable, rate and our outlook for 1997 is relatively bright. Lower mortgage
rates, increased consumer spending power and accelerating exports lead us to
believe that the current economic expansion could continue through the year
ahead.
As always, we thank you for the opportunity to help you meet your investment
goals through the Colonial family of funds.
Respectfully,
/s/ Howard W. Cogger
- --------------------------
Howard W. Cogger
President
January 10, 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.
- --------------------------------------------------------------------------------
3
<PAGE>
INVESTMENT PORTFOLIO
<TABLE>
NOVEMBER 30, 1996 (IN THOUSANDS)
<CAPTION>
BONDS & NOTES - 97.0% PAR VALUE
- --------------------------------------------------------------------------------
CORPORATE FIXED INCOME BONDS & NOTES - 42.0%
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MANUFACTURING - 17.6%
ELECTRONIC & ELECTRICAL EQUIPMENT - 3.8%
Advanced Micro Devices, Inc.,
11.000% 08/01/03 $ 750 $ 813
Amphenol Corp.,
12.750% 12/15/02 1,550 1,687
Delco Remy International, Inc.,
10.625% 08/01/06 400 416
K&F Industries, Inc.,
10.375% 09/01/04 350 368
Unisys Corp.,
11.750% 10/15/04 1,500 1,568
------
4,852
------
FABRICATED METAL - 1.6%
Euramax International, PLC.
11.250% 10/01/06 2,000 2,050
------
FOOD & KINDRED PRODUCTS - 2.4%
Chiquita Brands International, Inc.,
10.250% 11/01/06 750 792
Gillett Holdings, Inc.,
12.250% 06/30/02 535 559
Van De Kamps, Inc.
12.000% 09/15/05 1,500 1,643
------
2,994
------
MACHINERY & COMPUTER EQUIPMENT- 1.8%
IMO Industries, Inc.,
11.750% 05/01/06 (a) 750 713
Shop Vac, Corp.,
10.625% 09/01/03 (a) 1,500 1,571
------
2,284
------
MEASURING & ANALYZING INSTRUMENT - 0.4%
Intertek Finance PLC ,
10.250% 11/01/06 500 514
------
MISCELLANEOUS MANUFACTURING - 0.6%
Dade International, Inc.,
11.125% 05/01/06 (a) 750 810
------
</TABLE>
4
<PAGE>
<TABLE>
Investment Portfolio/November 30, 1996
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PAPER PRODUCTS - 2.1%
Florida Coast Paper,
12.750% 06/01/03 (a) $1,250 $1,313
Gaylord Container Corp.,
11.500% 05/15/01 1,250 1,331
------
2,644
------
PETROLEUM REFINING - 0.3%
Texas Petrochemical Corp.,
11.125% 07/01/06 400 428
------
PRIMARY METAL - 2.1%
Algoma Steel, Inc.,
12.375% 07/15/05 1,500 1,581
WCI Steel, Inc.,
10.000% 12/01/06 1,100 1,111
------
2,692
------
PRINTING & PUBLISHING - 0.9%
K-III Communications Corp.,
10.625% 05/01/02 1,000 1,055
------
RUBBER & PLASTIC - 0.8%
Portola Packaging, Inc.,
10.750% 10/01/05 1,000 1,040
------
TRANSPORTATION EQUIPMENT - 0.8%
Aftermarket Technology Corp.,
Series B,
12.000% 08/01/04 500 555
Ryder Transportation, Inc.,
10.000% 12/01/06 400 409
------
964
------
MINING & ENERGY - 3.9%
OIL & GAS EXTRACTION
Falcon Drilling Co., Inc.,
Series B,
8.875% 03/15/03 250 253
Forcenergy, Inc.,
9.500% 11/01/06 550 575
</TABLE>
5
<PAGE>
<TABLE>
Investment Portfolio/November 30, 1996
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MINING & ENERGY - CONT.
OIL & GAS EXTRACTION -CONT.
