UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-5851
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Colonial InterMarket Income Trust I
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(Exact name of registrant as specified in charter)
One Financial Center, Boston, Massachusetts 02111
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(Address of principal executive offices) (Zip code)
Russell Kane, Esq.
Columbia Management Group, Inc.
One Financial Center
Boston, MA 02111
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(Name and address of agent for service)
Registrant's telephone number, including area code: 1-617-772-3363
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Date of fiscal year end: 11/30/2003
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Date of reporting period: 11/30/2003
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
[photo of calculator and newspaper]
COLONIAL INTERMARKET INCOME TRUST I ANNUAL REPORT
NOVEMBER 30, 2003
Not FDIC Insured
May Lose Value
No Bank Guarantee
COLONIAL FUNDS
One Financial Center
Boston, MA 02111-2621
January 14, 2004
Dear Shareholder:
I am writing to you as the independent chairman of the board of trustees of your
Colonial fund. I have been privileged to serve on the board of the Colonial
funds for more than three years and on the board of many of the affiliated
Columbia funds for more than seven years. On December 8, 2003 the board of
trustees elected me the chairman. Over those seven years I have gained a deep
sense of responsibility for the continued success of our funds. Needless to say,
the entire board shares that commitment to you.
These have been troubling times in the fund industry, with newspapers reporting
widely on trading and governance failings. Your board has been energetic over
the past year in strengthening our organization and our capacity to effectively
oversee the Colonial funds.
First, as already indicated, the trustees in December elected an independent
trustee to chair our twelve person board. All of the trustees are completely
independent of the advisor and its affiliates except for the president of the
funds, Joseph Palombo. Each committee of the board is comprised only of
independent trustees.
Second, last year we reconfigured the membership of the four person audit
committee to include only persons qualifying as "audit committee financial
experts" under the demanding standards of the Sarbanes-Oxley legislation. Few
audit committees are fortunate to possess such a breadth and depth of financial
experience.
Third, we strengthened our oversight capacity by appointing Martha Fox as chief
compliance officer of the Colonial funds, reporting directly to your fund's
audit committee. We also assigned board members to four separate investment
oversight committees, each better able to monitor performance of individual
funds.
Fourth, with guidance from our board the investment advisor last year increased
its vigilance to identify and discourage trading in open end mutual fund shares
by speculators. Monitoring personnel have attempted to identify and reject
frequent traders, but frankly that effort by itself cannot be 100% effective.
Accordingly, in February 2003 we implemented 2% redemption penalties in the open
end international funds most subject to market timing, and we are considering
still broader application of redemption fees to curb further attempts to profit
from the open end funds by short-term trading. We are also closely monitoring
legislative and regulatory initiatives that would aid in preventing abuses of
open end funds that currently cannot be detected directly by management or our
transfer agent.
Finally, to further align the interests of the trustees with those of our
shareholders, the board late last year voted to double the required investment
by each trustee in the funds that we oversee. At the same time, new policies
were instituted requiring all investment personnel and trustees to hold any
mutual fund shares for a minimum of one year (unless extraordinary circumstances
warrant an exception to be granted by a board committee).
Undoubtedly, more improvements will be made in the period ahead, but the board
wants you to know that we take our responsibilities very seriously and we commit
to you our continued efforts to serve your interests.
Sincerely,
/s/ Thomas C. Theobald
Thomas C. Theobald
Chairman
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
It was another solid year for the US bond market. However, the positive gains
reported from all major sectors masked an extremely volatile environment. Most
of the gains were actually earned in the first half of the reporting period and
they were sufficient to offset losses or declining performance in the second
half.
From December through mid-June, interest rates generally declined and bond
prices rose as the economy struggled to gain a solid footing and the nation
prepared to go to war. In June, the yield on the 10-year Treasury note fell to a
45-year low of just over 3.1%. High-yield bonds were the primary beneficiaries
of this trend as investors seemed willing to put their fears aside and look to
better times ahead. However, after the major military battles of the war were
declared over and the economy showed clear signs of picking up, interest rates
began to rise and bond prices came down in most sectors. The 10-year yield
reached a high of 4.4% in August, then moved within a tight range around 4.0% to
4.2% for the remainder of the period. As the environment changed, high-yield and
mortgage bonds held up better than other sectors while Treasury bonds lagged.
This reversal of fortune for bonds and a shift of investor enthusiasm back to
stocks, which drove equity returns back into double digit territory, serve as a
reminder that a diversified portfolio may offer the best opportunity for
long-term investment success. Talk to your financial advisor if you're uncertain
about the level of diversification of your portfolio. Your advisor can help you
keep your investments on track.
As always, thank you for investing in Colonial Funds. We look forward to
continuing to serve you in the years ahead.
Sincerely,
/s/ Joseph R. Palombo
Joseph R. Palombo
President
January 12, 2004
Economic and market conditions change frequently. There is no assurance that the
trends described in this report will continue or commence.
1
PORTFOLIO MANAGER'S REPORT
PRICE PER SHARE AS OF 11/30/03 ($)
Net asset value 9.47
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Market price 8.96
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1-YEAR TOTAL RETURN
AS OF 11/30/03 (%)
Net asset value 18.21
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Market price 20.93
- -------------------------------
Lipper General Bond
Funds Category average 17.73
- -------------------------------
All results shown assume reinvestment of distributions.
DISTRIBUTIONS DECLARED
PER SHARE
12/1/02-11/30/03 ($)
0.65
- -------------------------------
SECURITIES BREAKDOWN
AS OF 11/30/03 (%)
Corporate fixed-income
bonds & notes 41.7
- -------------------------------
Foreign government
obligations 32.1
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US government
agencies & obligations 22.9
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Cash equivalents 2.3
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Preferred stock 0.9
- -------------------------------
Other 0.1
- -------------------------------
TOP 5 FOREIGN COUNTRIES
AS OF 11/30/03 (%)
Canada 3.8
- -------------------------------
United Kingdom 3.6
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Brazil 2.8
- -------------------------------
Australia 2.7
- -------------------------------
Sweden 2.6
- -------------------------------
Securities and country breakdowns are calculated as a percentage of net assets.
Because the trust is actively managed, there can be no guarantee that the trust
will continue to maintain these weightings in the future.
For the 12-month period ended November 30, 2003, Colonial InterMarket Income
Trust I generated a total return of 18.21%, based on investment at net asset
value. It did better than the Lipper General Bond Funds Category average of
17.73%.1 The period was favorable for fixed-income securities, as interest rates
trended downward for most of the year. The trust was aided by especially strong
performances from high-yield and foreign bonds.
Since November of 2002, when signs of a meaningful economic rebound began to
emerge, investors have been more willing to assume the risks of economically
leveraged securities. High-yield bonds outperformed the US government and
investment grade corporate fixed-income markets, appreciating during the
12-month period by over 25%, as measured by the CSFB High Yield Developed
Country Index. The trust was able to capitalize on this shift in market
sentiment because we had increased our high-yield exposure from 36% of total
assets in November of 2002 to 40% at the beginning of 2003. We maintained this
allocation throughout the year, trimming some individual positions as they
appreciated.
In February and March, we increased our exposure to formerly down-and-out
industries such as cable and telecom. Cable company Charter Communications
Holdings (0.7% of net assets) exemplified the advantage in holding low-quality
securities: its CCC-rated bonds nearly tripled in value.2 Electric utility
holdings such as AES and Calpine (0.4% and 0.3% of net assets, respectively)
also performed well.
The trust also benefited from its exposure to a range of foreign markets. During
a time when the lowest quality securities posted the highest returns, our
positions in emerging markets such as Brazil and Russia were especially helpful.
Brazil's new government had been perceived as a threat to financial markets, but
investor views turned positive when pro-market, pro-reform policies were put in
place. While the country remains highly indebted, inflation is trending lower
and financial markets have responded well to this and other signs of positive
political and economic momentum. Russia, meanwhile, has benefited from high oil
prices, prudent fiscal policy and improving economic prospects. In October,
Moody's upgraded Russian securities to investment grade, noting the country's
strong reserves and ability to pay back debt.
The weakness of the US dollar against most currencies during the past 12 months
enhanced the returns from established foreign markets. The trust had significant
exposure to bonds denominated in currencies such as the Euro and the Canadian,
Australian and New Zealand dollars, which gained more than 20% relative to the
US dollar. The trust also had a small amount of exposure to bonds denominated in
the South African rand, which appreciated over 40% versus the dollar as the
South African central bank brought inflation under control and the government
adhered to fiscally responsible policy.
- ------------
1 Lipper, Inc., a widely respected data provider in the industry, calculates
an average total return for mutual funds with similar investment objectives
as those of the trust.
2 Holdings are disclosed as of November 30, 2003.
2
PORTFOLIO MANAGER'S REPORT (CONTINUED)
We anticipate that the US economy will continue to drive global growth in 2004.
The growing fiscal and current account deficits in the United States are likely
to continue to put downward pressure on the dollar. We also believe that the
Federal Reserve should be able to keep interest rates low for some time to come,
because unemployment remains around 6%, job growth is tentative and core
inflation is low. It is unlikely that the high-yield market will repeat its
recent strong performance next year because the yield advantage of low-rated
securities came down considerably over the past year. However, the overall
economic environment still appears favorable enough for us to maintain the
trust's current allocation to high-yield. We believe that low US rates and a
strengthening economy should allow for continued improvement in credit quality.
/s/ Laura A. Ostrander
Laura A. Ostrander has been the portfolio manager of Colonial InterMarket Income
Trust I since November 1999 and has co-managed various other funds for Columbia
Management Advisors, Inc. or its predecessors since December 1996.
Past performance is no guarantee of future investment results. Current
performance may be higher or lower than performance data shown.
Investing in fixed-income securities offers the potential for attractive current
income and total returns, but also involves certain risks. Investing in high
yield securities offers the potential for high current income and attractive
total return, but involves certain risks. Lower-rated bond risks include default
of the issuer, rising interest rates and risk associated with investing in
securities of foreign and emerging markets, including currency exchange rate
fluctuations and economic and political change. The value and return of your
investment may fluctuate as a result of changes in interest rates; the financial
strength of issuers of lower-rated bonds; foreign, political and economic
developments; and changes in currency exchange rates.
