PROSPECTUS
[Logo]
1,314,122 Shares of Common Stock, par value $.10 per share
Issuable Upon Exercise of Rights
to Subscribe for such Shares
LIBERTY ALL-STAR GROWTH FUND, INC.
Liberty All-Star Growth Fund, Inc. ("All-Star") is offering to its
shareholders of record as of the close of business on June 2, 1998 rights
("Rights") entitling the holders thereof to subscribe for an aggregate of
1,314,122 shares of Common Stock, par value $.10 per share, of All-Star (the
"Shares") at the rate of one Share for each ten Rights held (the "Offer"), and
entitling such shareholders to subscribe, subject to certain limitations and
subject to allotment, for any Shares not acquired by exercise of primary
subscription Rights. The Rights are not transferable and will not be admitted
for trading on the New York Stock Exchange. See "The Offer". THE SUBSCRIPTION
PRICE PER SHARE WILL BE 95% OF THE LOWER OF (i) THE LAST REPORTED SALE PRICE ON
THE NEW YORK STOCK EXCHANGE ON JULY 10, 1998 OF A SHARE OF ALL-STAR, OR (ii) THE
NET ASSET VALUE OF A SHARE OF ALL-STAR ON THAT DATE.
THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK TIME, ON JULY 9, 1998 (the
"Expiration Date"). SINCE THE CLOSE OF THE OFFERING ON THE EXPIRATION DATE IS
PRIOR TO THE PRICING DATE, SHAREHOLDERS WHO CHOOSE TO EXERCISE THEIR RIGHTS WILL
NOT KNOW THE SUBSCRIPTION PRICE PER SHARE AT THE TIME THEY EXERCISE SUCH RIGHTS.
For additional information, please call Corporate
Investor Communications, Inc. (the "Information Agent")
toll free at (888) 216-4788.
All-Star is a multi-managed diversified closed-end management investment
company that allocates its portfolio assets on an approximately equal basis
among several independent investment organizations (currently three in number)
having different investment styles recommended and monitored by Liberty Asset
Management Company, All-Star's fund manager. All-Star's investment objective is
to seek long term capital appreciation. It seeks its investment objective
through investment primarily in a diversified portfolio of equity securities.
The address of All-Star is Federal Reserve Plaza, Boston, Massachusetts
02210 and its telephone number is 1-800-542-3863. All-Star's shares are listed
on the New York Stock Exchange under the symbol "ASG".
All-Star announced the terms of the Offer before the opening of trading on
the New York Stock Exchange on April 24, 1998. The net asset value per share of
common stock of All-Star at the close of business on April 23, 1998 and June 2,
1998 was $14.56 and $13.53, respectively, and the last reported sale price of a
share on such Exchange on those dates was $13.562 and $12.438, respectively.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
===================================================================
Subscription Proceeds to
Price (1) Sales Load All-Star(2)
- -------------------------------------------------------------------
Per Share...$11.82 NONE $11.82
- -------------------------------------------------------------------
Total.......$15,532,922 NONE $15,532,922
===================================================================
(1) Estimated based on an assumed Subscription Price of 95% of the last
reported sale price on the New York Stock Exchange on June 2, 1998.
(2) Before deduction of expenses payable by All-Star, estimated at
$105,000.
---------------------------
As a result of the terms of the Offer, shareholders who do not exercise
their Rights will, upon completion of the Offer, own a smaller proportional
interest in All-Star. In addition, because the Subscription Price per share will
be less than the then current net asset value per share, the Offer will result
in some dilution of the aggregate net asset value of the shares owned by
shareholders who do not fully exercise their Rights.
-----------------------------
This Prospectus sets forth concisely the information
that a shareholder ought
to know before exercising his
or her Rights and should be retained for future
reference. A Statement of Additional Information dated
June 3, 1998 has been filed with the Securities and
Exchange Commission and is incorporated herein by
reference. The table of contents of the Statement
of Additional Information appears on
page 22 of this Prospectus, and a copy is available
at no charge by calling the Information Agent
at (888) 216-4788.
-------------------------------
The date of this Prospectus
is June 3, 1998
[End of Cover]
<PAGE>
EXPENSES
Shareholder Transaction Expenses
These are the expenses that an investor incurs when buying shares of
All-Star, whether in this Offer, in the open-market or through All-Star's
Automatic Dividend Reinvestment and Cash Purchase Plan.
Sales load None(1)
Dividend Reinvestment
and Cash Purchase Plan Fees $1.25 per
voluntary cash
investment
- ----------------
(1) No sales load or commission will be payable in connection with this Offer.
Purchases of shares through brokers in secondary market transactions are subject
to brokers' commissions and charges.
Annual Expenses (as a percentage of net assets
attributable to Common Stock)
Management and administrative fees 1.00%
Other Expenses .19%
Total Annual Expenses 1.19%
Example: You would pay the following expenses on an
investment (at net asset value) of $1,000, assuming a 5%
annual return.
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
$12 $38 $65 $144
These figures are intended to illustrate the effect of All-Star's expenses,
but are not meant to predict its future returns and expenses, which may be
higher or lower than those shown.
The purpose of the above tables is to assist investors in understanding the
various costs and expenses that an investor in All-Star will bear directly or
indirectly. The numbers shown under the Annual Expenses table are projections
based on All-Star's actual expenses for the year ended December 31, 1997, and on
its projected net assets assuming the offer is fully subscribed for at an
assumed Subscription Price of $11.82 per share, and have been adjusted to assume
that the increased management and administrative fees to be effective August 1,
1998 (see "Management of All-Star") were in effect for the full year ended
December 31, 1997. See "Financial Highlights" for All-Star's actual ratio of
expenses to average net assets for the year ended December 31, 1997.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information included elsewhere in this Prospectus.
Purpose of the Offer
The Board of Directors of Liberty All-Star Growth
Fund, Inc. ("All-Star" or the "Fund") has determined that
it would be in the best interest of All-Star and its
shareholders to increase the assets of All-Star available
for investment. The Offer seeks to reward investors in
All-Star by giving existing shareholders the opportunity
to purchase additional Shares at a price below market
value and without brokerage commissions. See "The
Offer-Purpose of the Offer."
Terms of the Offer
All-Star is issuing to its shareholders of record as of the close of
business on June 2, 1998 (the "Record Date") rights ("Rights") to subscribe for
an aggregate of 1,314,122 shares (sometimes referred to herein as the "Shares")
of Common Stock, par value $.10 per share, of All-Star. Each such shareholder is
being issued one Right for each full share of Common Stock owned on the Record
Date. The Rights entitle the holder to acquire, at the Subscription Price (as
hereinafter defined), one Share for each ten Rights held. Rights may be
exercised at any time during the period (the "Subscription Period") which
commences on June 9,1998 and ends at 5:00 p.m., New York time, on July 9, 1998
(the "Expiration Date"). The right to acquire during the Subscription Period at
the Subscription Price one additional Share for each ten Rights held is
hereinafter referred to as the "Primary Subscription."
In addition, any shareholder who fully exercises all Rights issued to him
or her (other than those Rights which cannot be exercised because they represent
the right to acquire less than one Share) is entitled to subscribe for Shares
which were not otherwise subscribed for by others on Primary Subscription (the
"Over-Subscription Privilege"). For purposes of determining the maximum number
of Shares a shareholder may acquire pursuant to the Offer, broker-dealers whose
shares are held of record by Cede & Co., Inc. ("Cede"), nominee for Depository
Trust Company, or by any other depository or nominee will be deemed to be the
holders of the Rights that are issued to Cede or such other depository or
nominee. Shares acquired pursuant to the Over-Subscription Privilege are subject
to allotment, which is more fully discussed under "The Offer--Over-Subscription
Privilege."
The subscription price per Share (the "Subscription Price") will be 95% of
the lower of (i) the last reported sale price on the New York Stock Exchange on
July 10, 1998 (the "Pricing Date") of a share of Common Stock of All-Star, or
(ii) the net asset value of a share of All-Star on the Pricing Date. Since the
Expiration Date is prior to the Pricing Date, shareholders who choose to
exercise their Rights will not know at the time they exercise such Rights what
the purchase price for Shares acquired pursuant to such exercise will be.
Shareholders will have no right to rescind their subscription after receipt of
their payment for Shares by the Subscription Agent. Subscription payments will
be held by the Subscription Agent pending completion of the processing of the
subscription. No interest thereon will be paid to subscribers.
The Rights are not transferable. Therefore, only the underlying Shares, and
not the Rights, will be admitted for trading on the New York Stock Exchange.
Since fractional shares will not be issued on exercise of Rights, shareholders
who receive, or are left with, fewer than ten Rights will be unable to exercise
such Rights and will not be entitled to receive any cash in lieu of fractional
shares.
Shareholders' inquiries about the Offer should be directed to their broker, bank
or trust company, or to:
Corporate Investor Communications, Inc.
1-888-216-4788
Important Dates to Remember
Event Date
Record Date. . . . . . . . . . . . . . . June 2, 1998
Subscription
Period . . . . . . . . . . . . . . . . June 9, 1998
through July 9, 1998
Expiration Date (Deadline for delivery
of Subscription Certificate together
with payment of estimated Subscription
Price or for delivery of Notice of
Guaranteed Delivery). . . . . . . . . . . July 9, 1998
Pricing Date . . . . . . . . . . . . . .. July 10, 1998
Deadline for payment of final
Subscription Price pursuant to Notice
Of Guaranteed Delivery. . . . . . . . . . July 14, 1998
Confirmation
to Registered Shareholders. . . . . . . July 21, 1998
For Registered Shareholders'
Subscriptions - deadline for
payment of unpaid balance if final
Subscription Price is higher than
Estimated Subscription Price. . . . . . . August 7, 1998
Information about All-Star
All-Star is a multi-managed diversified closed-end management investment
company that allocates its assets on an approximately equal basis among a number
of independent investment management organizations (currently three in number)
each having a different investment style. See "The Multi-Manager Concept."
All-Star's investment objective is to seek long-term capital appreciation. It
seeks its objective through investment primarily (at least 65% of total assets
under normal conditions) in a diversified portfolio of equity securities. The
portion of All-Star's portfolio not invested in equity securities (not more than
35% of total assets under normal conditions) is invested in U.S. Government
Securities, repurchase agreements with respect thereto, and certain money market
mutual funds. See "Investment Objective and Policies."
All-Star commenced investment operations in March 1986 under the name
"Growth Stock Outlook Trust, Inc." (see "History of the Fund" below). Its
outstanding shares of Common Stock are listed and traded on the New York Stock
Exchange (Symbol "ASG"). The average weekly trading volume of the shares on the
New York Exchange during the year ended December 31, 1997 was 235,439 shares. As
at June 2, 1998 All-Star's net assets were $177,783,000 and 13,141,220 shares of
All-Star were issued and outstanding.
Information about Liberty Asset Management Company
Liberty Asset Management Company ("LAMCO") provides Portfolio Manager
selection, evaluation and monitoring services to All-Star, and is responsible
for the provision of administrative services to the Fund, some of which are
delegated to LAMCO's affiliate, Colonial Management Associates, Inc.
("Colonial"). See "Management of All-Star" for the fees paid by the Fund to
LAMCO and by LAMCO to the Portfolio Managers. Since the fees of LAMCO and the
Portfolio Managers are based on the average weekly net assets of All-Star, LAMCO
and the Portfolio Managers will benefit from the Offer.
LAMCO, organized in 1985, is an indirect wholly-owned subsidiary of Liberty
Financial Companies, Inc. As of June 2, 1998, approximately 72% of the combined
voting power of the issued and outstanding voting stock of Liberty Financial
Companies, Inc. was held, indirectly, by Liberty Mutual Insurance Company, and
substantially all of the remaining shares are listed on the New York Stock
Exchange.
Special Considerations and Risk Factors
The following summarizes certain matters that should be considered, among
others, in connection with the Offer.
Dilution............. As a result of the terms of the
Offer, shareholders who do not
fully exercise their Rights should
expect that they will, at the
completion of the Offer, own a
smaller proportional interest in
All-Star than if they fully
exercise their Rights. In
addition, some dilution of the
aggregate net asset value of the
shares owned by shareholders who do
not fully exercise their Rights
will be experienced as a result of
the Offer because the Subscription
Price will be less than the net
asset value per share and therefore
the number of shares outstanding
after the Offer will increase by a
greater percentage than the
increase in All-Star's assets.
Although it is not possible to
state precisely the amount of such
dilution because it is not known at
this time how many shares will be
subscribed for or what the net
asset value or market price per
share will be on the Pricing Date,
All-Star estimates that such
dilution should not be
substantial. For example, if
All-Star's Shares are trading at a
discount from their net asset value
of 4.7% (the average discount for
the four month period ended April
30, 1998), and assuming all Rights
are exercised, the Subscription
Price would be 9.7% below
All-Star's net asset value per
share, resulting in a reduction of
such net asset value of
approximately $.14 per share, or
less than 0.93%.
Anti-takeover
Provisions........... All-Star's Articles of
Incorporation and By-laws have
provisions (commonly referred to as
"anti-takeover provisions") which
are intended to have the effect of
limiting the ability of other
entities or persons to acquire
control of All-Star, to cause it to
engage in certain transactions, or
to modify its structure. For
instance, the affirmative vote of
66 2/3 percent of the shares of the
Fund is required to authorize
All-Star's conversion from a
closed-end to an open-end
investment company, regardless of
whether such conversion is approved
or recommended by the Board of
Directors. A similar shareholder
vote is required to authorize a
merger, sale of a substantial part
of the assets, issuance of
securities for cash, or similar
transaction with a person
beneficially owning five percent or
more of All-Star's shares, unless
approved by All-Star's Board of
Directors under certain
conditions. These provisions
cannot be amended without a similar
super-majority vote. In addition,
All-Star's Board of Directors is
divided into three classes, each of
which has a term of three years and
only one of which is elected at
each annual meeting of
shareholders. See "Description of
Shares--Anti-takeover Provisions
of the Articles of Incorporation
and By-laws; Super-majority Vote
Requirement for Conversion to
Open-End Status."
Distributions..........All-Star currently has a policy of paying distributions
on its Common Stock totalling approximately 10% of its
net asset value per year, payable in four quarterly
distributions of 2.5% of All-Star's net asset value at
the close of the New York Stock Exchange on the Friday
prior to each quarterly declaration date. These fixed
distributions are not related to All-Star's net
investment income or net realized capital gains or
losses. If, for any calendar year, the total
distributions made under the 10% pay-out policy exceed
All-Star's net investment income and net realized capital
gains, the excess will generally be treated as a tax-free
return of capital to shareholders (up to the amount of
the shareholder's basis in his or her shares), and
thereafter as gain from the sale of shares. The amount
treated as a tax-free return of capital will reduce the
shareholder's adjusted basis in his or her shares,
thereby increasing his or her potential gain or reducing
his or her potential loss on the sale of his or her
shares. Such excess, however, will be treated first as
ordinary dividend income up to the amount of All-Star's
current and accumulated earnings and profits, and then as
return of capital and capital gain as set forth above.
All-Star may, in the discretion of the Board of
Directors, retain for reinvestment net long-term capital
gains in excess of net short-term capital losses for any
year to the extent that its net investment income, net
short-term realized gains, and net long-term realized
gains exceed the minimum amount required to be
distributed for such year under the 10% pay-out policy.
Such retained capital gains will be taxed to both
All-Star and the shareholders as long-term capital gains;
however shareholders will be able to claim their
proportionate share of the federal income taxes paid by
All-Star as a credit against their own federal income tax
liabilities, and will be entitled to increase the
adjusted tax basis of their All-Star shares by the
difference between their pro rata share of the
undistributed capital gains and their tax credit. See
"Distributions; Automatic Dividend Reinvestment and Cash
Purchase Plan."
Closed-end fund
discounts............ Shares of closed-end
investment companies such as
All-Star are not redeemable and
frequently trade at a discount from
their net asset value. This risk
is separate and distinct from the
risk that All-Star's net asset
value may decline. See "Share Price
Data."
FINANCIAL HIGHLIGHTS
The following information as to per share operating performance, total
investment return and ratios for each of the years in the ten year period ended
December 31, 1997 has been audited by KPMG Peat Marwick LLP, Boston,
Massachusetts, independent auditors. The report of KPMG Peat Marwick LLP,
together with the financial statements of All-Star, are included in the
Statement of Additional Information (see cover page). The information for the
three months ended March 31, 1998 is unaudited.
YEAR ENDED DECEMBER 31,
------------------------------------------------------
Three
months
ended
March
31,
1998 1997 1996 1995 1994 1993 1992 19911990 1989 1988
------------------------------------------------------
PER SHARE
OPERATING
PERFORMANCE:
Net asset
value
at
beginning
of
period $12.89 $11.27 $10.55 $9.95 $10.54 $10.28 $10.40 $9.90 $10.10 $9.59 $9.18
Income from Investment
Operations:
Net
investment
income
(loss) -- (0.02) 0.01 0.31 0.23 0.18 0.29 0.44 0.54 0.57 0.41
Net
realized
and
unrealized
gain
(loss)
on
investments 1.82 2.88 1.86 1.05 (0.24) 0.56 0.03 0.71 (0.12) 0.58 0.41
Total
from
Investment
Operations 1.82 2.86 1.87 1.36 (0.01) 0.74 0.32 1.15 0.42 1.15 0.82
Less
Distributions:
Dividends
from
net
investment
income - - (0.01) (0.31)(0.23)(0.18)(0.30) (0.44) (0.54) (0.57) (0.41)
Distributions
from
realized
capital
gains (0.35) (1.24)(1.01) (0.45)(0.35)(0.30)(0.14)(0.21)(0.08)(0.07) -
Total ---- ---- ----- ----- ---- ---- ----- ----- ---- ----- ----
Distributions(0.35)(1.24)(1.02) (0.76)(0.58)(0.48)(0.44)(0.65)(0.62)(0.64)(0.41)
Impact of
shares
issued
in
dividend re-
investment(a) - - (0.13) - - - - - - - -
Total ---- --- ---- --- ---- --- --- --- --- ---- ----
Distributions
and
Reinvestments(0.35)(1.24)(1.15)(0.76)(0.58)(0.48)(0.44)(0.65)(0.62)(0.64)(0.41)
Net asset ---- ---- ---- ----- ---- ----- ----- ------ ---- ------ ----
value
at end
of
period$14.36 $12.89 $11.27 $10.55 $9.95 $10.54 $10.28 $10.40 $9.90 $10.10 $9.59
----- ---- ----- ----- ----- ----- ------ ----- ----- ----- ----
Per share
market
value
at end
of
period
$13.500 $11.938 $9.250 $9.375 $8.500 $10.250 $10.00 $10.00 $10.25 $10.00 $9.38
----- ------ ----- ----- ------ ------ ------ ------ ----- ------ -----
TOTAL INVESTMENT RETURN FOR
SHAREHOLDERS:(b)
Based on
net
asset
value 14.36%(c) 27.3% 18.3% 14.6% 0.5% 7.2% 3.2% 11.9% 4.1% 12.1% 9.1%
Based on
market
price 16.0%(c) 43.6% 9.3% 19.3% (11.7)% 7.2% 4.4% 3.9% 8.9% 13.5% 5.8%
RATIOS AND SUPPLEMENTAL DATA:
Net
assets
at end
of
period
(millions) $189 $167 $137 $120 $113 $125 $123 $125 $121 $124 $128
Ratio of
expenses
to
average
net
assets 1.15%(d) 1.20% 1.35% 1.42% 1.51% 1.35% 1.33% 1.31% 1.48% 1.43% 1.46%
Ratio of
net
investment
income
to
average
net
assets 0.01%(d)(0.18%) 0.06% 2.87% 2.12% 1.71% 2.80% 4.17% 5.30% 5.58% 4.24%
Portfolio
turnover
rate 8%(c) 57% 51% 82% 50% 47% 19% 25% 41% 25% 24%
Average
commission
rate(e) $0.0545 $0.0502 $0.055 - - - - - - - -
- ------------
(a) Effect on dividend reinvestment shares at a price below net asset value in
accordance with the 1996 Automatic Dividend Reinvestment and Cash Purchase
Plan.
