COLONIAL INTERMARKET INCOME TRUST I, DEFA14A, 1999-04-21

COLONIAL INTERMARKET INCOME TRUST I
DEFA14A, 1999-04-21

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COLONIAL INTERMARKET INCOME TRUST I
One Financial Center, Boston, Massachusetts 02111
(617) 426-3750

Dear Shareholder:

Colonial InterMarket Income Trust I (Fund) will hold its Annual Meeting of
Shareholders (Meeting) on May 26, 1999 at 10:00 a.m., Eastern Time, at the
offices of Colonial Management Associates, Inc., the Fund's investment advisor.
A formal Notice of Annual Meeting of Shareholders appears on the next page,
followed by the proxy statement which explains in more detail the proposals to
be considered. We hope that you can attend the Meeting in person; however, we
urge you in any event to vote your shares at your earliest convenience.

YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE HELP
YOUR FUND AVOID THE EXPENSE OF A FOLLOW-UP MAILING BY VOTING TODAY!

The Fund is using Corporate Investor Communications, Inc. (CIC), a professional
proxy solicitation firm, to assist shareholders in the voting process. As the
date of the Meeting approaches, if we have not yet received your vote, you may
receive a telephone call from CIC reminding you to exercise your right to vote.

Please take a few moments to review the details of each proposal. We appreciate
your participation and prompt response in these matters, and thank you for your
continued support.

Sincerely,

/s/ Stephen E. Gibson
- ------------------------------

Stephen E. Gibson, President

April 21, 1999

C1-85/860G-0399

1
<PAGE>

COLONIAL INTERMARKET INCOME TRUST I
One Financial Center, Boston, Massachusetts 02111
(617) 426-3750

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 26, 1999

Dear Shareholder:

The Annual Meeting of Shareholders (Meeting) of Colonial InterMarket
Income Trust I (Fund) will be held at the offices of Colonial Management
Associates, Inc. (Advisor), One Financial Center, Boston, Massachusetts, on
Wednesday, May 26, 1999, at 10:00 a.m. Eastern time, to:

1. Elect eight Trustees;

2. Approve an Amended and Restated Management Agreement providing for a change
in the method of calculating the fee payable to the Advisor;

3. Ratify the selection of independent accountants; and

4. Transact such other business as may properly come before the Meeting or any
adjournment thereof.

By order of the Board of Trustees,

Nancy L. Conlin, Secretary

April 21, 1999

NOTICE: YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. IF A
QUORUM IS NOT PRESENT AT THE MEETING, ADDITIONAL EXPENSES WILL BE
INCURRED TO SOLICIT ADDITIONAL PROXIES. TO AVOID THESE COSTS TO YOUR
FUND, PLEASE VOTE, SIGN AND RETURN YOUR PROXY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE IMMEDIATELY.

<PAGE>

ANNUAL MEETING OF SHAREHOLDERS

PROXY STATEMENT

General Information

April 21, 1999

The enclosed proxy, which was first mailed on April 21, 1999, is
solicited by the Trustees for use at the Meeting. All properly executed proxies
received in time for the Meeting will be voted as specified in the proxy or, if
no specification is made, in favor of each proposal referred to in the Proxy
Statement. The proxy may be revoked prior to its exercise by a later dated
proxy, by written revocation received by the Secretary or by voting in person.
Solicitation may be made by mail, telephone, telegraph, telecopy and personal
interviews. Authorization to execute proxies may be obtained by telephonically
or electronically transmitted instructions. The Fund will bear the cost of the
printing and mailing of proxy materials and the tabulation of votes. By voting
as soon as you receive your proxy materials, you will help to reduce the cost of
any additional mailings.

Holders of a majority of the shares outstanding and entitled to vote
constitute a quorum and must be present in person or represented by proxy for
business to be transacted at the Meeting. On March 1, 1999, the Fund had
outstanding 11,009,000 shares of beneficial interest. Shareholders of record at
the close of business on March 1, 1999 will have one vote for each share held.
As of March 1, 1999, The Depository Trust Company (Cede & Company), 7 Hanover
Square, New York, New York 10004, owned of record 9,216,339 shares representing
84% of the Fund's outstanding shares.

Votes cast by proxy or in person will be counted by persons appointed by
the Fund to act as election tellers for the Meeting. The tellers will count the
total number of votes cast "for" approval of the proposals for purposes of
determining whether sufficient affirmative votes have been cast. Where a
shareholder withholds authority or abstains, or the proxy reflects a "broker
non-vote" (i.e., shares held by brokers or nominees as to which (i) instructions
have not been received from the beneficial owners or persons entitled to vote
and (ii) the broker or nominee does not have discretionary voting power on a
particular matter), the shares will be counted as present and entitled to vote
for purposes of determining the presence of a quorum. With respect to the
Amended and Restated Management Agreement, withheld authority, abstentions and
broker non-votes have the effect of a vote against the proposal. With respect to
the election of Trustees and ratification of independent accountants, withheld
authority, abstentions and broker non-votes have no effect on the outcome of the
voting.

2
<PAGE>

Further information concerning the Fund is contained in its most recent
Annual Report to shareholders, which is obtainable free of charge by writing the
Advisor at One Financial Center, Boston, Massachusetts 02111 or by calling
1-800-426-3750.

