<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section
14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ x ] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
LIBERTY ALL-STAR GROWTH FUND, INC.
________________________________________________
(Name of Registrant as Specified In Its Charter)
_______________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date
of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement no.:
3) Filing Party:
4) Date Filed:
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[Preliminary]
LIBERTY ALL-STAR GROWTH FUND, INC.
Federal Reserve Plaza
Boston, Massachusetts 02210
(617) 722-6000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 19, 2000
To the Shareholders of Liberty All-Star Growth Fund, Inc.:
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Shareholders of
Liberty All-Star Growth Fund, Inc. (the "Fund") will be held in Room AV-1, 3rd
Floor, Federal Reserve Plaza, 600 Atlantic Avenue, Boston, Massachusetts, on
April 19, 2000 at 11:00 a.m., Boston time. The purpose of the Meeting is to
consider and act upon the following matters:
1. To approve or disapprove the conversion of the Fund from a closed-end
investment company to an open-end investment company.
2. To approve or disapprove a Distribution Plan.
3. To elect two Directors of the Fund.
4. To approve or disapprove the Fund's Portfolio Management Agreement with M.A.
Weatherbie & Co., Inc.
5. To approve or disapprove a new Portfolio Management Agreement with
Oppenheimer Capital which will replace the current Portfolio Management
Agreement which will terminate upon change in control of Oppenheimer
Capital upon acquisition by Allianz AG.
6. To ratify the selection by the Board of Directors of
PricewaterhouseCoopers LLP as the Fund's independent auditors for the
year ending December 31, 2000.
7. To transact such other business as may properly come before the Meeting
or any adjournments thereof.
The Board of Directors has fixed the close of business on February 1,
2000 as the record date for the determination of the shareholders of the Fund
entitled to notice of, and to vote at, the Meeting and any adjournments thereof.
By order of the Board of Directors
Nancy L. Conlin, Secretary
<PAGE>
YOUR VOTE IS IMPORTANT--PLEASE RETURN YOUR PROXY PROMPTLY.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. WE URGE YOU, WHETHER
OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, TO INDICATE YOUR VOTING
INSTRUCTIONS ON THE ENCLOSED PROXY, DATE AND SIGN IT, AND RETURN IT IN THE
ENVELOPE PROVIDED, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. WE ASK
YOUR COOPERATION IN MAILING YOUR PROXY PROMPTLY.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST PROPOSALS 1
AND 2, AND RECOMMENDS THAT YOU VOTE FOR ALL OF THE OTHER PROPOSALS.
February 28, 2000
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LIBERTY ALL-STAR GROWTH FUND, INC.
PROXY STATEMENT
Annual Meeting of Shareholders
April 19, 2000
This Proxy Statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of Liberty All-Star Growth Fund,
Inc. (the "Fund") to be used at the Annual Meeting of Shareholders of the Fund
to be held on April 19, 2000 at 11:00 a.m. Boston time in Room AV-1, 3rd Floor,
Federal Reserve Plaza, 600 Atlantic Avenue, Boston, Massachusetts, and at any
adjournments thereof (such meeting and any adjournments being referred to as the
"Meeting").
The solicitation of proxies for use at the Meeting is being made
primarily by the mailing on or about February 28, 2000 of this Proxy Statement
and the accompanying proxy. Supplementary solicitations may be made by mail,
telephone, telegraph or personal interview by officers and Directors of the Fund
and officers and employees of its manager, Liberty Asset Management Company
("Liberty Asset Management") and its affiliates. In addition, the Fund has
retained Corporate Investor Communications, Inc. to coordinate the distribution
of proxy material to, and to solicit the return of proxies from, banks, brokers,
nominees and other custodians at a fee of $_____ plus out-of-pocket expenses.
Authorization to execute proxies may be obtained from shareholders through
telephonically or electronically transmitted instructions. The expenses in
connection with preparing this Proxy Statement and of the solicitation of
proxies for the Meeting will be paid by the Fund. The Fund will reimburse
brokerage firms and others for their expenses in forwarding solicitation
material to the beneficial owners of shares. This Proxy Statement is accompanied
by the Fund's 1999 Annual Report to Shareholders.
The Meeting is being held to vote on the matters described below.
PROPOSAL 1. APPROVAL OR DISAPPROVAL OF THE CONVERSION OF ALL-STAR FROM
CLOSED-END TO OPEN-END STATUS AND CERTAIN RELATED AMENDMENTS TO ALL-STAR'S
AGREEMENT AND ARTICLES OF INCORPORATION
I. BACKGROUND AND SUMMARY
The Fund is registered as a closed-end investment company under the
Investment Company Act of 1940 (the "Investment Company Act") and has operated
as a closed-end fund since its inception in December 16, 1985.
As part of the settlement of litigation relating to the Fund's 1995
annual meeting, Liberty Asset Management agreed to recommend to the Fund'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 Liberty
Asset Management nor the Fund's Directors are obligated, however, to recommend
approval of this proposal to shareholders. The affirmative vote of the holders
of 66 2/3rds percent of the outstanding shares of Common Stock will be required
to authorize the Fund's conversion from a closed-end to an open-end investment
company. This "super-majority" vote would be required for such conversion
regardless of whether or not the proposal is recommended by the Board of
Directors.
Shareholders will have the opportunity to vote at the meeting on the
question of whether the Fund should be converted from a closed-end fund to an
open-end fund. The Directors, as discussed in more detail below, unanimously
recommend that shareholders vote AGAINST converting the Fund to an open-end
fund. This recommendation is based on the Directors' view that, as a closed-end
fund, the Fund is afforded significant investment advantages.
If approved, the conversion would result in the "delisting" of the
Fund's shares from the New York Stock Exchange where they currently may be
bought or sold at prevailing market prices. The shares would then become
redeemable directly from the Fund at net asset value. Other differences between
closed-end and open-end investment companies are described below.
A conversion from closed-end to open-end status would also require a
number of changes in the Agreement and Articles of Incorporation (the "Articles
of Incorporation") under which the Fund was established. Accordingly, approval
of this proposal would also authorize the Fund's Directors to make such
amendments, as they may deem necessary to operate the Fund as an open-end fund
if this proposal is approved. These changes are described in greater detail
below.
The Directors regularly review the overall performance and trading
information for the Fund. At their December 15, 1999 meeting, the Directors of
the Fund carefully reviewed and evaluated information about the possible
advantages and disadvantages of converting from a closed-end fund structure to
an open-end fund structure and whether the Fund's long-term shareholders would
benefit by this conversion.
FOR THE REASONS DESCRIBED BELOW, THE DIRECTORS OF THE FUND HAVE UNANIMOUSLY
CONCLUDED THAT THE CONVERSION OF THE FUND TO OPEN-END STATUS WOULD NOT BE IN THE
BEST LONG-TERM INTERESTS OF THE FUND AND ITS SHAREHOLDERS. ACCORDINGLY, THE
DIRECTORS OF THE FUND UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS VOTE "AGAINST"
THIS PROPOSAL.
II. THE REASONS FOR VOTING AGAINST CONVERSION TO AN OPEN-END FUND
The Directors believe that the Fund's closed-end status provides
significant investment benefits not available in an open-end fund. Because the
Fund's shares are not redeemable, the Fund is not required to maintain
short-term investments in anticipation of possible redemptions. Therefore, the
Fund's assets can be fully invested in pursuit of the Fund's investment
objectives. As an open-end fund, the Fund's investment strategy may be hampered
as the Fund's sub-advisors will be more strictly limited in their ability to
invest in less liquid securities. Furthermore, as a closed-end fund, the Fund
does not experience the cash flows associated with sales and redemptions of
open-end fund shares. As a result, the Fund's manager does not have to invest
additional cash from new sales at times when market conditions are unfavorable
or sell securities at inopportune times to meet redemptions.
The Directors have reviewed and evaluated certain industry reports
which indicates that the supposed benefit of open-ending the Fund - immediate
gain to shareholders who cash out of the Fund - will result in seriously
disadvantageous consequences for shareholders who continue to hold the Fund.
These reports have demonstrated that only a small number of selling shareholders
actually benefit from an open-end conversion.
The Fund's operating expenses will increase if the Fund is converted to
open-end status. As an open-end fund, the Fund would be required, as a practical
matter, to make a continuous public offering of its shares in order to offset
redemptions and maintain the economies of scale available at its current size.
All shareholders would bear the brokerage and other transactional costs
associated with purchases and sales of securities in response to the sale or
redemption of shares if the Fund were converted to open-end status (except to
the extent that the Directors decide to impose a temporary redemption fee, as
described below). Furthermore, in order to market the Fund's shares effectively
to conform generally to sales practices of competing dealer-sold funds,
following a conversion to open-end status, the Directors recommend that
shareholders approve the adoption of a distribution plan under Rule 12b-1 of the
1940 Act.
In implementing such a plan, the fund would create three separate
classes of shares each with its own expenses. Class A shares have a front-end
load (sales charge) of 5.75% imposed on the purchase of Class A shares. Class B
and Class C shares each charge a Contingent Deferred Sales Charge (CDSC) of
5.00% and 1.00%, respectively, upon redemption of shares within a specified
period of time. These sales charges parallel those of the only other All-Star
open-end fund - All-Star Growth and Income Fund. In addition to the sales
charge, the distribution plan would permit the Fund to pay an annual service fee
of 0.25% on net assets of Class A, B, and C shares and annual distribution fees
of up to 0.75% of the Fund's net assets for Class B and C shares, as is the case
with the only other All-Star open-end fund - All-Star Growth and Income Fund. If
shareholders vote to convert the Fund to an open-end fund and the distribution
plan is approved, shareholders remaining in the Fund would have their shares
converted to Class A shares. The initial sales charge for these funds would be
waived (along with the sales charge on reinvested dividends) and shareholders
would simply be responsible for the 12b-1 Plan fees and the other expenses
associated with an open-end mutual fund. Additional purchases of Class A shares
will be subject to a sales charge
Open-end funds, since they continually issue new shares, have the
ability to increase in size. This growth could result in efficiencies as fixed
costs are spread over a larger pool of assets. Alternatively, since they also
continually redeem shares, open-end funds can also decrease in size. In that
case, expense ratios may increase. Liberty Asset Management has advised the
Directors that it is possible that the Fund might experience significant
redemptions following any conversion, thereby shrinking in size. Furthermore,
certain studies reviewed by the Directors indicate that fund performance can be
affected (most notably in the first six months after open-ending the Fund) due
to fewer assets being invested as a result of actual and anticipated
redemptions. Depending on the size of the redemptions and any sales of new
shares, increased expense ratios could result.
The need to sell securities as an open-end fund to meet redemptions may
have adverse tax consequences to shareholders remaining in the Fund. If the Fund
sells securities to meet redemptions and realizes a gain for tax purposes, the
Fund will be required to allocate the tax gain to remaining shareholders. In
order to retain its qualification as a regulated investment company under the
Internal Revenue Code and thus be relieved of taxation at the investment company
level, the Fund is required to distribute net realized capital gains to its
shareholders who do not redeem their shares and remain shareholders of the Fund.
This would have two negative consequences. First, non-redeeming shareholders
would recognize and be required to pay taxes on a greater amount of capital gain
than would otherwise be the case. Secondly, the Fund may need to sell additional
portfolio securities in order to make the required distribution of realized
capital gains, thereby further reducing the size of the fund and possibly
causing the realization of additional net capital gains.
Another reason that the Directors recommend voting against the
conversion to open-end status is that the impact of large-scale redemptions will
be magnified inasmuch as the Fund employs the multi-manager, multi-style
approach to investment management. The volatile outflow of cash, that will
follow the open-ending of the Fund, is bound to disrupt the balance of
investment styles among the fund's managers, and will certainly induce the
portfolio managers to make investment decisions based on factors other than
their pre-determined investment approaches. Most notable, certain Fund
sub-advisors will be more strictly limited in their ability to invest in less
liquid securities with greater total return potential. These effects on
portfolio management and a decrease in the fund's asset base due to redemptions
could hamper Liberty Asset Management's ability to find and retain quality
investment sub-advisors for the Fund.
FOR ALL OF THE FOREGOING REASONS, THE DIRECTORS UNANIMOUSLY
RECOMMEND THAT SHAREHOLDERS VOTE AGAINST THIS PROPOSAL.
