<PAGE>
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COLONIAL
INTERMARKET
INCOME
TRUST I
- -------------------------------------------------------------------------------
ANNUAL REPORT
NOVEMBER 30, 1997
<PAGE>
COLONIAL INTERMARKET INCOME TRUST I HIGHLIGHTS
DECEMBER 1, 1996 - NOVEMBER 30, 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: "The continued moderate growth of the U.S. economy
without any significant inflation led to strong performance in the U.S.
Government and high yield corporate bond sectors, especially during the last six
months. By increasing our exposure to these sectors, and reducing holdings in
more volatile foreign government bonds, the Fund provided shareholders with
attractive returns." - Carl Ericson
COLONIAL INTERMARKET INCOME TRUST I PERFORMANCE
Distributions declared per share $0.977
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12-month total return, assuming
reinvestment of all distributions
* NAV 8.71%
* Market Price 12.62%
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Price per share
* NAV $11.45
* Market Price $10.94
GOVERNMENT BREAKDOWN
SECURITIES BREAKDOWN TOP FIVE FOREIGN COUNTRIES
(as of 11/30/97) (as of 11/30/97)
- ----------------------------------- -------------------------------------
1. High yield corporate ..... 43.6% 1. United Kingdom ............. 5.3%
2. U.S. government .......... 25.7% 2. Australia .................. 4.7%
3. Foreign government ....... 22.2% 3. Denmark .................... 2.8%
4. Other .................... 8.5% 4. Sweden ..................... 2.2%
5. Poland ..................... 2.1%
Securities breakdown and country weightings are calculated as a percentage of
total unaudited 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.
<PAGE>
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[Photo of Harold W. Cogger]
I am pleased to present your Fund's annual report for the 12 months ended
November 30, 1997.
During the first half of the year, concerns that continued strong economic
growth would lead to renewed inflation caused the Federal Reserve Board to raise
short-term rates in a preemptive strike. As expected, this had a negative effect
on bond prices, especially in the U.S. government sector. U.S. bonds rallied in
the second half of the year, however, as there were no signs of increased
inflation and investors moved to bonds in response to October's stock market
volatility. By the end of November, prices of the long Treasury bond were at a
12-month high.
High yield corporate bonds benefited from the stronger stock market in the first
half of the year, but underperformed Treasurys later in the year as the stock
market became more volatile. Bonds issued by foreign governments have been
increasingly volatile toward year end due to currency instability overseas.
In the months to come, moderate economic growth and low inflation should mean
continued improvement for U.S. Treasury and high yield corporate bonds. The
foreign bond markets may remain volatile due to further currency instability.
Your Fund will continue to carefully manage its holdings in order to keep
providing shareholders with income generated by well-researched investments.
We look forward to updating you on the Fund's performance six months from now,
in the semiannual report.
Respectfully,
/s/ Harold W. Cogger
Harold W. Cogger
President
January 9, 1998
Because market conditions change frequently, there can be no assurance that the
trends described here will continue.
