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
--------
Colonial InterMarket Income Trust I
--------------------------------------------------
(Exact name of registrant as specified in charter)
One Financial Center, Boston, Massachusetts 02111
--------------------------------------------------
(Address of principal executive offices) (Zip code)
Vincent Pietropaolo, Esq.
Columbia Management Group, Inc.
One Financial Center
Boston, MA 02111
--------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-617-772-3698
-------------------
Date of fiscal year end: 11/30/2004
------------------
Date of reporting period: 11/30/2004
------------------
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. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
COLONIAL INTERMARKET INCOME TRUST I ANNUAL REPORT
NOVEMBER 30, 2004
[photo of calculator and newspaper]
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
PRESIDENT'S MESSAGE
Dear Shareholder:
In 2004, Colonial Funds became part of the Bank of America family, one of the
largest, most respected financial institutions in the United States. As a direct
result of this merger, a number of changes are in the works that we believe
offer significant potential benefits for our shareholders. First, some funds may
be merged in order to eliminate redundancies, others may be liquidated and fund
management teams will be aligned to maximize performance potential. You will
receive more detailed information about these changes if your fund is affected
and you may be asked to vote on certain fund changes. In this matter, your
timely response will enable us to implement the changes in 2005.
As a result of these changes, we believe we will offer shareholders an even
stronger lineup of investment options. What will not change as we enter this
next phase of consolidation is our commitment to the highest standards of
performance and our dedication to superior service. Change for the good has
another name: it's called improvement. It helps move us forward, and we believe
that it represents progress for all our shareholders in their quest for
long-term financial success.
In the pages that follow, you'll find a detailed report from the fund's manager
or managers on key factors that influenced your fund's performance. We hope that
you will read the manager reports carefully and discuss any questions you might
have with your financial advisor.
As always, we thank you for choosing Colonial Funds. We appreciate your
continued confidence. And, we look forward to helping you keep your long-term
financial goals on target in the years to come.
Sincerely,
/s/ Christopher L. Wilson
Christopher L. Wilson
Head of Mutual Funds, Columbia Management
Christopher Wilson is Head of Mutual Funds for Columbia Management, responsible
for the day-to-day delivery of mutual fund services to the firm's investors.
With the exception of distribution, Chris oversees all aspects of the mutual
fund services operation, including treasury, investment accounting and
shareholder and broker services. Chris serves as Columbia Management's liaison
to the mutual fund boards of trustees.
Chris joined Bank of America in August 2004.
Economic and market conditions change frequently. There is no assurance that
trends described in this report will continue or commence.
PORTFOLIO MANAGER'S REPORT
PRICE PER SHARE
AS OF 11/30/04 ($)
Net asset value 9.79
- -----------------------------
Market price 8.68
- -----------------------------
1-YEAR TOTAL RETURN
AS OF 11/30/04 (%)
Net asset value 11.26
- -----------------------------
Market price 4.91
- -----------------------------
Lipper General Bond Funds
Category average 10.24
- -----------------------------
All results shown assume reinvestment of distributions.
DISTRIBUTIONS DECLARED
PER SHARE
12/01/03-11/30/04 ($)
0.70
- -----------------------------
SECURITIES BREAKDOWN
AS OF 11/30/04 (%)
Corporate fixed-income
bonds & notes 40.9
- -----------------------------
Foreign government
obligations 33.0
- -----------------------------
US government agencies
& obligations 21.5
- -----------------------------
Cash equivalents 3.1
- -----------------------------
Asset-backed securities 0.7
- -----------------------------
Convertible bonds 0.3
- -----------------------------
Common stocks 0.3
- -----------------------------
Municipal bond (taxable) 0.2
- -----------------------------
Warrants 0.0
- -----------------------------
TOP 5 FOREIGN COUNTRIES
AS OF 11/30/04 (%)
Canada 3.8
- -----------------------------
Sweden 3.3
- -----------------------------
United Kingdom 3.1
- -----------------------------
Germany 3.1
- -----------------------------
Mexico 2.8
- -----------------------------
Securities and country breakdown are calculated as a percentage of total
investments.
Because the trust is actively managed, there is no guarantee that the trust will
continue to invest in these sectors or maintain these country weightings in the
future.
For the 12-month period ended November 30, 2004, Colonial InterMarket Income
Trust I generated a total return of 4.91%, based on its market price. Changes in
the market price of the trust's shares reflect investor demand and are not
necessarily linked directly to changes in the trust's net asset value. The trust
returned 11.26%, based on investment at net asset value. That was slightly
higher than the average return of the Lipper General Bond Funds Category, which
was 10.24%.1 The trust's above-average return was helped by its positions in
high-yield securities and foreign debt.
HIGH YIELD CONTINUES TO OUTPERFORM
Riskier lower quality corporate bonds outperformed US Treasury obligations
during this reporting period, continuing a pattern that has been in place for
most of the last two years. With approximately 40% of its assets invested in the
US high-yield marketplace, the trust has been positioned to take advantage of an
environment that rewarded holders of debt with lower credit quality.
The trust's high-yield holdings carry an average credit quality of single B,
compared to a weighted average of BBB+ for the trust as a whole. An overweight
position in B and CCC-rated bonds paid off handsomely, especially during the
equity rally that followed the US presidential election in early November. For
the 12-month period as a whole, high-yield indices were up approximately 13%,
compared to returns of less than 5% for a 10 year US Treasury security. We held
the trust's position in US government securities at or just below 25% during the
period.
Among the specific issues that aided the trust were Levi Strauss &Co., the
casual clothing maker, and chemicals manufacturer Huntsman ICI Holding LLC. Levi
Strauss &Co. stabilized its operations as it investigated a possible sale of its
Dockers brand. (In October, the company announced plans to retain the brand.)
Bonds of chemical producer Huntsman rose as commodity chemical prices trended
higher, and in anticipation of a proposed transaction that would retire the
bonds at a premium. Poor performers included Delta Air Lines, Inc., which faced
high fuel prices and high labor costs, and Merisant Co., the manufacturer of the
sugar substitute Equal. The company lost market share to Johnson & Johnson's
Splenda.
FOREIGN BONDS OUTPERFORM DOMESTIC HOLDINGS
Approximately 35% of the trust's assets were invested outside of the United
States during the period. The trust's exposure to non-US dollar denominated
bonds of developed countries was approximately 20%. The trust's exposure to
foreign currencies, notably the euro and the British pound, was of particular
value because the US dollar declined, adding to the gains of bonds denominated
in these currencies.
- --------------
1 Lipper Inc., a widely respected data provider in the industry, calculates
an average total return based on net asset value for mutual funds with
similar investment objectives as those of the fund.
1
PORTFOLIO MANAGER'S REPORT (CONTINUED)
Bonds in emerging markets accounted for approximately 14% of the trust's assets.
Emerging market bonds performed well during the period as the global interest
rate environment remained favorable and demand for commodities remained strong.
In particular, oil producing countries such as Russia, Venezuela and Mexico
benefited from the sustained strength in oil prices. The credit quality of many
emerging market issuers has improved over the past two years, adding to the
strong performance of emerging market debt. Recent rating agency credit upgrades
include Brazil, Peru and Bulgaria.
PREPARING FOR HIGHER RATES AND A LOWER DOLLAR
We have structured the trust to benefit from steady economic growth in the
United States and abroad. As long as the domestic economy continues to grow at a
reasonable pace, we expect the Federal Reserve to continue to raise short-term
rates, a course that it set in motion with four increases during this reporting
period.2 Although the dollar has been weak for some time now, we maintained the
trust's overseas positions because we believe it could move even lower.
Investors are paying increasing attention to US fiscal, current account and
trade deficits. One way for the financial markets to adjust these imbalances is
to bid the dollar down even lower, which would continue to favor securities
denominated in some foreign currencies.
/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 trusts for Columbia
Management Advisors, Inc. or its predecessors or affiliate organizations since
December 1996.
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
The values of fixed-income securities generally move inversely with changes in
interest rates such that when interest rates rise, bond values fall and vice
versa. 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
involve greater risk of loss due to credit deterioration and default by the
issuer. Foreign securities are subject to special risks including the impact of
political events, fluctuations in currency exchange rates and less publicly
available information about companies. Emerging markets may be more subject to
these risks than developed markets. 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.
- -------------
2 The federal funds rate was raised for a fifth time, from 2.0% to 2.25%, on
December 14, 2004.
2
INVESTMENT PORTFOLIO
November 30, 2004
CORPORATE FIXED-INCOME
BONDS & NOTES - 41.2% PAR ($) VALUE ($)
- ------------------------------------------------------------
BASIC MATERIALS - 3.8%
CHEMICALS - 2.0%
AGRICULTURAL CHEMICALS - 0.6%
IMC Global, Inc.,
10.875% 08/01/13 140,000 177,800
Terra Capital, Inc.,
12.875% 10/15/08 215,000 265,525
UAP Holding Corp.,
(a) 07/15/12
(10.750% 01/15/08) (b) 125,000 95,000
United Agri Products,
8.250% 12/15/11
(8.750%, 12/15/04) (b)(p) 120,000 127,800
-----------
666,125
-----------
CHEMICALS-DIVERSIFIED - 1.3%
BCP Caylux Holdings
Luxembourg S.C.A.,
9.625% 06/15/14 (b) 95,000 106,875
Equistar Chemicals LP,
10.625% 05/01/11 220,000 254,650
HMP Equity Holdings Corp.,
(c) 05/15/08 380,000 249,850
Huntsman ICI Holdings LLC,
(c) 12/31/09 710,000 395,825
Lyondell Chemical Co.,
9.625% 05/01/07 230,000 252,425
NOVA Chemicals Corp.,
6.500% 01/15/12 70,000 72,638
Westlake Chemical Corp.,
8.750% 07/15/11 55,000 62,012
-----------
1,394,275
-----------
CHEMICALS-SPECIALTY - 0.1%
Crompton Corp.,
7.670% 08/01/10 (b)(d) 75,000 81,000
-----------
81,000
-----------
Chemicals Total 2,141,400
-----------
FOREST PRODUCTS & PAPER - 0.8%
FORESTRY - 0.2%
Millar Western Forest Products,
7.750% 11/15/13 95,000 101,650
Tembec Industries, Inc.,
8.500% 02/01/11 80,000 80,000
-----------
181,650
-----------
PAPER & RELATED PRODUCTS - 0.6%
Boise Cascade LLC:
5.005% 10/15/12 (b)(d) 70,000 71,400
7.125% 10/15/14 (b) 80,000 84,000
Buckeye Technologies, Inc.,
8.500% 10/01/13 30,000 33,000
Caraustar Industries, Inc.,
9.875% 04/01/11 115,000 123,625
PAR ($) VALUE ($)
- ------------------------------------------------------------
Georgia-Pacific Corp.,
8.000% 01/15/24 80,000 92,800
Neenah Paper, Inc.,
7.375% 11/15/14 (b) 60,000 60,600
Newark Group, Inc.,
9.750% 03/15/14 (b) 110,000 115,225
Norske Skog Canada Ltd.:
7.375% 03/01/14 45,000 47,250
8.625% 06/15/11 60,000 64,800
-----------
692,700
-----------
Forest Products & Paper Total 874,350
-----------
IRON/STEEL - 0.6%
METAL-IRON - 0.2%
Wise Metals Group LLC,
10.250% 05/15/12 (b) 175,000 176,312
-----------
176,312
-----------
STEEL-PRODUCERS - 0.2%
Bayou Steel Corp.,
9.000% 03/31/11 125,000 117,500
Steel Dynamics, Inc.,
9.500% 03/15/09 70,000 77,524
-----------
195,024
-----------
STEEL-SPECIALTY - 0.2%
Oregon Steel Mills, Inc.,
10.000% 07/15/09 85,000 95,200
UCAR Finance, Inc.,
10.250% 02/15/12 155,000 178,250
-----------
273,450
-----------
Iron/Steel Total 644,786
-----------
MINING - 0.4%
METAL-ALUMINUM - 0.2%
Kaiser Aluminum & Chemical Corp.:
9.875% 02/15/49 (e) 250,000 230,625
10.875% 10/15/06 (e) 25,000 21,500
-----------
252,125
-----------
METAL-DIVERSIFIED - 0.2%
Earle M. Jorgensen Co.,
9.750% 06/01/12 155,000 174,375
-----------
174,375
-----------
Mining Total 426,500
-----------
BASIC MATERIALS TOTAL 4,087,036
-----------
- -----------------------------------------------------------
COMMUNICATIONS - 9.8%
ADVERTISING - 0.1%
ADVERTISING SERVICES - 0.1%
WDAC Subsidiary Corp.
8.375% 12/01/14 (b)(f) 125,000 126,250
-----------
126,250
-----------
Advertising Total 126,250
-----------
See Accompanying Notes to Financial Statements.