HS Resources, Inc.,
9.250% 11/15/06 $ 400 $ 407
Mariner Energy Corp.,
10.500% 08/01/06 1,000 1,048
Nuevo Energy Co.,
12.500% 06/15/02 2,000 2,145
Parker Drilling Corp.,
9.750% 11/15/06 (a) 500 518
------
4,946
------
RETAIL TRADE - 3.0%
FOOD STORES - 3.0%
Dominick's Finer Foods, Inc.,
10.875% 05/01/05 1,500 1,665
Pathmark Stores, Inc.,
9.625% 05/01/03 1,000 983
Smiths Food & Drugs,
11.250% 05/15/07 1,000 1,098
------
3,746
------
SERVICES - 3.5%
AMUSEMENT & RECREATION - 1.4%
Argosy Gaming Co.,
13.250% 06/01/04 500 470
Harvey Casinos Resorts,
10.625% 06/01/06 1,250 1,338
------
1,808
------
BUSINESS SERVICES - 0.6%
Pierce Leahy,
11.125% 07/15/06 700 770
------
HOTELS, CAMPS & LODGING - 1.5%
Casino Magic-Louisiana,
13.000% 08/15/03 (a) 500 496
Eldorado Resorts Limited Liability Corp.,
10.500% 08/15/06 300 315
HMH Properties, Inc.,
9.500% 05/15/05 1,000 1,036
------
1,847
------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 14.0%
<S> <C> <C> <C> <C>
AIR TRANSPORTATION - 0.8%
Greenwich Air Services, Inc.,
10.500% 06/01/06 $1,000 $1,058
------
BROADCASTING - 3.6%
Allbritton Communications Co.,
11.500% 08/15/04 1,500 1,575
Heritage Media Corp.,
11.000% 06/15/02 750 799
NWCG Holding Corp.,
(b) 06/15/99 1,400 1,162
Young Broadcasting Corp.,
10.125% 02/15/05 1,000 1,005
------
4,541
------
CABLE - 1.9%
Cablevision Systems Corp.,
10.750% 04/01/04 1,500 1,541
Comcast UK Cable Partners Ltd.,
stepped coupon (c)
(11.200% 11/15/00) 11/15/07(d) 1,250 869
------
2,410
------
COMMUNICATIONS - 0.9%
Brooks Fiber Properties, Inc.,
stepped coupon (c)
(10.875% 03/01/01) 3/01/06 (a) 1,000 663
UNC, Inc., 11.000% 6/01/06 (a) 500 533
------
1,196
------
ELECTRIC, GAS & SANITARY SERVICES- 1.9%
Allied Waste NA,
10.250% 12/01/06 500 512
Mesa Operating Co.,
10.625% 07/01/06 1,750 1,890
------
2,402
------
GAS SERVICES - 1.0%
California Energy Co., Inc.,
9.875% 06/30/03 1,250 1,313
------
</TABLE>
7
<PAGE>
<TABLE>
Investment Portfolio/November 30, 1996
<CAPTION>
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - CONT.
TELECOMMUNICATION -3.9%
Clearnet Communications Units
stepped coupon(c)
(14.750% 12/15/00) 12/15/05(e) $ 750 $ 465
ICG Holding, Inc.,
stepped coupon(c)
(13.500% 09/15/05) 09/15/05 1,500 1,043
MFS Communications, Inc.,
stepped coupon(c)
(8.875% 01/15/01) 01/15/06 1,000 723
OMNIPOINT Corp.,
11.625% 08/15/06(a) 1,250 1,309
PanAmSat Corp.,
stepped coupon(c)
(11.375% 08/01/98) 08/01/03 1,500 1,378
------
4,918
------
TOTAL CORPORATE FIXED-INCOME
BONDS & NOTES (cost of $47,299) 53,282
------
<CAPTION>
FOREIGN GOVERNMENT & AGENCY
OBLIGATIONS - 31.7% CURRENCY
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Government of Finland,
7.250% 04/18/06 FN 23,000 5,340
Government of Poland, Brady Bonds,
Past Due Interest, stepped coupon,
(5.000% 10/27/99) 4.000% 10/27/14 (g) 4,000 3,450
Kingdom of Denmark,
8.000% 05/15/03 DK 33,422 6,268
Republic of Argentina,
11.000% 10/09/06 AR 900 941
Republic of Argentina Par Brady,
stepped coupon
(6.000% 03/01/99) 5.250% 03/31/23 (f) 2,850 1,820
Spanish Government Bonds,
10.150% 01/31/06 SP 731,040 6,807
Swedish Government Bonds,
10.250% 05/05/03 SK 35,600 6,324
Western Australia Treasury Corp:
10.000% 07/15/05 A$ 6,602 6,290
12.000% 08/01/01 A$ 3,050 2,977
-------
TOTAL FOREIGN GOVERNMENT & AGENCY
OBLIGATIONS (cost of $37,446) 40,217
-------
</TABLE>
8
<PAGE>
<TABLE>
Investment Portfolio/November 30, 1996
<CAPTION>
- --------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 23.3%
- --------------------------------------------------------------------------------
Maturities
Coupon From/To
------ ----------
<S> <C> <C> <C> <C> <C>
Government National Mortgage Association:
9.000% 2016 $2,136 $ 2,304
10.500% 2015-2020 509 571
11.000% 2018-2019 1,513 1,727