1. TO ELECT EIGHT TRUSTEES.

Ms. Verville and Messrs. Birnbaum, Carberry, Grinnell, Macera, Moody,
Sullivan and Stitzel (who have each agreed to serve) are proposed for election
as Trustees of the Fund. Messrs. Carberry and Macera will serve for one year,
Ms. Verville and Mr. Stitzel will each serve two years, and Messrs. Grinnell,
Moody and Sullivan will each serve three years, or until a successor is elected.
Mr. Birnbaum will retire as a trustee of the Fund at the end of 1999. The Board
of Trustees currently consists of Mss. Collins and Verville and Messrs.
Birnbaum, Bleasdale, Carberry, Grinnell, Lowry, Macera, Mayer, Moody, Neuhauser,
Stitzel and Sullivan.

The Board of Trustees is divided into the following three classes, each
with a three year term expiring in the year indicated (assuming the persons
listed above are elected at the Meeting):

<TABLE>
<CAPTION>
2000 2001 2002
- ---- ---- ----
<S> <C> <C>
Mr. Bleasdale Mr. Lowry Mr. Birnbaum
Mr. Carberry Mr. Mayer Mr. Grinnell
Ms. Collins Mr. Stitzel Mr. Moody
Mr. Macera Ms. Verville Mr. Sullivan
Mr. Neuhauser
</TABLE>

The following table sets forth certain information about the Board of Trustees
of the Fund:

Shares and
Percent of
Fund
Beneficially
Owned at
Name Trustee March 1,
(Age) since Principal Occupation (1) and Directorships 1999 (2)
<S> <C> <C> <C>
Robert J. Birnbaum 1995 Consultant (formerly Special Counsel,
(71) Dechert Price & Rhoads -- law).
Director or Trustee: Colonial Funds, -0-
Liberty Funds Trust IX, Liberty All-Star
Equity Fund, Liberty All-Star Growth
Fund, Inc., The Emerging Germany Fund.
</TABLE>

3
<PAGE>

Shares and
Percent of
Fund
Beneficially
Owned at
Name Trustee March 1,
(Age) since Principal Occupation (1) and Directorships 1999 (2)
<S> <C> <C> <C>
Tom Bleasdale 1989 Retired (formerly Chairman of the Board
(68) and Chief Executive Officer, Shore Bank
& Trust Company -- banking). Director -0-
or Trustee: Colonial Funds, Empire
Company Limited.

John V. Carberry * 1998 Senior Vice President of Liberty
(51) Financial Companies, Inc. (formerly
managing Director, Salomon Brothers -- -0-
investment banking). Director or
Trustee: Colonial Funds, Liberty
FundsTrust IX, Liberty All-Star Equity
Fund, Liberty All-Star Growth Fund, Inc.

Lora S. Collins 1989 Attorney (formerly Attorney with Kramer,
(63) Levin, Naftalis & Frankel -- law). -0-
Trustee: Colonial Funds.

James E. Grinnell 1995 Private Investor. Director or Trustee:
(69) Colonial Funds, Liberty Funds Trust IX, -0-
Liberty All-Star Equity Fund, Liberty
All-Star Growth Fund, Inc.

Richard W. Lowry 1995 Private Investor (formerly Senior Vice
(62) President -- Operations, The Rockport
Company). Director or Trustee: Colonial -0-
Funds, Liberty Funds Trust IX, Liberty
All-Star Equity Fund, Liberty All-Star
Growth Fund, Inc.

Salvatore Macera 1998 Private Investor (formerly Executive
(67) Vice President of Itek Corp. and
President of Itek Optical & Electronics -0-
Industries, Inc. - electronics).
Trustee: Colonial Funds.
</TABLE>

4
<PAGE>

Shares and
Percent of
Fund
Beneficially
Owned at
Name Trustee March 1,
(Age) since Principal Occupation (1) and Directorships 1999 (2)
<S> <C> <C> <C>
William E. Mayer * 1994 Partner, Development Capital, LLC --
(58) investments (formerly Dean, College of
Business and Management, University of
Maryland--higher education; Dean, Simon
Graduate School of Business, University
of Rochester--higher education; Chairman -0-
and Chief Executive Officer, CS First
Boston Merchant Bank; and President and
Chief Executive Officer, The First
Boston Corporation). Director or
Trustee: Colonial Funds, Liberty Funds
Trust IX, Liberty All-Star Equity Fund,
Liberty All-Star Growth Fund, Inc.,
Hambrecht & Quist Incorporated, Lee
Enterprises, Inc., Johns Manville.

James L. Moody, Jr. 1989 Retired (formerly Chairman of the Board,
(67) Chief Executive Officer and Director,
Hannaford Bros. Co. -- food
distributor). Director or Trustee: -0-
Colonial Funds, Penobscot Shoe Co.,
UNUM Corporation, IDEXX Laboratories,
Inc., Staples, Inc., Empire Company
Limited.

John J. Neuhauser 1992 Dean, School of Management, Boston
(56) College -- higher education. Director or
Trustee: Colonial Funds, Liberty -0-
All-Star Equity Fund, Liberty Funds
Trust IX, Liberty All-Star Growth Fund,
Inc., Saucony, Inc.

Thomas E. Stitzel 1998 Professor of Finance, College of
(63) Business, Boise State University --
higher education; Business Consultant -0-
and Author. Trustee: Colonial Funds.
</TABLE>

5
<PAGE>

Shares and
Percent of
Fund
Beneficially
Owned at
Name Trustee March 1,
(Age) since Principal Occupation (1) and Directorships 1999 (2)
<S> <C> <C> <C>
Robert L. Sullivan 1989 Retired Partner, KPMG LLP -- management
(71) consulting (formerly Management
Consulting, Saatchi and Saatchi
Consulting Ltd.; Principal and -0-
International Practice Director,
Management Consulting, Peat Marwick Main
& Co.). Trustee: Colonial Funds.