3
INVESTMENT PORTFOLIO
November 30, 2003
CORPORATE FIXED-INCOME
BONDS & NOTES - 41.7% PAR VALUE
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AGRICULTURE - 0.3%
AGRICULTURE PRODUCTION - 0.3%
Hines Nurseries, Inc.,
10.250% 10/01/11 (a) USD 70,000 $ 75,775
Seminis, Inc.,
10.250% 10/01/13 (a) 202,000 214,120
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289,895
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- -----------------------------------------------------------
CONSTRUCTION - 1.4%
BUILDING CONSTRUCTION - 1.4%
Associated Materials, Inc.,
9.750% 04/15/12 125,000 135,000
Atrium Companies, Inc.,
10.500% 05/01/09 95,000 101,056
D.R. Horton, Inc.,
9.750% 09/15/10 400,000 472,000
J. Ray McDermott SA,
11.000% 12/15/13 (a)(b) 120,000 120,600
K. Hovnanian Enterprises, Inc.:
8.875% 04/01/12 25,000 27,313
10.500% 10/01/07 125,000 146,719
Nortek Holdings, Inc.,
(d) 05/15/11
(10.000% 11/15/07) (a) 215,000 152,650
Standard Pacific Corp.,
9.250% 04/15/12 185,000 205,350
William Lyon Homes, Inc.,
10.750% 04/01/13 90,000 100,800
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1,461,488
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FINANCE, INSURANCE & REAL ESTATE - 2.4%
DEPOSITORY INSTITUTIONS - 1.6%
Dollar Financial Group, Inc.,
9.750% 11/15/11 (a) 150,000 154,500
Euro Investment Bank,
7.625% 12/07/07 GBP 295,000 553,681
Federal Farm Credit Bank,
5.000% 08/25/10 USD 900,000 914,840
Western Financial Bank,
9.625% 05/15/12 30,000 33,600
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1,656,621
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FINANCIAL SERVICES - 0.6%
FINOVA Group, Inc.,
7.500% 11/15/09 255,000 141,525
LaBranche & Co., Inc.,
12.000% 03/02/07 140,000 133,000
MDP Acquisitions PLC,
9.625% 10/01/12 235,000 260,850
Poster Financial Group, Inc.,
8.750% 12/01/11 (a)(b) 25,000 25,625
Tiers-Mir-2001-14,
7.200% 06/15/04 (a)(f) 180,000 88,200
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649,200
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REAL ESTATE - 0.2%
Forest City Enterprises, Inc.,
7.625% 06/01/15 70,000 73,150
PAR VALUE
- -----------------------------------------------------------
Thornburg Mortgage, Inc.,
8.000% 05/15/13 USD 110,000 $ 115,500
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188,650
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- -----------------------------------------------------------
MANUFACTURING - 12.9%
APPAREL - 0.5%
Broder Brothers,
11.250% 10/15/10 (a) 120,000 121,200
Levi Strauss & Co.,
12.250% 12/15/12 255,000 183,600
Perry Ellis International, Inc.,
8.875% 09/15/13 (a) 20,000 20,800
Phillips-Van Heusen Corp.,
8.125% 05/01/13 (a) 60,000 63,300
Warnaco, Inc.,
8.875% 06/15/13 (a) 45,000 45,787
William Carter Co.,
10.875% 08/15/11 42,000 47,723
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482,410
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AUTO PARTS & EQUIPMENT - 0.8%
Accuride Corp.,
9.250% 02/01/08 50,000 50,500
Cummins, Inc.,
9.500% 12/01/10 (a) 135,000 155,250
Dana Corp.:
9.000% 08/15/11 95,000 108,063
10.125% 03/15/10 80,000 91,600
Delco Remy International, Inc.,
10.625% 08/01/06 55,000 53,900
Goodyear Tire & Rubber Co.,
7.857% 08/15/11 170,000 145,350
Metaldyne Corp.,
10.000% 11/01/13 (a) 70,000 67,900
Rexnord Corp.,
10.125% 12/15/12 60,000 65,400
TRW Automotive, Inc.:
9.375% 02/15/13 (a) 35,000 39,550
11.000% 02/15/13 (a) 30,000 35,250
----------
812,763
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CHEMICALS & ALLIED PRODUCTS - 2.5%
Avecia Group PLC,
11.000% 07/01/09 155,000 133,300
Bio-Rad Laboratories, Inc.,
7.500% 08/15/13 150,000 161,250
Equistar Chemicals LP:
10.125% 09/01/08 100,000 106,000
10.625% 05/01/11 (a) 85,000 89,675
FMC Corp.,
10.250% 11/01/09 90,000 105,300
Huntsman ICI Holdings LLC,
(c) 12/31/09 1,430,000 622,050
IMC Global, Inc.,
10.875% 08/01/13 (a) 105,000 110,775
Koppers Industries, Inc.:
9.875% 12/01/07 225,000 232,407
9.875% 10/15/13 (a) 160,000 173,600
See notes to investment portfolio.
4
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2003
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR VALUE
- -----------------------------------------------------------
MANUFACTURING (CONTINUED)
CHEMICALS & ALLIED PRODUCTS (CONTINUED)
Lyondell Chemical Co.,
9.625% 05/01/07 USD 190,000 $ 195,225
MacDermid, Inc.,
9.125% 07/15/11 125,000 139,687
Phibro Animal Health Corp.,
13.000% 12/01/07 (a) 130,000 133,900
PolyOne Corp.,
10.625% 05/15/10 35,000 33,600
Scotts Co.,
6.625% 11/15/13 (a) 20,000 20,150
Terra Capital, Inc.,
12.875% 10/15/08 215,000 249,938
Westlake Chemical Corp.,
8.750% 07/15/11 (a) 85,000 91,587
----------
2,598,444
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ELECTRONIC & ELECTRICAL EQUIPMENT - 0.2%
General Cable Corp.,
9.500% 11/15/10 (a) 35,000 36,925
UCAR Finance, Inc.,
10.250% 02/15/12 155,000 171,275
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208,200
----------
FABRICATED METAL - 0.2%
Earle M. Jorgensen Co.,
9.750% 06/01/12 175,000 190,750
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FOOD & KINDRED PRODUCTS - 2.1%
Bavaria SA,
8.875% 11/01/10 (a) 180,000 178,256
Constellation Brands, Inc.,
8.125% 01/15/12 125,000 136,875
Del Monte Corp.,
9.250% 05/15/11 280,000 307,300
Dole Food Co., Inc.,
8.625% 05/01/09 185,000 199,338
Merisant Co.,
9.500% 07/15/13 (a) 90,000 92,250
Pinnacle Foods,
8.250% 12/01/13 (a) 170,000 175,100
Premier International Foods PLC,
12.000% 09/01/09 500,000 545,000
Roundy's, Inc.,
8.875% 06/15/12 180,000 190,800
Smithfield Foods, Inc.,
8.000% 10/15/09 205,000 225,500
Tabletop Holdings, Inc.,
(d) 05/15/14
(12.250% 11/15/08) (a) 230,000 124,200
----------
2,174,619
----------
FURNITURE & FIXTURES - 0.4%
Congoleum Corp.,
8.625% 08/01/08 95,000 57,000
Juno Lighting, Inc.,
11.875% 07/01/09 135,000 146,813
PAR VALUE
- -----------------------------------------------------------
Norcraft Companies,
9.000% 11/01/11 (a) USD 65,000 $ 68,413
Simmons Co.,
10.250% 03/15/09 35,000 37,450
Tempur-Pedic, Inc.,
10.250% 08/15/10 (a) 115,000 128,512
----------
438,188
----------
MEASURING & ANALYZING INSTRUMENTS - 0.2%
Fisher Scientific International, Inc.,
8.125% 05/01/12 152,000 163,020
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MISCELLANEOUS MANUFACTURING - 2.0%
AGCO Corp.,
9.500% 05/01/08 150,000 163,875
Applied Extrusion Technologies, Inc.,
10.750% 07/01/11 145,000 112,375
Berry Plastics Corp.,
10.750% 07/15/12 (a) 110,000 124,850
Case New Holland, Inc.,
9.250% 08/01/11 (a) 110,000 123,200
Crown European Holdings SA,
10.875% 03/01/13 135,000 155,925
Flowserve Corp.,
12.250% 08/15/10 140,000 162,400
Owens-Brockway Glass Container,
8.250% 05/15/13 245,000 256,025
Owens-Illinois, Inc.:
7.150% 05/15/05 30,000 30,675
7.350% 05/15/08 160,000 160,400
7.500% 05/15/10 35,000 35,000
SPX Corp.,
7.500% 01/01/13 115,000 123,050
Tekni-Plex, Inc.,
12.750% 06/15/10 215,000 227,900
Terex Corp.,
10.375% 04/01/11 150,000 168,000
TriMas Corp.,
9.875% 06/15/12 285,000 289,987
----------
2,133,662
----------
PAPER PRODUCTS - 0.6%
Buckeye Technologies, Inc.,
8.500% 10/01/13 (a) 30,000 31,875
Caraustar Industries, Inc.,
9.875% 04/01/11 115,000 121,900
Georgia-Pacific Corp.,
8.875% 02/01/10 140,000 157,850
Millar Western Forest Products,
7.750% 11/15/13 (a) 95,000 95,485
Norske Skog Canada Ltd.,
8.625% 06/15/11 60,000 61,200
Smurfit-Stone Container Corp.,
8.250% 10/01/12 110,000 117,425
Tembec Industries, Inc.,
8.500% 02/01/11 100,000 97,000
----------
682,735
----------
See notes to investment portfolio.
5
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2003
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR VALUE
- -----------------------------------------------------------
MANUFACTURING (CONTINUED)
PRIMARY METAL - 0.6%
Bayou Steel Corp.,
9.500% 05/15/08 (f) USD 500,000 $ 95,000
IMCO Recycling, Inc.,
10.375% 10/15/10 (a) 85,000 79,900
Kaiser Aluminum & Chemical Corp.:
9.875% 02/15/49 (f) 250,000 212,500
10.875% 10/15/06 (f) 40,000 34,600
Oregon Steel Mills, Inc.,
10.000% 07/15/09 110,000 88,000
Steel Dynamics, Inc.:
9.500% 03/15/09 35,000 38,238
9.500% 03/15/09 (a) 35,000 38,238
----------
586,476
----------
PRINTING & PUBLISHING - 2.0%
Advanstar Communications, Inc.,
12.000% 02/15/11 210,000 215,250
Dex Media, Inc.,
8.000% 11/15/13 (a) 150,000 151,875
Dex Media East LLC,
12.125% 11/15/12 260,000 312,000
Dex Media West LLC,
9.875% 08/15/13 (a) 120,000 136,200
Hollinger, Inc.,
11.875% 03/01/11 (a) 130,000 141,700
Moore North America Finance, Inc.,
7.875% 01/15/11 (a) 75,000 85,125
PriMedia, Inc.,
8.875% 05/15/11 260,000 269,750
Quebecor Media, Inc.,
11.125% 07/15/11 275,000 315,562
Von Hoffmann Corp.:
10.250% 03/15/09 200,000 210,000
10.250% 03/15/09 (a) 50,000 52,500
Yell Finance BV,
10.750% 08/01/11 215,000 252,625
----------
2,142,587
----------
TRANSPORTATION EQUIPMENT - 0.8%
BE Aerospace, Inc.,
8.875% 05/01/11 155,000 141,050
Collins & Aikman Products Co.,
9.750% 02/15/10 100,000 107,250
Dura Operating Corp.:
8.625% 04/15/12 155,000 157,325
9.000% 05/01/09 130,000 120,250
Hexcel Corp.,
9.750% 01/15/09 100,000 104,250
Newcor, Inc.,
6.000% 01/31/13 (g) 165,817 71,999
Sequa Corp.,
8.875% 04/01/08 95,000 103,313
----------
805,437
----------
- -----------------------------------------------------------
PAR VALUE
- -----------------------------------------------------------
MINING & ENERGY - 2.8%
OIL & GAS EXTRACTION - 2.6%
Benton Oil & Gas Co.,
9.375% 11/01/07 USD 140,000 $ 138,600
Chesapeake Energy Corp.:
7.750% 01/15/15 130,000 139,750
8.125% 04/01/11 60,000 65,400
Coastal Corp.,
7.750% 06/15/10 250,000 220,000
Compton Petroleum Corp.,
9.900% 05/15/09 135,000 147,150
Denbury Resources, Inc.,
7.500% 04/01/13 75,000 77,813
El Paso Energy Partners LP,
8.500% 06/01/11 40,000 43,800
Encore Acquisition Co.,
8.375% 06/15/12 135,000 143,100
Energy Partners Ltd.,
8.750% 08/01/10 50,000 52,813
Forest Oil Corp.,
8.000% 06/15/08 170,000 182,750
Gazprom,
9.625% 03/01/13 140,000 151,200
Houston Exploration Co.,
7.000% 06/15/13 (a) 35,000 35,438
Magnum Hunter Resources, Inc.,
9.600% 03/15/12 60,000 67,500
PDVSA Finance Ltd.:
6.250% 02/15/06 EUR 212,250 249,554
6.650% 02/15/06 USD 150,000 148,875
Petroleos Mexicanos,
6.500% 02/01/05 150,000 157,125
Pioneer Natural Resources Co.,
9.625% 04/01/10 225,000 275,969
Pogo Producing Co.,
8.250% 04/15/11 225,000 249,187
Stone Energy Corp.,
8.250% 12/15/11 90,000 96,525
Tom Brown, Inc.,
7.250% 09/15/13 80,000 83,600
Trico Marine Services, Inc.,
8.875% 05/15/12 45,000 29,250
----------
2,755,399
----------
OIL & GAS FIELD SERVICES - 0.2%
Newpark Resources, Inc.,
8.625% 12/15/07 130,000 133,900
Premcor Refining Group, Inc.,
7.500% 06/15/15 105,000 107,625
----------
241,525
----------
- -----------------------------------------------------------
RETAIL TRADE - 1.3%
APPAREL & ACCESSORY STORES - 0.1%
Gap, Inc.,
10.550% 12/15/08 75,000 91,688
Saks, Inc.,
8.250% 11/15/08 50,000 56,875
----------
148,563
----------
See notes to investment portfolio.