<PAGE>
INVESTMENT PORTFOLIO
NOVEMBER 30, 1997 (IN THOUSANDS)
BONDS & NOTES - 91.5%
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CORPORATE FIXED-INCOME BONDS & NOTES - 43.6% PAR VALUE
- ---------------------------------------------------------------------------
CONSTRUCTION - 0.4%
BUILDING CONSTRUCTION
Kevco, Inc.,
10.375% 12/01/07 (a)(b) $ 500 $ 504
--------
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FINANCE, INSURANCE & REAL ESTATE - 0.8%
FINANCIAL SERVICES
U.S. Timberlands,
9.625% 11/15/07 1,000 1,022
--------
- ---------------------------------------------------------------------------
MANUFACTURING - 18.1%
CHEMICALS & ALLIED PRODUCTS - 3.0%
Hydrochem Industrial Services,
10.375% 08/01/07 490 507
LaRoche Industries, Inc.,
9.500% 09/15/07(b) 1,000 982
PCI Chemicals Canada, Inc.,
9.250% 10/15/07(b)(c) 250 246
Sterling Chemicals, Inc.,
11.750% 08/15/06 1,500 1,613
Texas Petrochemical Corp.,
11.125% 07/01/06 400 432
--------
3,780
--------
ELECTRONIC & ELECTRICAL EQUIPMENT - 1.9%
Amphenol Corp.,
9.875% 05/15/07 250 263
Delco Remy International, Inc.,
10.625% 08/01/06(b) 400 433
Unisys Corp.,
11.750% 10/15/04 1,500 1,706
--------
2,402
--------
FABRICATED METAL - 1.7%
Euramax International, PLC,
11.250% 10/01/06(d) 2,000 2,165
--------
Food & Kindred Products - 1.0%
Chiquita Brands International, Inc.,
10.250% 11/01/06 750 817
Windy Hill Pet Food Co.,
9.750% 05/15/07 400 412
--------
1,229
--------
MACHINERY & COMPUTER EQUIPMENT - 0.7%
IMO Industries, Inc.,
11.750% 05/01/06 750 834
--------
MEASURING & ANALYZING INSTRUMENT - 0.4%
Intertek Finance, PLC,
10.250% 11/01/06 500 525
--------
MISCELLANEOUS MANUFACTURING - 5.3%
AEI Holding Co.,
10.000% 11/15/07(b) 500 509
Climachem, Inc.,
10.750% 12/01/07(b) 500 512
Coleman Escrow Corp.,
(e) 05/15/01 1,000 630
Dade International, Inc.,
11.125% 05/01/06 750 834
Insilco Corp.,
10.250% 08/15/07 300 313
Keystone Consolidated Industries, Inc.,
9.625% 08/01/07(b) 500 509
Polymer Group, Inc.,
9.000% 07/01/07 1,000 980
Shop Vac Corp.,
10.625% 09/01/03 1,500 1,628
Werner Holdings,
10.000% 11/15/07(b) 750 765
--------
6,680
--------
PAPER PRODUCTS - 1.0%
Riverwood International Corp.,
10.625% 08/01/07 1,000 1,035
Stone Container Corp. Units,
12.250% 04/01/02(f) 250 259
--------
1,294
--------
PETROLEUM REFINING - 0.2%
Benton Oil & Gas Co.,
9.375% 11/01/07(b) 300 304
--------
PRIMARY METAL - 1.4%
Algoma Steel, Inc.,
12.375% 07/15/05 1,500 1,747
--------
RUBBER & PLASTIC - 1.1%
Burke Industries, Inc.,
10.000% 08/15/07(b) 300 310
Portola Packaging, Inc.,
10.750% 10/01/05 1,000 1,045
--------
1,355
--------
TRANSPORTATION EQUIPMENT - 0.4%
Aftermarket Technology Corp.,
Series B,
12.000% 08/01/04 430 477
--------
- ---------------------------------------------------------------------------
MINING & ENERGY - 2.5%
OIL & GAS EXTRACTION - 1.5%
Falcon Drilling Co., Inc.,
Series B,
8.875% 03/15/03 250 264
Forcenergy, Inc.,
9.500% 11/01/06 550 579
Mariner Energy Corp.,
10.500% 08/01/06 1,000 1,047
--------
1,890
--------
OIL & GAS FIELD SERVICES - 1.0%
Magnum Hunter Resources, Inc.,
10.000% 06/01/07(b) 750 767
Parker Drilling Corp.,
9.750% 11/15/06 500 540
--------
1,307
--------
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RETAIL TRADE - 2.0%
FOOD STORES
Friendly Ice Cream,
10.500% 12/01/07 500 506
Pathmark Stores, Inc.,