Anne-Lee Verville 1998 Consultant (formerly General Manager,
(53) Global Education Industry, and
President, Applications Solutions -0-
Division, IBM Corporation). Trustee or
Director: Colonial Funds, Enesco Group.
</TABLE>

* Mr. Carberry is an "interested person," as defined in the Investment Company
Act of 1940 (1940 Act), because of his affiliation with Liberty Financial
Companies, Inc. (Liberty Financial) (the indirect parent company of the
Advisor). Mr. Carberry is the owner of common shares and other securities of
Liberty Financial. Mr. Mayer is an "interested person," as defined in the
1940 Act, because of his affiliation with Hambrecht & Quist Incorporated (a
registered broker-dealer).

(1) Except as otherwise noted, each individual has held the office indicated or
other offices in the same company for the last five years.

(2) On March 1, 1999, the Trustees and officers of the Fund as a group
beneficially owned less than 1% of the then outstanding shares of the Fund.

In this Proxy Statement, the "Colonial Funds" means Liberty Funds Trust
I, Liberty Funds Trust II, Liberty Funds Trust III, Liberty Funds Trust IV,
Liberty Funds Trust V, Liberty Funds Trust VI, Liberty Funds Trust VII, Liberty
Funds Trust VIII, Liberty Variable Investment Trust, Colonial High Income
Municipal Trust, Colonial InterMarket Income Trust I, Colonial Intermediate High
Income Fund, Colonial Investment Grade Municipal Trust and Colonial Municipal
Income Trust.

6
<PAGE>

The following table sets forth certain information about the executive
officers of the Fund:

Shares and
Percent of
Fund
Beneficially
Executive Owned at
Name Officer March 1,
(Age) since Office with Fund; Principal Occupation (3) 1999 (4)
<S> <C> <C> <C>
Stephen E. Gibson President of the Fund and of the Colonial
(45) 1998 Funds since June, 1998; Chairman of the Board
since July, 1998, Chief Executive Officer and
President since December, 1996, and Director
since July, 1996 of the Advisor (formerly
Executive Vice President from July, 1996 to -0-
December, 1996); Director, Chief Executive
Officer and President of Liberty Funds Group
LLC (LFG) since December, 1998 (formerly
Director, Chief Executive Officer and
President of The Colonial Group, Inc. (TCG)
from December, 1996 to December, 1998);
Assistant Chairman of Stein Roe & Farnham
Incorporated (SR&F) since August, 1998
(formerly Managing Director of Marketing of
Putnam Investments, from June, 1992 to July,
1996).
</TABLE>

7
<PAGE>

Shares and
Percent of
Fund
Beneficially
Executive Owned at
Name Officer March 1,
(Age) since Office with Fund; Principal Occupation (3) 1999 (4)
<S> <C> <C> <C>
Timothy J. Jacoby Treasurer and Chief Financial Officer of the
(46) 1996 Fund and of the Colonial Funds since October,
1996 (formerly Controller and Chief
Accounting Officer from October, 1997 to
February, 1998); Treasurer since December,
1998 of Liberty Funds Trust IX; Treasurer -0-
since October, 1996 of Liberty All-Star
Equity Fund and of Liberty All-Star Growth
Fund, Inc.; Senior Vice President since
September, 1996 of the Advisor; Vice
President, Chief Financial Officer and
Treasurer since December, 1998 of LFG
(formerly Vice President, Chief Financial
Officer and Treasurer from July, 1997 to
December, 1998 of TCG); Senior Vice President
since August, 1998 of SR&F (formerly Senior
Vice President, Fidelity Accounting and
Custody Services from September, 1993 to
September, 1996).

J. Kevin Connaughton Controller and Chief Accounting Officer of
(34) 1998 the Fund and of the Colonial Funds since
February, 1998; Controller since December,
1998 of Liberty FundsTrust IX; Controller -0-
since April, 1998 of Liberty All-Star Equity
Fund and of Liberty All-Star Growth Fund,
Inc.; Vice President of the Advisor since
February, 1998 (formerly Senior Tax Manager,
Coopers & Lybrand, LLP from April, 1996 to
January, 1998; Vice President, 440 Financial
Group/First Data Investor Services Group from
March, 1994 to April, 1996).
</TABLE>

8
<PAGE>

Shares and
Percent of
Fund
Beneficially
Executive Owned at
Name Officer March 1,
(Age) since Office with Fund; Principal Occupation (3) 1999 (4)
<S> <C> <C> <C>
Nancy L. Conlin 1998 Secretary of the Fund and of the Colonial
(45) Funds since April, 1998 (formerly Assistant
Secretary from July, 1994 to April, 1998);
Director, Senior Vice President, General
Counsel, Clerk and Secretary of the Advisor
since April, 1998 (formerly Vice President,
Counsel, Assistant Secretary and Assistant -0-
Clerk from July, 1994 to April, 1998); Vice
President - Legal, General Counsel, Secretary
and Clerk of LFG since December, 1998
(formerly Vice President - Legal, General
Counsel, Secretary and Clerk of TCG from
April, 1998 to December, 1998; Assistant Clerk
from July, 1994 to April, 1998); (formerly
Partner at Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo from June, 1990 to June, 1994).
</TABLE>

(3) Except as otherwise noted, each individual has held the office indicated or
other offices in the same company for the last five years.

(4) As of record on March 1, 1999, the Trustees and officers of the Fund as a
group beneficially owned less than 1% of the then outstanding shares of the
Fund.

