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)
James R. Bordewick, Jr., Esq.
Columbia Management Advisors, LLC
One Financial Center
Boston, MA 02111
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-617-426-3750
Date of fiscal year end: November 30, 2006
Date of reporting period: May 31, 2006
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
[GRAPHIC]
[GRAPHIC]
COLONIAL INTERMARKET INCOME TRUST I
SEMIANNUAL REPORT
MAY 31, 2006
[LOGO] Not FDIC Insured May Lose Value
No Bank Guarantee
[GRAPHIC]
Dear Shareholder:
The US stock and bond markets delivered positive, but modest, returns during
the six month period ended May 31, 2006. After a weak fourth quarter, economic
growth turned sharply higher in 2006 and job growth was steady, although
somewhat slower at the end of the period. Confident consumers continued to pump
dollars into US retail markets, despite higher energy prices, which boosted
inflation. The housing market continued to cool as mortgage rates moved higher,
but housing-market indicators--such as housing starts, sales of existing homes,
and house prices--remained strong by historical measures.
In this environment, the US fixed income markets faced the challenge of rising
interest rates, especially within the short-and intermediate-maturity ranges
and was generally flat for the period. The Federal Reserve Board, in an effort
to balance economic growth and the forces of inflation, raised short-term
interest rates by one full percentage point during the reporting period. The
yield on the 10-year US Treasury note, a bellwether for the bond market, moved
up from 4.5% to 5.1%. Lower quality bonds did better than higher quality bonds.
In fact, high-yield bonds did better than either stocks or investment-grade
bonds. A strong economy favored corporate high-yield bonds, as default rates
remained low and corporate profits surprised investors with
better-than-expected results. However, that trend showed signs of shifting near
the end of the six-month period. The municipal sector generated respectable
gains as economic growth helped buoy revenues and stabilize budgets in many
states and municipalities. Within the municipal market, high-yield also
outperformed high-grade bonds for the period.
In the pages that follow, your fund's manager discusses key factors that
influenced performance during this six-month reporting period. We urge you to
read this report carefully and to discuss any questions you might have with
your financial advisor.
As always, we thank you for choosing Colonial Funds. We look forward to
continuing to help you build toward your financial goals.
Sincerely,
/s/ Christopher L. Wilson
Christopher L. Wilson
President, Columbia Funds
Past performance is no guarantee of future results.
Investments in high-yield or "junk" bonds offer the potential for higher income
than investments in investment-grade bonds, but also have a higher degree of
risk. Changes in economic conditions or other circumstances may adversely
effect a high-yield bond issuer's ability to make timely principal and interest
payments.
The views expressed in the President's Letter and Portfolio Managers' Report
reflect the current views of the respective parties. These views are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions that are difficult to predict so actual outcomes and results may
differ significantly from the views expressed. These views are subject to
change at any time based upon economic, market or other conditions and the
respective parties disclaim any responsibility to update such views. These
views may not be relied on as investment advice and, because investment
decisions for a Colonial Fund are based on numerous factors, may not be relied
on as an indication of trading intent on behalf of any particular Colonial
Fund. References for specific company securities should not be construed as a
recommendation or investment advice.
[GRAPHIC]
Price per share as of 05/31/06 ($)
Market price 7.98
--------------------
Net asset value 9.02
--------------------
6-month (cumulative) total return as of 05/31/06 (%)
Market price 3.58
------------------------------
Net asset value 1.98
------------------------------
Lipper General Bond Funds
Category average 2.08
------------------------------
Performance is historical, assumes reinvestment of all dividends and capital
gains, and does not guarantee future results. Investment return and principal
value fluctuate with changing market conditions so that, when sold, shares may
be worth more or less than their original cost. Current performance may be
lower or higher than the performance data quoted. Please call 800-730-6001 for
the trust's most recent performance.
Total return based on net asset value reflects changes in the trust's net asset
value during each period. Total return based on market value reflects changes
to market value. These figures will differ depending on the level of any
discount from or premium to during the period.
Distributions declared per share
12/01/05-05/31/06 ($) 0.41
-------------------------------------
Securities breakdown as of 05/31/06 (%)
Corporate fixed-income
bonds & notes 38.6
-------------------------------------
Foreign government obligations 31.5
-------------------------------------
U.S. government agencies &
obligations 21.4
-------------------------------------
Cash & equivalent 5.1
-------------------------------------
Mortgage-backed securities 2.2
-------------------------------------
Asset-backed securities 0.7
-------------------------------------
Convertible bonds 0.3
-------------------------------------
Municipal bond (taxable) 0.2
-------------------------------------
Common stocks 0.0 *
-------------------------------------
Warrants 0.0 *
-------------------------------------
*Represents less than 0.1%.
Top 5 countries as of 05/31/06 (%)
Russia 3.8
-----------
Canada 3.3
-----------
Mexico 3.3
-----------
Germany 2.9
-----------
France 2.5
-----------
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.
[GRAPHIC]
PORTFOLIO MANAGERS' REPORT
Summary
.. For the six-month period ended May 31, 2006, Colonial InterMarket Income
Trust I generated a total return of 3.58%, based on its market price. During
this period, the trust returned 1.98%, based on investment at net asset
value, less than the average return of the Lipper General Bond Funds
Category, which was 2.08%./1/
.. Allocation decisions drove the trust's performance during the period.
High-yield was the best performing fixed-income sector during the period and
a significant allocation to these credits positively impacted performance.
The portfolio was also positioned for emerging market and dollar weakness
and both of these tactics proved beneficial over the last several months of
the period, although they did detract somewhat, initially. An underweight in
US Treasuries was also a plus, as these higher quality securities
underperformed lower quality securities as the Federal Reserve Board
continued to raise short-term interest rates during the period. In addition,
we believe that the fund's duration was shorter than its peer group, which
aided results as interest rates rose. Duration is a measure of interest rate
sensitivity.
.. The trust remains defensively positioned in emerging markets, where
continued volatility seems likely while valuations remain high compared to
those of more developed nations. We expect to maintain a sizeable commitment
to high yield issues. Several years of strong economic growth have left many
corporate balance sheets healthier and, in general, better positioned to
weather a slowdown in economic activity. However, we plan to continue to
monitor economic data, and if our outlook changes, we would alter our
investment focus accordingly.
Portfolio Management
Laura A. Ostrander has managed Colonial InterMarket Income Trust I since
November 1999.
Kevin L. Cronk, CFA, has co-managed the trust since May 2005.
Thomas A. LaPointe, CFA, has co-managed the trust since May 2005.
SHARES OF CLOSED-END FUNDS FREQUENTLY TRADE AT A DISCOUNT TO NET ASSET VALUE.
THE PRICE OF THE TRUST'S SHARES IS DETERMINED BY A NUMBER OF FACTORS, SEVERAL
OF WHICH ARE BEYOND THE CONTROL OF THE TRUST. THEREFORE, THE TRUST CANNOT
PREDICT WHETHER ITS SHARES WILL TRADE AT, BELOW OR ABOVE NET ASSET VALUE.
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
- --------
/1/Lipper Inc., a widely respected data provider in the industry, calculates an
average total return (assuming reinvestment of distributions) for mutual
funds with investment objectives similar to those of the trust. Lipper makes
no adjustment for the effect of sales loads.
1
[GRAPHIC]
PORTFOLIO MANAGERS' REPORT (continued)
[GRAPHIC]
Investing in fixed-income securities may involve certain risks, including the
credit quality of individual issuers, possible prepayments, market or economic
developments and yield and share price fluctuations due to changes in interest
rates. When interest rates go up, bond prices typically drop, and vice versa.
Investing in high-yield or "junk" bonds offers the potential for higher income
than investments in investment-grade bonds, but also has a higher degree of
risk. Changes in economic conditions or other circumstances may adversely
affect a high-yield bond issuer's ability to make timely principal and interest
payments. Rising interest rates tend to lower the value of all bonds.
International investing involves special risks, including foreign taxation,
currency fluctuations, risks associated with possible differences in financial
standards and other monetary and political risks.
Emerging markets may be more subject to these risks than developed markets. In
addition, concentration of investments in a single region may result in greater
volatility.
2
[GRAPHIC]
INVESTMENT PORTFOLIO
May 31, 2006 (Unaudited)
GOVERNMENT & AGENCY
OBLIGATIONS - 53.0% PAR ($) VALUE ($)
---------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS - 31.6%
Aries Vermoegensverwaltungs GmbH
6.182% 10/25/07 (a) EUR 250,000 333,164
7.750% 10/25/09 (b) 250,000 355,493
Corp. Andina de Fomento
6.375% 06/18/09 340,000 464,629
European Investment Bank
5.500% 12/07/11 GBP 300,000 576,112
Federal Republic of Brazil
7.375% 02/03/15 EUR 380,000 527,104
8.750% 02/04/25 USD 670,000 711,875
11.000% 08/17/40 260,000 317,460
Federal Republic of Germany
4.250% 07/04/14 EUR 970,000 1,271,286
5.000% 07/04/12 375,000 511,151
6.000% 07/04/07 800,000 1,054,311
Government of Canada
4.500% 06/01/15 CAD 755,000 687,554
10.00% 06/01/08 1,400,000 1,411,642
Government of New Zealand
6.000% 07/15/08 NZD 275,000 173,788
6.000% 11/15/11 740,000 472,606
Kingdom of Norway
5.500% 05/15/09 NOK 7,180,000 1,236,053
6.000% 05/16/11 4,590,000 820,968
Kingdom of Spain
5.500% 07/30/17 EUR 820,000 1,185,837
Kingdom of Sweden
5.000% 01/28/09 SEK 9,065,000 1,307,577
6.750% 05/05/14 6,210,000 1,030,561
New South Wales Treasury
Corp.
