-----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, DWLZkwjvod4n8fZ6F+48y6ZZArYVUSqkdkaCJ3Ax8S3ISFCa2mjdsMisYThp/EZd Q+UWb5veJcz4zqo9WzbSfw== 0000021847-99-000045.txt : 19990315 0000021847-99-000045.hdr.sgml : 19990315 ACCESSION NUMBER: 0000021847-99-000045 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990415 FILED AS OF DATE: 19990312 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLONIAL HIGH INCOME MUNICIPAL TRUST CENTRAL INDEX KEY: 0000845606 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 811-05754 FILM NUMBER: 99564248 BUSINESS ADDRESS: STREET 1: ONE FINANCIAL CTR CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 6174263750 DEF 14A 1 COLONIAL HIGH INCOME MUNICIPAL TRUST One Financial Center, Boston, Massachusetts 02111 (617) 426-3750 Dear Shareholder: Colonial High Income Municipal Trust (Fund) will hold its Annual Meeting of Shareholders (Meeting) on April 15, 1999 at 10:00 a.m., Eastern time, at the offices of Colonial Management Associates, Inc., the Fund's investment advisor. A formal Notice of Annual Meeting of Shareholders appears on the next page, followed by the proxy statement which explains in more detail the proposals to be considered. We hope that you can attend the Meeting in person; however, we urge you in any event to vote your shares at your earliest convenience. YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE HELP YOUR FUND AVOID THE EXPENSE OF A FOLLOW-UP MAILING BY VOTING TODAY! The Fund is using Corporate Investor Communications, Inc. (CIC), a professional proxy solicitation firm, to assist shareholders in the voting process. As the date of the Meeting approaches, if we have not yet received your vote, you may receive a telephone call from CIC reminding you to exercise your right to vote. Please take a few moments to review the details of each proposal. We appreciate your participation and prompt response in these matters, and thank you for your continued support. Sincerely, Stephen E. Gibson, President March 12, 1999 HI-85/815G-0399 1001-PS-99 COLONIAL HIGH INCOME MUNICIPAL TRUST One Financial Center, Boston, Massachusetts 02111 (617) 426-3750 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 15, 1999 Dear Shareholder: The Annual Meeting of Shareholders (Meeting) of Colonial High Income Municipal Trust (Fund) will be held at the offices of Colonial Management Associates, Inc. (Advisor), One Financial Center, Boston, Massachusetts, on Thursday, April 15, 1999, at 10:00 a.m., Eastern time, to: 1. Elect six Trustees; 2. Approve or disapprove amendments to the Fund's Agreement and Declaration of Trust to permit the issuance of preferred shares of the Fund; 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 Trustees, Nancy L. Conlin, Secretary March 12, 1999 NOTICE: YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. IF A QUORUM IS NOT PRESENT AT THE MEETING, ADDITIONAL EXPENSES WILL BE INCURRED TO SOLICIT ADDITIONAL PROXIES. TO AVOID THESE COSTS TO YOUR FUND, PLEASE VOTE, SIGN AND RETURN YOUR PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE IMMEDIATELY. PROXY STATEMENT General Information March 12, 1999 The enclosed proxy, which was first mailed on or about March 12, 1999, is solicited by the Trustees for use at the Meeting. All properly executed proxies received in time for the Meeting will be voted as specified in the proxy or, if no specification is made, in favor of each proposal referred to in the Proxy Statement. The proxy may be revoked prior to its exercise by a later dated proxy, by written revocation received by the Secretary or by voting in person. Corporate Investor Communications, Inc. (CIC) has been engaged by the Fund to assist in the proxy solicitation process. The cost of this assistance is not expected to exceed $10,000. Solicitation may be made by mail, telephone, telegraph, telecopy and personal interviews. Authorization to execute proxies may be obtained by telephonically or electronically transmitted instructions. The Fund will bear the cost of solicitation which includes the printing and mailing of proxy materials and the tabulation of votes. By voting as soon as you receive your proxy materials, you will help to reduce the cost of any additional mailings. Holders of a majority of the shares outstanding and entitled to vote constitute a quorum and must be present in person or represented by proxy for business to be transacted at the Meeting. On February 17, 1999, the Fund had outstanding 31,059,288 shares of beneficial interest. Shareholders of record at the close of business on February 17, 1999 will have one vote for each share held. As of February 17, 1999, The Depository Trust Company (Cede & Co.), 7 Hanover Square, New York, New York 10004, owned of record 26,304,679 shares representing 84.69% 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 the respect to the Declaration of Trust amendments, withheld authority, abstentions and broker non-votes have the effect of a vote against the proposal. With respect to the election of Trustees and ratification of independent accountants, withheld authority, abstentions and broker non-votes have no effect on the outcome of the voting. 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, MA 02111 or by calling 1-800-426-3750. 1. Election of Six Trustees. Ms. Verville, Ms. Collins and Messrs. Carberry, Macera, Stitzel and Sullivan (who have each agreed to serve) are proposed for election as Trustees of the Fund. Ms. Verville and Mr. Stitzel will each serve for two years, and Ms Collins and Messrs. Carberry, Macera and Sullivan will each to serve for three years or until a successor is elected. The Board of Trustees currently consists of Ms. Collins and Ms. Verville and Messrs. Birnbaum, Bleasdale, Carberry, Grinnell, Lowry, Mayer, Macera, Moody, Neuhauser, Stitzel, and Sullivan. The Board of Trustees is divided into the following three classes, each with a term expiring in the year indicated (assuming the persons listed above are elected at the Meeting): 2000 2001 2002 - ---- ---- ---- Mr. Birnbaum Mr. Bleasdale Mr. Carberry Mr. Grinnell Mr. Lowry Ms. Collins Mr. Mayer Mr. Neuhauser Mr. Macera Mr. Moody Mr. Stitzel Mr. Sullivan Ms. Verville
The following table sets forth certain information about the Board of Trustees: Shares Beneficially Owned and Percent of Fund at Name Trustee February (Age) since Principal Occupation (1) and 17, 1999 (2) Directorships Robert J. Birnbaum 1995 Consultant (formerly Special Counsel, -0- (71) Dechert Price & Rhoads--law). Director or Trustee: Colonial Funds, LAMCO Trust I, Liberty All-Star Equity Fund, Liberty All-Star Growth Fund, Inc., The Emerging Germany Fund. Tom Bleasdale 1989 Retired (formerly Chairman of the Board -0- (68) and Chief Executive Officer, Shore Bank & Trust Company--banking). Director or Trustee: Colonial Funds, Empire Company Limited. John V. Carberry (*)1998 Senior Vice President of Liberty Financial -0- (51) Companies, Inc. (formerly managing Director, Salomon Brothers--Investment Banking). Director or Trustee: Colonial Funds LAMCO Trust I. Lora S. Collins 1992 Attorney (law) (formerly Attorney Kramer, -0- (63) Levin, Naftalis & Frankel--law). Trustee: Colonial Funds. James E. Grinnell 1995 Private Investor. Director or Trustee: -0- (69) Colonial Funds, LAMCO Trust I, Liberty All-Star Equity Fund, Liberty All-Star Growth Fund, Inc. Richard W. Lowry 1995 Private Investor (formerly Senior Vice -0- (62) President--Operations, The Rockport Company). Director or Trustee: Colonial Funds, LAMCO Trust I, Liberty All-Star Equity Fund, Liberty All-Star Growth Fund, Inc. Salvatore Macera 1998 Private Investor (formerly Executive Vice -0- (67) President of Itek Corp. and President of Itek Optical & Electronics Industries, Inc.--electronics). Director or Trustee: Colonial Funds. William E. Mayer (*)1994 Partner, Development Capital, LLC -0- (58) (investments) (formerly Dean, College of Business and Management, University of Maryland--higher education; Dean, Simon Graduate School of Business, University of Rochester--higher education; Chairman and Chief Executive Officer, CS First Boston Merchant Bank; and President and Chief Executive Officer, The First Boston Corporation). Director or Trustee: Colonial Funds, Trust I, Liberty All-Star Equity Fund, Liberty All-Star Growth Fund, Inc., Hambrecht & Quist Incorporated, Chart House Enterprises, Johns Manville. James L. Moody, Jr. 1989 Retired (formerly Chairman of the Board, -0- (67) Chief Executive Officer and Director, Hannaford Bros. Co.--food distributor). Director or Trustee: Colonial Funds, LAMCO Trust I, Penobscot Shoe Co., UNUM Corporation, IDEXX Laboratories, Inc., Staples, Inc., Empire Company Limited. John J. Neuhauser 1992 Dean of the School of Management, Boston -0- (56) College --higher education. Director or Trustee: Colonial Funds, LAMCO Trust I, Liberty All-Star Equity Fund, Liberty All-Star Growth Fund, Inc., Hyde Athletic Industries, Inc. Thomas E. Stitzel 1998 Professor of Finance, College of Business, -0- (63) Boise State University - higher education; Business Consultant and Author. Director or Trustee: Colonial Funds. Robert L. Sullivan 1989 Retired Partner, KPMG LLP Management -0- (71) Consulting (formerly Management Consulting, Saatchi and Saatchi Consulting Ltd., and Principal and International Practice Director, Management Consulting, Peat Marwick Main & Co.). Trustee: Colonial Funds. Anne-Lee Verville 1998 Consultant (formerly General Manager, -0- (53) Global Education Industry, and President, Applications Solutions Division, IBM Corporation--global education and global applications.). Trustee: Colonial Funds.