Trustees' Compensation, Meetings and Committees

A. Trustees' Compensation.

For the fiscal year ended November 30, 1998 and the calendar year ended
December 31, 1998, the Trustees received the following compensation for serving
as Trustees (5):

9
<PAGE>

<TABLE>
<CAPTION>
Total Compensation from
the Colonial Funds Paid
Aggregate Compensation from to the Trustees for the
the Fund for the Fiscal Year Calendar Year Ended
Trustee Ended November 30, 1998 December 31, 1998 (6)
- ------- ---------------------------- -----------------------
<S> <C> <C>
James E. Grinnell (7) $1,295(12) $103,071
Richard W. Lowry (7) 1,235 98,214
Salvatore Macera (13) -- 25,250
William E. Mayer (7) 1,299 99,286
James L. Moody, Jr. (7) 1,332(14) 105,857(15)
John J. Neuhauser (7) 1,326 105,323
Thomas E. Stitzel (13) -- 25,250
Robert L. Sullivan (7) 1,331 104,100
Anne-Lee Verville (7)(10) 911(16) 23,445(17)
</TABLE>

(5) The Fund does not currently provide pension or retirement plan benefits to
the Trustees.

(6) At December 31, 1998, the Colonial Funds consisted of 56 open-end
management investment portfolios and 5 closed-end management investment
portfolios.

(7) Elected by the shareholders of Liberty Variable Investment Trust on October
30, 1998.

(8) Includes $636 payable in later years as deferred compensation.

(9) Includes $52,000 payable in later years as deferred compensation.

(10) Elected by the trustees of the closed-end Colonial Funds on June 18, 1998,
and by the shareholders of the open-end Colonial Funds on October 30, 1998.

(11) Does not receive compensation because he is an affiliated Trustee and
employee of Liberty Financial.

(12) Includes $10 payable in later years as deferred compensation.

(13) Elected by the shareholders of the open-end Colonial Funds on October 30,
1998, and by the trustees of the closed-end Colonial Funds on December 17,
1998.

(14) Total compensation of $1,332 for the fiscal year ended November 30, 1998,
will be payable in later years as deferred compensation.

(15) Total compensation of $105,857 for the calendar year ended December 31,
1998, will be payable in later years as deferred compensation.

(16) Total compensation of $911 for the fiscal year ended November 30, 1998,
will be payable in later years as deferred compensation.

(17) Total compensation of $23,445 for the calendar year ended December 31,
1998, will be payable in later years as deferred compensation.

For the calendar year ended December 31, 1998, certain of the Trustees
received the following compensation in their capacities as Trustees or Directors
of the Liberty All-Star Equity Fund and of the Liberty All-Star Growth Fund,
Inc. (together, Liberty All-Star Funds)(18):

10
<PAGE>

<TABLE>
<CAPTION>
Total Compensation from the
Liberty All-Star Funds for the Calendar
Trustee Year Ended December 31, 1998 (19)
- ------- ---------------------------------------
<S> <C>
Robert J. Birnbaum $25,000
John V. Carberry (20)(21) N/A
James E. Grinnell 25,000
Richard W. Lowry 25,000
William E. Mayer (22) 14,000
John J. Neuhauser (23) 25,000
</TABLE>

(18) The Liberty All-Star Funds do not currently provide pension or retirement
plan benefits to the Directors or Trustees.

(19) The Liberty All-Star Funds are advised by Liberty Asset Management Company
(LAMCO). LAMCO is an indirect wholly-owned subsidiary of Liberty Financial
(an intermediate parent of the Advisor).

(20) Does not receive compensation because he is an affiliated Director or
Trustee and employee of Liberty Financial.

(21) Elected by the Trustees/Directors of the Liberty All-Star Funds on June 30,
1998.

(22) Elected by the shareholders of the Liberty All-Star Equity Fund on April
22, 1998, and by the Directors of the Liberty All-Star Growth Fund, Inc. on
December 17, 1998.

(23) Elected by the shareholders of the Liberty All-Star Funds on April 22,
1998.

B. Meetings and Committees.

During the fiscal year ended November 30, 1998, the Board of Trustees
held six meetings.

The Audit Committee of the Colonial Funds, consisting of Messrs.
Bleasdale, Grinnell, Lowry, Moody and Sullivan, all of whom are non-interested
Trustees, met three times during the Fund's fiscal year ended November 30, 1998.
The Audit Committee recommends to the Board of Trustees the independent
accountants to serve as auditors, reviews with the independent accountants the
results of the auditing engagement and internal accounting procedures and
considers the independence of the independent accountants, the range of their
audit services and their fees.

The Compensation Committee of the Colonial Funds, consisting of Ms.
Collins and Messrs. Birnbaum, Grinnell and Neuhauser, all of whom are
non-interested Trustees, met one time during the Fund's fiscal year ended
November 30, 1998. The Compensation Committee reviews compensation of the Board
of Trustees.

11
<PAGE>

The Governance Committee of the Colonial Funds, consisting of Messrs.
Bleasdale, Lowry, Mayer, Moody and Sullivan (Mr. Mayer being the only interested
member), met six times during the Fund's fiscal year ended November 30, 1998.
The Governance Committee, in its sole discretion, recommends to the Trustees,
among other things, nominees for Trustee and for appointments to various
committees. The Committee will consider candidates for Trustee recommended by
shareholders. Written recommendations with supporting information should be
directed to the Committee in care of the Fund.

During the Fund's fiscal year ended November 30, 1998, each of the
current Trustees attended more than 75% of the combined total of the meetings of
the Board of Trustees and the meetings of the committees of which such Trustee
is a member.