III. THE PRINCIPAL DIFFERENCES BETWEEN A CLOSED-END AND OPEN-END FUND
In evaluating this proposal, shareholders may wish to consider the
following differences between closed-end and open-end funds:
CHANGES IN CAPITAL. Closed-end funds raise their capital through an
initial public offering and generally do not raise additional capital after that
time. Closed-end funds therefore have limited opportunities to gain additional
economies of scale through growth of assets. At the same time, because shares of
closed-end funds cannot be redeemed, the risk of higher expense ratios resulting
from a decline in assets is also limited.
Open-end funds, in contrast, generally engage in a continuous public
offering of their shares, which provides the opportunity for growth of assets
and reduced expense ratios. However, because shares of open-end funds are
generally redeemable at any time, such funds face the risk of higher expense
ratios if significant redemptions are not offset by sales of new shares.
REDEMPTION OF SHARES. Shares of open-end funds may be redeemed at any
time at their net asset value (subject only to the right of the Fund to withhold
payment for up to seven days or to impose a temporary redemption fee or, with
the permission of the SEC, to suspend redemptions under emergency conditions).
In contrast, shares of closed-end funds are not redeemable and can generally be
bought and sold at current market prices only on the exchange on which such
funds are listed. The share's current market price may be trading at a discount
(below net asset value) or at a premium (above net asset value). Currently, the
Fund's shares are trading at a discount to net asset value. Thus, converting the
Fund from closed-end to open-end status would eliminate the current discount
between market price and net asset value, but would also eliminate the
possibility that the Fund's shares might trade at a premium in the future.
REGULATORY REQUIREMENTS. Both closed-end and open-end funds are
registered with the SEC under the Investment Company Act of 1940 and, with
certain differences relating largely to the sale and redemption of shares, are
generally subject to the same regulatory requirements of that Act. The Fund's
shares are listed for trading on the New York Stock Exchange. That listing would
be terminated in the event of a conversion to open-end status. Since open-end
funds generally engage in a continuous public offering of their shares, they are
required to maintain current registrations under federal and state securities
laws, which involves additional costs.
ANNUAL SHAREHOLDER MEETINGS. The Fund is currently required by the
rules of the New York Stock Exchange to hold annual meetings of shareholders for
the purpose of electing Directors and ratifying the selection of auditors. As
noted above, conversion of the Fund to open-end status would result in
termination of the Fund's listing on the New York Stock Exchange with the result
that the Fund would no longer be required to hold annual meetings. In such
event, the Fund expects that meetings would be held only on an as-needed basis.
INVESTMENT FLEXIBILITY. As noted above, the cash flows associated with
sales and redemptions of open-end fund shares, as well as the need to maintain
cash reserves in anticipation of possible redemptions, tend to reduce the
investment flexibility of open-end funds.
LEVERAGE. Open-end investment companies are prohibited by the
Investment Company Act from issuing "senior securities" representing
indebtedness (i.e. bonds, debentures, notes and other similar securities), other
than indebtedness to banks when there is asset coverage of at least 300% for all
borrowings, and may not issue preferred stock. Closed-end investment companies
are permitted to issue senior securities representing indebtedness when the 300%
asset coverage test is met, may issue preferred stock subject to various
limitations, and are not limited to borrowings from banks. The Fund has not
issued senior securities and/or preferred stock yet but may in the future if it
remains closed-end.
SHAREHOLDER PRIVILEGES. Shareholders of the Fund currently have the
option of participating in the Fund's Dividend Reinvestment Plan, under which
cash distributions paid by the Fund are generally reinvested through the
purchase of additional fund shares at market prices (which currently reflect a
discount from net asset value). At times when the Fund's shares are trading at a
premium over their net asset value, such reinvestments are made at the higher of
net asset value or 95% of market value. If the Fund were to convert to open-end
status, shareholders would no longer be able to reinvest dividends at a price
below net asset value per share. Upon conversion to an open-end fund,
shareholders will have an exchange privilege available to them. Shareholders of
the Fund currently do not have that privilege. Currently, All-Star Growth and
Income Fund is the only open-end All-Star fund available to shareholders. Any
direct exchange privileges would be limited to that fund.
IV. THE POSSIBLE CONSEQUENCES RESULTING FROM CONVERSION OF
ALL-STAR TO OPEN-END STATUS
In addition to those matters described above, shareholders should
consider the following possible consequences of conversion of the Fund to
open-end status:
Closed-end funds operate with a relatively fixed capitalization, while
the capitalization of open-end funds fluctuates depending on whether the Fund
experiences net sales or net redemptions of its shares. More new money tends to
be invested in open-end funds near market highs, while more money tends to leave
(be redeemed from) open-end funds near market lows. Accordingly, if the Fund
were to convert to an open-end fund, it is likely that the Fund's managers would
be subject to pressures to sell portfolio securities at times when their
investment styles would indicate that they should be investing, and to invest in
new portfolio securities when their investment styles would indicate that they
should be reducing the Fund's exposure to the market. As managers of a
closed-end fund, however, the Fund's managers currently are able to ride through
market swings without being pressured to invest new money or liquidate portfolio
holdings at inopportune times, and can manage their portion of the Fund with a
greater emphasis on long-term considerations.
As stated above, significant redemptions following a conversion would
require the Fund to sell portfolio securities, significantly reducing the asset
size of the Fund. These transactions involve brokerage and other transaction
costs and could result in the recognition of capital gains for federal income
tax purposes. Such costs and liabilities would be borne by all remaining, except
to the extent that the Directors decide to impose a temporary redemption fee, as
described below.
The Directors believe that, in deciding whether to open-end the Fund,
the performance of the Fund is an important factor to consider. Currently, the
Fund's shares are selling at a discount to net asset value. Conversion to an
open-end fund would eliminate any possibility of a discount, thus assuring
shareholders of the ability to redeem at net asset value. However, in light of
the Fund's long-term performance, the Directors do not believe that eliminating
the possibility of a discount justifies the fundamental changes which would
result from a conversion to open-end status, including the loss of the
investment advantages of closed-end status and the likelihood of increased
operating expenses and taxable gains.
Furthermore, although the current size of the Fund's discount may seem
to provide a powerful basis for converting the Fund to open-end status, the
discount offers a positive feature. Under the Fund's current distribution
policy, all of the Fund's distributions have been declared payable in newly
issued shares to all shareholders except those who do not participate in the
Fund's Dividend Reinvestment Plan and who elect to receive cash. For the three
year period ending December 1999, more than half of the Fund's shareholders have
re-invested their distributions and are purchasing more than a dollar of net
assets for every dollar re-invested while paying no brokerage commission.
The Directors believe that most shareholders of the Fund purchased
their shares with a long-term investment perspective that recognizes the special
advantages of the closed-end structure. In addition, many shareholders purchased
their fund shares at a discount and have not been adversely affected by the
discount. Consequently, the Directors do not believe that the recent history of
greater discounts, which may be temporary, should be viewed as grounds for
depriving shareholders of the advantages of the closed-end structure.
Finally, if shareholders vote to convert the Fund to an open-end fund,
then the Directors have approved the implementation of a temporary redemption
fee of up to 2.5% of the value of shares redeemed for a period of up to one year
following the Fund's conversion to an open-end investment company. The Directors
have approved the imposition of this fee because they believe that immediately
following a conversion to open-end status, significant redemptions of shares
would disrupt long-term portfolio management of the Fund and dilute the
interests of the remaining shareholders. Imposition of a redemption fee is
intended to deter certain redemptions and compensate remaining long-term
shareholders for the costs of the liquidation of a significant percentage of the
Fund's portfolio.
V. MEASURES TO BE ADOPTED IN THE EVENT SHAREHOLDERS VOTE TO CONVERT THE FUND
TO OPEN-END STATUS
In the event that shareholders vote to convert the Fund from a
closed-end fund to an open-end fund, a number of additional actions would need
to be taken not only to effect the conversion of the Fund to an open-end
investment company but also to allow the fund to operate effectively as an
open-end investment company.
DISCONTINUATION OF 10% PAYOUT POLICY. The Fund currently has a policy
of paying distributions on its common shares totaling 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 NYSE on the Friday prior to each quarterly
declaration date. If total distributions under the 10% pay-out policy for any
calendar year exceed the Fund's net investment income and net realized capital
gains for that year, the excess is generally treated as a tax-free return of
capital (up to the amount of the shareholder's basis in his or her shares), thus
reducing the shareholder's basis in the shares and increasing his or her
potential gain or reducing his or her potential loss on the sale of the shares.
The Board of Directors believes that a 10% distribution policy is not
appropriate to an open-end investment company because of the need for open-end
funds to maintain higher cash reserves to meet redemptions and the need of the
Fund managers to manage continuous in-flows and out-flows of capital.
Accordingly, in the event shareholders vote to convert the Fund to an open-end
fund, the Fund's 10% distribution policy would be discontinued. Like most
investment companies, the Fund would make distributions of its net investment
income and net realized gains, if any.
REDEMPTION FEE. In order to reduce the number of redemptions of the
Fund's shares immediately following conversion (thereby reducing any disruption
of the Fund's normal portfolio management), and to offset the brokerage and
other costs of such redemptions, for a period of one year following the
conversion to an open-end fund, the Fund will impose a fee of up to 2.5% of the
redemption proceeds payable to the Fund on all redemptions (whether in cash or
in kind).
REDEMPTIONS IN KIND. The Board of Directors has reserved the right to
meet redemptions occurring during the first year following the Fund's conversion
to an open-end fund by delivering the Fund's portfolio securities to the
redeeming shareholder in kind, rather than paying cash. Such redemptions in kind
would shift the brokerage cost of liquidating the portfolio securities from the
Fund to the redeeming shareholder, and, to the extent appreciated securities
were delivered, would avoid the recognition of capital gains by the Fund.
UNDERWRITING AND DISTRIBUTION. If conversion to an open-end fund is
approved, Liberty Funds Distributor, Inc. (LFDI), an affiliate of Liberty Asset
Management, would become the principal underwriter of the shares of the Fund.
The shares would be offered and sold directly by LFDI and by any other
broker-dealers who enter into selling agreements with LFDI, although there is no
assurance that LFDI or any such other broker-dealer firms would be able to
generate sufficient sales of fund shares to offset redemptions, particularly in
the initial months following conversion.
Fund shares would be offered at their NAV plus a sales charge. It is
currently anticipated that the sales charges for Class A shares would not exceed
5.75% of the offering price. In the event that the proposal to convert the Fund
to an open end fund passes, the initial sales charge for Class A shares will be
waived for those shareholders remaining in the fund (and for shares purchased
through reinvestment of dividends). Additional purchases of Class A shares will
be subject to a sales charge. It is further anticipated that Class B and C
shares will charge a CDSC of 5.00% and 1.00% respectively. These charges will
only apply if the shares are sold within a specific period of time.
The Board of Directors has also adopted and recommended to shareholders
that they approve a distribution plan to take effect if the requisite number of
shareholders vote to convert the Fund to an open-end fund (see Proposal 2). In
implementing the distribution plan, the fund would create three separate classes
of shares each with varying loads and expenses (see above description of Class
A, B, and C Shares loads and expenses). Pursuant to the plan, the Fund would pay
to LFDI an annual service fee of 0.25% on net assets of Class A, B, and C shares
and annual distribution fees of up to 0.75% of the Fund's net assets for Class B
and C shares. Shareholders remaining in the fund will be issued Class A Shares
without the Class A Shares sales charge.
AMENDMENT AND RESTATEMENT OF ALL-STAR'S ARTICLES OF INCORPORATION.
Conversion of the Fund from a closed-end to an open-end fund would require
certain changes to the Fund's Articles of Incorporation. The Articles of
Incorporation would be amended to require the Fund to purchase all shares
offered to it for redemption at a price equal to the net asset value of the
shares next determined, less any redemption charge fixed by the Directors.
Notwithstanding this provision, all shares would be redeemable at a
shareholder's option.
The Articles of Incorporation would also be amended to include
provisions commonly found in the governing documents of open-end investment
companies. Specifically, the Articles of Incorporation would be amended to
authorize the issuance of additional series of shares and classes thereof from
time to time as the Directors in their discretion may determine. Each series
would have its own investment objective, policies and restrictions and shares of
each series would represent interests in separate investment portfolios, each of
which would be accounted for separately on the books of the Corporation with
respect to income, earnings, profits, proceeds, assets and liabilities
attributable to that series. Shares of each series would be entitled to vote
separately to approve investment advisory agreements, changes in fundamental
investment restrictions and distribution plans, but shares of all series would
vote together on the election of Directors and the ratification of the selection
of accountants. Classes of a series would have such preferences or special or
relative rights, and privileges as the Directors may determine, and each class
would vote separately on issues that relate exclusively to that class.