3
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2004
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
- ------------------------------------------------------------
COMMUNICATIONS (CONTINUED)
MEDIA - 4.9%
BROADCAST SERVICES/PROGRAMS - 0.4%
Fisher Communications, Inc.,
8.625% 09/15/14 (b) 75,000 81,000
TV Azteca SA de CV,
10.500% 02/15/07 275,000 281,875
XM Satellite Radio, Inc.,
7.660% 05/01/09 (d) 110,000 112,200
-----------
475,075
-----------
CABLE TV - 1.9%
Atlantic Broadband Finance LLC,
9.375% 01/15/14 (b) 155,000 150,350
Cablevision Systems Corp.,
6.669% 04/01/09 (b)(d) 125,000 130,625
Charter Communications Holdings LLC:
9.920% 04/01/11 655,000 538,738
10.250% 09/15/10 175,000 183,750
CSC Holdings, Inc.:
6.750% 04/15/12 (b) 170,000 174,250
7.625% 04/01/11 10,000 10,725
DirecTV Holdings LLC,
8.375% 03/15/13 70,000 78,925
EchoStar DBS Corp.,
6.375% 10/01/11 190,000 195,700
Insight Communications Co., Inc.,
(a) 02/15/11
(12.250% 02/15/06) 70,000 67,550
Insight Midwest LP,
9.750% 10/01/09 70,000 73,763
Northland Cable Television, Inc.,
10.250% 11/15/07 205,000 205,000
Pegasus Satellite Communications, Inc.,
11.250% 01/15/10 (b)(e) 180,000 114,750
Telenet Group Holdings NV,
(a) 06/15/14
(11.500% 12/15/08) (b) 170,000 131,325
-----------
2,055,451
-----------
MULTIMEDIA - 0.7%
Advanstar Communications, Inc.:
(a) 10/15/11
(15.000% 10/15/05) 125,000 105,625
12.000% 02/15/11 155,000 168,950
Haights Cross Communications, Inc.,
(a) 08/15/11
(12.500% 02/15/09) 135,000 87,075
Haights Cross Operating Co.,
11.750% 08/15/11 130,000 148,200
Quebecor Media, Inc.,
11.125% 07/15/11 180,000 206,550
-----------
716,400
-----------
PAR ($) VALUE ($)
- ------------------------------------------------------------
PUBLISHING-NEWSPAPERS - 0.1%
Hollinger, Inc.:
11.875% 03/01/11 (b)(n) 54,000 58,443
12.875% 03/01/11 (b) 85,000 92,650
-----------
151,093
-----------
PUBLISHING-PERIODICALS - 1.0%
CBD Media Holdings LLC
& Finance, Inc.,
9.250% 07/15/12 (b) 95,000 97,375
Dex Media, Inc.:
(a) 11/15/13
(9.000% 11/15/08) 105,000 80,588
8.000% 11/15/13 125,000 133,750
Dex Media East LLC,
12.125% 11/15/12 169,000 207,025
Dex Media West LLC,
9.875% 08/15/13 117,000 135,135
PriMedia, Inc.,
8.875% 05/15/11 215,000 221,450
Yell Finance BV,
10.750% 08/01/11 165,000 192,225
-----------
1,067,548
-----------
RADIO - 0.2%
Spanish Broadcasting System, Inc.,
9.625% 11/01/09 200,000 210,000
-----------
210,000
-----------
TELEVISION - 0.6%
Granite Broadcasting Corp.,
9.750% 12/01/10 235,000 220,900
Paxson Communications Corp.,
10.750% 07/15/08 240,000 247,200
Sinclair Broadcast Group, Inc.,
8.750% 12/15/11 170,000 182,750
-----------
650,850
-----------
Media Total 5,326,417
-----------
TELECOMMUNICATIONS - 4.8%
CELLULAR TELECOMMUNICATIONS - 2.2%
American Cellular Corp.,
10.000% 08/01/11 105,000 88,463
Dobson Cellular Systems, Inc.,
8.375% 11/01/11 (b) 40,000 41,000
Dobson Communications Corp.,
8.875% 10/01/13 230,000 155,250
Horizon PCS, Inc.,
11.375% 07/15/12 (b) 95,000 104,025
iPCS Escrow Co.,
11.500% 05/01/12 (b) 70,000 78,050
Nextel Communications, Inc.,
7.375% 08/01/15 330,000 363,000
Nextel Partners, Inc.,
8.125% 07/01/11 325,000 357,500
See Accompanying Notes to Financial Statements.
4
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2004
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
- ------------------------------------------------------------
COMMUNICATIONS (CONTINUED)
TELECOMMUNICATIONS (CONTINUED)
CELLULAR TELECOMMUNICATIONS (CONTINUED)
Rogers Cantel, Inc.,
9.750% 06/01/16 295,000 347,362
Rogers Wireless, Inc.,
8.000% 12/15/12 (b) 95,000 99,037
Rural Cellular Corp.,
8.250% 03/15/12 90,000 93,825
UbiquiTel, Inc.:
9.875% 03/01/11 105,000 115,238
9.875% 03/01/11 (b) 75,000 82,312
US Unwired, Inc.,
10.000% 06/15/12 215,000 238,650
Western Wireless Corp.,
9.250% 07/15/13 185,000 199,800
-----------
2,363,512
-----------
SATELLITE TELECOMMUNICATIONS - 0.3%
Inmarsat Finance II PLC,
(a) 11/15/12
(10.375% 11/15/08) (b) 55,000 38,088
New Skies Satellites NV,
9.125% 11/01/12 (b) 85,000 86,700
PanAmSat Corp.:
(a) 11/01/14
(10.375% 11/01/09) (b) 180,000 108,000
9.000% 08/15/14 (b) 80,000 86,000
-----------
318,788
-----------
TELECOMMUNICATION EQUIPMENT - 0.1%
Lucent Technologies, Inc.,
6.450% 03/15/29 125,000 107,188
-----------
107,188
-----------
TELECOMMUNICATION SERVICES - 0.7%
Axtel SA de CV,
11.000% 12/15/13 180,000 191,250
Carrier1 International SA,
13.250% 02/15/09 (e) 450,000 40,500
FairPoint Communications, Inc.,
11.875% 03/01/10 120,000 136,500
Securus Technologies, Inc.,
11.000% 09/01/11 (b) 150,000 150,000
Time Warner Telecom, Inc.:
9.750% 07/15/08 205,000 204,487
10.125% 02/01/11 30,000 28,800
-----------
751,537
-----------
TELEPHONE-INTEGRATED - 1.2%
Cincinnati Bell, Inc.,
8.375% 01/15/14 195,000 195,975
Qwest Capital Funding, Inc.:
7.250% 02/15/11 390,000 370,500
7.750% 02/15/31 175,000 149,625
PAR ($) VALUE ($)
- -----------------------------------------------------------
Qwest Services Corp.,
13.500% 12/15/10 (b) 450,000 535,500
US LEC Corp.,
10.670% 10/01/09 (b)(d) 75,000 74,838
-----------
1,326,438
-----------
WIRELESS EQUIPMENT - 0.3%
American Towers, Inc.,
7.250% 12/01/11 90,000 95,175
SBA Communications, Inc.,
(a) 12/15/11
(9.750% 12/15/07) 100,000 84,250
SpectraSite, Inc.,
8.250% 05/15/10 90,000 97,425
-----------
276,850
-----------
Telecommunications Total 5,144,313
-----------
COMMUNICATIONS TOTAL 10,596,980
-----------
- -----------------------------------------------------------
CONSUMER, CYCLICAL - 8.3%
AIRLINES - 0.5%
AIRLINES - 0.5%
Continental Airlines, Inc.,
7.568% 12/01/06 180,000 138,600
Delta Air Lines, Inc.,
7.900% 12/15/09 65,000 36,400
Northwest Airlines, Inc.,
9.875% 03/15/07 250,000 217,500
United Air Lines, Inc.,
2.020% 03/02/04 (d)(o) 139,476 111,580
-----------
504,080
-----------
Airlines Total 504,080
-----------
APPAREL - 0.4%
APPAREL MANUFACTURERS - 0.4%
Broder Brothers Co.:
11.250% 10/15/10 95,000 98,800
11.250% 10/15/10 (b) 55,000 57,200
Levi Strauss & Co.,
12.250% 12/15/12 190,000 200,450
Phillips-Van Heusen Corp.:
7.250% 02/15/11 65,000 68,575
8.125% 05/01/13 60,000 65,700
-----------
490,725
-----------
Apparel Total 490,725
-----------
AUTO MANUFACTURERS - 0.1%
AUTO-MEDIUM & HEAVY DUTY TRUCKS - 0.1%
Navistar International Corp.,
7.500% 06/15/11 115,000 124,200
-----------
124,200
-----------
Auto Manufacturers Total 124,200
-----------
See Accompanying Notes to Financial Statements.
5
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2004
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
- ------------------------------------------------------------
CONSUMER, CYCLICAL (CONTINUED)
AUTO PARTS & EQUIPMENT - 0.6%
AUTO/TRUCK PARTS & EQUIPMENT - ORIGINAL - 0.3%
Accuride Corp.,
9.250% 02/01/08 65,000 66,138
Affinia Group, Inc.,
9.000% 11/30/14 (b) 20,000 20,600
Delco Remy International, Inc.,
11.000% 05/01/09 130,000 137,150
Dura Operating Corp.,
8.625% 04/15/12 155,000 158,100
-----------
381,988
-----------
AUTO/TRUCK PARTS & EQUIPMENT - REPLACEMENT - 0.1%
Rexnord Corp.,
10.125% 12/15/12 90,000 101,700
-----------
101,700
-----------
RUBBER-TIRES - 0.2%
Goodyear Tire & Rubber Co.,
7.857% 08/15/11 205,000 203,463
-----------
203,463
-----------
Auto Parts & Equipment Total 687,151
-----------
ENTERTAINMENT - 1.1%
GAMBLING (NON-HOTEL) - 0.2%
Global Cash Access LLC,
8.750% 03/15/12 160,000 172,800
-----------
172,800
-----------
MUSIC - 0.3%
Steinway Musical Instruments, Inc.,
8.750% 04/15/11 85,000 92,225
Warner Music Group,
7.375% 04/15/14 (b) 160,000 163,600
-----------
255,825
-----------
RESORTS/THEME PARKS - 0.2%
Six Flags, Inc.:
8.875% 02/01/10 165,000 165,825
9.625% 06/01/14 75,000 74,062
-----------
239,887
-----------
THEATERS - 0.4%
LCE Acquisition Corp.,
9.000% 08/01/14 (b) 195,000 209,625
Marquee Holdings, Inc.,
(a) 08/15/14
(12.000% 08/15/09) (b) 405,000 261,225
-----------
470,850
-----------
Entertainment Total 1,139,362
-----------
HOME BUILDERS - 0.7%
BUILDING-RESIDENTIAL/COMMERCIAL - 0.7%
D.R. Horton, Inc.,
9.750% 09/15/10 400,000 479,000
PAR ($) VALUE ($)
- ------------------------------------------------------------
K. Hovnanian Enterprises, Inc.:
8.875% 04/01/12 25,000 27,500
10.500% 10/01/07 125,000 144,063
Standard Pacific Corp.,
9.250% 04/15/12 125,000 145,937
-----------
796,500
-----------
Home Builders Total 796,500
-----------
HOME FURNISHINGS - 0.3%
HOME FURNISHINGS - 0.3%
Norcraft Companies,
9.000% 11/01/11 65,000 70,525
WII Components, Inc.,
10.000% 02/15/12 215,000 210,700
-----------
281,225
-----------
Home Furnishings Total 281,225
-----------
LEISURE TIME - 0.7%
CRUISE LINES - 0.1%
NCL, Inc.,
10.625% 07/15/14 (b) 60,000 61,800
-----------
61,800
-----------
LEISURE & RECREATIONAL PRODUCTS - 0.2%
Bombardier Recreational Products, Inc.,
8.375% 12/15/13 155,000 167,400
K2, Inc.,
7.375% 07/01/14 (b) 80,000 87,800
-----------
255,200
-----------
RECREATIONAL CENTERS - 0.4%
AMF Bowling Worldwide, Inc.,
10.000% 03/01/10 105,000 112,350
Equinox Holdings, Inc.,
9.000% 12/15/09 170,000 179,350
Town Sports International, Inc.,
(a) 02/01/14
(11.000% 02/01/09) 185,000 103,137
-----------
394,837
-----------
Leisure Time Total 711,837
-----------
LODGING - 2.7%
CASINO HOTELS - 2.4%
Ameristar Casinos, Inc.,
10.750% 02/15/09 150,000 168,562
Circus & Eldorado/Silver Legacy
Capital Corp.,
10.125% 03/01/12 85,000 93,075
Hard Rock Hotel, Inc.,
8.875% 06/01/13 170,000 187,000
Hollywood Casino Shreveport,
13.000% 08/01/06 (g) 410,000 360,800
Inn of the Mountain Gods
Resort & Casino,
12.000% 11/15/10 140,000 163,100
See Accompanying Notes to Financial Statements.