If any nominee listed above becomes unavailable for election, the
enclosed proxy may be voted for a substitute candidate in the discretion of the
proxy holder(s).

REQUIRED VOTE

A plurality of the votes cast at the Meetings, if a quorum is
represented, is required for the election of each Trustee.

2. APPROVAL OF AN AMENDED AND RESTATED MANAGEMENT
AGREEMENT.

A. Description of Proposal.

The Advisor serves as the Fund's investment advisor under a management
agreement dated March 27, 1995 (the "Current Management Agreement"). At the
Meeting, shareholders of the Fund will be asked to approve an amended and
restated management agreement (the "New Management Agreement") to change the
base amount used to determine the Advisor's management fee. There are no other
changes being proposed to be made in the Current Management Agreement. The
proposed change to the Current Management Agreement will have no immediate
effect on the management fee. The proposed change would result in higher
management fees to the Advisor if the Fund uses financial leverage.

Leverage. 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 seeks to achieve its objective
by investing in three different sectors of the fixed income securities markets.
The Fund currently does not use financial leverage. However, the Advisor may in
the future recommend to the Board of Trustees that the Fund use leverage through
bank borrowings to seek higher distributions to shareholders.

12
<PAGE>

The net proceeds of borrowings would be available for investment in
accordance with the Fund's investment objective and policies. If the rate of
return on these investments exceeds the interest rate on the borrowings, an
enhanced return to the Fund's shareholders should result. For example, the Fund
might borrow money at short-term interest rates and invest the proceeds in
longer-term portfolio investments that pay a higher rate. Historically,
prevailing long-term interest rates have generally been higher than short-term
rates. However, there can be no assurance that the historical relationship
between short-term and long-term interest rates will continue, nor is the Fund
limited to borrowing at short-term rates.

The Fund would only utilize leverage when the Advisor believes that such
leverage will benefit the Fund and the shareholders, after taking into account
considerations such as the interest rates payable on the borrowings, other costs
to the Fund of maintaining the leverage and on the anticipated return from the
portfolio securities purchased with the proceeds of the borrowings. The
issuance, timing, amount and other terms of any such borrowings would be subject
to the approval and supervision of the Fund's Board of Trustees and to a
determination by the Board that such leverage is likely to achieve benefits to
shareholders.

Risks of Leverage. Although the use of leverage by the Fund creates an
opportunity for increased net income available for distribution to shareholders,
utilization of leverage entails special risks. Leverage could result in a
reduction of net income available for distribution to shareholders if the
interest rate on the leverage paid by the Fund exceeds the yield received by the
Fund on investments made with the proceeds of the leverage. In addition, the net
asset value and market value of the Fund's shares may be more volatile if the
Fund utilizes leverage. The Fund could also lose money on the investments
purchased with the proceeds of borrowings, as a result of factors such as
changes in interest rates or in the creditworthiness of the issuers of those
investments. Such losses would not relieve the Fund of the obligation to repay
the borrowings, and the Fund might have to sell other assets to repay the
borrowings or comply with terms agreed to by the Fund in connection with the
borrowings.

The Proposed New Management Agreement. The Fund's Board of Trustees
approved the New Management Agreement at a meeting held on February 26, 1999,
the form of which is attached as Exhibit A. The form of the New Management
Agreement is substantially identical to the Current Management Agreement, except
for the base amount of the Fund's assets used to determine the Advisor's
management fee. Under the terms of the New Management Agreement, the monthly
management fee at the annual rate of 0.75% would be based on the "Average Weekly
Managed Assets" of the Fund, which is defined in the New Management Agreement as
follows:

13
<PAGE>

"Average Weekly Managed Assets" of the Fund shall mean the average
weekly value of the total assets of the Fund less all accrued
liabilities of the Fund (other than the aggregate amount of any
outstanding borrowings constituting financial leverage)."

Under the terms of the Current Management Agreement, the Advisor is paid
a management fee of 0.75% on the net assets of the Fund, which does not include
the amount of any assets representing financial leverage. In comparison, under
the terms of the New Management Agreement, the Advisor would be paid a
management fee of 0.75% on the total assets of the Fund, including assets
representing leverage.

B. Expenses.

The table below summarizes the Fund's annual operating expenses, based
on expenses incurred in the fiscal year ended November 30, 1998. Because the
Fund has not utilized leverage, the expenses of the Fund would have been the
same during the last fiscal year if the New Management Agreement had been in
effect.

Shareholder Transaction Expenses
Annual Expenses (as a % of average weekly net assets attributable
to shares)
<TABLE>
<S> <C>
Management fees 0.75%
Other expenses 0.18%
-----
Total annual operating expenses 0.93%
=====
</TABLE>

Example

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following
expenses on a $10,000 investment,
assuming a 5% annual return
throughout the periods $94 $295 $512 $1,138
</TABLE>

C. Considerations by the Board of Trustees.

The Fund's Board of Trustees considered the proposal to amend the
Current Management Agreement at a meeting on February 26, 1999. Based upon the
evaluation of the materials presented by the Advisor, the Trustees unanimously
approved the fee structure proposed by the Advisor in the New Management
Agreement. In reaching its decision to approve the New Management Agreement, the
Board of Trustees considered many factors, among others: the benefits, under
appropriate market conditions, of leverage to the Fund's shareholders, including
potentially higher levels of distributions; the fact that the proposed fee
structure would somewhat reduce the possible benefits of the

14
<PAGE>

use of leverage; the need of the Advisor to devote personnel and resources to
managing the Fund and the additional assets attributable to leverage; and the
comparability of the current and proposed structure of the management fee to
that of other investment companies that utilize leverage.