9.625% 05/01/03 1,000 990
Shoppers Food Warehouse Corp.,
9.750% 06/15/04(b) 1,000 1,015
--------
2,511
--------
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SERVICES - 6.1%
AMUSEMENT & RECREATION - 2.8%
Harvey Casinos Resorts,
10.625% 06/01/06 1,250 1,369
Hollywood Park, Inc.,
9.500% 08/01/07(b) 500 530
Horseshoe Gaming, LLC,
9.375% 06/15/07 1,500 1,549
--------
3,448
--------
BUSINESS SERVICES - 1.2%
AmeriServe Food Co.,
10.125% 07/15/07(b) 500 517
DecisionOne Corp.,
9.750% 08/01/07 500 513
Pierce Leahy Corp.,
11.125% 07/15/06 455 514
--------
1,544
--------
HEALTH SERVICES - 1.0%
Graham Field Health,
9.750% 08/15/07(b) 490 510
Teligent, Inc.,
11.500% 12/01/07 750 750
--------
1,260
--------
HOTELS, CAMPS & LODGING - 1.1%
Eldorado Resorts Corp.,
10.500% 08/15/06 300 328
HMH Properties, Inc.,
9.500% 05/15/05 1,000 1,050
--------
1,378
--------
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TRANSPORTATION, COMMUNICATION, ELECTRIC, GAS & SANITARY SERVICES - 13.7%
AIR TRANSPORTATION - 1.4%
Continental Airlines, Inc.,
9.500% 12/15/01 325 338
ValueJet Airlines, Inc.,
10.500% 04/15/01 1,500 1,477
--------
1,815
--------
BROADCASTING - 2.6%
Allbritton Communications Co.,
11.500% 08/15/04 1,500 1,571
NWCG Holding Corp.,
(e) 06/15/99 660 599
Young Broadcasting Corp.,
10.125% 02/15/05 1,000 1,050
--------
3,220
--------
CABLE - 0.8%
Comcast UK Cable Partners Ltd.,
stepped coupon, (11.200% 11/15/00)
(g) 11/15/07(d) 1,250 994
--------
COMMUNICATIONS - 2.9%
BTI Telecom Corp.,
10.500% 09/15/07(b) 500 498
Intermedia Communications, Inc.,
stepped coupon, (11.250% 07/15/02)
(g) 07/15/07 1,000 685
Metrocall, Inc.,
9.750% 11/01/07(b) 750 746
Metronet Communications-Units,
12.000% 08/15/07(b)(h) 250 282
Northland Cable,
10.250% 11/15/07(b) 250 257
RCN Corp.,
stepped coupon, (11.125% 10/15/02)
(g) 10/15/07(b) 750 435
Sprint Spectrum, L.P.,
stepped coupon, (12.500% 08/15/01)
(g) 08/15/06 1,000 780
--------
3,683
--------
ELECTRIC, GAS & SANITARY SERVICES - 0.6%
Allied Waste Industries, Inc.,
stepped coupon, (11.300% 06/01/02)
(g) 06/01/07(b) 1,000 690
--------
GAS SERVICES - 2.0%
California Energy Co. Inc.,
9.875% 06/30/03 1,250 1,361
HS Resources, Inc.,
9.250% 11/15/06 400 411
Petsec Energy, Inc.,
9.500% 06/15/07(b) 750 769
--------
2,541
--------
SANITARY SERVICES - 0.4%
Allied Waste North America, Inc.,
10.250% 12/01/06 500 545
--------
TELECOMMUNICATION - 2.4%
Brooks Fiber Properties, Inc.,
stepped coupon, (10.875% 03/01/01)
(g) 03/01/06 500 411
Clearnet Communications,
stepped coupon, (14.750% 12/15/00)
(g) 12/15/05 750 565
ICG Holding, Inc.,
stepped coupon, (13.500% 09/15/00)
(g) 09/15/05 1,500 1,193
Nextel Communications, Inc.,
stepped coupon, (9.750% 02/15/99)
(g) 08/15/04 1,000 863
--------
3,032
--------
TRANSPORTATION SERVICES - 0.6%
Williams Scotsman, Inc.,
9.875% 06/01/07 750 780
--------
TOTAL CORPORATE FIXED-INCOME
BONDS & NOTES (cost of $52,432) 54,956
--------
FOREIGN GOVERNMENT & AGENCY
OBLIGATIONS - 22.2% CURRENCY
- ---------------------------------------------------------------------------
Kingdom of Denmark,
8.000% 03/15/06 DK 20,800 3,520
Mexican Brady Bonds,
6.250% 12/31/19(i) 700 568
Mexican Global Bonds,
9.750% 02/06/01(i) 1,415 1,475
Ministry Finance Russia Government Bonds,
9.000% 03/25/04(j) DM 2,100 1,160
Republic of Argentina,
11.250% 04/10/06(k) DM 1,200 741