(b) Calculated assuming all distributions reinvested.
(c) Not annualized
(d) Annualized
(e) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
See "History of the Fund" below for changes in the investment management of
All-Star effective May 27, 1994 and November 6, 1995.
SHARE PRICE DATA
Trading in All-Star's shares on the New York Stock Exchange commenced on
March 14, 1986. For the two years ended December 31, 1997 and the quarter ended
March 31, 1998 the high and low sales prices for All-Star's shares, as reported
in the consolidated transaction reporting system, and the highest discount from
or premium to net asset value per share and the net asset value on the day or
days when the shares traded at such high and low sales prices, were as follows:
<PAGE>
=================================================================
(Dis- (Dis-
count count
from) from)
or or
Premium Premium
High Net to Net Low Net to Net
Sales Asset Asset Sales Asset Asset
Price Value Value Price Value Value
=================================================================
1996
=================================================================
1st
Quarter $9.625 $10.47 -8.1% $9.125 $10.28 -11.2%
- -----------------------------------------------------------------
2nd
Quarter $9.875 $11.62 -15.0% $9.25 $10.80 -14.4%
- -----------------------------------------------------------------
3rd
Quarter $9.75 $11.70 -16.7% $8.375 $10.34 -19.0%
- -----------------------------------------------------------------
4th
Quarter $10.50 $12.47 -15.8% $9.125 $11.36 -19.7%
=================================================================
1997
=================================================================
1st
Quarter $10.875 $11.93 -8.8% $9.125 $11.16 -18.2%
- -----------------------------------------------------------------
2nd
Quarter $11.625 $12.48 -6.9% $9.625 $10.63 -9.5%
- -----------------------------------------------------------------
3rd
Quarter $13.438 $13.36 0.6% $11.188 $12.62 -11.4%
- -----------------------------------------------------------------
4th
Quarter $13.063 $13.12 -0.4% $11.125 $12.77 -12.9%
=================================================================
1998
=================================================================
1st
Quarter $13.938 $14.29 -2.5% $11.625 $12.19 -4.6%
=================================================================
All-Star's shares have historically traded at a discount from their net
asset value. Certain features of and steps taken by All-Star may have tended to
reduce the discount from net asset value at which its shares might otherwise
have traded, although All-Star is not able to determine what effect, if any,
these various features and steps may have had. All-Star's current 10%
distribution policy (see "Distributions; Automatic Dividend Reinvestment and
Cash Purchase Plan-10% Distribution Policy" below), begun in February, 1997, may
have contributed to this effect. This trend may also have resulted in whole or
in part from other factors, such as the Fund's investment performance and
increased attention directed to All-Star by securities analysts and market
letters.
The net asset value of a share of All-Star on June 2, 1998 was $13.53. The
last reported sale price of an All-Star share on that day was $12.438,
representing a discount from net asset value of 8.1%.
INVESTMENT PERFORMANCE
The table below shows two measures of All-Star's return to investors for
periods beginning April 1, 1996 and ended March 31, 1998, the calendar quarter
beginning April 1, 1996 being the first full calendar quarter during all of
which the Fund was fully invested in accordance with LAMCO's multi-management
methodology (see "History of the Fund" below). No. 1 ("All-Star NAV") shows
All-Star's investment performance based on a valuation of its shares at net
asset value ("NAV"). No. 2 ("All-Star Price") shows All-Star's investment
performance based on the market price of All-Star's shares. Both measures assume
reinvestment of all of the Fund's dividends and distributions in additional
shares pursuant to All-Star's Automatic Dividend Reinvestment and Cash Purchase
Plan (see "Distributions; Automatic Dividend Reinvestment and Cash Purchase
Plan" below).
The Lipper Growth Fund Average has been included so that the Fund's results
may be compared with an unweighted average of the total return of open-end
mutual funds classified as growth funds (i.e. mutual funds having investment
objectives and policies comparable to All-Star) published by Lipper Analytical
Services, Inc. The record of the S&P 500 Index has also been included so that
All-Star's results may be compared with those of an unmanaged group of
securities widely regarded by investors as representative of the stock market in
general. The S&P 500 Index information reflects the total return (change in the
market price) of the securities included in the index, and the Lipper Growth
Fund Average information reflects the total return (change in net asset value)
of the mutual funds included in the average, in each case assuming reinvestment
of dividends and distributions.
- --------------------------------------------------------------
No. 1 No. 2 Lipper
All-Star All-Star Growth S&P 500
NAV Price Fund Index
Average
- --------------------------------------------------------------
- --------------------------------------------------------------
1 Year Since
April 1, 1997 47.0% 49.6% 42.9% 48.0%
- --------------------------------------------------------------
- --------------------------------------------------------------
2 Years Since
April 1, 1996 27.9% 34.9% 26.6% 33.3%
- --------------------------------------------------------------
- --------------------------------------------------------------
- --------------
The return shown is the average annual return for the period indicated to March
31, 1998.
The above results represent All-Star's past performance and are not
intended as a prediction of its future performance. The investment return, net
asset value and market value of All-Star's shares will fluctuate, so that such
shares when sold may be worth more or less than their original cost.
THE OFFER
Terms of the Offer
All-Star is issuing to the holders of its shares of Common Stock of record
on the Record Date non-transferable Rights to subscribe for the Shares. Each
such shareholder is being issued one Right for each share of Common Stock owned
on the Record Date. The Rights entitle the holder to acquire on Primary
Subscription at the Subscription Price one Share for each ten Rights held. No
Rights will be issued for fractional shares. Rights may be exercised at any time
during the Subscription Period, which commences on June 9, 1998 and ends at 5:00
p.m., New York time, on July 9, 1998 (the "Expiration Date").
In addition, any shareholder who fully exercises all Rights initially
issued to him or her in the Primary Subscription (other than those Rights which
cannot be exercised because they represent the right to acquire less than one
Share) is entitled to subscribe for Shares which were not otherwise subscribed
for by others on Primary Subscription. For purposes of determining the number of
Shares a shareholder may acquire pursuant to the Offer, broker-dealers whose
shares are held of record on the Record Date by Cede or by any other depository
or nominee will be deemed to be the holders of the Rights that are issued to
Cede or such other depository or nominee on their behalf. Shares acquired
pursuant to the Over-Subscription Privilege are subject to allotment, which is
more fully discussed below under "Over-Subscription Privilege."
The Rights are not transferable. Therefore, only the underlying Shares, and
not the Rights, will be admitted for trading on the New York Stock Exchange.
Since fractional shares will not be issued, shareholders who receive, or who are
left with, fewer than ten Rights will be unable to exercise such Rights and will
not be entitled to receive any cash in lieu of such fractional shares.
The Rights will be evidenced by Subscription Certificates which will be
mailed to shareholders of record on the Record Date. Rights may be exercised by
completing a Subscription Certificate and delivering it, together with payment
by means of (i) a check or money order, or (ii) a Notice of Guaranteed Delivery,
to the Subscription Agent during the Subscription Period. The method by which
Rights may be exercised and the Shares paid for is set forth below under "Method
of Exercise of Rights" and "Payment for Shares."
Purpose of the Offer
The Board of Directors of All-Star has determined that it would be in the
best interests of All-Star and its shareholders to increase the assets of
All-Star available for investment, and that the potential benefits of the Offer
to All-Star and its shareholders will outweigh the dilution to shareholders who
do not fully exercise their rights. The proceeds of the Offer will enable
All-Star's Portfolio Managers to take advantage of perceived investment
opportunities without having to sell existing portfolio holdings which they
otherwise would retain. The Offer seeks to reward investors by giving existing
shareholders the opportunity to purchase additional Shares at a price below
market value and without brokerage commissions. Increasing the size of All-Star
should result in lowering its total expenses as a percentage of average net
assets. In addition, the Offer will enhance the likelihood that All-Star will
continue to have sufficient assets remaining after the distributions called for
by its current 10% distribution policy to permit the Fund to maintain the
current ratio of its fixed expenses to its net assets.
All-Star's Fund Manager and Portfolio Managers will benefit from the Offer
because their fees are based on the average weekly net assets of All-Star. See
"Management of All-Star." It is not possible to state precisely the amount of
additional compensation they will receive as a result of the Offer because it is
not known how many Shares will be subscribed for and because the net proceeds of
the Offer will be invested in additional portfolio securities that will
fluctuate in value. One of All-Star's Directors who voted to authorize the Offer
is an "interested person," within the meaning of the 1940 Act, of LAMCO, and
therefore could benefit indirectly from the Offer. The other four Directors are
not "interested persons" of All-Star or LAMCO.
All-Star may, in the future and at its discretion, choose to make
additional rights offerings from time to time for a number of shares and on
terms which may or may not be similar to the Offer. Any such future rights
offering will be made in accordance with the 1940 Act.
Over-Subscription Privilege
If some shareholders do not exercise all of their Rights initially issued
to them in the Primary Subscription, the remaining unsubscribed Shares ("Excess
Shares") will be offered, by means of the Over-Subscription Privilege, to
holders of Rights who have exercised all the Rights initially issued to them and
who wish to acquire more than the number of Shares to which their Rights entitle
them. Holders of Rights who exercise all their Rights initially issued to them
(other than those Rights which cannot be exercised because they represent the
right to acquire less than one Share) will have the opportunity to indicate on
their Subscription Certificate how many Shares they are willing to acquire
pursuant to this Over-Subscription Privilege. If there are sufficient Excess
Shares, all over-subscriptions will be honored in full. If the Excess Shares are
insufficient to honor all over-subscriptions, the available Excess Shares will
be allocated (subject to the elimination of fractional Shares) among those
holders of Rights exercising the Over-Subscription Privilege, in proportion, not
to the number of Shares requested pursuant to the Over-Subscription Privilege,
but to the number of shares held by them on the Record Date; provided, however,
that if such pro rata allocation results in any holder being allocated a greater
number of Excess Shares than such holder subscribed for pursuant to the exercise
of such holder's Over-Subscription Privilege, then such holder will be allocated
only such number of Excess Shares as such holder subscribed for and the
remaining Excess Shares will be allocated among all other holders exercising
Over-Subscription Privileges. The formula to be used in allocating the Excess
Shares is as follows:
Holder's Record Date Position
-----------------------------
Total Record Date Position x Excess Shares
of all Oversubscribers Remaining
The allocation process may involve a series of allocations in order to
assure that the total number of shares available for Over-Subscription is
distributed on a pro rata basis. The Fund will not offer or sell any Shares
which are not subscribed for under the Primary Subscription or the
Over-Subscription Privilege.
The Subscription Price
The Subscription Price for the Shares to be issued pursuant to the Rights
will be 95% of the lower of (i) the last reported sale price of a share of
Common Stock of All-Star on the New York Stock Exchange on July 10, 1998 (the
"Pricing Date"), or (ii) the net asset value of a share of All-Star on the
Pricing Date.
All-Star announced the terms of the Offer before the opening of trading on
the New York Stock Exchange on April 24, 1998. The net asset value per share of
All-Star at the close of business on April 24, 1998 and on June 2, 1998 was
$14.43 and $13.53, respectively, and the last reported sale price of a share on
such Exchange on those dates was $13.75 and $12.438, respectively.
Expiration of the Offer
The Offer will expire at 5:00 p.m., New York time, on July 9, 1998 (the
"Expiration Date"). Rights will expire on the Expiration Date and thereafter may
not be exercised, unless the Offer is extended. Since the Expiration Date is
prior to the Pricing Date, shareholders who decide to acquire Shares on Primary
Subscription or pursuant to the Over-Subscription Privilege will not know, when
they make such decision, what the purchase price for such Shares will be.
Any extension, termination, or amendment of the Offer will be followed as
promptly as practical by announcement thereof, such announcement in the case of
an extension to be issued no later than 9:00 a.m., New York City time, on the
next business day following the previously scheduled Expiration Date. The Fund
will not, unless otherwise required by law, have any obligation to publish,
advertise, or otherwise communicate any such announcement other than by making a
release to the Dow Jones New Service or such other means of announcement as the
Fund deems appropriate.
Subscription Agent
The Subscription Agent is State Street Bank and Trust Company, P.O. Box
8200, Boston, Massachusetts 02266-8200. State Street Bank and Trust Company is
also the Fund's dividend paying agent, transfer agent and registrar. The
Subscription Agent will receive from All-Star a fee estimated to be $33,000 and
reimbursement for its out-of-pocket expenses related to the Offer.
Information Agent
Any questions or requests for assistance regarding the Offer may be
directed to the Information Agent at its telephone number and address listed
below:
Corporate Investor Communications, Inc.
111 Commerce Road
Carlstadt, NJ 07072-2586
Call Toll Free (888) 216-4788
The Information Agent will receive a fee estimated at approximately $10,000.
Method of Exercise of Rights
Rights may be exercised by filling in and signing the Subscription
Certificate and mailing it in the envelope provided, or otherwise delivering the
completed and signed Subscription Certificate to the Subscription Agent,
together with payment for the Shares as described below under "Payment for
Shares." Rights may also be exercised through a Rights holder's broker, who may
charge such Rights holder a servicing fee in connection with such exercise.
Fractional Shares will not be issued, and Rights holders who receive, or who are
left with, fewer than ten Rights will not be able to exercise such Rights.
Completed Subscription Certificates and related payments must be received
by the Subscription Agent prior to 5:00 p.m., New York time, on the Expiration
Date (unless payment is effected by means of a notice of guaranteed delivery as
described below under "Payment for Shares") at the offices of the Subscription
Agent at one of the addresses set forth below.
The Subscription Certificate and payment should be sent to STATE STREET
BANK AND TRUST COMPANY by one of the following methods:
Subscription Certificate
Delivery Method Address/Number
- ------------------------ --------------
By First Class Mail State Street Bank and
Trust Company
Corporate Reorganization
P.O. Box 9061
Boston, MA 02205-8686
By Hand State Street Bank and Trust Company
Securities Transfer and Reporting
Services
One Exchange Place
55 Broadway, 3rd Floor
New York, New York 10006
By Overnight Courier State Street Bank and Trust Company
or Express Mail Corporate Reorganization Department
70 Campanelli Drive
Braintree, MA 02184
By Broker-Dealer or Shareholders whose Shares are held in
other Nominee a brokerage, bank or trust account
(Notice of Guaranteed may contact their broker or other
Delivery) nominee and instruct them to submit
a Notice of Guaranteed Delivery and
payment on their behalf.
Delivery by any method or to any address not listed above will not
constitute good delivery.
All questions as to the validity, form, eligibility (including times of
receipt and matters pertaining to beneficial ownership) and the acceptance of
subscription forms and the Subscription Price will be determined by All-Star,
which determinations will be final and binding. No alternative, conditional or
contingent subscriptions will be accepted. All-Star reserves the absolute right
to reject any or all subscriptions not properly submitted or the acceptance of
which would, in the opinion of the Fund's counsel, be unlawful. All-Star also
reserves the right to waive any irregularities or conditions, and the Fund's
interpretations of the terms and conditions of the Offer shall be final and
binding. Any irregularities in connection with subscriptions must be cured
within such time, if any, as the Fund shall determine unless waived. Neither
All-Star nor the Subscription Agent shall be under any duty to give notification
of defects in such subscriptions or incur any liability for failure to give such
notification. Subscriptions will not be deemed to have been made until such
irregularities have been cured or waived.
Payment for Shares
Holders of Rights who subscribe for Shares on Primary Subscription or
pursuant to the Over-Subscription Privilege may choose between the following
methods of payment:
(1) If, prior to 5:00 p.m., New York time, on the Expiration Date, the
Subscription Agent shall have received a notice of guaranteed delivery, by
facsimile or otherwise, from a bank or trust company or a New York Stock
Exchange or National Association of Securities Dealers member firm,
guaranteeing delivery of (a) payment of the full Subscription Price for the
Shares subscribed for on Primary Subscription and any additional Shares
subscribed for pursuant to the Over-Subscription Privilege and (b) a
properly completed and executed Subscription Certificate, the subscription
will be accepted by the Subscription Agent. The Subscription Agent will not
honor a notice of guaranteed delivery if a properly completed and executed
Subscription Certificate and full payment for the Shares is not received by
the Subscription Agent by July 14, 1998.
(2) Alternatively, a holder of rights can, together with the
Subscription Certificate, send payment for the Shares acquired on Primary
Subscription and any additional shares subscribed for pursuant to the
Over-Subscription Privilege to the Subscription Agent based on an estimated
purchase price of $12.00 per Share. To be accepted, such payment, together
with the Subscription Certificate, must be received by the Subscription
Agent prior to 5:00 p.m., New York time, on the Expiration Date.
A PAYMENT BY CHECK OR MONEY ORDER, PURSUANT TO THE SECOND METHOD DESCRIBED
ABOVE, MUST ACCOMPANY ANY SUBSCRIPTION CERTIFICATE FOR SUCH EXERCISE TO BE
ACCEPTED. The check or money order must be drawn on a bank located in the United
States and must be made payable to Liberty All-Star Growth Fund, Inc..
On July 21, 1998 (the "Confirmation Date"), a confirmation will be sent by
the Subscription Agent to each shareholder exercising his or her Rights (or, if
the All-Star shares on the Record Date are held by Cede or any other depository
or nominee, to Cede or such other depository or nominee), showing (i) the number
of Shares acquired pursuant to the Primary Subscription; (ii) the number of
Shares, if any, acquired pursuant to the Over-Subscription Privilege; (iii) the
per Share and total purchase price for the Shares; and (iv) any additional
amount payable by such shareholder to All-Star or any excess to be refunded by
All-Star to such shareholder, in each case based on the Subscription Price as
determined on the Pricing Date. Any additional payment required from a
shareholder must be received by the Subscription Agent prior to 5:00 p.m., New
York time, on August 7, 1998, and any excess payment to be refunded by All-Star
to such shareholder will be mailed by the Subscription Agent with the
confirmation. All payments by a shareholder must be in United States dollars by
money order or check drawn on a bank located in the United States of America and
be payable to Liberty All-Star Growth Fund, Inc. Such payments will be held by
the Subscription Agent pending completion of the processing of the subscription,
and will then be paid to All-Star. Any interest earned on such amounts will
accrue to All-Star and none will be paid to the subscriber.