-------
4,602
-------
U.S. Treasury Bonds:
8.750% 05/15/17 (h) 1,777 2,236
11.625% 11/15/04 (h) 9,240 12,473
12.000% 08/15/13 (h) 6,944 10,195
-------
24,904
-------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS (cost of $32,558) 29,506
-------
---------------------------------------------------------------------------
COMMON STOCKS - 0.0% SHARES
---------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.0%
MOTOR FREIGHT & WAREHOUSING
St. Johnsbury Trucking Co.(i)(j) 16 16
Sun Carriers, Inc. (a)(i)(j) 65 1
-------
TOTAL COMMON STOCKS (cost of $180) 17
-------
WARRANTS (i) - 0.0%
---------------------------------------------------------------------------
Clearnet Communications
(expires 9/15/05) (cost of $15) 2 15
-------
TOTAL INVESTMENTS - 97.0% (cost of $117,498)(k) 123,037
---------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 0.8% PAR
---------------------------------------------------------------------------
Repurchase agreement with Bankers Trust
Securities Corp., dated 11/29/96, due 12/02/96
at 5.650%, collateralized by U.S. Treasury
notes with various maturities to 1999, market
value $1,039 (repurchase proceeds $1,018) $1,018 1,018
-------
</TABLE>
9
<PAGE>
<TABLE>
Investment Portfolio/November 30, 1996
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
FORWARD CURRENCY CONTRACTS - 0.1% (l) $ 132
---------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - 2.1% 2,648
---------------------------------------------------------------------------
NET ASSETS - 100.0% $126,835
---------
<FN>
- ----------
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 November 30, 1996, the value of these
securities amounted to $7,927 or 6.2% 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 at
this rate.
(d) This is a British security. Par amount is stated in U.S. dollars.
(e) Each unit consists of ten senior discounts notes and thirty three
warrants.
(f) This is a Argentinean security. Shown parenthetically is the
interest rate to be paid and the date the Fund will begin
accruing at this rate.
(g) This is a Polish security. Shown parenthetically is the
interest rate to be paid and the date the Fund will begin
accruing at this rate.
(h) These securities, or a portion thereof, with a total market
value of $15,651 are being used to collateralize the forward
currency contracts shown below.
(i) Non-income producing.
(j) The value of this security represents fair value as determined
in good faith under the direction of the Trustees.
(k) Cost for federal income tax purposes is $118,031.
(l) As of November 30, 1996, the Fund had entered into the following
forward currency contracts:
</TABLE>
10
<PAGE>
<TABLE>
Investment Portfolio/November 30, 1996
<CAPTION>
- --------------------------------------------------------------------------------
Net Unrealized
Contracts Appreciation
to In Exchange Settlement (Depreciation)
Deliver For Date (U.S.$)
------------- --- ---- ------
<S> <C> <C> <C> <C> <C>
A$ 2,866 USD 2,339 12/23/96 $(48)
DK 18,492 USD 3,138 12/16/96 66
DK 517 USD 88 01/08/97 0
FF 9,484 USD 1,815 12/12/96 50
FF 9,089 USD 1,742 01/08/97 18
FN 1,333 USD 289 12/12/96 4
FN 2,521 USD 547 12/16/96 10
FN 8,811 USD 1,915 01/08/97 4
SK 9,422 USD 1,402 12/16/96 17
SK 12,635 USD 1,881 01/08/97 11
----
$132
----
<CAPTION>
Summary of Securities by
Country/Currency Currency Value % of Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $ $ 81,951 66.6
Australia A$ 9,267 7.5
Spain SP 6,807 5.5
Denmark DK 6,268 5.2
Sweden SK 6,324 5.1
Finland FN 5,340 4.3
Poland PL 3,450 2.8
Argentina AR 2,761 2.2
United Kingdom UK 869 0.8
-------- -----
$123,037 100.0
-------- -----
</TABLE>
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
See notes to financial statements.