Republic of Poland (Brady):
Past Due Interest, stepped coupon,
(5.000% 10/27/98) 4.000% 10/27/14(l) 1,600 1,354
6.688% 10/27/24(m) 1,320 1,252
Spanish Government Bonds,
10.000% 02/28/05 SP 290,000 2,446
Swedish Government Bonds,
13.000% 06/15/01 SK 17,900 2,832
Treasury Corp. of Victoria:
10.250% 11/15/06 A$ 3,360 2,886
12.500% 10/15/03 A$ 3,330 2,968
United Kingdom Treasury:
9.000% 08/06/12 UK 980 2,042
10.000% 02/26/01 UK 1,460 2,672
10.000% 09/08/03 UK 1,050 2,044
--------
TOTAL FOREIGN GOVERNMENT & AGENCY
OBLIGATIONS (cost of $27,888) 27,960
--------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 25.7% PAR VALUE
- ---------------------------------------------------------------------------
Government National Mortgage Association:
9.000% 2016 1,756 1,903
10.500% -5 261 295
11.000% -1 1,170 1,349
--------
3,547
--------
U.S. Treasury Bonds:
8.750% 05/15/17(n) 1,790 2,320
11.625% 11/15/04(n)(o) 13,801 18,241
12.000% 08/15/13(n) 3,944 5,770
--------
26,331
--------
U.S. Treasury Notes,
11.875% 11/15/03(n) 1,940 2,515
--------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS (cost of $31,607) 32,393
--------
TOTAL BONDS & NOTES (cost of $111,927) 115,309
--------
COMMON STOCKS - 0.0% SHARES
- ---------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.0%
Motor Freight & Warehousing
St. Johnsbury Trucking Co.(p)(q) 16 (r)
Sun Carriers, Inc. (p)(q) 1
--------
1
--------
TOTAL COMMON STOCKS (cost of $180) 1
--------
PREFERRED STOCKS - 2.5%
- ---------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 0.2%
Depository Institutions
California Federal Preferred Capital, Inc.,
9.125%, Series A 9 225
--------
- ---------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 2.3%
COMMUNICATIONS - 2.1%
EchoStar Communications Corp., 12.125% (b) (r) 257
Nextel Communications, Inc.,
13.000%, PIK (b) 1 1,138
Time Warner, Inc.,
10.250%, Series M 1 1,228
--------
2,623
--------
Electric Services - 0.2%
PriMedia, Inc.,
9.200% (b) 3 299
--------
TOTAL PREFERRED STOCKS (cost of $2,996) 3,147
--------
WARRANTS - 0.0% (p)
- ---------------------------------------------------------------------------
PUBLIC ADMINISTRATION - 0.0%
GENERAL GOVERNMENT
Mexican Government Rights W/Series A&B,
(expires 06/30/03)(q) 700 (r)
--------
- ---------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.0%
COMMUNICATIONS
Clearnet Communications, Inc.,
(expires 09/15/05) 2 22
--------
TOTAL WARRANTS (cost of $15) 22
--------
TOTAL INVESTMENTS - 94.0% (cost of $115,118)(s) 118,479
--------
SHORT-TERM OBLIGATIONS - 4.7% PAR
- ---------------------------------------------------------------------------
epurchase agreement with ABN Amro Chicago
Corp., dated 11/28/97, due 12/01/97 at 5.730%,
collateralized by U.S. Treasury notes and bills
with various maturities to 2000, market value
$6,072 (repurchase proceeds $5,943) $5,940 5,940
--------
FORWARD CURRENCY CONTRACTS - 0.1% (t) 128
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OTHER ASSETS & LIABILITIES, NET - 1.2% 1,464
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NET ASSETS - 100% $126,011
========
NOTES TO INVESTMENT PORTFOLIO:
- ---------------------------------------------------------------------------
(a) This security has been purchased on a delayed delivery basis for settlement
at a future date beyond the customary settlement time.