(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 February 17, 1999, the Trustees and officers of the Fund as a group beneficially owned less than 1% of the then outstanding shares of the Fund. (*) Mr. Carberry is an "interested person," as defined in the Investment Company Act of 1940 (1940 Act) because of his affiliation with Liberty Financial Companies, Inc. (Liberty Financial) (an indirect parent company of the Advisor). Mr. Carberry is the owner of common shares and other securities of Liberty Financial. Mr. Mayer is an "interested person," as defined by the 1940 Act because of his affiliation with Hambrecht & Quist Incorporated (a registered broker-dealer). In this Proxy Statement, "Colonial Funds" means Colonial Trust I, Colonial Trust II, Colonial Trust III, Colonial Trust IV, Colonial Trust V, Colonial Trust VI, Colonial Trust VII, LFC Utilities Trust, Liberty Variable Investment Trust Colonial High Income Municipal Trust, Colonial InterMarket Income Trust I, Colonial Intermediate High Income Fund, Colonial Investment Grade Municipal Trust and Colonial Municipal Income Trust. The following table sets forth certain information about the executive officers of the Fund:
Shares Executive Beneficially Name Owned and Officer Percent of (Age) Fund at Since February Office with Fund; Principal Occupation (3) 17, 1999 (4) Stephen E. Gibson President of the Fund and of the Colonial -0- 1998 Funds since June, 1998 is Chairman of the Board since July, 1998, Chief Executive (45) 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 COGRA, LLC (COGRA) since December, 1998 (formerly Director, Chief Executive Officer and President of The Colonial Group, Inc. (TCG) from December, 1996 to December, 1998); Assistant Chairman since August, 1998 of Stein Roe & Farnham Incorporated (SR&F) (formerly Managing Director of Marketing of Putnam Investments, June, 1992 to July, 1996). Davey S. Scoon Vice President of the Fund and of the -0- 1993 Colonial Funds since June, 1993; Vice (52) President since December, 1998 of LAMCO Trust I; Executive Vice President since July 1993 and Director since March, 1995 of the Advisor; Executive Vice President and Chief Operating Officer since December, 1998 of COGRA (formerly Executive Vice President and Chief Operating Officer from March, 1995 to December, 1998 of TCG; Vice President - Finance and Administration and Treasurer from November, 1985 to March, 1995); Executive Vice President since August, 1998 SR&F. Timothy J.Jacoby Treasurer and Chief Financial Officer of -0- 1996 the Fund and of the Colonial Funds since October, 1996; (formerly Controller and (46) Chief Accounting Officer from October, 1997 to February, 1998); Treasurer since December, 1998 of LAMCO Trust I; Senior Vice President since September, 1996 of the Advisor; Vice President, Chief Financial Officer and Treasurer since December, 1998 of COGRA (formerly Vice President, Chief Financial Officer and Treasurer from July, 1997 to December, 1998 of TCG); Senior Vice President of SR&F since August, 1998 (formerly Senior Vice President, Fidelity Accounting and Custody Services from September, 1993 to September, 1996). J. Kevin Connaughton Controller and Chief Accounting Officer of -0- 1998 the Fund and of the Colonial Funds since February, 1998; since December, 1998 of (34) LAMCO Trust I; Vice President since February, 1998 of the Advisor (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). Nancy L. Secretary of the Fund and of the Colonial -0- Conlin 1994 Funds since April, 1998 (formerly Assistant Secretary from July, 1994 to April, 1998), (45) is 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 Secretary and General Counsel of COGRA since December, 1998 (formerly Vice President - Secretary, Clerk and General Counsel of TCG from April, 1998 to December, 1998; Assistant Clerk from July, 1994 to April, 1998 formerly Partner Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. from June 1990 to June 1994).
(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) On February 17, 1999, the Trustees and officers of the Fund as a group beneficially owned less than 1% of the then outstanding shares of the Fund. Trustees' Compensation, Meetings and Committees For the fiscal year ended December 31, 1998 and for the calendar year ended December 31, 1998 the Trustees received the following compensation for serving as Trustees (5): Total Compensation From Aggregate The Fund Complex Paid Compensation To The From Fund For The Trustees For The Fiscal Year Ended Calendar Year Ended Trustee December, 1998 December 31, 1998 (6) Robert J. Birnbaum (7) $1,773 $99,429 Tom Bleasdale (7) 2,053 (8) 115,000 (9) John E. Carberry (10, 11) N/A N/A Lora S. Collins (7) 1,738 97,429 James E. Grinnell (7) 1,838 103,071 William D. Ireland, Jr.(12) 636 35,333 Richard W. Lowry (7) 1,751 98,214 Salvatore Macera (13) 000 25,250 William E. Mayer (7) 1,779 99,286 James L. Moody, Jr. (7) 1,887(14) 105,857 (15) John J. Neuhauser (7) 1,878 105,323 George L. Shinn (12) 564 31,334 Thomas E. Stitzel (13) 000 25,250 Robert L. Sullivan (7) 1,866 104,100 Anne-Lee Verville (7, 10) 1,644(16) 23,445 (17) Sinclair Weeks, Jr. (12) 617 34,333 (5) The Fund does not currently provide pension or retirement plan benefits to the Trustees. (6) On December 31, 1998, the Fund Complex consisted of 56 open-end and 5 closed-end management investment. (7) Elected by the shareholders of Liberty Variable Investment Trust on October 30, 1998. (8) Includes $935 payable in later years as deferred compensation. (9) Includes payable in later years as deferred compensation. (10) Elected by the Trustees of the closed-end Colonial Funds on June 18, 1998 and by the shareholders of the open-end Colonial Funds on October 30, 1998. (11) Does not receive compensation because he is an affiliated Trustee and employee of Liberty Financial Companies, Inc. (Liberty Financial). (12) Retired as a Trustee of the Fund on April 24, 1998. (13) Elected by the shareholders of the open-end Colonial Funds on October 30, 1998, and by the trustees of the closed-end Colonial Funds on December 17, 1998. (14) Total compensation of $1,887 for the fiscal year ended December 31, 1998 will be payable in later years as deferred compensation. (15) Total compensation of $105,857 for the calendar year ended December 31, 1998 will be payable in later years as deferred compensation. (16) Total compensation of $1,644 for the fiscal year ended December 31, 1998 will be payable in later years as deferred compensation. (17) Total compensation of $23,445 for the calendar year ended December 31, 1998 will be payable in later years as deferred compensation. For the fiscal year ended December 31, 1998, the Trustees received the following compensation in their capacities as Trustees or Directors of the Liberty All-Star Equity Fund and of the Liberty All-Star Growth Fund, Inc. (together, Liberty All-Star Funds): (18) Total Compensation From Liberty All-Star Funds For The Calendar Trustee Year Ended December 31, 1998 (19) - ------- --------------------------------- Robert J. Birnbaum $25,000 John E. Carberry (20, 21) N/A James E. Grinnell 25,000 Richard W. Lowry 25,000 William E. Mayer (22) 14,000 John J. Neuhauser (23) 25,000 (18) The Funds do not currently provide pension or retirement plan benefits to the trustees. (19) The Liberty All-Star Funds are advised by Liberty Asset Management Company (LAMCO). LAMCO is a indirect wholly-owned subsidiary of Liberty Financial (an intermediate parent of the Advisor. (20) Does not receive compensation because he is an affiliated trustee and employee of Liberty Financial. (21) Elected by the trustees of the Liberty All-Star Funds on June 30, 1998. (22) Elected by the shareholders of the Liberty All-Star Equity Fund