Whichever of the above two methods of payment is used, issuance and
delivery of the Shares subscribed for are subject to collection of checks and
actual payment pursuant to any notice of guaranteed delivery.
Rights holders will have no right to rescind their subscription after
receipt of their payment for Shares by the Subscription Agent.
If a holder of Rights who acquires Shares pursuant to the Primary
Subscription or the Over-Subscription Privilege does not make payment of any
amounts due, All-Star reserves the right to take any or all of the following
actions: (i) find other purchasers for such subscribed and unpaid for Shares;
(ii) apply any payment actually received by it toward the purchase of the
greatest number of whole Shares which could be acquired by such holder upon
exercise of the Primary Subscription or the Over-Subscription Privilege; (iii)
sell in the open market all or a portion of the Shares purchased by the holder,
and apply the proceeds to the amounts owed; and (iv) exercise any and all other
rights or remedies to which it may be entitled, including, without limitation,
the right to set off against payments actually received by it with respect to
such subscribed Shares to enforce the relevant guaranty of payment or monetary
damages.
All-Star shareholders whose shares are held by a broker-dealer, bank, trust
company or other nominee should contact the nominee to exercise their Rights and
request the nominee to exercise their Rights in accordance with their
instructions.
Brokers, banks, trust companies, depositories and other nominees who hold
All-Star shares for the account of others should notify the respective
beneficial owners of such shares as soon as possible to ascertain such
beneficial owners' intentions and to obtain instructions with respect to
exercising the Rights. If the beneficial owner so instructs, the record holder
of such Right should complete Subscription Certificates and submit them to the
Subscription Agent with the proper payment.
The instructions contained on the Subscription Certificate should be read
carefully and followed in detail. DO NOT SEND SUBSCRIPTION CERTIFICATES TO
ALL-STAR. (They should be sent to State Street Bank and Trust Company as
indicated above).
Delivery of Stock Certificates
Participants in All-Star's Automatic Dividend Reinvestment and Cash
Purchase Plan (the "Plan") who exercise the Rights issued on the shares held in
their accounts in the Plan will have their Shares acquired on Primary
Subscription and pursuant to the Over-Subscription Privilege credited to their
shareholder distribution reinvestment accounts in the Plan. Shareholders whose
shares are held of record by Cede or by any other depository or nominee on their
behalf or their broker-dealers' behalf will have their Shares acquired on
Primary Subscription and pursuant to the Over-Subscription Privilege credited to
the account of Cede or such other depository or nominee. With respect to all
other shareholders, stock certificates for all Shares acquired on Primary
Subscription and pursuant to the Over-Subscription Privilege will be mailed,
together with the confirmation and refund of the amount, if any, paid in excess
of the final Subscription Price, on or about July 21, 1998 if the estimated
Subscription Price is equal to or in excess of the final Subscription Price. If
the shareholder's confirmation shows that an additional amount is payable due to
the final Subscription Price exceeding the estimated Subscription Price, the
stock certificates will be mailed on or about August 7, 1998, provided that such
additional amount has been paid and payment for the Shares subscribed for has
cleared, which clearance may take up to five days from the date of receipt of
the payment. If such payment does not clear within five days from the date of
receipt, All-Star may exercise its rights in the event of non-payment under
"Payment for Shares" above.
Federal Income Tax Consequences
For federal income tax purposes, neither the receipt nor the exercise of
the Rights will result in taxable income to holders of shares, and no loss will
be realized if the Rights expire without being exercised. All-Star will realize
no gain or loss on the issuance, exercise or expiration of the Rights.
The holding period for a Share acquired upon exercise of a Right begins
with the date of exercise. In the absence of a special election by the
shareholder, the shareholder's basis for determining gain or loss upon the sale
of that Share will be the per share Subscription Price. The gain or loss
recognized upon such sale will be capital gain or loss if the Share was held as
a capital asset at the time of sale taxable, in the case of noncorporate
shareholders, at a maximum rate of 20% if the shareholder's holding period for
the Share is more than eighteen months, or 28% if the shareholder's holding
period for the Share is more than twelve months but less than or equal to
eighteen months.
The foregoing does not cover the state or local tax consequences of
receiving or exercising a Right or address tax aspects of the Offer that may be
relevant to shareholders subject to special treatment under the Internal Revenue
Code (such as insurance companies, financial institutions, tax-exempt entities,
employee benefit plans, dealers in securities, foreign corporations, and persons
who are not citizens or residents of the U.S.). The foregoing is intended solely
as general information, based on the Internal Revenue Code, applicable
regulations and judicial precedent as of the date hereof, and each shareholder
is advised to consult his or her own tax adviser regarding tax consequences.
Special Considerations and Risk Factors
As a result of the terms of the Offer, shareholders who do not exercise
their Rights will, at the completion of the Offer, own a smaller proportional
interest in All-Star. In addition, because the Subscription Price will be less
than the then current net asset value per Share, the Offer will result in a
dilution of net asset value, which will disproportionately affect shareholders
who do not exercise their Rights.
Possible Suspension of the Offer
All-Star has, as required by the Securities and Exchange Commission's
registration form, undertaken to suspend the Offer until it amends this
Prospectus if subsequent to May 27, 1998,- the effective date of the Fund's
Registration Statement,- All-Star's net asset value declines more than 10% from
its net asset value as of May 27, 1998. Accordingly, All-Star will notify
shareholders of any such decline and thereby permit them to cancel their
exercise of Rights.
USE OF PROCEEDS
The net proceeds of the Offer, assuming that all Shares offered hereby are
sold at an assumed Subscription Price of $11.82 per share, are estimated to be
approximately $15,427,922, after deducting expenses payable by All-Star
estimated at $105,000. Such net proceeds will be invested by All-Star's
Portfolio Managers in portfolio securities in accordance with All-Star's
investment objective and policies. It is anticipated that investment of such net
proceeds under normal market conditions will take place during a period of
approximately 30 days from their receipt by All-Star, and would in any event be
completed within three months. Pending such investment the net proceeds will be
invested in Short-Term Money Market Instruments (as defined under "Investment
Objective and Policies" below).
HISTORY OF THE FUND
The Fund commenced investment operations on March 14, 1986 under the name
"Growth Stock Outlook Trust, Inc." and under the management of Growth Stock
Outlook, Inc. ("GSO"), a corporation owned by Mr. Charles Allmon and his wife.
In May, 1990 the Fund's original investment objective of long-term capital
appreciation (with income being a consideration in the selection of investments
but not an investment objective) was changed to long-term capital appreciation
as a primary objective and current income as a secondary objective, in each case
with an emphasis on the preservation of capital, and in May, 1991 the Fund's
name was changed to "The Charles Allmon Trust, Inc." During GSO's management of
the Fund, a substantial portion of the Fund's portfolio was invested in U.S.
Government Securities and other short-term cash equivalents.
Pursuant to an Asset Acquisition and Fund Transition Agreement among LAMCO,
GSO and Mr. Allmon, on May 27, 1994 the Fund entered into a Fund Management
Agreement with LAMCO pursuant to which LAMCO provided its multi-manager services
described under "The Multi-Manager Concept" below with respect to an initial
amount equal to 20% of the Fund's total assets, with GSO continuing to manage
the remaining 80%. LAMCO also assumed administrative responsibility for the
Fund. On November 6, 1995 LAMCO assumed investment management responsibility for
100% of the Fund's assets, the Fund's name was changed to "Liberty All-Star
Growth Fund, Inc.", the Fund's investment objective was returned to the original
objective of long-term capital appreciation, eliminating the secondary objective
of current income and the emphasis on preservation of capital, and the Fund's
Board of Directors was reconstituted. The approximately 79% of the Fund's assets
then being managed by GSO, over 80% of which had been invested in U.S. Treasury
bills and other short-term cash equivalents, was assigned in substantially equal
portions to the Fund's then three Portfolio Managers under LAMCO's supervision
and within three months was substantially fully invested in equity securities in
accordance with their respective investment styles.
THE MULTI-MANAGER CONCEPT
All-Star allocates its portfolio assets on an approximately equal basis
among a number of independent investment management firms ("Portfolio
Managers"),currently three in number,- recommended by LAMCO, each of which
employs a different investment style, and from time to time rebalances the
portfolio among the Portfolio Managers so as to maintain an approximately equal
allocation of the portfolio among them throughout all market cycles.
In the opinion of LAMCO, the multi-manager concept provides advantages over
the use of a single manager because of the following primary factors:
(i) most equity investment management firms consistently employ a
distinct investment style which causes them to emphasize stocks with
particular characteristics;
(ii) because of changing investor preferences, any given investment
style will move into and out of market favor and will result in better
investment performance under certain market conditions but less successful
performance under other conditions;
(iii) consequently, by allocating All-Star's portfolio on an
approximately equal basis among Portfolio Managers employing different
styles, the impact of any one such style on investment performance will be
diluted, and the investment performance of the total portfolio will be more
consistent and less volatile over the long-term than if a single style were
employed throughout the entire period;
(iv) consistent performance at a given annual rate of return over time
produces a higher rate of return for the long-term than more volatile
performance having the same average annual rate of return.
LAMCO, based on the foregoing principles and on its analysis and evaluation
of information regarding the personnel and investment styles and performance of
a universe of several hundred professional investment management firms, has
selected for appointment by All-Star a group of Portfolio Managers representing
a blending of different investment styles which, in its opinion, is appropriate
to All-Star's investment objective.
LAMCO continuously monitors the performance and investment styles of
All-Star's Portfolio Managers and from time to time recommends changes of
Portfolio Managers based on factors such as changes in a Portfolio Manager's
investment style or a departure by a Portfolio Manager from the investment style
for which it had been selected, a deterioration in a Portfolio Manager's
performance relative to that of other investment management firms practicing a
similar style, or adverse changes in its ownership or personnel. Portfolio
Manager changes may also be made to change the mix of investment styles employed
by All-Star's Portfolio Managers. Since LAMCO's assumption of management
responsibilities for the Fund in May, 1994 (see "History of the Fund"), All-Star
has had two Portfolio Manager changes.
All-Star Portfolio Manager changes, as well as the periodic rebalancings of
its portfolio among the Portfolio Managers and the need to raise cash for
All-Star's quarterly distributions, may result in some portfolio turnover in
excess of what would otherwise be the case (see "Financial Highlights" above).
Increased portfolio turnover would cause increased brokerage commission costs to
the Fund, and may result in realization of capital gains, which are taxable to
shareholders.
Under the terms of an exemptive order issued to All-Star and LAMCO by the
Securities and Exchange Commission, a portfolio management agreement with a new
or additional Portfolio Manager may be entered into in advance of shareholder
approval, provided that the new agreement is at a fee no higher than that
provided in, and is on other terms and conditions substantially similar to,
All-Star's agreements with its other Portfolio Managers, and that its
continuance is subject to approval by shareholders at All-Star's regularly
scheduled annual shareholder meeting (normally held in April) next following the
date of the new or additional portfolio management agreement. Information about
Portfolio Manager changes or additions made in advance of shareholder approval
will be announced to the press following Board of Director action and will be
included in the next report to shareholders.
All-Star's current Portfolio Managers are:
Oppenheimer Capital
William Blair & Company, L.L.C.
Mississippi Valley Advisers, Inc.
See Appendix A for information about these Portfolio Managers, including
the employees primarily responsible for the day-to-day management of the portion
of All-Star's portfolio allocated to each.
INVESTMENT OBJECTIVE AND POLICIES
All-Star's investment objective is to seek long-term capital appreciation.
It seeks its investment objective through investment primarily in a diversified
portfolio of equity securities. See "History of the Fund" above for its prior
investment objectives.
All-Star invests primarily (at least 65% under normal market conditions) in
equity securities, including securities convertible into or exchangeable for
equity securities.
Although under normal market conditions All-Star will remain substantially
fully invested in equity securities, up to 35% of the value of All-Star's total
assets may be invested in obligations of the U.S. Government and its agencies
and instrumentalities ("U.S. Government Securities"), repurchase agreements with
respect to U.S. Government Securities, and, to an extent not greater than 10% of
the market value of the Fund's total assets, money market mutual funds that
invest primarily in U.S. Government Securities. All-Star may temporarily invest
without limit in U.S. Government Securities, repurchase agreements and money
market mutual funds for defensive purposes when LAMCO or the Portfolio Managers
deem that market conditions are such that a more conservative approach to
investment is desirable.
All-Star's investment objective of long-term capital appreciation, as well
as certain of its investment restrictions referred to under Reducing Risk below
and in the Statement of Additional Information, are fundamental and may not be
changed without a majority vote of All-Star's outstanding shares. Under the 1940
Act, a "majority vote" means the vote of the lesser of (a) 67% of the shares of
All-Star represented at a meeting at which the holders of more than 50% of the
outstanding shares of All-Star are present or represented, or (b) more than 50%
of the outstanding shares of All-Star. Non-fundamental policies may be changed
by vote of the Board of Directors.
Repurchase Agreements
All-Star may enter into repurchase agreements with banks or broker-dealer
firms whereby such institutions sell U.S. Government Securities to All-Star and
agree at the time of sale to repurchase them at a mutually agreed upon time and
price. The resale price is greater than the purchase price, reflecting an
agreed-upon interest rate which is effective during the time between the
purchase and resale and is not related to the stated interest rate on the
purchased securities. All-Star requires the seller of the securities to maintain
on deposit with All-Star's custodian bank securities in an amount at all times
equal to or in excess of the value of the repurchase agreement. In the event
that the seller of the securities defaults on its repurchase obligation or
becomes bankrupt, All-Star could receive less than the repurchase price on the
sale of the securities to another party or could be subjected to delays in
selling the securities. Under normal market conditions, not more than 35% of
All-Star's total assets will be invested in Short-Term Money Market Instruments,
including repurchase agreements, and not more than 10% of All-Star's net assets
will be invested in repurchase agreements maturing in more than seven days.
Foreign Securities
All-Star may invest up to 25% percent of its net assets in foreign
securities, provided that it will not purchase the securities of a foreign
issuer if as a result more than 50% of the Fund's investments in equity
securities would consist of securities of foreign issuers. All-Star presently
does not intend to invest 10% or more of its assets in foreign securities.
Investment in foreign securities involves considerations and risks not typically
associated with investing in securities of domestic companies. See "Investment
Objectives and Policies - Foreign Securities" in the Statement of Additional
Information.
Risks
As an investment company that holds common stocks, All-Star's portfolio is
subject to the possibility that common stock prices will decline over short or
even extended periods. All-Star may remain substantially fully invested during
periods when stock prices generally rise and also during periods when they
generally decline. Risks are inherent in investment in equities, and Fund
shareholders should be able to tolerate significant fluctuations in the value of
their investment in All-Star. All-Star is intended to be a long-term investment
vehicle and is not designed to provide investors with a means of speculating on
short-term stock market movements. Investors should not consider the Fund a
complete investment program.
In addition to the foregoing investment risks, shares of closed-end
investment companies such as All-Star are not redeemable and frequently trade at
a discount from their net asset value. This risk is separate and distinct from
the risk that All-Star's net asset value may decline. See "Share Price Data" for
information about the market price and net asset value of All-Star's shares
since January 1, 1996.
Reducing Investment Risk
As a matter of fundamental policy, All-Star will not (i), as to 75% of its
total assets, purchase the securities (other than U.S. Government Securities) of
any one issuer if after such purchase more than 5% of its assets would be
invested in the securities of that issuer, (ii) purchase more than 10% of the
outstanding voting securities of such issuer, (iii) invest 25% more of its total
assets in the securities of issuers in the same industry, or (iv) invest more
than 10% of its total assets in securities that at the time of purchase have
legal or contractual restrictions on resale (including unregistered securities
that are eligible for resale to qualified institutional buyers pursuant to Rule
144A under the Securities Act of 1933). See "Investment Restrictions" in the
Statement of Additional Information.
MANAGEMENT OF ALL-STAR
The management of All-Star's business and affairs is the responsibility of
its Board of Directors.
All-Star has a Fund Management Agreement with Liberty Asset Management
Company (the "Fund Manager") pursuant to which LAMCO provides the Portfolio
Manager selection, evaluation, monitoring and rebalancing services ("investment
management services") described above under "The Multi-Manager Concept." No
single individual at LAMCO is responsible for LAMCO's decisions with respect to
the retention or replacement of the Portfolio Managers.
LAMCO is also responsible for the provision of administrative services to
All-Star, including the provision of office space, shareholder and broker-dealer
communications, compensation of all officers of All-Star who are officers or
employees of LAMCO or its affiliates, and the supervision of transfer agency,
dividend disbursing, custodial and other services provided to others. Certain of
LAMCO's administrative responsibilities have been delegated to Colonial.
LAMCO has its offices at 600 Atlantic Avenue, 23rd Floor, Boston,
Massachusetts 02210. LAMCO was organized in 1985 and is an indirect wholly-owned
subsidiary of Liberty Financial Companies, Inc., which in turn is an indirect
majority-owned subsidiary of Liberty Mutual Insurance Company, an international
multi-line insurance carrier.
Under All-Star's Portfolio Management Agreements with each of its Portfolio
Managers and LAMCO, each Portfolio Manager has discretionary authority
(including for the selection of brokers and dealers for the execution of
All-Star's portfolio transactions) with respect to the portion of All-Star's
assets allocated to it by LAMCO from time to time, subject to All-Star's
investment objective and policies, to the supervision and control of the
Directors, and to instructions from LAMCO. As described under "The Multi-Manager
Concept", LAMCO from time to time reallocates All-Star's portfolio assets in
order to maintain an approximately equal allocation of them among the Portfolio
Managers and to preserve an approximately equal weighting among the different
investment styles practiced by the Portfolio Managers. Although the Portfolio
Managers' activities are subject to general oversight by LAMCO and the Directors
and officers of All-Star, neither LAMCO nor such Directors and officers evaluate
the investment merits of the Portfolio Managers' selections of individual
securities.
Although All-Star does not permit a Portfolio Manager to act or have a
broker-dealer affiliate act as broker for Fund portfolio transactions initiated
by it, All-Star's Portfolio Managers are permitted to place portfolio
transactions initiated by them with another Portfolio Manager or its
broker-dealer affiliate for execution on an agency basis, provided the
commission does not exceed the usual and customary broker's commission being
paid to other brokers for comparable transactions and is otherwise in accordance
with All-Star's procedures adopted under Rule 17e-1 under the 1940 Act.