(b) 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,
1997, the value of these securities amounted to $13,784 or 10.9% of net
assets.
(c) This is a Canadian security. Par amount is stated in U.S. dollars.
(d) This is a British security. Par amount is stated in U.S. dollars.
(e) Zero coupon bond.
(f) Each unit consists of a 10.750% bond and a 1.500% supplemental interest
certificate.
(g) Currently zero coupon. Shown parenthetically is the interest rate to be
paid and the date the Fund will begin accruing this rate.
(h) Each unit consists of one senior discount note and one warrant to purchase
common stock.
(i) This is a Mexican security. Par amount is stated in U.S. dollars.
(j) This is a Russian security. Par amount is stated in Deutschemarks.
(k) This is an Argentinean security. Par amount is stated in Deutschemarks.
(l) 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.
(m) This is a Polish security. Par amount is stated in U.S. dollars.
(n) These securities, or a portion thereof, with a total market value of
$11,346 are being used to collateralize the forward currency contracts
shown below.
(o) This security, or a portion thereof, with a total market value of $504 is
being used to collateralize the delayed delivery purchase indicated in note
(a) above.
(p) Non-income producing.
(q) Represents fair value as determined in good faith under the direction of
the Trustees.
(r) Rounds to less than one.
(s) Cost for federal income tax purposes is $115,718.
(t) As of November 30, 1997, the Fund had entered into the following forward
currency contracts:
Net Unrealized
Appreciation
Contracts In Exchange Settlement (Depreciation)
to Deliver For Date (U.S.$)
- ------------- -------------- ---------- --------------
US$ 740 A$ 1,075 12/01/97 ($9)
SK 11,300 US$ 1,463 12/03/97 26
US$ 1,463 SK 11,300 12/03/97 (58)
A$ 7,630 US$ 5,357 12/04/97 161
UK 2,950 US$ 4,978 12/17/97 (1)
A$ 1,109 US$ 765 01/08/98 9
--------
$ 128
========
Summary of Securities by
Country/Currency Currency Value % of Total
- ---------------------------------------------------------------------------
United States $ 87,114 73.5
United Kingdom UK 9,917 8.4
Australia A$ 5,854 4.9
Denmark DK 3,520 3
Sweden SK 2,832 2.4
Poland 2,606 2.2
Spain SP 2,446 2.1
Mexico 2,043 1.7
Russia 1,160 1
Argentina 741 0.6
Canada 246 0.2
-------- --------
$118,479 100
======== ========
Certain securities are listed by country of underlying exposure but may
trade predominantly on other exchanges.
Acronym Name
------- ----
PIK Payment-In-Kind
DM Deutschemarks
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
NOVEMBER 30, 1997
(in thousands except for per share amount)
ASSETS
Investments at value (cost $115,118) $ 118,479
Short-term obligations 5,940
---------
124,419
Receivable for:
Investments sold $ 10,686
Interest 2,240
Unrealized appreciation on forward
currency contracts 128
Other 4 13,058
-------- ---------
Total Assets 137,477
LIABILITIES
Payable for:
Investments purchased 10,537
Distributions 881
Accrued:
Deferred Trustees fees 3
Other 45
--------
Total Liabilities 11,466
---------
NET ASSETS at value for 11,009
shares of beneficial interest outstanding $ 126,011
=========
Net asset value per share $ 11.45
=========
COMPOSITION OF NET ASSETS
Capital paid in $ 122,282
Overdistributed net investment income (70)
Accumulated net realized gain 305
Net unrealized appreciation on:
Investments 3,361
Foreign currency transactions 133
---------
$ 126,011
=========
See notes to financial statements.