on April 22, 1998 and by the trustees of the Liberty All-Star Growth Fund Inc. on December 17, 1998. (23) Elected by the shareholders of the Liberty All-Star Funds on April 22, 1998. During the Fund's fiscal year ended December 31, 1998, the Board of Trustees held six meetings. The Audit Committee of the Colonial Funds, consisting of Messrs. Bleasdale, Grinnell, Lowry, Moody, and Sullivan, met two times during the Fund's fiscal year ended December 31, 1998. The Committee recommends to the Trustees the independent accountants to serve as auditors, reviews with the independent accountants the results of the auditing engagement and the 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 Colonial Funds, consisting of Ms. Collins and Messrs. Birnbaum Grinnell and Neuhauser, met once during the Fund's fiscal year ended December 31, 1998. The Committee reviews compensation of the Board of Trustees. The Governance Committee of the Colonial Funds, consisting of Messrs. Bleasdale, Lowry, Mayer, Moody and Sullivan, met six times during the Fund's fiscal year ended December 31, 1998. The Committee in its sole discretion recommends to the Trustees among other things, nominees for Trustee and for appointments to various committees. The Committee considers candidates for election as Trustees. During the Fund's fiscal year ended December 31, 1998, each of the current Trustees, attended more than 75% of the meetings of the Board of Trustees and the committees of which such Trustee is a member. If any of the nominees listed above becomes unavailable for election, the enclosed proxy will be voted for a substitute candidate in the discretion of the proxy holder(s). Required Vote A plurality of the votes cast at the Meeting, if a quorum is represented, is required for the election of each Trustee. Description of the Advisor The Advisor is a wholly-owned subsidiary of COGRA, which in turn is an indirect wholly-owned subsidiary of Liberty Financial. Liberty Financial is an indirect majority-owned subsidiary of Liberty Mutual Insurance Company (Liberty Mutual). Liberty Financial is a diversified and integrated asset management organization which provides insurance and investment products to individuals and institutions. Its 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 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. 2. Amendments to the Fund's Agreement and Declaration of Trust to Permit the Issuance of Preferred Shares of the Fund. At a meeting on February 26, 1998, the Board of Trustees unanimously approved and recommended the approval by shareholders of an amendment to the Fund's Agreement and Declaration of Trust (Declaration of Trust) that would authorize the issuance by the Trust of multiple classes or series of shares (any such additional classes or series of preferred shares are referred to herein as the "preferred shares"), with rights as determined by the Board of Trustees, by action of the Board of Trustees without further shareholder approval. The text of the proposed amendments to the Declaration of Trust is included as Exhibit A to this proxy statement. Holders of existing shares of beneficial interest of the Fund (common shares) have no preemptive right to purchase or otherwise acquire any preferred shares that might be issued. Reasons for Authorization At its meeting the Board of Trustees concluded that the issuance of up to $120 million of floating rate preferred stock would be in the best interests of the holders of common shares if the reinvestment rates of return for long-term tax-exempt securities continued to be favorable. The Board of Trustees noted that, historically, the Fund has been able to earn a considerably higher return for its common shares in the past than it would likely have to pay on preferred shares and that, therefore, the issuance of preferred shares may increase the net investment income available to the holders of the common shares. In considering whether to approve or disapprove the proposed amendments to the Declaration of Trust, shareholders should consider not only the potential advantages of the issuance of preferred shares discussed immediately below, but also the income tax considerations discussed below under "Certain Federal Income Tax Considerations," and the possible effects of dilution, leverage and certain anti-takeover measures discussed below under "Risks of Issuance of Preferred Shares". In addition, shareholders should be aware that the net proceeds to the Fund of any issuance of preferred shares will increase the net assets of the Fund, and therefore will increase the dollar amount of the investment advisory and service fees payable by the Fund to the Advisor, since these fees are calculated as a percentage of the net assets of the Fund. However, the advisory fees as a percentage of the Fund's net assets would not change as a result of the issuance of preferred shares. Proposed Issuance of Preferred Shares The Board of Trustees of the Fund has approved the issuance of the proposed preferred shares in one or more initial series, which generally would be similar but would potentially differ in a number of respects, including the dates of issuance, the amount payable upon redemption or liquidation, the potentially different application on the Fund's ability to redeem such shares, certain voting rights, the dividend rates, dividend payment dates and dividend periods, which would be determined at the time of issuance of each series. The proposed initial series, which would have a variable dividend rate or rates, would be structured to be suitable for investment by persons seeking income that is exempt from federal income tax. The of Trustees believes that issuing such a series or more than one series of preferred shares may be likely, in certain circumstances, to increase the net investment income available for distribution to the holders of the common shares because of the effect of leverage (see "Risks of Issuance of Preferred Shares--Leverage" below), although there can be no assurance that such increase would in fact be achieved. Holders of the proposed initial series would be entitled to receive cumulative dividends at a variable rate with respect to each such series that would be set initially and at periodic intervals thereafter, through auctions, at a level that would be intended to cause the preferred shares to trade at their original offering price, subject to a ceiling set by reference to the credit rating assigned to the shares and prevailing rates on certain short-term securities. The dividends on the initial series would be intended, to the extent possible, to qualify in their entirety as "exempt-interest dividends" which are not subject to federal income tax under current law. To the extent that such dividends did not so qualify, additional dividends might be paid or might accumulate on the preferred shares so that, assuming payment, the net after-tax return to a holder of the preferred shares would be the same as if all of the dividends had qualified. See "Certain Federal Income Tax Considerations" below. Auctions of the proposed initial series of preferred shares would generally be held, and thereafter the dividend rate will generally be reset, periodically over short time periods (generally seven days but at the option of the Fund up to five years). The Fund would generally, in most circumstances have the right to redeem any initial series of preferred shares on or about any dividend payment date, at a stated redemption price plus an amount equal to accumulated and unpaid dividends, plus with respect to a redemption made at the Board of Trustee's discretion during a specific rate period, a redemption premium . The Fund would have the proceeds of the issuance of the series available for investment in accordance with the Fund's investment objectives and policies. The Fund would thus be able to invest the proceeds in longer-term investments and would intend to invest the proceeds principally in longer-term debt securities. Historically, prevailing long-term interest rates have generally been higher than prevailing short-term rates. Any incremental return available from investing new funds reduced by expenses attributable thereto (net incremental return) would be available for distribution to the holders of the common shares and, if the rate of return on the Fund's investments exceeds the dividend rate on the preferred shares, should enhance the return on the common shares. However, there can be no assurance that the historical relationship between short-term and long-term interest rates will always continue or that the Fund will receive any net incremental return that would be available to the