Under All-Star's Fund Management Agreement with LAMCO and its Portfolio
Management Agreements with the Portfolio Managers, All-Star pays LAMCO a fund
management fee and an administrative fee, and LAMCO in turn pays the fees of the
Portfolio Managers from the fund management fees paid to it. The shareholders of
the Fund at their 1998 annual meeting approved a new Fund Management Agreement
with LAMCO and new Portfolio Management Agreements with the Portfolio Managers
increasing, effective August 1, 1998, the fees payable to LAMCO and the
Portfolio Managers on net assets in excess of $125 million. The annual fees that
are paid under the current agreements and that will be paid under the new
agreements effective August 1, 1998 are shown below (fees are payable quarterly
based on the indicated percentage of the Fund's average weekly net assets during
the prior quarter).
Fund Management
Fee Paid to LAMCO
and Portfolio Manage-
Average weekly ment Fee Paid to Port- Administrative
Net Asset Value folio Managers Fee Paid to LAMCO Total Fees
- --------------- ----------------------- ----------------- ----------
Fee schedule under
current Agreements
First $125 million 0.75% (0.40% to 0.25% 1.00%
Portfolio Managers)
Next $125 million 0.5625% (0.30% to 0.1875% 0.75%
Portfolio Managers)
Over $250 million 0.375% (0.20% to 0.125%
0.50% Portfolio Managers)
Fee schedule under
new Agreements effective
August 1, 1998
First $300 million 0.80% (0.40% to 0.20% 1.00%
Portfolio Managers)
Over $300 million 0.72% (0.36% to 0.18% 0.90%
Portfolio Managers)
Colonial provides pricing and bookkeeping services to All-Star for an
annual fee of $21,000 plus an annual asset-based fee of 0.0233% of net assets in
excess of $50 million, with breakpoint reductions at $500 million and $1
billion.
Custodian and Transfer Agent
The Chase Manhattan Bank, 270 Park Avenue, New York, New York 10017, is
All-Star's custodian. State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110, is the transfer and dividend disbursing agent and
registrar for All-Star.
Expenses of the Fund
LAMCO provides the Portfolio Manager selection, evaluation, monitoring and
rebalancing services and assumes responsibility for the administrative services
described above, pays the compensation of and furnishes office space for the
officers of All-Star who are affiliated with LAMCO, and pays the management fees
of the Portfolio Managers. All-Star pays all its expenses, other than those
expressly assumed by LAMCO. The expenses payable by All-Star include: management
and administrative fees payable to LAMCO; pricing and bookkeeping fees payable
to Colonial; fees and expenses of independent auditors; fees for transfer agent
and registrar, dividend disbursing, custodian and portfolio recordkeeping
services; expenses in connection with the Automatic Dividend Reinvestment and
Cash Purchase Plan; expenses in connection with obtaining quotations for
calculating the value of All-Star's net assets; taxes (if any) and the
preparation of All-Star's tax returns; brokerage fees and commissions; interest;
costs of director and shareholder meetings (including expenses of printing and
mailing proxy material therefor); expenses of printing and mailing reports to
shareholders; fees for filing reports with regulatory bodies and the maintenance
of All-Star's existence; membership dues for investment company industry trade
associations; legal fees; stock exchange listing fees and expenses; fees to
federal and state authorities for the registration of shares; fees and expenses
of Directors who are not directors, officers, employees or stockholders of LAMCO
or its affiliates; insurance and fidelity bond premiums; and any extraordinary
expenses of a non-recurring nature.
Year 2000
Many existing computer programs and systems, including some used by LAMCO,
by All-Star's custodian bank, transfer and dividend dispersing agent, and by
Colonial in connection with its pricing and bookkeeping services to the Fund,
have been written in such a way that, without modification, they will not
properly process and calculate date-related information and data from and after
January 1, 2000. All-Star has been advised that LAMCO, Colonial, and the Fund's
custodian bank and transfer agent (neither of which are affiliated with LAMCO)
are in the process of making any required modifications of their programs and
systems and that they believe that they will complete such modifications on a
timely basis and will be able properly to process such information and data for
All-Star after that date. The cost of these modifications will not affect
All-Star. However, failure by LAMCO or any of All-Star's other service providers
to successfully complete the required modifications in a timely manner could
have a materially adverse impact on All-Star.
DESCRIPTION OF SHARES
General
All-Star's capitalization consists of 20,000,000 shares of Common Stock,
par value $.10 per share, of which 13,141,220 shares were outstanding on the
date of this Prospectus. The currently outstanding shares are, and the Shares
offered hereby when issued and paid for pursuant to the terms of the Offer will
be, fully paid and non-assessable. Shareholders would be entitled to share pro
rata in the net assets of All-Star available for distribution to shareholders
upon liquidation of All-Star.
Shareholders are entitled to one vote for each share held. All-Star's
shares do not have cumulative voting rights, which means that the holders of
more than 50% of the shares of All-Star voting for the election of Directors can
elect all the Directors standing for election, and, in such event, the holders
of the remaining shares will not be able to elect any of such Directors.
Repurchase of Shares
All-Star is a closed-end investment company and as such its shareholders do
not have the right to cause All-Star to redeem their All-Star shares. All-Star,
however, is authorized to repurchase its shares on the open market when its
shares are trading at a discount from their net asset value. All-Star has no
current plans to repurchase its shares.
Anti-takeover Provisions of the Articles of Incorporation
and By-Laws; Super-majority Vote Requirement for
Conversion to Open-End Status
All-Star's Articles of Incorporation and By-laws contain provisions
(commonly referred to as "anti-takeover" provisions) which are intended to have
the effect of limiting the ability of other entities or persons to acquire
control of All-Star, to cause it to engage in certain transactions, or to modify
its structure. The Board of Directors is divided into two classes, each having a
term of three years. On the date of the annual meeting of shareholders in each
year the term of one class expires. This provision could delay for up to two
years the replacement of a majority of the Board of Directors. In addition, the
affirmative vote of the holders of 66 2/3% of the shares of the Fund will be
required generally to authorize any of the following transactions:
(i) All-Star's merger or consolidation with or into any other corporation;
(ii) the issuance of any securities of All-Star to any person or entity for
cash;
(iii) the sale, lease or exchange of all or any substantial part of
All-Star's assets to any entity or person (except assets having an aggregate
fair market value of less than $1,000,000); or
(iv) the sale, lease or exchange to All-Star, in exchange for securities
of All-Star, of any assets of any entity or person (except assets having an
aggregate fair market value of less than $1,000,000);
if such corporation, person or entity is directly, or indirectly through
affiliates, the beneficial owner of five percent or more of the outstanding
shares of All-Star. Such 66 2/3% vote will not be required with respect to the
transactions listed in (i) through (iv) above where the Board of Directors under
certain conditions approves the transaction. However, depending upon the
transaction, a different shareholder vote may nevertheless be required under
Maryland law.
The affirmative vote of the holders of 66 2/3rds percent of the outstanding
shares of Common Stock will be required to authorize All-Star's conversion from
a closed-end to an open-end investment company, regardless of whether approved
or recommended by the Fund's Board of Directors. As part of the settlement of
litigation relating to the Fund's 1995 annual meeting, LAMCO agreed to recommend
to All-Star's Board of Directors that the Fund's proxy statement for the annual
meeting of shareholders to be held in the year 2000 include a proposal to change
the Fund from a closed-end investment company to an open-end mutual fund.
Neither LAMCO nor the Fund's Directors are obligated, however, to recommend that
proposal to shareholders. The super-majority vote referred to above would be
required for such conversion regardless of whether or not recommended by the
Board of Directors.
The foregoing super-majority vote requirements may not be amended except
with a similar super-majority vote of the shareholders.
These provisions will make more difficult a change in All-Star's structure
or management or consummation of the foregoing transactions without the
Directors' approval. The anti-takeover provisions 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 All-Star in a tender offer or similar transaction. However, the Board
of Directors continues to believe that the anti-takeover provisions are in the
best interests of All-Star and its shareholders because they provide the
advantage of potentially requiring persons seeking control of All-Star to
negotiate with its management regarding the price to be paid and facilitating
the continuity of All-Star's management and its continuing application of the
multi-manager concept.
The Board also believes that the super majority vote requirement for
conversion to an open-end investment company is in the best interest of All-Star
and its shareholders because it will allow All-Star to continue to benefit from
the advantages of its closed-end structure until such time that, based on
relevant factors including the then current relationship of the market price of
All-Star's shares to their net asset value, the Board determines to recommend to
shareholders All-Star's conversion to an open-end investment company.
DISTRIBUTIONS; AUTOMATIC DIVIDEND
REINVESTMENT AND CASH PURCHASE PLAN
10% Distribution Policy
All-Star's current distribution policy, announced in February, 1997, is to
pay distributions on its Common Stock totaling approximately 10% of its net
asset value per year, payable in four quarterly distributions of 2.5% of
All-Star's net asset value at the close of the New York Stock Exchange on the
Friday prior to each quarterly declaration date. These fixed distributions are
not related to the Fund's net investment income or net realized capital gains or
losses. If, for any calendar year, the total distributions required by the 10%
pay-out policy exceed All-Star's net investment income and net realized capital
gains, the excess will generally be treated as a tax-free return of capital to
the extent of the shareholder's basis in his or her shares, and thereafter, to
the extent of any excess over such basis, as capital gain. The amount treated as
a tax-free return of capital will reduce the shareholder's adjusted basis in his
or her shares, thereby increasing his or her potential gain or reducing his or
her potential loss on the sale of his or her shares.
To the extent All-Star's 10% payout policy results in distributions in
excess of its net investment income and net realized capital gains, such
distributions will decrease All-Star's total assets and increase its expense
ratio to a greater extent than would have been the case without the 10% payout
policy. In addition, in order to make distributions under the 10% payout policy,
All-Star may have to sell portfolio securities at times when the particular
investment styles of its Portfolio Managers would dictate not doing so.
All-Star may, in the discretion of the Board of Directors, retain for
reinvestment, and not distribute, net long-term capital gains in excess of net
short-term capital losses for any year to the extent that its net investment
income, net short-term realized gains and net long-term realized gains exceed
the minimum amount required to be distributed for such year under the 10%
pay-out policy, although All-Star reserves the right to distribute such excess.
Any such retained capital gains would be taxed to shareholders as long-term
capital gains and shareholders would be able to claim their proportionate share
of the federal income taxes paid by All-Star with respect to such retained gains
as a credit against their own federal income tax liabilities, and would be
entitled to increase the adjusted tax basis of their All-Star shares by the
difference between their pro rata share of the undistributed capital gains and
their tax credit.
All-Star intends to pay all or a substantial portion of its distributions
in each year to shareholders in the form of newly issued shares (plus cash in
lieu of any fractional shares that would otherwise be issuable), to all
shareholders except those non-participants in All-Star's Automatic Dividend
Reinvestment and Cash Purchase Plan who specifically elect to receive their
distribution in cash by completing and signing an option card, a copy of which
will be enclosed with the notice of each such distribution payable in shares,
and returning it on a timely basis to State Street Bank and Trust Company,
All-Star's transfer agent and dividend paying agent.
The number of shares to be issued in payment of distributions declared
payable in shares will be determined by dividing the total dollar amount of the
distribution payable to the shareholder by the lower of the market value or the
net asset value per share on the valuation date for the distribution (but not at
a discount of more than 5% from the market value). Market value per share for
this purpose will be the last sales price on the New York Stock Exchange on the
valuation date or, if there are no sales on that day, the mean between the
closing bid and closing asked quotations for that date.
Automatic Dividend Reinvestment and Cash Purchase Plan
Each shareholder of the Fund will automatically be a participant in
All-Star's Automatic Dividend Reinvestment and Cash Purchase Plan, as amended
(the "Plan"),unless the shareholder specifically elects otherwise by writing or
calling the Plan Agent, State Street Bank & Trust Company, P.O. Box 8200,
Boston, Massachusetts 02266-8200 (1-800-542-3863). Shareholders whose shares are
held in the name of a brokerage firm, bank or other nominee must notify their
brokerage firm, bank or nominee if they do not want to participate in the Plan.
Shareholders who want to receive their distributions in cash should elect not to
participate in the Plan and, as noted above, will be required to elect to
receive in cash each distribution declared payable in shares or cash.
Under the Plan, distributions declared payable in shares or cash at the
option of shareholders are paid to participants in the Plan entirely in newly
issued full and fractional shares valued at the lower of market value or net
asset value per share on the valuation date for the distribution (but not a
discount of more than 5% from market price). Distributions declared payable in
cash will be reinvested for the accounts of participants in the Plan in
additional shares purchased by the Plan Agent on the open market, on the New
York Stock Exchange or elsewhere at prevailing market prices (if the Fund's
shares are trading at a discount to their net asset value), or in newly issued
shares (if the Fund's shares are trading at or above their net asset value).
Dividends and distributions are subject to taxation, whether received in cash or
in shares (see "Tax Status" below).
Participants in the Plan have the option of making additional cash payments
in any amount from $100 to $3000 on a monthly basis for investment in All-Star
shares purchased on the open market. These voluntary cash payments will be
invested on or about the 15th day of each calendar month, and voluntary payments
should be sent so as to be received by the Plan Agent no later than ten business
days before the next investment date. Barring suspension of trading, voluntary
cash payments will be invested within 45 days of receipt. A participant may
withdraw a voluntary cash payment by written notice received by the Plan Agent
at least 48 hours before such payment is to be invested.
The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in the account, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Plan Agent in non-certificated form in the name
of the participant, and each shareholder's proxy will include those shares
purchased or received pursuant to the Plan.
In the case of shareholders such as banks, brokers or nominees which hold
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
record shareholder as representing the total amount registered in the record
shareholder's name and held for the account of beneficial owners who participant
in the Plan.
There is no charge to participants for reinvesting distributions payable in
either shares or cash. The Plan Agent's fees for handling the reinvestment of
such distributions are paid by All-Star. There are no brokerage charges with
respect to shares issued directly by All-Star as a result of distributions
payable in shares or in cash. However, each participant bears a pro rata share
of brokerage commissions incurred with respect to the Plan Agent's open market
purchases in connection with the reinvestment of distributions declared payable
in cash.
With respect to purchases from voluntary cash payments, the Plan Agent will
charge $1.25 for each such purchase for a participant, plus a pro rata share of
the brokerage commissions. Brokerage charges for purchasing small amounts of
shares for individual accounts through the Plan are expected to be less than the
usual brokerage charges for such transactions, as the Plan Agent will be
purchasing shares for all participants in blocks and prorating the lower
commission thus attainable.
The automatic reinvestment of dividends and distributions will not relieve
plan participants of any income tax which may be payable on such dividends or
distributions. See "Tax Status" below.
A participant may elect to withdraw from the Plan at any time by notifying
the Plan Agent in writing. There will be no penalty for withdrawal from the Plan
and shareholders who have previously withdrawn from the Plan may rejoin it at
any time. A withdrawal will only be effective for subsequent distributions with
a record date at least ten days after the notice of withdrawal is received by
the Plan Agent.
Experience under the Plan may indicate that changes are desirable.
Accordingly, All-Star reserves the right to amend or terminate the Plan.
TAX STATUS
The following discussion summarizes the general rules applicable to
taxation of All-Star and its shareholders. Shareholders are urged to consult
with their own tax advisors concerning the tax consequences of their continued
investment in All-Star and of their receipt and exercise of the Rights.
All-Star intends to elect and to qualify each year for federal income tax
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"), and to make distributions to the shareholders in
accordance with the timing requirements set out in the Code. As a result, it is
expected that All-Star will be relieved of federal income taxes on its net
investment income and net realized capital gains to the extent distributed to
shareholders. (See "Distributions; Automatic Dividend Reinvestment and Cash
Purchase Plan--10% Distribution Policy" regarding the authority of All-Star to
retain and pay taxes on, and not distribute, net realized capital gains). If
All-Star should fail to qualify as a regulated investment company in any year,
it would incur a federal corporate income tax upon its taxable income and its
distributions would generally be taxable as ordinary dividend income to the
shareholders.
Dividends and distributions by All-Star from net investment income and net
realized capital gains are subject to taxation whether received by shareholders
in cash or in shares of All-Star. Shareholders receiving a dividend or
distribution in the form of newly issued shares will be treated for federal
income tax purposes as receiving a distribution in an amount equal to the fair
market value, determined as of the distribution date, of the shares received.
Such shareholders will have a cost basis in each newly issued share equal to the
fair market value of a share of All-Star on the distribution date. Distributions
are generally taken into account for tax purposes when paid, except that
distributions paid in January but declared in the last quarter of the preceding
calendar year must be taken into account as if paid on December 31 of such
preceding calendar year. A portion of All-Star's net investment income paid to
corporate shareholders which is attributable to dividends from domestic
corporations may be eligible for the 70% dividends received deduction available
to corporations. Availability of the deduction for particular corporate
shareholders is subject to certain limitations, and deducted amounts may be
subject to the alternative minimum tax or result in certain basis adjustments.
Distributions from net realized capital gains are taxable as long-term capital
gains, regardless of how long the shareholder has held the shares, and are not
eligible for the dividends received deduction for corporations. Net long-term
capital gains are taxable, in the case of noncorporate shareholders, at a
maximum rate of 20% if attributable to the disposition of assets the holding
period for which was more than eighteen months or 28% if attributable to the
disposition of assets the holding period for which was more than twelve months
but less than or equal to eighteen months.
If a shareholder holds shares of All-Star for six months or less, any loss
on the sale of the shares will be treated as a long-term capital loss to the
extent of any amount reportable by the shareholder as long-term capital gain
with respect to such shares. Any loss realized upon a disposition of shares may
also be disallowed under rules relating to wash sales.
At the time of an investor's purchase of All-Star shares, All-Star's net
asset value may reflect undistributed net investment income or capital gains or
net unrealized appreciation of securities held by All-Star. As of May 29, 1998,
All-Star had net unrealized appreciation of its investments of $56.2 million. A
subsequent distribution to the investor of such amounts, although it may in
effect constitute a return of his or her investment, would be taxable to the
shareholder as ordinary income or capital gain as described above. For federal
income tax purposes, All-Star is permitted to carry forward its net realized
capital losses, if any, and may realize net capital gains up to the amount of
such losses without being required to pay taxes on or distribute such gains. As
of December 31, 1997, All-Star had no capital loss carryovers.
Under the Interest and Dividend Tax Compliance Act of 1983, certain
non-corporate All-Star shareholders may be subject to 31% withholding on
reportable dividends and capital gains distributions ("back-up withholding").
Generally, shareholders subject to back-up withholding will be those for whom a
taxpayer identification number and certain required certificates are not on file
with All-Star or who, to All-Star's knowledge, have furnished an incorrect
number. In addition, All-Star is required to withhold from distributions to any
shareholder who does not certify to All-Star that such shareholder is not
subject to back-up withholding due to notification by the Internal Revenue
Service that such taxholder has under-reported interest or dividend income.
Distributions from net investment income paid to shareholders who are
non-resident aliens or entities may be subject to 30% United States withholding
tax (but not, in such event, subject to backup withholding) under the existing
provisions of the Code applicable to foreign individuals and entities unless a
reduced rate of withholding or a withholding exemption is provided under an
applicable treaty. Non-U.S. shareholders are urged to consult their own tax
advisors concerning the applicability of the United States withholding tax.
Information concerning the federal income tax status of All-Star dividends
and distributions is mailed to shareholders annually.
Distributions and the transactions referred to in the preceding paragraphs
may be subject to state and local income taxes, and the treatment thereof may
differ from the federal income tax consequences discussed herein. Shareholders
are advised to consult with their tax advisors concerning the application of
state and local taxes.
See "The Offer-Federal Income Tax Consequences" for a discussion of the
federal income tax consequences of the receipt and exercise of Rights.
GENERAL
All-Star was incorporated as a Maryland corporation on December 16, 1985
and commenced investment operations on March 14, 1986.
LAMCO is an indirect wholly-owned subsidiary of Liberty Financial
Companies, Inc., itself an indirect majority-owned subsidiary of Liberty Mutual
Insurance Company.
Under the Fund Management Agreement between All-Star and LAMCO, All-Star
may use the name "Liberty All-Star" only so long as the Fund Management
Agreement remains in effect. If the Fund Management Agreement is no longer in
effect, All-Star is obligated (to the extent it lawfully can) to cease using
such name or any other name indicating that it is advised by or otherwise
connected with LAMCO. In addition, LAMCO may grant the non-exclusive right to
use the name "Liberty All-Star" to any other entity, including any other
investment company of which LAMCO or any of its affiliates is the investment
adviser or distributor.
STATEMENT OF ADDITIONAL INFORMATION
Additional information about the Fund is contained in the Statement of
Additional Information, a copy of which is available at no charge by calling the
Information Agent at the telephone number indicated on the cover of the
Prospectus. Set forth below is the Table of Contents of the Statement of
Additional Information.
Table of Contents
-----------------
Page
----
Investment Objective and Policies 2
Investment Restrictions 2
Investment Advisory and Other Services 4
Directors and Officers of All-Star 5
Portfolio Security Transactions 8
Principal Shareholders 9
Financial Statements 10
<PAGE>
APPENDIX A
INFORMATION ABOUT THE PORTFOLIO MANAGERS
WILLIAM BLAIR & COMPANY, L.L.C.
222 West Adams Street
Chicago, IL 60606
William Blair & Company, L.L.C. ("Blair") was appointed as All-Star
Portfolio Manager effective March 1, 1997. Blair is a registered investment
adviser and a securities broker-dealer. It is the successor to a general
partnership over 140 former general partners of which are members or principals
no one of whom owns more than a 25% interest.
As of December 31, 1997, Blair had approximately $9 billion in assets under
management. John Jostrand, Principal of Blair, has managed the portion of
All-Star's portfolio allocated to Blair since its appointment as an All-Star
Portfolio Manager. Mr. Jostrand has been associated with Blair since 1993.
MISSISSIPPI VALLEY ADVISORS INC.
One Mercantile Center
Seventh & Washington Streets
St. Louis, Missouri 63101
Mississippi Valley Advisors Inc. ("MVA") was
appointed an All-Star Portfolio Manager effective January
2, 1996. MVA is a wholly-owned subsidiary of Mercantile
Bank, N.A., which in turn is a wholly-owned subsidiary of
Mercantile Bancorporation Inc., a New York Stock Exchange
listed bank holding company.
As of December 31, 1997, MVA had approximately $9.4 billion in assets under
management. Robert J. Anthony, Senior Associate of MVA, has managed the portion
of All-Star's portfolio assigned to MVA since its appointment as an All-Star
Portfolio Manager. Mr. Anthony has been associated with MVA since 1987.
OPPENHEIMER CAPITAL
Oppenheimer Tower
World Financial Center
New York, NY 10281
Oppenheimer Capital ("Opp Cap") has been a Portfolio Manager of All-Star
since June 1, 1994. Opp Cap is a Delaware general partnership formed on July 1,
1987 as the successor to a corporation formed in 1975. Opp Cap is owned and
controlled by PIMCO Advisors L.P. ("PIMCO"), an investment adviser with
approximately $199 billion in assets under management. One of PIMCO's general
partners is PIMCO Partners, G.P., a general partnership of which the managing
general partner is a limited liability company whose members are the Managing
Directors of Pacific Investment Management Company, and the other general
partner of which is a subsidiary of Pacific Mutual Life Insurance Company.
Approximately 42% of the limited partnership interests in PIMCO are owned by
PIMCO Advisors Holdings, L.P., units of which are publicly traded.
Mr.John Lindenthal, Managing Director of Opp Cap, has managed the portion
of All-Star's portfolio allocated to Opp Cap since its appointment as an
All-Star Portfolio Manager. Mr. Lindenthal has been associated with Opp Cap for
over 18 years.
[Back Cover]
No person has been authorized to give any information or to make any
representation not contained in this Prospectus and, if given or made, such
information or representation must not be relied upon as having been authorized.
This Prospectus does not constitute an offering of any securities other than the
registered securities to which it relates or an offer to any person in any State
or jurisdiction of the United States or any country where such offer would be
unlawful.
[Logo] LIBERTY
All-Star
GROWTH FUND, INC.
TABLE OF CONTENTS
Expenses........................
Prospectus Summary..............
Financial Highlights............
Share Price Data................
Investment Performance..........
The Offer.......................
Use of Proceeds.................
History of the Fund.............
The Multi-Manager Concept....... A Multi-Managed Investment
Investment Objective Company
and Policies..................
Management of All-Star.......... 1,314,122 Shares of Common Stock
Description of Shares........... Issuable upon Exercise of
Distributions; Automatic Rights to Subscribe
Dividend Reinvestment and for such Shares
Cash Purchase Plan............
Tax Status General.............. PROSPECTUS
Statement of Additional June 3, 1998
Information...................
Appendix A--Information about
the Portfolio Managers..........
LIBERTY ALL-STAR GROWTH FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
June 3, 1998
This Statement of Additional Information is not a prospectus, and should be
read in conjunction with the Prospectus of Liberty All-Star Growth Fund, Inc.
("All-Star") dated June 3, 1998. A copy of the Prospectus may be obtained by
calling or writing Liberty Asset Management Company at 600 Atlantic Avenue,
Boston, Massachusetts 02110 (1-800-542-3863).
TABLE OF CONTENTS PAGE
Investment Objectives and Policies........... 2
Investment Restrictions...................... 2
Investment Advisory and Other Services....... 4
Directors and Officers of All-Star............ 5
Portfolio Security Transactions.............. 8
Principal Shareholders....................... 9
Financial Statements......................... 9
INVESTMENT OBJECTIVES AND POLICIES
A description of the investment objective of Liberty Al-Star Growth Fund,
Inc. ("All-Star" or the "Fund") and the types of securities in which it may
invest is contained in the Prospectus under "Investment Objectives and
Policies."
Foreign Securities
All-Star may invest up to 25 percent of its net assets in securities of
foreign issuers, provided that the Fund will not purchase the securities of a
foreign issuer, if, as a result of the purchase, more than 50% of its equity
investment would consist of securities of foreign issuers. All-Star's investment
in foreign securities involves considerations not typically associated with
investing in securities of domestic companies. Investing in securities of
foreign issuers and the attendant holding of foreign currencies, for example,
could cause the Fund to be affected favorably or unfavorably by changes in
currency rates and exchange control regulations. In addition, less information
may be available about foreign companies that about domestic companies and
foreign companies may not be subject to reporting or accounting standards and
requirements comparable to those applicable to domestic companies. Foreign
securities and their markets may not be as liquid as domestic securities and
their markets. Securities of some foreign companies may involve greater market
risk than securities of domestic companies and foreign brokerage commissions and
custody fees are generally higher than those in the United States. Investment in
foreign securities may also be subject to local economic or political risks,
including instability of some foreign governments, the possibility of currency
blockage or the imposition of withholding taxes on dividend or interest payments
and the potential for expropriation of the assets of the companies issuing the
securities.
Short sales against the box
All-Star may, to an extent not greater than 5% of its net assets, effect
short sales of securities "against the box" (i.e., short sales of securities
where the Fund holds or has the right to obtain at no additional cost securities
identical to those sold short.)
INVESTMENT RESTRICTIONS
The following investment restrictions have been adopted for All-Star as
fundamental policies and may be changed only by a majority vote (as defined
under "Investment Objective and Policies" in the Prospectus) of All-Star's
outstanding shares. Non-fundamental policies may be changed by the Board of
Directors without shareholder approval.
All-Star may not:
(1) With respect to 75 percent of its total assets, invest in securities of
any one issuer if immediately after and as a result of such investment more than
five percent of the total assets of the Fund, taken at market value, would be
invested in the securities of such issuer. This restriction does not apply to
investments in U.S. Government Securities.
(2) Purchase more than 10 percent of the outstanding voting securities, or
any class of securities, of any one issuer.
(3) Invested 25 percent or more of its total assets, taken at market value
at the time of each investment, in the securities of issuers in any particular
industry. This restriction does not apply to investments in U.S.
Government Securities.
(4) Purchase securities of other investment companies, except in connection
with a merger, consolidation, acquisition or reorganization, if more than 10
percent of the market value of the Fund's total assets would be invested in
securities of other investment companies, more than five percent of the market
value of the Fund's total assets would be invested in the securities of any one
investment company or the Fund would own more than three percent of any other
investment company's securities.
(5) Purchase or sell commodities or real estate; provided that All-Star may
invest in securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein.
(6) Purchase any securities on margin or make short sales of securities,
except that All-Star may obtain such short-term credit as may be necessary for
the clearance of purchases and sales of portfolio securities.
(7) Make loans of money, except by the purchase of debt obligations in
which the Trust may invest consistent with its investment objective and
policies. Although there is no present intention of doing so in the foreseeable
future, All-Star reserves the authority to make loans of its portfolio
securities in an aggregate amount not exceeding 20 percent of its total assets.
Any such loans will only be made upon approval of, and subject to any conditions
imposed by, All-Star's Board of Directors.
(8) Borrow money, except that All-Star may borrow from banks and other
financial institutions on an unsecured basis to finance the repurchase of its
shares. All-Star also may borrow money on a secured basis from banks as a
temporary measure for extraordinary or emergency purposes. Such temporary
borrowings may not exceed five percent of the value of the Fund's total assets
at the time the loan is made. All-Star may pledge up to 10 percent of the lesser
of the cost or value of its total assets to secure temporary borrowings.
All-Star will not borrow for investment purposes. Immediately after any
borrowing, All-Star will maintain asset coverage of not less than 300 percent
with respect to all borrowings. While the Fund's borrowings exceed five percent
of its total assets, All-Star will make no further purchases of securities,
although this limitation will not apply to share repurchase transactions.
(9) Issue senior securities, as defined in the Investment Company Act of
1940 (the "Act"), or mortgage, pledge, hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held by All-Star except as
may be necessary in connection with borrowings mentioned in (8) above, and then
such mortgaging, pledging or hypothecating may not exceed 10 percent of the
Fund's total assets, taken at the lesser of cost or market value.
(10) Underwrite securities of other issuers except insofar as All-Star may
be deemed an underwriter under the Securities Act of 1933, as amended, in
selling portfolio securities.
(11) Invest more than 10 percent of All-Star's total assets in securities
that at the time of purchase have legal or contractual restrictions on resale
(including unregistered securities that are eligible for resale pursuant to Rule
144A under the Securities Act of 1933).
Except for the 300% limitation referred to in Investment Restriction No. 8
above, if a percentage restriction on investment or utilization of assets as set
forth above is adhered to at the time an investment is made, a later change in
percentage resulting from a change in the market values of All-Star's assets
will not be considered a violation of the restriction.
INVESTMENT ADVISORY AND OTHER SERVICES
As stated under "Management of All-Star" in the Prospectus, Liberty Asset
Management Company ("LAMCO") performs the investment management services and is
responsible for the administrative services described therein. LAMCO, through
Liberty Financial Companies, Inc. ("Liberty Financial"), is an indirect majority
owned subsidiary of Liberty Mutual Insurance Company, Boston, Massachusetts. As
indicated under "Directors and Officers of All-Star" below, one of All-Star's
Directors and all of its officers are officers of LAMCO, Colonial Management
Associates, Inc., Liberty Financial or other affiliates of liberty Financial.
Reference is made to Appendix A of the Prospectus for the names of the
controlling persons of All-Star's current Portfolio Managers and the names of
the individuals at each Portfolio Manager primarily responsible for the
management of the portion of All-Star's portfolio assigned to it. None of such
Portfolio Managers has any affiliation with LAMCO or (except as Portfolio
Manager) with All-Star.
As described under "Management of All-Star" in the Prospectus, All-Star
pays LAMCO a fund management fee for its investment management services (from
which LAMCO pays the Portfolio Managers' fee), and an administrative fee for its
administrative services. As shown under "Management of All-Star", effective
August 1, 1998 these fees will increase on net assets in excess of $125 million.
For the years ended December 31, 1996 and 1997 the total fund management
and administrative fees paid to LAMCO were $1,274,516 and $1,455,145,
respectively, of which an aggregate of $509,771 and $583,116, respectively, was
paid to the Portfolio Managers. For the year ended December 31, 1995 the Fund
Manager received an administrative fee of $301,070, and a fund management fee of
$309,708 representing its fee for its investment management of the approximately
20% of the net assets of All-Star under its supervision from January 1, 1995
through December 5, 1995 and 100% of such assets under its supervision for the
balance of 1995. The Fund Manager paid $165,124 of such investment management
fees to the Fund's then Portfolio Managers. All-Star's original investment
manager, Growth Stock Outlook, Inc., received investment management fees of
$593,500 for its investment management of approximately 80% of All-Star's net
assets from January 1 through December 5, 1995. See "History of the Fund" in the
Prospectus.
All-Star's current Fund Management Agreement and Portfolio Management
Agreements will continue in effect until July 31, 1998, whereupon the new
agreements at the increased fees will take effect. The new agreements will
continue in effect until July 31, 1999 and will continue in effect thereafter so
long as such continuance is specifically approved annually by (a) the Board of
Directors or (b) the majority vote of All-Star's outstanding shares (as defined
under "Investment Objective and Policies" in the Prospectus), provided that, in
either event, the continuance is also approved by a majority of the Directors
who are not "interested persons" (as defined in the 1940 Act) of All-Star, LAMCO
or the Portfolio Managers by a vote cast in person at a meeting called for the
purpose of voting on such approval. The Fund Management Agreement may be
terminated on 60 days written notice by either party, and the Portfolio
Management Agreements may be terminated on 30 days' notice by any party, and any
such agreements will terminate automatically if assigned.
Custodian and Pricing and Bookkeeping Agent
The Chase Manhattan Bank (the "Bank"), 4 Chase MetroTech Center, Brooklyn,
NY 11245, is the custodian of the portfolio securities and cash of All-Star. As
such, the Bank holds All-Star's portfolio securities and cash in separate
accounts on All-Star's behalf and receives and delivers portfolio securities and
cash in connection with portfolio transactions initiated by All-Star's Portfolio
Managers, collects income due on its portfolio securities and disburses funds in
connection with the payment of distributions and expenses.
Colonial Management Associates, Inc. ("Colonial"), an
affiliate of LAMCO, performs pricing and bookkeeping
services for All-Star (see "Management of All-Star" in
the Prospectus). For the years ended December 31, 1996
and 1997, All-Star paid pricing and bookkeeping fees to
Colonial Management Associates, Inc. of $48,161 and
$53,795 respectively.
Independent Auditors
KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts 02110, are the
independent auditors of All-Star. KPMG Peat Marwick LLP audits and reports on
All-Star's annual financial statements, reviews certain of its regulatory
reports and its Federal income tax returns, and performs such other accounting,
tax and advisory services as All-Star may engage it to do.
DIRECTORS AND OFFICERS OF ALL-STAR
The following is a list of All-Star's Directors and officers, together with
information about their present positions with All-Star and their principal
occupations during the past five years. The Director who is an "interested
person" of All-Star, as defined by the 1940 Act, is indicated with an asterisk.
Position
with Principal Occupation During
Name and Address All-Star Past Five Years
- --------------- -------- ----------------------------
Robert J. Director Retired (since January,
Birnbaum 1994); Special Counsel,
(Age 70) Dechert, Price & Rhoads
313 Bedford Road (September, 1988 to
Ridgewood, NJ December, 1993); President
07450 and Chief Operating Officer,
New York Stock Exchange,
Inc. (May, 1985 to June,
1988).
James E. Grinnell Director Private investor (since
(Age 68) November, 1988); President
22 Harbor Avenue and Chief Executive Officer,
Marblehead, MA Distribution Management
01945 Systems, Inc. (1983 to May
1986); Senior Vice President-Operations, The
Rockport Company, importer and distributor of
shoes (May, 1986 to November, 1988).
Harold W. Cogger* Director Executive Vice President and
(Age 62) and Director, Liberty Financial
Liberty Financial Chairman Companies, Inc. (since
Companies, Inc. March, 1995); Director
600 Atlantic (since October, 1981) and
Avenue Chairman of the Board (since
Boston, MA 02210 March, 1996), The Colonial
Group, Inc.; Executive Vice President (October,
1989 to July, 1993), Colonial Management
Associates, Inc.; President (since March 1996),
Stein Roe & Farnham Incorporated.
Richard W. Lowry Director Private investor (since
(Age 61) August, 1987); Chairman and
10701 Charleston Chief Executive Officer,
Drive U.S. Plywood Corporation,
Vero Beach, FL manufacturer and distributor
32963 of wood products (August,
1985 to August, 1987).
John J. Neuhauser Director Dean, Boston College School
(Age 54) of Management (since
140 Commonwealth September 1977). Director
Ave of Hyde Athletic Industries,
Chestnut Hill, Inc. (athletic footwear), a
MA 02167 public company.
Richard R. President President of LAMCO (since
Christensen and Chief January, 1995); President of
(Age 64) Executive Liberty Investment Services,
Liberty Asset Officer Inc. (April, 1987 to March,
Management 1995).
Company
600 Atlantic
Avenue
Boston, MA 02210
William R. Vice Senior Vice President and
Parmentier President Chief Investment Officer of
(Age 45) - Chief LAMCO (since May, 1995);
Liberty Asset Investment Consultant (October, 1994 to
Management Officer May, 1995); President, GQ
Company Asset Management, Inc.
600 Atlantic (July, 1993 to October,
Avenue 1994); Assistant Treasurer,
Boston, MA 02210 Grumman Corporation
(December, 1974 to July, 1993).
Christopher S. Vice Vice President-Investments
Carabell President of LAMCO (since March,
(Age 33) 1996); Associate Director,
Liberty Asset U.S. Equity Research of
Management Rogers Casey & Associates,
Company investment consultants
600 Atlantic (January, 1995 to February,
Avenue 1996); Director of
Boston, MA 02210 Investments, Boy Scouts of
America (June, 1990 to January, 1995).
Timothy J. Jacoby Treasurer Senior Vice President, Fund
(Age 45) Administration, Colonial
Colonial Management Associates, Inc.
Management (since September, 1996);
Associates, Senior Vice President,
Inc. Fidelity Accounting and
One Financial Custody Services (September,
Center 1993 to September, 1996);
Boston, MA 02111 Assistant Treasurer,
Fidelity Group of Funds
(August, 1990 to September,
1993).
J. Kevin Controller Vice President, Fund
Connaughton Administration Treasury
(Age 33) Group of Colonial Management
Colonial Associates, Inc. (since
Management February, 1998); Senior Tax
Associates, Manager, Coopers & Lybrand
Inc. (April, 1996 to February,
One Financial 1998); Vice President of
Center Financial Administration
Boston, MA 02111 (April, 1995 to April,
1996), Director of Compliance (March, 1994 to
April, 1995), First Data Investor Services Group;
Vice President of Tax (January, 1994 to March,
1994), Assistant Vice President of Tax (March,
1992 to January, 1994), The Boston Company.
John L. Davenport Secretary Vice President and Associate
(Age 61) General Counsel of Liberty
Liberty Financial Financial Companies, Inc.
Companies, and predecessor (since
Inc. January, 1984).
600 Atlantic
Avenue
Boston, MA 02210
- ------
* Interested Director
Messrs. Birnbaum, Grinnell, Neuhauser and Lowry comprise
the Audit Committee of the Board of Directors.
All-Star's Board of Directors is divided into three classes, each of which
has a term of three years expiring with the annual meeting of shareholders in
the third year of the term. All-Star holds annual meetings of shareholders to
vote on, among other things, the election or re-election of the Directors whose
terms are expiring with that meeting. The term or office of Mr. Birnbaum will
expire upon the final adjournment of the 1999 annual meeting; the term of office
of Messrs. Neuhauser and Grinnell will expire upon final adjournment of the
annual meeting for the year 2000; and the term of office of Messrs. Cogger and
Lowry will expire upon final adjournment of the annual meeting for the year
2001. Messrs. Birnbaum, Grinnell, Neuhauser and Lowry are also Directors of
Colonial Trusts I through VII (the "Colonial Trusts"), the umbrella trusts for
an aggregate of 39 open-end funds managed by Colonial, an affiliate of LAMCO,
five closed-end funds managed by Colonial (the "Colonial Closed-End Funds"), and
LFC Utilities Trust, an open-end investment company managed by Stein Roe &
Farnham Incorporated, another affiliate of LAMCO. Messrs. Birnbaum, Cogger,
Grinnell, Neuhauser and Lowry are also directors of Liberty All-Star Equity
Fund, another closed-end multi-managed fund managed by LAMCO.
LAMCO or its affiliates pay the compensation of all the officers of
All-Star, including the Director who is affiliated with LAMCO. All-Star
currently pays the independent Directors an annual retainer of $5,000, plus
$1,200 per meeting attended, with a minimum of $11,000 per annum if less than
five meetings are held and all meetings are attended, plus out-of-pocket
expenses relating to attendance at meetings. For 1997, All-Star paid the
independent Directors an aggregate of $33,000 in fees and $1,952 in expenses.
The following table shows, for the year ended December 31, 1997, the
compensation received from the Fund by each current Director, and the aggregate
compensation paid to each current Director for service on the Board of Directors
of the Fund and the Board of Trustees of the Colonial Trusts, the Colonial
Closed-End Funds, LFC Utilities Trust and Liberty All-Star Equity Fund (of which
Messrs. Birnbaum, Grinnell and Lowry are also trustees). The Fund has no bonus,
profit sharing or retirement plans.
Aggregate Total Compensation from the Fund, the Colonial
Compensation Funds, the Colonial Closed-End Funds, LFC
Name from the Fund Utilities Trust and Liberty All-Star Equity Fund
- ---- ------------- ------------------------------------------------
Harold W. Cogger -0- -0-
Robert J. Birnbaum $11,000 $120,749
James E. Grinnell $11,000 $121,498
John J. Neuhauser* - $95,273
Richard W. Lowry $11,000 $121,498
PORTFOLIO SECURITY TRANSACTIONS
Each of All-Star's Portfolio Managers has discretion to select brokers and
dealers to execute portfolio transactions initiated by the Portfolio Manager for
the portion of All-Star's portfolio assets allocated to it, and to select the
markets in which such transactions are to be executed. The Portfolio Management
Agreements with All-Star provide, in substance, that, except as provided in the
following paragraph, in executing portfolio transactions and selecting brokers
or dealers, the primary responsibility of the Portfolio Manager is to seek to
obtain best net price and execution for All-Star. It is expected that securities
will ordinarily be purchased in the primary markets, and that, in assessing the
best net price and execution available to All-Star, the Portfolio Manager will
consider all factors it deems relevant, including the breadth of the market in
the security, the price of the security, the financial condition and execution
capability of the broker or dealer and the reasonableness of the commission, if
any, for the specific transaction and on a continuing basis. Recognizing these
factors, All-Star may pay a brokerage commission in excess of that which another
broker or dealer may have charged for effecting the same transaction.
The Portfolio Management Agreements also provide that LAMCO has the right
to request that transactions giving rise to brokerage commissions, in amounts to
be agreed upon from time to time between LAMCO and the Portfolio Manager, be
executed by brokers and dealers (to be agreed upon from time to time between
LAMCO and the Portfolio Manager) which provide, directly or through third
parties, research products and services to LAMCO or to All-Star. The commissions
paid on such transactions may exceed the amount of commissions another broker
would have charged for effecting that transaction. Research products and
services made available to LAMCO through brokers and dealers executing
transactions for All-Star involving brokerage commissions include performance,
portfolio characteristics, investment style and other qualitative and
quantitative data relating to investment managers in general and the Portfolio
Managers in particular; data relating to the historic performance of categories
of securities associated with particular investment styles; mutual fund
portfolio, performance and fee and expense data; data relating to portfolio
manager changes by pension plan fiduciaries; quotation equipment; and related
computer hardware and software, all of which are used by LAMCO in connection
with its selection and monitoring of portfolio managers (including the Portfolio
Managers) for All-Star and other multi-managed clients of LAMCO, the assembly of
a mix of investment styles appropriate to the investment objectives of All-Star
or such other clients, and the determination of overall portfolio strategies.
LAMCO from time to time reaches understandings with each of the Portfolio
Managers as to the amount of the All-Star portfolio transactions initiated by
such Portfolio Manager that are to be directed to brokers and dealers which
provide or make available research products and services to LAMCO and the
commissions to be charged to All-Star in connection therewith. These amounts may
differ among the Portfolio Managers based on the nature of the markets for the
types of securities managed by them and other factors.
These research products and services are used by LAMCO in connection with
its management of All-Star, Liberty All-Star Equity Fund, Liberty All-Star
Equity Fund, Variable Series, and other multi-managed clients of LAMCO,
regardless of the source of the brokerage commissions. In instances where LAMCO
receives from broker-dealers products or services which are used both for
research purposes and for administrative or other non-research purposes, LAMCO
makes a good faith effort to determine the relative proportions of such products
or services which may be considered as investment research, based primarily on
anticipated usage, and pays for the costs attributable to the non-research usage
in cash.
The Portfolio Managers are authorized to cause All-Star to pay a commission
to a broker or dealer who provides research products and services to the
Portfolio Manager for executing a portfolio transaction which is in excess of
the amount of commission another broker or dealer would have charged for
effecting that transaction. The Portfolio Managers must determine in good faith,
however, that such commission was reasonable in relation to the value of the
research products and services provided to them, viewed in terms of that
particular transaction or in terms of all the client accounts (including
All-Star) over which the Portfolio Manager exercises investment discretion. It
is possible that certain of the services received by a Portfolio Manager
attributable to a particular transaction will primarily benefit one or more
other accounts for which investment discretion is exercised by the Portfolio
Manager.
During 1996 and 1997, All-Star paid total brokerage commissions of
$180,014, and $134,006, respectively. Approximately $23,251 of the commissions
paid in 1995, and $84,761, respectively, of the commissions paid in 1996 and
1997 on transactions aggregating $72,447,861 and $71,426,687, respectively, were
paid to brokerage firms which provided or made available to All-Star's Portfolio
Managers or to LAMCO research products and services as described above.
Although All-Star does not permit a Portfolio Manager to act or have an
affiliate act as broker for Fund portfolio transactions initiated by it, the
Portfolio Managers are permitted to place Fund portfolio transactions initiated
by them with another Portfolio Manager or its broker-dealer affiliate for
execution on an agency basis, provided the commission does not exceed the usual
and customary broker's commission being paid to other brokers for comparable
transactions and is otherwise in compliance with Rule 17e-1 under the Investment
Company Act of 1940. During 1996 aggregate commissions of $600, representing
less than one percent of the total commissions paid by All-Star, were paid to
Oppenheimer & Co., Inc., then a broker-dealer affiliate of Oppenheimer Capital,
a Portfolio Manager of the Fund, in connection with the execution of portfolio
transactions for the Fund initiated by another Portfolio Manager. During 1997 no
Fund portfolio transactions were placed with any Portfolio Manager or its
broker-dealer affiliate.
PRINCIPAL SHAREHOLDERS
To the knowledge at All-Star, no shareholder on May 15, 1998 owned
beneficially 5% or more of the outstanding shares of All-Star.
As of May , 1998, all officers and Directors of All-Star as a group owned
less than 1% of All-Star's outstanding shares.
* Elected a Director on April 22, 1998.
FINANCIAL STATEMENTS
LIBERTY ALL*STAR GROWTH FUND
................................................................................
Schedule of Investments
December 31, 1997
<TABLE>
<CAPTION>
COMMON STOCKS (98.9%) SHARES MARKET VALUE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
AEROSPACE (2.0%)
Boeing Co. 39,000 $ 1,908,563
Lockheed Martin Corp. 15,000 1,477,500
-----------
3,386,063
-----------
AUTO, TIRES & ACCESSORIES (1.1%)
Discount Auto Parts, Inc. (a) 18,000 344,250
LucasVarity PLC ADR (a) 45,000 1,569,375
-----------
1,913,625
===========
BANKS (6.3%)
Associated Banc-Corp 13,961 769,600
Bank United Corp., Class A 15,600 763,425
CCB Financial Corp. 6,300 677,250
Charter One Financial, Inc. 10,750 678,594
Citicorp 20,000 2,528,750
Crestar Financial Corp. 14,000 798,000
State Street Corp. 31,500 1,832,906
TCF Financial Corp. 24,000 814,500
Wells Fargo & Co. 5,000 1,697,188
10,560,213
BUSINESS SERVICES (12.5%)
Acxiom Corp. (a) 58,200 $1,120,350
American Management Systems (a) 36,100 699,438
Automatic Data Processing, Inc. (a) 46,400 2,847,800
Cintas Corp. 16,700 651,300
Cognizant Corp. (a) 27,100 1,207,644
Cognos, Inc. (a) 47,600 1,094,800
Concord EFS, Inc. (a) 27,700 689,038
Cotelligent Group, Inc. (a) 30,000 573,750
First Data Corp. 55,070 1,610,797
Gartner Group, Inc., Class A (a) 39,600 1,475,100
Intelliquest Information Group (a) 34,500 439,875
National Data Corp. 32,900 1,188,512
Network Associates, Inc. (a) 21,837 1,150,536
Rental Service Corp. (a) 18,000 445,500
Reuters Holdings PLCADR 17,200 1,139,500
Robert Half International, Inc. 18,450 738,000
</TABLE>
See Notes to Schedule of Investments.
<PAGE>
LIBERTY ALL*STAR GROWTH FUND
...............................................................................
Schedule of Investments
<TABLE>
<CAPTION>
COMMON STOCKS (CONT.) SHARES MARKET VALUE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
BUSINESS SERVICES (CONT.)
Shared Medical Systems, Inc. 23,500 $ 1,551,000
SPSS, Inc. (a) 28,500 548,625
Sungard Data Systems, Inc. (a) 45,200 1,401,200
SystemSoft Corp. (a) 49,903 324,369
-----------
20,897,134
-----------
CHEMICALS (5.1%)
Cytec Industries, Inc. (a) 15,000 704,063
Hanna (M.A.) Co. 44,693 1,128,498
Hercules, Inc. 25,000 1,254,688
International Specialty Products, Inc. (a) 30,000 448,125
Minerals Technologies, Inc. 54,790 2,489,521
Monsanto Co. 30,000 1,260,000
OM Group, Inc. 14,400 529,200
RPM, Inc. 42,500 653,438
-----------
8,467,533
-----------
COMPUTER & BUSINESS EQUIPMENT (4.9%)
Black Box Corp. (a) 18,800 665,050
CFM Technologies (a) 27,546 423,520
Computer Associates International, Inc. 15,000 793,125
DT Industries, Inc. 14,000 479,500
Intel Corp. 37,000 2,599,250
Komag, Inc. (a) 34,332 510,689
Microsoft Corp. (a) 12,000 1,551,000
Zebra Technologies Corp., Class A (a) 37,803 1,124,639
-----------
8,146,773
-----------
CONSUMER PRODUCTS (1.6%)
Blyth Industries, Inc. (a) 26,200 784,363
Cole National Corp., Class A (a) 21,600 646,650
Furniture Brands International, Inc. (a) 23,000 480,125
Samsonite Corp. (a) 24,400 771,650
-----------
2,682,788
-----------
COSMETICS & TOILETRIES (0.4%)
Revlon, Inc. (a) 17,200 607,375
-----------
</TABLE>
See Notes to Schedule of Investments.
<PAGE>
LIBERTY ALL*STAR GROWTH FUND
................................................................................
Schedule of Investments
<TABLE>
<CAPTION>
COMMON STOCKS (CONT.) SHARES MARKET VALUE
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
DIVERSIFIED (1.3%)
Ball Corp. 7,000 $ 247,188
General Electric Co. 20,000 1,467,500
Lydall, Inc. (a) 23,000 451,375
-----------
2,166,063
-----------
DRUGS & HEALTH CARE (11.5%)
Allergan, Inc. 26,700 897,787
Amgen, Inc. 9,300 503,362
Apria Healthcare Group, Inc. (a) 45,800 621,162
Bard (C.R.), Inc. 20,000 626,250
Beverly Enterprises, Inc. (a) 47,000 611,000
Biomet, Inc. 45,000 1,147,500
Boston Scientific Corp. (a) 13,000 596,375
Cardinal Health, Inc. 14,300 1,074,287
Covance, Inc. (a) 56,500 1,122,937
DENTSPLY International, Inc. 30,000 915,000
Elan Corp. ADR(a) 21,100 1,080,056
Hanger Orthopedic Group, Inc. (a) 28,000 360,500
HEALTHSOUTH Corp. (a) 63,800 1,770,450
Integrated Health Services, Inc. 24,500 764,093
Medtronic, Inc. 27,500 1,440,312
Millipore Corp. 16,500 559,968
Pfizer, Inc. 24,800 1,849,150
Pharmerica, Inc. (a) 43,189 448,085
R.P. Scherer Corp. (a) 13,600 829,600
Sun Healthcare Group, Inc. (a) 57,600 1,116,000
Omnicare,Inc. 27,500 852,500
-----------
19,186,374
-----------
ELECTRONICS & ELECTRICAL EQUIPMENT (5.1%)
Adaptec, Inc. (a) 30,000 1,113,750
Analog Devices, Inc. (a) 15,333 424,532
Arrow Electronics, Inc. (a) 60,000 1,946,250
Hubbell, Inc., Class B 19,000 941,687
Linear Technology Corp. 16,400 943,000
Molex, Inc. 62,218 1,788,767
SBS Technologies (a) 22,000 596,750
Xilinix, Inc. (a) 21,800 764,362
-----------
8,519,098
-----------
</TABLE>
See Notes to Schedule of Investments.
<PAGE>
LIBERTY ALL*STAR GROWTH FUND
...............................................................................
Schedule of Investments
<TABLE>
<CAPTION>
COMMON STOCKS (CONT.) SHARES MARKET VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES (13.1%)
Aames Financial Corp. 29,000 $ 377,000
Cendant Corp. (a) 41,700 1,433,438
CMACInvestment Corp. 15,000 905,625
Countrywide Credit Industries, Inc. 55,000 2,358,125
Credit Acceptance Corp. (a) 49,700 385,175
Federal Home Loan Mortgage Corp. 93,000 3,900,188
Finova Group, Inc. 17,400 864,562
Household International, Inc. 15,900 2,028,244
Interim Services, Inc. (a) 28,600 732,875
MBNA Corp. 65,200 1,780,775
Money Store, Inc. (The) 30,000 630,000
Morgan Stanley, Dean Witter, Discover & Co. 41,250 2,438,906
Paychex, Inc. 15,000 759,375
Southern Pacific Funding Corp. (a) 37,500 492,187
Travelers Group, Inc. 50,000 2,693,750
-----------
21,780,225
-----------
FOOD, BEVERAGE &RESTAURANTS (3.4%)
Brinker International, Inc. (a) 35,000 560,000
Canandaigua Brands, Inc. Class A (a) 18,716 1,036,399
Diageo PLC ADR 30,000 1,136,250
Dole Food Co. 30,000 1,372,500
Hormel Foods Corp. 26,000 851,500
Performance Food Group Co. (a) 32,378 768,978
-----------
5,725,627
-----------
HOTEL & LEISURE (0.6%)
Carnival Corp., Class A 19,400 1,074,275
-----------
INDUSTRIAL EQUIPMENT (3.3%)
Albany International 29,500 678,500
Barnett, Inc. (a) 19,000 418,000
Caterpillar, Inc. 36,000 1,748,250
Illinois Tool Works, Inc. 25,100 1,509,138
Kulicke & Soffa Industries, Inc. (a) 32,000 596,000
MSC Industrial Direct Co., Inc. (a) 14,000 588,000
-----------
5,537,888
-----------
</TABLE>
See Notes to Schedule of Investments.
<PAGE>
LIBERTY ALL*STAR GROWTH FUND
................................................................................
Schedule of Investments
<TABLE>
<CAPTION>
COMMON STOCKS (CONT.) SHARES MARKET VALUE
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
INSURANCE (8.5%)
ACE Limited 25,000 $ 2,404,688
AFLAC, Inc. 35,000 1,789,375
American International Group, Inc. 15,000 1,631,250
EXEL Ltd. 40,000 2,535,000
HCC Insurance Holdings, Inc. 35,500 754,375
PMI Group, Inc. 10,000 723,125
Progressive Corp. 20,000 2,397,500
Transamerica Corp. 18,000 1,917,000
-----------
14,152,313
-----------
METALS & MINING (0.4%)
Freeport-McMoRan Copper & Gold, Inc., Class A 40,000 630,000
-----------
OIL & GAS (2.6%)
Global Industries Ltd. (a) 36,500 620,500
Ocean Energy, Inc. (a) 11,500 567,094
Swift Energy Co. (a) 29,446 620,204
Tidewater, Inc. 9,000 496,125
Triton Energy Corp. (a) 27,000 788,063
Union Texas Petroleum Holdings, Inc. 30,000 624,375
United Meridian Corp. (a) 19,900 559,688
-----------
4,276,049
-----------
PAPER & PLASTIC (1.6%)
Aptar Group, Inc. 9,567 530,969
Caraustar Industries, Inc. 13,000 445,250
Champion International Corp. 25,000 1,131,250
Consolidated Papers, Inc. 9,000 480,375
-----------
2,587,844
PUBLISHING (0.8%)
R.R. Donnelley & Sons Co. 35,000 1,303,750
-----------
RETAIL TRADE (5.8%)
CVS Corp. 20,200 1,294,063
Fastenal Co. (a) 13,100 501,075
Home Depot, Inc. 27,900 1,642,613
Lowe's Companies, Inc. 17,900 853,606
Marks Brothers Jewelers,Inc. (a) 31,000 511,500
May Department Stores Co. 25,000 1,317,188
</TABLE>
See Notes to Schedule of Investments.
<PAGE>
LIBERTY ALL*STAR GROWTH FUND
...............................................................................
Schedule of Investments
<TABLE>
<CAPTION>
COMMON STOCKS (CONT.) SHARES MARKET VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
RETAIL TRADE (CONT.)
Staples, Inc. (a) 51,000 $ 1,421,625
Viking Office Products, Inc. (a) 101,700 2,218,331
-----------
9,760,001
TELECOMMUNICATIONS (4.5%)
Airtouch Communications, Inc. (a) 33,000 1,371,563
Arch Communications Group, Inc. (a) 48,482 248,470
IXCCommunications, Inc. (a) 33,000 1,035,375
Mobile Telecommunication Technologies Corp. (a) 49,946 1,098,812
Nokia Corp. ADR 25,000 1,750,000
Sprint Corp. 35,000 2,045,313
-----------
7,549,533
TRANSPORTATION (2.5%)
AMR Corp. (a) 16,000 2,058,000
Hub Group, Inc., Class A(a) 18,500 550,375
U.S. Freightways Corp. 45,300 1,472,250
-----------
4,080,625
-----------
TOTAL COMMON STOCKS (Cost $122,777,125) 164,991,169
-----------
</TABLE>
See Notes to Schedule of Investments.
<PAGE>
LIBERTY ALL*STAR GROWTH FUND
................................................................................
Schedule of Investments
<TABLE>
<CAPTION>
REPURCHASE AGREEMENT (1.7%) PAR VALUE MARKET VALUE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
ABN AMRO Chicago Corp., dated 12/31/97, 6.60%, to
be repurchased at $2,779,019 on 01/2/98, collaterized
by U.S. Treasury Notes with various maturities to
2016, with a current market value of $2,842,078. $ 2,778,000 $ 2,778,000
------------
TOTAL INVESTMENTS (100.6%) (Cost $125,555,125)(b) 167,769,169
OTHER ASSETS AND LIABILITIES, NET (-0.6%) (1,032,050)
------------
NET ASSETS (100.0%) $166,737,119
============
NET ASSET VALUE PER SHARE (12,937,680 SHARES OUTSTANDING) $ 12.89
============
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) The cost of investments for federal income tax purposes is $125,751,189.
Gross unrealized appreciation and depreciation of investments at December
31, 1997, is as follows:
Gross unrealized appreciation $ 47,930,605
Gross unrealized depreciation (5,912,625)
------------
Net unrealized appreciation $ 42,017,980
============
Acronym Name
------- ---------------------------
ADR American Depository Receipt
See Notes to Financial Statements.
<PAGE>
LIBERTY ALL*STAR GROWTH FUND
...............................................................................
Statement of Assets and Liabilities
December 31, 1997
ASSETS:
Investments at market value (identified cost $125,555,125) $167,769,169
Cash 710
Receivable for investments sold 1,037,457
Dividends and interest receivable 103,010
------------
TOTAL ASSETS 168,910,346
------------
LIABILITIES:
Payable for investments purchased 78,865
Distributions payable to shareholders 1,590,287
Management fees payable 290,160
Administrative and bookkeeping fees payable 110,716
Accrued other expenses 103,199
------------
TOTAL LIABILITIES 2,173,227
------------
NET ASSETS $166,737,119
============
NET ASSETS REPRESENTED BY:
Paid-in capital (authorized 20,000,000 shares
at $0.10 Par; 12,937,680 shares outstanding) $122,876,305
Accumulated net realized gains on investments
less distributions 1,646,770
Net unrealized appreciation on investments 42,214,044
------------
TOTAL NET ASSETS APPLICABLE
TO OUTSTANDING SHARES
OF BENEFICIAL INTEREST
($12.89 PER SHARE) $166,737,119
============
See Notes to Financial Statements.
<PAGE>
LIBERTY ALL*STAR GROWTH FUND
................................................................................
Statement of Operations
Year ended December 31, 1997
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C> <C>
Dividends $ 1,265,415
Interest 293,433
------------
TOTAL INVESTMENT INCOME (NET OF
FOREIGN TAXES WITHHELD AT SOURCE
WHICH AMOUNTED TO $13,348) 1,558,848
EXPENSES:
Management fees $ 1,093,343
Administrative fee 361,802
Bookkeeping fee 53,795
Custodian and transer agent fees 91,567
Proxy and shareholder communication expense 38,756
Printing expense 73,572
Legal and audit fees 53,547
Directors' fees and expense 34,955
Miscellaneous expense 30,208
------------
TOTAL EXPENSE 1,831,545
------------
NET INVESTMENT LOSS (272,697)
REALIZED AND UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investment transactions:
Proceeds from sales 86,998,115
Cost of investments sold 70,458,759
------------
Net realized gains on investment transactions 16,539,356
Net unrealized appreciation on investments:
Beginning of year 22,346,578
End of year 42,214,044
------------
Change in unrealized appreciation -- net 19,867,466
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 36,134,125
============
</TABLE>
See Notes to Financial Statements.
<PAGE>
LIBERTY ALL*STAR GROWTH FUND
...............................................................................
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (272,697) 77,663
Net realized gain on investment transactions 16,539,356 7,600,155
Change in unrealized appreciation-net 19,867,466 13,538,818
------------- -------------
Net increase in net assets resulting from operations 36,134,125 21,216,636
------------- -------------
DISTRIBUTIONS DECLARED FROM:
Net investment income (35,334) (42,330)
Net realized gains on investments (15,385,610) (11,523,548)
------------- -------------
Total distributions (15,420,944) (11,565,878)
------------- -------------
CAPITAL TRANSACTIONS:
Increase in net assets from capital share transactions 9,386,884 7,411,472
------------- -------------
Total increase in net assets 30,100,065 17,062,230
NET ASSETS:
Beginning of year 136,637,054 119,574,824
------------- -------------
End of year (including undistributed net investment
income of $0 and $35,334, respectively) $ 166,737,119 $ 136,637,054
============= =============
</TABLE>
See Notes to Financial Statements.
<PAGE>
LIBERTY ALL*STAR GROWTH FUND
................................................................................
Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value at beginning of year $11.27 $10.55 $9.95 $10.54 $10.28
------- ------ ------ ------ -------
Income from Investment Operations:
Net investment income (loss) (0.02) 0.01 0.31 0.23 0.18
Net realized and unrealized gain (loss)
on investments 2.88 1.86 1.05 (0.24) 0.56
------- ------ ------ ------ -------
Total from Investment Operations 2.86 1.87 1.36 (0.01) 0.74
------- ------ ------ ------ -------
Less Distributions:
Dividends from net investment income -- (0.01) (0.31) (0.23) (0.18)
Distributions from realized capital gains (1.24) (1.01) (0.45) (0.35) (0.30)
------- ------ ------ ------ -------
Total Distributions (1.24) (1.02) (0.76) (0.58) (0.48)
Impact of shares issued in dividend reinvestment (a) -- (0.13) -- -- --
------- ------ ------ ------ -------
Total Distributions and Reinvestments (1.24) (1.15) (0.76) (0.58) (0.48)
------- ------ ------ ------ -------
Net asset value at end of year $12.89 $11.27 $10.55 $9.95 $10.54
======= ====== ====== ====== =======
Per share market value at end of year $11.938 $9.250 $9.375 $8.500 $10.250
======= ====== ====== ====== =======
TOTAL INVESTMENT RETURN FOR SHAREHOLDERS: (b)
Based on net asset value 27.3% 18.3% 14.6% 0.05% 7.2%
Based on market price 43.6% 9.3% 19.3% (11.7%) 7.2%
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of year (millions) $167 $137 $120 $113 $125
Ratio of expenses to average net assets 1.20% 1.35% 1.42% 1.51% 1.35%
Ratio of net investment income to average net assets (0.18%) 0.06% 2.87% 2.12% 1.71%
Portfolio turnover rate 57% 51% 82% 50% 47%
Average commission rate (c) $0.0502 $0.0555 -- -- --
</TABLE>
(a) Effect of dividend reinvestment shares at a price below net asset value in
accordance with the 1996 Automatic Dividend Reinvestment and Cash Purchase
Plan.
(b) Calculated assuming all distributions reinvested.
(c) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for trades on which
commissions are charged.
See Notes to Financial Statements.
<PAGE>
LIBERTY ALL*STAR GROWTH FUND
...............................................................................
Notes to Financial Statements
December 31, 1997
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
Liberty All-Star Growth Fund, Inc. (the Fund), is registered under the
Investment Company Act of 1940, as amended, as a closed-end, diversified
management investment company and commenced operations on March 14, 1986. The
Fund's investment objective is to seek long-term capital appreciation. The Fund
is managed by Liberty Asset Management Company (the "Manager"). The Manager is a
subsidiary of Liberty Financial Companies, Inc., a publicly traded company of
which Liberty Mutual Insurance Company is the majority shareholder.
The following is a summary of significant accounting policies followed
by the Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results, if different,
are expected to be immaterial to the net assets of the Fund.
VALUATION OF INVESTMENTS -- Portfolio securities listed on an exchange
and over-the-counter securities quoted on the NASDAQ system are valued on the
basis of the last sale on the date as of which the valuation is made, or,
lacking any sales, at the mean of the closing bid and asked quotations on that
date. Over-the-counter securities not quoted on the NASDAQ system are valued at
the most recent bid prices on that date. Securities for which reliable
quotations are not readily available are valued at fair value, as determined in
good faith and pursuant to procedures established by the Board of Directors.
Short-term instruments maturing in more than 60 days for which market quotations
are readily available are valued at current market value. Short-term instruments
with remaining maturities of 60 days or less are valued at amortized cost,
unless the Board of Directors determine that this does not represent fair value.
PROVISION FOR FEDERAL INCOME TAX -- The Fund qualifies as a "regulated
investment company." As a result, a federal income tax provision is not required
for amounts distributed to shareholders.
OTHER -- Security transactions are accounted for on the trade date.
Interest income and expenses are recorded on the accrual basis. Dividend income
is recorded on the ex-dividend date.
NOTE 2. FEES PAID TO AFFILIATES
Under the Fund's Management and Portfolio Management Agreements, the
Fund pays the Manager a management fee for its investment management services at
an annual rate of 0.75% of the Fund's average weekly net assets. The Manager
pays each Portfolio Manager a portfolio management fee at an annual rate of
0.40% of the average weekly net assets of the portion of the investment
portfolio managed by it. The Fund also pays the Manager a fee for its
administrative services at an annual rate of 0.25% of the Fund's average weekly
net assets. The annual fund management and administrative fees are reduced to
0.5625% and 0.1875%, respectively, on average weekly net assets in excess of
$125 million up to $250 million and to 0.375% and 0.125%, respectively, on
average weekly net assets in excess of $250 million. The aggregate annual fees
payable by the Manager to the Portfolio Managers are reduced to 0.30% of the
Fund's average weekly net assets in excess of $125 million up to $250 million
and to 0.20% on average weekly net assets in excess of $250 million. Colonial
Management Associates, Inc. (an affiliate of the Manager) provides bookkeeping
and pricing services for $30,000 per year plus 0.0233% of the Fund's average
weekly net assets over $50 million.
NOTE 3. CAPITAL TRANSACTIONS
During the year ended December 31, 1997 and December 31, 1996,
distributions in the amount of $9,386,884 and $7,411,472, respectively, were
paid in newly issued shares valued at market value or net asset value, but not
less than 95% of market value, resulting in the issuance of 818,429 and 780,155
shares, respectively.
LIBERTY ALL*STAR GROWTH FUND
................................................................................
Notes to Financial Statements
NOTE 4. SECURITIES TRANSACTIONS
Realized gains and losses are recorded on the identified cost basis for
both financial reporting and federal income tax purposes. The cost of
investments purchased and the proceeds from investments sold, excluding
short-term debt obligations for the year ended December 31, 1997, were
$84,561,657 and $86,998,115, respectively.
The Fund may enter into repurchase agreements and require the seller of
the instrument to maintain on deposit with the Fund's custodian bank or in the
Federal Reserve Book-Entry System securities in the amount at all times equal to
or in excess of the value of the repurchase agreement, plus accrued interest.
The Fund may experience costs and delays in liquidating the collateral if the
issuer defaults or enters bankruptcy.
NOTE 5. DISTRIBUTIONS TO SHAREHOLDERS
The Fund currently has a policy of paying distributions on its common
shares totaling approximately 10% of its net asset value per year, payable in
four quarterly distributions of 2.5% of the Fund's net asset value at the close
of the New York Stock Exchange on the Friday prior to each quarterly declaration
date.
Distributions to shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Reclassifications are made to the Fund's capital accounts to reflect
income and gains available for distribution (or available capital loss
carryovers) under income tax regulations.
LIBERTY ALL*STAR GROWTH FUND
...............................................................................
Independent Auditors' Report
[LOGO] KPMG Peat Marwick LLP
The Board of Directors and Shareholders
Liberty All-Star Growth Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of Liberty
All-Star Growth Fund, Inc. (the Fund), including the schedule of investments, as
of December 31, 1997, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the ten-year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Investment securities held in custody are
confirmed to us by the custodian. As to securities purchased and sold, but not
received or delivered, we request confirmations from brokers and, where replies
are not received, we carry out other appropriate procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Liberty All-Star Growth Fund, Inc. as of December 31, 1997, the results of its
operations for the year then ended, changes in its net assets for each of the
years in the two-year period then ended, and financial highlights for each of
the years in the five-year period then ended, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Boston, Massachusetts
February 13, 1998
SCHEDULE OF INVESTMENTS
as of March 31, 1998
(Unaudited)
COMMON STOCKS (98.4%) SHARES MARKET VALUE
AEROSPACE (2.0%)
Boeing Co. 39,000 $ 2,032,875
Lockheed Martin Corp. 15,000 1,687,500
-------------
3,720,375
-------------
AUTO, TIRES & ACCESSORIES (1.0%)
LucasVarity PLC ADR 45,000 1,859,063
-------------
BANKS (6.7%)
Aspen Technology, Inc. 17,500 721,875
Associated Bancorp 13,961 753,021
Bank United Corp., Class A 15,600 780,000
CCB Financial Corp. 6,300 696,544
Citicorp 20,000 2,840,000
Commercial Federal Corp. 11,613 422,423
Crestar Financial Corp. 14,000 827,750
State Street Boston Corp. 31,500 2,143,969
Sovereign Bancorp, Inc. 42,000 763,875
TCF Financial Corp. 24,000 817,500
Wells Fargo & Co. 5,000 1,656,250
-------------
12,423,207
-------------
BUSINESS SERVICES (11.7%)
Acxiom Corp. (a) 66,900 1,714,313
Alternative Resources Corp. 28,100 604,150
American Management Systems (a) 36,100 990,494
Automatic Data Processing, Inc. 46,400 3,158,100
Cintas Corp. 12,700 657,225
Cognizant Corp. (a) 27,100 1,554,862
Cognos, Inc. (a) 47,600 1,341,725
Concord EFS, Inc. (a) 27,700 957,381
Cotelligent Group, Inc. (a) 30,000 888,750
First Data Corp. 38,470 1,250,275
Gartner Group, Inc. Class A (a) 39,600 1,480,050
Iron Mountain, Inc. 10,619 398,213
National Data Corp. 32,900 1,367,406
Network General Corp. (a) 21,837 1,446,701
Rental Service Corp. (a) 18,000 418,500
Robert Half International, Inc. (a) 18,450 885,600
Shared Medical Systems, Inc. 23,500 1,841,813
SPSS, Inc. (a) 31,900 749,650
-------------
21,705,208
-------------
CHEMICALS (4.9%)
Cytec Industries, Inc. (a) 15,000 825,937
Hanna (M.A.) Co. 44,693 1,092,185
Hercules, Inc. 25,000 1,234,375
International Specialty Products, Inc. (a) 30,000 526,875
Minerals Technologies, Inc. 54,790 2,452,759
Monsanto Co. 30,000 1,560,000
OM Group, Inc. 14,400 606,600
RPM, Inc. 42,500 757,031
-------------
9,055,762
-------------
COMPUTER & BUSINESS EQUIPMENT (5.5%)
Black Box Corp. (a) 18,800 693,250
CFM Technologies (a) 29,300 437,669
DT Industries, Inc. 14,000 537,250
Intel Corp. 37,000 2,886,000
Komag, Inc. (a) 34,332 502,106
Microchip Technology 10,500 220,500
Microsoft Corp. (a) 17,200 1,538,325
Photronics, Inc. 25,000 700,000
Sungard Data Systems Inc. (a) 35,100 1,292,119
Zebra Technologies Corp., Class A (a) 37,803 1,450,690
-------------
10,257,909
-------------
CONSUMER PRODUCTS (1.3%)
Blyth Industries, Inc. (a) 26,200 894,075
Cole National Corp., Class A (a) 21,600 834,300
Mattel, Inc. 17,000 673,625
-------------
2,402,000
-------------
DIVERSIFIED (1.2%)
General Electric Co. 20,000 1,721,250
Lydall, Inc. (a) 23,000 415,438
-------------
2,136,688
-------------
DRUGS & HEALTH CARE (11.4%)
Allergan, Inc. 26,700 1,014,600
Amgen, Inc. 9,300 566,428
Apria Healthcare Group, Inc. (a) 45,800 406,475
Bard (C.R.), Inc. 20,000 735,000
Beverly Enterprises, Inc. (a) 47,000 625,687
Biomet, Inc. 45,000 1,350,000
Boston Scientific Corp. (a) 1,500 101,250
Cardinal Health, Inc. 14,300 1,261,081
Covance, Inc. (a) 56,500 1,387,781
DENTSPLY International, Inc. 36,000 1,122,750
Elan Corp. ADR (a) 21,100 1,363,588
Hanger Orthopedic Group, Inc. (a) 28,000 470,750
HEALTHSOUTH Corp. (a) 63,800 1,790,388
Integrated Health Services, Inc. 24,500 963,156
Medtronic, Inc. 27,500 1,426,563
Millipore Corp. 16,500 573,375
See Notes to Schedule of Investments.