D. Information Concerning the Advisor and its Affiliates.

The Advisor is a wholly-owned subsidiary of LFG, which in turn is an
indirect wholly-owned subsidiary of Liberty Financial. Liberty Financial is a
direct majority-owned subsidiary of LFC Management Corporation, which in turn is
a direct wholly-owned subsidiary of Liberty Corporate Holdings, Inc., which in
turn is a direct wholly-owned subsidiary of LFC Holdings, Inc., which in turn is
a direct wholly-owned subsidiary of Liberty Mutual Equity Corporation, which in
turn is a direct wholly-owned subsidiary of Liberty Mutual Insurance Company
(Liberty Mutual). As of March 31, 1999, LFC Management Corporation owned 71.8%
of Liberty Financial. Liberty Financial is a diversified and integrated asset
management organization which provides insurance and investment products to
individuals and institutions. Liberty Financial's, LFC Management Corporation's,
Liberty Corporate Holdings, Inc.'s and LFC Holdings, Inc.'s principal executive
offices are located at 600 Atlantic Avenue, 24th Floor, Boston, Massachusetts
02210. Liberty Mutual is an underwriter of workers' compensation insurance and a
Massachusetts-chartered mutual property and casualty insurance company. The
principal business activities of Liberty Mutual's subsidiaries other than
Liberty Financial are property-casualty insurance, insurance services and life
insurance (including group life and health insurance products) marketed through
its own sales force. Liberty Mutual's and Liberty Mutual Equity Corporation's
principal executive offices are located at 175 Berkeley Street, Boston,
Massachusetts 02117.

The directors of the Advisor are Nancy L. Conlin, Stephen E. Gibson and
Joseph R. Palombo. Mr. Gibson is the principal executive officer of the Advisor.
The principal occupations of the Advisor's directors are as officers and
directors of the Advisor and certain of its affiliates. The address of the
directors and officers of the Advisor is One Financial Center, Boston,
Massachusetts 02111.

The Advisor's compensation under the Current Management Agreement is
subject to reduction to the extent that in any year the expenses of the Fund
exceed the limits on investment company expenses imposed by any statute or
regulatory authority of any jurisdiction in which shares of the Fund are
qualified for offer and sale. No such limits are currently in effect.

The Current Management Agreement provides that, subject to the Board of
Trustees' supervision, the Advisor will manage the assets of the Fund in
accordance with its investment policies, purchase and sell securities and other
investments on behalf of the Fund and report results to the Board of Trustees
periodically. The Current Management Agreement also requires the Advisor to
furnish, at its expense (a) office space, supplies,

15
<PAGE>

facilities and equipment; (b) executive and other personnel for managing the
affairs of the Fund (excluding custodial, transfer agency, dividend and plan
agency services, pricing and certain record keeping services); and (c)
compensation to Trustees who are directors, officers or employees of the Advisor
or its affiliates.

The Current Management Agreement may be terminated at any time by the
Advisor, by the Board of Trustees or by vote of a majority of the outstanding
voting securities of the Fund without penalty on 60 days' written notice; shall
automatically terminate upon any assignment; and otherwise shall continue in
effect from year to year if approved annually (1) by the Board of Trustees or by
vote of a majority of the outstanding voting securities of the Fund and (2) by a
majority of the Trustees who are not "interested persons" as defined under the
1940 Act. The Board of Trustees approved the Current Management Agreement at a
meeting held on June 8, 1998. The Fund's shareholders approved the Current
Management Agreement at a Special Meeting of Shareholders held on February 15,
1995.

The Advisor provides bookkeeping and pricing services to the Fund
pursuant to a separate Service Contract under which the Advisor is paid a yearly
fee of $18,000 plus 0.0233% of the Fund's average net assets over $50 million.
For these services, the Fund paid the Advisor $35,000 for the fiscal year ended
November 30, 1998.

In addition to the fees described above, the Fund pays all of its
expenses not assumed by the Advisor, including, without limitation, fees and
expenses of the Independent Trustees, interest charges, taxes, brokerage
commissions, expenses of issue or redemption of shares, fees and expenses of
registering and qualifying shares of the Fund for distribution under federal and
state laws and regulations, custodial, auditing and legal expenses, expenses of
determining net asset value of the Fund's shares, expenses of providing reports
to shareholders, proxy statements and proxies to existing shareholders, and its
proportionate share of insurance premiums and professional association dues or
assessments. The Fund also is responsible for such non-recurring expenses as may
arise, including litigation in which the Fund may be a party, and other expenses
as determined by the Board of Trustees. The Fund may have an obligation to
indemnify its officers and Trustees with respect to litigation.

E. Other Funds Managed by the Advisor.

In addition to the services provided by the Advisor to the Fund, the
Advisor also provides management and other services and facilities to other
investment companies with different investment objectives than the Fund.
Information with respect to the assets of and management fees payable to the
Advisor by another fund having an investment objective similar to that of the
Fund, is set forth below:

16
<PAGE>

<TABLE>
<CAPTION>
Total Net
Assets at
March 31, Annual Management Fee
1999 as a % of Average
Fund (in millions) Daily Net Assets
- ---- ------------ ---------------------
<S> <C> <C>
Colonial Strategic Income Fund $1,939.1 0.65% on the first $1 billion;
0.60% of any excess over $1 billion
</TABLE>

F. Required Vote.

Approval of the New Management Agreement will require the affirmative
vote of a "majority of the outstanding voting securities" of the Fund (as
defined in the 1940 Act), which means the affirmative vote of the lesser of (1)
more than 50% of the outstanding shares of the Fund or (2) 67% or more of the
shares of the Fund present at the Meeting if more than 50% of the outstanding
shares of the Fund are represented at the Meeting in person or by proxy. If the
New Management Agreement is not approved, the Fund's current Management
Agreement will remain in effect. The Fund's ability to borrow money to engage in
leverage (or for other purposes) does not depend on approval of the New
Management Agreement.