The Articles of Incorporation would be further amended to eliminate
certain provisions that relate specifically to the Fund's closed-end status,
such as the conversion, voting percentage and other provisions relating to an
open-ending.
Finally, the Directors would also make certain technical and
non-material changes to the Articles of Incorporation and conforming changes to
the Fund's Bylaws if the shareholders vote in favor of the conversion of the
Fund to an open-end fund.
Therefore, a vote in favor of converting the Fund to open-end status
would also authorize the Directors to amend the Fund's Articles of Incorporation
to reflect such changes.
VI. IF THE CONVERSION IS NOT APPROVED
In the event that shareholders do not approve the conversion of the
Fund to open-end status, the Fund would continue as a closed-end fund.
<PAGE>
THE DIRECTORS BELIEVE THAT THE CONTINUED OPERATION OF THE FUND AS A CLOSED-END
INVESTMENT COMPANY IS IN THE BEST LONG-TERM INTERESTS OF SHAREHOLDERS, AND
UNANIMOUSLY RECOMMEND A VOTE AGAINST THE CONVERSION OF ALL-STAR TO OPEN-END
STATUS AT THIS TIME.
Required Vote
Approval of the conversion of the Fund to open-end status and of the
related amendments to the Fund's Articles of Incorporation will require the
"yes" vote from holders of 66 2/3rds percent of the outstanding shares of the
Fund's Common Stock.
If such conversion is approved, the conversion would become effective
following compliance with all necessary regulatory requirements under federal
and state law. The Fund would seek to complete this process as soon as
reasonably practicable, but it is estimated that this process may require at
least several months.
THE BOARD OF DIRECTORS UNAMIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE AGAINST
PROPOSAL 1.
PROPOSAL 2. APPROVAL OF DISTRIUBTION PLAN
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL
REGARDLESS OF HOW YOU VOTE ON PROPOSAL [1]. THIS PROPOSAL WILL ONLY BE
EFFETIVE IF OPEN-ENDING IS APPROVED
The Fund's Board of Directors has approved a Distribution Plan (the
"Plan") and 12b-1 Plan Implementing Agreement (Agreement) pursuant to Rule 12b-1
under the Investment Company Act to take effect if, and only, if, contrary to
the recommendation of the Directors, the shareholders of the Fund vote to
convert the Fund to an open-end investment company. Copies of the Plan and
Agreement are attached to this proxy statement as Appendix A.
Under the Plan, the Fund would be authorized to pay to LFDI a service
fee, accrued daily and paid monthly, at an annual rate of 0.25% for Class A, B
and C shares and a distribution fee of 0.75% for Class B and C shares of the
Fund's average daily net assets, regardless of the amount of expenses incurred
by LFDI, to compensate LFDI for its activities and expenses intended to result
in the sale of shares of the Fund, including expenses of printing and
distributing prospectuses used for sales purposes, preparation and distribution
of sales literature, advertising and marketing expenses, interest expense,
promotional incentives and other compensation paid to its employees or to other
dealers that sell shares of the Fund, and payments to financial institutions and
other third parties. Amounts payable by the Fund under the Plan would be in
addition to any sales charge payable by investors in connection with purchases
of shares of the Fund. Shareholders of the Fund will have their shares converted
to Class A shares of the open-end fund and will not be subject to the initial
Class A sales charge. On [December __, 1999], the Fund's net assets were
[$_______]. If payments to LFDI under the Plan together with such sales charges
were to exceed its distribution expenses, LFDI would realize a profit from such
distribution activities.
The Board of Directors believes that, if the Fund is converted to an
open-end investment company, the Plan would be reasonably likely to benefit the
Fund and its shareholders through stimulating sales of shares of the Fund,
therebv tending to offset redemptions that are likely to occur upon conversion
and avoiding a shrinkage in the Fund's size, with the attendant loss of
economies of scale and investment flexibility.
There is of course no assurance that the Plan would succeed in enabling
the Fund to avoid substantial net redemptions following its conversion, and the
fees payable pursuant to the Plan (up to a maximum of the Fund's average net
assets) would add to its expenses and reduce the value of a shareholder's
account and the Fund's net investment income available for distribution.
If shareholders vote to convert the Fund to an open-end investment
company (Proposal 1) and the Plan is approved by shareholders, the Plan would
remain in effect for one year from the date of its adoption, and would continue
in effect thereafter only if such continuance is specifically approved at least
annually by vote of both a majority of the Directors and a majority of the
Directors who are not "interested persons" of the Fund (as defined in the
Investment Company Act) and who have no direct or indirect financial interest in
the operation of the Plan or in any agreements related to it ("Qualified
Directors").
The Plan would be terminable at any time by vote of a majority of the
Qualified Directors or by vote of a majority of the outstanding voting
securities (as defined below). If the Plan were terminated or not renewed, the
Fund would owe no amounts to LFDI under the Plan other than unpaid distribution
fees accrued through the date of the Plan's termination or expiration, and LFDI
would have no right to recover its distribution expenses in excess of the
accrued distribution fee and amounts due through sales charges.
The Plan could not be amended to increase materially the amount of
distribution expenses permitted thereunder without the approval of shareholders
and could not be materially amended in any way without a vote of the majority of
both the Directors and the Qualified Directors.
Rule 12b-1 requires that the selection and nomination of Directors who
are not "interested persons" of the Fund be committed to the discretion of such
disinterested Directors. In addition, as required by the Rule, if the Plan is
approved and implemented, the Directors would review on a quarterly basis the
amounts expended by the Fund pursuant to the Plan and the purposes for which
such expenditures were made.
The Plan will not be implemented unless shareholders both vote to
convert the Fund to an open-end investment company (Proposal 1) and approve the
Plan (Proposal 2).
<PAGE>
Required Vote
Approval of this proposal requires the affirmative vote of a "majority
of the outstanding voting securities" of the Fund. The term "majority of the
outstanding voting securities," as defined in the 1940 Act, means the
affirmative vote of the lesser of (1) 67% of the voting securities of the Fund
present at the meeting if more than 50% of the outstanding shares of the Fund
are present in person or by proxy or (2) more than 50% of the outstanding shares
of the Fund.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR PROPOSAL 2
REGARDLESS OF HOW YOU VOTE ON PROPOSAL 1. THIS PROPOSAL WILL ONLY BE EFFECTIVE
IF OPEN-ENDING IS APPROVED.
PROPOSAL 3. ELECTION OF DIRECTORS
The Fund 's Board of Directors is divided into three classes, each of
which serves for three years. The term of office of one of the classes expires
at the final adjournment of the Annual Meeting of Shareholders (or special
meeting in lieu thereof) each year. Unless authority is withheld, the enclosed
proxy will be voted for the election of James E. Grinnell and John J. Neuhauser
as the Directors to hold office until the final adjournment of the Annual
Meeting of Shareholders for the year 2003 (or special meeting in lieu thereof).
Messrs. Grinnell and Neuhauser have served as Directors since May 27, 1994 and
April 23, 1998, respectively. Each of them has consented to serve as a Director
following the Meeting if elected, and is expected to be able to do so. If any of
Messrs. Grinnell or Neuhauser is unable or unwilling to do so at the time of the
Meeting, proxies will be voted for such substitute as the Directors may
recommend (unless authority to vote for the election of Directors has been
withheld).
Information about the nominees for election as a Director follows:
<TABLE>
<CAPTION>
Fund Shares
Name/Age and Address Principal Occupation During Past Five Years Owned(1)
<S> <C> <C>
James E. Grinnell (Age 70)(2) Private investor (since November, 1988); President and Chief
22 Harbor Avenue Executive Officer, Distribution Management Systems, Inc. (1983
Marblehead, MA 01945 to May, 1986); Senior Vice President-Operations, The Rockport
Company, importer and distributor
of shoes (May, 1986 to November,
1988).
1,404
John J. Neuhauser(2) (Age 56) Academic Vice President and Dean of Faculties, Boston College
84 College Road (since August, 1999); Dean, Boston College School of
Chestnut Hill, MA 02467-3838 Management (September, 1977 to September, 1999). Director of
Hyde Athletic Industries, Inc. (athletic footwear).
</TABLE>
The Following Directors continue to serve in such capacity until their terms
of office expire and their successors are elected and qualified:
<TABLE>
<CAPTION>
Fund Shares
Name/Age and Address Principal Occupation During Past Five Years Owned(1)
<S> <C> <C>
Robert J. Birnbaum (Age 72)(2) Retired (since January, 1994); Special Counsel, Dechert, Price
313 Bedford Road & Rhoads (September, 1988 to December, 1993); President and
Ridgewood, NJ 07450 Chief Operating Officer, New York Stock Exchange, Inc. (May,
1985 to June, 1988). Director of Dresdner RCM Europe Fund
(investment company). 3,297
John V. Carberry (Age 53)(3) Senior Vice President, Liberty Financial Companies, Inc.
Liberty Financial Companies, Inc. (since February, 1998); Managing Director, Salomon Brothers,
600 Atlantic Avenue Inc. (December, 1974 to February, 1998). 1,089
Boston, MA 02210
Richard W. Lowry(2) (Age 63) Private investor (since August, 1987); Chairman and Chief
10701 Charleston Drive Executive Officer, U.S. Plywood Corporation, manufacturer and
Vero Beach, FL 32963 distributor of wood products (August, 1985 to August, 1987). 1,263(4)
William E. Mayer (Age 59) Partner, Development Capital, LLC (since December, 1996);
500 Park Avenue, 5th Floor Dean, College of Business and Management, University of
New York, NY 10022 Maryland (October, 1992 to November, 1996); Dean, Simon
Graduate School of Business, University of Rochester (October,
1991 to July, 1992). Director of Johns Manville Corporation
(building products) and Chart House Enterprises
(restaurant/food).
</TABLE>
- -----------------------
(1) Shows all shares owned beneficially, directly or indirectly, on the record
date for the Meeting. Such ownership includes voting and investment control. The
Fund's Directors and officers as a group then so owned less than 1% of the
shares of the Fund outstanding.
(2) Member of the Audit Committee.
(3) "Interested person" of the Fund, as defined in the Investment Company Act of
1940, by reason of his positions with Liberty Financial Companies, Inc., the
indirect parent of Liberty Asset Management, and its affiliates.
(4) Held by the trustee of a trust of which Mr. Lowry is the sole beneficiary.
<PAGE>
The term of office of Mr. Lowry will expire on final adjournment of the
Annual Meeting (or special meeting in lieu thereof) in the year 2001, and the
term of office of Messrs. Birnbaum, Carberry and Mayer will expire on final
adjournment of the Annual Meeting (or special meeting in lieu thereof) in the
year 2002. Mr. Lowry has served as a Director since May 27, 1994, and Messrs.
Birnbaum, Carberry and Mayer have served as Directors since November 6, 1995,
June 30, 1998 and December 17, 1998, respectively. Messrs. Birnbaum, Carberry,
Grinnell, Lowry, Mayer and Neuhauser are also trustees of Liberty Funds Trusts I
through VII (the "Liberty Trusts"), the umbrella trusts for an aggregate of 52
open-end funds (the "Colonial Funds") managed by Colonial Management Associates,
Inc. ("Colonial"), or other affiliates of Liberty Asset Management, nine
closed-end funds managed by Colonial (the "Colonial Closed-End Funds"), Liberty
Funds Trust VIII, an open-end investment company managed by Stein Roe & Farnham
Incorporated, another affiliate of Liberty Asset Management, Liberty Funds Trust
IX, the umbrella trust for Liberty All-Star Growth and Income Fund, an open-end
multi-managed fund managed by Liberty Asset Management and Liberty Variable
Investment Trust ("LVIT"), the umbrella trust for 12 open-end funds managed by
Colonial or its affiliates that serve as investment vehicles for variable
annuities and variable life insurance products, and Liberty All-Star Equity
Fund, another closed-end multi-manager fund managed by Liberty Asset Management.
During 1999 the full Board of Directors of the Fund held four meetings,
and the Audit Committee, which is comprised of all the Directors who are not
"interested persons" of the Fund, met three times. All Directors were present
at all meetings.