6
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2003
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR VALUE
- -----------------------------------------------------------
RETAIL TRADE (CONTINUED)
FOOD STORES - 0.3%
Delhaize America, Inc.,
8.125% 04/15/11 USD 150,000 $ 169,925
Winn-Dixie Stores, Inc.,
8.875% 04/01/08 140,000 138,250
----------
308,175
----------
MISCELLANEOUS RETAIL - 0.7%
General Nutrition Center,
8.500% 12/01/10 (a) 50,000 51,000
Hollywood Entertainment Corp.,
9.625% 03/15/11 160,000 172,000
JC Penney Co., Inc.,
8.000% 03/01/10 185,000 212,750
Rite Aid Corp.,
9.250% 06/01/13 255,000 273,487
----------
709,237
----------
RESTAURANTS - 0.2%
Domino's, Inc.,
8.250% 07/01/11 (a) 40,000 42,150
Yum! Brands, Inc.,
7.700% 07/01/12 130,000 148,850
----------
191,000
----------
- -----------------------------------------------------------
SERVICES - 6.3%
AMUSEMENT & RECREATION - 2.7%
Ameristar Casinos, Inc.,
10.750% 02/15/09 150,000 171,750
Boyd Gaming Corp.,
8.750% 04/15/12 60,000 65,100
Circus-Circus & Eldorado/Silver Legacy,
10.125% 03/01/12 85,000 86,487
Hard Rock Hotel, Inc.,
8.875% 06/01/13 (a) 135,000 141,750
Hollywood Casino Shreveport,
13.000% 08/01/06 (e) 330,000 235,950
Mohegan Tribal Gaming Authority:
8.000% 04/01/12 220,000 237,600
8.375% 07/01/11 90,000 97,875
Park Place Entertainment Corp.,
9.375% 02/15/07 200,000 223,500
Pinnacle Entertainment, Inc.:
8.750% 10/01/13 225,000 226,125
9.250% 02/15/07 140,000 144,200
Regal Cinemas, Inc.,
9.375% 02/01/12 150,000 170,250
River Rock Entertainment,
9.750% 11/01/11 (a) 140,000 149,100
Royal Caribbean Cruises Ltd.,
8.000% 05/15/10 95,000 102,481
Six Flags, Inc.,
9.500% 02/01/09 375,000 379,688
Town Sports International, Inc.,
9.625% 04/15/11 80,000 85,600
Trump Casino Holdings LLC,
11.625% 03/15/10 115,000 102,925
PAR VALUE
- -----------------------------------------------------------
Venetian Casino Resort LLC,
11.000% 06/15/10 USD 135,000 $ 156,262
----------
2,776,643
----------
AUTO EQUIPMENT & RENTAL SERVICES - 0.4%
NationsRent, Inc.,
9.500% 10/15/10 (a) 205,000 212,687
United Rentals, Inc.,
10.750% 04/15/08 115,000 128,225
Williams Scotsman, Inc.,
9.875% 06/01/07 80,000 78,800
----------
419,712
----------
BUSINESS SERVICES - 0.3%
Iron Mountain, Inc.,
6.625% 01/01/16 140,000 136,500
Stratus Technologies, Inc.,
10.375% 12/01/08 (a) 150,000 153,375
Xerox Corp.,
7.125% 06/15/10 70,000 72,100
----------
361,975
----------
FUNERAL SERVICES - 0.4%
Service Corp. International,
7.700% 04/15/09 180,000 186,750
Stewart Enterprises, Inc.,
10.750% 07/01/08 170,000 191,250
----------
378,000
----------
HEALTH SERVICES - 1.7%
AmerisourceBergen Corp.,
8.125% 09/01/08 85,000 94,138
Coventry Health Care, Inc.,
8.125% 02/15/12 195,000 214,988
HCA, Inc.,
8.750% 09/01/10 90,000 104,085
IASIS Healthcare Corp.,
13.000% 10/15/09 125,000 140,313
InSight Health Services Corp.,
9.875% 11/01/11 160,000 168,200
Magellan Health Services, Inc.,
9.375% 11/15/07 (a)(f) 95,000 104,975
MedQuest, Inc.,
11.875% 08/15/12 225,000 246,656
PacifiCare Health Systems, Inc.,
10.750% 06/01/09 230,000 264,500
Tenet Healthcare Corp.,
6.375% 12/01/11 230,000 212,750
United Surgical Partners
International, Inc.,
10.000% 12/15/11 165,000 186,037
----------
1,736,642
----------
HOTELS, CAMPS & LODGING - 0.6%
Host Marriott LP,
9.500% 01/15/07 150,000 164,063
Inn of the Mountain Gods Resort
& Casino,
12.000% 11/15/10 (a) 90,000 94,725
Starwood Hotels & Resorts Worldwide, Inc.,
7.875% 05/01/12 250,000 277,812
See notes to investment portfolio.
7
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2003
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR VALUE
- -----------------------------------------------------------
SERVICES (CONTINUED)
HOTELS, CAMPS & LODGING (CONTINUED)
Wynn Las Vegas LLC,
12.000% 11/01/10 USD 105,000 $ 121,275
----------
657,875
----------
OTHER SERVICES - 0.2%
Corrections Corp. of America,
9.875% 05/01/09 125,000 140,000
Wackenhut Corrections Corp.,
8.250% 07/15/13 (a) 70,000 73,850
----------
213,850
----------
- -----------------------------------------------------------
TRANSPORTATION, COMMUNICATIONS, ELECTRIC,
GAS & SANITARY SERVICES - 13.8%
AEROSPACE - 0.2%
TransDigm, Inc.,
8.375% 07/15/11 (a) 85,000 89,675
Vought Aircraft Industries, Inc.,
8.000% 07/15/11 (a) 70,000 70,875
----------
160,550
----------
AIR TRANSPORTATION - 0.4%
Delta Air Lines, Inc.,
7.900% 12/15/09 185,000 148,000
Northwest Airlines, Inc.,
9.875% 03/15/07 150,000 133,500
U.S. Airways, Inc.,
10.375% 03/01/13 (h) 557,585 192,367
----------
473,867
----------
BROADCASTING - 1.3%
CanWest Media, Inc.,
10.625% 05/15/11 265,000 300,775
Corus Entertainment, Inc.,
8.750% 03/01/12 80,000 88,000
Emmis Communications Corp.,
(d) 03/15/11
(12.500% 03/15/06) 217,000 198,013
Sinclair Broadcast Group, Inc.,
8.750% 12/15/11 170,000 186,150
Spanish Broadcasting System, Inc.,
9.625% 11/01/09 30,000 31,500
TV Azteca SA de CV,
10.500% 02/15/07 275,000 281,875
Videotron Ltee,
6.875% 01/15/14 (a) 105,000 108,150
XM Satellite Radio Holdings, Inc.,
(d) 12/31/09
(14.000% 12/31/05) 208,520 181,412
----------
1,375,875
----------
CABLE - 2.2%
Charter Communications Holdings LLC:
(d) 04/01/11
(9.920% 04/01/04) 610,000 466,650
10.000% 04/01/09 75,000 62,250
10.250% 09/15/10 (a) 175,000 178,281
PAR VALUE
- -----------------------------------------------------------
Comcast UK Cable Partners Ltd.,
11.200% 11/15/07 USD 310,000 $ 311,550
CSC Holdings, Inc.,
7.625% 04/01/11 165,000 166,650
DirecTV Holdings LLC,
8.375% 03/15/13 130,000 147,063
EchoStar DBS Corp.,
6.375% 10/01/11 (a) 270,000 270,000
Insight Communications Co., Inc.,
(d) 02/15/11
(12.250% 02/15/06) 180,000 142,650
Insight Midwest LP,
9.750% 10/01/09 150,000 158,625
Northland Cable Television, Inc.,
10.250% 11/15/07 205,000 202,950
Rogers Cable, Inc.,
6.250% 06/15/13 50,000 50,156
Shaw Communications, Inc.,
7.500% 11/20/13 CAD 170,000 129,846
----------
2,286,671
----------
COMMUNICATION SERVICES - 0.5%
Crown Castle International Corp.,
10.750% 08/01/11 USD 150,000 166,500
Dobson Communications Corp.,
8.875% 10/01/13 (a) 190,000 191,188
SBA Communications Corp.,
10.250% 02/01/09 235,000 215,612
----------
573,300
----------
COMMUNICATIONS - 0.1%
SpectraSite, Inc.,
8.250% 05/15/10 (a) 90,000 95,400
----------
ELECTRIC, GAS & SANITARY SERVICES - 0.7%
Allied Waste North America, Inc.:
6.500% 11/15/10 (a) 145,000 145,000
8.500% 12/01/08 340,000 372,300
CMS Energy Corp.,
8.900% 07/15/08 175,000 185,719
----------
703,019
----------
ELECTRIC SERVICES - 2.0%
AES Corp.:
9.000% 05/15/15 (a) 205,000 223,450
9.500% 06/01/09 132,000 141,900
Beaver Valley Funding Corp.,
9.000% 06/01/17 165,000 188,471
Caithness Coso Funding Corp.,
9.050% 12/15/09 200,606 217,658
Calpine Corp.:
8.500% 07/15/10 (a) 140,000 129,500
8.500% 02/15/11 190,000 137,750
8.625% 08/15/10 100,000 72,500
Edison Mission Energy,
9.875% 04/15/11 170,000 170,850
Illinois Power Co.,
11.500% 12/15/10 50,000 59,000
See notes to investment portfolio.