holders of the common shares. Because the holders of the preferred shares would be entitled to receive dividends before the holders of the common shares, if the dividend rate on the preferred shares were greater than the net rate of return earned by the Fund on its portfolio investments, the amounts available for distribution to the holders of the common shares could be reduced. However, the Board of Trustees does not intend to approve the issuance of the initial series unless it believes, at the time of such issuance, that the return on the Fund's common shares is likely for the foreseeable future to be enhanced by the issuance. In addition, if, after a series of preferred shares were issued, the continuing payment of dividends on such shares had the effect of reducing the return on the common shares, the Fund expects that it would consider the redemption of preferred shares, to the extent possible or permitted by the terms of such shares. The Fund expects to seek a credit rating of the proposed initial series of preferred shares from one or more national securities rating agencies. There can, however, be no assurance that such credit ratings will be obtained. In addition, obtaining such credit ratings will involve additional costs to the Fund and may require that the Fund agree to various financial and operating restraints as a condition of such credit ratings. The discussion above describes an issuance of preferred shares considered by the Board of Trustees. If the proposed amendments to the Declaration of Trust concerning the issuance of additional classes or series of shares are approved, and if the Board of Trustees determines to proceed with issuance of one or more initial series of preferred shares, the terms of such issuance may be the same as, or different from, the terms described above. The proposed amendments to the Declaration of Trust would permit issuance of series of additional classes or series of shares, including preferred shares, other than the possible series described above, without further shareholder approval. Such broad authorization at this time of additional classes or series of shares will provide flexibility to take advantage of opportunities and possible future circumstances in which the issuance of preferred shares might be desirable. Requiring the shareholders to meet and approve each separate issuance of such shares would be time-consuming and costly, particularly in those instances where the number of shares to be issued may be small in relation to the total capital of the Fund. Moreover, if shareholder approval of such securities were postponed until a specific need arose, the delay could, in some instances, deprive the Fund of opportunities otherwise available. Certain Federal Income Tax Considerations General. Set forth below is a general description of certain federal income tax consequences to the Fund and to the holders of common shares of the Fund, of the possible issuance by the Fund of the initial series of preferred shares described above. If a series of preferred shares were issued with different terms than those of the proposed initial series, different federal income tax consequences than those described below might result. The description assumes that the Fund will continue to qualify as a regulated investment company under the Internal Revenue Code of 1986, as amended (the Code), as it did in its most recent fiscal year, so as to be relieved of federal income tax on net investment income and net capital gains distributed to shareholders. If the Fund were prohibited from paying dividends on its common shares by the asset coverage requirements of the preferred shares described below under "Description of Preferred Shares," its ability to meet the qualification requirements of the Code might be impaired. The Fund expects, however, that to the extent possible it would purchase or redeem preferred shares to maintain compliance with such asset coverage requirements. If the Fund failed to qualify for taxation as a regulated investment company under the Code in any taxable year, the Fund would be subject to tax on its taxable income at corporate rates, and all distributions from earnings and profits, including any distributions of net tax-exempt income and net long-term capital gains, would be taxable to shareholders as ordinary income. In addition, the Fund could be required to recognize unrealized gains, pay substantial taxes and interest (including an interest charge measured by the underpayment rate established in section 6621 of the Code on an amount equal to 50% of the Fund's earnings and profits for the taxable year) and make substantial distributions before re-qualifying for taxation as a regulated investment company. In addition, before re-qualifying, the Fund might under certain circumstances be required to recognize net unrealized gains for federal income tax purposes. To the extent that the Fund has net tax-exempt income from its investments, dividends paid by the Fund from its net investment income may be designated by the Fund as "exempt-interest dividends," which are not subject to federal income tax. If the Fund issues the proposed initial series of preferred shares described above, then - in order to increase the marketability of the series and thereby minimize the dividend rate required to be paid to make those shares attractive to investors - the Fund intends to give holders of the shares of the series priority over holders of common shares with respect to the payment of dividends. If any of the dividends on the preferred shares is determined to be from taxable capital gains or ordinary income, the terms of the preferred shares may require the Fund to pay an extra amount of dividends on the preferred shares in an amount sufficient to make each holder of the preferred shares whole (on an after-tax basis) with respect to the estimated federal income tax which the holder would be required to pay on the taxable distributions (gross-up payments). The amount of any dividends payable to common shareholders would normally be reduced by the amount of any such gross-up payments. Deduction for Dividends Paid by the Fund. As a regulated investment company, the Fund is generally entitled to a deduction for dividends paid to its shareholders out of its ordinary income. Under Section 562(c) of the Code, a distribution will not qualify for the deduction for dividends paid unless the distribution is pro rata, with no preferences to any share of the Fund as compared with other shares of the same class, and with no preference to one class of shares as compared with another class except to the extent that the former is entitled (without reference to waivers of their rights by shareholders) to such preference. The Fund intends to make distributions in a manner that will allow such distributions to qualify for the dividends-paid deduction. Description of Preferred Shares General. The proposed amendments to the Declaration of Trust would authorize the Board of Trustees to establish at or prior to the time of issuance of the class of preferred shares, or any series thereof, the issue price or prices, voting rights, dividend rate or rates, redemption price, liquidation value, conversion rights and such other terms and conditions of that class or series as the Board of Trustees deems appropriate, without further action on the part of the common shareholders. Under the 1940 Act, the Fund would not be permitted to issue preferred shares unless immediately after such issuance the value of the Fund's assets, less all liabilities and indebtedness not represented by senior securities (including private or temporary borrowings), would be at least 200% of (i) the aggregate amount of all debt securities, plus (ii) the aggregate involuntary liquidation preference of any shares (such as the preferred shares) having priority as to distribution of assets or payment of dividends over any other shares. Voting Rights. The 1940 Act requires that the holders of any preferred shares, voting separately as a single class, have the right to elect at least two Trustees at all times, and, subject to the prior rights, if any, of the holders of any other class of senior securities outstanding, to elect a majority of the Trustees at any time two years' dividends on the preferred shares are unpaid. (In order to give effect to this right of the holders of preferred shares to elect a majority of the Trustees in such circumstances, the proposed amendments to the Declaration of Trust would remove the provision that fixes the maximum number of Trustees at fifteen.) All other Trustees will be elected by the holders of the common shares and the preferred shares, voting together as a single class. The 1940 Act also requires that, in addition to any approval by shareholders that might otherwise be required, the approval of the holders of a majority of any outstanding preferred shares, voting separately as a class, would be required to (a) adopt any plan of reorganization that would adversely affect the preferred shares and (b) take any action requiring a vote of security holders pursuant to Section 13(a) of the 1940 Act, including, among other things, changes in the Fund's sub-classification as a closed-end investment company, changes in the classification of the Fund from a non-diversified investment company or changes in its fundamental investment policies and restrictions. Holders of preferred shares shall have such other voting rights as are required by law or are provided by the Trust's Board of Trustees at the time of issuance of the shares, and holders of a particular series of preferred shares may be entitled to vote as a separate series on certain matters. Dividend and Liquidation Preference. Holders of preferred shares would be entitled to receive dividends before holders of common shares, and would be entitled to receive the liquidation value of their shares before any distributions are made to holders of common shares should the Fund ever be dissolved. The dividend rights and liquidation value of the class or any particular series of preferred shares would be determined at the time of issuance of shares of the class or series, subject to the requirement of the 1940 Act that the dividends payable on preferred shares be cumulative. The Fund would not be permitted to pay or declare dividends (except a dividend payable in shares of the Fund) or other distributions on the common shares, or the purchase of any common shares by the Fund, unless the asset coverage test described above under "General" would be met, after giving effect to the dividend or distribution. Risks of Issuance of Preferred Shares Leverage. The issuance of preferred shares would create leverage which would affect the amount of income available for distribution on the Fund's common shares and the net asset value of the common shares. The initial dividend rate or rates that would be paid on any class or series of preferred shares would be determined at the time of issuance and would be the result of arms-length negotiations with the underwriters and would depend on various factors including market conditions prevailing at the time. The dividend rate will generally vary from time to time after the initial issuance of a series of preferred shares. At initial issuance or from time to time thereafter, the dividend rate could exceed both the current yield on the Fund's portfolio investments and the yield received by the Fund on investments made with the proceeds of the issuance of the offering of preferred shares and, therefore, an offering of preferred shares could result in a reduction of net investment income available for distribution on common shares. As a result of leverage, after giving effect to the liquidation preference of any preferred shares issued, any increase or decrease in the net asset value per common share would be somewhat greater than would have been the case had no preferred shares been issued. In addition, the leverage effect created by the issuance of preferred shares could magnify the effect on the holders of common shares of any increase or decrease in the yield on the Fund's portfolio for a given period of time. It is not possible to predict now the effect on the net asset value of the Fund's common shares that might result from the leverage effect of issuance of preferred shares. The Board of Trustees does not intend to issue preferred shares unless it believes, at the time of such issuance, that such issuance is likely for the foreseeable future to increase the yield on the Fund's common shares. Furthermore, since the proposed initial series would be generally, in most cases, redeemable on or about any dividend payment date at the option of the Fund, those preferred shares may be redeemed if, after issuance, redemption were considered advisable by the Board of Trustees and the terms of the Shares permitted such redemption. Dilution of Voting Rights. The voting rights of the outstanding common shares would be diluted upon the issuance of any preferred shares, because the holders of any preferred shares would have voting rights as described above under "Description of Preferred Shares - Voting Rights." Voting rights in the Trust are non-cumulative. Other Considerations. The class voting requirements, and the Board of Trustees representation, of the preferred shares could make it more difficult for the Fund to engage in certain types of transactions that might be proposed by the Board of Trustees and/or holders of common shares, such as a merger, sale of assets, exchange of securities, liquidation of the Fund or conversion to an open-end fund. Holders of preferred shares might have interests that differ from holders of common shares and there can be no assurance that holders of preferred shares will vote to approve transactions approved by holders of the common shares. The Fund's Board of Trustees is not currently aware of any efforts, pending or threatened, to acquire control of the Fund or to force an open-ending, merger or sale of assets by the Fund, or the liquidation or dissolution of the Fund. The purpose in presenting the proposed amendments to shareholders at this time is not to have available a defensive technique (although that would be a result of approval of the amendment), but to have available a mechanism for increasing the capital of the Fund in a way that might enhance the return on the Fund's common shares. The flexibility to issue preferred shares as well as common shares could enhance the Board of Trustee's ability to negotiate on behalf of the shareholders in a takeover but might also render more difficult or discourage a merger, tender offer or proxy contest, the assumption of control by the holder of a large block of the Fund's securities and the removal of incumbent management. The Declaration of Trust already includes certain defensive provisions that are discussed in the following paragraph. The Board of Trustees has no plans at this time to adopt or to ask shareholders to adopt any other defensive or potentially defensive provisions. The Declaration of Trust currently includes provisions that could have the effect of limiting the ability of other entities or persons to acquire control of the Fund or to change the composition of its Board of Trustees, and could have the effect of depriving shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging a third party from seeking to obtain control of the Fund. Specifically, the Fund's Board of Trustees is divided into three classes, each having a term of three years. The term of one class expires at each annual meeting of shareholders. This provision could delay for up to two years the replacement of a majority of the Board of Trustees. In addition, conversion of the Fund to an open-end investment company would require the favorable vote of the holders of at least two-thirds of the shares of the Fund entitled to be voted on the matter. The 1940 Act requires that the holders of the preferred shares vote separately from the holders of common shares on this issue. Therefore, if the holders of preferred shares did not approve the conversion of the Fund to an open-end investment company, the Fund could not be converted to an open-end investment company even if the holders of two-thirds or more of the common shares favored such a conversion. Any amendments to the sections of the Declaration of Trust which relate to the division of the Board of Trustees into three classes or to the requirement that two-thirds of the outstanding shares vote to approve any conversion of the Trust to an open-end company would themselves require approval by affirmative vote of two-thirds of the outstanding shares of the Fund. Recommendation of the Trustees The Board of Trustees of the Fund recommend a vote "For" the proposed amendments to the Declaration of Trust creating a class of preferred shares of the Fund. Approval of the proposed amendments requires the affirmative vote of the holders of 66 2/3% of the outstanding shares entitled to be voted at the meeting. 3. Ratification of Independent Accountants. PricewaterhouseCoopers LLP was selected as independent accountants for the Fund for the Fund's fiscal year ending December 31, 1999 by unanimous vote of the Board of Trustees, subject to ratification or rejection by the shareholders. Neither PricewaterhouseCoopers LLP nor any of its partners has any direct or material indirect financial interest in the Fund. A representative of PricewaterhouseCoopers LLP will be available at the Meeting, if requested by a shareholder in writing at least five days before the Meeting, to respond to appropriate questions and make a statement (if the representative desires). Required Vote Ratification requires the affirmative vote of a majority of the shares of the Fund voted at the Meeting. 4. Other Matters and Discretion of Attorneys Named in the Proxy. As of the date of this Proxy Statement, only the business mentioned in Items 1 through 3 of the Notice of the Meeting is contemplated to be presented. If any procedural or other matters properly come before the Meeting, the enclosed proxy shall be voted in accordance with the best judgment of the proxy holder(s). The Meeting is to be held at the same time as meetings of the shareholders of Colonial Municipal Income Trust and Colonial Investment Grade Municipal 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 April 15, 1999, the persons named as proxies may propose one or more adjournments of the Meeting for a period or periods of not more than ninety days in the aggregate and further solicitation of proxies may be made. Any such adjournment may be effected by a majority of the votes properly cast in person or by proxy on the question at the session of the Meeting to be adjourned. The persons named as proxies will vote in favor of such adjournment those proxies which they are entitled to vote in favor of the Items set forth in the Notice of the Meeting. They will vote against any such adjournment those proxies required to be voted against any of such Items. Compliance with Section 16(a) of the Securities 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 (Section 16 reporting persons), the Fund's investment advisor and affiliated persons of the Fund's investment advisor to file with the Securities and Exchange Commission (SEC) 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 December 31, 1998, the Section 16 reporting persons complied with all Section 16(a) filings applicable to them. Date for Receipt of Shareholder Proposals Proposals of shareholders which are intended to be considered for inclusion in the Fund's proxy statement relating to the 2000 Annual Meeting of Shareholders of the Fund must be received by the Fund at One Financial Center, Boston, Massachusetts, 02111 on or before December 15, 1999. Shareholders are urged to vote, sign and mail their proxies immediately. EXHIBIT A Text of Proposed Amendments to Provisions of the Trust's Agreement and Declaration of Trust (language proposed to be deleted is shown in brackets and language proposed to be added is shown in italics) Subsection (c) of Section 2 of Article I of the Agreement and Declaration of Trust is amended to read in its entirety as follows: (c) "Shares" means the equal proportionate transferable units of interest into which the beneficial interest in the Trust shall be divided from time to time or, if more than one class or series of Shares is authorized by the Trustees, the equal proportionate transferable units into which each class or series of shares shall be divided from time to time; Subsections (g) and (h) of Section 2 of Article I of the Agreement and Declaration of Trust are amended to read in their entirety, and new subsections (i) and (j) are added immediately thereafter, as follows: (g) "Declaration of Trust" shall mean this Agreement and Declaration of Trust as amended or restated from time to time; [and] (h) "By-Laws" shall mean the By-Laws of the Trust as amended from time to time[.]; (i) The term "class" or "class of Shares" refers to the division of Shares into two or more classes as provided in Article III, Section 1 hereof; and (j) The term "series" or "series of Shares" refers to the division of Shares representing any class into two or more series as provided in Article III, Section 1 hereof. Sections 1 and 2 of Article III of the Agreement and Declaration of Trust are amended to read in their entirety as follows: Division of Beneficial Interest Section 1. [The beneficial interest in the Trust shall at all times be divided into Shares of a single series, without par value, each of which shall represent an equal proportionate interest in the Trust with each other Share, none having priority or preference over another.] The Trustees may, without Shareholder approval, authorize one or more classes of Shares (which classes may be divided into two or more series), Shares of each such class or series having such preferences, voting powers, terms of redemption, if any, and special or relative rights or privileges (including conversion rights, if any) as the Trustees may determine and as shall be set forth in the By-Laws. The number of Shares of each class or series authorized shall be unlimited, except as the By-Laws may otherwise provide, and the Shares so authorized may be represented in part by fractional shares. The Trustees may from time to time divide or combine the Shares of any class or series into a greater or lesser number without thereby changing the proportionate beneficial interest in the [Trust] class or series. Ownership of Shares Section 2. The ownership of Shares shall be recorded on the books of the Trust or its transfer or similar agent. No certificates certifying the ownership of Shares shall be issued except as the Trustees may otherwise determine from time to time. The Trustees may make such rules as they consider appropriate for the issuance of Share certificates, the transfer of Shares and similar matters. The record books of the Trust as kept by the Trust or any transfer or similar agent of the Trust, as the case may be, shall be conclusive as to who are the Shareholders of each class or series and as to the number of Shares of each class or series held from time to time by each Shareholder. Sections 1 and 2 of Article IV of the Agreement and Declaration of Trust are amended to read in their entirety as follows: Number of Trustees and Term of Office Section l. Subject to the voting powers of one or more classes or series of Shares as set forth in the By-Laws, [T]the number of Trustees shall be such number as shall be fixed from time to time by a written instrument signed by a majority of the Trustees, provided, however, that the number of Trustees shall in no event be less than three (3) [nor more than fifteen (15)]. No reduction in the number of Trustees shall have the effect of removing any Trustee from office prior to the expiration of his term unless the Trustee is specifically removed pursuant to Section 2 of this Article at the time of the decrease. The Board of Trustees shall be divided into three classes. [Within the limits above specified,] T[t]he number of Trustees in each class shall be determined by resolution of the Board of Trustees. The initial Trustees, each of whom shall serve until the first meeting of Shareholders at which Trustees are elected and until his or her successor is elected and qualified, or until he or she sooner dies, resigns or is removed, shall be John A. McNeice, Jr. and such other persons as the Trustee or Trustees then in office shall, prior to any sale of Shares pursuant to a public offering, appoint. The term of office of all of the initial Trustees shall expire on the date of the first annual meeting of S[s]hareholders or special meeting in lieu thereof, which annual or special meeting shall be called to be held not more than fifteen months after Shares are first sold pursuant to a public offering. The term of office of the first class shall expire on the date of the second annual meeting of S[s]hareholders or any special meeting in lieu thereof. The term of office of the second class shall expire on the date of the third annual meeting of S[s]hareholders or any special meeting in lieu thereof. The term of office of the third class shall expire on the date of the fourth annual meeting of S[s]hareholders or any special meeting in lieu thereof. Upon expiration of the term of office of each class as set forth above, the number of Trustees in such class, as determined by the Board of Trustees, shall be elected for a term expiring on the date of the third annual meeting of S[s]hareholders or any special meeting in lieu thereof following such expiration to succeed the Trustees whose terms of office expire. The Trustees shall be elected at an annual meeting of the S[s]hareholders or a special meeting in lieu thereof, except as provided in Section 2 of this Article. Vacancies; Removal Section 2. Subject to the voting powers of one or more classes or series of Shares as set forth in the By-Laws, [A]any vacancies occurring in the Board of Trustees may be filled by the Trustees if, immediately after filling any such vacancy, at least two-thirds of the Trustees then holding office shall have been elected to such office by the Shareholders. In the event that at any time less than a majority of the Trustees then holding office were elected to such office by the Shareholders, the Trustees shall call a meeting of Shareholders for the purpose of electing Trustees. At any meeting called for such purpose and subject to the voting powers of one or more classes or series of Shares as set forth in the By-Laws, a Trustee may be removed, with or without cause, by vote of a majority of the outstanding S[s]hares of the classes or series entitled to vote for the election of such Trustee. By vote of a majority of the Trustees then in office, the Trustees may remove a Trustee with or without cause. The first paragraph of Section 4 of Article IV of the Agreement and Declaration of Trust is amended to read in its entirety as follows: Powers Section 4. Subject to the provisions of this Declaration of Trust, the business of the Trust shall be managed by the Trustees, and they shall have all powers necessary or convenient to carry out that responsibility. Without limiting the foregoing, the Trustees may adopt By-Laws not inconsistent with this Declaration of Trust providing for the conduct of the business of the Trust and may amend and repeal them to the extent that such By-Laws do not reserve that right to the Shareholders[;] of one or more classes or series. Subject to the voting power of one or more classes or series of shares as set forth in the By-Laws, the Trustees [they] may fill vacancies in or add to their number, including vacancies resulting from increases in their number, and may elect and remove such officers and appoint and terminate such agents as they consider appropriate; they may appoint from their own number, and terminate, any one or more committees consisting of two or more Trustees, including an executive committee which may, when the Trustees are not in session, exercise some or all of the power and authority of the Trustees as the Trustees may determine; they may appoint an advisory board, the members of which shall not be Trustees and need not be Shareholders; they may employ one or more custodians of the assets of the Trust and may authorize such custodians to employ subcustodians and to deposit all or any part of such assets in a system or systems for the central handling of securities, retain a transfer agent or a Shareholder services agent, or both, provide for the distribution of Shares by the Trust, through one or more principal underwriters or otherwise, set record dates for the determination of Shareholders with respect to various matters, and in general delegate such authority as they consider desirable to any officer of the Trust, to any committee of the Trustees and to any agent or employee of the Trust or to any such custodian or underwriter. Sections 1, 2, 3 and 4 of Article V of the Agreement and Declaration of Trust are amended to read in their entirety as follows: Voting Powers Section 1. Subject to the voting powers of one or more classes or series of Shares as set forth in the By-Laws, [T]the Shareholders shall have power to vote only (i) for the election or removal of Trustees as provided in Article IV, Section 1, (ii) with respect to any Adviser as provided in Article IV, Section 7, (iii) with respect to any termination of this Trust to the extent and as provided in Article IX, Section 4, (iv) with respect to any amendment of this Declaration of Trust to the extent and as provided in Article IX, Section 7, (v) to the same extent as the stockholders of a Massachusetts business corporation as to whether or not a court action, proceeding or claim should or should not be brought or maintained derivatively or as a class action on behalf of the Trust or the Shareholders, (vi) with respect to such additional matters relating to the Trust as may be required by law, this Declaration of Trust, the By-Laws or any registration of the Trust with the Securities and Exchange Commission (or any successor agency) or any state, or as the Trustees may consider necessary or desirable. Each whole Share shall be entitled to one vote as to any matter on which it is entitled to vote and each fractional Share shall be entitled to a proportionate fractional vote, except as otherwise provided in the By-Laws. Notwithstanding any other provision of this Declaration of Trust, on any matter submitted to a vote of Shareholders, all Shares of the Trust then entitled to vote shall, except as otherwise provided in the By-Laws or required by law, be voted in the aggregate as a single class without regard to classes or series of Shares. There shall be no cumulative voting in the election of Trustees. Shares may be voted in person or by proxy. A proxy with respect to Shares held in the name of two or more persons shall be valid if executed by any one of them unless at or prior to exercise of the proxy the Trust receives a specific written notice to the contrary from any one of them. A proxy purporting to be executed by or on behalf of a Shareholder shall be deemed valid unless challenged at or prior to its exercise and the burden of proving invalidity shall rest on the challenger. Until Shares of a particular class or series are issued, the Trustees may exercise all rights of Shareholders and may take any action required by law, this Declaration of Trust or the By-Laws to be taken by Shareholders as to such class or series. Voting Power and Meetings Section 2. There shall be an annual meeting of the Shareholders on the date fixed in the By-Laws at the office of the Trust in Boston, Massachusetts, or at such other place as may be designated in the call thereof, which call shall be made by the Trustees. In the event that such meeting is not held in any year on the date fixed in the By-Laws, whether the omission be by oversight or otherwise, a subsequent special meeting may be called by the Trustees and held in lieu of the annual meeting with the same effect as though held on such date. Special meetings of Shareholders of any or all classes or series may also be called by the Trustees from time to time for the purpose of taking action upon any matter requiring the vote or authority of the Shareholders of such class or series as herein provided or upon any other matter deemed by the Trustees to be necessary or desirable. Written notice of any meeting of Shareholders shall be given or caused to be given by the Trustees by mailing such notice at least seven days before such meeting, postage prepaid, stating the time, place and purpose of the meeting, to each Shareholder entitled to vote at such meeting at the Shareholder's address as it appears on the records of the Trust. If the Trustees shall fail to call or give notice of any meeting of Shareholders for a period of 30 days after written application by Shareholders holding at least 10% of the Shares then outstanding of all classes and series entitled to vote at such meeting requesting a meeting to be called for a purpose requiring action by the Shareholders as provided herein or in the By-Laws, then Shareholders holding at least 10% of the Shares then outstanding of all classes and series entitled to vote at such meeting may call and give notice of such meeting, and thereupon the meeting shall be held in the manner provided for herein in case of call thereof by the Trustees. Quorum and Required Vote Section 3. A majority of the Shares entitled to vote on a particular matter shall be a quorum for the transaction of business at a Shareholders' meeting, except that where the By-Laws require that holders of any class or series shall vote as an individual class or series, then a majority of the aggregate number of Shares of that class or series entitled to vote shall be necessary to constitute a quorum for the transaction of business by that class or series. Any lesser number, however, shall be sufficient for adjournments. Any adjourned session or sessions may be held within a reasonable time after the date set for the original meeting without the necessity of further notice. Except when a larger vote is required by any provision of this Declaration of Trust or the By-Laws, a majority of the Shares voted shall decide any questions and a plurality shall elect a Trustee, provided that where the By-Laws require that the holders of any class or series shall vote as an individual class or series a majority of the Shares of that class or series voted on the matter (or a plurality with respect to the election