The Audit Committee makes recommendations to the full Board as to the
firm of independent accountants to be selected, reviews the methods, scope and
results of audits and fees charged by such accountants, and reviews the Fund's
internal accounting procedures and controls. The Fund has no nominating or
compensation committee.
Compensation
Liberty Asset Management or its affiliates pay the compensation of all
the officers of the Fund. In 1999, the Fund paid each Director not affiliated
with Liberty Asset Management (the "independent Directors") total fees of
$11,000, consisting of a $5,000 retainer and meeting fees aggregating $6,000.
The total fees accrued to the independent Directors as a group during 1999 by
the Fund were $55,000, and out-of-pocket expenses relating to their attendance
at meetings were $___________.
The following table shows, for the year ended December 31, 1999, 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 Boards of Trustees of the Liberty Trusts, the Colonial
Closed-End Funds, Liberty Funds Trust VIII, Liberty Funds Trust IX, LVIT and
Liberty All-Star Equity Fund (the "Liberty Funds Complex") comprised of an
aggregate of _____ funds (including the Fund). The Fund has no bonus, profit
sharing or retirement plan.
Aggregate Compensation from Total Compensation from
the Fund the Liberty Funds Complex
Name (including the Fund)
- ------ --------------------------- --------------------------
Robert J. Birnbaum $11,000 $
John V. Carberry -0- -0-
James E. Grinnell $11,000 $
Richard W. Lowry $11,000 $
William E. Mayer $11,000 $
John J. Neuhauser $11,000 $
Beginning January 1, 1999, the aggregate of the fees to be paid to each
Director by the Fund and by Liberty All-Star Equity Fund and Liberty All-Star
Growth and Income Fund, two other investment companies managed by Liberty Asset
Management that have the same Board of Directors as the Fund and hold their
meetings concurrently with those of the Fund, will consist of a retainer of
$10,000, plus a fee of $3,000 per meeting attended with a minimum of $15,000 per
annum if less than five meetings are held and all meetings are attended. One
third of the retainer and the fees for concurrently held meetings will be
allocated among the Fund and the two other funds on a per fund basis, and the
remaining two thirds will be allocated among the three funds based on their net
assets.
Officers
The following are the executive officers of the Fund, in addition to
Mr. John V. Carberry who serves as Chairman of the Board of Directors.
<TABLE>
<CAPTION>
Principal Occupation During
Name/Age and Address Position with Fund Past Five Years
- --------------------- ------------------ ------------------------------
<S> <C> <C>
William R. Parmentier, Jr. (Age 47) President, Chief President and Chief Executive Officer (since
Liberty Asset Management Company Executive June, 1998) and Chief Investment Officer (since
600 Atlantic Avenue Officer and Chief May, 1995), Senior Vice President (May, 1995 to
Boston, MA 02210 Investment Officer June, 1998), Liberty Asset Management; Consultant
(October, 1994 to May, 1995); President, GQ Asset
Management, Inc.(July, 1993 to October, 1994);
Assistant Treasurer, Grumman Corporation
(December, 1974 to July, 1993).
Christopher S. Carabell (Age 36) Vice President Senior Vice President - Product Development and
Liberty Asset Management Company Marketing (since January, 1999), Vice
600 Atlantic Avenue President-Investments, Liberty Asset Management
Boston, MA 02210 (March, 1996 to January, 1999); Associate
Director, U.S. Equity Research, Rogers
Casey & Associates, investment consultants
(January, 1995 to February, 1996); Director
of Investments, Boy Scouts of America (June, 1990
to January, 1995).
Mark T. Haley (Age 35) Vice President Vice President-Investments (since January,
Liberty Asset Managewment Company 1999), Director of Investment Analysis
600 Atlantic Avenue (December, 1996 to December, 1998),
Boston, MA 02210 Investment Analyst (January, 1994 to November, 1996),
Liberty Asset Management.
Joseph R. Palombo (Age 46) Vice President Vice President, Liberty Trusts (since April,
Liberty Funds Group 1999); Executive Vice President and Director,
One Financial Center Colonial (since April, 1999); Executive Vice
Boston, MA 02111 President and Chief Administrative Officer,
Liberty Funds Group LLC (LFG)(since April, 1999);
Managing Director, Putnam Investments (from
December, 1993 to January, 1999).
Timothy J. Jacoby (Age 47) Treasurer Treasurer and Chief Financial Officer, Liberty
Liberty Funds Group Trusts (since October, 1996); Senior Vice
245 Summer Street President (since September, 1996), Chief
Boston, MA 02111 Financial Officer and Treasurer (July, 1997 to
December, 1999), Colonial; Senior Vice President,
Fidelity Accounting and Custody Services (October,
1993 to September, 1996); Assistant Treasurer,
Fidelity Group of Funds (August, 1990 to
September, 1993).
J. Kevin Connaughton (Age 35) Controller Controller and Chief Accounting Officer, Liberty
Liberty Funds Group Trusts and Vice President, Colonial (since
245 Summer Street February, 1998); Senior Tax Manager, Coopers &
Boston, MA 02210 Lybrand, LLP (April, 1996 to January, 1998); Vice
President, 440 Financial Group/First Data Investor
Services Group(March, 1994 to April, 1996); Vice
President, The Boston Company (subsidiary of
Mellon Bank)(December, 1993 to March, 1994).
Nancy L. Conlin (Age 46) Secretary Secretary, Liberty Trusts (since April, 1998);
Liberty Funds Group Assistant Secretary, Liberty Trusts (July, 1994
One Financial Center to April, 1998); Director, Senior Vice President,
Boston, MA 02111 General Counsel, Clerk and Secretary, Colonial
(since April, 1998); Vice President, Counsel,
Assistant Secretary and Assistant Clerk,
Colonial (July, 1994 to April, 1998); Vice
President, General Counsel and Secretary,
LFG (since December, 1998); Vice President,
General Counsel and Clerk, LFG (April, 1998 to
December, 1998); Assistant Clerk, LFG (July, 1994
to April, 1998).
</TABLE>
Mr. Carberry has served as Chairman of the Board since June 30, 1998;
Mr. Parmentier has served as President, Chief Executive Officer and Chief
Investment Officer since April 29, 1999; Mr. Carabell was elected as a Vice
President on April 17, 1997, and Messrs. Haley and Palombo were elected as Vice
Presidents on April 29, 1999, respectively; Mr. Jacoby was appointed Treasurer
effective October 10, 1996; Mr. Connaughton was elected Controller on April 23,
1998; and Ms. Conlin has served as Secretary since April 29, 1999. Mr. Carberry
is a Trustee of, and Ms. Conlin and Messrs. Jacoby and Connaughton hold the same
offices with, Liberty All-Star Equity Fund, the Liberty Trusts, the Colonial
Closed-End Funds, LVIT, Liberty Funds Trust VIII and Liberty Funds Trust IX, and
Messrs. Carabell, Haley and Parmentier hold the same offices with Liberty
All-Star Equity Fund and Liberty Funds Trust IX. Each officer of the Fund serves
at the pleasure of the Board of Directors.
Required Vote
A plurality of the votes cast at the Meeting, if a quorum is represented, is
required for the election of each Director.
PROPOSAL 4. TO APPROVE OR DISAPPROVE PORTFOLIO MANAGEMENT AGREEMENT WITH
M.A. WEATHERBIE & CO., INC.
Background - The Multi-Manager Methodology
The Fund allocates its portfolio assets on an approximately equal basis
among a number of independent investment management firms ("Portfolio Managers")
recommended by Liberty Asset Management, currently three in number, 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. The
Portfolio Managers recommended by Liberty Asset Management represent a blending
of different styles which, in its opinion, is appropriate for the Fund's
investment objective. Liberty Asset Management continuously analyses and
evaluates the investment performance and portfolios of the Fund's Portfolio
Managers and from time to time recommends changes in the Portfolio Managers.
New Portfolio Manager
Effective May 1, 1999, M.A. Weatherbie & Co., Inc. replaced Mississipp
Valley Advisors, Inc. (Mississippi Valley), a Portfolio Manager since January 2,
1996. Under the terms of an exemptive order issued to the Fund and Liberty
Asset Management by the Securities and Exchange Commission , the Fund may enter
into a portfolio management agreement with a new or additional Portfolio Manager
recommended by Liberty Asset Management, in advance of shareholder approval, or
enter into a new portfolio management agreement with a Portfolio Manager or its
successor, provided that the new agreement is at a fee no higher than, and is
on other terms and conditions substantially similar to, the Fund's agreements
with its other Portfolio Managers, and that its continuance is subject to
approval by shareholders at the Fund's next annual meeting. Accordingly, the
Fund's new portfolio management agreement with M.A. Weatherbie & Co., Inc. is
being submitted for shareholder approval at the Meeting.
Mississippi Valley's investment style is to invest in small
capitalization growth companies that sell at a reasonable current price relative
to their projected growth rates. Liberty Asset Management in early 1999
determined to recommend the replacement of Mississippi Valley with another
Portfolio Manager practicing a similar small capitalization growth investment
style focusing more on a growth-oriented style. Liberty Asset Management first
analyzed information regarding the personnel, investment process and performance
of a large number of investment management firms practicing such an investment
style, ultimately reducing the number of potential candidates to four. Liberty
Asset Management then analyzed the four candidates in terms of their historic
returns, volatility and portfolio characteristics when combined with those of
the Fund's two other Portfolio Managers. Based on the foregoing and on Liberty
Asset Management's qualitative analysis, Liberty Asset Management recommended,
and the Board of Directors on April 29, 1999 approved, the termination of the
Fund's portfolio management agreement with Mississippi Valley and its
replacement with M.A. Weatherbie & Co., Inc., effective May 1, 1999.
M.A. Weatherbie & Co., Inc. (Weatherbie) was founded in 1995 by Matthew
A. Weatherbie. Mr. Weatherbie serves as President of Weatherbie and manages
that portion of the Fund's portfolio assigned to Weatherbie. Prior
to founding Weatherbie, Mr. Weatherbie was a Managing Director at Putnam
Investments (Putnam). From 1983 until 1995, Mr. Weatherbie managed the Putnam
Voyager Fund during the time it grew from $200 million in assets to more
than $5 billion in assets. Mr. Weatherbie was also founding Chief Investment
Officer of Putnam's Specialty Growth Equities Group, responsible for the firm's
aggressive growth investments, which totaled $13 billion at the time of his
departure from Putnam. Mr. Weatherbie has over 26 years of investment
experience. See Appendix B for further information about Weatherbie.
Reference is made to MANAGEMENT - Portfolio Transactions and Brokerage
below for the direction by the Fund's Portfolio Managers, including Weatherbie,
of Fund portfolio transactions to broker-dealers that make certain research
services available to Liberty Asset Management.
Terms of Portfolio Management Agreement with Weatherbie
The portfolio management agreement with Weatherbie is at the same fee
rates and is on other terms and conditions substantially similar to those of the
portfolio management agreements with the Fund's two other Portfolio Managers. A
copy of the portfolio management agreement with Weatherbie is attached to this
proxy statement as Appendix C.
Under the Fund's portfolio management agreements (including that with
Weatherbie), each Portfolio Manager has discretionary investment authority
(including the selection of brokers and dealers for the execution of the Fund's
portfolio transactions) with respect to the portion of the Fund's assets
allocated to it by Liberty Asset Management from time to time, subject to the
Fund's investment objective and policies, to the supervision and control of the
Directors, and to instructions from Liberty Asset Management. The Portfolio
Managers are required to use their best professional judgment in making timely
investment decisions for the Fund. The Portfolio Managers, however, will not be
liable for actions taken or omitted in good faith and believed to be within the
authority conferred by their portfolio management agreements and without willful
misfeasance, bad faith or gross negligence.
From the fund management fees it receives from the Fund (0.80% per
annum of the Fund's average weekly net asset value up to $300 million, and up to
0.72% per annum of the Fund's average weekly net asset value in excess of $300
million). Liberty Asset Management pays each Portfolio Manager a quarterly
portfolio management fee at the rate of .10% (.40% annually) of the Portfolio
Manager's Percentage (as defined in Schedule C of Appendix B) of the average
weekly net assets of the Fund up to and including $300 million, and 0.09% (0.36%
annually) of the Portfolio Manager's Percentage of the average weekly net assets
of the Fund exceeding $300 million. "Portfolio Manager's Percentage" means the
percentage obtained by dividing the average weekly net assets of the portion of
the Fund's assets assigned to that Portfolio Manager by the total of the Fund's
average weekly net assets. As of February 11, 2000, the Fund's net assets were
$_____________.