8.000% 03/01/08 AUD 720,000 560,270
Province of Ontario
5.000% 03/08/14 CAD 550,000 509,231
Province of Quebec
6.000% 10/01/12 380,000 369,920
6.000% 10/01/29 260,000 264,121
Republic of Bulgaria
8.250% 01/15/15 USD 645,000 737,622
Republic of Colombia
8.125% 05/21/24 240,000 252,000
9.750% 04/09/11 342,324 370,566
11.375% 01/31/08 EUR 245,000 348,477
Republic of France
3.000% 10/25/15 690,000 817,244
4.000% 10/25/09 650,000 844,114
4.000% 04/25/14 630,000 812,445
Republic of Panama
8.875% 09/30/27 USD 560,000 653,800
Republic of Peru
7.500% 10/14/14 EUR 210,000 292,640
9.875% 02/06/15 USD 100,000 117,500
PAR ($) VALUE ($)
---------------------------------------------------
Republic of Poland
5.750% 03/24/10 PLN 2,715,000 908,150
Republic of South Africa
5.250% 05/16/13 EUR 425,000 562,785
6.500% 06/02/14 USD 520,000 531,050
13.000% 08/31/10 ZAR 1,600,000 283,818
Republic of Venezuela
9.250% 09/15/27 USD 577,000 689,515
Russian Federation
5.000% 03/31/30 (c)
(7.500% 03/31/07) 525,000 561,645
11.000% 07/24/18 500,000 695,650
12.750% 06/24/28 595,000 1,012,274
Treasury Corp. of Victoria
6.250% 10/15/12 AUD 675,000 516,398
United Kingdom Treasury
5.750% 12/07/09 GBP 165,000 318,912
8.000% 06/07/21 190,000 486,737
9.000% 07/12/11 415,000 926,653
United Mexican States
7.500% 03/08/10 EUR 385,000 548,297
8.125% 12/30/19 USD 100,000 112,000
8.375% 01/14/11 875,000 953,750
11.375% 09/15/16 625,000 850,938
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FOREIGN GOVERNMENT OBLIGATIONS
TOTAL 31,357,693
----------
---------------------------------------------------
U.S. GOVERNMENT AGENCIES - 0.9%
Federal Farm Credit Bank
5.000% 08/25/10 USD 900,000 881,553
----------
U.S. GOVERNMENT AGENCIES TOTAL 881,553
----------
---------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS - 20.5%
U.S. Treasury Bonds
7.500% 11/15/24 865,000 1,080,371
8.875% 02/15/19 1,817,000 2,413,914
10.375% 11/15/12 1,520,000 1,632,159
10.625% 08/15/15 2,780,000 3,888,092
12.500% 08/15/14 5,309,000 6,471,379
U.S. Treasury Notes
5.000% 02/15/11 1,845,000 1,844,712
7.000% 07/15/06 3,050,000 3,056,911
----------
U.S. GOVERNMENT OBLIGATIONS TOTAL 20,387,538
----------
TOTAL GOVERNMENT & AGENCY OBLIGATIONS
(cost of $51,555,571) 52,626,784
----------
CORPORATE FIXED-INCOME
BONDS & NOTES - 38.8%
---------------------------------------------------
BASIC MATERIALS - 3.5%
CHEMICALS - 1.8%
AGRICULTURAL CHEMICALS - 0.5%
IMC Global, Inc.
10.875% 08/01/13 105,000 118,388
See Accompanying Notes to Financial Statements.
3
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------
BASIC MATERIALS (CONTINUED)
CHEMICALS (CONTINUED)
AGRICULTURAL CHEMICALS (CONTINUED)
Terra Capital, Inc.
12.875% 10/15/08 165,000 188,925
UAP Holding Corp.
(d) 07/15/12
(10.750% 01/15/08) 125,000 120,625
United Agri Products
8.250% 12/15/11 48,000 51,744
---------
479,682
---------
CHEMICALS - DIVERSIFIED - 1.1%
BCP Crystal US Holdings Corp.
9.625% 06/15/14 82,000 90,200
EquiStar Chemicals LP
10.625% 05/01/11 120,000 130,200
Huntsman International LLC
8.125% 01/01/15 (b) 125,000 120,625
Huntsman LLC
11.500% 07/15/12 45,000 51,075
Ineos Group Holdings PLC
7.875% 02/15/16 (b) 85,000 103,746
8.500% 02/15/16 (b) 105,000 98,831
Innophos Investments Holdings, Inc.
PIK,
13.170% 02/15/15 (a) 76,518 76,709
Lyondell Chemical Co.
9.625% 05/01/07 155,000 159,456
NOVA Chemicals Corp.
6.500% 01/15/12 170,000 157,250
8.405% 11/15/13 (a) 85,000 86,275
---------
1,074,367
---------
CHEMICALS - SPECIALTY - 0.2%
Chemtura Corp.
6.875% 06/01/16 45,000 43,875
Rhodia SA
8.875% 06/01/11 160,000 161,400
---------
205,275
---------
Chemicals Total 1,759,324
---------
FOREST PRODUCTS & PAPER - 1.0%
PAPER & RELATED PRODUCTS - 1.0%
Abitibi-Consolidated, Inc.
8.375% 04/01/15 105,000 100,275
Boise Cascade LLC
7.125% 10/15/14 80,000 72,800
7.943% 10/15/12 (a) 145,000 146,087
Buckeye Technologies, Inc.
8.500% 10/01/13 95,000 93,338
Georgia-Pacific Corp.
8.000% 01/15/24 210,000 203,700
PAR ($) VALUE ($)
--------------------------------------------------------
Neenah Paper, Inc.
7.375% 11/15/14 60,000 55,800
NewPage Corp.
10.000% 05/01/12 95,000 101,413
12.000% 05/01/13 40,000 43,200
Norske Skog
7.375% 03/01/14 125,000 115,000
8.625% 06/15/11 60,000 59,700
---------
991,313
---------
Forest Products & Paper Total 991,313
---------
IRON/STEEL - 0.2%
STEEL - PRODUCERS - 0.1%
Steel Dynamics, Inc.
9.500% 03/15/09 70,000 72,975
---------
72,975
---------
STEEL - SPECIALTY - 0.1%
UCAR Finance, Inc.
10.250% 02/15/12 80,000 85,200
---------
85,200
---------
Iron/Steel Total 158,175
---------
METALS & MINING - 0.5%
MINING SERVICES - 0.0%
Hudson Bay Mining & Smelting Co., Ltd.
9.625% 01/15/12 45,000 49,500
---------
49,500
---------
NON-FERROUS METALS - 0.5%
Codelco, Inc.
5.500% 10/15/13 500,000 487,145
---------
487,145
---------
Metals & Mining Total 536,645
---------
BASIC MATERIALS TOTAL 3,445,457
---------
--------------------------------------------------------
COMMUNICATIONS - 7.8%
MEDIA - 3.3%
BROADCAST SERVICES/PROGRAMS - 0.2%
Fisher Communications, Inc.
8.625% 09/15/14 75,000 78,188
XM Satellite Radio, Inc.
9.750% 05/01/14 (b) 90,000 83,700
---------
161,888
---------
CABLE TV - 1.4%
Atlantic Broadband Finance LLC
9.375% 01/15/14 115,000 110,400
Charter Communications Holdings II
LLC
10.250% 09/15/10 265,000 265,662
See Accompanying Notes to Financial Statements.
4
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------
COMMUNICATIONS (CONTINUED)
MEDIA (CONTINUED)
CABLE TV (CONTINUED)
Charter Communications Holdings LLC
9.920% 04/01/14 340,000 209,100
CSC Holdings, Inc.
7.250% 04/15/12 (b) 220,000 217,250
7.625% 04/01/11 145,000 146,450
EchoStar DBS Corp.
6.625% 10/01/14 230,000 217,925
Insight Midwest LP
9.750% 10/01/09 110,000 112,750
Telenet Group Holding NV
(d) 06/15/14
(11.500% 12/15/08) (b) 147,000 123,480
---------
1,403,017
---------
MULTIMEDIA - 0.4%
Advanstar Communications, Inc.
15.000% 10/15/11 125,000 131,406
Lamar Media Corp.
6.625% 08/15/15 125,000 119,688
Quebecor Media, Inc.
7.750% 03/15/16 (b) 130,000 131,300
---------
382,394
---------
PUBLISHING - NEWSPAPERS - 0.1%
Hollinger, Inc.
11.875% 03/01/11 (b) 54,000 54,000
12.875% 03/01/11 (b) 80,000 83,300
---------
137,300
---------
PUBLISHING - PERIODICALS - 0.8%
Dex Media West LLC
9.875% 08/15/13 257,000 280,773
Dex Media, Inc.
(d) 11/15/13
(9.000% 11/15/08) 105,000 88,725
PriMedia, Inc.
8.000% 05/15/13 195,000 175,500
RH Donnelley Corp.
8.875% 01/15/16 (b) 120,000 120,300
WDAC Subsidiary Corp.
8.375% 12/01/14 (b) 125,000 122,656
---------
787,954
---------
RADIO - 0.1%
CMP Susquehanna Corp.
9.875% 05/15/14 (b) 115,000 112,125
---------
112,125
---------
TELEVISION - 0.3%
LIN Television Corp.
6.500% 05/15/13 110,000 103,125
Sinclair Broadcast Group, Inc.
8.750% 12/15/11 145,000 151,706
---------
254,831
---------
Media Total 3,239,509
---------
PAR ($) VALUE ($)
----------------------------------------------------
TELECOMMUNICATION SERVICES - 4.5%
CELLULAR TELECOMMUNICATIONS - 1.8%
Digicel Ltd.
9.250% 09/01/12 (b) 100,000 105,375
Dobson Cellular Systems, Inc.
8.375% 11/01/11 160,000 166,200
9.875% 11/01/12 170,000 184,450
Horizon PCS, Inc.
11.375% 07/15/12 80,000 90,700
iPCS Escrow Co.
11.500% 05/01/12 70,000 78,925
Nextel Communications, Inc.
7.375% 08/01/15 255,000 263,147
Nextel Partners, Inc.
8.125% 07/01/11 205,000 216,531
Rogers Cantel, Inc.
9.750% 06/01/16 155,000 180,575
Rogers Wireless, Inc.
8.000% 12/15/12 95,000 98,325
Rural Cellular Corp.
8.250% 03/15/12 90,000 93,262
9.750% 01/15/10 30,000 30,450
10.899% 11/01/12 (a)(b) 115,000 120,319
US Unwired, Inc.
10.000% 06/15/12 165,000 184,166
---------
1,812,425
---------
SATELLITE TELECOMMUNICATIONS - 0.6%
Inmarsat Finance II PLC
(d) 11/15/12
(10.375% 11/15/08) 190,000 163,400
Intelsat Bermuda, Ltd.
8.250% 01/15/13 245,000 243,775
PanAmSat Corp.
9.000% 08/15/14 92,000 95,680
Zeus Special Subsidiary Ltd.
(d) 02/01/15
(9.250% 02/01/10) (b) 135,000 97,200
---------
600,055
---------
TELECOMMUNICATION EQUIPMENT - 0.1%
Lucent Technologies, Inc.
6.450% 03/15/29 135,000 117,787
---------
117,787
---------
TELECOMMUNICATION SERVICES - 0.5%
Embarq Corp.
7.082% 06/01/16 55,000 55,171
7.995% 06/01/36 55,000 55,337
Nordic Telephone Co. Holdings ApS
8.250% 05/01/16 (b) 85,000 111,914
Syniverse Technologies, Inc.
7.750% 08/15/13 105,000 104,738
Time Warner Telecom Holdings, Inc.
9.250% 02/15/14 155,000 165,463
---------
492,623
---------
See Accompanying Notes to Financial Statements.
5
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
-----------------------------------------------------
COMMUNICATIONS (CONTINUED)
TELECOMMUNICATION SERVICES (CONTINUED)
TELEPHONE - INTEGRATED - 1.4%
Axtel SA de CV
11.000% 12/15/13 30,000 33,713
Cincinnati Bell, Inc.
7.000% 02/15/15 240,000 232,800
Citizens Communications Co.
9.000% 08/15/31 205,000 214,481
Qwest Capital Funding, Inc.
6.875% 07/15/28 275,000 241,313
Qwest Communications International,
Inc.
7.500% 02/15/14 175,000 173,031
Qwest Corp.
7.500% 06/15/23 195,000 187,200
8.875% 03/15/12 170,000 182,325
US LEC Corp.
13.620% 10/01/09 (a) 95,000 102,006
---------
1,366,869
---------
WIRELESS EQUIPMENT - 0.1%
American Towers, Inc.
7.250% 12/01/11 125,000 128,125
---------
128,125
---------
Telecommunication Services Total 4,517,884
---------
COMMUNICATIONS TOTAL 7,757,393
---------
-----------------------------------------------------
CONSUMER CYCLICAL - 6.5%
AIRLINES - 0.2%
AIRLINES - 0.2%
Continental Airlines, Inc.
7.568% 12/01/06 190,000 190,000
---------
190,000
---------
Airlines Total 190,000
---------
APPAREL - 0.5%
APPAREL MANUFACTURERS - 0.5%
Broder Brothers Co.
11.250% 10/15/10 85,000 80,537
Levi Strauss & Co.
9.750% 01/15/15 210,000 217,875
Phillips-Van Heusen Corp.
7.250% 02/15/11 85,000 85,425
8.125% 05/01/13 75,000 77,625
---------
461,462
---------
Apparel Total 461,462
---------
AUTO MANUFACTURERS - 0.1%
AUTO - CARS/LIGHT TRUCKS - 0.1%
General Motors Corp.
8.375% 07/15/33 105,000 79,800
---------
79,800
---------
Auto Manufacturers Total 79,800
---------
PAR ($) VALUE ($)
----------------------------------------------------
AUTO PARTS & EQUIPMENT - 0.7%
AUTO/TRUCK PARTS & EQUIPMENT - ORIGINAL - 0.2%
TRW Automotive, Inc.
9.375% 02/15/13 130,000 140,400
---------
140,400
---------
AUTO/TRUCK PARTS & EQUIPMENT - REPLACEMENT - 0.2%
Commercial Vehicle Group
8.000% 07/01/13 125,000 123,125
Rexnord Corp.
10.125% 12/15/12 90,000 99,000
---------
222,125
---------
RUBBER - TIRES - 0.3%
Goodyear Tire & Rubber Co.
9.000% 07/01/15 275,000 280,500
---------
280,500
---------
Auto Parts & Equipment Total 643,025
---------
DISTRIBUTION/WHOLESALE - 0.1%
DISTRIBUTION/WHOLESALE - 0.1%
Buhrmann US, Inc.
7.875% 03/01/15 85,000 85,213
---------
85,213
---------
Distribution/Wholesale Total 85,213
---------
ENTERTAINMENT - 0.5%
GAMBLING (NON-HOTEL) - 0.1%
Global Cash Access LLC
8.750% 03/15/12 131,000 138,860
---------
138,860
---------
MUSIC - 0.3%
Steinway Musical Instruments, Inc.
7.000% 03/01/14 (b) 105,000 102,769
Warner Music Group
7.375% 04/15/14 160,000 158,400
---------
261,169
---------
RESORTS/THEME PARKS - 0.1%
Six Flags, Inc.
9.625% 06/01/14 140,000 138,950
---------
138,950
---------
Entertainment Total 538,979
---------
HOME BUILDERS - 0.6%
BUILDING - RESIDENTIAL/COMMERCIAL - 0.6%
D.R. Horton, Inc.
9.750% 09/15/10 400,000 447,211
K. Hovnanian Enterprises, Inc.
6.375% 12/15/14 125,000 113,281
8.875% 04/01/12 25,000 25,844
Standard Pacific Corp.
9.250% 04/15/12 35,000 35,700
---------
622,036
---------
Home Builders Total 622,036
---------
See Accompanying Notes to Financial Statements.
6
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
---------------------------------------------------------
CONSUMER CYCLICAL (CONTINUED)
HOME FURNISHINGS - 0.1%
HOME FURNISHINGS - 0.1%
Sealy Mattress Co.
8.250% 06/15/14 85,000 88,825
---------
88,825
---------
Home Furnishings Total 88,825
---------
LEISURE TIME - 0.2%
LEISURE & RECREATIONAL PRODUCTS - 0.1%
K2, Inc.
7.375% 07/01/14 100,000 98,500
---------
98,500
---------
RECREATIONAL CENTERS - 0.1%
Town Sports International, Inc.
(d) 02/01/14
(11.000% 02/01/09) 170,000 134,937
---------
134,937
---------
Leisure Time Total 233,437
---------
LODGING - 2.4%
CASINO HOTELS - 2.3%
CCM Merger, Inc.
8.000% 08/01/13 (b) 170,000 163,625
Chukchansi Economic Development
Authority
8.780% 11/15/12 (a)(b) 95,000 96,900
Circus & Eldorado/Silver Legacy Capital
Corp.
10.125% 03/01/12 115,000 122,187
Eldorado Casino Shreveport
10.000% 08/01/12 328,834 263,067
Galaxy Entertainment Finance Co., Ltd.
9.875% 12/15/12 (b) 115,000 119,600
Greektown Holdings LLC
10.750% 12/01/13 (b) 135,000 143,100
Hard Rock Hotel, Inc.
8.875% 06/01/13 205,000 222,425
Inn of the Mountain Gods
Resort & Casino
12.000% 11/15/10 55,000 59,263
Kerzner International Ltd.
6.750% 10/01/15 190,000 200,450
MGM Mirage
6.000% 10/01/09 90,000 88,200
6.750% 09/01/12 195,000 191,831
8.500% 09/15/10 45,000 47,644
Mohegan Tribal Gaming Authority
6.125% 02/15/13 85,000 80,856
Pinnacle Entertainment, Inc.
8.250% 03/15/12 145,000 148,625
Station Casinos, Inc.
6.000% 04/01/12 155,000 148,025
PAR ($) VALUE ($)
------------------------------------------------
Wynn Las Vegas LLC
6.625% 12/01/14 180,000 171,450
---------
2,267,248
---------
HOTELS & MOTELS - 0.1%
Hilton Hotels Corp.
7.500% 12/15/17 105,000 109,217
---------
109,217
---------
Lodging Total 2,376,465
---------
RETAIL - 1.0%
RETAIL - AUTOMOBILES - 0.2%
Asbury Automotive Group, Inc.
8.000% 03/15/14 140,000 139,475
AutoNation, Inc.
7.000% 04/15/14 (b) 50,000 49,500
7.045% 04/15/13 (a)(b) 30,000 30,450
---------
219,425
---------
RETAIL - DRUG STORES - 0.1%
Rite Aid Corp.
7.500% 01/15/15 110,000 108,075
---------
108,075
---------
RETAIL - HOME FURNISHINGS - 0.2%
Tempur-Pedic, Inc.
10.250% 08/15/10 155,000 166,238
---------
166,238
---------
RETAIL - PROPANE DISTRIBUTORS - 0.3%
AmeriGas Partners LP
7.125% 05/20/16 110,000 105,875
Ferrellgas Partners LP
8.750% 06/15/12 105,000 106,837
Inergy LP/Inergy Finance Corp.
8.250% 03/01/16 95,000 97,375
---------
310,087
---------
RETAIL - RESTAURANTS - 0.2%
Dave & Buster's, Inc.
11.250% 03/15/14 (b) 85,000 85,850
Landry's Restaurants, Inc.
7.500% 12/15/14 120,000 113,100
---------
198,950
---------
Retail Total 1,002,775
---------
TEXTILES - 0.1%
TEXTILE - PRODUCTS - 0.1%
INVISTA
9.250% 05/01/12 (b) 90,000 95,400
---------
95,400
---------
Textiles Total 95,400
---------
CONSUMER CYCLICAL TOTAL 6,417,417
---------
See Accompanying Notes to Financial Statements.
7
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
--------------------------------------------------
CONSUMER NON-CYCLICAL - 5.7%
AGRICULTURE - 0.2%
TOBACCO - 0.2%
Alliance One International, Inc.
11.000% 05/15/12 105,000 100,144
Reynolds American, Inc.
7.625% 06/01/16 (b) 90,000 89,775
---------
189,919
---------
Agriculture Total 189,919
---------
BEVERAGES - 0.2%
BEVERAGES - NON-ALCOHOLIC - 0.1%
Cott Beverages, Inc.
8.000% 12/15/11 105,000 105,263
---------
105,263
---------
BEVERAGES - WINE/SPIRITS - 0.1%
Constellation Brands, Inc.
8.125% 01/15/12 100,000 103,500
---------
103,500
---------
Beverages Total 208,763
---------
BIOTECHNOLOGY - 0.2%
MEDICAL - BIOMEDICAL/GENE - 0.2%
Bio-Rad Laboratories, Inc.
7.500% 08/15/13 150,000 151,875
---------
151,875
---------
Biotechnology Total 151,875
---------
COMMERCIAL SERVICES - 1.8%
COMMERCIAL SERVICES - 0.1%
Iron Mountain, Inc.
7.750% 01/15/15 150,000 150,000
---------
150,000
---------
COMMERCIAL SERVICES - FINANCE - 0.1%
Dollar Financial Group, Inc.
9.750% 11/15/11 75,000 80,625
---------
80,625
---------
CONSULTING SERVICES - 0.1%
FTI Consulting
7.625% 06/15/13 80,000 81,600
---------
81,600
---------
FUNERAL SERVICES & RELATED ITEMS - 0.2%
Service Corp. International
6.750% 04/01/16 60,000 56,775
7.700% 04/15/09 105,000 107,100
---------
163,875
---------
PRINTING - COMMERCIAL - 0.2%
Quebecor World Capital Corp.
8.750% 03/15/16 (b) 130,000 121,986
PAR ($) VALUE ($)
----------------------------------------------------
Sheridan Group
10.250% 08/15/11 105,000 107,100
---------
229,086
---------
PRIVATE CORRECTIONS - 0.3%
Corrections Corp. of America
6.250% 03/15/13 180,000 171,000
GEO Group, Inc.
8.250% 07/15/13 165,000 168,713
---------
339,713
---------
RENTAL AUTO/EQUIPMENT - 0.8%
Ashtead Holdings PLC
8.625% 08/01/15 (b) 165,000 168,094
Avis Budget Car Rental LLC
7.625% 05/15/14 (b) 75,000 75,750
7.750% 05/15/16 (b) 50,000 50,500
Hertz Corp.
8.875% 01/01/14 (b) 125,000 130,937
NationsRent, Inc.
9.500% 10/15/10 165,000 177,375
United Rentals North America, Inc.
6.500% 02/15/12 115,000 110,688
7.750% 11/15/13 50,000 49,375
---------
762,719
---------
Commercial Services Total 1,807,618
---------
COSMETICS/PERSONAL CARE - 0.2%
COSMETICS & TOILETRIES - 0.2%
DEL Laboratories, Inc.
8.000% 02/01/12 115,000 96,312
Elizabeth Arden, Inc.
7.750% 01/15/14 135,000 135,675
---------
231,987
---------
Cosmetics/Personal Care Total 231,987
---------
FOOD - 0.5%
FOOD - CONFECTIONERY - 0.1%
Merisant Co.
9.500% 07/15/13 95,000 65,075
---------
65,075
---------
FOOD - MISCELLANEOUS/DIVERSIFIED - 0.3%
Dole Food Co., Inc.
8.625% 05/01/09 146,000 143,810
Pinnacle Foods Holding Corp.
8.250% 12/01/13 180,000 178,200
Reddy Ice Holdings, Inc.
(d) 11/01/12
(10.500% 11/01/08) 95,000 79,325
---------
401,335
---------
See Accompanying Notes to Financial Statements.
8
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
------------------------------------------------
CONSUMER NON-CYCLICAL (CONTINUED)
FOOD (CONTINUED)
FOOD - RETAIL - 0.1%
Stater Brothers Holdings, Inc.
8.125% 06/15/12 55,000 55,000
---------
55,000
---------
Food Total 521,410
---------
HEALTHCARE SERVICES - 1.1%
DIALYSIS CENTERS - 0.1%
DaVita, Inc.
7.250% 03/15/15 145,000 141,738
---------
141,738
---------
MEDICAL - HMO - 0.2%
Coventry Health Care, Inc.
8.125% 02/15/12 145,000 151,518
---------
151,518
---------
MEDICAL - HOSPITALS - 0.4%
HCA, Inc.
7.875% 02/01/11 150,000 155,614
Tenet Healthcare Corp.
9.875% 07/01/14 260,000 264,550
---------
420,164
---------
MEDICAL - OUTPATIENT/HOME MEDICAL - 0.1%
Select Medical Corp.
7.625% 02/01/15 80,000 71,400
---------
71,400
---------
MRI/MEDICAL DIAGNOSTIC IMAGING - 0.1%
MedQuest, Inc.
11.875% 08/15/12 60,000 54,300
MQ Associates, Inc.
(d) 08/15/12
(12.250% 08/15/08) 75,000 29,250
---------
83,550
---------
PHYSICIAN PRACTICE MANAGEMENT - 0.2%
US Oncology Holdings, Inc.
10.320% 03/15/15 (a) 55,000 55,894
US Oncology, Inc.
9.000% 08/15/12 160,000 168,800
---------
224,694
---------
Healthcare Services Total 1,093,064
---------
HOUSEHOLD PRODUCTS/WARES - 0.6%
CONSUMER PRODUCTS - MISCELLANEOUS - 0.5%
American Greetings Corp.
7.375% 06/01/16 65,000 65,813
Amscan Holdings, Inc.
8.750% 05/01/14 125,000 113,437
Jostens IH Corp.
7.625% 10/01/12 125,000 123,125
PAR ($) VALUE ($)
---------------------------------------------------
Scotts Co.
6.625% 11/15/13 130,000 126,912
---------
429,287
---------
OFFICE SUPPLIES & FORMS - 0.1%
ACCO Brands Corp.
7.625% 08/15/15 110,000 105,325
---------
105,325
---------
Household Products/Wares Total 534,612
---------
PHARMACEUTICALS - 0.9%
MEDICAL - DRUGS - 0.3%
Elan Finance PLC
7.750% 11/15/11 185,000 181,762
Warner Chilcott Corp.
8.750% 02/01/15 125,000 125,313
---------
307,075
---------
MEDICAL - GENERIC DRUGS - 0.1%
Mylan Laboratories, Inc.
6.375% 08/15/15 170,000 164,050
---------
164,050
---------
MEDICAL - WHOLESALE DRUG DISTRIBUTION - 0.3%
AmerisourceBergen Corp.
5.875% 09/15/15 (b) 95,000 91,691
Nycomed A/S, PIK,
11.750% 09/15/13 (b) EUR 128,670 171,949
---------
263,640
---------
PHARMACY SERVICES - 0.1%
Omnicare, Inc. Series 2005 B,
6.750% 12/15/13 USD 65,000 63,050
---------
63,050
---------
VITAMINS & NUTRITION PRODUCTS - 0.1%
NBTY, Inc.
7.125% 10/01/15 105,000 100,800
---------
100,800
---------
Pharmaceuticals Total 898,615
---------
CONSUMER NON-CYCLICAL TOTAL 5,637,863
---------
---------------------------------------------------
ENERGY - 5.8%
COAL - 0.4%
COAL - 0.4%
Arch Western Finance LLC
6.750% 07/01/13 165,000 160,875
Massey Energy Co.
6.875% 12/15/13 (b) 210,000 201,075
---------
361,950
---------
Coal Total 361,950
---------
See Accompanying Notes to Financial Statements.
9
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
----------------------------------------------------
ENERGY (CONTINUED)
OIL & GAS - 2.2%
OIL & GAS DRILLING - 0.1%
Pride International, Inc.
7.375% 07/15/14 75,000 76,688
---------
76,688
---------
OIL COMPANIES - EXPLORATION & PRODUCTION - 1.9%
Chesapeake Energy Corp.
6.375% 06/15/15 90,000 84,825
7.500% 06/15/14 150,000 153,000
Compton Petroleum Corp.
7.625% 12/01/13 125,000 121,875
Delta Petroleum Corp.
7.000% 04/01/15 40,000 36,800
Forest Oil Corp.
8.000% 12/15/11 90,000 94,050
Magnum Hunter Resources, Inc.
9.600% 03/15/12 97,000 103,547
Newfield Exploration Co.
6.625% 04/15/16 90,000 86,175
PEMEX Finance Ltd.
9.150% 11/15/18 205,000 236,815
10.610% 08/15/17 135,000 166,756
PEMEX Project Funding Master Trust
5.430% 12/03/12 (a)(b) 450,000 450,000
Pogo Producing Co.
6.625% 03/15/15 95,000 90,250
Quicksilver Resources, Inc.
7.125% 04/01/16 70,000 67,025
Whiting Petroleum Corp.
7.250% 05/01/12 175,000 171,719
---------
1,862,837
---------
OIL REFINING & MARKETING - 0.2%
Premcor Refining Group, Inc.
7.500% 06/15/15 105,000 109,200
Tesoro Petroleum Corp.
6.625% 11/01/15 (b) 130,000 125,450
---------
234,650
---------
Oil & Gas Total 2,174,175
---------
OIL & GAS SERVICES - 1.1%
OIL - FIELD SERVICES - 1.1%
Gazprom
9.625% 03/01/13 400,000 462,080
Gazprom International SA
7.201% 02/01/20 360,000 368,820
Hornbeck Offshore Services, Inc.
6.125% 12/01/14 150,000 139,125
Newpark Resources, Inc.
8.625% 12/15/07 120,000 120,000
---------
1,090,025
---------
Oil & Gas Services Total 1,090,025
---------
PAR ($) VALUE ($)
-----------------------------------------------------
OIL, GAS & CONSUMABLE FUELS - 0.4%
OIL COMPANY - INTEGRATED - 0.4%
Qatar Petroleum
5.579% 05/30/11 (b) 400,000 398,336
---------
398,336
---------
Oil, Gas & Consumable Fuels Total 398,336
---------
PIPELINES - 1.7%
PIPELINES - 1.7%
Atlas Pipeline Partners LP
8.125% 12/15/15 (b) 90,000 92,475
Colorado Interstate Gas Co.
6.800% 11/15/15 (b) 185,000 185,925
El Paso Corp.
7.625% 09/01/08 (b) 100,000 101,750
7.750% 06/15/10 (b) 190,000 194,750
Northwest Pipeline Corp.
8.125% 03/01/10 55,000 57,819
Pacific Energy Partners LP
6.250% 09/15/15 165,000 153,450
Sonat, Inc.
7.625% 07/15/11 355,000 359,881
Southern Natural Gas Co.
8.875% 03/15/10 95,000 101,056
Williams Companies, Inc.
6.375% 10/01/10 (b) 375,000 375,469
8.125% 03/15/12 70,000 74,113
---------
1,696,688
---------
Pipelines Total 1,696,688
---------
ENERGY TOTAL 5,721,174
---------
-----------------------------------------------------
FINANCIALS - 1.9%
DIVERSIFIED FINANCIAL SERVICES - 1.6%
FINANCE - AUTO LOANS - 0.8%
Ford Motor Credit Co.
7.375% 02/01/11 235,000 211,809
General Motors Acceptance Corp.
6.875% 09/15/11 260,000 244,722
8.000% 11/01/31 345,000 324,300
---------
780,831
---------
FINANCE - CONSUMER LOANS - 0.4%
SLM Corp.
6.500% 06/15/10 NZD 615,000 385,187
---------
385,187
---------
FINANCE - INVESTMENT BANKER/BROKER - 0.4%
E*Trade Financial Corp.
8.000% 06/15/11 USD 150,000 155,625
LaBranche & Co., Inc.
11.000% 05/15/12 220,000 241,450
---------
397,075
---------
See Accompanying Notes to Financial Statements.
10
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
--------------------------------------------------
FINANCIALS (CONTINUED)
DIVERSIFIED FINANCIAL SERVICES (CONTINUED)
SPECIAL PURPOSE ENTITY - 0.0%
Hughes Network Systems LLC/HNS
Finance Corp.
9.500% 04/15/14 (b) 45,000 45,450
---------
45,450
---------
Diversified Financial Services Total 1,608,543
---------
REAL ESTATE INVESTMENT TRUSTS - 0.3%
REITS - HOTELS - 0.2%
Host Marriott LP
6.750% 06/01/16 (b) 180,000 175,500
---------
175,500
---------
REITS - REGIONAL MALLS - 0.1%
Rouse Co. LP/TRC Co-Issuer, Inc.
6.750% 05/01/13 (b) 115,000 114,260
---------
114,260
---------
Real Estate Investment Trusts Total 289,760
---------
FINANCIALS TOTAL 1,898,303
---------
--------------------------------------------------
INDUSTRIALS - 5.5%
AEROSPACE & DEFENSE - 0.6%
AEROSPACE/DEFENSE - EQUIPMENT - 0.4%
BE Aerospace, Inc.
8.500% 10/01/10 155,000 164,688
Sequa Corp.
8.875% 04/01/08 70,000 73,150
9.000% 08/01/09 60,000 63,600
TransDigm, Inc.
8.375% 07/15/11 110,000 116,875
---------
418,313
---------
ELECTRONICS - MILITARY - 0.2%
L-3 Communications Corp.
5.875% 01/15/15 40,000 36,600
6.375% 10/15/15 120,000 113,700
---------
150,300
---------
Aerospace & Defense Total 568,613
---------
BUILDING MATERIALS - 0.3%
BUILDING & CONSTRUCTION PRODUCTS -
MISCELLANEOUS - 0.1%
Nortek, Inc.
8.500% 09/01/14 80,000 80,400
NTK Holdings, Inc.
(d) 03/01/14
(10.750% 09/01/09) 90,000 68,175
---------
148,575
---------
PAR ($) VALUE ($)
--------------------------------------------------
BUILDING PRODUCTS - AIR & HEATING - 0.1%
Goodman Global Holding Co., Inc.
7.875% 12/15/12 110,000 107,525
---------
107,525
---------
BUILDING PRODUCTS - CEMENT/AGGREGATION - 0.1%
RMCC Acquisition Co.
9.500% 11/01/12 (b) 100,000 104,000
---------
104,000
---------
Building Materials Total 360,100
---------
ELECTRONICS - 0.1%
ELECTRONIC COMPONENTS - MISCELLANEOUS - 0.1%
Flextronics International Ltd.
6.250% 11/15/14 140,000 133,350
---------
133,350
---------
Electronics Total 133,350
---------
ENGINEERING & CONSTRUCTION - 0.2%
BUILDING & CONSTRUCTION - MISCELLANEOUS - 0.2%
J. Ray McDermott SA
11.500% 12/15/13 (b) 145,000 172,144
---------
172,144
---------
Engineering & Construction Total 172,144
---------
ENVIRONMENTAL CONTROL - 0.6%
NON-HAZARDOUS WASTE DISPOSAL - 0.5%
Allied Waste North America, Inc.
7.125% 05/15/16 (b) 205,000 199,875
7.875% 04/15/13 325,000 332,312
---------
532,187
---------
RECYCLING - 0.1%
Aleris International, Inc.
9.000% 11/15/14 50,000 52,250
---------
52,250
---------
Environmental Control Total 584,437
---------
MACHINERY - CONSTRUCTION & MINING - 0.1%
MACHINERY - CONSTRUCTION & MINING - 0.1%
Terex Corp.
7.375% 01/15/14 120,000 121,200
---------
121,200
---------
Machinery - Construction & Mining Total 121,200
---------
MACHINERY - DIVERSIFIED - 0.3%
MACHINERY - GENERAL INDUSTRY - 0.2%
Douglas Dynamics LLC
7.750% 01/15/12 (b) 100,000 96,000
Manitowoc Co., Inc.
7.125% 11/01/13 65,000 66,138
---------
162,138
---------
See Accompanying Notes to Financial Statements.
11
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
------------------------------------------------------
INDUSTRIALS (CONTINUED)
MACHINERY - DIVERSIFIED (CONTINUED)
MACHINERY - MATERIAL HANDLING - 0.1%
Columbus McKinnon Corp.
8.875% 11/01/13 100,000 103,500
---------
103,500
---------
Machinery - Diversified Total 265,638
---------
METAL FABRICATE/HARDWARE - 0.3%
METAL PROCESSORS & FABRICATION - 0.3%
Mueller Group, Inc.
10.000% 05/01/12 135,000 147,319
Mueller Holdings, Inc.
(d) 04/15/14
(14.750% 04/15/09) 115,000 96,600
TriMas Corp.
9.875% 06/15/12 80,000 76,800
---------
320,719
---------
Metal Fabricate/Hardware Total 320,719
---------
MISCELLANEOUS MANUFACTURING - 0.9%
DIVERSIFIED MANUFACTURING OPERATORS - 0.6%
Bombardier, Inc.
6.300% 05/01/14 (b) 270,000 244,012
J.B. Poindexter & Co.
8.750% 03/15/14 105,000 87,675
Koppers Industries, Inc.
9.875% 10/15/13 86,000 94,600
Trinity Industries, Inc.
6.500% 03/15/14 215,000 205,594
---------
631,881
---------
MISCELLANEOUS MANUFACTURING - 0.3%
Nutro Products, Inc.
10.750% 04/15/14 (b) 135,000 138,037
Samsonite Corp.
8.875% 06/01/11 105,000 110,119
---------
248,156
---------
Miscellaneous Manufacturing Total 880,037
---------
PACKAGING & CONTAINERS - 1.1%
CONTAINERS - METAL/GLASS - 0.6%
Crown Americas LLC & Crown
Americas Capital Corp.
7.750% 11/15/15 (b) 155,000 156,162
Owens-Brockway Glass Container, Inc.
8.250% 05/15/13 295,000 299,794
Owens-Illinois, Inc.
7.500% 05/15/10 90,000 89,438
---------
545,394
---------
PAR ($) VALUE ($)
-----------------------------------------------------
CONTAINERS - PAPER/PLASTIC - 0.5%
Consolidated Container Co., LLC
(d) 06/15/09
(10.750% 06/15/07) 105,000 98,437
Jefferson Smurfit Corp.
8.250% 10/01/12 145,000 137,025
PIK,
11.500% 10/01/15 (b) EUR 106,370 137,637
MDP Acquisitions PLC
9.625% 10/01/12 USD 150,000 157,125
---------
530,224
---------
Packaging & Containers Total 1,075,618
---------
TRANSPORTATION - 1.0%
TRANSPORTATION - MARINE - 0.4%
Ship Finance International Ltd.
8.500% 12/15/13 215,000 202,906
Stena AB
7.500% 11/01/13 200,000 197,500
---------
400,406
---------
TRANSPORTATION - RAILROAD - 0.2%
TFM SA de CV
9.375% 05/01/12 150,000 160,688
12.500% 06/15/12 40,000 44,050
---------
204,738
---------
TRANSPORTATION - SERVICES - 0.3%
CHC Helicopter Corp.
7.375% 05/01/14 200,000 197,750
PHI, Inc.
7.125% 04/15/13 (b) 105,000 102,375
---------
300,125
---------
TRANSPORTATION - TRUCKS - 0.1%
QDI LLC
9.000% 11/15/10 90,000 85,274
---------
85,274
---------
Transportation Total 990,543
---------
INDUSTRIALS TOTAL 5,472,399
---------
-----------------------------------------------------
TECHNOLOGY - 0.3%
OFFICE/BUSINESS EQUIPMENT - 0.2%
OFFICE AUTOMATION & EQUIPMENT - 0.2%
Xerox Corp.
6.400% 03/15/16 35,000 33,732
7.125% 06/15/10 140,000 143,675
---------
177,407
---------
Office/Business Equipment Total 177,407
---------
See Accompanying Notes to Financial Statements.
12
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
CORPORATE FIXED-INCOME
BONDS & NOTES (CONTINUED) PAR ($) VALUE ($)
------------------------------------------------
TECHNOLOGY (CONTINUED)
SEMICONDUCTORS - 0.1%
ELECTRONIC COMPONENTS - SEMICONDUCTORS - 0.1%
Amkor Technology, Inc.
9.250% 06/01/16 70,000 67,462
Freescale Semiconductor, Inc.
6.875% 07/15/11 85,000 86,169
----------
153,631
----------
Semiconductors Total 153,631
----------
TECHNOLOGY TOTAL 331,038
----------
------------------------------------------------
UTILITIES - 1.8%
ELECTRIC - 1.8%
ELECTRIC - GENERATION - 0.5%
AES Corp.
9.000% 05/15/15 (b) 45,000 48,487
9.500% 06/01/09 182,000 194,740
Edison Mission Energy
7.730% 06/15/09 235,000 241,169
----------
484,396
----------
ELECTRIC - INTEGRATED - 0.6%
CMS Energy Corp.
6.875% 12/15/15 70,000 68,162
8.500% 04/15/11 45,000 47,363
Mirant Mid Atlantic LLC
8.625% 06/30/12 41,521 43,857
Nevada Power Co.
9.000% 08/15/13 49,000 53,616
10.875% 10/15/09 97,000 103,851
Sierra Pacific Resources
6.750% 08/15/17 135,000 132,300
TECO Energy, Inc.
7.000% 05/01/12 110,000 111,650
----------
560,799
----------
INDEPENDENT POWER PRODUCER - 0.7%
Dynegy Holdings, Inc.
6.875% 04/01/11 175,000 167,781
7.125% 05/15/18 20,000 17,800
Mirant North America LLC
7.375% 12/31/13 (b) 190,000 186,675
MSW Energy Holdings LLC
7.375% 09/01/10 50,000 50,313
8.500% 09/01/10 155,000 161,394
NRG Energy, Inc.
7.250% 02/01/14 95,000 95,119
7.375% 02/01/16 70,000 70,087
----------
749,169
----------
Electric Total 1,794,364
----------
UTILITIES TOTAL 1,794,364
----------
TOTAL CORPORATE FIXED-INCOME BONDS & NOTES
(cost of $38,529,978) 38,475,408
----------
MORTGAGE-BACKED
SECURITIES - 2.2% PAR ($) VALUE ($)
---------------------------------------------------------
Federal National Mortgage Association
TBA
6.500% 06/15/36 (e) 1,895,000 1,911,581
Government National Mortgage
Association
9.000% 04/15/16 237 254
9.000% 05/15/16 26,618 28,539
9.000% 06/15/16 26,316 28,214
9.000% 11/15/16 52,943 56,761
9.000% 12/15/16 15,282 16,385
10.500% 07/15/19 8,025 8,842
10.500% 05/15/20 7,862 8,671
11.000% 01/15/18 3,184 3,499
11.000% 05/15/18 13,842 15,212
11.000% 08/15/18 5,527 6,073
11.000% 01/15/19 52,004 57,276
11.000% 02/15/19 2,704 2,942
11.000% 04/15/19 1,423 1,567
11.000% 05/15/19 8,644 9,521
---------
TOTAL MORTGAGE-BACKED SECURITIES
(cost of $2,150,532) 2,155,337
---------
ASSET-BACKED SECURITIES - 0.7%
---------------------------------------------------------
Equity One ABS, Inc.
4.205% 04/25/34 425,000 397,274
GMAC Mortgage Corp.
4.865% 09/25/34 350,000 337,878
---------
TOTAL ASSET-BACKED SECURITIES
(cost of $771,945) 735,152
---------
CONVERTIBLE BONDS - 0.3%
---------------------------------------------------------
COMMUNICATIONS - 0.3%
TELECOMMUNICATION SERVICES - 0.3%
TELECOMMUNICATION EQUIPMENT - 0.2%
Nortel Networks Corp.
4.250% 09/01/08 265,000 250,756
---------
250,756
---------
TELEPHONE - INTEGRATED - 0.1%
NTL Cable PLC
8.750% 04/15/14 55,000 72,591
---------
72,591
---------
323,347
---------
COMMUNICATIONS TOTAL 323,347
---------
TOTAL CONVERTIBLE BONDS
(cost of $315,563) 323,347
---------
MUNICIPAL BOND (TAXABLE) - 0.2%
---------------------------------------------------------
CALIFORNIA - 0.2%
CA Cabazon Band Mission Indians
13.000% 10/01/11 230,000 227,146
---------
CALIFORNIA TOTAL 227,146
---------
TOTAL MUNICIPAL BOND (TAXABLE)
(cost of $230,000) 227,146
---------
See Accompanying Notes to Financial Statements.
13
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
COMMON STOCKS - 0.0% SHARES VALUE ($)
-----------------------------------------------------
CONSUMER DISCRETIONARY - 0.0%
HOTELS, RESTAURANTS & LEISURE - 0.0%
Shreveport Gaming Holdings, Inc. (f) 2,098 17,833
---------
Total Hotels, Restaurants & Leisure 17,833
---------
CONSUMER DISCRETIONARY TOTAL 17,833
---------
-----------------------------------------------------
INDUSTRIALS - 0.0%
COMMERCIAL SERVICES & SUPPLIES - 0.0%
Fairlane Management Corp. (f)(g)(h) 1,800 --
---------
Commercial Services & Supplies Total --
---------
INDUSTRIALS TOTAL --
---------
TOTAL COMMON STOCKS
(cost of $30,466) 17,833
---------
WARRANTS - 0.0% UNITS VALUE ($)
-----------------------------------------------------
COMMUNICATIONS - 0.0%
TELECOMMUNICATION SERVICES - 0.0%
CELLULAR TELECOMMUNICATIONS - 0.0%
UbiquiTel, Inc.
Expires 04/15/10 (b)(f)(g) 150 1
---------
1
---------
TELECOMMUNICATION SERVICES - 0.0%
Jazztel PLC
Expires 07/15/10 (f)(g)(h) 40 --
---------
--
---------
Telecommunication Services Total 1
---------
COMMUNICATIONS TOTAL 1
---------
-----------------------------------------------------
INDUSTRIALS - 0.0%
TRANSPORTATION - 0.0%
TRANSPORTATION-TRUCKS - 0.0%
QDI LLC
Expires 01/15/07 (b)(f)(g) 510 5,462
---------
5,462
---------
Transportation Total 5,462
---------
INDUSTRIALS TOTAL 5,462
---------
TOTAL WARRANTS
(cost of $7,679) 5,463
---------
SHORT-TERM OBLIGATION - 5.2% PAR ($) VALUE ($)
---------------------------------------------------------
Repurchase agreement with State
Street Bank & Trust Co., dated
05/31/06, due 06/01/06 at 4.770%,
collateralized by a U.S. Treasury
Note maturing 12/15/10, market
value of $5,240,000 (repurchase
proceeds $5,109,677) 5,109,000 5,109,000
----------
TOTAL SHORT-TERM OBLIGATION
(cost of $5,109,000) 5,109,000
----------
TOTAL INVESTMENTS - 100.4% 99,675,470
(cost of $98,700,734) (i)
OTHER ASSETS & LIABILITIES, NET - (0.4)% (401,275)
----------
NET ASSETS - 100.0% 99,274,195
----------
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a)The interest rate shown on floating rate or variable rate securities
reflects the rate at May 31, 2006.
(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 May 31, 2006,
these securities, which are not illiquid except the following, amounted to
$8,006,103, which represents 8.1% of net assets.
Acquisition
Security Date Par/Units Cost Value
------------------------------------------------------
Hollinger, Inc 03/05/03 $80,000 $79,502 $ 83,300
09/30/04 54,000 54,000 54,000
QDI LLC 06/01/02 510 -- 5,462
UbiquiTel, Inc. 04/11/00 150 7,600 1
--------
$142,763
--------
(c)Step bond. Shown parenthetically is the next interest rate to be paid.
(d)Step bond. This security is currently not paying coupon. Shown
parenthetically is the next interest rate to be paid and the date the Trust
will begin accruing at this rate.
(e)Security purchased on a delayed delivery basis.
(f)Non-income producing security.
(g)Represents fair value as determined in good faith under procedures approved
by the Board of Trustees.
(h)Security has no value.
(i)Cost for federal income tax purposes is $100,492,202.
See Accompanying Notes to Financial Statements.
14
[GRAPHIC]
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2006 (Unaudited)
At May 31, 2006, the Trust had entered into the following forward currency
exchange contracts:
Forward
Currency
Contracts Aggregate Settlement Unrealized
to Buy Value Face Value Date Appreciation
-------------------------------------------------------
CAD $1,062,782 $1,057,866 06/21/06 $4,916
Forward
Currency Unrealized
Contracts Aggregate Settlement Appreciation
to Sell Value Face Value Date (Depreciation)
---------------------------------------------------------
CAD $1,062,782 $1,027,217 06/21/06 $ (35,565)
AUD 688,337 695,583 06/05/06 7,246
EUR 898,110 852,103 06/19/06 (46,007)
EUR 1,856,100 1,789,020 06/26/06 (67,080)
EUR 487,804 473,412 06/27/06 (14,392)
EUR 109,136 106,308 06/30/06 (2,828)
GBP 579,910 541,912 06/19/06 (37,998)
GBP 1,100,072 1,047,545 06/26/06 (52,527)
---------
$(249,151)
---------
At May 31, 2006, the asset allocation of the Trust is as follows:
% OF
ASSET ALLOCATION NET ASSETS
-----------------------------------------------
Government Agencies & Obligations 53.0%
Corporate Fixed-Income Bonds & Notes 38.8
Mortgage-Backed Securities 2.2
Asset-Backed Securities 0.7
Convertible Bonds 0.3
Municipal Bond (Taxable) 0.2
Common Stocks 0.0*
Warrants 0.0*
Short-Term Obligation 5.2
Other Assets & Liabilities, Net (0.4)
-----
100.0%
-----
* Rounds to less than 0.1%
Acronym Name
----------------------------------------
AUD Australian Dollar
CAD Canadian Dollar
EUR Euro
GBP British Pound
NOK Norwegian Krone
NZD New Zealand Dollar
PIK Payment-In-Kind
PLN Polish Zloty
REIT Real Estate Investment Trust
SEK Swedish Krona
TBA To Be Announced
USD United States Dollar
ZAR South African Rand
See Accompanying Notes to Financial Statements.
15
[GRAPHIC]
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2006 (Unaudited)
ASSETS:
Total Investments, at cost $ 98,700,734
------------
Investments, at value $ 99,675,470
Cash 400,742
Foreign currency (cost of $1,022) 1,018
Net unrealized appreciation on foreign forward
currency contracts 12,162
Receivable for:
Investments sold 420,520
Interest 2,004,115
Foreign tax reclaims 23,399
Dollar roll fee income 1,925
Deferred Trustees' compensation plan 13,794
------------
Total Assets 102,553,145
------------
LIABILITIES:
Net unrealized depreciation on foreign forward
currency contracts 256,397
Payable for:
Investments purchased 400,000
Investments purchased on a delayed
delivery basis 1,924,126
Distributions 550,450
Investment advisory fee 62,943
Transfer agent fee 7,682
Pricing and bookkeeping fees 14,964
Audit fee 18,659
Custody fee 6,122
Chief compliance officer expenses 687
Deferred dollar roll fee income 695
Deferred Trustees' fees 13,794
Other liabilities 22,431
------------
Total Liabilities 3,278,950
------------
NET ASSETS 99,274,195
------------
COMPOSITION OF NET ASSETS:
Paid-in capital $120,444,508
Overdistributed net investment income (1,991,143)
Accumulated net realized loss (19,940,361)
Net unrealized appreciation (depreciation) on:
Investments 974,736
Foreign currency translations (213,545)
------------
NET ASSETS $ 99,274,195
------------
SHARES OUTSTANDING 11,009,000
------------
Net asset value per share $ 9.02
------------
[GRAPHIC]
STATEMENT OF OPERATIONS
For the Six Months Ended May 31, 2006 (Unaudited)
INVESTMENT INCOME:
Interest (net of foreign taxes withheld of $375) $3,364,399
Dollar roll fee income 11,078
----------
Total Investment Income 3,375,477
----------
EXPENSES:
Investment advisory fee 375,672
Transfer agent fee 21,957
Pricing and bookkeeping fees 54,234
Trustees' fees 6,417
Custody fee 17,892
Chief compliance officer expenses
(See Note 4) 2,138
Other expenses 64,341
----------
Total Expenses 542,651
Custody earnings credit (2,002)
----------
Net Expenses 540,649
----------
Net Investment Income 2,834,828
----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized loss on:
Investments (346,975)
Foreign currency transactions (357,712)
----------
Net realized loss (704,687)
----------
Net change in unrealized
appreciation (depreciation) on:
Investments (40,194)
Foreign currency translations (187,406)
----------
Net change in unrealized
appreciation (depreciation) (227,600)
----------
Net Loss (932,287)
----------
Net Increase in Net Assets from Operations 1,902,541
----------
See Accompanying Notes to Financial Statements.
16
[GRAPHIC]
STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED
MAY 31, NOVEMBER 30,
INCREASE (DECREASE) IN NET ASSETS: 2006 2005
--------------------------------------------------------------
OPERATIONS:
Net investment income $ 2,834,828 $ 6,031,503
Net realized gain (loss) on
investments and foreign
currency transactions (704,687) 1,479,808
Net change in unrealized
appreciation (depreciation) on
investments and foreign
currency translations (227,600) (5,252,103)
------------ ------------
Net Increase from Operations 1,902,541 2,259,208
------------ ------------
DISTRIBUTIONS DECLARED TO
SHAREHOLDERS:
From net investment income (4,502,681) (6,939,699)
From net realized gains -- (1,242,191)
------------ ------------
Total Distributions Declared to
Shareholders (4,502,681) (8,181,890)
------------ ------------
Total Decrease in Net Assets (2,600,140) (5,922,682)
------------ ------------
NET ASSETS:
Beginning of period 101,874,335 107,797,017
------------ ------------
End of period 99,274,195 101,874,335
------------ ------------
Overdistributed net investment
income at end of period (1,991,143) (323,290)
------------ ------------
NUMBER OF TRUST SHARES
OUTSTANDING:
End of period 11,009,000 11,009,000
------------ ------------
See Accompanying Notes to Financial Statements.
17
[GRAPHIC]
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period is as follows:
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED NOVEMBER 30,
MAY 31, -------------------------------------------------
2006 2005 2004 2003 2002 2001
- -------------------------------------------- --------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.25 $ 9.79 $ 9.47 $ 8.60 $ 8.91 $ 9.14
------- -------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.26 0.55 0.56 0.59 0.63(b) 0.78
Net realized and unrealized gain (loss) on
investments and foreign currency (0.08) (0.35) 0.46 0.93 (0.23)(b) (0.17)
------- -------- -------- -------- ------- -------
Total from Investment Operations 0.18 0.20 1.02 1.52 0.40 0.61
------- -------- -------- -------- ------- -------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS:
From net investment income (0.41) (0.63) (0.60) (0.65) (0.64) (0.75)
From net realized gains -- (0.11) (0.10) -- -- --
Return of capital -- -- -- -- (0.07) (0.09)
------- -------- -------- -------- ------- -------
Total Distributions Declared to
Shareholders (0.41) (0.74) (0.70) (0.65) (0.71) (0.84)
------- -------- -------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.02 $ 9.25 $ 9.79 $ 9.47 $ 8.60 $ 8.91
------- -------- -------- -------- ------- -------
Market price per share $ 7.98 $ 8.09 $ 8.68 $ 8.96 $ 7.98 $ 8.19
------- -------- -------- -------- ------- -------
Total return -- based on market value (c) 3.58%(d) 1.30% 4.91% 20.93% 6.00% 13.47%
------- -------- -------- -------- ------- -------
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (e) 1.08%(f) 1.04% 1.01% 1.04% 1.00% 1.04%
Net investment income (e) 5.66%(f) 5.76% 5.91% 6.44% 7.24%(b) 8.52%
Portfolio turnover rate 24%(d) 47% 73% 64% 83% 65%
Net assets, end of period (000's) $99,274 $101,874 $107,797 $104,238 $94,665 $98,088
(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)Total return at market value assuming all distributions reinvested at prices
calculated in accordance with the Dividend Reinvestment Plan.
(d)Not annualized.
(e)The benefits derived from custody credits had an impact of less than 0.01%.
(f)Annualized.
See Accompanying Notes to Financial Statements
18
[GRAPHIC]
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share outstanding throughout each period is as follows:
YEAR ENDED NOVEMBER 30,
-------------------------------------------------------
2000 1999 1998 1997 1996
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.26 $ 11.13 $ 11.45 $ 11.52 $ 11.27
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.90(a) 0.91 0.94 0.91 1.00
Net realized and unrealized gain (loss) on
investments and foreign currency (1.13) (0.88) (0.25) --(b) 0.24
-------- -------- -------- -------- --------
Total from Investment Operations (0.23) 0.03 0.69 0.91 1.24
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS:
From net investment income (0.87) (0.90) (0.93) (0.98) (0.99)
In excess of net investment income -- -- --(b) -- --
From net realized gains -- -- (0.03) -- --
In excess of net realized gains -- -- (0.05) -- --
Return of capital (0.02) -- -- -- --
-------- -------- -------- -------- --------
Total Distributions Declared to
Shareholders (0.89) (0.90) (1.01) (0.98) (0.99)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 9.14 $ 10.26 $ 11.13 $ 11.45 $ 11.52
-------- -------- -------- -------- --------
Market price per share $ 7.94 $ 8.31 $ 10.56 $ 10.94 $ 10.63
-------- -------- -------- -------- --------
Total return -- based on market value (c) 6.08% (13.51)% 6.26% 12.62% 8.30%
-------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (d) 0.94% 1.00% 0.93% 0.96% 0.95%
Net investment income (d) 9.08% 8.51% 8.22% 8.06% 8.33%
Portfolio turnover rate 53% 52% 99% 156% 117%
Net assets, end of period (000's) $100,649 $113,005 $122,490 $126,011 $126,835
(a)The per share net investment income amount does not reflect the period's
reclassification of differences between book and tax basis net investment
income.
(b)Rounds to less than $0.01 per share.
(c)Total return at market value assuming all distributions reinvested at prices
calculated in accordance with the Dividend Reinvestment Plan.
(d)The benefits derived from custody credits had an impact of less than 0.01%.
See Accompanying Notes to Financial Statements
19
[GRAPHIC]
NOTES TO FINANCIAL STATEMENTS
May 31, 2006 (Unaudited)
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 4:00 p.m. Eastern (U.S.) time. 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. If a security is valued at
a "fair value", such value is likely to be different from the last quoted
market price for the security.
Investments for which market quotations are not readily available, or that have
quotations which management believes are not appropriate, are valued at fair
value as determined in good faith under consistently applied procedures
established by and under the general supervision of the Board of Trustees.
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
20
[GRAPHIC]
NOTES TO FINANCIAL STATEMENTS (continued)
May 31, 2006 (Unaudited)
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 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 rolls" in which the Trust sells
securities for delivery in the current month and simultaneously contracts with
the same counterparty to repurchase similar (same type, coupon and maturity)
but not identical securities on a specified future date not exceeding 120 days.
During the roll period, the Trust loses the right to receive principal and
interest paid on the securities sold. However, the Trust would benefit to the
extent of any difference between the price received for the securities sold and
the lower forward price for the future purchase (often referred to as the
"drop") or fee income plus the interest earned on the cash proceeds of the
securities sold until the settlement date of the forward purchase. Unless such
benefits exceed the income, capital appreciation and gain or loss due to
mortgage prepayments that would have been realized on the securities sold as
part of the mortgage dollar roll, the use of this technique will diminish the
investment performance of the Trust compared with what such performance would
have been without the use of mortgage dollar rolls. All cash proceeds will be
invested in instruments that are permissible investments for the Trust. The
Trust will hold and maintain in a segregated account until the settlement date,
cash or liquid securities in an amount equal to the forward purchase price.
The Trust's policy is to record the components of dollar rolls using "to be
announced" mortgage-backed securities ("TBA Dollar Rolls"). For financial
reporting and tax purposes, the Trust treats mortgage dollar rolls as two
separate transactions, one involving the purchase of a security and a separate
transaction involving a sale. The Trust does not currently enter into mortgage
dollar rolls that are accounted for as financing.
Mortgage dollar rolls involve certain risks. If the broker-dealer to whom the
Trust sells the security becomes insolvent, the Trust's right to purchase or
repurchase the mortgage-related securities may be restricted and the instrument
which the Trust is required to repurchase may be worth less than an instrument
which the Trust originally held. Successful use of mortgage dollar rolls may
depend upon the Advisor's ability to predict correctly interest rates and
mortgage prepayments. For these reasons, there is no assurance that mortgage
dollar rolls can be successfully employed.
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
21
[GRAPHIC]
NOTES TO FINANCIAL STATEMENTS (continued)
May 31, 2006 (Unaudited)
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 tax character of distributions paid during the year ended November 30, 2005
was as follows:
Distributions paid from:
Ordinary Income* $8,181,890
Long-Term Capital Gains --
* For tax purposes short-term capital gains distributions, if any, are
considered ordinary income distributions.
Unrealized appreciation and depreciation at May 31, 2006, based on cost of
investments for federal income tax purposes, was:
Unrealized appreciation $ 3,168,639
Unrealized depreciation (3,985,371)
-----------
Net unrealized depreciation $ (816,732)
-----------
The following capital loss carryforwards, determined as of November 30, 2005,
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
2013.... 333,261
-----------
$18,953,057
-----------
NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES
INVESTMENT ADVISORY FEE
Columbia Management Advisors, LLC ("Columbia"), an indirect, wholly-owned
subsidiary of Bank of America Corporation ("BOA"), is the investment advisor to
the Trust and provides administrative and other 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 State Street
the total fees collected under the pricing and bookkeeping agreement.
Under its pricing and bookkeeping agreement with the Trust, Columbia receives
an annual fee of $38,000 paid monthly plus an additional monthly fee based on
the level of average daily net assets for the month; provided that during any
12-month period, the aggregate fee, exclusive of out-of-pocket expenses and
charges, shall not exceed $140,000.
The Trust also reimburses Columbia and State Street for out-of-pocket expenses
and charges, including fees payable to third parties for pricing the Trust's
portfolio securities and direct internal costs incurred by Columbia
22
[GRAPHIC]
NOTES TO FINANCIAL STATEMENTS (continued)
May 31, 2006 (Unaudited)
in connection with providing fund accounting oversight and monitoring and
certain other services. For the six months ended May 31, 2006, the annualized
effective pricing and bookkeeping fee rate for the Trust, inclusive of
out-of-pocket expenses, was 0.108% of the Trust's average daily net assets.
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
All officers of the Trust, with the exception of the Trust's Chief Compliance
Officer, are employees of Columbia or its affiliates and receive no
compensation from the Trust. The Board of Trustees has appointed a Chief
Compliance Officer to the Trust in accordance with federal securities
regulations. The Trust, along with other affiliated funds, pays its pro-rata
share of the expenses associated with the Chief Compliance Officer. The Trust's
expenses for the Chief Compliance Officer 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 six months ended May 31, 2006, the Trust paid $1,213 to
Columbia for such services. This amount is included in "Other expenses" on the
Statement of Operations.
NOTE 5. PORTFOLIO INFORMATION
For the six months ended May 31, 2006, the cost of purchases and proceeds from
sales of securities, excluding short-term obligations, were $22,783,915 and
$23,741,641, respectively of which $1,955,844 and $1,324,864, 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.
Investments in emerging market countries are subject to additional risk. The
risk of foreign investments is typically increased in less developed countries.
These countries are also more likely to experience high levels of inflation,
deflation or currency devaluation which could hurt their economies and
securities markets.
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 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 that 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
On February 9, 2005, Columbia Management Advisors, Inc. (which has since merged
into Banc of America Capital Management, LLC (now named Columbia Management
Advisors, LLC)) ("Columbia") and Columbia Funds Distributor, Inc. (which has
been renamed Columbia Management Distributors, Inc.) (the "Distributor")
(collectively, the "Columbia Group") entered into an Assurance of
Discontinuance with the New York Attorney General ("NYAG") (the "NYAG
Settlement") and consented to the entry of a cease-and-desist order by the
Securities and Exchange
23
[GRAPHIC]
NOTES TO FINANCIAL STATEMENTS (continued)
May 31, 2006 (Unaudited)
Commission ("SEC") (the "SEC Order"). The SEC Order and the NYAG Settlement are
referred to collectively as the "Settlements". The Settlements contain
substantially the same terms and conditions as outlined in the agreements in
principle which Columbia Group entered into with the SEC and NYAG in March 2004.
Under the terms of the SEC Order, the Columbia Group agreed, among other
things, to: pay $70 million in disgorgement and $70 million in civil money
penalties; cease and desist from violations of the antifraud provisions and
certain other provisions of the federal securities laws; maintain certain
compliance and ethics oversight structures; retain an independent consultant to
review the Columbia Group's applicable supervisory, compliance, control and
other policies and procedures; and retain an independent distribution
consultant (see below). The Columbia Funds have also voluntarily undertaken to
implement certain governance measures designed to maintain the independence of
their boards of trustees. The NYAG Settlement also, among other things,
requires Columbia and its affiliates to reduce management fees for certain
Columbia Funds (including the former Nations Funds) and other mutual funds
collectively by $32 million per year for five years, for a projected total of
$160 million in management fee reductions.
Pursuant to the procedures set forth in the SEC order, the $140 million in
settlement amounts described above will be distributed in accordance with a
distribution plan developed by an independent distribution consultant and
approved by the SEC. The independent distribution consultant has been in
consultation with the staff of the SEC and has submitted a proposed plan of
distribution. The SEC has not yet approved a final plan of distribution.
As a result of these matters or any adverse publicity or other developments
resulting from them, the market price of the shares could decline.
A copy of the SEC Order is available on the SEC website at http://www.sec.gov.
A copy of the NYAG Settlement is available as part of the Bank of America
Corporation Form 8-K filing on February 10, 2005.
In connection with the events described in detail above, various parties have
filed suit against certain funds, the Trustees of the Columbia Funds,
FleetBoston Financial Corporation and its affiliated entities and/or Bank of
America and its affiliated entities.
On February 20, 2004, the Judicial Panel on Multidistrict Litigation
transferred these cases and cases against several other mutual fund companies
based on similar allegations to the United States District Court in Maryland
for consolidated or coordinated pretrial proceedings (the "MDL"). Subsequently,
additional related cases were transferred to the MDL. On September 29, 2004,
the plaintiffs in the MDL filed amended and consolidated complaints. One of
these amended complaints is a putative class action that includes claims under
the federal securities laws and state common law, and that names Columbia, the
Distributor, the Trustees of the Columbia Funds, Bank of America Corporation
and others as defendants. Another of the amended complaints is a derivative
action purportedly on behalf of the Columbia Funds that asserts claims under
federal securities laws and state common law.
On February 25, 2005, Columbia and other defendants filed motions to dismiss
the claims in the pending cases. On March 1, 2006, for reasons stated in the
court's memoranda dated November 3, 2005, the U.S. District Court for the
District of Maryland granted in part and denied in part the defendants' motions
to dismiss. The court dismissed all of the class action claims pending against
the Columbia Funds Trusts and the Columbia Acorn Trust. As to Columbia and the
Distributor, the claims under the Securities Act of 1933, the claims under
Sections 34(b) and 36(a) of the Investment Company Act of 1940 ("ICA") and the
state law claims were dismissed. The claims under Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 and claims under Section 36(b) of the ICA
along with related claims under Section 48(a) of the ICA were not dismissed.
On March 21, 2005, a purported class action was filed in Massachusetts state
court alleging that the conduct, including market timing, entitles Class B
shareholders in certain Columbia funds to an exemption from contingent deferred
sales charges upon early redemption ("the CDSC Lawsuit"). The CDSC Lawsuit has
been removed to federal court in Massachusetts and the federal Judicial Panel
has transferred the CDSC Lawsuit to the MDL.
The MDL is ongoing. Accordingly, an estimate of the financial impact of this
litigation on any fund, if any, cannot currently be made.
In 2004, certain Columbia funds, the Trustees of the Columbia Funds, advisers
and affiliated entities were named as defendants in certain purported
shareholder class and derivative actions making claims, including claims under
the Investment Company and the Investment Advisers Acts of 1940 and state law.
The suits
24
[GRAPHIC]
NOTES TO FINANCIAL STATEMENTS (continued)
May 31, 2006 (Unaudited)
allege, inter alia, that the fees and expenses paid by the funds are excessive
and that the advisers and their affiliates inappropriately used fund assets to
distribute the funds and for other improper purpose. On March 2, 2005, the
actions were consolidated in the Massachusetts federal court as In re Columbia
Entities
Litigation. The plaintiffs filed a consolidated amended complaint on June 9,
2005. On November 30, 2005, the judge dismissed all claims by plaintiffs and
ordered that the case be closed. The plaintiffs filed a notice of appeal on
December 30, 2005 and this appeal is pending.
25
[GRAPHIC]
SHAREHOLDER MEETING RESULTS
RESULTS OF THE ANNUAL MEETING OF SHAREHOLDERS
On May 24, 2006, the Annual Meeting of Shareholders of the Trust was held to
consider re-election of Trustees. On March 10, 2006, the record date for the
Meeting, the Trust had 11,009,000 common shares outstanding. The votes cast
were as follows:
ELECTION OF TRUSTEES:
The shareholders re-elected the following Trustees as follows:
For Withheld
----------------------------------------
Janet Langford Kelly 10,008,219 177,205
Douglas A. Hacker 10,000,135 185,289
Charles R. Nelson 10,005,542 179,883
Patrick J. Simpson 10,013,358 172,067
The terms of office of Thomas C. Theobald, John J. Neuhauser, Richard L.
Woolworth, Anne-Lee Verville, William E. Mayer, Richard W. Lowry and Thomas E.
Stitzel continued after the Meeting.
26
[GRAPHIC]
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
Computershare (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. Contact the Plan Agent for additional information regarding the
Plan. All correspondence concerning the Plan should be directed to
Computershare by mail at P.O. Box 403011, Providence, RI 02940-3011, or by
phone at 1-800-426-5523.
27
[LOGO]
Transfer Agent
Important Information About This Report
The Transfer Agent for Colonial InterMarket Income Trust I is:
Computershare
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, 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.
Annual Certifications -- As required, on June 21, 2006, the trust submitted to
the New York Stock Exchange ("NYSE") the annual certification of the trust's
Chief Executive Officer certifying that he is not aware of any violation of the
NYSE's Corporate Governance listing standards. The trust also has included the
certifications of the trust's Chief Executive Officer and Chief Financial
Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 as exhibits
to the trust's Form N-CSR filed with the Securities and Exchange Commission for
the annual period.
This report has been prepared for shareholders of Colonial InterMarket Income
Trust I.
[GRAPHIC]
COLONIAL INTERMARKET INCOME TRUST I
SEMIANNUAL REPORT
SHC-44/111522-0506 (07/06) 06/26838
Item 2. Code of Ethics.
Not applicable at this time.
Item 3. Audit Committee Financial Expert.
Not applicable at this time.
Item 4. Principal Accountant Fees and Services.
Not applicable at this time.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
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.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Registrant Purchases of Equity Securities*
-----------------------------------------------------------------
(c)
Total Number of (d)
(a) (b) Shares Purchased as Maximum Number of
Total Number Average Part of Publicly Shares that May Yet
of Shares Price Paid Announced Plans Be Purchased Under
Period Purchased Per Share or Programs the Plans or Programs
- ------ ------------ ---------- ------------------- ---------------------
12/01/05 through 12/31/05... 6,263 $8.21 6,263 N/A
01/01/06 through 01/31/06... 16,869 $8.44 16,869 N/A
02/01/06 through 02/28/06... 6,185 $8.43 6,185 N/A
03/01/06 through 03/31/06... 5,964 $8.39 5,964 N/A
04/01/06 through 04/30/06... 6,109 $8.23 6,109 N/A
05/01/06 through 05/31/06... 6,303 $8.15 6,303 N/A
------ ----- ------ ---
Total....................... 47,693 $8.34 47,693 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: Not
applicable at this time.
(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 July 27, 2006
---------------------------------------------------------
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 July 27, 2006
---------------------------------------------------------
By (Signature and Title) /S/ J. Kevin Connaughton
-------------------------------------
J. Kevin Connaughton, Treasurer
Date July 27, 2006
---------------------------------------------------------