<PAGE>
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:
<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
Shares and
Percent of Fund
Beneficially
Name Trustee Principal Occupation (1) and Owned at
(Age) since Directorships April 21,
2000(2)
<S> <C> <C> <C>
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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Shares and
Percent of
Fund
Beneficially
Name Trustee Principal Occupation (1) and Owned at
(Age) since Directorships April 21,
2000(2)
<S> <C> <C> <C>
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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Shares and
Percent of
Fund
Beneficially
Name Trustee Principal Occupation (1) and Owned at
(Age) since Directorships April 21,
2000(2)
<S> <C> <C> <C>
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.
</TABLE>
* 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:
<TABLE>
<CAPTION>
Shares and
Percent of Fund
Beneficially
Executive Owned at
Name Officer April 21,
(Age) Since Office with Fund; Principal Occupation (3) 2000(4)
<S> <C> <C> <C>
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).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Shares and
Percent of
Fund
Executive Beneficially
Name Officer Owned at
(Age) Since Office with Fund; Principal Occupation (3) April 21,
2000(4)
<S> <C> <C> <C>
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).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Shares and
Percent of
Fund
Executive Beneficially
Name Officer Owned at
(Age) Since Office with Fund; Principal Occupation (3) April 21,
2000(4)
<S> <C> <C> <C>
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).
</TABLE>
(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):
<TABLE>
<CAPTION>
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)
- ------- ---------------------- --------------------
<S> <C> <C>
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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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)
- ------- ---------------------- --------------------
<S> <C> <C>
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)
</TABLE>
(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
<PAGE>
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
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
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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
<PAGE>
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
<PAGE>
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
<PAGE>
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).
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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/
<PAGE>
/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------------------