of a Trustee) shall decide that matter insofar as that class or series is concerned. Conversion Section 4. Notwithstanding any other provision of this Declaration of Trust, the conversion of the Trust from a "closed-end company" to an "open-end company," as those terms are defined in Sections 5(a)(2) and 5(a)(1), respectively, of the 1940 Act as in effect on January 1, 1989, shall require the affirmative vote or consent of the holders of at least 66 2/3% of the Shares of each class entitled to vote. Such affirmative vote or consent shall be in addition to the vote or consent of the holders of the Shares otherwise required by law or by any agreement between the Trust and any national securities exchange. Section I of Article VI of the Agreement and Declaration of Trust is amended to read in its entirety as follows: Distributions Section 1. The Trustees may, but need not, each year distribute to the Shareholders of any or all classes or series such income and gains, accrued or realized, as the Trustees may determine, after providing for actual and accrued expenses and liabilities (including such reserves as the Trustees may establish) determined in accordance with good accounting practices and subject to the preferences, special or relative rights and privileges of the various classes or series of Shares. The Trustees shall have full discretion to determine which items shall be treated as income and which items as capital and their determination shall be binding upon the Shareholders. Distributions of each year's income, if any be made, may be made in one or more payments, which shall be in Shares, in cash or otherwise and on a date or dates and as of a record date or dates determined by the Trustees. At any time and from time to time in their discretion, the Trustees may distribute to the Shareholders as of a record date or dates determined by the Trustees, in Shares, in cash or otherwise, all or part of any gains realized on the sale or disposition of property or otherwise, or all or part of any other principal of the Trust. Each distribution pursuant to this Section 1 to the Shareholders of a particular class or series shall be made ratably according to the number of Shares of such class or series held by the several Shareholders on the applicable record date thereof, provided that no distribution need be made on Shares purchased pursuant to orders received, or for which payment is made, after such time or times as the Trustees may determine. Any such distribution paid in Shares will be paid at the net asset value thereof as determined in accordance with Section 2 of this Article VI, or at such other value as may be specified by the By-Laws or as the Trustees may from time to time determine, subject to applicable laws and regulations then in effect. The first paragraph of Section 2 of Article VI of the Agreement and Declaration of Trust is amended to read in its entirety as follows: Determination of Net Asset Value Section 2. At such times as the Trust shall have outstanding only one class or series of Shares, [T]the term "net asset value" of the Shares shall mean: (i) the value of all the assets of the Trust; (ii) less the total liabilities of the Trust; (iii) divided by the number of Shares outstanding, in each case at the time of each determination. Any fractions involved in the computation of net asset value per share shall be adjusted to the nearer cent unless the Trustees shall determine to adjust such fractions to a fraction of a cent. At such times as the Trust shall have outstanding more than one class or series of Shares, the term "net asset value" of the Shares shall have such meaning, with respect to the Shares of any particular class or series of Shares, as shall from time to time be specified in the By-Laws. Section 4 of Article IX of the Agreement and Declaration of Trust is amended to read in its entirety as follows: Duration and Termination of Trust Section 4. Unless terminated as provided herein, the Trust shall continue without limitation of time. Subject to the voting powers of one or more classes or series of Shares as set forth in the By-Laws, [T]the Trust may be terminated at any time by vote of Shareholders holding at least 66 2/3 % of the Shares entitled to vote or by the Trustees by written notice to the Shareholders. Upon termination of the Trust, after paying or otherwise providing for all charges, taxes, expenses and liabilities, whether due or accrued or anticipated as may be determined by the Trustees, the Trust shall in accordance with such procedures as the Trustees consider appropriate reduce the remaining assets to distributable form in cash or shares or other securities, or any combination thereof, and distribute the proceeds to the Shareholders, ratably according to the number of Shares held by the several Shareholders on the date of termination, except to the extent otherwise required or permitted by the preferences and special or relative rights and privileges of any classes or series of Shares. Section 7 of Article IX of the Agreement and Declaration of Trust is amended to read in its entirety as follows: Amendments Section 7. (a) Except to the extent that the By-Laws or applicable law may require a higher vote or the separate vote of one or more classes or series of Shares, and [E]except as provided in paragraph (b) of this Section 7, this Declaration of Trust may be amended at any time by an instrument in writing signed by a majority of the then Trustees (1) when authorized so to do by a vote of Shareholders holding a majority of the Shares entitled to vote or (2) without Shareholder approval as may be necessary or desirable in order to authorize one or more classes or series of Shares as in Section 1 of Article III. Amendments having the purpose of changing the name of the Trust or of supplying any omission, curing any ambiguity or curing, correcting or supplementing any defective or inconsistent provision contained herein shall not require authorization by Shareholder vote. (b) Except to the extent that the By-Laws or applicable law may require a higher vote or the separate vote of one or more classes or series of Shares, [N]no amendment may be made under this Section 7 which shall amend, alter, change or repeal any of the provisions of Article IV, Section 1, Article V, Section 4 or this paragraph (b) unless the amendment effecting such amendment, alteration, change or repeal shall receive the affirmative vote or consent of at least 66 2/3% of the Shares entitled to vote. Such affirmative vote or consent shall be in addition to the vote or consent of the holders of Shares otherwise required by law or by the terms of any agreement between the Trust and any national securities exchange. COLONIAL HIGH INCOME MUNICIPAL TRUST This Proxy is Solicited on Behalf of the Board of Trustees PROXY The undersigned shareholder hereby appoints William J. Ballou, Suzan M. Barron, Nancy L. Conlin, Stephen E. Gibson, Timothy J. Jacoby and Davey S. Scoon, each of them proxies of the undersigned, with power of substitution, to vote at the Annual Meeting of Shareholders of Colonial Investment Grade Municipal Trust (the "Fund"), to be held in Boston, Massachusetts, on Thursday, April 15, 1999 and at any adjournments, as follows on the reverse side of this card. CONTINUED AND TO BE SIGNED ON 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 the Items below. This proxy will be voted in accordance with the holder's best judgement as to any other matter. The Board of Trustees recommends a vote FOR the following Items: 1. ELECTION OF SEVEN TRUSTEES. (Item 1 of the Notice) John V. Carberry Lora S. Collins Salvatore Macera Robert L. Sullivan Thomas E. Stitzel Anne-Lee Verville / / FOR / / WITHHOLD / / FOR ALL EXCEPT Instruction: To withhold authority to vote for any individual nominee, mark the "For All Except" box and strike a line through that nominee's name in the list above. 2. APPROVE OF DISAPPROVE AMENDMENTS TO THE FUND'S AGREEMENT AND DECLARATION OF TRUST TO PERMIT THE ISSUANCE OF PREFERRED SHARES OF THE FUND. (Item 2 of the Notice) / / FOR / / AGAINST / / WITHHOLD 3. PROPOSAL TO RATIFY THE SELECTION OF INDEPENDENT ACCOUNTANTS. (Item 3 of the Notice) / / FOR / / AGAINST / / WITHHOLD 4. In their discretion upon such other matters as may properly come before the meeting. MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / / Please sign exactly as name or names appear hereon. Joint owners should each 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. Signature-------------- Date-------------- Signature----------- Date------------ PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. -----END PRIVACY-ENHANCED MESSAGE-----