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1997
(in thousands)
INVESTMENT INCOME
Interest $ 11,129
Dividends 146
--------
11,275
EXPENSES
Management fee $ 937
Transfer agent 51
Bookkeeping fee 35
Trustees fee 16
Custodian fee 33
Audit fee 42
Legal fee 4
Reports to shareholders 12
Other 71 1,201
------ --------
Net Investment Income 10,074
NET REALIZED & UNREALIZED GAIN (LOSS)
ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments (41)
Foreign currency transactions 2,070
------
Net Realized Gain 2,029
Change in net unrealized appreciation
(depreciation)
during the period on:
Investments (2,178)
Foreign currency transactions 5
------
Net Change in Unrealized Depreciation (2,173)
--------
Net Loss (144)
--------
Increase in Net Assets from Operations $ 9,930
========
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands) Year ended November 30
--------------------------
INCREASE IN NET ASSETS 1997 1996
Operations:
Net investment income $ 10,074 $ 10,275
Net realized gain 2,029 2,367
Net unrealized appreciation (depreciation) (2,173) 1,049
--------- ---------
Net Increase from Operations 9,930 13,691
Distributions:
From net investment income (10,754) (10,953)
--------- ---------
Total Increase (Decrease) (824) 2,738
--------- ---------
NET ASSETS
Beginning of period 126,835 124,097
--------- ---------
End of period (net of overdistributed and
including undistributed net investment income
$70 and $656, respectively) $ 126,011 $ 126,835
========= =========
NUMBER OF FUND SHARES
Outstanding at end of period 11,009 11,009
========= =========
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997
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 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 generally are valued by a
pricing service based upon market transactions for normal, institutional- size
trading units of similar securities. When management deems it appropriate, an
over-the-counter or exchange bid quotation is used.
Equity securities generally are valued at the last sale price or, in the case of
unlisted or listed securities for which there were no sales during the day, at
current quoted bid prices.
Forward currency contracts are valued based on the weighted value of the
exchange traded contracts with similar durations.
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 for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
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 includes gains (losses) arising from the
fluctuation in exchange rates between trade and settlement dates on securities
transactions, gains (losses) arising from the disposition of foreign currency
and currency gains (losses) between the accrual and payment dates on dividends,
interest income and foreign withholding taxes.
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 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, 1997, purchases and
sales of investments, other than short-term obligations, were $182,263,016 and
$185,503,809, respectively, of which $19,275,837 and $15,331,429 respectively,
were U.S. government securities.
Unrealized appreciation (depreciation) at November 30, 1997, based on cost of
investments for federal income tax purposes was approximately:
Gross unrealized appreciation $ 3,995,000
Gross unrealized depreciation (1,234,000)
-----------
Net unrealized appreciation $ 2,761,000
===========
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.
<PAGE>
FINANCIAL HIGHLIGHTS
Selected per share data, total return, ratios and supplemental data throughout
each period are as follows:
Year ended November 30
------------------------------------
1997 1996 1995
Net asset value -
Beginning of period $ 11.520 $ 11.270 $ 10.410
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.911 1.003 0.986
Net realized and
unrealized gain (loss) (0.004) 0.242 0.822
-------- -------- --------
Total from Investment
Operations 0.907 1.245 1.808
-------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.977) (0.995) (0.948)
From net realized gains -- -- --
-------- -------- --------
Total Distributions
Declared to Shareholders (0.977) (0.995) (0.948)
-------- -------- --------
Net asset value -
End of period $ 11.450 $ 11.520 $ 11.270
======== ======== ========
Market price per share -
End of period $ 10.940 $ 10.630 $ 10.750
======== ======== ========
Total return - based on
net asset value (a) 8.71% 11.94% 18.46%
======== ======== ========
Total return - based on
market value (b) 12.62% 8.30% 17.67%
======== ======== ========
RATIOS TO AVERAGE NET ASSETS
Expenses 0.96%(c) 0.95%(c) 0.97%(c)
Net investment income 8.06%(c) 8.33%(c) 8.73%(c)
Portfolio turnover 154% 117% 77%
Net assets at end
of period (000) $ 126,011 $126,835 $124,097
(a) Total return at net asset value assuming all distributions reinvested.