8
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2003
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR VALUE
- -----------------------------------------------------------
TRANSPORTATION, COMMUNICATIONS, ELECTRIC,
GAS & SANITARY SERVICES (CONTINUED)
ELECTRIC SERVICES (CONTINUED)
MSW Energy Holdings LLC:
7.375% 09/01/10 (a) USD 50,000 $ 50,750
8.500% 09/01/10 (a) 190,000 203,775
Nevada Power Co.:
9.000% 08/15/13 (a) 75,000 81,844
10.875% 10/15/09 150,000 169,500
Orion Power Holdings, Inc.,
12.000% 05/01/10 65,000 76,050
PSE&G Energy Holdings, Inc.,
8.625% 02/15/08 190,000 201,875
----------
2,124,873
----------
MOTOR FREIGHT & WAREHOUSING - 0.4%
QDI, LLC:
9.000% 11/15/10 (a) 160,000 166,000
12.000% 06/15/09 (a)(g) 41,927 45,072
12.500% 06/15/08 (g) 170,500 174,046
----------
385,118
----------
PIPELINES - 1.0%
Dynegy Holdings, Inc.:
8.750% 02/15/12 130,000 125,450
9.875% 07/15/10 (a) 70,000 76,300
10.125% 07/15/13 (a) 20,000 22,000
GulfTerra Energy Partners LP,
8.500% 06/01/10 80,000 87,600
Northwest Pipelines Corp.,
8.125% 03/01/10 55,000 61,050
Sonat, Inc.,
7.625% 07/15/11 190,000 163,400
Southern Natural Gas Co.,
8.875% 03/15/10 95,000 105,688
Williams Companies, Inc.,
8.125% 03/15/12 405,000 437,400
----------
1,078,888
----------
POLLUTION CONTROL - 0.1%
EnviroSource, Inc.,
14.000% 12/15/08 (g) 61,573 59,489
----------
RADIOTELEPHONE COMMUNICATIONS - 1.4%
AirGate PCS, Inc.,
(d) 10/01/09
(13.500% 10/01/04) 26,000 16,900
Nextel Communications, Inc.,
9.375% 11/15/09 410,000 445,875
Nextel Partners, Inc.,
11.000% 03/15/10 325,000 359,125
Rogers Cantel, Inc.,
9.750% 06/01/16 300,000 354,000
Triton PCS, Inc.,
8.750% 11/15/11 55,000 52,800
US Unwired, Inc.,
(d) 11/01/09 (13.375% 11/01/04) 330,000 219,450
----------
1,448,150
----------
PAR VALUE
- -----------------------------------------------------------
RAILROAD - 0.3%
Kansas City Southern Railway Co.,
7.500% 06/15/09 USD 100,000 $ 102,250
TFM SA de CV,
12.500% 06/15/12 155,000 171,662
----------
273,912
----------
TELECOMMUNICATIONS - 2.6%
ACC Escrow Corp.,
10.000% 08/01/11 (a) 105,000 114,975
American Towers, Inc.,
7.250% 12/01/11 (a) 90,000 90,225
Amkor Technology, Inc.:
9.250% 02/15/08 130,000 145,600
10.500% 05/01/09 120,000 128,400
Avaya, Inc.,
11.125% 04/01/09 99,000 116,325
Carrier1 International SA,
13.250% 02/15/09 (f) 450,000 40,500
Cincinnati Bell, Inc.,
8.375% 01/15/14 (a) 135,000 141,750
COLT Telecom Group PLC,
12.000% 12/15/06 110,000 109,725
FairPoint Communications, Inc.,
11.875% 03/01/10 120,000 141,000
Horizon PCS, Inc.,
13.750% 06/15/11 (f) 195,000 43,875
Innova S. de R.L.,
9.375% 09/19/13 (a) 40,000 40,950
Level 3 Communications, Inc.,
(d) 12/01/08
(10.500% 12/01/03) 170,000 158,950
Lucent Technologies, Inc.,
6.450% 03/15/29 150,000 113,625
MCI Communications Corp.:
7.125% 06/15/27 (f) 55,000 44,550
7.500% 08/20/04 (f) 205,000 166,050
Qwest Capital Funding, Inc.:
7.250% 02/15/11 275,000 261,937
7.750% 02/15/31 175,000 154,000
Qwest Corp.,
13.500% 12/15/10 (a) 265,000 311,375
Time Warner Telecom, Inc.:
9.750% 07/15/08 275,000 280,500
10.125% 02/01/11 30,000 31,050
Western Wireless Corp.,
9.250% 07/15/13 85,000 87,975
----------
2,723,337
----------
TRANSPORTATION SERVICES - 0.6%
Allied Holdings, Inc.,
8.625% 10/01/07 105,000 100,800
Petroleum Helicopters, Inc.,
9.375% 05/01/09 225,000 242,437
Stena AB:
7.500% 11/01/13 (a) 70,000 70,220
9.625% 12/01/12 115,000 127,937
See notes to investment portfolio.
9
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2003
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR VALUE
- -----------------------------------------------------------
TRANSPORTATION, COMMUNICATIONS, ELECTRIC,
GAS & SANITARY SERVICES (CONTINUED)
TRANSPORTATION SERVICES (CONTINUED)
Teekay Shipping Corp.,
8.875% 07/15/11 USD 45,000 $ 51,075
----------
592,469
----------
- -----------------------------------------------------------
WHOLESALE TRADE - 0.5%
DURABLE GOODS - 0.5%
Kinetic Concepts, Inc.,
7.375% 05/15/13 (a) 50,000 51,500
Playtex Products, Inc.,
9.375% 06/01/11 250,000 248,125
Steinway Musical Instruments, Inc.,
8.750% 04/15/11 180,000 189,000
----------
488,625
----------
TOTAL CORPORATE FIXED-INCOME BONDS & NOTES
(cost of $41,350,586) 43,407,284
----------
FOREIGN GOVERNMENT OBLIGATIONS - 32.1%
- -----------------------------------------------------------
German Republic:
5.375% 01/04/10 EUR 605,000 778,927
6.000% 07/04/07 800,000 1,037,845
Government of Canada:
5.500% 06/01/10 CAD 680,000 553,000
10.000% 06/01/08 1,800,000 1,724,226
Government of France:
5.000% 10/25/16 EUR 720,000 892,867
5.500% 10/25/10 405,000 526,106
Government of New Zealand:
6.000% 11/15/11 NZD 2,265,000 1,427,310
6.500% 04/15/13 1,885,000 1,224,315
Government of Norway:
6.000% 05/16/11 NOK 7,760,000 1,217,846
6.750% 01/15/07 1,550,000 246,169
Government of Poland,
8.500% 05/12/07 PLN 2,225,000 586,920
Hellenic Republic of Greece:
5.350% 05/18/11 EUR 750,000 956,943
8.600% 03/26/08 260,000 371,923
Kingdom of Sweden:
5.000% 01/28/09 SEK 13,595,000 1,844,611
5.500% 10/08/12 1,870,000 258,386
6.750% 05/05/14 3,200,000 483,328
Republic of Brazil:
9.250% 10/22/10 USD 320,000 330,240
9.500% 01/24/11 EUR 280,000 346,848
11.000% 01/11/12 USD 450,000 501,750
11.000% 08/17/40 307,000 314,061
11.500% 04/02/09 EUR 325,000 430,470
12.750% 01/15/20 USD 330,000 401,775
14.500% 10/15/09 490,000 618,870
FOREIGN GOVERNMENT
OBLIGATIONS (CONTINUED) PAR VALUE
- -----------------------------------------------------------
Republic of Bulgaria:
1.938% 07/28/24 (m) USD 180,000 $ 177,192
7.500% 01/15/13 EUR 550,000 735,417
Republic of Colombia:
9.750% 04/09/11 USD 428,013 476,164
10.000% 01/23/12 520,000 549,900
11.500% 05/31/11 EUR 225,000 301,122
Republic of Italy,
5.250% 08/01/11 1,630,000 2,078,147
Republic of Peru,
9.875% 02/06/15 USD 450,000 520,875
Republic of Philippines,
8.250% 01/15/14 255,000 238,425
Republic of South Africa:
5.250% 05/16/13 EUR 545,000 625,421
13.000% 08/31/10 ZAR 5,655,000 1,061,900
Republic of Venezuela:
9.250% 09/15/27 USD 1,137,000 943,710
10.750% 09/19/13 190,000 186,675
Russian Federation:
5.000% 03/31/30 1,135,000 1,063,381
11.000% 07/24/18 300,000 397,320
12.750% 06/24/28 340,000 533,800
Treasury Corp. of Victoria, Australia,
7.500% 08/15/08 AUD 1,455,000 1,115,570
United Kingdom:
5.000% 03/07/12 GBP 360,000 617,804
7.500% 12/07/06 250,000 463,043
9.000% 07/12/11 415,000 893,180
United Mexican States:
7.500% 03/08/10 EUR 385,000 509,018
11.375% 09/15/16 USD 533,000 747,532
11.500% 05/15/26 355,000 508,538
Western Australia Treasury Corp.,
8.750% 08/15/08 AUD 2,050,000 1,653,372
----------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(cost of $29,782,206) 33,472,242
----------
U.S. GOVERNMENT AGENCIES & OBLIGATIONS - 22.9%
- -----------------------------------------------------------
U.S. GOVERNMENT AGENCIES - 2.4%
Federal National Mortgage Association,
6.500% 30-Year
To Be Announced (b) 1,895,000 1,975,537
----------
Government National Mortgage Association:
9.000% 04/15/16 - 12/15/16 251,020 278,863
10.500% 07/15/19 - 07/15/20 26,309 29,691
11.000% 01/15/18 - 05/15/19 176,911 200,680
----------
509,234
----------
- -----------------------------------------------------------
See notes to investment portfolio.
10
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2003
U.S. GOVERNMENT AGENCIES
& OBLIGATIONS (CONTINUED) PAR VALUE
- -----------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS - 20.5%
U.S. Treasury Bonds and Notes:
7.000% 07/15/06 USD 1,700,000 $ 1,899,419
7.500% 11/15/24 865,000 1,119,296
8.875% 02/15/19 672,000 954,319
10.375% 11/15/12 1,520,000 1,934,735
10.625% 08/15/15 2,780,000 4,309,759
11.625% 11/15/04 1,750,000 1,918,438
12.000% 08/15/13 6,732,000 9,287,528
----------
21,423,494
----------
TOTAL U.S. GOVERNMENT AGENCIES & OBLIGATIONS
(cost of $24,493,256) 23,908,265
----------
PREFERRED STOCKS - 0.9% SHARES
- -----------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 0.3%
REAL ESTATE - 0.3%
iStar Financial, Inc.:
7.800% 4,797 122,923
7.875% 5,700 143,035
----------
265,958
----------
- -----------------------------------------------------------
MANUFACTURING - 0.1%
FOOD & KINDRED PRODUCTS - 0.0%
Constellation Brands, Inc.,
5.750% 1,100 35,475
----------
PRINTING & PUBLISHING - 0.1%
PriMedia, Inc.:
8.625% 15 1,357
9.200% 700 64,750
----------
66,107
----------
- -----------------------------------------------------------
TRANSPORTATION, COMMUNICATIONS, ELECTRIC,
GAS & SANITARY SERVICES - 0.5%
BROADCASTING - 0.2%
Spanish Broadcasting System, Inc.,
10.750% (a) 190 190,950
----------
CABLE - 0.3%
CSC Holdings, Inc.,
11.125% 3,538 374,143
----------
POLLUTION CONTROL - 0.0%
EnviroSource, Inc.,
7.250% (g) 209 24,035
----------
TOTAL PREFERRED STOCKS
(cost of $943,959) 956,668
----------
- -----------------------------------------------------------
CONVERTIBLE BONDS - 0.5% PAR VALUE
- -----------------------------------------------------------
TRANSPORTATION, COMMUNICATIONS, ELECTRIC,
GAS & SANITARY SERVICES - 0.5%
TELECOMMUNICATIONS - 0.5%
COLT Telecom Group PLC:
2.000% 03/29/06 (a) USD 115,000 $ 146,250
2.000% 12/16/06 (a) 60,000 76,343
Nortel Networks Corp.,
4.250% 09/01/08 310,000 293,647
----------
(cost of $421,579) 516,240
----------
COMMON STOCKS - 0.1% (I) SHARES
- -----------------------------------------------------------
TRANSPORTATION, COMMUNICATIONS, ELECTRIC,
GAS & SANITARY SERVICES - 0.1%
POLLUTION CONTROL - 0.1%
EnviroSource, Inc. (g) 1,800 129,600
Fairlane Management Corp. (g) 1,800 --(j)
----------
129,600
----------
TELECOMMUNICATION - 0.0%
Telus Corp. 1 18
----------
TOTAL COMMON STOCKS
(cost of $54) 129,618
----------
WARRANTS - 0.1% (i) UNITS
- -----------------------------------------------------------
RETAIL TRADE - 0.0%
FOOD STORES - 0.0%
Pathmark Stores, Inc.,
Expires 09/19/10 4,407 4,319
----------
TRANSPORTATION, COMMUNICATIONS, ELECTRIC,
GAS & SANITARY SERVICES - 0.1%
BROADCASTING - 0.1%
XM Satellite Radio Holdings, Inc.:
Expires 12/31/09 40 72,000
Expires 03/15/10 (a) 100 2,075
----------
74,075
----------
CABLE - 0.0%
Cable Satisfaction International, Inc.,
Expires 03/01/05 355 4
Ono Finance PLC,
Expires 03/16/11 (a)(c) 160 2
----------
6
----------
COMMUNICATION SERVICES - 0.0%
UbiquiTel, Inc.,
Expires 04/15/10 (a) 150 2
----------
MOTOR FREIGHT & WAREHOUSING - 0.0%
QDI, Inc.,
Expires 01/15/07 (a)(g) 510 7,818
----------
See notes to investment portfolio.