11
<PAGE>
<TABLE>
STATEMENT OF ASSETS & LIABILITIES
NOVEMBER 30, 1996
<CAPTION>
(in thousands except for per share amount)
<S> <C> <C>
ASSETS
Investments at value (cost $117,498) $123,037
Short-term obligations 1,018
--------
124,055
Receivable for:
Interest $3,268
Investments sold 1,197
Unrealized appreciation on forward
currency contracts 132
Other 2 4,599
------ --------
Total Assets 128,654
LIABILITIES
Payable for:
Investments purchased 900
Distributions 881
Payable to custodian bank 5
Accrued:
Deferred Trustees fees 2
Other 31
------
Total Liabilities 1,819
--------
NET ASSETS at value for 11,009
shares of beneficial interest outstanding $126,835
--------
Net asset value per share $ 11.52
--------
COMPOSITION OF NET ASSETS
Capital paid in $122,287
Undistributed net investment income 656
Accumulated net realized loss (1,775)
Net unrealized appreciation on:
Investments 5,539
Foreign currency transactions 128
--------
$126,835
--------
</TABLE>
See notes to financial statements.
12
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1996
<CAPTION>
(in thousands)
<S> <C> <C>
INVESTMENT INCOME
Interest $11,443
Dividends 7
-------
11,450
EXPENSES
Management fee $ 925
Transfer agent 54
Bookkeeping fee 35
Trustees fee 14
Custodian fee 33
Audit fee 44
Legal fee 6
Reports to shareholders 12
Other 52 1,175
----- -------
Net Investment Income 10,275
-------
NET REALIZED & UNREALIZED GAIN ON PORTFOLIO POSITIONS
Net realized gain on:
Investments 1,805
Foreign currency transactions 562
-----
Net Realized Gain 2,367
Net unrealized appreciation during
the period on:
Investments 910
Foreign currency transactions 139
-----
Net Unrealized Appreciation 1,049
-------
Net Gain 3,416
-------
Net Increase in Net Assets from Operations $13,691
-------
</TABLE>
See notes to financial statements.
13
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
Year ended
(in thousands) November 30
----------------------
INCREASE IN NET ASSETS 1996 1995
-------- --------
<S> <C> <C>
Operations:
Net investment income $ 10,275 $ 10,413
Net realized gain (loss) 2,367 (57)
Net unrealized appreciation 1,049 9,608
-------- --------
Net Increase from Operations 13,691 19,964
Distributions from
Net investment income (10,953) (10,435)
-------- --------
Total Increase 2,738 9,529
-------- --------
NET ASSETS
Beginning of period 124,097 114,568
-------- --------
End of period (including undistributed net investment
income of $656 and $571, respectively) $126,835 $124,097
-------- --------
NUMBER OF FUND SHARES
Outstanding at end of period 11,009 11,009
-------- --------
</TABLE>
See notes to financial statements.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 1. ACCOUNTING POLICIES
- ------------------------------------------------------------------------------
ORGANIZATION: Colonial Intermarket Income Trust I ( 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 maximize 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.
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.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS/NOVEMBER 30, 1996
- -------------------------------------------------------------------------------
NOTE 1. ACCOUNTING POLICIES - CONT.
- -------------------------------------------------------------------------------
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 foreign currency transactions. Forward currency
contracts do not eliminate fluctuations in the prices of the Fund's portfolio
securities. While
16
<PAGE>
Notes to Financial Statements/November 30, 1996
- -------------------------------------------------------------------------------
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 2. 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 3. PORTFOLIO INFORMATION
- -------------------------------------------------------------------------------
INVESTMENT ACTIVITY: During the year ended November 30, 1996, purchases and
sales of investments, other than short-term obligations, were $138,720,684 and
$139,337,221, respectively, of which $18,100,833 and $15,719,302 respectively,
were U.S. government securities.