6
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2004
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
- ------------------------------------------------------------
CONSUMER, CYCLICAL (CONTINUED)
LODGING (CONTINUED)
CASINO HOTELS (CONTINUED)
MGM Mirage, Inc.,
8.375% 02/01/11 170,000 192,100
Mohegan Tribal Gaming Authority,
7.125% 08/15/14 (b) 30,000 32,025
Park Place Entertainment Corp.,
9.375% 02/15/07 200,000 221,500
Pinnacle Entertainment, Inc.:
8.250% 03/15/12 (f) 185,000 192,400
8.750% 10/01/13 255,000 274,125
Premier Entertainment Biloxi LLC,
10.750% 02/01/12 90,000 97,200
River Rock Entertainment,
9.750% 11/01/11 190,000 210,425
Seneca Gaming Corp.,
7.250% 05/01/12 145,000 153,337
Station Casinos, Inc.,
6.875% 03/01/16 40,000 42,000
Wynn Las Vegas LLC:
6.625% 12/01/14 (b)(f) 110,000 108,350
12.000% 11/01/10 70,000 88,200
-----------
2,584,199
-----------
HOTELS & MOTELS - 0.3%
Starwood Hotels & Resorts Worldwide, Inc.,
7.875% 05/01/12 250,000 285,937
-----------
285,937
-----------
Lodging Total 2,870,136
-----------
RETAIL - 1.0%
RETAIL-AUTOMOBILES - 0.1%
Asbury Automotive Group, Inc.,
8.000% 03/15/14 130,000 128,700
-----------
128,700
-----------
RETAIL-DRUG STORES - 0.3%
Jean Coutu Group, Inc., (PJC),
8.500% 08/01/14 (b) 95,000 96,425
Rite Aid Corp.,
9.250% 06/01/13 200,000 206,500
-----------
302,925
-----------
RETAIL-HOME FURNISHINGS - 0.2%
Levitz Home Furnishings, Inc.,
12.000% 11/01/11 (b) 95,000 96,900
Tempur-Pedic, Inc.,
10.250% 08/15/10 120,000 137,400
-----------
234,300
-----------
RETAIL-JEWELRY - 0.1%
Finlay Fine Jewelry Corp.,
8.375% 06/01/12 120,000 130,800
-----------
130,800
-----------
PAR ($) VALUE ($)
- ------------------------------------------------------------
RETAIL-MAJOR DEPARTMENT STORES - 0.1%
Saks, Inc.,
7.000% 12/01/13 39,000 39,682
-----------
39,682
-----------
RETAIL-PROPANE DISTRIBUTORS - 0.1%
Ferrellgas Partners LP,
8.750% 06/15/12 130,000 141,700
-----------
141,700
-----------
RETAIL-RESTAURANTS - 0.1%
Denny's Holdings, Inc.,
10.000% 10/01/12 (b) 115,000 121,038
-----------
121,038
-----------
Retail Total 1,099,145
-----------
TEXTILES - 0.2%
TEXTILE-PRODUCTS - 0.2%
Collins & Aikman Floorcovering, Inc.,
9.750% 02/15/10 110,000 118,250
INVISTA,
9.250% 05/01/12 (b) 90,000 99,900
-----------
218,150
-----------
Textiles Total 218,150
-----------
CONSUMER, CYCLICAL TOTAL 8,922,511
-----------
- -----------------------------------------------------------
CONSUMER, NON-CYCLICAL - 5.2%
AGRICULTURE - 0.3%
AGRICULTURAL OPERATIONS - 0.2%
Seminis, Vegetable Seeds, Inc.,
10.250% 10/01/13 202,000 227,250
-----------
227,250
-----------
TOBACCO - 0.1%
North Atlantic Trading Co., Inc.,
9.250% 03/01/12 100,000 80,000
-----------
80,000
-----------
Agriculture Total 307,250
-----------
BEVERAGES - 0.1%
BEVERAGES-WINE/SPIRITS - 0.1%
Constellation Brands, Inc.,
8.125% 01/15/12 125,000 135,938
-----------
135,938
-----------
Beverages Total 135,938
-----------
BIOTECHNOLOGY - 0.1%
MEDICAL-BIOMEDICAL/GENE - 0.1%
Bio-Rad Laboratories, Inc.,
7.500% 08/15/13 150,000 163,875
-----------
163,875
-----------
Biotechnology Total 163,875
-----------
See Accompanying Notes to Financial Statements.
7
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2004
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
- -----------------------------------------------------------
CONSUMER, NON-CYCLICAL (CONTINUED)
COMMERCIAL SERVICES - 1.4%
COMMERCIAL SERVICES - 0.2%
Iron Mountain, Inc.,
7.750% 01/15/15 35,000 35,613
Language Line Holdings, Inc.,
11.125% 06/15/12 (b) 195,000 209,625
-----------
245,238
-----------
COMMERCIAL SERVICES-FINANCE - 0.3%
Dollar Financial Group, Inc.,
9.750% 11/15/11 265,000 286,200
-----------
286,200
-----------
FUNERAL SERVICES & RELATED ITEMS - 0.2%
Service Corp. International,
7.700% 04/15/09 180,000 196,650
-----------
196,650
-----------
PRINTING-COMMERCIAL - 0.3%
American Color Graphics, Inc.,
10.000% 06/15/10 75,000 64,500
Sheridan Group,
10.250% 08/15/11 (b) 105,000 114,712
Vertis, Inc.,
13.500% 12/07/09 (b) 120,000 127,200
-----------
306,412
-----------
PRIVATE CORRECTIONS - 0.1%
GEO Group, Inc.,
8.250% 07/15/13 70,000 74,550
-----------
74,550
-----------
RENTAL AUTO/EQUIPMENT - 0.3%
NationsRent, Inc.,
9.500% 10/15/10 215,000 241,875
Williams Scotsman, Inc.,
9.875% 06/01/07 110,000 109,175
-----------
351,050
-----------
Commercial Services Total 1,460,100
-----------
COSMETICS/PERSONAL CARE - 0.1%
COSMETICS & TOILETRIES - 0.1%
Elizabeth Arden, Inc.,
7.750% 01/15/14 110,000 116,600
-----------
116,600
-----------
Cosmetics/Personal Care Total 116,600
-----------
FOOD - 1.2%
FOOD-CONFECTIONERY - 0.2%
Merisant Co.,
9.500% 07/15/13 (b) 110,000 99,000
PAR ($) VALUE ($)
- ------------------------------------------------------------
Tabletop Holdings, Inc.,
(a) 05/15/14
(12.250% 11/15/08) (b) 325,000 147,875
-----------
246,875
-----------
FOOD-MISCELLANEOUS/DIVERSIFIED - 0.8%
Del Monte Corp.,
9.250% 05/15/11 280,000 306,600
Dole Food Co., Inc.,
8.625% 05/01/09 185,000 203,963
Pinnacle Foods Holding Corp.,
8.250% 12/01/13 (b) 235,000 212,675
Reddy Ice Holdings, Inc.,
(a) 11/01/12
(10.500% 11/01/08) (b) 110,000 76,450
-----------
799,688
-----------
FOOD-RETAIL - 0.2%
Stater Brothers Holdings,
8.125% 06/15/12 190,000 202,350
-----------
202,350
-----------
Food Total 1,248,913
-----------
HEALTHCARE-SERVICES - 1.5%
MEDICAL-HMO - 0.1%
Coventry Health Care, Inc.,
8.125% 02/15/12 145,000 159,500
-----------
159,500
-----------
MEDICAL-HOSPITALS - 0.6%
Tenet Healthcare Corp.,
9.875% 07/01/14 (b) 390,000 418,275
United Surgical Partners
International, Inc.,
10.000% 12/15/11 165,000 188,512
-----------
606,787
-----------
MRI/MEDICAL DIAGNOSTIC IMAGING - 0.6%
InSight Health Services Corp.,
9.875% 11/01/11 200,000 203,000
MedQuest, Inc.,
11.875% 08/15/12 180,000 210,600
MQ Associates, Inc.,
(a) 08/15/12
(12.250% 08/15/08) 325,000 227,500
-----------
641,100
-----------
PHYSICAL PRACTICE MANAGEMENT - 0.2%
US Oncology, Inc.,
9.000% 08/15/12 (b) 160,000 178,400
-----------
178,400
-----------
Healthcare-Services Total 1,585,787
-----------
See Accompanying Notes to Financial Statements.
8
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2004
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
- -----------------------------------------------------------
CONSUMER, NON-CYCLICAL (CONTINUED)
HOUSEHOLD PRODUCTS/WARES - 0.5%
CONSUMER PRODUCTS-MISCELLANEOUS - 0.5%
AAC Group Holdings Corp.,
(a) 10/01/12
(10.250% 10/01/08) (b) 40,000 27,000
Amscan Holdings, Inc.,
8.750% 05/01/14 175,000 175,875
Jostens IH Corp.,
7.625% 10/01/12 (b) 95,000 99,750
Playtex Products, Inc.,
9.375% 06/01/11 250,000 265,312
-----------
567,937
-----------
Household Products/Wares Total 567,937
-----------
CONSUMER, NON-CYCLICAL TOTAL 5,586,400
-----------
- -----------------------------------------------------------
ENERGY - 3.3%
OIL & GAS - 1.5%
OIL & GAS DRILLING - 0.2%
Ocean Rig Norway AS,
10.250% 06/01/08 130,000 133,900
Pride International, Inc.,
7.375% 07/15/14 (b) 75,000 83,250
-----------
217,150
-----------
OIL COMPANIES-EXPLORATION & PRODUCTION - 1.2%
Chesapeake Energy Corp.,
7.500% 06/15/14 70,000 77,438
Compton Petroleum Corp.,
9.900% 05/15/09 185,000 203,500
Encore Acquisition Co.,
8.375% 06/15/12 135,000 150,525
Energy Partners Ltd.,
8.750% 08/01/10 90,000 99,000
Magnum Hunter Resources, Inc.,
9.600% 03/15/12 72,000 82,080
PEMEX Finance Ltd.:
9.150% 11/15/18 205,000 254,428
10.610% 08/15/17 135,000 180,595
Whiting Petroleum Corp.,
7.250% 05/01/12 180,000 189,000
-----------
1,236,566
-----------
OIL REFINING & MARKETING - 0.1%
Premcor Refining Group, Inc.,
7.500% 06/15/15 105,000 114,975
-----------
114,975
-----------
Oil & Gas Total 1,568,691
-----------
OIL & GAS SERVICES - 0.6%
OIL-FIELD SERVICES - 0.6%
Gazprom,
9.625% 03/01/13 400,000 461,720
Hornbeck Offshore Services, Inc.,
6.125% 12/01/14 (b) 40,000 40,000
PAR ($) VALUE ($)
- ------------------------------------------------------------
Newpark Resources, Inc.,
8.625% 12/15/07 120,000 121,200
-----------
622,920
-----------
Oil & Gas Services Total 622,920
-----------
PIPELINES - 1.2%
PIPELINES - 1.2%
Coastal Corp.,
7.750% 06/15/10 290,000 298,338
Dynegy Holdings, Inc.:
6.875% 04/01/11 205,000 196,800
9.875% 07/15/10 (b) 70,000 79,100
Northwest Pipeline Corp.,
8.125% 03/01/10 55,000 61,325
Sonat, Inc.:
6.875% 06/01/05 100,000 101,250
7.625% 07/15/11 335,000 340,025
Southern Natural Gas Co.,
8.875% 03/15/10 95,000 106,637
Williams Companies, Inc.,
8.125% 03/15/12 135,000 157,275
-----------
1,340,750
-----------
Pipelines Total 1,340,750
-----------
ENERGY TOTAL 3,532,361
-----------
- -----------------------------------------------------------
FINANCIALS - 1.6%
DIVERSIFIED FINANCIAL SERVICES - 0.8%
FINANCE-COMMERCIAL - 0.1%
FINOVA Group, Inc.,
7.500% 11/15/09 (h) 186,150 88,887
-----------
88,887
-----------
FINANCE INVESTMENT BANKER/BROKER - 0.4%
E*Trade Financial Corp.,
8.000% 06/15/11 (b) 110,000 116,325
LaBranche & Co., Inc.,
11.000% 05/15/12 290,000 308,850
-----------
425,175
-----------
FINANCE-OTHER SERVICES - 0.3%
Aries Vermogensverwalting,
7.750% 10/25/09 (b) EUR 250,000 370,733
-----------
370,733
-----------
Diversified Financial Services Total 884,795
-----------
REITS - 0.1%
REITS-HOTELS - 0.0%
La Quinta Properties, Inc.,
7.000% 08/15/12 (b) USD 40,000 43,000
-----------
43,000
-----------
See Accompanying Notes to Financial Statements.