If approved by shareholders at the Meeting, the Portfolio Management
Agreement with Weatherbie will remain in effect until July 31, 2000, and will
continue thereafter until terminated by the Fund or the Portfolio Manager,
provided such continuance is approved at least annually by the Board of
Directors, including a majority of the independent Directors, or by the vote of
a "majority of the outstanding voting securities" (as defined under Required
Vote below) of the Fund.
Required Vote
Approval of the portfolio management agreement with Weatherbie requires
the affirmative vote of a "majority of the outstanding voting securities" of the
Fund, which, under the Investment Company Act of 1940, means the affirmative
vote of the lesser of (a) 67% or more of the shares of the Fund present at the
Meeting or represented by proxy if the holders of more than 50% of the
outstanding shares are present or represented by proxy, or (b) more than 50% of
the outstanding shares.
In the event that the shareholders of the Fund fail to approve the
portfolio management agreement with Weatherbie, the agreement will terminate and
Liberty Asset Management will cause the portfolio assets under management by
Weatherbie to be reallocated to one or more of the other Portfolio Managers or
invested in money market instruments or other cash equivalent holdings pending
the reappointment of Weatherbie or the appointment of a new Portfolio Manager.
The Board of Directors unanimously recommends that the shareholders
vote FOR approval of the portfolio management agreement with Weatherbie.
PROPOSAL 5. TO APPROVE OR DISAPPROVE A NEW PORTFOLIO MANAGEMENT AGREEMENT WITH
OPPENHEIMER CAPITAL WHICH WILL REPLACE THE CURRENT PORTFOLIO
MANAGEMENT AGREEMENT WHICH WILL TERMINATE UPON CHANGE IN
CONTROL OF OPPENHEIMER CAPITAL UPON ACQUISITION BY ALLIANZ AG.
Background
The Fund allocates its portfolio assets on an approximately equal basis
among a number of independent investment management firms ("Portfolio Managers")
recommended by Liberty Asset Management, currently three in number, 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. The
Portfolio Managers recommended by Liberty Asset Management represent a blending
of different styles which, in its opinion, is appropriate for the Fund's
investment objective. Liberty Asset Management continuously analyzes and
evaluates the investment performance and portfolios of the Fund's Portfolio
Managers and from time to time recommends changes in the Portfolio Managers.
One of the Fund's Portfolio Managers, Oppenheimer Capital, will undergo
a change of control as a result of the consummation of the Transaction described
below under Description of the Transaction, resulting in the automatic
termination of its Portfolio Management Agreement dated August 1, 1998. After
reviewing the proposed change of control transactions and considering Liberty
Asset Management's opinion that they would not have an adverse effect on the
nature or quality of the services being provided by Oppenheimer Capital, the
Board of Directors on December 15, 1999 approved a new portfolio management
agreement at the same fee and on substantially identical other terms and
conditions as the prior agreement, and the new agreement will be executed
effective with the closing of the change in control transactions.
Under the terms of an exemptive order issued to the Fund and Liberty
Asset Management by the Securities and Exchange Commission, the Fund may, in
advance of shareholder approval, enter into a new portfolio management agreement
with a Portfolio Manager or its successor following a change in control of the
Portfolio Manager, provided that the new agreement is at a fee no higher than,
and is on other terms and conditions substantially similar to, the Fund's
agreements with its other Portfolio Managers, and that its continuance is
subject to approval by shareholders at the Fund's next annual meeting.
Accordingly, the Fund's new portfolio management agreement with Oppenheimer
Capital is being submitted for shareholder approval at the Meeting. A copy of
the Portfolio Management Agreement is attached to this proxy statement as
Appendix D.
The Fund's initial portfolio management agreement with Oppenheimer Capital was
approved by shareholders on May 27,1994 incident to Liberty Asset Management's
assumption from the Fund's prior investment adviser, Growth Stock Outlook, Inc.,
of administrative responsibilities for the Fund and investment responsibilities
for 20% of its portfolio. Following shareholder approval on __________, the Fund
entered into a new portfolio management agreement with Oppenheimer Capital on
November 6, 1995, when Liberty Asset Management assumed investment
responsibilities for the balance of the Fund's portfolio. Following shareholder
approval on April 22, 1998, the Fund entered into a new portfolio management
agreement with Oppenheimer Capital on August 1, 1998, following a change in
control. For the fiscal year ended December 31, 1999, Oppenheimer Capital
received $______________ for its portfolio management services to the Fund. Mr.
John Lindenthal, Managing Director of Oppenheimer Capital, has managed the
portion of the Fund's portfolio allocated to Oppenheimer Capital since its
initial appointment as a Fund Portfolio Manager in May, 1994, and continues to
do so.
See Appendix E for information regarding other registered investment
companies with investment objectives similar to the Fund's for which a
subsidiary of Oppenheimer Capital provides investment advisory or portfolio
management services.
Description of the Transaction. On October 31, 1999, PIMCO Advisors
L.P. ("PIMCO Advisors"), its two general partners, PIMCO Advisors Holdings L.P.
("PAH") and PIMCO Partners G.P. ("Partners GP"), certain of their affiliates,
Allianz of America, Inc. ("Allianz of America") and certain other parties named
therein entered into an Implementation and Merger Agreement (the "Merger
Agreement") pursuant to which Allianz of America will acquire majority ownership
of PIMCO Advisors.
As a result of the transactions contemplated by the Merger Agreement,
Allianz of America will control PIMCO Advisors, having acquired approximately
70% of the outstanding partnership interests in PIMCO Advisors (together, the
"Transaction"), while the remainder will continue to be held indirectly by
Pacific Life. The Transaction is expected to be completed by the end of the
first quarter of 2000, although there is no assurance that the Transaction will
be completed.
Oppenheimer Capital, an indirect wholly-owned subsidiary of PIMCO
Advisors, serves as investment manager of the Fund. Openheimer Capital will
undergo a change of control as a result of the consummation of the Transaction,
resulting in the automatic termination of its current Portfolio Management
Agreement with the Fund (the "Existing Portfolio Management Agreement").
Following completion of the Transaction, it is expected that Oppenheimer Capital
will continue to serve as a portfolio manager of the Fund. Therefore, in
connection with the Transaction and as required by the Investment Company Act of
1940, as amended (the "1940 Act"), shareholders of the Fund are being asked to
approve a Portfolio Management Agreement between the Fund and Oppenheimer
Capital which is substantially identical to the Existing Portfolio Management
Agreement (the "New Portfolio Management Agreement"). If the Transaction is not
completed for any reason, the agreement will terminate and Liberty Asset
Management will cause the portfolio assets under management by Oppenheimer
Capital to be invested in money market instruments or other cash equivalent
holdings or derivative investments pending the reappointment of Oppenheimer
Capital or the appointment of a new Portfolio Manager.
Post-Transaction Structure and Operations. Upon completion of the
Transaction, PIMCO Advisors and its subsidiaries, including Oppenheimer Capital,
will be controlled by Allianz of America. Allianz of America is a holding
company that owns several insurance and financial service companies and is a
subsidiary of Allianz AG which, together with its subsidiaries, comprise the
world's second largest insurance group as measured by premium income. Allianz of
America will control PIMCO Advisors through its managing member interest in
PacPartners LLC, which will be the sole general partner of PIMCO Advisors
following the Transaction. While Allianz of America will control PacPartners
LLC, Pacific Life will hold a portion of its continuing interest in PIMCO
Advisors through an interest in PacPartners LLC. Allianz of America, through
subsidiaries, will be the managing member of PacPartners LLC and will have full
authority and control over all actions taken by PacPartners LLC as the general
partner of PIMCO Advisors, provided that Pacific Life's consent is required for
certain extraordinary actions.
Operationally, PIMCO Advisors is expected to become a unit of Allianz
Asset Management ("AAM"), the division of Allianz that coordinates global
Allianz asset management activities. PIMCO Advisors and its subsidiaries are
currently expected to continue to operate in the United States under their
existing names.
Description of Allianz and Its Affiliates. Allianz AG, the parent of
Allianz of America, is a publicly traded German Aktiengesellschaft and which,
together with its subsidiaries, comprise the world's second largest insurance
group as measured by premium income. Allianz AG is a leading provider of
financial services, particularly in Europe, and is represented in 68 countries
world-wide through subsidiaries, branch and representative offices, and other
affiliated entities. The Allianz group currently has assets under management of
more than $390 billion, and in its last fiscal year wrote approximately $50
billion in gross insurance premiums. After completion of the Transaction, PIMCO
Advisors and the Alliance group combined will have over $650 billion in assets
under management. Allianz AG's address is: Koniginstrasse 28, D-80802, Munich,
Germany.
Affiliates of Allianz AG currently include Dresdner Bank AG, Deutsche
Bank AG, Munich Re, and HypoVereinsbank. These entities, as well as certain
broker-dealers that might be deemed to be controlled by or affiliated with these
entities, such as Bankers Trust Company, BT Alex. Brown Incorporated, Deutsche
Bank Securities, Inc. and Dresdner Kleinwort Benson North America LLC, may be
considered as "Affiliated Brokers". Once the Transaction is completed, absent an
SEC exemption or other relief, the Fund would generally be precluded from
effecting principal transactions with the Affiliated Brokers, and its ability to
purchase securities from underwriting syndicates including an Affiliated Broker
or to utilize the Affiliated Brokers for agency transactions would be subject to
restrictions. Oppenheimer Capital does not believe that applicable restrictions
on transactions with the Affiliated Brokers described above will materially
adversely affect its ability, post-closing, to provide services to the Fund, the
Fund's ability to take advantage of market opportunities, or the Fund's overall
performance.
Section 15(f) of the 1940 Act. Section 15(f) provides a non-exclusive
safe harbor for an investment adviser or any affiliated persons to receive any
amount or benefit in connection with a change of control of the investment
adviser to an investment company as long as two conditions are satisfied. First,
an "unfair burden" must not be imposed on investment company clients of the
adviser as a result of the transaction, or any express or implied terms,
conditions or understandings applicable to the transaction. The term "unfair
burden" (as defined in the 1940 Act) includes any arrangement during the
two-year period after the transaction whereby the investment advisor (or
predecessor or successor advisor), or any "interested person" (as defined in the
1940 Act) (an "Interested Person") of any such adviser, receives or is entitled
to receive any compensation, directly or indirectly, from such an investment
company or its security holders (other than fees for bona fide investment
advisory or other services) or from any other person in connection with the
purchase or sale of securities or other property to, from or on behalf of such
investment company. The Board of Directors of the Fund has been advised that
neither PIMCO Advisors nor Oppenheimer Capital is aware of any circumstances
arising from the Transaction that might result in an unfair burden being imposed
on the Fund. Allianz and each of the other parties to the Agreement have agreed
to use their reasonable best efforts to assure compliance with Section 15(f) as
it applies to the Transaction during such two-year period.
The second condition of Section 15(f) is that during the three-year
period after the transaction, at least 75% of each such investment company's
board of directors must not be Interested Persons of the investment advisor (or
predecessor or successor advisor). The Fund has been advised by LAMCO that an
unfair burden will not be placed on the Fund as at least 75% of the Fund's Board
of Directors are not "Interested Persons" (as defined in the 1940 Act).
Moreover, Allianz has agreed with PIMCO Advisors that it will use its reasonable
best efforts to comply with such 75% requirement during such three-year period
through one or more intermediaries.
Required Vote
Approval of the new portfolio management agreement with Oppenheimer
Capital requires the affirmative vote of a "majority of the outstanding voting
securities" of the Fund which, under the Investment Company Act of 1940, means
the affirmative vote of the lesser of (a) 67% or more of the shares of the Fund
present at the Meeting or represented by proxy if the holders of more than 50%
of the outstanding shares are present or represented by proxy, or (b) more than
50% of the outstanding shares.
The Board of Directors unanimously recommends that the shareholders vote FOR
approval of the portfolio management agreement with Oppenheimer Capital.
PROPOSAL 6. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
By vote of the Board of Directors, including the vote of the
non-interested Directors, the firm of PricewaterhouseCoopers LLP has been
selected as independent auditors for the Fund for the year ending December 31,
2000. Such selection is being submitted to the shareholders for ratification.
The employment of PricewaterhouseCoopers LLP is conditioned on the right of the
Fund by majority vote of its shareholders to terminate such employment. Such
firm has acted as independent auditors for the Fund since September 30, 1999 and
PricewaterhouseCoopers LLP is completing the Fund's December 31, 1999 audit.