The Board of Trustees unanimously recommends that shareholders of the
Fund vote FOR the New Management Agreement.

3. TO RATIFY THE SELECTION OF THE INDEPENDENT ACCOUNTANTS.

PricewaterhouseCoopers LLP was selected as independent accountants for
the Fund for the Fund's fiscal year ending November 30, 1999 by unanimous vote
of the Board of Trustees, subject to ratification or rejection by the
shareholders. Neither PricewaterhouseCoopers LLP nor any of its partners has any
direct or material indirect financial interest in the Fund. A representative of
PricewaterhouseCoopers LLP will be available at the Meeting, if requested by a
shareholder in writing at least five days before the Meeting, to respond to
appropriate questions and make a statement (if the representative desires).

REQUIRED VOTE

Ratification requires the affirmative vote of a majority of the shares
of the Fund voted at the Meeting.

4. OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY.

As of the date of this Proxy Statement, only the business mentioned in
Items 1 through 3 of the Notice of the Meeting is contemplated to be presented.
If any procedural or other matters properly come before the Meeting, the
enclosed proxy shall be voted in accordance with the best judgment of the proxy
holder(s).

17
<PAGE>

If a quorum of shareholders (a majority of the shares entitled to vote
at the Meeting) is not represented at the Meeting or at any adjournment thereof,
or, even though a quorum is so represented, if sufficient votes in favor of the
Items set forth in the Notice of the Meeting are not received by May 26, 1999,
the persons named as proxies may propose one or more adjournments of the Meeting
for a period or periods of not more than ninety days in the aggregate and
further solicitation of proxies may be made. Any such adjournment may be
effected by a majority of the votes properly cast in person or by proxy on the
question at the session of the Meeting to be adjourned. The persons named as
proxies will vote in favor of such adjournment those proxies which they are
entitled to vote in favor of the Items set forth in the Notice of the Meeting.
They will vote against any such adjournment those proxies required to be voted
against any of such Items.

Compliance with Section 16(a) of the Securities Act of 1934

Section 16(a) of the Securities Exchange Act of 1934, as amended, and
Section 30(f) of the 1940 Act, as amended, require the Fund's Board of Trustees
and executive officers, persons who own more than ten percent of the Fund's
equity securities, the Fund's investment advisor and affiliated persons of the
Fund's investment advisor (Section 16 reporting persons), to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of the Fund's shares and to furnish the Fund with copies of
all Section 16(a) forms they file. Based solely upon a review of copies of such
reports furnished to the Fund, and on representations that no other reports were
required during the fiscal year ended November 30, 1998, the Section 16
reporting persons complied with all Section 16(a) filings applicable to them.

Date for Receipt of Shareholder Proposals

Proposals of shareholders which are intended to be considered for
inclusion in the Fund's proxy statement relating to the 2000 Annual Meeting of
Shareholders of the Fund must be received by the Fund at One Financial Center,
Boston, Massachusetts 02111 on or before December 24, 1999. Shareholders who
wish to make a proposal for consideration at the 2000 Annual Meeting without
regard to whether it will be included in the Fund's Proxy Statement should
notify the Fund no later than (March 8, 2000). If a shareholder who wishes to
present a proposal fails to notify the Fund by such date, the proxies solicited
for the meeting will confer discretionary authority to the proxy holders to vote
on the shareholder's proposal if it is properly brought before the meeting. If a
shareholder makes a timely notification, proxy holders may still exercise
discretionary voting authority under circumstances consistent with the SEC's
proxy rules.

Shareholders are urged to vote, sign and mail their proxies immediately.

18
<PAGE>

EXHIBIT A

AMENDED AND RESTATED MANAGEMENT AGREEMENT

AGREEMENT dated as of May 26, 1999, between Colonial Intermarket Income Trust I,
a Massachusetts business trust (Fund), and COLONIAL MANAGEMENT ASSOCIATES, INC.,
a Massachusetts corporation (Advisor), which amends and restates the Management
Agreement dated as of March 27, 1995 between the Fund and the Advisor.

In consideration of the promises and covenants herein, the parties agree as
follows:

1. The Advisor will manage the investment of the assets of the Fund in
accordance with its investment policies and will perform the other services
herein set forth, subject to the supervision of the Board of Trustees of the
Fund.

2. In carrying out its investment management obligations, the Advisor shall:

(a) evaluate such economic, statistical and financial information and
undertake such investment research as it shall believe advisable; (b)
purchase and sell securities and other investments for the Fund in
accordance with the procedures approved by the Board of Trustees; and (c)
report results to the Board of Trustees.

3. The Advisor shall furnish at its expense the following:

(a) office space, supplies, facilities and equipment; (b) executive and
other personnel for managing the affairs of the Fund (including preparing
financial information of the Fund and reports and tax returns required to be
filed with public authorities, but exclusive of those related to custodial,
transfer, dividend and plan agency services, determination of net asset
value and maintenance of records required by Section 31(a) of the Investment
Company Act of 1940, as amended, and the rules thereunder (1940 Act)); and
(c) compensation of Trustees who are directors, officers, partners or
employees of the Advisor or its affiliated persons (other than a registered
investment company).