9
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2004
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
- -----------------------------------------------------------
FINANCIALS (CONTINUED)
REITS (CONTINUED)
REITS-MORTGAGES - 0.1%
Thornburg Mortgage, Inc.,
8.000% 05/15/13 110,000 117,975
-----------
117,975
-----------
REITS Total 160,975
-----------
SAVINGS & LOANS - 0.7%
SAVINGS & LOANS/THRIFT-WESTERN US - 0.1%
Western Financial Bank,
9.625% 05/15/12 90,000 102,600
-----------
102,600
-----------
SUPRANATIONAL BANKS - 0.6%
Euro Investment Bank,
7.625% 12/07/07 GBP 295,000 608,227
-----------
608,227
-----------
Savings & Loans Total 710,827
-----------
FINANCIALS TOTAL 1,756,597
-----------
- -----------------------------------------------------------
INDUSTRIALS - 6.8%
AEROSPACE/DEFENSE - 0.6%
AEROSPACE/DEFENSE-EQUIPMENT - 0.6%
Argo-Tech Corp.,
9.250% 06/01/11 USD 95,000 103,788
BE Aerospace, Inc.,
8.875% 05/01/11 155,000 161,975
Sequa Corp.,
8.875% 04/01/08 95,000 104,025
Standard Aero Holdings, Inc.,
8.250% 09/01/14 (b) 110,000 118,250
TransDigm, Inc.,
8.375% 07/15/11 110,000 118,525
-----------
606,563
-----------
Aerospace/Defense Total 606,563
-----------
BUILDING MATERIALS - 0.7%
BUILDING & CONSTRUCTION PRODUCTS-MISCELLANEOUS - 0.2%
Associated Materials, Inc.,
(a) 03/01/14
(11.250% 03/01/09) 85,000 63,325
Congoleum Corp.,
8.625% 08/01/08 (i) 95,000 74,100
Nortek Holdings, Inc.,
8.500% 09/01/14 (b) 55,000 59,125
-----------
196,550
-----------
BUILDING PRODUCTS-CEMENT/AGGREGATION - 0.2%
RMCC Acquisition Co.,
9.500% 11/01/12 (b) 155,000 155,387
U.S. Concrete, Inc.,
8.375% 04/01/14 130,000 138,775
-----------
294,162
-----------
PAR ($) VALUE ($)
- -----------------------------------------------------------
BUILDING PRODUCTS-DOORS & WINDOWS - 0.3%
Atrium Companies, Inc.,
10.500% 05/01/09 285,000 299,250
-----------
299,250
-----------
Building Materials Total 789,962
-----------
ELECTRONIC COMPONENTS & EQUIPMENT - 0.2%
WIRE & CABLE PRODUCTS - 0.2%
Coleman Cable, Inc.,
9.875% 10/01/12 (b) 175,000 184,188
-----------
184,188
-----------
Electronic Components & Equipment Total 184,188
-----------
ELECTRONICS - 0.1%
ELECTRONIC COMPONENTS-MISCELLANEOUS - 0.1%
Flextronics International Ltd.,
6.250% 11/15/14 (b) 55,000 54,175
-----------
54,175
-----------
Electronics Total 54,175
-----------
ENGINEERING & CONSTRUCTION - 0.2%
BUILDING & CONSTRUCTION-MISCELLANEOUS - 0.2%
J. Ray McDermott SA,
11.000% 12/15/13 (b) 185,000 202,113
-----------
202,113
-----------
Engineering & Construction Total 202,113
-----------
ENVIRONMENTAL CONTROL - 0.6%
NON-HAZARDOUS WASTE DISPOSAL - 0.5%
Allied Waste North America, Inc.:
7.875% 04/15/13 90,000 90,900
8.500% 12/01/08 235,000 247,044
Waste Services, Inc.,
9.500% 04/15/14 (b) 225,000 222,750
-----------
560,694
-----------
RECYCLING - 0.1%
IMCO Recycling Escrow,
9.000% 11/15/14 (b) 50,000 51,750
-----------
51,750
-----------
Environmental Control Total 612,444
-----------
HAND/MACHINE TOOLS - 0.1%
MACHINE TOOLS & RELATED PRODUCTS - 0.1%
Newcor, Inc.,
6.000% 01/31/13 (j) 165,817 106,123
-----------
106,123
-----------
Hand/Machine Tools Total 106,123
-----------
See Accompanying Notes to Financial Statements.
10
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2004
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
- ------------------------------------------------------------
INDUSTRIALS (CONTINUED)
MACHINERY-CONSTRUCTION & MINING - 0.1%
MACHINERY-CONSTRUCTION & MINING - 0.1%
Terex Corp.,
10.375% 04/01/11 125,000 140,937
-----------
140,937
-----------
Machinery-Construction & Mining Total 140,937
-----------
METAL FABRICATE/HARDWARE - 0.9%
METAL PROCESSORS & FABRICATION - 0.7%
Altra Industrial Motion, Inc.,
9.000% 12/01/11 (b) 75,000 76,125
Hawk Corp.,
8.750% 11/01/14 (b) 30,000 30,975
Mueller Group, Inc.,
10.000% 05/01/12 135,000 146,475
Mueller Holdings, Inc.,
(a) 04/15/14
(14.750% 04/15/09) 170,000 114,750
TriMas Corp.,
9.875% 06/15/12 315,000 329,175
-----------
697,500
-----------
METAL PRODUCTS-FASTENERS - 0.2%
FastenTech, Inc.,
11.500% 05/01/11 (b) 220,000 250,800
-----------
250,800
-----------
Metal Fabricate/Hardware Total 948,300
-----------
MISCELLANEOUS MANUFACTURERS - 0.7%
ADVANCED MATERIALS/PRODUCTS - 0.1%
Hexcel Corp.,
9.750% 01/15/09 150,000 157,125
-----------
157,125
-----------
DIVERSIFIED MANUFACTURING OPERATORS - 0.5%
J.B. Poindexter & Co.,
8.750% 03/15/14 (b) 140,000 148,400
KI Holdings, Inc.,
(a) 11/15/14
(9.875% 11/15/09) (b) 170,000 107,950
Koppers Industries, Inc.,
9.875% 10/15/13 140,000 158,900
Trinity Industries, Inc.,
6.500% 03/15/14 70,000 69,387
-----------
484,637
-----------
FILTRATION/SEPARATION PRODUCTS - 0.1%
Polypore, Inc.,
(a) 10/01/12
(10.500% 10/01/08) (b) 195,000 125,287
-----------
125,287
-----------
Miscellaneous Manufacturers Total 767,049
-----------
PAR ($) VALUE ($)
- ------------------------------------------------------------
PACKAGING & CONTAINERS - 1.2%
CONTAINERS-METAL/GLASS - 0.6%
Crown European Holdings SA,
10.875% 03/01/13 135,000 158,963
Owens-Brockway Glass Container,
8.250% 05/15/13 245,000 267,663
Owens-Illinois, Inc.:
7.350% 05/15/08 160,000 166,800
7.500% 05/15/10 35,000 36,881
-----------
630,307
-----------
CONTAINERS-PAPER/PLASTIC - 0.6%
Consolidated Container Co. LLC,
(a) 06/15/09
(10.750% 06/15/07) 120,000 100,800
MDP Acquisitions PLC,
9.625% 10/01/12 235,000 265,550
Portola Packaging, Inc.,
8.250% 02/01/12 120,000 93,600
Smurfit-Stone Container Corp.,
8.250% 10/01/12 110,000 120,450
Tekni-Plex, Inc.,
12.750% 06/15/10 140,000 123,900
-----------
704,300
-----------
Packaging & Containers Total 1,334,607
-----------
TRANSPORTATION - 1.4%
TRANSPORTATION-MARINE - 0.7%
Ship Finance International Ltd.,
8.500% 12/15/13 295,000 303,112
Stena AB:
7.000% 12/01/16 (b) 55,000 54,037
7.500% 11/01/13 175,000 181,125
9.625% 12/01/12 115,000 129,375
Teekay Shipping Corp.,
8.875% 07/15/11 40,000 46,400
-----------
714,049
-----------
TRANSPORTATION-RAILROAD - 0.2%
TFM SA de CV,
12.500% 06/15/12 155,000 175,925
-----------
175,925
-----------
TRANSPORTATION-SERVICES - 0.3%
CHC Helicopter Corp.,
7.375% 05/01/14 120,000 126,900
Petroleum Helicopters, Inc.,
9.375% 05/01/09 225,000 243,000
-----------
369,900
-----------
See Accompanying Notes to Financial Statements.
11
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2004
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
- ------------------------------------------------------------
INDUSTRIALS (CONTINUED)
TRANSPORTATION (CONTINUED)
TRANSPORTATION-TRUCKS - 0.2%
Allied Holdings, Inc.,
8.625% 10/01/07 105,000 89,250
QDI Capital Corp.,
9.000% 11/15/10 (b) 160,000 159,600
-----------
248,850
-----------
Transportation Total 1,508,724
-----------
INDUSTRIALS TOTAL 7,255,185
-----------
- -----------------------------------------------------------
TECHNOLOGY - 0.2%
SEMICONDUCTORS - 0.2%
ELECTRONIC COMPONENTS-SEMICONDUCTORS - 0.2%
Amkor Technology, Inc.,
9.250% 02/15/08 205,000 201,413
-----------
201,413
-----------
Semiconductors Total 201,413
-----------
TECHNOLOGY TOTAL 201,413
-----------
- -----------------------------------------------------------
UTILITIES - 2.2%
ELECTRIC - 2.2%
ELECTRIC-GENERATION - 0.4%
AES Corp.:
9.000% 05/15/15 (b) 45,000 51,750
9.500% 06/01/09 132,000 151,470
Edison Mission Energy,
9.875% 04/15/11 170,000 201,450
Mission Energy Holding,
13.500% 07/15/08 60,000 75,450
-----------
480,120
-----------
ELECTRIC-INTEGRATED - 0.8%
CMS Energy Corp.,
8.900% 07/15/08 175,000 194,250
Nevada Power Co.:
9.000% 08/15/13 75,000 87,750
10.875% 10/15/09 150,000 175,500
PSE&G Energy Holdings, Inc.,
8.625% 02/15/08 190,000 210,188
TNP Enterprises, Inc.,
10.250% 04/01/10 130,000 139,100
-----------
806,788
-----------
INDEPENDENT POWER PRODUCERS - 1.0%
Caithness Coso Funding Corp.,
9.050% 12/15/09 179,018 198,710
Calpine Corp.,
8.500% 07/15/10 (b) 190,000 149,150
Calpine Generating Co. LLC:
11.169% 04/01/11 (b)(d) 240,000 227,400
11.500% 04/01/11 (b) 140,000 128,800
PAR ($) VALUE ($)
- -----------------------------------------------------------
MSW Energy Holdings LLC:
7.375% 09/01/10 50,000 52,750
8.500% 09/01/10 190,000 209,000
Orion Power Holdings, Inc.,
12.000% 05/01/10 120,000 152,400
-----------
1,118,210
-----------
Electric Total 2,405,118
-----------
UTILITIES TOTAL 2,405,118
-----------
TOTAL CORPORATE FIXED-INCOME BONDS & NOTES
(cost of $41,933,356) 44,343,601
-----------
MUNICIPAL BOND (TAXABLE) - 0.2%
- -----------------------------------------------------------
Cabazon Band Mission
Indians California,
13.000% 10/01/11 (n) 230,000 228,167
-----------
TOTAL MUNICIPAL BOND (TAXABLE)
(cost of $230,000) 228,167
-----------
FOREIGN GOVERNMENT
OBLIGATIONS - 33.2%
- -----------------------------------------------------------
Federal Republic of Brazil:
7.720% 06/29/09 (d) USD 625,000 701,644
8.250% 01/20/34 490,000 452,025
11.500% 04/02/09 EUR 325,000 510,617
14.500% 10/15/09 USD 810,000 1,059,075
German Republic:
4.250% 07/04/14 EUR 970,000 1,341,708
6.000% 07/04/07 800,000 1,154,142
Government of Canada:
5.250% 06/01/13 CAD 530,000 473,991
10.000% 06/01/08 1,800,000 1,839,207
Government of New Zealand:
6.000% 11/15/11 NZD 1,940,000 1,392,321
6.500% 04/15/13 1,885,000 1,396,907
Government of Poland,
8.500% 05/12/07 PLN 2,225,000 733,946
Hellenic Republic of Greece,
5.350% 05/18/11 EUR 375,000 551,527
Kingdom of Norway,
5.500% 05/15/09 NOK 3,360,000 602,294
Kingdom of Spain,
5.500% 07/30/17 EUR 820,000 1,252,976
Kingdom of Sweden:
5.000% 01/28/09 SEK 13,595,000 2,154,432
6.750% 05/05/14 6,210,000 1,115,994
Republic of Bulgaria:
2.750% 07/28/11 (d) USD 637,000 636,045
8.250% 01/15/15 325,000 402,512
Republic of Colombia:
9.750% 04/09/11 161,560 185,794
10.000% 01/23/12 520,000 588,900
11.500% 05/31/11 EUR 225,000 370,693
11.750% 02/25/20 USD 370,000 463,055
See Accompanying Notes to Financial Statements.
12
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2004
FOREIGN GOVERNMENT
OBLIGATIONS (CONTINUED) PAR ($) VALUE ($)
- -----------------------------------------------------------
Republic of France,
4.000% 04/25/14 EUR 630,000 854,145
Republic of Italy,
5.000% 02/01/12 1,890,000 2,747,215
Republic of Panama,
8.875% 09/30/27 USD 500,000 527,500
Republic of Peru:
7.500% 10/14/14 EUR 210,000 289,898
9.875% 02/06/15 USD 450,000 523,125
Republic of Philippines,
10.625% 03/16/25 240,000 249,000
Republic of South Africa:
5.250% 05/16/13 EUR 855,000 1,192,113
13.000% 08/31/10 ZAR 1,823,000 381,051
Republic of Venezuela,
9.250% 09/15/27 USD 577,000 600,080
Russian Federation:
5.000% 03/31/30 525,000 521,955
11.000% 07/24/18 500,000 674,600
12.750% 06/24/28 595,000 941,588
United Kingdom:
5.000% 03/07/12 GBP 215,000 421,466
7.500% 12/07/06 655,000 1,325,431
9.000% 07/12/11 415,000 992,197
United Mexican States:
7.500% 03/08/10 EUR 385,000 591,636
7.500% 04/08/33 USD 780,000 812,760
11.375% 09/15/16 625,000 910,938
Western Australia Treasury Corp.:
7.500% 10/15/09 AUD 1,200,000 1,012,271
8.750% 08/15/08 985,000 854,260
-----------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(cost of $31,244,269) 35,803,034
-----------
U.S. GOVERNMENT AGENCIES
& OBLIGATIONS - 21.6%
- -----------------------------------------------------------
U.S. GOVERNMENT AGENCIES - 3.0%
Federal Home Loan Mortgage Corp.,
5.000% 08/25/10 USD 900,000 910,340
Federal National Mortgage Association,
To Be Announced,
6.500% 12/13/34 (f) 1,895,000 1,987,972
Government National Mortgage
Association:
9.000% 04/15/16 - 12/15/16 165,538 185,431
10.500% 07/15/19 - 07/15/20 25,677 28,843
11.000% 01/15/18 - 05/15/19 123,988 139,952
-----------
U.S. Government Agencies Total 3,252,538
-----------
PAR ($) VALUE ($)
- -----------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS - 18.6%
U.S. Treasury Bonds and Notes:
4.875% 02/15/12 1,245,000 1,305,013
7.000% 07/15/06 1,700,000 1,809,504
7.500% 11/15/24 865,000 1,133,352
8.875% 02/15/19 672,000 953,689
10.375% 11/15/12 1,520,000 1,819,428
10.625% 08/15/15 2,780,000 4,233,854
12.500% 08/15/14 6,354,000 8,745,932
-----------
U.S. Government Obligations Total 20,000,772
-----------
TOTAL U.S. GOVERNMENT AGENCIES & OBLIGATIONS
(cost of $23,944,838) 23,253,310
-----------
ASSET-BACKED SECURITIES - 0.7%
- -----------------------------------------------------------
Equity One, Inc.,
Series 2004-1, AFG,
4.205% 04/25/34 425,000 414,265
GMAC Mortgage Corp. Loan Trust,
Series 2004-HES, A5,
4.865% 09/25/34 350,000 345,598
-----------
TOTAL ASSET-BACKED SECURITIES
(cost of $771,945) 759,863
-----------
CONVERTIBLE BONDS - 0.3%
- -----------------------------------------------------------
COMMUNICATIONS - 0.2%
TELECOMMUNICATIONS - 0.2%
TELECOMMUNICATION EQUIPMENT - 0.2%
Nortel Networks Corp.,
4.250% 09/01/08 265,000 254,106
-----------
254,106
-----------
Telecommunications Total 254,106
-----------
COMMUNICATIONS TOTAL 254,106
-----------
- -----------------------------------------------------------
UTILITIES - 0.1%
ELECTRIC - 0.1%
INDEPENDENT POWER PRODUCERS - 0.1%
Mirant Corp.,
2.500% 06/15/21 (e) 125,000 88,806
-----------
88,806
-----------
Electric Total 88,806
-----------
UTILITIES TOTAL 88,806
-----------
TOTAL CONVERTIBLE BONDS
(cost of $323,469) 342,912
-----------
See Accompanying Notes to Financial Statements.
13
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2004
COMMON STOCKS - 0.3% (k) SHARES VALUE ($)
- -----------------------------------------------------------
BASIC MATERIALS - 0.2%
IRON/STEEL - 0.2%
STEEL-PRODUCERS - 0.2%
Bayou Steel Corp. 5,637 196,172
-----------
196,172
-----------
Iron/Steel Total 196,172
-----------
BASIC MATERIALS TOTAL 196,172
-----------
- -----------------------------------------------------------
COMMUNICATIONS - 0.1%
TELECOMMUNICATIONS - 0.1%
CELLULAR TELECOMMUNICATIONS - 0.1%
Horizon PCS, Inc., Class A 4,350 95,265
-----------
95,265
-----------
Telecommunications Total 95,265
-----------
COMMUNICATIONS TOTAL 95,265
-----------
- -----------------------------------------------------------
INDUSTRIALS - 0.0%
ENVIRONMENTAL CONTROL - 0.0%
NON-HAZARDOUS WASTE DISPOSAL - 0.0%
Fairlane Management Corp. (j)(l) 1,800 --
-----------
--
-----------
Environmental Control Total --
-----------
INDUSTRIALS TOTAL --
-----------
TOTAL COMMON STOCKS
(cost of $271,210) 291,437
-----------
WARRANTS - 0.0% (k) UNITS
- -----------------------------------------------------------
COMMUNICATIONS - 0.0%
MEDIA - 0.0%
CABLE TV - 0.0%
Cable Satisfaction International, Inc.,
Expires 03/01/05 (b)(j)(l) 355 --
Ono Finance PLC,
Expires 03/16/11 (b)(j)(l) 160 --
-----------
--
-----------
Media Total --
-----------
TELECOMMUNICATIONS - 0.0%
CELLULAR TELECOMMUNICATIONS - 0.0%
Horizon PCS, Inc.,
Expires 10/01/10 (b)(j)(l) 220 --
UbiquiTel, Inc.,
Expires 04/15/10 (b)(j)(l) 150 --
-----------
--
-----------
WARRANTS (CONTINUED) UNITS VALUE ($)
- -----------------------------------------------------------
TELECOMMUNICATION SERVICES - 0.0%
AT&T Canada, Inc.,
Expires 08/15/07 (b)(j)(l) 250 --
Carrier1 International SA,
Expires 02/19/09 (b)(e)(j)(l) 209 --
Jazztel PLC
Expires 07/15/10 (b)(j)(l) 40 --
-----------
--
-----------
Telecommunications Total --
-----------
COMMUNICATIONS TOTAL --
-----------
- -----------------------------------------------------------
INDUSTRIALS - 0.0%
TRANSPORTATION - 0.0%
TRANSPORTATION-TRUCKS - 0.0%
QDI LLC,
Expires 01/15/07 (b)(j) 510 1,586
-----------
1,586
-----------
Transportation Total 1,586
-----------
INDUSTRIALS TOTAL 1,586
-----------
TOTAL WARRANTS
(cost of $20,772) 1,586
-----------
SHORT-TERM OBLIGATION - 3.1% PAR ($)
- -----------------------------------------------------------
Repurchase agreement with State Street
Bank & Trust Co., dated 11/30/04,
due 12/01/04 at 1.870%, collateralized
by U.S. Treasury Bonds maturing
11/15/16, market value of $3,440,800
(repurchase proceeds $3,373,175)
TOTAL SHORT-TERM OBLIGATION
(cost of $3,373,000) 3,373,000 3,373,000
-----------
TOTAL INVESTMENTS - 100.6%
(cost of $102,112,859) (m) 108,396,910
OTHER ASSETS & LIABILITIES, NET - (0.6)% (599,893)
-----------
NET ASSETS - 100.0% 107,797,017
===========
See Accompanying Notes to Financial Statements.
14
INVESTMENT PORTFOLIO (CONTINUED)
November 30, 2004
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) Step bond. This security is currently not paying coupon. Shown
parenthetically is the interest rate to be paid and the date the Trust will
begin accruing at this rate.
(b) Security exempt from registration pursuant to Rule 144A under the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At November 30,
2004, these securities amounted to $9,978,236, which represents 9.3% of net
assets.
(c) Zero coupon bond.
(d) Floating rate note. The interest rate shown reflects the rate as of November
30, 2004.
(e) The issuer has filed for bankruptcy protection under Chapter 11, and is in
default of certain debt covenants. Income is not being accrued. As of
November 30, 2004, the value of these securities amounted to $496,181, which
represents 0.5% of net assets.
(f) Security, or a portion thereof, purchased on a delayed delivery basis.
(g) The issuer is in default of certain debt covenants. Income is not being
accrued. As of November 30, 2004, the value of this security represents 0.3%
of net assets.
(h) Issued as part of bankruptcy reorganization.
(i) The issuer has filed for bankruptcy protection under Chapter 11, and is in
default of certain debt covenants, however, under the issuer's plan of
reorganization, the issuer has guaranteed all interest due and therefore
income is still being accrued. As of November 30, 2004, the value of this
security represents 0.1% of net assets.
(j) Represents fair value as determined in good faith under procedures approved
by the Board of Trustees.
(k) Non-income producing security.
(l) Security has no value.
(m) Cost for federal income tax purposes is $103,160,387.
(n) Illiquid security.
(o) The issuer has filed for bankruptcy protection under Chapter 11, and is in
default of certain debt covenants. Income is being accrued. As of November
30, 2004, the value of this security represents 0.1% of net assets.
(p) Step bond. Shown parenthetically is the next interest rate to be paid and
the date the Trust will begin accruing at this rate.
As of November 30, 2004, the Trust had entered into the following forward
currency exchange contracts:
FORWARD CURRENCY AGGREGATE SETTLEMENT UNREALIZED
CONTRACTS TO SELL VALUE FACE VALUE DATE DEPRECIATION
- --------------------------------------------------------------
EUR $1,329,070 $1,355,329 12/23/04 $(26,259)
EUR 703,707 714,981 01/26/05 (11,274)
EUR 588,951 598,048 01/31/05 (9,097)
GBP 1,081,920 1,122,615 12/13/04 (40,695)
GBP 493,430 504,474 01/26/05 (11,044)
----------
$(98,369)
----------
- ------------------------------------------------------------------------
THE TRUST WAS INVESTED IN THE FOLLOWING COUNTRIES AT NOVEMBER 30, 2004:
% OF TOTAL
COUNTRY VALUE INVESTMENTS
- --------------------------------------------------------------
United States* $ 66,980,424 61.8
Canada 4,124,203 3.8
Sweden 3,580,926 3.3
United Kingdom 3,385,409 3.1
Germany 3,328,303 3.1
Mexico 3,042,887 2.8
New Zealand 2,789,228 2.6
Italy 2,747,215 2.5
Brazil 2,723,361 2.5
Russia 2,138,143 2.0
Australia 1,866,531 1.7
Colombia 1,608,442 1.5
South Africa 1,573,164 1.5
Spain 1,252,976 1.1
Bulgaria 1,038,557 1.0
France 1,013,108 0.9
Peru 813,023 0.8
Norway 736,194 0.7
Poland 733,946 0.7
Panama 729,613 0.7
Venezuela 600,080 0.6
Greece 551,527 0.5
Ireland 265,550 0.2
Philippines 249,000 0.2
Netherlands 192,225 0.2
Luxembourg 147,375 0.1
Belgium 131,325 0.1
Singapore 54,175 0.0
------------ ------
$108,396,910 100.0
------------ ------
* Includes Short-Term Obligation.
Certain securities are listed by country of underlying exposure but may trade
predominately on other exchanges.
At November 30, 2004, the Trust held investments in the following sectors:
% OF
HOLDINGS BY REVENUE SOURCE (UNAUDITED) NET ASSETS
- --------------------------------------------------------------
Foreign Government Obligations 33.2
U.S. Government Obligations 18.6
Communications 10.1
Consumer, Cyclical 8.3
Industrials 6.8
Consumer, Non-Cyclical 5.2
Basic Materials 4.0
Energy 3.3
U.S. Government Agencies 3.0
Utilities 2.3
Financials 1.6
Asset Backed Securities 0.7
Technology 0.2
Municipal Bond 0.2
Short-Term Obligation 3.1
Other Assets & Liabilities, Net (0.6)
------
100.0
------
ACRONYM NAME
- --------------------------------------------------------------------
AUD Australian Dollar
CAD Canadian Dollar
EUR Euro
GBP British Pound
NOK Norwegian Krona
NZD New Zealand Dollar
PLN Polish Zloty
REIT Real Estate Investment Trust
SEK Swedish Krona
USD United States Dollar
ZAR South African Rand
See Accompanying Notes to Financial Statements.