Prior to September 30, 1999, KPMG Peat Marwick LLP, acted as independent
auditors for the Fund since its commencement of operations in 1986.
The services provided by the Fund 's independent auditors include
examination of its annual financial statements, assistance and consultation in
connection with Securities and Exchange Commission filings, and review of the
Fund 's annual federal income tax returns. Representatives of
PricewaterhouseCoopers LLP are expected to be present at the Meeting, will be
given the opportunity to make a statement if they should so desire and will be
available to respond to appropriate questions.
OTHER BUSINESS
The Board of Directors knows of no other business to be brought before
the Meeting. However, if any other matters properly come before the Meeting, it
is the intention of the Board that proxies that do not contain specific
instructions to the contrary will be voted on such matters in accordance with
the judgment of the persons designated therein as proxies.
MANAGEMENT
Liberty Asset Management, 600 Atlantic Avenue, Boston, Massachusetts
02210, is the Fund's manager. Liberty Asset Management is an indirect
wholly-owned subsidiary of Liberty Financial Companies, Inc. ("Liberty
Financial"), the address of which is also 600 Atlantic Avenue, Boston,
Massachusetts 02210. Approximately 72% of the common stock of Liberty Financial
is owned through subsidiaries by Liberty Mutual Insurance Company, Boston,
Massachusetts, and the balance is held by the public and listed on the New York
Stock Exchange. Liberty Asset Management's Chief Executive Officer is William R.
Parmentier (see PROPOSAL 2 - Officers), and its Board of Directors is comprised
of William R. Parmentier, President and Chief Investment Officer, Liberty Asset
Management and President of the Fund, John V. Carberry, Director and Chairman of
the Board of the Fund, and Lindsay Cook, an officer of Liberty Financial.
Pursuant to its fund management agreement with the Fund, Liberty Asset
Management has overall supervisory responsibility for the general management and
investment of the Fund 's securities portfolio, subject to the Fund 's
investment objective and policies and any directions of the Directors. Liberty
Asset Management recommends to the Board of Directors multiple independent
investment management firms (currently three in number) for appointment as
Portfolio Managers of the Fund, each of which employs a different investment
style, and from time to time rebalances the Fund's portfolio among the Portfolio
Managers so as to maintain an approximately equal allocation of the portfolio
among the investment styles practiced by them throughout all market cycles.
Liberty Asset Management continuously analyses and evaluates the investment
performance and portfolios of the Fund's Portfolio Managers and from time to
time recommends changes in the Portfolio Managers.
Liberty Asset Management is also responsible under the fund management
agreement for the provision of administrative services to the Fund, including
the provision of office space, shareholder and broker-dealer communications,
compensation of all officers and employees of the Fund who are officers or
employees of Liberty Asset Management or its affiliates, and supervision of
transfer agency, dividend disbursing, custodial and other services provided by
others. Certain of Liberty Asset Management's administrative responsibilities to
the Fund have been delegated to its affiliate, Colonial Management Associates,
Inc., One Financial Center, Boston, Massachusetts 02111.
Under the Fund's portfolio management agreements, each Portfolio
Manager has discretionary investment authority with respect to the portion of
the Fund's assets allocated to it by Liberty Asset Management from time to time,
subject to the Fund's investment objective and policies, to the supervision and
control of the Directors, and to instructions from Liberty Asset Management. The
Portfolio Managers are required to use their best professional judgment in
making timely investment decisions for the Fund. The Portfolio Managers,
however, will not be liable for actions taken or omitted in good faith and
believed to be within the authority conferred by their portfolio management
agreements and without willful misfeasance, bad faith or gross negligence.
The names and addresses of the Fund's current Portfolio Managers are as
follows:
Oppenheimer Capital William Blair & Company, L.L.C. M.A. Weatherbie &
Oppenheimer Tower 222 West Adams Street Co., Inc.
World Financial Center Chicago, IL 60606 265 Franklin Street
New York, NY 10281 Boston, MA 02110
Portfolio Transactions and Brokerage
Each of the Fund's Portfolio Managers has discretion to select brokers
and dealers to execute portfolio transactions initiated by the Portfolio Manager
for the portion of the Fund's portfolio assets allocated to it, and to select
the markets in which such transactions are to be executed. The portfolio
management agreements with the Fund provide, in substance, that 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 the Fund.
The Portfolio Managers are authorized to cause the Fund 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 the
Fund) 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.
In addition, under their portfolio management agreements with the Fund
and Liberty Asset Management, the Portfolio Managers, in selecting brokers or
dealers to execute portfolio transactions for the Fund, are authorized to
consider (and Liberty Asset Management may request them to consider) brokers or
dealers that provide to Liberty Asset Management, directly or through third
parties, research products or services such as research reports; subscriptions
to financial publications and research compilations; portfolio analyses;
economic reports; compilations of securities prices, earnings, dividends and
other data; computer hardware and software, quotation equipment and services
used for research; and services of economic or other consultants. The
commissions paid on such transactions may exceed the amount of commission
another broker would have charged for effecting that transaction. Research
products and services made available to Liberty Asset Management include
performance and other qualitative and quantitative data relating to investment
managers in general and the Fund's Portfolio Managers in particular; data
relating to the historic performance of categories of securities associated with
particular investment styles; mutual fund portfolio and performance data; data
relating to portfolio manager changes by pension plan fiduciaries; and related
computer hardware and software, all of which are used by Liberty Asset
Management in connection with its selection and monitoring of Portfolio
Managers, the assembly of an appropriate mix of investment styles, and the
determination of overall portfolio strategies. These research products and
services may also be used by Liberty Asset Management in connection with its
management of Liberty All-Star Equity Fund, Liberty All-Star Growth and Income
Fund and other multi-managed clients of Liberty Asset Management. In instances
where Liberty Asset Management receives from or through brokers and dealers
products or services which are used both for research purposes and for
administrative or other non-research purposes, Liberty Asset Management 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.
Liberty Asset Management from time to time reaches understandings with
each of the Fund's Portfolio Managers as to the amount of the Fund's 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 Liberty Asset Management and the commissions to be charged to the
Fund in connection therewith. These amounts may differ among the Portfolio
Managers based on the nature of the market for the types of securities managed
by them and other factors.
Although the Fund does not permit a Portfolio Manager to act or have a
broker-dealer 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 accordance with the Fund's
procedures adopted pursuant to Rule 17e-1 under the Investment Company Act.
During 1999 no Fund portfolio transactions were placed with any Portfolio
Manager or its broker-dealer affiliate.
The Fund has applied to the Securities and Exchange Commission for
exemptive relief from Sections 10(f), 17(a) and 17(e) and Rule 17e-1 under the
Investment Company Act of 1940. If exemptive relief is granted, it will permit
(1) broker-dealers which are, or are affiliated with, Portfolio Managers of the
Fund to engage in principal transactions with and brokerage services to
portion(s) of the Fund advised by another Portfolio Manager and (2) the Fund to
purchase securities either directly from a principal underwriter which is an
affilate of a Portfolio Manager or from an underwriting syndicate of which a
principal underwriter is affiliated with a Portfolio Manager of the Fund. It is
anticipated that the requested relief could be granted by the Securities and
Exchange Commission during the period of time this proxy is pending.
INFORMATION ABOUT THE MEETING
All proxies solicited by the Board of Directors which are properly
executed and returned in time to be voted at the Meeting will be voted at the
Meeting in accordance with the instructions thereon. If no specification is made
on a proxy, it will be voted AGAINST conversion of the Fund to an open-end
investment company referred to under PROPOSAL 1, FOR the approval of a
Distribution Plan referred to under PROPOSAL 2, FOR the election as Director of
the nominees named under PROPOSAL 3, FOR approval of the Fund's Portfolio
Management Agreement with M.A. Weatherbie & Co., Inc. referred to under PROPOSAL
4, FOR the new Portfolio Management Agreement to be effective upon change in
control of Oppenheimer Capital upon acquisition by Allianz AG referred to under
PROPOSAL 5, and FOR the ratification of the Board's selection of the Fund's
independent auditors for 2000 referred to under PROPOSAL 6. Any proxy may be
revoked at any time prior to its use by written notification received by the
Fund's Secretary, by the execution of a later-dated proxy, or by attending the
Meeting and voting in person.
Each of the following proposals requires the affirmative vote of a
majority of the shares of Common Stock entitled to vote at the Meeting, as
defined under PROPOSAL 1: (a) approval of the conversion of the Fund to an
open-end investment company, (b) approval of the Fund's Portfolio Management
Agreement with M.A. Weatherbie & Co., Inc., and (c) approval of the new
Portfolio Management Agreement to be effective upon change in control of
Oppenheimer Capital. The election of Directors is by plurality of votes cast at
the Meeting. Ratification of the selection of the Fund 's independent auditors
requires the affirmative vote of a majority of the votes cast at the Meeting, a
quorum being present. Under Maryland law, abstentions do not constitute a vote
"for" or "against" a matter and will be disregarded in determining the "votes
cast", but the shares represented thereby will be considered to be present for
the purposes of determining the presence of a quorum. Accordingly, an abstention
on the proposals relating to the conversion of the Fund to an open-end fund and
the new portfolio management agreements will have the same effect as a vote
against the proposals, and the withholding of a vote on the election of
Directors or an abstention on the proposal to ratify the selection of the Fund's
independent auditors will have no effect on such proposals. Only shareholders of
record may vote.
Broker-dealer firms holding Fund shares in "street name" for the
benefit of their customers and clients will request the instructions of such
customers and clients on how to vote their shares on each proposal before the
Meeting. The Fund understands that, under the rules of the New York Stock
Exchange, if no instructions have been received prior to the date specified in
such broker-dealer firm's request for voting instructions, the broker-dealer
firms may grant authority to the proxies designated by the Fund to vote for the
election of the Directors, for approval of the portfolio management agreements,
and for the ratification of the selection of the Fund 's independent auditors.
All shareholders of record on February 1, 2000 are entitled to one vote
for each share held. As of that date 16,302,347 shares of common stock of the
Fund were issued and outstanding. To the knowledge of the Fund, on the record
date for the Meeting no shareholder owned beneficially, as defined by Rule 13d-3
under the Exchange Act, more than 5% of the outstanding shares of the Fund.
In the event a quorum is present at the Meeting but sufficient votes to
approve any of the above proposals have not been received, the persons named as
proxies may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. A shareholder vote may be taken on one or more of the
proposals referred to above prior to such adjournment if sufficient votes have
been received and it is otherwise appropriate. Any such adjournment will require
the affirmative vote of a majority of those shares present at the Meeting in
person or by proxy. If a quorum is present, the persons named as proxies will
vote those proxies which they are entitled to vote FOR any such proposal in
favor of such adjournment and will vote those proxies required to be voted for
rejection of such proposal against any such adjournment.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Fund 's Directors and
officers and persons who own more than ten percent of the Fund's outstanding
shares and certain officers and directors of Liberty Asset Management
(collectively, "Section 16 reporting persons"), to file with the Securities and
Exchange Commission ("SEC") initial reports of ownership and reports of changes
in ownership of Fund shares. Section 16 reporting persons are required by SEC
regulations to furnish the Fund with copies of all Section 16(a) forms they
file. To the Fund 's knowledge, based solely on a review of the copies of such
reports furnished to the Fund and on representations made, all Section 16
reporting persons complied with all Section 16(a) filing requirements applicable
to them.
SUBMISSION OF CERTAIN SHAREHOLDER PROPOSALS
Under the proxy rules of the Securities and Exchange Commission,
shareholder proposals meeting tests contained in those rules may, under certain
conditions, be included in the Fund 's proxy material for a particular annual
shareholders meeting. Under the foregoing proxy rules, proposals submitted for
inclusion in the proxy material for the Annual Meeting for the year 2001 must be
received by the Fund on or before October 26, 2000. The fact that the Fund
receives a shareholder proposal in a timely manner does not ensure its inclusion
in its proxy material, since there are other requirements in the proxy rules
relating to such inclusion.
February 28, 2000
<PAGE>
Appendix A
DISTRIBUTION AGREEMENT
Liberty All-Star Growth Fund, Inc. (Fund) and Liberty Funds
Distributor, Inc. (LFDI), a Massachusetts corporation, agree effective
[DATE]:
1. APPOINTMENT OF LFDI. The Fund appoints LFDI as the principal
underwriter and distributor of Shares of Fund.