4. The Advisor shall be free to render similar services to others so long as
its services hereunder are not impaired thereby.

5. The Fund shall pay the Advisor monthly a fee at the annual rate of 0.75% of
the Average Weekly Managed Assets of the Fund.

"Average Weekly Managed Assets" of the Fund shall mean the average weekly
value of the total assets of the Fund less all accrued liabilities of the
Fund (other than the aggregate amount of any outstanding borrowings
constituting financial leverage).

6. If the operating expenses of the Fund for any fiscal year exceed the most
restrictive applicable expense limitation for any state in which shares are
sold, the Advisor's fee shall be reduced by the excess but not to less than
zero.

19
<PAGE>

Operating expenses shall not include brokerage, interest, taxes, deferred
organization expenses and extraordinary expenses, if any. The Advisor may
waive its compensation (and, bear expenses of the Fund) to the extent that
expenses of the Fund exceed any expense limitation the Advisor declares to
be effective.

7. This Agreement shall become effective as of the date of its execution, and

(a) unless otherwise terminated, shall continue until two years from its
date of execution and from year to year thereafter so long as approved
annually in accordance with the 1940 Act; (b) may be terminated without
penalty on sixty days' written notice to the Advisor either by vote of the
Board of Trustees of the Fund or by vote of a majority of the outstanding
voting securities of the Fund; (c) shall automatically terminate in the
event of its assignment; and (d) may be terminated without penalty by the
Advisor on sixty days' written notice to the Fund.

8. This Agreement may be amended in accordance with the 1940 Act.

9. For the purpose of the Agreement, the terms "vote of a majority of the
outstanding voting securities", "affiliated person" and "assignment" shall
have their respective meanings defined in the 1940 Act and exemptions and
interpretations issued by the Securities and Exchange Commission under the
1940 Act.

10. In the absence of willful misfeasance, bad faith or gross negligence on the
part of the Advisor, or reckless disregard of its obligations and duties
hereunder, the Advisor shall not be subject to any liability to the Fund, to
any shareholder of the Fund or to any other person, firm or organization,
for any act or omission in the course of, or connected with, rendering
services hereunder.

COLONIAL INTERMARKET INCOME TRUST I

By: --------------------------------
Title:

COLONIAL MANAGEMENT ASSOCIATES, INC.

By: --------------------------------
Title:

A copy of the document establishing the Fund is filed with the Secretary of The
Commonwealth of Massachusetts. This Agreement is executed by officers not as
individuals and is not binding upon any of the Trustees, officers or
shareholders of the Fund individually but only upon the assets of the Fund.

20
<PAGE>

COLONIAL INTERMARKET INCOME TRUST I

This Proxy is Solicited on Behalf of the Board of Trustees

The undersigned shareholder hereby appoints William J. Ballou, Suzan M. Barron,
Nancy L. Conlin, Stephen E. Gibson and Timothy J. Jacoby and each of them,
proxies of the undersigned, with power of substitution, to vote at the Annual
Meeting of Shareholders of Colonial InterMarket Income Trust I (Trust), to be
held in Boston, Massachusetts, on Wednesday, May 26, 1999, and at any
adjournments, as follows on the reverse side of this card.

PLEASE VOTE, DATE AND SIGN ON REVERSE SIDE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.

Please sign exactly as your name appears on the books of the Trust. Joint owners
should each sign personally. Trustees and other fiduciaries should indicate the
capacity in which they sign, and where more than one name appears, a majority
must sign. If a corporation, this signature should be that of an authorized
officer who should state his or her title.

<TABLE>
<CAPTION>
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
<S> <C>

- ------------------------------- -----------------------------

- ------------------------------- -----------------------------
</TABLE>

<PAGE>

- ------
| | PLEASE MARK VOTES
| X | AS IN THIS EXAMPLE
| |
- ------

- ------------------------------------
COLONIAL INTERMARKET INCOME TRUST I
- ------------------------------------

---------------------
Please be sure to sign | Date |
and Date date this proxy. | |
- ------------------------------------------------------
| |
- ------------------------------------------------------
Shareholder sign here Co-owner sign here

The Board of Trustees recommends a vote
FOR thefollowing items:

1. Election of Eight Trustees.
(Item 1 of the Notice).

For All With For All
Nominees hold Except
--------- ------ --------
Robert J. Birnbaum | | | | | |
John V. Carberry | | | | | |
James E. Grinnell --------- ------ --------
James E. Grinnell
Salvatore Macera
James L. Moody, Jr.
Robert L. Sullivan
Thomas E. Stitzel
Anne-Lee Verville

NOTE: If you do not wish your shares voted
"For" a particular nominee, mark the "For All
Except" box and strike a line through the name(s)
of the nominee(s). Your shares will be voted for
the remaining nominee(s).

2. Proposal to approve an Amended and
Restated Management Agreement providing
for a change in the method of calculating the
fee payable to the Advisor (Item 2 of the
Notice).

For Against Abstain
------- ------- -------
| | | | | |
| | | | | |
------- ------- -------

3. Proposal to ratify the selection of Independent Accountants (Item 3 of the
Notice).

For Against Abstain
------- ------- -------
| | | | | |
| | | | | |
------- ------- -------

This proxy, when properly executed, will be
voted in the manner directed herein. If not
specification is made, this proxy will be voted
FOR Items 1 through 3 above and in the
discretion of the proxies upon such other
business as may properly come before the
meeting.

RECORD DATE SHARES: