-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HupSjH08kdadefwpgNOgxGyO3v7l6LD1RKu24MCbjkkOXoZjuV5dzlgLpDuv/ccX uqZw1ogBpM1bx9/K0zYCIw== 0000021832-00-000076.txt : 20000508 0000021832-00-000076.hdr.sgml : 20000508 ACCESSION NUMBER: 0000021832-00-000076 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000628 FILED AS OF DATE: 20000505 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLONIAL INTERMEDIATE HIGH INCOME FUND CENTRAL INDEX KEY: 0000833021 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 811-05567 FILM NUMBER: 620276 BUSINESS ADDRESS: STREET 1: ONE FINANCIAL CNTR CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 6174263750 DEF 14A 1 COLONIAL INTERMEDIATE HIGH INCOME FUND SCHEDULE 14A (Rule 14a-101) INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant [ X ] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ X ] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 [ ] Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) COLONIAL INTERMEDIATE HIGH INCOME FUND ________________________________________________ (Name of Registrant as Specified In Its Charter) _______________________________________________________________________ (Name of Person(s) Filing Proxy Statement, if Other Than the Registrant) Payment of Filing Fee (Check the appropriate box): [ X ] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. 1) Title of each class of securities to which transaction applies: 2) Aggregate number of securities to which transaction applies: 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): 4) Proposed maximum aggregate value of transaction: 5) Total fee paid: [ ] Fee paid previously with preliminary materials: [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. 1) Amount Previously Paid: 2) Form, Schedule or Registration Statement no.: 3) Filing Party: 4) Date Filed: COLONIAL INTERMEDIATE HIGH INCOME FUND One Financial Center, Boston, Massachusetts 02111 (617) 426-3750 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 28, 2000 Dear Shareholder: The Annual Meeting of Shareholders (Meeting) of Colonial Intermediate High Income Fund (Fund) will be held at the offices of Colonial Management Associates, Inc. (Advisor), One Financial Center, Boston, Massachusetts, on Wednesday, June 28, 2000, at 10:00 a.m. Eastern time, to: 1. Elect five Trustees; 2. Approve an Amended and Restated Management Agreement providing for a change in the method of calculating the fee payable to the Advisor; 3. Ratify the selection of independent accountants; and 4. Transact such other business as may properly come before the Meeting or any adjournment thereof. By order of the Board of Trustees, Nancy L. Conlin, Secretary May 5, 2000 NOTICE: YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. IF A QUORUM IS NOT PRESENT AT THE MEETING, ADDITIONAL EXPENSES WILL BE INCURRED TO SOLICIT ADDITIONAL PROXIES. PLEASE VOTE, SIGN AND RETURN YOUR PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE IMMEDIATELY. G-60/040B-0400 ANNUAL MEETING OF SHAREHOLDERS PROXY STATEMENT General Information May 5, 2000 The enclosed proxy, which was first mailed on May 5, 2000, is solicited by the Trustees for use at the Meeting. All properly executed proxies received in time for the Meeting will be voted as specified in the proxy or, if no specification is made, in favor of each proposal referred to in the Proxy Statement. The proxy may be revoked prior to its exercise by a later dated proxy, by written revocation received by the Secretary or by voting in person. Solicitation may be made by mail, telephone, telegraph, telecopy and personal interviews. Authorization to execute proxies may be obtained by telephonically or electronically transmitted instructions. The Advisor has retained Corporate Investor Communications, Inc. to coordinate the distribution of proxy material to, and to solicit the return of proxies from, individuals, banks brokers, nominees and other custodians at a fee of $5,500 plus out-of-pocket expenses. The Advisor will bear the cost of solicitation, which includes the printing and mailing of proxy materials and the tabulation of votes. Holders of a majority of the shares outstanding and entitled to vote constitute a quorum and must be present in person or represented by proxy for business to be transacted at the Meeting. On April 21, 2000, the Fund had outstanding 20,268,041.558 shares of beneficial interest. Shareholders of record at the close of business on April 21, 2000 will have one vote for each share held. As of April 21, 2000, The Depository Trust Company (Cede & Company), 7 Hanover Square, New York, New York 10004, owned of record 18,307,343 shares representing 90.32% of the Fund's outstanding shares. Votes cast by proxy or in person will be counted by persons appointed by the Fund to act as election tellers for the Meeting. The tellers will count the total number of votes cast "for" approval of the proposals for purposes of determining whether sufficient affirmative votes have been cast. Where a shareholder withholds authority or abstains, or the proxy reflects a "broker non-vote" (i.e., shares held by brokers or nominees as to which (i) instructions have not been received from the beneficial owners or persons entitled to vote and (ii) the broker or nominee does not have discretionary voting power on a particular matter), the shares will be counted as present and entitled to vote for purposes of determining the presence of a quorum. With respect to Item 1, the election of Trustees, Item 2, approval of an amended and restated Management Agreement and Item 3, ratification of independent accountants, withheld authority, abstentions and broker non-votes have no effect on the outcome of the voting. Further information concerning the Fund is contained in its most recent Annual Report to shareholders, which is obtainable free of charge by writing the Advisor at One Financial Center, Boston, Massachusetts 02111 or by calling 1-800-426-3750. 1. ELECTION OF FIVE TRUSTEES Ms. Verville and Messrs. Grinnell, Macera, Moody and Stitzel (who have each agreed to serve) are proposed for election as Trustees of the Fund. Each will serve three years, or until a successor is elected. The Board of Trustees currently consists of Mses. Collins and Verville and Messrs. Bleasdale, Carberry, Grinnell, Lowry, Macera, Mayer, Moody, Neuhauser and Stitzel. The Board of Trustees is divided into the following three classes, each with a three year term expiring in the year indicated (assuming the persons listed above are elected at the Meeting): 2001 2002 2003 ---- ---- ---- Mr. Lowry Mr. Bleasdale Mr. Grinnell Mr. Mayer Mr. Carberry Mr. Macera Ms. Collins Mr. Moody Mr. Neuhauser Mr. Stitzel Ms. Verville The following table sets forth certain information about the Board of Trustees of the Fund:
Shares and Percent of Fund Beneficially Name Trustee Principal Occupation (1) and Owned at (Age) since Directorships April 21, 2000(2) Tom Bleasdale 1988 Retired (formerly Chairman of the -0- (69) Board and Chief Executive Officer, Shore Bank & Trust Company (banking) from 1992 to 1993). Director or Trustee: Liberty Funds, Empire Company Limited.
Shares and Percent of Fund Beneficially Name Trustee Principal Occupation (1) and Owned at (Age) since Directorships April 21, 2000(2) John V. Carberry * 1998 Senior Vice President of Liberty -0- (53) Financial Companies, Inc. since February, 1998 (Liberty Financial) (formerly Managing Director, Salomon Brothers (investment banking) from December, 1974 to January, 1998). Director or Trustee: Liberty Funds, Liberty All-Star Funds. Lora S. Collins 1992 Attorney (formerly Attorney with -0- (64) Kramer, Levin, Naftalis & Frankel (law) from September, 1986 to November, 1996). Trustee: Liberty Funds. James E. Grinnell 1995 Private Investor since November, -0- (70) 1988. Director or Trustee: Liberty Funds, Liberty All-Star Funds. Richard W. Lowry 1995 Private Investor since August, 1987. -0- (63) Director or Trustee: Liberty Funds, Liberty All-Star Funds. Salvatore Macera 1998 Private Investor (formerly Executive -0- (68) Vice President of Itek Corporation (electronics) from 1975 to 1981). Trustee: Liberty Funds. William E. Mayer 1994 Partner, Development Capital, LLC -0- (59) (venture capital) since December, 1996 (formerly Dean, College of Business and Management, University of Maryland (higher education) from October, 1992 to November, 1996). Director or Trustee: Liberty Funds, Liberty All-Star Funds, Lee Enterprises, Johns Manville Corporation.
Shares and Percent of Fund Beneficially Name Trustee Principal Occupation (1) and Owned at (Age) since Directorships April 21, 2000(2) James L. Moody, Jr. 1988 Retired (formerly Chairman of the -0- (68) Board, Hannaford Bros. Co. (food distributor) from May, 1984 to May, 1997 and Chief Executive Officer, Hannaford Bros. Co. from May, 1973 to May, 1992). Director or Trustee: Liberty Funds, UNUM Product Corporation, IDEXX Laboratories, Inc., Staples, Inc., Empire Company Limited. John J. Neuhauser 1992 Academic Vice President and Dean of -0- (56) Faculties, Boston College (higher education) since August, 1999 (formerly Dean, Boston College School of Management from September, 1977 to September, 1999). Director or Trustee: Liberty Funds, Liberty All-Star Funds, Saucony, Inc. Thomas E. Stitzel 1998 Business Consultant (formerly -0- (64) Professor of Finance from 1975 to 1999 and Dean from 1977 to 1991, College of Business, Boise State University (higher education); Chartered Financial Analyst. Trustee: Liberty Funds. Anne-Lee Verville 1998 Consultant (formerly General Manager, -0- (54) Global Education Industry from 1994 to 1997, and President, Applications Solutions Division, IBM Corporation (global education and global applications)). Trustee: Liberty Funds.
* Mr. Carberry is an "interested person," as defined in the Investment Company Act of 1940 (1940 Act), because of his affiliation with Liberty Financial (the indirect parent company of the Advisor). On April 21, 2000, Mr. Carberry beneficially owned less than 1% of the then outstanding common shares and other securities of Liberty Financial. (1) Except as otherwise noted, each individual has held the office indicated or other offices in the same company for the last five years. (2) On April 21, 2000, the Trustees and officers of the Fund as a group beneficially owned less than 1% of the then outstanding shares of the Fund. In this Proxy Statement, the "Liberty Funds" means Liberty Funds Trust I, Liberty Funds Trust II, Liberty Funds Trust III, Liberty Funds Trust IV, Liberty Funds Trust V, Liberty Funds Trust VI, Liberty Funds Trust VII, Liberty Funds Trust VIII, Liberty Variable Investment Trust, Colonial High Income Municipal Trust, Colonial InterMarket Income Trust I, Colonial Intermediate High Income Fund, Colonial Investment Grade Municipal Trust, Colonial Municipal Income Trust, Colonial Insured Municipal Fund, Colonial California Insured Municipal Fund, Colonial New York Insured Municipal Fund, Liberty-Stein Roe Advisor Floating Rate Advantage Fund and Colonial Investment Grade Bond Fund. In this Proxy Statement "Liberty All-Star Funds" means Liberty Funds Trust IX, Liberty All-Star Equity Fund and Liberty All-Star Growth Fund, Inc. The following table sets forth certain information about the executive officers of the Fund:
Shares and Percent of Fund Beneficially Executive Owned at Name Officer April 21, (Age) Since Office with Fund; Principal Occupation (3) 2000(4) Stephen E. Gibson 1998 President of the Fund and of the Liberty -0- (46) Funds since June, 1998; Chairman of the Board since July, 1998, Chief Executive Officer and President since December, 1996, and Director since July, 1996 of the Advisor (formerly Executive Vice President from July, 1996 to December, 1996); Director, Chief Executive Officer and President of Liberty Funds Group LLC (LFG) since December, 1998 (formerly Director, Chief Executive Officer and President of The Colonial Group, Inc. (TCG) from December, 1996 to December, 1998); Assistant Chairman of Stein Roe & Farnham Incorporated (SR&F) since August, 1998 (formerly Managing Director of Marketing of Putnam Investments, June, 1992 to July, 1996).
Shares and Percent of Fund Executive Beneficially Name Officer Owned at (Age) Since Office with Fund; Principal Occupation (3) April 21, 2000(4) Joseph R. Palombo 1999 Vice President of the Fund and of the Liberty -0- (46) Funds since April, 1999; Vice President of the Liberty All-Star Funds since April, 1999; Executive Vice President and Director of the Advisor since April, 1999; Executive Vice President and Chief Administrative Officer of LFG since April, 1999 (formerly Chief Operating Officer, Putnam Mutual Funds from 1994 to 1998). Carl C. Ericson 1989 Vice President of the Fund since February, -0- (57) 1989; Senior Vice President, Director and Manager of the Taxable Fixed Income Group of the Advisor since March, 1996 (formerly Vice President of the Advisor from January, 1992 to March, 1996). Pamela A. McGrath 2000 Treasurer and Chief Financial Officer of the -0- (46) Fund and of the Liberty Funds and Liberty All-Star Funds since April, 2000; Treasurer, Chief Financial Officer and Vice President of LFG since December, 1999; Chief Financial Officer, Treasurer and Senior Vice President of the Advisor since December, 1999; (formerly Director of Offshore Accounting for Putnam Investments from May, 1998 to October, 1999; Managing Director of Scudder Kemper Investments from October, 1984 to December, 1997). J. Kevin Connaughton 1998 Controller and Chief Accounting Officer of -0- (35) the Fund and of the Liberty Funds since February, 1998; Controller since December, 1998 of Liberty All-Star Funds; Vice President of the Advisor since February, 1998 (formerly Senior Tax Manager, Coopers & Lybrand, LLP from April, 1996 to January, 1998; Vice President, 440 Financial Group/First Data Investor Services Group from March, 1994 to April, 1996).
Shares and Percent of Fund Executive Beneficially Name Officer Owned at (Age) Since Office with Fund; Principal Occupation (3) April 21, 2000(4) Nancy L. Conlin 1998 Secretary of the Fund and of the Liberty -0- (46) Funds since April, 1998 (formerly Assistant Secretary from July, 1994 to April, 1998); Director, Senior Vice President, General Counsel, Clerk and Secretary of the Advisor since April, 1998 (formerly Vice President, Counsel, Assistant Secretary and Assistant Clerk from July, 1994 to April, 1998); Vice President - Legal, General Counsel and Secretary of LFG since December, 1998 (formerly Vice President - Legal, General Counsel, Secretary and Clerk of TCG from April, 1998 to December, 1998; Assistant Clerk from July, 1994 to April, 1998).
(3) Except as otherwise noted, each individual has held the office indicated or other offices in the same company for the last five years. (4) As of record on April 21, 2000, the Trustees and officers of the Fund as a group beneficially owned less than 1% of the then outstanding shares of the Fund. Trustees' Compensation, Meetings and Committees A. Trustees' Compensation. For the fiscal year ended October 31, 1999 and the calendar year ended December 31, 1999, the Trustees received the following compensation for serving as Trustees(5):
Total Compensation from the Fund Complex Paid Aggregate Compensation from to the Trustees for the the Fund for the Fiscal Year Calendar Year Ended Trustee Ended October 31, 1999 December 31, 1999(6) - ------- ---------------------- -------------------- Robert J. Birnbaum (7) $1,000 $ 97,000 Tom Bleasdale 1,176(8) 103,000(9) John V. Carberry (10) N/A N/A Lora S. Collins 990 96,000
Total Compensation from the Fund Complex Paid Aggregate Compensation from to the Trustees for the the Fund for the Fiscal Year Calendar Year Ended Trustee Ended October 31, 1999 December 31, 1999(6) - ------- ---------------------- -------------------- James E. Grinnell $1,032 $100,000 Richard W. Lowry 1,000 97,000 Salvatore Macera 768 95,000 William E. Mayer 999 101,000 James L. Moody, Jr. 930(11) 91,000(12) John J. Neuhauser 1,046 101,252 Thomas E. Stitzel 768 95,000 Robert L. Sullivan(13) 1,077 104,100 Anne-Lee Verville 980(14) 96,000(15)
(5) The Fund does not currently provide pension or retirement plan benefits to the Trustees. (6) At December 31, 1999, the Fund Complex consisted of 51 open-end and 8 closed-end management investment portfolios. (7) Retired as Trustee of the Fund on December 31, 1999. (8) Includes $540 payable in later years as deferred compensation. (9) Includes $52,000 payable in later years as deferred compensation. (10) Does not receive compensation because he is an affiliated Trustee and employee of Liberty Financial. (11) Total compensation of $930 for the fiscal year ended October 31, 1999, will be payable in later years as deferred compensation. (12) Total compensation of $91,000 for the calendar year ended December 31, 1999, will be payable in later years as deferred compensation. (13) Retired as Trustee of the Fund on April 26, 2000. (14) Total compensation of $980 for the fiscal year ended October 31, 1999, will be payable in later years as deferred compensation. (15) Total compensation of $96,000 for the calendar year ended December 31, 1999, will be payable in later years as deferred compensation. For the calendar and fiscal year ended December 31, 1999, some of the Trustees received the following compensation in their capacities as trustees or directors of the Liberty All-Star Equity Fund, Liberty All-Star Growth Fund, Inc., and Liberty Funds Trust IX (together, Liberty All-Star Funds)(16): Total Compensation from the Liberty All-Star Funds for the Calendar Trustee Year Ended December 31, 1999 (17) - ------- ---------------------------- Robert J. Birnbaum (18) $25,000 John V. Carberry (18)(19) N/A Total Compensation from the Liberty All-Star Funds for the Calendar Trustee Year Ended December 31, 1999 (17) - ------- ---------------------------- James E. Grinnell (18) $25,000 Richard W. Lowry (18) 25,000 William E. Mayer (18) 25,000 John J. Neuhauser (18) 25,000 (16) The Funds do not currently provide pension or retirement plan benefits to the Trustees. (17) The Liberty All-Star Funds are advised by Liberty Asset Management Company (LAMCO). LAMCO is an indirect wholly-owned subsidiary of Liberty Financial (an intermediate parent of the Advisor). (18) Elected by the sole Trustee of Liberty Funds Trust IX on December 17, 1998. (19) Does not receive compensation because he is an affiliated Trustee and employee of Liberty Financial. B. Meetings and Committees. During the fiscal year ended October 31, 1999, the Board of Trustees held six meetings. The Audit Committee of the Liberty Funds, consisting of Messrs. Bleasdale, Grinnell, Lowry, Moody and Neuhauser and as of April, 1999, Mr. Macera and Ms. Verville, all of whom are non-interested Trustees, met three times during the Fund's fiscal year ended October 31, 1999. The Audit Committee recommends to the Board of Trustees the independent accountants to serve as auditors, reviews with the independent accountants the results of the auditing engagement and internal accounting procedures and controls, and considers the independence of the independent accountants, the range of their audit services and their fees. The Compensation Committee of the Liberty Funds, consisting of Ms. Collins and Messrs. Birnbaum, Grinnell, Neuhauser and Stitzel, all of whom are non-interested Trustees, met twice during the Fund's fiscal year ended October 31, 1999. The Compensation Committee reviews compensation of the Board of Trustees. The Governance Committee of the Liberty Funds, consisting of Messrs. Bleasdale, Lowry, Mayer and Moody and as of April, 1999, Ms. Verville, met four times during the Fund's fiscal year ended October 31, 1999. The Governance Committee, in its sole discretion, recommends to the Trustees, among other things, nominees for Trustee and for appointments to various committees. The Committee will consider candidates for Trustee recommended by shareholders. Written recommendations with supporting information should be directed to the Committee in care of the Fund. During the Fund's fiscal year ended October 31, 1999, each of the current Trustees attended more than 75% of the combined total of the meetings of the Board of Trustees and the meetings of the committees of which such Trustee is a member. If any nominee listed above becomes unavailable for election, the enclosed proxy may be voted for a substitute candidate in the discretion of the proxy holder(s). REQUIRED VOTE A plurality of the votes cast at the Meetings, if a quorum is represented, is required for the election of each Trustee. 2. APPROVAL OF AN AMENDED AND RESTATED MANAGEMENT AGREEMENT A. Summary. The Advisor serves as the Fund's investment advisor under a management agreement dated March 27, 1995 (the "Current Management Agreement"). At a meeting held on June 18, 1999, the Trustees unanimously approved and voted to recommend that shareholders of the Fund approve an amended and restated management agreement (the "New Management Agreement") to change the base amount used to determine the Advisor's management fee. As described more fully below, in addition to paying the Advisor a fee for managing the Fund's assets, the Fund would pay the Advisor a percentage of any additional net income earned by the Fund as a result of the Fund's use of leverage. However, if the Fund's use of leverage generates negative net income to shareholders, then the Advisor would return a portion of its management fee to the Fund. There are no other changes being proposed to be made in the Current Management Agreement. B. Use of Leverage by the Fund and Related Risks. Leverage. The Fund's investment objective is to seek high current income and total return by investing primarily in lower-rated corporate debt securities. Under normal market conditions, the Fund invests primarily in a professionally managed, diversified portfolio of debt securities rated in the lower categories by established rating agencies (consisting principally of securities rated BBB or lower by Standard & Poor's Rating Group or Baa or lower by Moody's Investors Service, Inc.) or nonrated securities deemed by the Advisor to be of comparable quality. Lower rated securities entail risks that are different and more pronounced than those involved in higher rated securities. The Fund's use of leverage through bank borrowings creates the opportunity for greater total returns but at the same time involves certain substantial risks. The net proceeds of borrowings are available for investment in accordance with the Fund's investment objective and policies. If the rate of return on these investments exceeds the interest rate on the borrowings, an enhanced return to the Fund's shareholders should result. For example, the Fund might borrow money at short-term interest rates and invest the proceeds in longer-term portfolio investments that pay a higher rate. Historically, prevailing long-term interest rates have generally been higher than short-term rates. However, there can be no assurance that the historical relationship between short-term and long-term interest rates will continue, nor is the Fund limited to borrowing at short-term rates. The Fund utilizes leverage when the Advisor believes that such leverage will benefit the Fund and the shareholders, after taking into account considerations such as the interest rates payable on the borrowings, other costs to the Fund of maintaining the leverage and the anticipated return from the portfolio securities purchased with the proceeds of the borrowings. The issuance, timing, amount and other terms of any such borrowings are subject to the approval and supervision of the Fund's Board of Trustees and the determination by the Board that such leverage is likely to achieve benefits to shareholders. Risks of Leverage. The Fund's use of bank borrowings to leverage its portfolio creates special risks not associated with unleveraged funds having similar investment objectives and policies, including a higher volatility of the net asset value of the shares and potentially more volatility in the market value of the shares. Any investment income or gains earned by the Fund on amounts effectively borrowed that is in excess of what the Fund effectively pays as interest will cause the value of and dividends, if any, on the Fund's shares to rise more quickly than would otherwise be the case. Conversely, if the investment performance by the Fund on leverage fails to cover the interest on such leverage, the value of the shares may decrease more quickly than would otherwise be the case and dividends thereon will be reduced or eliminated. This is the speculative effect of "leverage." If the Fund's current investment income were not sufficient to meet interest payments on the leverage, it could be necessary for the Fund to liquidate certain of its investments, thereby reducing the net asset value attributable to the shares. In addition, a decline in the net asset value of the Fund's investments may affect the ability of the Fund to make dividend payments on its shares and such failure to pay dividends or make distributions may result in the Fund ceasing to qualify as a regulated investment company under the Internal Revenue Code of 1986 as amended (the "Code"). Successful use of a leveraging strategy may depend on the Advisor's ability to correctly predict interest rates and market movements, and there is no assurance that a leveraging strategy will be successful during any period in which it is employed. C. Proposed Leverage Fee Adjustment. The form of the proposed New Management Agreement is attached as Exhibit A. Under the terms of the Current Management Agreement, the Advisor is paid an annual management fee of 0.65% on the Fund's average weekly net assets (the "Base Fee"). The New Management Agreement is substantially similar to the current Management Agreement except for the addition of a separate leverage fee to accompany the Base Fee. The leverage fee will either increase or decrease the total management fee paid by the Fund to the Advisor based on the amount of income generated by the Fund's use of leverage. The leverage fee is calculated and paid monthly under the New Management Agreement as follows: Leverage (gross income (% of Fund's (interest and other fee = of the Fund) X average total - expenses of X 20% assets represented the leverage) by leverage) The gross income of the Fund is the amount of income generated by the Fund's investments. The product of the gross income and the percentage of the Fund's average total assets represented by leverage equals the gross income generated by the use of leverage. The cost of the leverage (i.e., the interest paid by the Fund and other expenses paid by the Fund) is subtracted from this amount. The resulting figure is the amount of income that is available for distribution to the Fund's shareholders as additional income. The Advisor would receive 20% of this additional income, if the leverage generates positive income, but would return to the Fund 20% of the income, if the leverage generates negative income. Positive income is generated if the pro rata return on the Fund's investments is greater than the Fund's borrowing costs for the leverage. Negative income is generated if the pro rata return on the Fund's investments is less than the Fund's borrowing costs for the leverage. It is not possible to predict the effect of the leverage fee adjustment to the Advisor because it will depend on the impact of leverage on the Fund's income. The Fund's Board of Trustees determined that it would be appropriate to increase the Advisor's compensation when the Fund's use of leverage increases the shareholders' yield and, conversely, to reduce the Advisor's compensation when the yield is reduced as a result of the leverage. The Board believes that this adjustment is appropriate for the Fund and that providing incentives to the Advisor based on its performance benefits shareholders. The New Management Agreement shall take effect immediately upon approval by the Fund's shareholders, if approved. If the New Management Agreement is not approved by the Fund's shareholders, the Current Management Agreement will continue in full force and effect. D. Application of the Leverage Fee Adjustment. The application of the leverage fee adjustment is illustrated by the chart below which uses figures from the twelve months ended October 31, 1999 and assumes that the New Management Agreement was in effect during this period. For illustrative purposes, the chart calculates the leverage fee adjustment once at the end of the twelve month period, although the proposed fee will be calculated monthly. Average Total Assets of the Fund $177,344,361 Average Assets of the Fund from Leverage $ 47,300,000 Percentage of Fund's Total Assets Represented by Leverage 26.7% Gross Income of the Fund $ 18,447,423 Pro-Rata Leverage Income at 26.7% $ 4,902,163 Less Expense of Leverage (Interest Paid to Lender) $ (3,220,445) Net Leverage Income $ 1,699,718 Percentage of Net Leverage Income Retained by Advisor 20% Net Leverage Income Retained by Advisor $ 339,944 Net Leverage Income Distributed to Shareholders $ 1,359,774 Set forth below is a chart showing the dollar amount of management fees paid during the twelve months ended October 31, 1999, under the Current Management Agreement assuming the agreement was in effect for the period. Also set forth below is a comparative fee table showing the amount of fees and expenses paid by the Fund under the Current Management Agreement as a percentage of average net assets during the twelve months ended October 31, 1999. The table also shows the fees and expenses shareholders would have paid if the New Management Agreement had been in effect during this period. DOLLAR AMOUNT OF MANAGEMENT FEES PAID (twelve months ended October 31, 1999) New Management Agreement ----------------------------------------- Current Leverage Fee Agreement Base Fee Adjustment Total Fee Amount of Fees Paid or that would have been Paid $845,923 $845,923 $339,944 $1,185,867 COMPARATIVE FEE TABLE (twelve months ended October 31, 1999) Annual Fund Operating Expenses (as a percentage of average net assets) New Management Agreement ----------------------------------------- Current Leverage Fee Agreement Base Fee Adjustment Total Fee Management Fee 0.65% 0.65% 0.26% 0.91% Other Expenses 0.24 0.24 -- 0.24 Interest Expense 2.48 2.48 -- 2.48 ---- ---- -- ---- Total Fund Operating Expenses 3.37% 3.37% 0.26% 3.63% ==== ==== ==== ==== Example The following example illustrates the expenses on a $1,000 investment under the Current and New Management Agreements, assuming a 5% annual return: 1 Year 3 Years 5 Years 10 Years Current Agreement $340 $1,036 $1,755 $3,658 New Agreement: Base Fee $340 $1,036 $1,755 $3,658 Leverage Fee $ 25 $ 76 $ 123 $ 231 Total $365 $1,112 $1,878 $3,889 E. Considerations by the Board of Trustees. The Fund's Board of Trustees first considered the proposal to amend the Current Management Agreement at a meeting on February 26, 1999. In addition, the Board's Advisory Fees and Expenses Committee met thereafter to consider the proposal. Based upon the evaluation of the materials presented by the Advisor, and with the advice of counsel, at a subsequent meeting on June 18, 1999 the Trustees unanimously approved the fee structure proposed by the Advisor in the New Management Agreement. In reaching its decision to approve the New Management Agreement, the Board of Trustees considered many factors, including: the benefits, under appropriate market conditions, of leverage to the Fund's shareholders, including potentially higher levels of distributions; the fact that the proposed fee structure would somewhat reduce the possible benefits of the use of leverage; the need of the Advisor to devote personnel and resources to managing the Fund and the additional assets attributable to leverage; and the comparability of the current and proposed structure of the management fee to that of other investment companies that utilize leverage. In addition, the Trustees concluded that the leverage fee adjustment provides a proper incentive for the Advisor and joins its interest with those of the shareholders in seeking good relative investment performance. Based upon all of the above considerations, the Trustees determined that the proposed leverage fee adjustment would be fair and reasonable and that its adoption will make it more likely that the objectives of continued levels of good service and investment performance currently and in the future will be achieved. F. Information Concerning the Advisor and its Affiliates and the Current Management Agreement. The Advisor is a wholly-owned subsidiary of LFG, which in turn is an indirect wholly-owned subsidiary of Liberty Financial. Liberty Financial is a direct majority-owned subsidiary of LFC Management Corporation, which in turn is a direct wholly-owned subsidiary of Liberty Corporate Holdings, Inc., which in turn is a direct wholly-owned subsidiary of LFC Holdings, Inc., which in turn is a direct wholly-owned subsidiary of Liberty Mutual Equity Corporation, which in turn is a direct wholly-owned subsidiary of Liberty Mutual Insurance Company (Liberty Mutual). As of February 29, 2000, LFC Management Corporation owned 72% of Liberty Financial. Liberty Financial is a diversified and integrated asset management organization which provides insurance and investment products to individuals and institutions. Liberty Financial's, LFC Management Corporation's, Liberty Corporate Holdings, Inc.'s and LFC Holdings, Inc.'s principal executive offices are located at 600 Atlantic Avenue, 24th Floor, Boston, Massachusetts 02210. Liberty Mutual is an underwriter of workers' compensation insurance and a Massachusetts-chartered mutual property and casualty insurance company. The principal business activities of Liberty Mutual's subsidiaries other than Liberty Financial are property-casualty insurance, insurance services and life insurance (including group life and health insurance products) marketed through its own sales force. Liberty Mutual's and Liberty Mutual Equity Corporation's principal executive offices are located at 175 Berkeley Street, Boston, Massachusetts 02117. Liberty Mutual is deemed to be the controlling entity of the Advisor and its affiliates. The directors of the Advisor are Nancy L. Conlin, Stephen E. Gibson and Joseph R. Palombo. Mr. Gibson is the principal executive officer of the Advisor. The principal occupations of the Advisor's directors are as officers and directors of the Advisor and certain of its affiliates. The address of the directors and officers of the Advisor is One Financial Center, Boston, Massachusetts 02111. The following officers of the Fund are officers, employees or directors of the Advisor: Stephen E. Gibson is President of the Fund and Chairman of the Board, President, Chief Executive Officer and Director of the Advisor; Joseph R. Palombo is Vice President of the Fund and Executive Vice President and Director of the Advisor; Pamela A. McGrath is Treasurer and Chief Financial Officer of the Fund and Chief Financial Officer, Treasurer and Senior Vice President of the Advisor; J. Kevin Connaughton is Controller and Chief Accounting Officer of the Fund and Vice President of the Advisor; Nancy L. Conlin is Secretary of the Fund and Senior Vice President, General Counsel, Director, Clerk and Secretary of the Advisor; Carl C. Ericson is Vice President of the Fund and Senior Vice President of the Advisor. The Current Management Agreement provides that, subject to the Board of Trustees' supervision, the Advisor will manage the assets of the Fund in accordance with its investment policies, purchase and sell securities and other investments on behalf of the Fund and report results to the Board of Trustees periodically. The Current Management Agreement also requires the Advisor to furnish, at its expense (a) office space, supplies, facilities and equipment; (b) executive and other personnel for managing the affairs of the Fund (excluding custodial, transfer agency, dividend and plan agency services, pricing and certain record keeping services); and (c) compensation to Trustees who are directors, officers or employees of the Advisor or its affiliates. For the fiscal year ended October 31, 1999, the Fund paid the Advisor $845,923 in management fees. Had the New Management Agreement been in effect for the fiscal year ended October 31, 1999, the Fund would have paid the Advisor $1,185,867 in management fees. The Current Management Agreement may be terminated at any time by the Advisor, by the Board of Trustees or by vote of a majority of the outstanding voting securities of the Fund without penalty on 60 days' written notice; shall automatically terminate upon any assignment; and otherwise shall continue in effect from year to year if approved annually (1) by the Board of Trustees or by vote of a majority of the outstanding voting securities of the Fund and (2) by a majority of the Trustees who are not "interested persons" as defined under the 1940 Act. The Board of Trustees last approved the Current Management Agreement at a meeting held on June 18, 1999. The Fund's shareholders approved the Current Management Agreement at a Special Meeting of Shareholders held on February 15, 1995. The Advisor provides bookkeeping and pricing services to the Fund pursuant to a separate Service Contract under which the Advisor is paid a yearly fee of $27,000 plus 0.035% of the Fund's average net assets over $50 million. For these services, the Fund paid the Advisor approximately $55,000 for the fiscal year ended October 31, 1999. In addition to the fees described above, the Fund pays all of its expenses not assumed by the Advisor, including, without limitation, fees and expenses of the Independent Trustees, interest charges, taxes, brokerage commissions, expenses of issue or redemption of shares, fees and expenses of registering and qualifying shares of the Fund for distribution under federal and state laws and regulations, custodial, auditing and legal expenses, expenses of determining net asset value of the Fund's shares, expenses of providing reports to shareholders, proxy statements and proxies to existing shareholders, and its proportionate share of insurance premiums and professional association dues or assessments. The Fund also is responsible for such non-recurring expenses as may arise, including litigation in which the Fund may be a party, and other expenses as determined by the Board of Trustees. The Fund may have an obligation to indemnify its officers and Trustees with respect to litigation. G. Other Funds Managed by the Advisor. In addition to the services provided by the Advisor to the Fund, the Advisor also provides management and other services and facilities to other investment companies with different investment objectives than the Fund. Information with respect to the assets of and management fees payable to the Advisor by another fund having an investment objective similar to that of the Fund, is set forth below: Annual Management Total Net Assets at Fee as a % of March 31, 2000 Average Daily Fund (in millions) Net Assets - ---- ------------- ---------- Colonial High Yield Securities Fund $1,127.4 0.60% H. Required Vote. Approval of the New Management Agreement will require the affirmative vote of a "majority of the outstanding voting securities" of the Fund (as defined in the 1940 Act), which means the affirmative vote of the lesser of (1) more than 50% of the outstanding shares of the Fund or (2) 67% or more of the shares of the Fund present at the Meeting if more than 50% of the outstanding shares of the Fund are represented at the Meeting in person or by proxy. If the New Management Agreement is not approved, the Fund's current Management Agreement will remain in effect. The Fund's ability to borrow money to engage in leverage (or for other purposes) does not depend on approval of the New Management Agreement. The Board of Trustees unanimously recommends that shareholders of the Fund vote FOR the New Management Agreement. 3. RATIFICATION OF INDEPENDENT ACCOUNTANTS PricewaterhouseCoopers LLP was selected as independent accountants for the Fund for the Fund's fiscal year ending October 31, 2000 by unanimous vote of the Board of Trustees, subject to ratification or rejection by the shareholders. Neither PricewaterhouseCoopers LLP nor any of its partners has any direct or material indirect financial interest in the Fund. A representative of PricewaterhouseCoopers LLP will be available at the Meeting, if requested by a shareholder in writing at least five days before the Meeting, to respond to appropriate questions and make a statement (if the representative desires). REQUIRED VOTE Ratification requires the affirmative vote of a majority of the shares of the Fund voted at the Meeting. 4. OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY As of the date of this Proxy Statement, only the business mentioned in Items 1 through 3 of the Notice of the Meeting is contemplated to be presented. If any procedural or other matters properly come before the Meeting, the enclosed proxy shall be voted in accordance with the best judgment of the proxy holder(s). The Meeting is to be held at the same time as the meeting of shareholders of Colonial Municipal Income Trust. It is anticipated that the meetings will be held simultaneously. In the event that any Fund shareholder at the Meeting objects to the holding of a simultaneous meeting and moves for an adjournment of the meetings so that the Meeting of the Fund may be held separately, the persons named as proxies will vote in favor of such an adjournment. If a quorum of shareholders (a majority of the shares entitled to vote at the Meeting) is not represented at the Meeting or at any adjournment thereof, or, even though a quorum is so represented, if sufficient votes in favor of the Items set forth in the Notice of the Meeting are not received by June 28, 2000, the persons named as proxies may propose one or more adjournments of the Meeting for a period or periods of not more than ninety days in the aggregate and further solicitation of proxies may be made. Any such adjournment may be effected by a majority of the votes properly cast in person or by proxy on the question at the session of the Meeting to be adjourned. The persons named as proxies will vote in favor of such adjournment those proxies which they are entitled to vote in favor of the Items set forth in the Notice of the Meeting. They will vote against any such adjournment those proxies required to be voted against any of such Items. Compliance with Section 16(a) of the Securities Exchange Act of 1934 Section 16(a) of the Securities Exchange Act of 1934, as amended, and Section 30(f) of the 1940 Act, as amended, require the Fund's Board of Trustees and executive officers, persons who own more than ten percent of the Fund's equity securities, the Fund's investment advisor and affiliated persons of the Fund's investment advisor (Section 16 reporting persons), to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of the Fund's shares and to furnish the Fund with copies of all Section 16(a) forms they file. Based solely upon a review of copies of such reports furnished to the Fund, and on representations that no other reports were required during the fiscal year ended October 31, 1999, the Section 16 reporting persons complied with all Section 16(a) filings applicable to them. Date for Receipt of Shareholder Proposals Proposals of shareholders which are intended to be considered for inclusion in the Fund's proxy statement relating to the 2001 Annual Meeting of Shareholders of the Fund must be received by the Fund at One Financial Center, Boston, Massachusetts 02111 on or before November 27, 2000. Shareholders are urged to vote, sign and mail their proxies immediately. EXHIBIT A AMENDED AND RESTATED MANAGEMENT AGREEMENT AGREEMENT dated as of June 28, 2000, between Colonial intermediate high Income Fund, a Massachusetts business trust (Fund), and COLONIAL MANAGEMENT ASSOCIATES, INC., a Massachusetts corporation (Adviser). In consideration of the promises and covenants herein, the parties agree as follows: 1. The Adviser will manage the investment of the assets of the Fund in accordance with its investment policies and will perform the other services herein set forth, subject to the supervision of the Board of Trustees of the Fund. 2. In carrying out its investment management obligations, the Adviser shall: (a) evaluate such economic, statistical and financial information and undertake such investment research as it shall believe advisable; (b) purchase and sell securities and other investments for the Fund in accordance with the procedures approved by the Board of Trustees; and (c) report results to the Board of Trustees. 3. The Adviser shall furnish at its expense the following: (a) office space, supplies, facilities and equipment; (b) executive and other personnel for managing the affairs of the Fund (including preparing financial information of the Fund and reports and tax returns required to be filed with public authorities, but exclusive of those related to custodial, transfer, dividend and plan agency services, determination of net asset value and maintenance of records required by Section 31(a) of the Investment Company Act of 1940, as amended, and the rules thereunder (1940 Act)); and (c) compensation of Trustees who are directors, officers, partners or employees of the Adviser or its affiliated persons (other than a registered investment company). 4. The Adviser shall be free to render similar services to others so long as its services hereunder are not impaired thereby. 5. The Fund shall pay the Adviser monthly a fee at the annual rate of 0.65% of the average weekly net assets of the Fund. In addition, the Fund shall pay the Advisor monthly a fee equal to 20% of the Fund's Leverage Income; provided, however, if the Fund's Leverage Income is less than zero then the Advisor shall pay the Fund 20% of the Fund's Leverage Income. "Leverage Income" shall mean: (gross income (% of Fund's (interest and other of the Fund for x average daily -- borrowing expenses such month) total assets associated with represented by leverage for such leverage as of month) the last day of such month) 6. If the operating expenses of the Fund for any fiscal year exceed the most restrictive applicable expense limitation for any state in which shares are sold, the Adviser's fee shall be reduced by the excess but not to less than zero. 7. This Agreement shall become effective as of the date of its execution, and (a) unless otherwise terminated, shall continue until two years from its date of execution and from year to year thereafter so long as approved annually in accordance with the 1940 Act; (b) may be terminated without penalty on sixty days' written notice to the Adviser either by vote of the Board of Trustees of the Fund or by vote of a majority of the outstanding voting securities of the Fund; (c) shall automatically terminate in the event of its assignment; and (d) may be terminated without penalty by the Adviser on sixty days' written notice to the Fund. 8. This Agreement may be amended in accordance with the 1940 Act. 9. For the purpose of the Agreement, the terms "vote of a majority of the outstanding voting securities", "affiliated person" and "assignment" shall have their respective meanings defined in the 1940 Act and exemptions and interpretations issued by the Securities and Exchange Commission under the 1940 Act. 10. In the absence of willful misfeasance, bad faith or gross negligence on the part of the Adviser, or reckless disregard of its obligations and duties hereunder, the Adviser shall not be subject to any liability to the Fund, to any shareholder of the Fund or to any other person, firm or organization, for any act or omission in the course of, or connected with, rendering services hereunder. COLONIAL INTERMEDIATE HIGH INCOME FUND By: Title: COLONIAL MANAGEMENT ASSOCIATES, INC. By: Title: A copy of the document establishing the Fund is filed with the Secretary of The Commonwealth of Massachusetts. This Agreement is executed by officers not as individuals and is not binding upon any of the Trustees, officers or shareholders of the Fund individually but only upon the assets of the Fund. PROXY COLONIAL INTERMEDIATE HIGH INCOME FUND This Proxy is Solicited on Behalf of the Trustees The undersigned shareholder hereby appoints William J. Ballou, Suzan M. Barron, Nancy L. Conlin, Stephen E. Gibson and Joseph R. Palombo, each of them proxies of the undersigned, with power of substitution, to vote at the Annual Meeting of Shareholders of Colonial Intermediate High Income Fund, to be held at Boston, Massachusetts, on Wednesday, June 28, 2000 and at any adjournments, as follows on the reverse side: CONTINUED AND TO BE SIGNED ON REVERSE SIDE /SEE REVERSE SIDE/ /SEE REVERSE SIDE/ /X/ Please mark votes as in this example. This proxy when properly executed will be voted in the manner directed herein and, absent direction, will be voted FOR Items 1 through 3 listed below. 1. ELECTION OF FIVE TRUSTEES. (Item 1 of the Notice) Nominees: (01) James E. Grinnell (02) Salvatore Macera (03) James L. Moody, Jr. (04) Thomas E. Stitzel (05) Anne-Lee Verville / / FOR ALL NOMINEES / / WITHHELD FROM ALL NOMINEES / / For all nominees except as noted above 2. APPROVAL OF AN AMENDED AND RESTATED MANAGEMENT AGREEMENT. (Item 2 of the Notice). / / FOR / / AGAINST / / ABSTAIN 3. PROPOSAL TO RATIFY THE SELECTION OF INDEPENDENT ACCOUNTANTS. (Item 3 of the Notice) / / FOR / / AGAINST / / ABSTAIN 4. IN THEIR DISCRETION, UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / / MARK HERE IF YOU PLAN TO ATTEND THE MEETING / / Please sign exactly as name(s) appear(s) hereon. Joint owners should sign personally. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. Signature------------------- Date------------------ Signature------------------- Date------------------ -----END PRIVACY-ENHANCED MESSAGE-----