2. SALE OF SHARES.
a. LFDI's Right to Purchase Shares From the Fund. LFDI, acting as
principal for its own account and not as agent for theFund, shall have
the right to purchase Shares and shall sell Shares in accordance with
the Fund's prospectus on a "best efforts" basis. LFDI shall purchase
Shares, at a price equal to the net asset value, only as needed to fill
orders. LFDI will receive all sales charges. LFDI will notify the Fund
at the end of each business day of the Shares purchased.
b. Appointment of Agent for Certain Sales of Shares at Net Asset Value.
The Fund may at any time designate its shareholder servicing, transfer
and dividend disbursing agent as its agent to accept orders for (i)
Class A Shares at net asset value or (ii) Class Z Shares, in each case
from individuals or entities that are entitled to purchase such shares
as provided in the Fund's prospectus, and to issue Shares directly to
such purchasers.
c. Refusal to Sell Shares; Direct Issue of Shares. The Fund may at any
time (i) refuse to sell Shares hereunder or (ii) issue Shares directly
to shareholders as a stock split or dividend.
3. REDEMPTION OF SHARES. The Fund will redeem in accordance with its
prospectus all Shares tendered by LFDI pursuant to shareholder redemption
requests. LFDI will notify the Fund at the end of each business day of the
Shares tendered. The Fund will impose a temporary redemption fee of 2.5% of the
redemption proceeds on all shareholder redemption requests which are tendered by
LFDI during the first year of implementation of this Agreement.
4. COMPLIANCE. LFDI will comply with applicable provisions of the
prospectus of the Fund and with applicable laws and rules relating to the sale
of Shares and indemnifies the Fund for any damage or expense from unlawful acts
by LFDI and persons acting under its direction or authority.
5. EXPENSES. The Fund will pay all expenses associated with:
a. the registration and qualification of Shares for sale;
b. shareholder meetings and proxy solicitation;
c. Share certificates;
d. communications to shareholders; and
e. taxes payable upon the issuance of Shares to LFDI.
In connection with the distribution of shares of the Fund, LFDI will be
entitled to receive payments pursuant to any Distribution Plan and related
agreement from time to time in effect between any Trust and LFDI with respect to
a Fund or any particular class of shares of a Fund, (b) any contingent deferred
sales charges applicable to the redemption of shares of a Fund or of any
particular class of shares of a Fund, determined in the manner set forth in the
then current Prospectus and Statement of Additional Information of that Fund,
and (c) any applicable front-end sales charges applicable to the sale of shares
of a Fund or of any particular class of shares of a Fund, less any applicable
dealer discount.
LFDI will pay all expenses associated with advertising and sales
literature including those of printing and distributing prospectuses and
shareholder reports, proxy materials and other shareholder communications used
as sales literature.
6. CONTINUATION, AMENDMENT OR TERMINATION.
A -This Agreement (a) supersedes and replaces any contract or agreement
relating to the subject matter hereof in effect prior to the date hereof, (b)
shall continue in effect only so long as specifically approved at least annually
by the Directors or shareholders of the Fund and (c) may be amended at any time
by written agreement of the parties, each in accordance with the Act.
B - This Agreement (a) shall terminate immediately upon the effective date
of any later dated agreement relating to the subject matter hereof, and (b) may
be terminated upon 60 days notice without penalty by a vote of the Directors or
by LFDI or otherwise in accordance with the Act and will terminate immediately
in the event of assignment (as defined under the Act). Upon termination the
obligations of the parties under this Agreement shall cease except for
unfulfilled obligations and liabilities arising prior to termination. All
notices shall be in writing and delivered to the office of the other party.
7. AGREEMENT AND DECLARATION OF TRUST. A copy of the document establishing
the Fund is filed with the Secretary of The Commonwealth of Massachusetts. As to
the Fund, this Agreement is executed by officers not as individuals and is not
binding upon any of the Directors, officers or shareholders of the Fund
individually but only upon the assets of the Fund.
Agreed:
LIBERTY ALL-STAR GROWTH FUND, INC. LIBERTY FUNDS DISTRIBUTOR, INC.
By: By:
<PAGE>
12B1- PLAN IMPLEMENTING AGREEMENT
Liberty All-Star Growth Fund, Inc. and Liberty Funds Distributor, Inc.
(LFDI), a Massachusetts corporation, agree effective [DATE]:
1. 12B-1 PLAN. The Fund has adopted a so-called "Rule 12b-1 Plan" (the
"Plan") pursuant to Rule 12b-1 (the "Rule") under the Investment Company Act of
1940 (the "Act"). Under the Rule, the Fund may, pursuant to the Plan, pay LFDI a
specified portion of its assets to be used for the purposes specified in its
Plan. The Plan shall continue in effect with respect to a Class of Shares only
so long as specifically approved for that Class at least annually as provided in
the Rule. The Plan may not be amended to increase materially the service fee or
distribution fee with respect to a Class of Shares without such shareholder
approval as is required by the Rule or any applicable orders of the Securities
and Exchange Commission, and all material amendments of the Plan must be
approved in the manner described in the Rule. The Plan may be terminated with
respect to a Class of Shares at any time as provided in the Rule without payment
of any penalty.
2. PAYMENTS, EXPENDITURES AND REPORTS.
A. The Fund shall pay LFDI the amount then due LFDI under a Plan on the
20th day of each month, or, if such day is not a business day, the next business
day thereafter, during the term of this Agreement.
B. LFDI shall expend the amounts paid to it by the Fund under a Plan in
its discretion, so long as such expenditures are consistent with the Rule, the
Plan, and any instructions LFDI may receive from the Directors of the Fund.
C. LFDI shall make all reports required under the Act, the Rule or a
Plan to the Directors of the Fund, as provided in the Act, the Rule and any Plan
or as requested by the Directors.
3. CONTINUATION; AMENDMENT; TERMINATION; NOTICE.
A. This Agreement (i) supersedes and replaces any contract or agreement
relating to the subject matter hereof in effect prior to the date hereof, (ii)
shall continue in effect as to the Fund only so long as specifically approved at
least annually by the Directorsor shareholders of the Fund and (iii) may be
amended at any time by written agreement of the parties, each in accordance with
the Act and the Rule.
B. This Agreement (i) shall terminate immediately upon the effective
date of any later dated agreement relating to the subject matter hereof, and
(ii) may be terminated upon 60 days' notice without penalty by a vote of the
Directors or by LFDI or otherwise in accordance with the Act, and (iii) will
terminate immediately in the event of its assignment (as defined in the Act).
Upon termination the obligations of the parties under this Agreement shall cease
except for unfulfilled obligations and liabilities arising prior to termination.
C. All notices required under this Agreement shall be in writing and
delivered to the office of the other party.
<PAGE>
4. AGREEMENT AND DECLARATION OF TRUST. A copy of the document establishing
the Fund is filed with the State of Maryland. As to the Fund this Agreement is
executed by officers not as individuals and is not binding upon any of the
Directors, officers or shareholders of the Fund individually but only upon the
assets of the Fund.
Agreed:
LIBERTY ALL-STAR GROWTH FUND, INC. LIBERTY FUNDS DISTRIBUTOR, INC.
By: By:
<PAGE>
APPENDIX B
Information about M.A. Weatherbie & Co., Inc.
M.A. Weatherbie & Co., Inc. ("Weatherbie") is 100 percent employee
owned and operates with a partnership philosophy. Weatherbie's clients are
primarily institutional, including large pension funds and university
endowments. Weatherbie manages approximately [percent] of the Fund's portfolio.
Weatherbie receives from Liberty Asset Management a portfolio management fee at
the annual rate of 0.40% of the average weekly net assets of the Fund's
investment portfolio managed by Weatherbie, and 0.36% of the Fund's average
weekly net assets in excess of $300 million.
<PAGE>
APPENDIX C
PORTFOLIO MANAGEMENT AGREEMENT
May 1, 1999
M.A. Weatherbie & Co., Inc.
265 Franklin Street
Boston, MA 02110
Re: Portfolio Management Agreement
Ladies and Gentlemen:
Liberty All-Star Growth Fund, Inc. (the "Fund") is a diversified
closed-end investment company registered under the Investment Company Act of
1940 (the "Act"), and is subject to the rules and regulations promulgated
thereunder.
Liberty Asset Management Company (the "Fund Manager") evaluates and
recommends portfolio managers for the assets of the Fund, and is responsible for
the day-to-day administration of the Fund.
1. Employment as a Portfolio Manager. The Fund being duly authorized
hereby employs M.A. Weatherbie & Co., Inc. (the "Portfolio Manager") as a
discretionary portfolio manager, on the terms and conditions set forth herein,
of that portion of the Fund's assets which the Fund Manager determines to assign
to the Portfolio Manager (those assets being referred to as the "Portfolio
Manager Account"). The Fund Manager may, from time to time, allocate and
reallocate the Fund's assets among the Portfolio Manager and the other portfolio
managers of the Fund's assets.
2. Acceptance of Employment; Standard of Performance. The Portfolio
Manager accepts its employment as a discretionary portfolio manager and agrees
to use its best professional judgment to make timely investment decisions for
the Portfolio Manager Account in accordance with the provisions of this
Agreement.
3. Portfolio Management Services of Portfolio Manager. In providing
portfolio management services to the Portfolio Manager Account, the Portfolio
Manager shall be subject to the investment objectives, policies and restrictions
of the Fund as set forth in its current Registration Statement under the Act, as
the same may be modified from time to time (the "Registration Statement"), and
the investment restrictions set forth in the Act and the Rules thereunder (as
and to the extent set forth in the Registration Statement or in other
documentation furnished to the Portfolio Manager by the Fund or the Fund
Manager), to the supervision and control of the Board of Directors of the Fund,
and to instructions from the Fund Manager. The Portfolio Manager shall not,
without the prior approval of the Fund or the Fund Manager, effect any
transactions which would cause the Portfolio Manager Account, treated as a
separate fund, to be out of compliance with any of such restrictions or
policies.
4. Transaction Procedures. All portfolio transactions for the
Portfolio Manager Account will be consummated by payment to or delivery by the
custodian of the Fund (the "Custodian"), or such depositories or agents as may
be designated by the Custodian in writing, as custodian for the Fund, of all
cash and/or securities due to or from the Portfolio Manager Account, and the
Portfolio Manager shall not have possession or custody thereof or any
responsibility or liability with respect to such custody. The Portfolio Manager
shall advise and confirm in writing to the Custodian all investment orders for
the Portfolio Manager Account placed by it with brokers and dealers at the time
and in the manner set forth in Schedule A hereto (as amended from time to time
by the Fund Manager). The Fund shall issue to the Custodian such instructions as
may be appropriate in connection with the settlement of any transaction
initiated by the Portfolio manager. The Fund shall be responsible for all
custodial arrangements and the payment of all custodial charges and fees, and,
upon giving proper instructions to the Custodian, the Portfolio Manager shall
have no responsibility or liability with respect to custodial arrangements or
the acts, omissions or other conduct of the Custodian.
5. Allocation of Brokerage. The Portfolio Manager shall have authority
and discretion to select brokers and dealers to execute portfolio transactions
initiated by the Portfolio Manager for the Portfolio Manager Account, and to
select the markets on or in which the transaction will be executed.
A. In doing so, the Portfolio Manager's primary responsibility
shall be to seek to obtain best net price and execution for the Fund.
However, this responsibility shall not obligate the Portfolio Manager
to solicit competitive bids for each transaction or to seek the lowest
available commission cost to the Fund, so long as the Portfolio Manager
reasonably believes that the broker or dealer selected by it can be
expected to obtain a "best execution" market price on the particular
transaction and determines in good faith that the commission cost is
reasonable in relation to the value of the brokerage and research
services (as defined in Section 28(e)(3) of the Securities Exchange Act
of 1934) provided by such broker or dealer to the Portfolio Manager
viewed in terms of either that particular transaction or of the
Portfolio Manager's overall responsibilities with respect to its
clients, including the Fund, as to which the Portfolio Manager
exercises investment discretion, notwithstanding that the Fund may not
be the direct or exclusive beneficiary of any such services or that
another broker may be willing to charge the Fund a lower commission on
the particular transaction.