(b) Total return at market value assuming all distributions reinvested and
excluding brokerage commissions.
(c) 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 for the year ended November 30, 1997 (unaudited)
An average of 19% of the Fund's investments as of the end of each quarter were
in direct obligations of the U.S. Treasury.
Approximately 19% of the Fund's distributions (13% of gross income) was derived
from interest on direct investments in U.S. Treasury bonds, notes, and bills.
- -----------------------------------------------------------------------------
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Year ended November 30
-----------------------
1994 1993
Net asset value -
Beginning of period $ 12.010 $ 11.220
-------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.980 1.093
Net realized and
unrealized gain (loss) (1.271) 0.777
-------- --------
Total from Investment
Operations (0.291) 1.870
-------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.970) (1.080)
From net realized gains (0.339) --
-------- --------
Total Distributions
Declared to Shareholders (1.309) (1.080)
-------- --------
Net asset value -
End of period $ 10.410 $ 12.010
======== ========
Market price per share -
End of period $ 10.000 $ 11.880
======== ========
Total return - based on
net asset value (2.67)% 17.19%
======== ========
Total return - based on
market value (a) (5.42)% 16.87%
======== ========
RATIOS TO AVERAGE NET ASSETS
Expenses 0.98% 1.02%
Net investment income 8.84% 9.27%
Portfolio turnover 99% 179%
Net assets at end
of period (000) $114,568 $132,272
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
T0 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, 1997, 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, 1997
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 9, 1998
<PAGE>
NOTICE TO SHAREHOLDERS OF
COLONIAL INTERMARKET INCOME TRUST I
At their meeting in August, 1997, the Trustees of your Trust amended the Trust's
Dividend Reinvestment Plan to conform the Plan more closely to those of the
other Colonial closed-end Funds.
The Amended Plan now provides that the Trust may issue new shares at the higher
of net asset value or 95% of market value for reinvestment of dividends, rather
than requiring the Plan Agent to purchase Trust shares in the open market. Under
the former plan, the Plan Agent would reinvest dividends in shares purchased in
the open market, at market price. If, when the Plan Agent was reinvesting
dividends, the price of shares in the open market was at or above the Trust's
net asset value, shareholders would have received fewer shares than if the Trust
had issued new shares at the higher of net asset value or 95% of market value.
In the future, if shares of the Trust are trading in the open market at a
discount to net asset value greater than 5% when the Plan Agent is reinvesting
dividends, the Plan Agent will continue the current practice of buying shares at
market price for dividend reinvestment.
The Trustees also amended the Plan so that when future changes are made to the
Plan, shareholders will receive 30 (rather than 90) days' notice of the changes.
The 30-day requirement is consistent with the notice requirement (adopted in
1989) of other Plans for shareholders in other Colonial closed-end Funds.
<PAGE>
DIVIDEND REINVESTMENT PLAN
As a 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.
If the market price of Fund shares on the distribution payment date is equal to
or greater than the net asset value, Plan participants will be issued shares at
the higher of net asset value or 95% of the market price. However, if the market
price of shares is less than the net asset value, shares will be bought as soon
as practicable (but no more than 30 days after the distribution, except as may
be required to comply with federal securities laws) in the open market for the
accounts of Plan participants. If, during this purchase period, the market price
surpasses the net asset value, the average per share price paid may exceed the
net asset value of the shares, resulting in the acquisition of fewer shares than
if the distribution had been in newly-issued shares. The aggregate market value
of the shares may constitute taxable income to shareholders for federal income
tax purposes.
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.
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 30 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.
<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
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.
<PAGE>
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
CI-02/416E-1197 M (1/98)