11
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2003
WARRANTS (CONTINUED) UNITS VALUE
- -----------------------------------------------------------
TRANSPORTATION, COMMUNICATIONS, ELECTRIC,
GAS & SANITARY SERVICES (CONTINUED)
TELECOMMUNICATIONS - 0.0%
AT&T Canada, Inc.,
Expires 08/15/07 (a)(g) 250 $ --(j)
Carrier1 International SA,
Expires 02/19/09 (a)(f) 209 2
Horizon PCS, Inc.,
Expires 10/01/10 (a) 220 --(k)
Jazztel PLC
Expires 07/15/10 (a) 40 --(j)
----------
2
----------
TOTAL WARRANTS
(cost of $605,161) 86,222
----------
SHORT-TERM OBLIGATION - 2.3% PAR
- ------------------------------------------------------------
Repurchase agreement with State Street
Bank & Trust Co., dated 11/28/03,
due 12/01/03 at 0.950%, collateralized
by U.S. Treasury Bonds maturing
02/15/29, market value of $2,412,167
(repurchase proceeds $2,364,187)
(cost of $2,364,000) USD 2,364,000 2,364,000
----------
TOTAL INVESTMENTS - 100.6%
(cost of $99,960,801) (l) 104,840,539
-----------
OTHER ASSETS & LIABILITIES, NET - (0.6)% (602,631)
- -----------------------------------------------------------
NET ASSETS - 100.0% $104,237,908
============
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) This security is exempt from registration under Rule 144A of the Securities
Act of 1933 and may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At November 30, 2003, the value
of these securities amounted to $8,315,545, which represents 8.0% of net
assets.
(b) This security has been purchased on a delayed delivery basis.
(c) Zero coupon bond.
(d) Stepped coupon bond. Currently accruing at zero. Shown parenthetically is
the next interest rate to be paid and the date the Trust will begin accruing
this rate.
(e) The issuer is in default of certain debt covenants. Income is not being
accrued.
(f) As of November 30, 2003, the Trust held securities of certain
issuers that have filed for bankruptcy protection under Chapter 11
representing 0.8% of net assets. This issuer is in default of certain debt
covenants. Income is not being accrued.
(g) Represents fair value as determined in good faith under the direction of the
Board of Trustees.
(h) Income is not being accrued on this security.
(i) Non-income producing.
(j) Amount rounds to less than $1.
(k) Security has no value.
(l) Cost for federal income tax purposes is $101,551,704.
(m) Interest rates on variable rate securities change periodically. The
rate listed is as of November 30, 2003.
As of November 30, 2003, the Trust had entered into the following forward
currency exchange contracts
CONTRACTS IN EXCHANGE SETTLEMENT NET UNREALIZED
TO DELIVER FOR DATE DEPRECIATION
- ---------------------------------------------------------------
CAD 170,000 USD 130,937 12/15/03 $ (783)
EUR 128,800 USD 154,482 12/08/03 (6,877)
EUR 1,020,000 USD 1,223,128 12/15/03 (36,868)
EUR 240,000 USD 287,718 12/24/03 (1,638)
EUR 450,000 USD 539,471 12/24/03 (3,071)
EUR 232,000 USD 278,127 12/24/03 (1,583)
EUR 1,510,000 USD 1,810,226 12/24/03 (10,306)
EUR 172,000 USD 206,198 12/24/03 (1,174)
GBP 265,000 USD 455,788 12/15/03 (12,390)
GBP 211,000 USD 362,665 12/24/03 (3,543)
GBP 29,200 USD 50,189 12/24/03 (520)
NOK 2,771,000 USD 405,800 12/29/03 (2,452)
NOK 436,000 USD 63,850 12/29/03 (303)
--------
$(81,508)
========
SUMMARY OF SECURITIES % OF TOTAL
BY COUNTRY (UNAUDITED) VALUE INVESTMENTS
- --------------------------------------------------------------
United States $ 66,046,178 63.0%
Canada 4,012,198 3.8
United Kingdom 3,740,150 3.6
Brazil 2,944,014 2.8
Australia 2,768,942 2.6
Sweden 2,714,263 2.6
New Zealand 2,651,625 2.5
Mexico 2,245,038 2.1
Russia 2,145,702 2.1
Italy 2,078,147 2.0
Germany 1,816,772 1.7
South Africa 1,687,321 1.6
France 1,574,898 1.5
Norway 1,464,015 1.4
Venezuela 1,379,939 1.3
Greece 1,328,866 1.3
Colombia 1,327,186 1.3
Bulgaria 912,609 0.9
Poland 586,920 0.6
Peru 520,875 0.5
Ireland 260,850 0.3
Netherlands 252,625 0.2
Philippines 238,425 0.2
Liberia 102,481 0.1
Luxembourg 40,500 0.0
------------ -------
$104,840,539 100.0%
============ =======
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
ACRONYM NAME
- --------------------------------------------------------------
AUD Australian Dollar
CAD Canadian Dollar
EUR Euro
GBP Great British Pound
NOK Norwegian Kroner
NZD New Zealand Dollar
PLN Polish Zloty
SEK Swedish Kroner
USD United States Dollar
ZAR South African Rand
See notes to financial statements.
12
STATEMENT OF ASSETS AND LIABILITIES
November 30, 2003
ASSETS:
Investments, at cost $ 99,960,801
------------
Investments, at value $104,840,539
Cash 105,090
Receivable for:
Investments sold 316,235
Interest 2,270,710
Dividends 5,241
Dollar roll fee income 3,256
Deferred Trustees' compensation plan 5,724
------------
Total Assets 107,546,795
------------
LIABILITIES:
Net unrealized depreciation on foreign
forward currency contracts 81,508
Payable for:
Investments purchased 364,718
Investments purchased
on a delayed delivery basis 2,110,350
Distributions 594,486
Investment advisory fee 63,055
Pricing and bookkeeping fees 16,642
Trustees' fees 1,190
Audit fee 37,820
Custody fee 12,440
Deferred Trustees' fees 5,724
Other liabilities 20,954
------------
Total Liabilities 3,308,887
------------
NET ASSETS $104,237,908
============
COMPOSITION OF NET ASSETS:
Paid-in capital $120,444,511
Overdistributed net investment income (898,430)
Accumulated net realized loss (20,146,402)
Net unrealized appreciation (depreciation) on:
Investments 4,879,738
Foreign currency translations (41,509)
------------
NET ASSETS $104,237,908
============
Shares outstanding 11,009,000
------------
Net asset value per share $ 9.47
============
STATEMENT OF OPERATIONS
For the Year Ended November 30, 2003
INVESTMENT INCOME:
Interest $ 7,446,102
Dividends 51,490
Dollar roll fee income 23,204
------------
Total Investment Income 7,520,796
------------
EXPENSES:
Investment advisory fee 753,564
Transfer agent fee 52,996
Pricing and bookkeeping fees 85,587
Trustees' fees 10,806
Custody fee 43,044
Other expenses 99,251
------------
Total Expenses 1,045,248
Custody earnings credit (432)
------------
Net Expenses 1,044,816
------------
Net Investment Income 6,475,980
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain (loss) on:
Investments 2,571,157
Foreign currency transactions (822,476)
------------
Net realized gain 1,748,681
------------
Net change in unrealized appreciation/
depreciation on:
Investments 8,623,930
Foreign currency translations (142,419)
------------
Net change in unrealized
appreciation/depreciation 8,481,511
------------
Net Gain 10,230,192
------------
Net Increase in Net Assets from Operations $ 16,706,172
------------
See notes to financial statements.
13
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED
NOVEMBER 30,
---------------------------------
INCREASE (DECREASE) IN NET ASSETS: 2003 2002
- -------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 6,475,980 $ 6,889,522
Net realized gain (loss) on investments and foreign currency transactions 1,748,681 (6,271,115)
Net change in unrealized appreciation/depreciation
on investments and foreign currency translations 8,481,511 3,751,685
------------ -----------
Net Increase from Operations 16,706,172 4,370,092
------------ -----------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (7,133,128) (7,072,078)
Return of capital -- (720,793)
------------ -----------
Total Distributions Declared to Shareholders (7,133,128) (7,792,871)
------------ -----------
Total Increase (Decrease) in Net Assets 9,573,044 (3,422,779)
NET ASSETS:
Beginning of period 94,664,864 98,087,643
------------ -----------
End of period (including overdistributed net investment income
of $(898,430) and $(1,884,573), respectively) $104,237,908 $94,664,864
============ ===========
NUMBER OF TRUST SHARES OUTSTANDING:
End of period 11,009,000 11,009,000
------------ -----------
See notes to financial statements.
14
NOTES TO FINANCIAL STATEMENTS
November 30, 2003
NOTE 1. ORGANIZATION
Colonial InterMarket Income Trust I (the "Trust"), is a Massachusetts business
trust registered under the Investment Company Act of 1940, as amended, as a
non-diversified, closed-end management investment company.
INVESTMENT GOAL
The Trust seeks to maximize current income by diversifying investments primarily
in U.S. and foreign government and lower-rated corporate debt securities.
TRUST SHARES
The Trust may issue an unlimited number of shares.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America ("GAAP") requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Trust in the preparation of its financial statements.
SECURITY VALUATION
Debt securities generally are valued by a pricing service approved by the
Trust's Board of Trustees, based upon market transactions for normal,
institutional-size trading units of similar securities. The services may use
various pricing techniques which take into account appropriate factors such as
yield, quality, coupon rate, maturity, type of issue, trading characteristics
and other data, as well as broker quotes. Certain securities, which tend to be
more thinly traded and of lesser quality, are priced based on fundamental
analysis of the financial condition of the issuer and the estimated value of any
collateral. Valuations developed through pricing techniques may vary from the
actual amounts realized upon sale of the securities, and the potential variation
may be greater for those securities valued using fundamental analysis. Debt
securities for which quotations are readily available are valued at an
over-the-counter or exchange bid quotation.
Equity securities are valued at the last sale price at the close of the
principal exchange on which they trade. Unlisted securities or listed securities
for which there were no sales during the day are valued at the closing bid price
on such exchanges or over-the-counter markets.
Short-term obligations maturing within 60 days are valued at amortized cost,
which approximates market value.
Forward currency exchange contracts are valued at the prevailing forward
exchange rate of the underlying currencies.
Foreign securities are generally valued at the closing price on the foreign
exchange or market on which they trade. If any foreign share prices are not
readily available as a result of limited share activity, the securities are
valued at the last sale price of the local shares in the principal market in
which such securities are normally traded.
Investments for which market quotations are not readily available, which tend to
be more thinly traded and of lesser quality, are valued at fair value as
determined in good faith under consistently applied procedures established by
and under the general supervision of the Board of Trustees. Foreign markets
close each day at various times prior to the close of the New York Stock
Exchange ("NYSE"). Foreign currency exchange rates are generally determined
prior to the close of the NYSE at 12:00 p.m. Eastern (U.S.) time. Occasionally,
events affecting the value of a foreign security may occur subsequent to the
close of the exchange or market which would not be reflected in the computation
of the Trust's net asset value. In such an event, the foreign security will be
valued at the fair value.
SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date. Cost is determined
and gains (losses) are based upon the specific identification method for both
financial statement and federal income tax purposes.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Forward foreign currency exchange contracts are agreements to exchange one
currency for another at a future date at a specified price. These contracts are
used to minimize the exposure to foreign exchange rate fluctuations during the
period between trade and settlement date of the contracts. The Trust may utilize
forward foreign currency exchange contracts in connection with the settlement of
purchases and sales of securities. The Trust may also enter into these contracts
to hedge certain other foreign currency denominated assets. Contracts to buy
generally are used to acquire exposure to foreign currencies, while contracts to
sell are used to hedge a Trust's investments against currency fluctuations.
Forward currency contracts are valued daily at the current exchange rate of the
underlying currency, resulting in unrealized gains (losses) which become
realized at the time the foreign 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. The use of forward currency contracts does not eliminate
fluctuations in the prices of the Trust'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. The Trust could also be exposed to risk if the counterparties of the
contracts are unable to fulfill the terms of
15
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
November 30, 2003
the contracts. The Trust's custodian will set aside cash or liquid portfolio
securities equal to the amount of the forward currency contract commitment in a
separate account.
REPURCHASE AGREEMENTS
The Trust may engage in repurchase agreement transactions with institutions that
the Trust's investment advisor has determined are creditworthy. The Trust,
through its custodian, receives delivery of underlying securities
collateralizing a repurchase agreement. Collateral securities are
marked-to-market daily to ensure that their market value is at least equal, at
all times, to the repurchase price. (In the event that the market value of the
collateral securities declines below the repurchase price of the repurchase
agreement, additional securities will be required to be segregated.) A
repurchase agreement transaction involves certain risks in the event of default
or insolvency of the counterparty, including possible delays or restrictions
upon the Trust's ability to dispose of the underlying securities, and a possible
decline in the value of the underlying securities during the period while the
Trust seeks to assert its rights.
MORTGAGE DOLLAR ROLL TRANSACTIONS
The Trust may enter into mortgage dollar roll transactions. A mortgage dollar
roll transaction involves a sale by the Trust of securities that it holds with
an agreement by the Trust to repurchase substantially similar securities at an
agreed upon price and date. During the period between the sale and repurchase,
the Trust will not be entitled to accrue interest and receive principal payment
on the securities sold. Mortgage dollar roll transactions involve the risk that
the market value of the securities sold by the Trust may decline below the
repurchase price of those securities. In the event the buyer of the securities
under a mortgage dollar roll transaction files for bankruptcy or becomes
insolvent, the Trust's use of proceeds of the transaction may be restricted
pending a determination by or with respect to the other party. The Trust
maintains U.S. Government securities or other liquid high grade debt obligations
as collateral with respect to mortgage dollar roll transactions.
DELAYED DELIVERY SECURITIES
The Trust may trade securities on other than normal settlement terms, including
securities purchased or sold on a "when-issued" basis. This may increase the
risk if the other party to the transaction fails to deliver and causes the Trust
to subsequently invest at less advantageous prices. The Trust's custodian will
set aside cash or liquid portfolio securities equal to the amount of the delayed
delivery commitment in a separate account.
INCOME RECOGNITION
Interest income is recorded on the accrual basis. Premium and discount are
amortized and accreted, respectively, on all debt securities. Corporate actions
and dividend income are recorded on the ex-date, except for certain foreign
securities which are recorded as soon after ex-date as the Trust becomes aware
of such, net of non-reclaimable tax withholdings. The value of additional
securities received as an income payment is recorded as income and as the cost
basis of such securities.
FOREIGN CURRENCY TRANSACTIONS
The values of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates. Net realized and
unrealized gains (losses) on foreign currency transactions include 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 Trust 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.
FEDERAL INCOME TAX STATUS
The Trust intends to qualify each year as a "regulated investment company" under
Subchapter M of the Internal Revenue Code, as amended, by distributing
substantially all of its taxable or tax-exempt income, if any, for its tax year,
and as such will not be subject to federal income taxes. In addition, by
distributing in each calendar year substantially all of its net investment
income, capital gains and certain other amounts, if any, the Trust will not be
subject to federal excise tax. Therefore, no federal income or excise tax
provision is recorded.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on ex-date. Net realized capital
gains, if any, are distributed at least annually. Income and capital gains
dividends are determined in accordance with income tax regulations which may
differ from GAAP.
NOTE 3. FEDERAL TAX INFORMATION
The timing and character of income and capital gain distributions are determined
in accordance with income tax regulations, which may differ from GAAP.
Reclassifications are made to the Trust's capital accounts for permanent tax
differences to reflect income and gains available for distribution (or available
capital loss carryforwards) under income tax regulations.
For the year ended November 30, 2003, permanent differences resulting primarily
from differing treatments for discount accretion/premium amortization on debt
securities, foreign currency transactions, market discount and paydowns were
identified and reclassified among the components of the Trust's net assets as
follows:
16
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
November 30, 2003
ACCUMULATED ACCUMULATED
NET INVESTMENT NET REALIZED PAID-IN
LOSS LOSS CAPITAL
------------ ------------ ------
$1,643,291 $(1,644,916) $1,625
Net investment income and net realized gains (losses), as disclosed on the
Statement of Operations, and net assets were not affected by this
reclassification.
The tax character of distributions paid during the years ended November 30, 2003
and November 30, 2002 was as follows:
NOVEMBER 30, NOVEMBER 30,
2003 2002
------------ ------------
Distributions paid from:
Ordinary Income* $7,133,128 $7,072,078
Tax Return of Capital -- 720,793
Long-Term Capital Gains -- --
* For tax purposes short-term capital gains distributions, if any, are
considered ordinary income distributions.
As of November 30, 2003, the components of distributable earnings on a tax basis
were as follows:
UNDISTRIBUTED UNDISTRIBUTED
ORDINARY LONG-TERM NET UNREALIZED
INCOME CAPITAL GAINS APPRECIATION*
------------ ------------ ------------
$1,143,948 $-- $3,328,834
* The difference between book-basis and tax-basis net unrealized appreciation
is primarily due to wash sales and discount accretion/premium amortization on
debt securities.
Unrealized appreciation (depreciation) at November 30, 2003, based on cost of
investments for federal income tax purposes was:
Unrealized appreciation $ 7,641,162
Unrealized depreciation (4,352,327)
-----------
Net unrealized appreciation $ 3,288,835
-----------
The following capital loss carryforwards are available to reduce taxable income
arising from future net realized gains on investments, if any, to the extent
permitted by the Internal Revenue Code:
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
---------- -------------
2007 $ 1,469,295
2008 5,857,135
2009 5,692,253
2010 7,020,484
-------------
$ 20,039,167
-------------
Capital loss carryforwards of $104,018 were utilized and/or expired during the
year ended November 30, 2003 for the Trust.
Expired capital loss carryforwards are recorded as a reduction of paid-in
capital.
NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES
On April 1, 2003, Colonial Management Associates, Inc., the previous investment
advisor to the Trust, merged into Columbia Management Advisors, Inc.
("Columbia"), formerly known as Columbia Management Co., an indirect,
wholly-owned subsidiary of FleetBoston Financial Corporation. As a result of the
merger, Columbia now serves as the Trust's investment advisor. The merger did
not change the way the Trust is managed, the investment personnel assigned to
manage the Trust or the fees paid by the Trust.
INVESTMENT ADVISORY FEE
Columbia is the investment advisor to the Trust and provides administrative and
other services. Columbia receives a monthly fee at the annual rate of 0.75% of
the Trust's average weekly net assets.
PRICING AND BOOKKEEPING FEES
Columbia is responsible for providing pricing and bookkeeping services to the
Trust under a pricing and bookkeeping agreement. Under a separate agreement (the
"Outsourcing Agreement"), Columbia has delegated those functions to State Street
Corporation ("State Street").
Under its pricing and bookkeeping agreement with the Trust, Columbia receives
from the Trust an annual flat fee of $10,000 paid monthly, and in any month that
the Trust's average weekly net assets exceed $50 million, an additional monthly
fee. The additional fee rate is calculated by taking into account the fees
payable to State Street under the Outsourcing Agreement. This rate is applied to
the average weekly net assets of the Trust for that month. The Trust also pays
additional fees for pricing services. For the year ended November 30, 2003, the
effective pricing and bookkeeping fee rate was 0.085%. Columbia pays the total
fees collected to State Street under the Outsourcing Agreement.
CUSTODY CREDITS
The Trust has an agreement with its custodian bank under which custody fees may
be reduced by balance credits. The Trust could have invested a portion of the
assets utilized in connection with the expense offset arrangement in an
income-producing asset if it had not entered into such an agreement.
FEES PAID TO OFFICERS AND TRUSTEES
The Trust pays no compensation to its officers, all of whom are employees of
Columbia or its affiliates.
The Trust'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 Trust's assets.
NOTE 5. PORTFOLIO INFORMATION
For the year ended November 30, 2003, the cost of purchases and proceeds from
sales of securities, excluding short-term obligations, were $63,594,444 and
$63,005,491, respectively, of which $3,224,225 and $4,010,318, respectively,
were U.S. government securities.
17
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
November 30, 2003
NOTE 6. DISCLOSURE OF SIGNIFICANT RISKS
AND CONTINGENCIES
INDUSTRY FOCUS
The Trust may focus its investments in certain industries, subjecting it to
greater risk than a trust that is more diversified
FOREIGN SECURITIES
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 other
foreign governmental laws or restrictions. In addition, the liquidity of foreign
securities may be more limited than that of domestic securities.
HIGH-YIELD SECURITIES
Investing in high-yield securities may involve greater credit risk and
considerations not typically associated with investing in U.S. government bonds
and other higher quality fixed income securities. These securities are
non-investment grade securities, often referred to as "junk bonds." Economic
downturns and industry events may disrupt the high yield market and impair the
ability of issuers to repay principal and interest. Also, an increase in
interest rates would likely have an adverse impact on the value of such
obligations. Moreover, high-yield securities may be less liquid due to the
extent that there is no established retail secondary market and because of a
decline in the value of such securities.
18
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period is as follows:
YEAR ENDED NOVEMBER 30,
--------------------------------------------------------------------
2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.60 $ 8.91 $ 9.14 $ 10.26 $ 11.13
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.59(a) 0.63(a)(b) 0.78(a) 0.90(c) 0.91
Net realized and unrealized gain (loss)
on investments and foreign currency 0.93 (0.23)(b) (0.17) (1.13) (0.88)
----------- ----------- ----------- ----------- -----------
Total from Investment Operations 1.52 0.40 0.61 (0.23) 0.03
----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.65) (0.64) (0.75) (0.87) (0.90)
Return of capital -- (0.07) (0.09) (0.02) --
----------- ----------- ----------- ----------- -----------
Total Distributions Declared to Shareholders (0.65) (0.71) (0.84) (0.89) (0.90)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 9.47 $ 8.60 $ 8.91 $ 9.14 $ 10.26
=========== =========== =========== =========== ===========
Market price per share $ 8.96 $ 7.98 $ 8.19 $ 7.94 $ 8.31
=========== =========== =========== =========== ===========
Total return--based on market value (d) 20.93% 6.00% 13.47% 6.08% (13.51)%
=========== =========== =========== =========== ===========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Expenses (e) 1.04% 1.00% 1.04% 0.94% 1.00%
Net investment income (e) 6.44% 7.24%(b) 8.52% 9.08% 8.51%
Portfolio turnover rate 64% 83% 65% 53% 52%
Net assets, end of period (000's) $ 104,238 $ 94,665 $ 98,088 $ 100,649 $ 113,005
(a)Per share data was calculated using average shares outstanding during the
period.
(b)Effective December 1, 2001, the Trust adopted the provision of the AICPA
Audit and Accounting Guide for Investment Companies and began amortizing
premium and accreting market discount on all debt securities. The effect of
this change for the year ended November 30, 2002, was to decrease the net
investment income per share by $0.04, decrease the net realized and
unrealized loss per share by $0.04 and decrease the ratio of net investment
income to average net assets from 7.79% to 7.24%. Per share data and ratios
for periods prior to November 30, 2002 have not been restated to reflect this
change in presentation.
(c)The per share net investment income amount does not reflect the period's
reclassification of differences between book and tax basis net investment
income.
(d)Total return at market value assuming all distributions reinvested at prices
calculated in accordance with the Dividend Reinvestment Plan.
(e)The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
19
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share outstanding throughout each period is as follows:
YEAR ENDED NOVEMBER 30,
- -------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.45 $ 11.52 $ 11.27 $ 10.41 $ 12.01
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.94 0.91 1.00 0.99 0.98
Net realized and unrealized gain (loss)
on investments and foreign currency (0.25) --(a) 0.24 0.82 (1.27)
----------- ----------- ----------- ----------- -----------
Total from Investment Operations 0.69 0.91 1.24 1.81 (0.29)
----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.93) (0.98) (0.99) (0.95) (0.97)
In excess of net investment income --(a) -- --
From net realized gains (0.03) -- -- -- (0.34)
In excess of net realized gains (0.05) -- -- -- --
----------- ----------- ----------- ----------- -----------
Total Distributions Declared to Shareholders (1.01) (0.98) (0.99) (0.95) (1.31)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 11.13 $ 11.45 $ 11.52 $ 11.27 $ 10.41
=========== =========== =========== =========== ===========
Market price per share $ 10.56 $ 10.94 $ 10.63 $ 10.75 $ 10.00
=========== =========== =========== =========== ===========
Total return-- based on market value (b) 6.26% 12.62% 8.30% 17.67% (5.42)%
=========== =========== =========== =========== ===========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Expenses (c) 0.93% 0.96% 0.95% 0.97% 0.98%
Net investment income (c) 8.22% 8.06% 8.33% 8.73% 8.84%
Portfolio turnover rate 99% 156% 117% 77% 99%
Net assets, end of period (000's) $ 122,490 $ 126,011 $ 126,835 $ 124,097 $ 114,568
(a)Rounds to less than $0.01 per share.
(b)Total return at market value assuming all distributions reinvested at prices
calculated in accordance with the Dividend Reinvestment Plan.
(c)The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
20
REPORT OF INDEPENDENT AUDITORS
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
(the "Trust") at November 30, 2003, and the results of its operations, the
changes in its net assets and its financial highlights for the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Trust'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 auditing standards generally accepted in
the United States of America 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 securities at November 30, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 12, 2004
21
DIVIDEND REINVESTMENT PLAN
COLONIAL INTERMARKET INCOME TRUST I
Pursuant to the Trust's Dividend Reinvestment Plan (the "Plan"), all
shareholders whose shares are registered in their own names will have all
distributions reinvested automatically in additional shares of the Trust by
EquiServe Trust Company, N.A. (the "Plan Agent") unless a shareholder elects to
receive cash. Shareholders whose shares are held in the name of a broker or
nominee will have distributions reinvested automatically by the broker or
nominee in additional shares under the Plan, unless the service is not provided
by the broker or the nominee or the shareholder elects to receive distributions
in cash. If the service is not available, such distributions will be paid in
cash. Shareholders whose shares are held in the name of a broker or nominee
should contact the broker or nominee for details. All distributions to
shareholders who elect not to participate in the Plan will be paid by check
mailed directly to the shareholder of record on the record date therefore by the
Plan Agent as the dividend disbursing agent.
Non-participants in the Plan will receive distributions in cash. Distributions
payable to participants in the Plan will be applied by the Plan Agent, acting as
agent for Plan participants, to the purchase of shares of the Trust. Such shares
will be purchased by the Plan Agent at the then current market price of such
shares in the open market, on the New York Stock Exchange or elsewhere, for the
participants' accounts.
Participants in the Plan may withdraw from the Plan upon written notice to the
Plan Agent. When a participant withdraws from the Plan or upon termination of
the Plan as provided below, certificates for whole shares credited to his
account under the Plan will be issued and a cash payment will be made for any
fraction of a share credited to such account. A shareholder's notice of election
to withdraw from the Plan must be received by the Plan Agent before the record
date for a dividend in order to be given effect with respect to that dividend.
In the case of shareholders such as banks, brokers or nominees holding shares
for others who are the beneficial owners of those shares, the Plan Agent will
administer the Plan on the basis of the number of shares certified from time to
time by the shareholder of record as representing the total amount registered in
such shareholder's name and held for the account of beneficial owners who are to
participate in the Plan.
There is no charge to Plan participants for reinvesting distributions. The Plan
Agent's fees for the handling of the reinvestment of distributions will be paid
by the Trust. Each participant in the Plan will pay a pro rata share of
brokerage commissions incurred with respect to the Plan Agent's open market
purchases in connection with the reinvestment of distributions. Purchase orders
from the participants in the Plan may be combined with those of other
participants and the price paid by any particular participant may be the average
of the price paid on various orders executed on behalf of groups of participants
in the Plan.
The automatic reinvestment of distributions will not relieve participants of any
income tax that may be payable on such dividends or distributions.
The Plan may be amended or terminated on 30 days' written notice to the Plan
participants. All correspondence concerning the Plan should be directed to
EquiServe Trust Company, N.A., by mail at P.O. Box 403011, Providence, RI
02940-3011, or by phone at 1-800-426-5523.
22
TRUSTEES
Effective October 8, 2003, Patrick J. Simpson and Richard L. Woolworth were
appointed to the Board of Trustees of the Fund. Messrs. Simpson and Woolworth
had been directors of 15 Columbia Funds and 20 funds in the CMG Fund Trust. Also
effective October 8, 2003, the incumbent trustees of the Fund were elected as
directors of the 15 Columbia Funds and as trustees of the 20 funds in the CMG
Fund Trust. The new combined Board of Trustees/Directors of the Fund now
oversees 119 funds in the Columbia Funds Complex (including the former Liberty
Funds, former Stein Roe Funds, Columbia Funds and CMG Funds). Several of these
trustees/directors also serve on the Boards of other funds in the Columbia Funds
Complex.
The Trustees/Directors serve terms of indefinite duration. The names, addresses
and ages of the Trustees/Directors and officers of the Funds in the Columbia
Funds complex, the year each was first elected or appointed to office, their
principal business occupations during at least the last five years, the number
of portfolios overseen by each Trustee/Director and other directorships they
hold are shown below. Each officer listed below serves as an officer of each
Fund in the Columbia Funds Complex.
Number of
portfolios in
Year first Columbia Funds
elected or Complex Other
Position appointed Principal occupation(s) overseen by directorships
Name, address and age with Funds to office1 during past five years Trustee/Director held
- ---------------------------------------------------------------------------------------------------------------------------------
Disinterested Trustees
- ----------------------
Douglas A. Hacker Trustee 1996 Executive Vice President-Strategy of United Airlines 119 Orbitz
(age 48) (airline) since December, 2002 (formerly President (online
P.O. Box 66100 of UAL Loyalty Services (airline) from September, travel
Chicago, IL 60666 2001 to December, 2002; Executive Vice President company)
and Chief Financial Officer of United Airlines from
March, 1993 to September, 2001).
Janet Langford Kelly Trustee 1996 Chief Administrative Officer and Senior Vice 119 None
(age 45) President, Kmart Holding Corporation (consumer
3100 West Beaver Road goods) since September, 2003 (formerly Executive
Troy, MI 48084-3163 Vice President-Corporate Development and
Administration, General Counsel and Secretary,
Kellogg Company (food manufacturer), from September,
1999 to August, 2003; Senior Vice President,
Secretary and General Counsel, Sara Lee Corporation
(branded, packaged, consumer-products manufacturer)
from January, 1995 to September, 1999).
Richard W. Lowry Trustee 1995 Private Investor since August, 1987 (formerly 121 3 None
(age 67) Chairman and Chief Executive Officer, U.S. Plywood
10701 Charleston Drive Corporation (building products manufacturer)).
Vero Beach, FL 32963
Charles R. Nelson Trustee 1981 Professor of Economics, University of Washington, 119 None
(age 61) since January, 1976; Ford and Louisa Van Voorhis
Department of Economics Professor of Political Economy, University of
University of Washington Washington, since September, 1993; Director,
Seattle, WA 98195 Institute for Economic Research, University of
Washington, since September, 2001; Adjunct
Professor of Statistics, University of Washington,
since September, 1980; Associate Editor, Journal of
Money Credit and Banking, since September, 1993;
consultant on econometric and statistical matters.
John J. Neuhauser Trustee 1985 Academic Vice President and Dean of Faculties 122 3,4 Saucony, Inc.
(age 60) since August, 1999, Boston College (formerly (athletic
84 College Road Dean, Boston College School of Management from footwear);
Chestnut Hill, MA 02467-3838 September, 1977 to September, 1999). SkillSoft Corp.
(e-learning)
Patrick J. Simpson Trustee 2000 Partner, Perkins Coie L.L.P. (law firm). 119 None
(age 58)
1211 S.W. 5th Avenue
Suite 1500
Portland, OR 97204
23
TRUSTEES (CONTINUED)
Number of
portfolios in
Year first Columbia Funds
elected or Complex Other
Position appointed Principal occupation(s) overseen by directorships
Name, address and age with Funds to office1 during past five years Trustee/Director held
- ---------------------------------------------------------------------------------------------------------------------------------
Disinterested Trustees (continued)
- ----------------------------------
Thomas E. Stitzel Trustee 1998 Business Consultant since 1999 (formerly Professor 119 None
(age 67) of Finance from 1975 to 1999, College of Business,
2208 Tawny Woods Place Boise State University); Chartered Financial Analyst.
Boise, ID 83706
Thomas C. Theobald Trustee 1996 Managing Director, William Blair Capital Partners 119 Anixter
(age 66) and (private equity investing) since September, 1994. International
27 West Monroe Street, Chairman of (network
Suite 3500 the Board6 support
Chicago, IL 60606 equipment
distributor),
Jones Lang
LaSalle (real
estate
management
services) and
MONY Group
(life insurance)
Anne-Lee Verville Trustee 1998 Author and speaker on educational systems needs 120 4 Chairman of
(age 58) (formerly General Manager, Global Education the Board of
359 Stickney Hill Road Industry, IBM Corporation (computer and Directors,
Hopkinton, NH 03229 technology) from 1994 to 1997). Enesco Group,
Inc. (designer,
importer and
distributor of
giftware and
collectibles)
Richard L. Woolworth Trustee 1991 Retired since December 2003 (formerly Chairman 119 NW Natural
(age 62) and Chief Executive Officer, The Regence Group (a natural gas
100 S.W. Market Street (regional health insurer); Chairman and Chief service provider)
#1500 Executive Officer, BlueCross BlueShield of Oregon;
Portland, OR 97207 Certified Public Accountant, Arthur Young & Company).
24
TRUSTEES (CONTINUED)
Number of
portfolios in
Year first Columbia Funds
elected or Complex Other
Position appointed Principal occupation(s) overseen by directorships
Name, address and age with Funds to office1 during past five years Trustee/Director held
- ---------------------------------------------------------------------------------------------------------------------------------
Interested Trustees
- -------------------
William E. Mayer2 Trustee 1994 Managing Partner, Park Avenue Equity Partners 121 3 Lee Enterprises
(age 63) (private equity) since February, 1999 (formerly (print media),
399 Park Avenue Founding Partner, Development Capital LLC from WR Hambrecht
Suite 3204 November 1996 to February, 1999). + Co. (financial
New York, NY 10022 service provider)
and First Health
(healthcare)
Joseph R. Palombo2 Trustee 2000 Executive Vice President and Chief Operating 120 5 None
(age 50) and Officer of Columbia Management Group, Inc. since
One Financial Center President December, 2001 and Director, Executive Vice
Boston, MA 02111 President and Chief Operating Officer of Columbia
Management Advisors, Inc. (Advisor) since April,
2003 (formerly Chief Operations Officer of Mutual
Funds, Liberty Financial Companies, Inc. from
August, 2000 to November, 2001; Executive Vice
President of Stein Roe & Farnham Incorporated
(Stein Roe) from April, 1999 to April, 2003;
Director of Colonial Management Associates, Inc.