15
STATEMENT OF ASSETS AND LIABILITIES
November 30, 2004
ASSETS:
Investments, at cost $102,112,859
------------
Investments, at value $108,396,910
Foreign currency (cost of $37) 38
Receivable for:
Investments sold 321,891
Interest 2,251,366
Foreign tax reclaims 21,867
Dollar roll fee income 3,627
Deferred Trustees' compensation plan 8,309
------------
Total Assets 111,004,008
------------
LIABILITIES:
Payable to custodian bank 30,901
Net unrealized depreciation on foreign
forward currency contracts 98,369
Payable for:
Investments purchased on a delayed
delivery basis 2,345,067
Distributions 594,486
Investment advisory fee 64,739
Transfer agent fee 4,122
Pricing and bookkeeping fees 16,149
Trustees' fees 158
Audit fee 31,950
Custody fee 3,425
Deferred Trustees' fees 8,309
Other liabilities 9,316
------------
Total Liabilities 3,206,991
------------
NET ASSETS $107,797,017
============
COMPOSITION OF NET ASSETS:
Paid-in capital $120,444,512
Undistributed net investment income 172,770
Accumulated net realized loss (19,061,159)
Net unrealized appreciation/depreciation on:
Investments 6,284,051
Foreign currency translations (43,157)
------------
NET ASSETS $107,797,017
============
Shares outstanding 11,009,000
------------
Net asset value per share $ 9.79
============
STATEMENT OF OPERATIONS
For the Year Ended November 30, 2004
INVESTMENT INCOME:
Interest $ 7,201,433
Dollar roll fee income 53,023
------------
Total Investment Income (net of foreign
taxes withheld of $2,924) 7,254,456
------------
EXPENSES:
Investment advisory fee 785,336
Transfer agent fee 40,246
Pricing and bookkeeping fees 80,237
Trustees' fees 8,312
Custody fee 35,801
Other expenses 107,566
------------
Total Expenses 1,057,498
Custody earnings credit (687)
------------
Net Expenses 1,056,811
------------
Net Investment Income 6,197,645
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain (loss) on:
Investments 4,182,785
Foreign currency transactions (529,796)
------------
Net realized gain 3,652,989
------------
Net change in unrealized appreciation/depreciation on:
Investments 1,404,313
Foreign currency translations (1,648)
------------
Net change in unrealized
appreciation/depreciation 1,402,665
------------
Net Gain 5,055,654
------------
Net Increase in Net Assets from Operations $ 11,253,299
------------
See Accompanying Notes to Financial Statements.
16
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED
NOVEMBER 30,
-------------------------------
INCREASE (DECREASE) IN NET ASSETS: 2004 2003
- ---------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 6,197,645 $ 6,475,980
Net realized gain on investments and foreign currency transactions 3,652,989 1,748,681
Net change in unrealized appreciation/depreciation
on investments and foreign currency transactions 1,402,665 8,481,511
------------- -------------
Net Increase from Operations 11,253,299 16,706,172
------------- -------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (7,694,190) (7,133,128)
------------- -------------
Total Increase in Net Assets 3,559,109 9,573,044
------------- -------------
NET ASSETS:
Beginning of period 104,237,908 94,664,864
------------- -------------
End of period (including undistributed (overdistributed) net investment income
of $172,770 and $(898,430), respectively) $ 107,797,017 $ 104,237,908
============= =============
NUMBER OF TRUST SHARES OUTSTANDING:
End of period 11,009,000 11,009,000
------------- -------------
See Accompanying Notes to Financial Statements.
17
NOTES TO FINANCIAL STATEMENTS
November 30, 2004
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 pricing services 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. Debt securities for which quotations are readily
available are valued at an over-the-counter or exchange bid quotation. Certain
debt 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.
Equity securities are valued at the last sale price on the principal exchange on
which they trade, except for securities traded on the NASDAQ, which are valued
at the NASDAQ official close price. 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 debt 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 last sale 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.
Generally, trading in foreign securities is substantially completed each day at
various times prior to the close of the New York Stock Exchange ("NYSE"). The
values of such securities used in computing the net asset value of the Trust's
shares are determined as of such times. Foreign currency exchange rates are
generally determined at 2:00 p.m. Eastern (U.S.) time. Occasionally, events
affecting the values of such foreign securities and such exchange rates may
occur between the times at which they are determined and the close of the
customary trading session of the NYSE, which would not be reflected in the
computation of the Trust's net asset value. If events materially affecting the
values of such foreign securities occur and it is determined that market
quotations are not reliable, then these foreign securities will be valued at
their fair value using procedures approved by the Board of Trustees.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value under
procedures approved by the Board of Trustees.
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 the 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
18
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
November 30, 2004
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 the contracts.
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 is at least equal, at all
times, to the value of the repurchase obligation including interest. A
repurchase agreement transaction involves certain risks in the event of default
or insolvency of the counterparty. These risks include 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
identifies U.S. Government securities or other liquid high grade debt
obligations as segregated with the custodian in an amount equal to the 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 identifies cash or
liquid portfolio securities as segregated with the custodian in an amount equal
to the delayed delivery commitment.
INCOME RECOGNITION
Interest income is recorded on the accrual basis and includes accretion of
discounts, amortization of premiums and paydown gains and losses. Fee income
attributable to mortgage dollar roll transactions is recorded on the accrual
basis over the term of the transaction. 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.
For financial statement purposes, 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, and will distribute
substantially all of its taxable income, if any, for its tax year, and as such
will not be subject to federal income taxes. In addition, the Trust intends to
distribute in each calendar year substantially all of its net investment income,
capital gains and certain other amounts, if any, such that the Trust should 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 the ex-date. Net realized capital
gains, if any, are distributed at least annually.
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.
19
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
November 30, 2004
For the year ended November 30, 2004, permanent book and tax basis differences
resulting primarily from differing treatments for discount accretion/premium
amortization on debt securities, market discount reclassification adjustments
and paydown reclassifications were identified and reclassified among the
components of the Trust's net assets as follows:
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT INCOME NET REALIZED LOSS PAID-IN CAPITAL
------------------- -------------- -----------
$2,567,745 $(2,567,746) $1
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, 2004
and November 30, 2003 was as follows:
NOVEMBER 30, 2004 NOVEMBER 30, 2003
---------------- ----------------
Distributions paid from:
Ordinary Income $7,694,190 $7,133,128
Long-Term Capital Gains -- --
As of November 30, 2004, the components of distributable earnings on a tax basis
were as follows:
UNDISTRIBUTED UNDISTRIBUTED
ORDINARY LONG-TERM NET UNREALIZED
INCOME CAPITAL GAINS APPRECIATION*
-------------- -------------- --------------
$1,688,421 $-- $ 5,332,940
* The differences between book-basis and tax-basis net unrealized appreciation
are primarily due to deferral of losses from wash sales and discount
accretion/premium amortization on debt securities.
Unrealized appreciation and depreciation at November 30, 2004, based on cost of
investments for federal income tax purposes, and excluding any unrealized
appreciation and depreciation from changes in the value of other assets and
liabilities resulting from changes in exchange rates, was:
Unrealized appreciation $ 8,000,935
Unrealized depreciation (2,764,412)
-----------
Net unrealized appreciation $ 5,236,523
===========
The following capital loss carryforwards, determined as of November 30, 2004,
may be 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 $ 49,924
2008 5,857,135
2009 5,692,253
2010 7,020,484
-----------
$18,619,796
===========
Capital loss carryforwards of $1,419,371 were utilized during the year ended
November 30, 2004 for the Trust.
Under current tax rules, certain capital losses realized after October 31 may be
deferred and treated as occurring on the first day of the following fiscal year.
As of November 30, 2004, post-October capital losses of $383,901 attributed to
security transactions were deferred to December 1, 2004.
NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES
Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the
Trust. Prior to April 1, 2004, Columbia was an indirect, wholly owned subsidiary
of FleetBoston Financial Corporation ("FleetBoston"). Effective April 1, 2004,
FleetBoston, including the Trust's investment advisor, was acquired by Bank of
America Corporation ("BOA"). The acquisition 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 provides administrative and other services to the Trust in addition to
investment advisory services. Columbia receives a monthly investment advisory
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"). As a result, Columbia pays the total fees received
to State Street under the Outsourcing Agreement.
20
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
November 30, 2004
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 based on the number of securities held by
the Trust. For the year ended November 30, 2004, the Trust's effective pricing
and bookkeeping fee rate, inclusive of out-of-pocket expenses, was 0.077%.
CUSTODY CREDITS
The Trust has an agreement with its custodian bank under which custody fees may
be reduced by balance credits. These credits are recorded as a reduction of
total expenses on the Statement of Operations. 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
With the exception of one officer, all officers of the Trust
are employees of Columbia or its affiliates and receive no compensation from the
Trust. Effective August 23, 2004, the Board of Trustees appointed a Chief
Compliance Officer to the Trust in accordance with federal securities
regulations. The Trust, along with other affiliated trusts, will pay its
pro-rata share of the expenses associated with the Office of the Chief
Compliance Officer. The Trust's fee will not exceed $15,000 per year.
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.
OTHER
Columbia provides certain services to the Trust related to Sarbanes-Oxley
compliance. For the year ended November 30, 2004, the Trust paid $1,447 to
Columbia for such services. This amount is included in "Other expenses" on the
Statement of Operations.
NOTE 5. PORTFOLIO INFORMATION
For the year ended November 30, 2004, the cost of purchases and proceeds from
sales of securities, excluding short-term obligations, were $73,991,870 and
$76,578,176, respectively of which $11,652,078 and $12,220,371, respectively,
were U.S. Government securities.
NOTE 6. DISCLOSURE OF SIGNIFICANT RISKS
AND CONTINGENCIES
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 to the extent
there is no established secondary market.
INDUSTRY FOCUS
The Trust may focus its investments in certain industries, subjecting it to
greater risk than a trust that is more diversified.
ISSUER FOCUS
As a non-diversified trust, the Trust may invest a greater percentage of its
total assets in the securities of fewer issuers than a diversified trust. The
Trust may, therefore, have a greater risk of loss from a few issuers than a
similar trust that invests more broadly.
LEGAL PROCEEDINGS
Columbia, Columbia Funds Distributor, Inc. ("CFDI"), and certain of their
affiliates (collectively, "the Columbia Group") have received information
requests and subpoenas from various regulatory and law enforcement authorities
in connection with their investigations of late trading and market timing in
mutual funds as well as other industry wide issues. The Columbia Group has not
uncovered any instances where Columbia or CFDI were knowingly involved in late
trading of mutual fund shares.
On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a
civil complaint in the United States District Court for the District of
Massachusetts against Columbia and CFDI, alleging that they had violated certain
provisions of the federal securities laws in connection with trading activity in
mutual fund shares. Also on February 24, 2004, the New York Attorney General
("NYAG") filed a civil
21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
November 30, 2004
complaint in New York Supreme Court, County of New York against Columbia and
CFDI alleging that Columbia and CFDI had violated certain New York anti-fraud
statutes. If either Columbia or CFDI is unsuccessful in its defense of these
proceedings, it could be barred from serving as an investment advisor or
distributor for any investment company registered under the Investment Company
Act of 1940, as amended (a "registered investment company"). Such results could
prevent Columbia, CFDI or any company that is an affiliated person of Columbia
and CFDI from serving as an investment advisor or distributor for any registered
investment company, including your fund. Your fund has been informed by Columbia
and CFDI that, if these results occur, they will seek exemptive relief from the
SEC to permit them to continue to serve as your fund's investment advisor and
distributor. There is no assurance that such exemptive relief will be granted.
On March 15, 2004, Columbia and CFDI entered into agreements in principle with
the SEC Division of Enforcement and NYAG in settlement of the charges. Under the
agreements, Columbia and CFDI agreed, among other things, to the following
conditions: payment of $70 million in disgorgement; payment of $70 million in
civil penalties; an order requiring Columbia and CFDI to cease and desist from
violations of the antifraud provisions and other provisions of the federal
securities laws; governance changes designed to maintain the independence of the
mutual fund boards of trustees and ensure compliance with securities laws and
their fiduciary duties; and retention of an independent consultant to review
Columbia's and CFDI's compliance policies and procedures. The agreement requires
the final approval of the SEC. In a separate agreement with the NYAG, the
Columbia Group and its affiliate Banc of America Capital Management, LLC have
agreed to collectively reduce mutual fund fees by $160 million over a five-year
period.
In connection with the events described in detail above, various parties have
filed suit against certain funds, their Boards and/or FleetBoston (and
affiliated entities). More than 300 cases (including those filed against
entities unaffiliated with the funds, their Boards and/or FleetBoston and its
affiliated entities) have been consolidated in a multi-district proceeding and
transferred to the Federal District Court in Maryland. Recently, certain
Columbia funds and affiliated entities have been named as defendants in several
derivative actions under various sections of the Investment Company Act of 1940,
as amended, alleging, among other things, that the fees and expenses paid by
those funds are excessive. The funds and the other defendants to these actions,
including Columbia and various of its affiliates, certain other mutual funds
advised by Columbia and its affiliates, and various directors of such funds,
have denied these allegations and are contesting the plaintiffs' claims. These
suits and certain regulatory investigations are ongoing, however, based on
currently available information, Columbia believes that these lawsuits are
without merit, that the likelihood they will have a material adverse impact on
any fund is remote, and that the lawsuits are not likely to materially affect
its ability to provide investment management services to its clients, including
the funds.
22
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period is as follows:
YEAR ENDED NOVEMBER 30,
---------------------------------------------------------------
2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.47 $ 8.60 $ 8.91 $ 9.14 $ 10.26
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.56(a) 0.59(a) 0.63(a)(b) 0.78(a) 0.90(c)
Net realized and unrealized gain (loss) on
investments and foreign currency 0.46 0.93 (0.23)(b) (0.17) (1.13)
----------- ----------- ----------- ----------- -----------
Total from Investment Operations 1.02 1.52 0.40 0.61 (0.23)
----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.70) (0.65) (0.64) (0.75) (0.87)
Return of capital -- -- (0.07) (0.09) (0.02)
----------- ----------- ----------- ----------- -----------
Total Distributions Declared to Shareholders (0.70) (0.65) (0.71) (0.84) (0.89)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 9.79 $ 9.47 $ 8.60 $ 8.91 $ 9.14
----------- ----------- ----------- ----------- -----------
Market price per share $ 8.68 $ 8.96 $ 7.98 $ 8.19 $ 7.94
=========== =========== =========== =========== ===========
Total return - based on market value (d) 4.91% 20.93% 6.00% 13.47% 6.08%
=========== =========== =========== =========== ===========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Expenses (e) 1.01% 1.04% 1.00% 1.04% 0.94%
Net investment income (e) 5.91% 6.44% 7.24%(b) 8.52% 9.08%
Portfolio turnover rate 73% 64% 83% 65% 53%
Net assets, end of period (000's) $ 107,797 $ 104,238 $ 94,665 $ 98,088 $ 100,649
(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%.
23
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share outstanding throughout each period is as follows:
YEAR ENDED NOVEMBER 30,
---------------------------------------------------------------
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.13 $ 11.45 $ 11.52 $ 11.27 $ 10.41
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.91 0.94 0.91 1.00 0.99
Net realized and unrealized gain (loss) on
investments and foreign currency (0.88) (0.25) --(a) 0.24 0.82
----------- ----------- ----------- ----------- -----------
Total from Investment Operations 0.03 0.69 0.91 1.24 1.81
----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.90) (0.93) (0.98) (0.99) (0.95)
In excess of net investment income -- --(a) -- -- --
From net realized gains -- (0.03) -- -- --
In excess of net realized gains -- (0.05) -- -- --
----------- ----------- ----------- ----------- -----------
Total Distributions Declared to Shareholders (0.90) (1.01) (0.98) (0.99) (0.95)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 10.26 $ 11.13 $ 11.45 $ 11.52 $ 11.27
----------- ----------- ----------- ----------- -----------
Market price per share $ 8.31 $ 10.56 $ 10.94 $ 10.63 $ 10.75
=========== =========== =========== =========== ===========
Total return - based on market value (b) (13.51)% 6.26% 12.62% 8.30% 17.67%
=========== =========== =========== =========== ===========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Expenses (c) 1.00% 0.93% 0.96% 0.95% 0.97%
Net investment income (c) 8.51% 8.22% 8.06% 8.33% 8.73%
Portfolio turnover rate 52% 99% 156% 117% 77%
Net assets, end of period (000's) $ 113,005 $ 122,490 $ 126,011 $ 126,835 $ 124,097
(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%.
24
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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 the standards of the Public Company
Accounting Oversight Board (United States), 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, 2004 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 19, 2005
25
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 (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 the
participant's 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.
26
ADDITIONAL INFORMATION
On August 3, 2004, the Board of Trustees approved the use of interest rate swaps
(and options on those swaps) for hedging purposes. The Trust may enter into swap
agreements to manage its exposure to the financial markets. A swap is an
agreement to exchange the return generated by one instrument for the return
generated by another instrument. The Trust may enter into interest rate swaps
and options on those swaps to manage its exposure to interest rates. Interest
rate swap agreements involve the exchange by the Trust with another party of
their respective commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments with respect to a notional amount
of principal.
These financial instruments are not actively traded on financial markets.
Entering into these agreements involves, to varying degrees, elements of credit,
legal, market and documentation risk. Such risks involve the possibility that
there will be no liquid market for these agreements, that the counterparty to
the agreement may default on its obligation to perform or disagree as to the
meaning of contractual terms in the agreements, or that there may be unfavorable
changes in interest rates.
27
TRUSTEES AND OFFICERS
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.
NAME, ADDRESS AND AGE,
POSITION WITH FUNDS,
YEAR FIRST ELECTED OR PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN COLUMBIA FUNDS
APPOINTED TO OFFICE(1) COMPLEX OVERSEEN BY TRUSTEE/DIRECTOR, OTHER DIRECTORSHIPS HELD
- --------------------------------------------------------------------------------------------------------------------------------
DISINTERESTED TRUSTEES
DOUGLAS A. HACKER (age 49) Executive Vice President-Strategy of United Airlines (airline) since December 2002 (formerly
P.O. Box 66100 President of UAL Loyalty Services (airline) from September 2001 to December 2002; Executive Vice
Chicago, IL 60666 President and Chief Financial Officer of United Airlines from March 1999 to September 2001; Senior
Trustee (since 1996) Vice President-Finance from March 1993 to July 1999). Oversees 118, None
JANET LANGFORD KELLY (age 47) Adjunct Professor of Law, Northwestern University, since September 2004; Private Investor since
9534 W. Gull Lake Drive March 2004 (formerly Chief Administrative Officer and Senior Vice President, Kmart Holding
Richland, MI 49083-8530 Corporation (consumer goods), from September 2003 to March 2004; Executive Vice President-Corporate
Trustee (since 1996) 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). Oversees 118, None
RICHARD W. LOWRY (age 68) Private Investor since August 1987 (formerly Chairman and Chief Executive Officer, U. S. Plywood
10701 Charleston Drive Corporation (building products manufacturer)). Oversees 120(3), None
Vero Beach, FL 32963
Trustee (since 1995)
CHARLES R. NELSON (age 62) Professor of Economics, University of Washington, since January 1976; Ford and Louisa Van Voorhis
Department of Economics Professor of Political Economy, University of Washington, since September 1993 (formerly Director,
University of Washington Institute for Economic Research, University of Washington from September 2001 to June 2003) Adjunct
Seattle, WA 98195 Professor of Statistics, University of Washington, since September 1980; Associate Editor, Journal
Trustee (since 1981) of Money Credit and Banking, since September 1993; consultant on econometric and statistical
matters. Oversees 118, None
JOHN J. NEUHAUSER (age 61) Academic Vice President and Dean of Faculties since August 1999, Boston College (formerly Dean,
84 College Road Boston College School of Management from September 1977 to September 1999). Oversees 121(3), (4),
Chestnut Hill, MA 02467-3838 Saucony, Inc. (athletic footwear)
Trustee (since 1985)
PATRICK J. SIMPSON (age 60) Partner, Perkins Coie LLP (law firm). Oversees 118, None
1120 N.W. Couch Street
Tenth Floor
Portland, OR 97209-4128
Trustee (since 2000)
28
TRUSTEES AND OFFICERS (CONTINUED)
NAME, ADDRESS AND AGE,
POSITION WITH FUNDS,
YEAR FIRST ELECTED OR PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN COLUMBIA FUNDS
APPOINTED TO OFFICE(1) COMPLEX OVERSEEN BY TRUSTEE/DIRECTOR, OTHER DIRECTORSHIPS HELD
- --------------------------------------------------------------------------------------------------------------------------------
DISINTERESTED TRUSTEES (continued)
THOMAS E. STITZEL (age 68) Business Consultant since 1999 (formerly Professor of Finance from 1975 to 1999, College of
2208 Tawny Woods Place Business, Boise State University); Chartered Financial Analyst. Oversees 118, None.
Boise, ID 83706
Trustee (since 1998)
THOMAS C. THEOBALD (age 67) Partner and Senior Advisor, Chicago Growth Partners (private equity investing) since September 2004
303 W. Madison (formerly Managing Director, William Blair Capital Partners (private equity investing) from
Suite 2500 September 1994 to September 2004). Oversees 118, Anixter International (network support equipment
Chicago, IL 60606 distributor); Ventas, Inc. (real estate investment trust); Jones Lang LaSalle (real estate
Trustee and Chairman management services) and Ambac Financial Group (financial guaranty insurance)
of the Board(5)
(since 1996)
ANNE-LEE VERVILLE (age 59) Retired since 1997 (formerly General Manager, Global Education Industry, IBM Corporation (computer
359 Stickney Hill Road and technology) from 1994 to 1997). Oversees 119(4), Chairman of the Board of Directors, Enesco
Hopkinton, NH 03229 Group, Inc. (designer, importer and distributor of giftware and collectibles)
Trustee (since 1998)
RICHARD L. WOOLWORTH (age 63) Retired since December 2003 (formerly Chairman and Chief Executive Officer, The Regence Group
100 S.W. Market Street #1500 (regional health insurer); Chairman and Chief Executive Officer, BlueCross BlueShield of Oregon;
Portland, OR 97207 Certified Public Accountant, Arthur Young & Company). Oversees 118, Northwest Natural Gas Co.
Trustee (since 1991) (natural gas service provider)
INTERESTED TRUSTEE
WILLIAM E. MAYER(2) (age 64) Partner, Park Avenue Equity Partners (private equity) since February 1999 (formerly Partner,
399 Park Avenue Development Capital LLC from November 1996 to February 1999). Oversees 120(3), Lee Enterprises
Suite 3204 (print media), WR Hambrecht + Co. (financial service provider); First Health (healthcare); Reader's
New York, NY 10022 Digest (publishing); OPENFIELD Solutions (retail industry technology provider)
Trustee (since 1994)
(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.
(3) Messrs. Lowry, Neuhauser and Mayer also serve as directors/trustees of the
Liberty 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. Theobald was appointed as Chairman of the Board effective December 10,
2003.
29
TRUSTEES AND OFFICERS (CONTINUED)
NAME, ADDRESS AND AGE,
POSITION WITH COLUMBIA FUNDS,
YEAR FIRST ELECTED OR
APPOINTED TO OFFICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------------------------------------------
OFFICERS
CHRISTOPHER L. WILSON (age 47) Head of Mutual Funds for the Advisor since August 2004; President of the Columbia Funds since
One Financial Center October 2004 (formerly President and Chief Executive Officer, CDC IXIS Asset Management Services,
Boston, MA 02111 Inc. from September 1998 to August 2004).
President (since 2004)
J. KEVIN CONNAUGHTON (age 40) Treasurer of the Columbia Funds and of the Liberty All-Star Funds since December 2000; Vice
One Financial Center President of the Advisor since April 2003 (formerly President of the Columbia Funds from February
Boston, MA 02111 2004 to October 2004; Chief Accounting Officer and Controller of the Liberty Funds and of the
Treasurer (since 2000) Liberty All-Star Funds from February 1998 to October 2000); Treasurer of the Galaxy Funds since
September 2002; (formerly Treasurer from December 2002 to December 2004 and President from February
2004 to December 2004 of the Columbia Management Multi-Strategy Hedge Fund, LLC; Vice President of
Colonial Management Associates, Inc. from February 1998 to October 2000).
MARY JOAN HOENE (age 54) Senior Vice President and Chief Compliance Officer of the Columbia Funds and of the Liberty All-Star
40 West 57th Street Funds since August 2004 (formerly Partner, Carter, Ledyard & Milburn LLP from January 2001 to August
New York, NY 10019 2004; Counsel, Carter, Ledyard & Milburn LLP from November 1999 to December 2000; Vice President and
Chief Compliance Officer Counsel, Equitable Life Assurance Society of the United States Senior Vice President and from April
(since 2004) 1998 to November 1999).
MICHAEL G. CLARKE (age 34) Chief Accounting Officer of the Columbia Funds and of the Liberty All-Star Funds since October 2004
One Financial Center (formerly Controller of the Columbia Funds and of the Liberty All-Star Funds from May 2004 to
Boston, MA 02111 October 2004; Assistant Treasurer from June, 2002 to May 2004; Vice President, Product Strategy &
Chief Accounting Officer Development of the Liberty Funds Group from February 2001 to June 2002; Assistant Treasurer of the
(since 2004) Liberty Funds and of the Liberty All-Star Funds from August 1999 to February 2001; Audit Manager,
Deloitte & Touche LLP from May 1997 to August 1999).
JEFFREY R. COLEMAN (age 35) Controller of the Columbia Funds and of the Liberty All-Star Funds since October 2004 (formerly Vice
One Financial Center President of CDC IXIS Asset Management Services, Inc. and Deputy Treasurer of the CDC Nvest Funds
Boston, MA 02111 and Loomis Sayles Funds from February 2003 to September 2004; Assistant Vice President of CDC IXIS
Controller (since 2004) Asset Management Services, Inc. and Assistant Treasurer of the CDC Nvest Funds from August 2000 to
February 2003; Tax Manager of PFPC Inc. from November 1996 to August 2000).
R. SCOTT HENDERSON (age 45) Secretary of the Columbia Funds since December 2004 (formerly Of Counsel, Bingham McCutchen from
One Financial Center April 2001 to September 2004; Executive Director and General Counsel, Massachusetts Pension Reserves
Secretary (since 2004) Investment Management Board from September 1997 to March 2001).
Boston, MA 02111
30
This page intentionally left blank.
This page intentionally left blank.
TRANSFER AGENT
- --------------------------------------------------------------------------------
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial InterMarket Income Trust I is:
EquiServe Trust Company, N.A.
P.O. Box 43010
Providence, RI 02940-3010
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 trust's proxy voting policies and procedures is available
(i) at www.columbiamanagement.com; (ii) on the Securities and Exchange
Commission's website at www.sec.gov, and (iii) without charge, upon request, by
calling 800-730-6001. Information regarding how the trust voted proxies relating
to portfolio securities during the 12-month period ended June 30, 2004 is
available from the SEC's website. Information regarding how the trust voted
proxies relating to portfolio securities is also available at
www.columbiamanagement.com.
The trust files a complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The trust's Form N-Q
is available on the SEC's website at www.sec.gov and may be reviewed and copied
at the SEC's Public Reference Room in Washington, DC. Information on the
operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
This report has been prepared for shareholders of Colonial InterMarket Income
Trust I.
COLONIAL INTERMARKET INCOME TRUST I ANNUAL REPORT
198-02/742T-1104 (01/05) 05/3933
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.
(a) Aggregate Audit Fees billed by the principal accountant for professional
services rendered during the fiscal years ended November 30, 2004 and November
30, 2003 are approximately as follows:
2004 2003
$28,350 $30,220
Audit Fees include amounts related to the audit of the registrant's annual
financial statements or services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements for those fiscal
years.
(b) Aggregate Audit-Related Fees billed by the principal accountant for
professional services rendered during the fiscal years ended November 30, 2004
and November 30, 2003 are approximately as follows:
2004 2003
$3,700 $4,000
Audit-Related Fees include amounts for assurance and related services by the
principal accountant that are reasonably related to the performance of the audit
of the registrant's financial statements and are not reported in Audit Fees
above. In both fiscal years 2004 and 2003, Audit-Related Fees include certain
agreed-upon procedures performed for semi-annual shareholder reports.
(c) Aggregate Tax Fees billed by the principal accountant for professional
services rendered during the fiscal years ended November 30, 2004 and November
30, 2003 are approximately as follows:
2004 2003
$2,610 $2,500
Tax Fees in both fiscal years 2004 and 2003 consist primarily of the review of
annual tax returns and include amounts for professional services by the
principal accountant for tax compliance, tax advice and tax planning.
(d) Aggregate All Other Fees billed by the principal accountant for professional
services rendered during the fiscal years ended November 30, 2004 and November
30, 2003 are as follows:
2004 2003
$0 $0
All Other Fees include amounts for products and services provided by the
principal accountant, other than the services reported in paragraphs (a) through
(c) above.
None of the amounts described in paragraphs (a) through (d) above were approved
pursuant to the "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01
of Regulation S-X.
(e)(1) AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
I. GENERAL OVERVIEW
The Audit Committee of the registrant has adopted a formal policy (the "Policy")
which sets forth the procedures and the conditions pursuant to which the Audit
Committee will pre-approve (i) all audit and non-audit (including audit related,
tax and all other) services provided by the registrant's independent auditor to
the registrant and individual funds
(collectively "Fund Services"), and (ii) all non-audit services provided by the
registrant's independent auditor to the funds' adviser or a control affiliate of
the adviser, that relate directly to the funds' operations and financial
reporting (collectively "Fund-related Adviser Services"). A "control affiliate"
is an entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the funds, and the term "adviser" is
deemed to exclude any unaffiliated sub-adviser whose role is primarily portfolio
management and is sub-contracted or overseen by another investment adviser. The
adviser and control affiliates are collectively referred to as "Adviser
Entities."
The Audit Committee uses a combination of specific (on a case-by-case basis as
potential services are contemplated) and general (pre-determined list of
permitted services) pre-approvals. Unless a type of service has received general
pre-approval, it will require specific pre-approval by the Audit Committee if it
is to be provided by the independent auditor.
The Policy does not delegate the Audit Committee's responsibilities to
pre-approve services performed by the independent auditor to management.
II. GENERAL PROCEDURES
On an annual basis, the Fund Treasurer and/or Director of Trustee Administration
shall submit to the Audit Committee a schedule of the types of Fund Services and
Fund-related Adviser Services that are subject to general pre-approval.
These schedules will provide a description of each type of service that is
subject to general pre-approval and, where possible, will provide estimated fees
for each instance of providing each service. This general pre-approval and
related fees (where provided) will generally cover a one-year period (for
example, from June 1 through May 31 of the following year). The Audit
Committee will review and approve the types of services and review the projected
fees for the next one-year period and may add to, or subtract from, the list of
general pre-approved services from time to time, based on subsequent
determinations. This approval acknowledges that the Audit Committee is in
agreement with the specific types of services that the independent auditor will
be permitted to perform. The fee amounts will be updated to the extent necessary
at other regularly scheduled meetings of the Audit Committee.
In addition to the fees for each individual service, the Audit Committee has the
authority to implement a fee cap on the aggregate amount of non-audit services
provided to an individual fund.
If, subsequent to general pre-approval, a fund, its investment adviser or a
control affiliate determines that it would like to engage the independent
auditor to perform a service that requires pre-approval and that is not included
in the general pre-approval list, the specific pre-approval procedure shall be
as follows:
o A brief written request shall be prepared by management detailing the
proposed engagement with explanation as to why the work is proposed to
be performed by the independent auditor;
o The request should be addressed to the Audit Committee with copies to
the Fund Treasurer and/or Director of Trustee Administration;
o The Fund Treasurer and/or Director of Trustee Administration will
arrange for a discussion of the service to be included on the agenda
for the next regularly scheduled Audit Committee meeting, when the
Committee will discuss the proposed engagement and approve or deny the
request.
o If the timing of the project is critical and the project needs to
commence before the next regularly scheduled meeting, the Chairperson
of the Audit Committee may approve or deny the request on behalf of
the Audit Committee, or, in the Chairperson's discretion, determine to
call a special meeting of the Audit Committee for the purpose of
considering the proposal. Should the Chairperson of the Audit
Committee be unavailable, any other member of the Audit Committee may
serve as an alternate for the purpose of approving or denying the
request. Discussion with the Chairperson (or alternate, if necessary)
will be arranged by the Fund Treasurer and/or Director of Trustee
Administration. The independent auditor will not commence any such
project unless and until specific approval has been given.
III. CERTAIN OTHER SERVICES PROVIDED TO ADVISER ENTITIES
The Audit Committee recognizes that there are cases where services proposed to
be provided by the independent auditor to the adviser or control affiliates are
not Fund-related Adviser Services within the meaning of the Policy, but
nonetheless may be relevant to the Audit Committee's ongoing evaluation of the
auditor's independence and objectivity with respect to its audit services to the
funds. As a result, in all cases where an Adviser Entity engages the independent
auditor to provide audit or non-audit services that are not Fund Services or
Fund-related Adviser Services, were not subject to pre-approval by the Audit
Committee, and the projected fees for any such engagement (or the aggregate of
all such engagements during the period covered by the Policy) exceeds a
pre-determined threshold established by the Audit Committee; the independent
auditor, Fund Treasurer and/or Director of Trustee Administration will notify
the Audit Committee not later than its next meeting. Such notification shall
include a general description of the services provided, the entity that is to be
the recipient of such services, the timing of the engagement, the entity's
reasons for selecting the independent auditor, and the projected fees. Such
information will allow the Audit Committee to consider whether non-audit
services provided to the adviser and Adviser Entities, which were not subject to
Audit Committee pre-approval, are compatible with maintaining the auditor's
independence with respect to the Funds.
IV. REPORTING TO THE AUDIT COMMITTEE
The Fund Treasurer or Director of Trustee Administration shall report to the
Audit Committee at each of its regular meetings regarding all Fund Services or
Fund-related Adviser Services initiated since the last such report was rendered,
including:
o A general description of the services, and
o Actual billed and projected fees, and
o The means by which such Fund Services or Fund-related Adviser Services
were pre-approved by the Audit Committee.
In addition, the independent auditor shall report to the Audit Committee
annually, and no more than 90 days prior to the filing of audit reports with the
SEC, all non-audit services provided to entities in the funds' "investment
company complex," as defined by SEC rules, that did not require pre-approval
under the Policy.
V. AMENDMENTS; ANNUAL APPROVAL BY AUDIT COMMITTEE
The Policy may be amended from time to time by the Audit Committee. Prompt
notice of any amendments will be provided to the independent auditor, Fund
Treasurer and Director of Trustee Administration. The Policy shall be reviewed
and approved at least annually by the Audit Committee.
*****
(e)(2) The percentage of services described in paragraphs (b) through (d) of
this Item approved pursuant to the "de minimis" exception under paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X during both fiscal years ended
November 30, 2004 and November 30, 2003 was zero.
(f) Not applicable.
(g) All non-audit fees billed by the registrant's accountant for services
rendered to the registrant for the fiscal years ended November 30, 2004 and
November 30, 2003 are disclosed in (b) through (d) of this Item.
During the fiscal years ended November 30, 2004 and November 30, 2003, there
were no Audit-Related Fees, Tax Fees or All Other Fees that were approved for
services to the investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser) and any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the registrant under
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X.
The percentage of Audit-Related Fees, Tax Fees and All Other Fees required to be
approved under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X that were
approved under the "de minimis" exception during both fiscal years ended
November 30, 2004 and November 30, 2003 was zero.
(h) The registrant's Audit Committee of the Board of Directors has considered
whether the provision of non-audit services that were rendered to the
registrant's adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under common control
with the investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X, is compatible with maintaining the principal accountant's
independence. The Audit Committee determined that the provision of such services
is compatible with maintaining the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately-designated standing audit committee established
in accordance with Section 3(a)(58)(A) of the Exchange Act (15 U.S.C.
78c(a)(58)(A)). Douglas A. Hacker, Thomas E. Stitzel, Anne-Lee Verville and
Richard L. Woolworth are each independent trustees and collectively constitute
the entire Audit Committee.
ITEM 6. SCHEDULE OF INVESTMENTS
The registrant's "Schedule I - Investments in securities of unaffiliated
issuers" (as set forth in 17 CFR 210.12-12) is included in Item 1 of this Form
N-CSR.
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. The
Advisor's Proxy Committee is composed of representatives of the Advisor's equity
investments, equity research, compliance, legal and fund administration
functions. In addition to the responsibilities described above, the Proxy
Committee has the responsibility to review, on a semi-annual basis, the
Advisor's proxy voting policies to ensure consistency with internal policies and
regulatory agency policies and to develop additional voting guidelines to assist
in the review of proxy proposals.
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. 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 retained 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. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not yet applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Registrant Purchases of Equity Securities*
(a) (b) (c) (d)
Total Number of Maximum Number of
Shares Purchased as Shares that May Yet
Period Total Number Average Price Part of Publically Be Purchased Under
of Shares Paid Per Share Announced Plans the Plans or Programs
- ------------------------------------------------------------------------------------------------------------------------------------
06/01/04 through 06/30/04 6,985 $8.32 6,985 N/A
07/01/04 through 07/31/04 7,216 $8.20 7,216 N/A
08/01/04 through 08/31/04 7,133 $8.42 7,133 N/A
09/01/04 through 09/30/04 6,898 $8.61 6,898 N/A
10/01/04 through 10/31/04 6,439 $8.79 6,439 N/A
11/01/04 through 11/30/04 6,254 $8.96 6,254 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Total 40,925 $8.54 40,925 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
* Includes shares purchased by the Dividend Reinvestment Agent pursuant to
the Registrant's Dividend Reinvestment Plan.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have not been any material changes to the procedures by which shareholders
may recommend nominees to the registrant's board of directors, since those
procedures were last disclosed in response to the requirements of Item
7(d)(2)(ii)(G) of Schedule 14A or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officers, 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 second fiscal
quarter of the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. 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/ Christopher L. Wilson
--------------------------------------------------------
Christopher L. Wilson, President
Date January 26, 2005
----------------------------------------------------------------------------
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/ Christopher L. Wilson
--------------------------------------------------------
Christopher L. Wilson, President
Date January 26, 2005
----------------------------------------------------------------------------
By (Signature and Title) /S/ J. Kevin Connaughton
--------------------------------------------------------
J. Kevin Connaughton, Treasurer
Date January 26, 2005
----------------------------------------------------------------------------