<TABLE>
Unrealized appreciation (depreciation) at November 30, 1996, based on cost of
investments for federal income tax purposes was:
<CAPTION>
<S> <C>
Gross unrealized appreciation $5,952,354
Gross unrealized depreciation (946,651)
----------
Net unrealized appreciation $5,005,703
----------
</TABLE>
17
<PAGE>
Notes to Financial Statements/November 30, 1996
- -------------------------------------------------------------------------------
NOTE 3. PORTFOLIO INFORMATION - CONT.
- -------------------------------------------------------------------------------
<TABLE>
CAPITAL LOSS CARRYFORWARDS: At November 30, 1996, capital loss carryforwards
available (to the extent provided in regulations) to offset future realized
gains were as follows:
<CAPTION>
Year of Capital loss
expiration carryforward
----------- ------------
<S> <C>
2002 $712,000
2003 529,000
----------
$1,241,000
----------
</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.
18
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period are as follows:
<CAPTION>
Year ended November 30
--------------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 11.270 $ 10.410 $ 12.010
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.968 0.986 0.980
Net realized and
unrealized gain (loss) 0.277 0.822 (1.271)
-------- -------- --------
Total from Investment
Operations 1.245 1.808 (0.291)
-------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.995) (0.948) (0.970)
From net realized gains -- -- (0.339)
-------- -------- --------
Total Distributions
Declared to Shareholders (0.995) (0.948) (1.309)
-------- -------- --------
Net asset value -
End of period $ 11.520 $ 11.270 $ 10.410
-------- -------- --------
Market Price per share -
End of period $ 10.625 $ 10.750 $ 10.000
-------- -------- --------
Total return - based on
market value (a) 8.30% 17.67% (5.42)%
-------- -------- --------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.95(b) 0.97(b) 0.98%
Net investment income 8.33(b) 8.73(b) 8.84%
Portfolio turnover 117% 77% 99%
Net assets at end
of period (000) $126,835 $124,097 $114,568
<FN>
(a) Total return at market value assuming all distributions reinvested and
excluding brokerage commissions.
(b) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
--------------------------------------------------------------------------
State Tax information(Unaudited)
An average of 16% of the Fund's investments as of the end of each quarter
were in direct obligations of the U.S. Treasury.
Approximately 16% of the Fund's distributions (12% of gross income ) was
derived from interest on direct investments in U.S. Treasury bonds, notes
and bills.
</TABLE>
19
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS - CONTINUED
Selected data for a share outstanding throughout each period are as follows:
<CAPTION>
Year ended November 30
----------------------
1993 1992
-------- -------
<S> <C> <C>
Net asset value -
Beginning of period $ 11.220 $11.330
-------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 1.093 1.152
Net realized and
unrealized gain (loss) 0.777 (0.132)
-------- --------
Total from Investment
Operations 1.870 1.020
-------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (1.080) (1.130)
From net realized gains -- --
-------- --------
Total Distributions
Declared to Shareholders (1.080) (1.130)
-------- --------
Net asset value -
End of period $ 12.010 $ 11.220
-------- --------
Market Price per share -
End of period $ 11.875 $ 11.125
-------- --------
Total return - based on
market value (a) 16.87% 11.57%
-------- --------
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.02% 1.04%
Net investment income 9.27% 10.08%
Portfolio turnover 179% 129%
Net assets at end
of period (000) $132,272 $123,560
<FN>
(a) Total return at market value assuming all distributions reinvested and
excluding brokerage commission.
</TABLE>
20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES AND SHAREHOLDERS OF COLONIAL INTERMARKET
INCOME TRUST I
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations and
of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial Intermarket Income Trust I
at November 30, 1996, the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
the financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of portfolio positions at November 30, 1996
by correspondence with the custodian and brokers, and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
January 10, 1997
21
<PAGE>
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.
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>
[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.
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[Copyright] 1997
One of the Liberty Financial Companies (NYSE:L)
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
CI-02/138D-1196 M (1/97)
- --------------------------------------------------------------------------------