(Colonial) from April, 1999 to April, 2003;
Director of Stein Roe from September, 2000 to
April, 2003) President of Columbia Funds and
Galaxy Funds since February, 2003 (formerly Vice
President from September 2002 to February 2003);
Manager of Columbia Floating Rate Limited Liability
Company since October, 2000; (formerly Vice
President of the Columbia Funds from April, 1999
to August, 2000; Chief Operating Officer and Chief
Compliance Officer, Putnam Mutual Funds from
December, 1993 to March, 1999).
1 In December 2000, the boards of each of the former Liberty Funds and former
Stein Roe Funds were combined into one board of trustees responsible for
the oversight of both fund groups (collectively, the "Liberty Board"). In
October 2003, the trustees on the Liberty Board were elected to the boards
of the Columbia Funds (the "Columbia Board") and of the CMG Fund Trust (the
"CMG Funds Board"); simultaneous with that election, Patrick J. Simpson and
Richard L. Woolworth, who had been directors on the Columbia Board and
trustees on the CMG Funds Board, were appointed to serve as trustees of the
Liberty Board. The date shown is the earliest date on which a
trustee/director was elected or appointed to the board of a Fund in the
Columbia Funds complex.
2 Mr. Mayer is an "interested person" (as defined in the Investment Company
Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht +
Co. Mr. Palombo is an interested person as an employee of the Advisor.
3 Messrs. Lowry, Neuhauser and Mayer each also serve as a director/trustee of
the All-Star Funds, currently consisting of 2 funds, which are advised by
an affiliate of the Advisor.
4 Mr. Neuhauser and Ms. Verville also serve as disinterested directors of
Columbia Management Multi-Strategy Hedge Fund, LLC, which is advised by the
Advisor.
5 Mr. Palombo also serves as an interested director of Columbia Management
Multi-Strategy Hedge Fund, LLC, which is advised by the Advisor.
6 Mr. Theobald was appointed as Chairman of the Board effective December 10,
2003. Prior to that date, Mr. Palombo was Chairman of the Board.
25
OFFICERS
Year first
Position with elected or
Columbia appointed
Name, address and age funds to office Principal occupation(s) during past five years
- ------------------------------------------------------------------------------------------------------------------------------------
Officers
- --------
Vicki L. Benjamin Chief 2001 Controller of the Columbia Funds and of the Liberty All-Star Funds since May, 2002;
(Age 42) Accounting Chief Accounting Officer of the Columbia Funds and Liberty All-Star Funds since
One Financial Center Officer and June, 2001; Controller and Chief Accounting Officer of the Galaxy Funds since
Boston, MA 02111 Controller September, 2002 (formerly Vice President, Corporate Audit, State Street Bank and
Trust Company from May, 1998 to April, 2001).
J. Kevin Connaughton Treasurer 2000 Treasurer of the Columbia Funds and of the Liberty All-Star Funds since December,
(Age 39) 2000; Vice President of the Advisor since April, 2003 (formerly Controller of the
One Financial Center Liberty Funds and of the Liberty All-Star Funds from February, 1998 to October,
Boston, MA 02111 2000); Treasurer of the Galaxy Funds since September 2002; Treasurer, Columbia
Management Multi-Strategy Hedge Fund, LLC since December, 2002 (formerly Vice
President of Colonial from February, 1998 to October, 2000).
David A. Rozenson Secretary 2003 Secretary of the Columbia Funds and of the Liberty All-Star Funds since December,
(Age 49) 2003; Senior Counsel, Fleet Boston Financial Corporation since January, 1996;
One Financial Center Associate General Counsel, Columbia Management Group since November, 2002.
Boston, MA 02111
26
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TRANSFER AGENT
- --------------------------------------------------------------------------------
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial InterMarket Income Trust I is:
EquiServe Trust Company, N.A.
150 Royall Street
Canton, MA 02021
The trust mails one shareholder report to each shareholder address. Shareholders
can order additional reports by calling 800-730-6001. In addition,
representatives at that number can provide shareholders information about the
trust.
Financial advisors who want additional information about the trust may speak to
a representative at 800-426-3750.
A description of the policies and procedures that the trust uses to determine
how to vote proxies relating to its portfolio securities is available (i)
without charge, upon request, by calling 800-730-6001 and (ii) on the Securities
and Exchange Commission's website at http://www.sec.gov.
This report has been prepared for shareholders of Colonial InterMarket Income
Trust I.
COLONIAL INTERMARKET INCOME TRUST I ANNUAL REPORT
198-02/582Q-1103 (01/04) 03/3856
Item 2. Code of Ethics.
(a) The registrant has, as of the end of the period covered by this report,
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions, regardless
of whether these individuals are employed by the registrant or a third
party.
(b) During the period covered by this report, there were not any amendments to
a provision of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, there were not any waivers or
implicit waivers to a provision of the code of ethics adopted in 2(a)
above.
Item 3. Audit Committee Financial Expert.
The registrant's Board of Trustees has determined that Douglas A. Hacker, Thomas
E. Stitzel, Anne-Lee Verville and Richard L. Woolworth, each of whom are members
of the registrant's Board of Trustees and Audit Committee, each qualify as an
audit committee financial expert. Mr. Hacker, Mr. Stitzel, Ms. Verville and Mr.
Woolworth are each independent trustees, as defined in paragraph (a)(2) of this
item's instructions and collectively constitute the entire Audit Committee.
Item 4. Principal Accountant Fees and Services.
Not applicable at this time.
Item 5. Audit Committee of Listed Registrants.
Not applicable at this time.
Item 6. Reserved.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
The Fund has delegated to Columbia Management Advisors, Inc. (the "Advisor") the
responsibility to vote proxies relating to portfolio securities held by the
Fund. In deciding to delegate this responsibility to the Advisor, the Board of
Trustees of the Trust reviewed and approved the policies and procedures adopted
by the Advisor. These included the procedures that the Advisor follows when a
vote presents a conflict between the interests of the Fund and its shareholders
and the Advisor, its affiliates, its other clients or other persons.
The Advisor's policy is to vote all proxies for Fund securities in a manner
considered by the Advisor to be in the best interest of the Fund and its
shareholders without regard to any benefit to the Advisor, its affiliates, its
other clients or other persons. The Advisor examines each proposal and votes
against the proposal, if, in its judgment, approval or adoption of the proposal
would be expected to impact adversely the current or potential market value of
the issuer's securities. The Advisor also examines each proposal and votes the
proxies against the proposal, if, in its judgment, the proposal would be
expected to affect adversely the best interest of the Fund. The Advisor
determines the best interest of the Fund in light of the potential economic
return on the Fund's investment.
The Advisor addresses potential material conflicts of interest by having
predetermined voting guidelines. For those proposals that require special
consideration or in instances where special circumstances may require varying
from the predetermined guideline, the Advisor's Proxy Committee determines the
vote in the best interest of the Fund, without consideration of any benefit to
the Advisor, its affiliates, its other clients or other persons. A member of the
Proxy Committee is prohibited from voting on any proposal for which he or she
has a conflict of interest by reason of a direct relationship with the issuer or
other party affected by a given proposal. Persons making recommendations to the
Proxy Committee or its members are required to disclose to the Committee any
relationship with a party making a proposal or other matter known to the person
that would create a potential conflict of interest.
The Advisor has three classes of proxy proposals. The first two classes are
predetermined guidelines to vote for or against specific proposals, unless
otherwise directed by the Proxy Committee. The third class is for proposals
given special consideration by the Proxy Committee. In addition, the Proxy
Committee considers requests to vote on proposals in the first two classes other
than according to the predetermined guidelines.
The Advisor generally votes in favor of proposals related to the following
matters: selection of auditors (unless the auditor receives more than 50% of its
revenues from non-audit activities from the company and its affiliates),
election of directors (unless the proposal gives management the ability to alter
the size of the board without shareholder approval), different persons for
chairman of the board /chief executive officer (unless, in light of the size of
the company and the nature of its shareholder base, the role of chairman and CEO
are not held by different persons), compensation (if provisions are consistent
with standard business practices), debt limits (unless proposed specifically as
an anti-takeover action), indemnifications (unless for negligence and or
breaches of fiduciary duty), meetings, name of company, principal office (unless
the purpose is to reduce regulatory or financial supervision), reports and
accounts (if the certifications required by Sarbanes-Oxley Act of 2002 have been
provided), par value, shares (unless proposed as an anti-takeover action), share
repurchase programs, independent committees, and equal opportunity employment.
The Advisor generally votes against proposals related to the following matters:
super majority voting, cumulative voting, preferred stock, warrants, rights,
poison pills, reclassification of common stock and meetings held by written
consent.
The Advisor gives the following matters special consideration: new proposals,
proxies of investment company shares (other than those covered by the
predetermined guidelines), mergers/acquisitions (proposals where a hostile
merger/acquisition is apparent or where the Advisor represents ownership in more
than one of the companies involved), shareholder proposals (other than those
covered by the predetermined guidelines), executive/director compensation (other
than those covered by the predetermined guidelines), pre-emptive rights and
proxies of international issuers which block securities sales between submission
of a proxy and the meeting (proposals for these securities are voted only on the
specific instruction of the Proxy Committee and to the extent practicable in
accordance with predetermined guidelines).
In addition, if a portfolio manager or other party involved with a client of the
Advisor or Fund account concludes that the interest of the client or Fund
requires that a proxy be voted on a proposal other than according to the
predetermined guidelines, he or she may request that the Proxy Committee
consider voting the proxy differently. If any person (or entity) requests the
Proxy Committee (or any of its members) to vote a proxy other than according to
a predetermined guideline, that person must furnish to the Proxy Committee a
written explanation of the reasons for the request and a description of the
person's (or entity's) relationship with the party proposing the matter to
shareholders or any other matter known to the person (or entity) that would
create a potential conflict of interest.
The Proxy Committee may vary from the predetermined guideline if it determines
that voting on the proposal according to the predetermined guideline would be
expected to impact adversely the
current or potential market value of the issuer's securities or to affect
adversely the best interest of the client. References to the best interest of a
client refer to the interest of the client in terms of the potential economic
return on the client's investment. In determining the vote on any proposal, the
Proxy Committee does not consider any benefit other than benefits to the owner
of the securities to be voted.
The Advisor's Proxy Committee is composed of operational and investment
representatives of its regional offices as well as senior representatives of the
Advisor's equity investments, equity research, compliance and legal functions.
During the first quarter of each year, the Proxy Committee reviews all
guidelines and establishes guidelines for expected new proposals. In addition to
these reviews and its other responsibilities described above, its functions
include annual review of its Proxy Voting Policy and Procedures to ensure
consistency with internal policies and regulatory agency policies, and
development and modification of voting guidelines and procedures as it deems
appropriate or necessary.
The Advisor uses Institutional Shareholder Services ("ISS"), a third party
vendor, to implement its proxy voting process. ISS provides proxy analysis,
record keeping services and vote disclosure services.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable at this time.
Item 9. Submission of Matters to a Vote of Security Holders.
Not applicable at this time.
Item 10. Controls and Procedures.
(a) The registrant's principal executive officer and principal financial
officer, based on their evaluation of the registrant's disclosure controls
and procedures as of a date within 90 days of the filing of this report,
have concluded that such controls and procedures are adequately designed to
ensure that information required to be disclosed by the registrant in Form
N-CSR is accumulated and communicated to the registrant's management,
including the principal executive officer and principal financial officer,
or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's last fiscal half-year (the
registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 11. Exhibits.
(a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR
attached hereto as Exhibit 99.CODE ETH
(a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT.
(a)(3) Not applicable.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of
1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) Colonial InterMarket Income Trust I
------------------------------------------------------------------
By (Signature and Title) /s/ Joseph R. Palombo
------------------------------------------------------
Joseph R. Palombo, President
Date February 4, 2004
--------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title) /s/ Joseph R. Palombo
------------------------------------------------------
Joseph R. Palombo, President
Date February 4, 2004
--------------------------------------------------------------------------
By (Signature and Title) /s/ J. Kevin Connaughton
------------------------------------------------------
J. Kevin Connaughton, Treasurer
Date February 4, 2004
--------------------------------------------------------------------------