<PAGE>
SCHEDULE OF INVESTMENTS (continued)
COMMON STOCKS - continued SHARES MARKET VALUE
DRUGS & HEALTH CARE (continued)
Pfizer, Inc. 16,000 $ 1,595,000
Pharmerica, Inc. (a) 43,189 642,436
R.P. Scherer Corp. (a) 13,600 918,000
Shire Pharmaceuticals (ADR) 31,184 668,507
Sun Healthcare Group, Inc. (a) 57,600 1,072,800
Omnicare, Inc. 28,400 1,125,350
-------------
21,180,965
-------------
ELECTRONICS & ELECTRICAL EQUIPMENT (5.5%)
Adaptec, Inc. (a) 35,000 686,875
Analog Devices, Inc. (a) 15,333 511,739
Arrow Electronics, Inc. (a) 60,000 1,623,750
General Scanning, Inc. 34,000 731,000
Hubbell, Inc., Class B 19,000 957,125
Linear Technology Corp. 16,400 1,131,600
Maxxim Medical, Inc. 28,000 803,250
Molex, Inc. 62,218 1,727,208
PRI Automation, Inc. 22,000 576,125
SBS Technologies (a) 22,000 632,500
Xilinix, Inc. (a) 23,300 872,294
-------------
10,253,466
-------------
FINANCIAL SERVICES (13.7%)
Aames Financial Corp. 29,000 402,375
Cendant Corp. (a) 41,700 1,652,362
CMAC Investment Corp. 15,000 1,001,250
Countrywide Credit Industries, Inc. 55,000 2,925,312
Federal Home Loan Mortgage Corp. 93,000 4,411,687
Finova Group, Inc. 17,400 1,024,425
Household International, Inc. 13,600 1,873,400
Interim Services, Inc. (a) 22,200 749,250
MBNA Corp. 57,200 2,048,475
Money Store, Inc. (THE) 45,800 1,462,738
Morgan Stanley, Dean Witter, Discover & Co. 41,250 3,006,094
Paychex, Inc. 15,000 868,125
Resource Bancshares Mtg. Grp. 35,000 555,625
Southern Pacific Funding Corp. (a) 30,500 468,938
Travelers Group, Inc. 50,000 3,000,000
-------------
25,450,056
-------------
FOOD, BEVERAGE & RESTAURANTS (3.2%)
Brinker International, Inc. (a) 35,000 765,625
Canandaigua Wine Co., Class A (a) 13,916 794,951
Diageo Pic 25,920 1,261,980
Dole Food Co. 30,000 1,451,250
Hormel Foods Corp. 26,000 1,009,125
Performance Food Group, Co. (a) 32,378 667,796
-------------
5,950,727
-------------
HOTEL & LEISURE (0.7%)
Carnival Corp., Class A 19,400 1,353,150
-------------
INDUSTRIAL EQUIPMENT (3.0%)
Albany International 29,500 770,687
Barnett, Inc. (a.) 19,000 410,875
Caterpillar, Inc. 36,000 1,982,250
Illinois Tool Works, Inc. 25,100 1,625,225
Kulicke & Soffa Industries, Inc. (a) 37,500 815,625
-------------
5,604,662
-------------
INSURANCE (8.3%)
ACE Limited 75,000 2,826,563
AFLAC, Inc. 35,000 2,213,750
American International Group, Inc. 15,000 1,889,062
EXEL Ltd. 40,000 3,100,000
HCC Insurance Holdings, Inc. 35,500 816,500
Progressive Corp. 18,000 2,424,375
Transamerica Corp. 18,000 2,097,000
-------------
15,367,250
-------------
METALS & MINING (0.4%)
Freeport-McMoRan Copper & Gold, Inc.,
Class A 40,000 797,500
-------------
OIL & GAS (1.6%)
Global Industries Ltd. 36,500 743,687
Ocean Energy, Inc. (a) 35,750 842,359
Swift Energy Co. (a) 32,446 553,608
Triton Energy Corp. (a) 5,600 205,800
Union Texas Petroleum Holdings, Inc. 30,000 663,750
-------------
3,009,204
-------------
PAPER & PLASTIC (1.5%)
Aptargroup, Inc. 9,567 574,618
Caraustar Industries, Inc. 13,000 429,000
Champion International Corp. 25,000 1,357,812
Consolidated Papers, Inc. 9,000 576,000
-------------
2,937,430
-------------
PUBLISHING (1.5%)
R.R. Donnelley & Sons Co. 35,000 2,726,550
-------------
RETAIL TRADE (7.5%)
CVS Corp. 20,200 1,525,100
Fastenal Co. (a) 13,100 568,212
Home Depot, Inc. 27,900 1,881,506
Lowes Companies, Inc. 18,200 1,277,413
Marks Brothers Jewelers, Inc. (a) 31,000 614,188
May Department Stores Co. 25,000 1,587,500
MSC Industrial Direct Co. (a) 14,300 774,881
See Notes to Schedule of Investments.
<PAGE>
SCHEDULE OF INVESTMENTS (continued)
COMMON STOCKS - continued SHARES MARKET VALUE
RETAIL TRADE (continued)
Petco Animal Supplies Inc. 35,012 $ 682,734
Staples, Inc. (a) 76,500 1,773,844
The Sports Authority Inc. 49,000 802,375
Viking Office Products, Inc. (a) 101,700 2,364,525
-------------
13,852,278
-------------
TELECOMMUNICATIONS (5.2%)
ADC Telecommunications, Inc. 24,100 664,256
Airtouch Communications, Inc. (a) 33,000 1,614,937
IRI International Corp. 53,000 649,250
IXC Communications, Inc. 20,700 1,181,194
Mobile Telecommunication Technologies
Corp. (a) 20,746 466,785
Nokia Corp. ADR 25,000 2,698,438
Sprint Corp. 35,000 2,373,438
-------------
9,648,298
-------------
TRANSPORTATION (2.1%)
AMR Corp. (a) 16,000 2,291,000
Hub Group, Inc., Class A (a) 24,500 684,469
U.S. Freightways Corp. 26,900 968,400
-------------
3,943,869
-------------
TOTAL COMMON STOCKS (Cost $121,216,059) 185,635,617
-------------
PAR MARKET
REPURCHASE AGREEMENT (2.7%) VALUE VALUE
ABN Amro dated 3/31/98, 5.95%, to be
repurchased at $5,158,853 on 04/1/98,
collaterized by U.S. Treasury Notes
with various maturities to 2016, $ 5,158,000 $ 5,158,000
with a current market value of -------------
$5,278,714
TOTAL INVESTMENTS (101.1%)
(Cost $126,374,059)(b) 190,793,617
OTHER ASSETS & LIABILITIES (NET)(-1.1%) (2,078,301)
-------------
NET ASSETS (100.0%) $188,715,316
=============
NET ASSET VALUE PER SHARE
(13,141,220 shares outstanding) $ 14.36
=============
NOTES TO SCHEDULE OF INVESTMENTS
(a) Non-income producing security
(b) Gross unrealized appreciation
and depreciation of investments at
March 31, 1998 is as follows:
Gross unrealized appreciation $ 67,245,055
Gross unrealized depreciation (2,825,497)
-------------
Net unrealized appreciation $ 64,419,558
=============
Acronym Name
- ------- -----------------------------
ADR American Depository Receipt
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1998
(Unaudited)
ASSETS:
Investment at market value
(Identified cost $126,374,059) $190,793,617
Cash 128,029
Receivable for Investments Sold 1,475,780
Dividends and interest receivable 103,624
------------
Total assets $192,501,050
------------
LIABILITIES:
Payable for investments purchased 1,566,877
Distributions payable to shareholders 1,751,677
Management fees payable 302,679
Administrative and bookkeeping fees payable 115,591
Accrued other expenses 48,910
------------
Total Liabilities 3,785,734
------------
NET ASSETS $188,715,316
============
NET ASSETS REPRESENTED BY:
Paid-in capital (authorized 20,000,000 shares
at $0.10 Par; 13,141,220 shares outstanding) $125,652,816
Undistributed net investment income 2,633
Accumulated net realized gains (losses) on
investments less distributions (1,359,691)
Net unrealized appreciation of investments 64,419,558
---------------
TOTAL NET ASSETS APPLICABLE TO OUTSTANDING
SHARES OF BENEFICIAL INTEREST ($14.36 PER SHARE) $188,715,316
===============
See Notes to Financial Statements.
<PAGE>
STATEMENT OF OPERATIONS
THREE MONTHS ENDED
MARCH 31, 1998
(UNAUDITED)
INVESTMENT INCOME:
Dividends $ 457,036
Interest 45,269
------------
Total investment income 502,305
EXPENSES:
Management fees $ 302,679
Administrative fee 100,893
Bookkeeping fee 14,698
Custodian and transfer agent fees 21,972
Proxy and shareholder
communication expense 17,694
Printing expense 13,326
Legal and audit fees 17,790
Directors' fees and expense 8,262
Miscellaneous expense 2,358
------------
Total expenses 499,672
-------------
Net investment income 2,633
REALIZED AND UNREALIZED GAINS ON
INVESTMENTS:
Net realized gains on investments
transactions:
Proceeds from sales 16,344,292
Cost of investments sold 14,822,565
------------
Net realized gains on investment
transactions 1,521,727
Net unrealized appreciation of
investments:
Beginning of year 42,214,044
End of period 64,419,558
------------
Change in unrealized
appreciation-net 22,505,514
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 23,729,874
============
See Notes to Financial Statements.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, 1998 DECEMBER 31,
(Unaudited) 1997
- -----------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ 2,633 $ (272,697)
Net realized gains on investment
transactions 1,521,727 16,539,356
Change in unrealized appreciation-
net 22,205,514 19,867,466
------------- -------------
Net increase in net assets
resulting from operations 23,729,874 36,134,125
------------- -------------
DISTRIBUTIONS DECLARED FROM:
Net investment income - (35,334)
Net realized gains on investments (4,528,188) (15,385,610)
------------- -------------
Total distributions (4,528,188) (15,420,944)
------------- -------------
CAPITAL TRANSACTIONS:
Increase in net assets from
capital share transactions 2,776,511 9,386,884
------------- -------------
Total increase in net assets 21,978,197 30,100,065
NET ASSETS:
Beginning of period 166,737,119 136,637,054
------------- -------------
End of Period (including
undistributed net investment
income of $2,633 and $0,
respectively)
$188,715,316 $166,737,119
============ ============
<PAGE>
FINANCIAL HIGHLIGHTS
Three Mos.
Ended
March 31, Year Ended December 31,
1998 --------------------------------------
(Unaudited) 1997 1996 1995 1994 1993
- -------------------------------------------------------------------
PER SHARE OPERATING
PERFORMANCE:
Net asset value at
beginning of year $12.89 $11.27 $10.55 $ 9.95 $10.54 $10.28
------- ------- ------- ------- ------- -------
Income from Investment
Operations:
Net investment income
(loss) - (0.02) 0.01 0.31 0.23 0.18
Net realized and
unrealized gains
(losses) on
securities 1.82 2.88 1.86 1.05 (0.24) 0.56
------- ------- ------- ------- ------- -------
Total from Investment
Operations 1.82 2.86 1.87 1.36 (0.01) 0.74
------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from net
investment income - - (0.01) (0.31) (0.23) (0.18)
Distributions from
realized capital
gains (0.35) (1.24) (1.01) (0.45) (0.35) (0.30)
------- ------- ------- ------- ------- -------
Total Distributions (0.35) (1.24) (1.02) (0.76) (0.58) (0.48)
------- ------- ------- ------- ------- -------
Impact of shares
issued in dividend
reinvestment (a) - - (0.13) - - -
------- ------- ------- ------- ------- -------
Total Distributions &
Reinvestments (0.35) (1.24) (1.15) (0.76) (0.58) (0.48)
------- ------- ------- ------- -------.-------
Net asset value at
end of period $14.36 $12.89 $11.27 $10.55 $ 9.95 $10.54
======= ======= ======= ======= ======= =======
Per share market value
at end of period $13.500 $11.938 $ 9.250 $ 9.375 $ 8.500 $10.250
======= ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN
FOR SHAREHOLDERS: (b)
Based on net asset
value 14.3%(c) 27.3% 18.3% 13.8% (1.1%) 7.2%
Based on market
price 16.0%(c) 43.6% 9.3% 19.3% (11.6%) 7.2%
RATIOS AND SUPPLEMENTAL
DATA
Net assets at end of
period (millions) $189 $167 $137 $120 $113 $125
Ratio of expenses to
average net assets 1.15% (d) 1.20% 1.35% 1.42% 1.51% 1.35%
Ratio of net investment
income to average
net assets 0.01% (d) (0.18%) 0.06% 2.87% 2.12% 1.71%
Portfolio turnover
rate 8% 57% 51% 82% 50% 47%
Average commission
rate (e) $0.0545 $0.0502 $0.0555 - - -
------- ------- ------- ------- ------ -------
(a) Effect of dividend reinvestment shares at a price below net
asset value in accordance with the 1996 Automatic Dividend
Reinvestment and Cash Purchase Plan.
(b) Calculated assuming all distributions reinvested.
(c) Not annualized.
(d) Annualized.
(e) For fiscal years beginning on or after September 1, 1995, a
fund is required to disclose its average commission rate per share
for trades on which commissions are charged.
See Notes to Financial Statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
(Unaudited)
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
Liberty All-Star Growth Fund, Inc. (the "Fund"), is registered
under the Investment Company Act of 1940, as amended, as a closed-
end, diversified management investment company and commenced
operations on March 14, 1986. The Fund's investment objective is to
seek long term capital appreciation. The Fund is managed by Liberty
Asset Management Company (the "Manager"). The Manager is a
subsidiary of Liberty Financial Companies, Inc. a publicly traded
company of which Liberty Mutual Insurance Company is the majority
shareholder.
The following is a summary of significant accounting policies
followed by the Fund in the preparation of its financial
statements. The preparation of financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results, if different, are expected to be immaterial
to the net assets of the Fund.
VALUATION OF INVESTMENTS
Portfolio securities listed on an exchange and over-the-counter
securities quoted on the NASDAQ system are valued on the basis of
the last sale on the date as of which the valuation is made, or,
lacking any sales, at the mean of the closing bid and asked
quotations on that date. Over-the-counter securities not quoted on
the NASDAQ system are valued at the most recent bid prices on that
date. Securities for which reliable quotations are not readily
available are valued at fair value, as determined in good faith and
pursuant to procedures established by the Board of Directors.
Short-term instruments maturing in more than 60 days for which
market quotations are readily available are valued at current
market value. Short-term instruments with remaining maturities of
60 days or less are valued at amortized cost, unless the Board of
Directors determine that this does not represent fair value.
PROVISION FOR FEDERAL INCOME TAX-The Fund qualifies as a "regulated
investment company". As a result, a federal income tax provision
is not required for amounts distributed to shareholders.
OTHER-Security transactions are accounted for on the trade date.
Interest income and expenses are recorded on the accrual basis.
Dividend income is recorded on the ex-dividend date. Discounts on
debt securities are amortized in accordance with Internal Revenue
Code requirements.
NOTE 2. FEES PAID TO AFFILIATES
Under the Fund's Management and Portfolio Management Agreements,
the Fund pays the Manager a management fee for its investment
management services at an annual rate of 0.75% of the Fund's
average weekly net assets. The Manager pays each Portfolio Manager
a portfolio management fee at an annual rate of 0.40% of the
average weekly net assets of the portion of the investment
portfolio managed by it. The Fund also pays the Manager a fee for
its administrative services at an annual rate of 0.25% of the
Fund's average weekly net assets. The annual fund management and
administrative fees are reduced to 0.5625% and 0.1875%,
respectively, on average weekly net assets in excess of $125
million up to $250 million and to 0.375% and 0.125%, respectively
on average weekly net assets in excess of $250 million. The
aggregate annual fees payable by the Manager to the Portfolio
Managers are reduced to 0.30% of the Fund's average weekly net
assets in excess of $125 million up to $250 million and to 0.20% on
average weekly net assets in excess of $250 million. Colonial
Management Associates, Inc. (an affiliate of the Manager) provides
bookkeeping and pricing services for $30,000 per year plus 0.0233%
of the Fund's average weekly net assets over $50 million
.
NOTE 3. CAPITAL TRANSACTIONS
During the period ended March 31, 1998, and the year ended
December 31, 1997, distributions in the amount of $2,776,511 and
$9,386,884, respectively, were paid in newly issued shares valued
at market value or net asset value, but not less than 95% of market
value, resulting in the issuance of 203,540 and 818,429 shares,
respectively.
NOTE 4. SECURITIES TRANSACTIONS Realized gains and losses are
recorded on the identified cost basis for both financial reporting
and federal income tax purposes. The cost of investments purchased
and the proceeds from investments sold excluding short-term debt
obligations for the period ended March 31, 1998 were $13,248,316
and $16,344,292, respectively.
The Fund may enter into repurchase agreements and require the
seller of the instrument to maintain on deposit with the Fund's
custodian bank or in the Federal Reserve Book-Entry System
securities in the amount at all times equal to or in excess of the
value of the repurchase agreement plus accrued interest. The Fund
may experience costs and delays in liquidating the collateral if
the issuer defaults or enters bankruptcy.
The Fund may enter into repurchase agreements and require the
seller of the instrument to maintain on deposit with the Fund's
custodian bank or in the Federal Reserve Book-Entry System
securities in the amount at all times equal to or in excess of the
value of the repurchase agreement, plus accrued interest. The Fund
may experience costs and delays in liquidating the collateral if
the issuer defaults or enters bankruptcy.
NOTE 5. DISTRIBUTIONS TO SHAREHOLDERS
All-Star currently has a policy of paying distributions on its
common shares totaling approximately 10% of its net asset value per
year, payable in four quarterly distributions of 2.5% of All-Star's
net asset value at the close of the New York Stock Exchange on the
Friday prior to each quarterly declaration date. Distributions to
shareholders are recorded on the ex-dividend date. The
characterization of income and capital gain distributions are
determined in accordance with federal income tax regulations, which
may differ from generally accepted accounting principles.
Reclassifications are made to the Fund's capital accounts to
reflect income and gains available for distribution (or available
capital loss carryovers) under income tax regulations.