B. Subject to the requirements of paragraph A above, the Fund
Manager shall have the right to request that transactions giving rise
to brokerage commissions, in an amount to be agreed upon by the Fund
Manager and the Portfolio Manager, shall be executed by brokers and
dealers that provide brokerage or research services to the Fund
Manager, or as to which an on-going relationship will be of value to
the Fund in the management of its assets, which services and
relationship may, but need not, be of direct benefit to the Portfolio
Manager Account.
C. The Portfolio Manager shall not execute any portfolio
transactions for the Portfolio Manager Account with a broker or dealer
which is an "affiliated person" (as defined in the Act) of the Fund,
the Portfolio Manager or any other Portfolio Manager of the Fund
without the prior written approval of the Fund. The Fund Manager will
provide the Portfolio Manager with a list of brokers and dealers which
are "affiliated persons" of the Fund or its Portfolio Managers.
6. Proxies. The Fund will vote or direct the voting of all proxies
solicited by or with respect to the issuers of securities in which assets of the
Portfolio Manager Account may be invested from time to time. At the request of
the Fund, the Portfolio Manager shall provide the Fund with its recommendations
as to the voting of such proxies.
7. Fees for Services. The compensation of the Portfolio Manager for its
services under this Agreement shall be calculated and paid by the Fund Manager
in accordance with the attached Schedule C. Pursuant to the Fund Management
Agreement between the Fund and the Fund Manager, the Fund Manager is solely
responsible for the payment of fees to the Portfolio Manager from the fund
management fees paid to it by the Fund, and the Portfolio Manager agrees to seek
payment of its fees solely from the Fund Manager.
8. Other Investment Activities of Portfolio Manager. The Fund
acknowledges that the Portfolio Manager or one or more of its affiliates has
investment responsibilities, renders investment advice to and performs other
investment advisory services for other individuals or entities ("Client
Accounts"), and that the Portfolio Manager, its affiliates or any of its or
their directors, members, officers, agents or employees may buy, sell or trade
in any securities for its or their respective accounts ("Affiliated Accounts").
Subject to the provisions of paragraph 2 hereof, the Fund agrees that the
Portfolio Manager or its affiliates may give advice or exercise investment
responsibility and take such other action with respect to other Client Accounts
and Affiliated Accounts which may differ from the advice given or the timing or
nature of action taken with respect to the Portfolio Manager Account, provided
that the Portfolio Manager acts in good faith, and provided further, that it is
the Portfolio Manager's policy to allocate, within its reasonable discretion,
investment opportunities to the Portfolio Manager Account over a period of time
on a fair and equitable basis relative to the Client Accounts and the Affiliated
Accounts, taking into account the cash position and the investment objectives
and policies of the Fund and any specific investment restrictions applicable
thereto. The Fund acknowledges that one or more Client Accounts and Affiliated
Accounts may at any time hold, acquire, increase, decrease, dispose of or
otherwise deal with positions in investments in which the Portfolio Manager
Account may have an interest from time to time, whether in transactions which
involve the Portfolio Manager Account or otherwise. The Portfolio Manager shall
have no obligation to acquire for the Portfolio Manager Account a position in
any investment which any Client Account or Affiliated Account may acquire, and
the Fund shall have no first refusal, coinvestment or other rights in respect of
any such investment, either for the Portfolio Manager Account or otherwise.
9. Limitation of Liability. The Portfolio Manager shall not be liable
for any action taken, omitted or suffered to be taken by it in its reasonable
judgment, in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement, or in
accordance with (or in the absence of) specific directions or instructions from
the Fund, provided, however, that such acts or omissions shall not have resulted
from the Portfolio Manager's willful misfeasance, bad faith or gross negligence,
a violation of the standard of care established by and applicable to the
Portfolio Manager in its actions under this Agreement or breach of its duty or
of its obligations hereunder (provided, however, that the foregoing shall not be
construed to protect the Portfolio Manager from liability in violation of
Section 17(i) of the Act).
10. Confidentiality. Subject to the duty of the Portfolio Manager and
the Fund to comply with applicable law, including any demand of any regulatory
or taxing authority having jurisdiction, the parties hereto shall treat as
confidential all information pertaining to the Portfolio Manager Account and the
actions of the Portfolio Manager and the Fund in respect thereof.
11. Assignment. This Agreement shall terminate automatically in the
event of its assignment, as that term is defined in Section 2(a)(4) of the Act.
The Portfolio Manager shall notify the Fund in writing sufficiently in advance
of any proposed change of control, as defined in Section 2(a)(9) of the Act, as
will enable the Fund to consider whether an assignment as defined in Section
2(a)(4) of the Act will occur, and whether to take the steps necessary to enter
into a new contract with the Portfolio Manager.
12. Representations, Warranties and Agreements of the Fund. The Fund
represents, warrants and agrees that:
A. The Portfolio Manager has been duly appointed to provide
investment services to the Portfolio Manager Account as contemplated
hereby.
B. The Fund has delivered to the Portfolio Manager such
instructions governing the investment of the Portfolio Manager Account
as are necessary for the Portfolio Manager to carry out its obligations
under this Agreement.
13. Representations, Warranties and Agreements of the Portfolio
Manager. The Portfolio Manager represents, warrants and agrees that:
A. It is registered as an "Investment Adviser" under the
Investment Advisers Act of 1940 ("Advisers Act").
B. It will maintain, keep current and preserve on behalf of
the Fund, in the manner required or permitted by the Act and the Rules
thereunder, the records identified in Schedule B (as Schedule B may be
amended from time to time by the Fund Manager). The Portfolio Manager
agrees that such records are the property of the Fund, and will be
surrendered to the Fund promptly upon request.
<PAGE>
C. It will adopt a written code of ethics complying with the
requirements of Rule l7j-l under the Act and will provide the Fund with
a copy of the code of ethics and evidence of its adoption. Within 45
days of the end of each year while this Agreement is in effect, an
officer or general partner of the Portfolio Manager shall certify to
the Fund that the Portfolio Manager has complied with the requirements
of Rule l7j-l during the previous year and that there has been no
violation of its code of ethics or, if such a violation has occurred,
that appropriate action was taken in response to such violation. Upon
the written request of the Fund, the Portfolio Manager shall permit the
Fund to examine the reports required to be made by the Portfolio
Manager under Rule l7j-l(c)(l).
D. Upon request, the Portfolio Manager will promptly supply
the Fund with any information concerning the Portfolio Manager and its
stockholders, employees and affiliates which the Fund may reasonably
require in connection with the preparation of its Registration
Statement or amendments thereto, proxy material, reports and other
documents required to be filed under the Act, the Securities Act of
1933, or other applicable securities laws.
14. Amendment. This Agreement may be amended at any time, but (except
for Schedules A and B which may be amended by the Fund Manager acting alone)
only by written agreement among the Portfolio Manager, the Fund Manager and the
Fund, which amendment, other than amendments to Schedules A and B, is subject to
the approval of the Board of Directors and the Shareholders of the Fund as and
to the extent required by the Act.
15. Effective Date; Term. This Agreement shall continue in effect until
July 31, 2000 and shall continue in effect thereafter provided such continuance
is specifically approved at least annually by (i) the Fund's Board of Directors
or (ii) a vote of a "majority" (as defined in the Act) of the Fund's outstanding
voting securities, provided that in either event such continuance is also
approved by a majority of the Board of Directors who are not "interested
persons" (as defined in the Act) of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting on such approval. The
aforesaid requirement that continuance of this Agreement be "specifically
approved at least annually" shall be construed in a manner consistent with the
Act and the Rules and Regulations thereunder.
16. Termination. This Agreement may be terminated by any party, without
penalty, immediately upon written notice to the other parties in the event of a
breach of any provision thereof by a party so notified, or otherwise upon not
less than thirty (30) days' written notice to the Portfolio Manager in the case
of termination by the Fund or the Fund Manager, or ninety (90) days' written
notice to the Fund and the Fund Manager in the case of termination by the
Portfolio Manager, but any such termination shall not affect the status,
obligations or liabilities of any party hereto to the other parties.
17. Applicable Law. To the extent that state law is not preempted by
the provisions of any law of the United States heretofore or hereafter enacted,
as the same may be amended from time to time, this Agreement shall be
administered, construed and enforced according to the laws of the Commonwealth
of Massachusetts.
18. Severability. If any term or condition of this Agreement shall be
invalid or unenforceable to any extent or in any application, then the remainder
of this Agreement, and such term or condition except to such extent or in such
application, shall not be affected thereby, and each and every term and
condition of this Agreement shall be valid and enforced to the fullest extent
and in the broadest application permitted by law.
LIBERTY ALL-STAR GROWTH FUND, INC.
By:
Title: Secretary
LIBERTY ASSET MANAGEMENT COMPANY
By:
Title: President and Chief Executive Officer
ACCEPTED:
M.A. WEATHERBIE & CO., INC.
By:
Title: President
SCHEDULES: A. Operational Procedures For Portfolio Transactions (omitted)
B. Record Keeping Requirements (omitted)
C. Fee Schedule
<PAGE>
SCHEDULE C
PORTFOLIO MANAGER FEE
For services provided to the Portfolio Manager Account, the Fund
Manager will pay to the Portfolio Manager, on or before the fifth business day
of each calendar quarter, a fee for the previous calendar quarter at the rate
of:
.10% (.40% annually) of the Portfolio Manager's Percentage (as defined
below) of the average weekly net assets of the Fund up to and including
$300 million; and
.09% (.36% annually) of the Portfolio Manager's Percentage of the
average weekly net assets of the Fund exceeding $300 million.
Each quarterly payment set forth above shall be based on the average
weekly net assets during such previous calendar quarter. The fee for the period
from the date this Agreement becomes effective to the end of the calendar
quarter in which such effective date occurs will be prorated according to the
proportion that such period bears to the full quarterly period. Upon any
termination of this Agreement before the end of a calendar quarter, the fee for
the part of that calendar quarter during which this Agreement was in effect
shall be prorated according to the proportion that such period bears to the full
quarterly period and will be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to the Portfolio Manager,
the value of the Fund's net assets will be computed at the times and in the
manner specified in the Registration Statement as from time to time in effect.
"Portfolio Manager's Percentage" means the percentage obtained by
dividing the average weekly net assets in the Portfolio Manager Account by the
Fund's average weekly net assets.
<PAGE>
APPENDIX D
PORTFOLIO MANAGEMENT AGREEMENT
[DATE]
Oppenheimer Capital
1 World Financial Center
New York, NY 10281-1098
Re: Portfolio Management Agreement
Ladies and Gentlemen:
Liberty All-Star Growth Fund, Inc. (the "Fund") is a diversified
closed-end investment company registered under the Investment Company Act of
1940 (the "Act"), and is subject to the rules and regulations promulgated
thereunder.
Liberty Asset Management Company (the "Fund Manager") evaluates and
recommends portfolio managers for the assets of the Fund, and is responsible for
the day-to-day administration of the Fund.
1. Employment as a Portfolio Manager. The Fund being duly authorized
hereby employs Oppenheimer Capital (the "Portfolio Manager") as a discretionary
portfolio manager, on the terms and conditions set forth herein, of that portion
of the Fund's assets which the Fund Manager determines to assign to the
Portfolio Manager (those assets being referred to as the "Portfolio Manager
Account"). The Fund Manager may, from time to time, allocate and reallocate the
Fund's assets among the Portfolio Manager and the other portfolio managers of
the Fund's assets.
2. Acceptance of Employment; Standard of Performance. The Portfolio
Manager accepts its employment as a discretionary portfolio manager and agrees
to use its best professional judgment to make timely investment decisions for
the Portfolio Manager Account in accordance with the provisions of this
Agreement.
3. Portfolio Management Services of Portfolio Manager. In providing
portfolio management services to the Portfolio Manager Account, the Portfolio
Manager shall be subject to the investment objectives, policies and restrictions
of the Fund as set forth in its current Registration Statement under the Act, as
the same may be modified from time to time (the "Registration Statement"), and
the investment restrictions set forth in the Act and the Rules thereunder (as
and to the extent set forth in the Registration Statement or in other
documentation furnished to the Portfolio Manager by the Fund or the Fund
Manager), to the supervision and control of the Board of Directors of the Fund,
and to instructions from the Fund Manager. The Portfolio Manager shall not,
without the prior approval of the Fund or the Fund Manager, effect any
transactions which would cause the Portfolio Manager Account, treated as a
separate fund, to be out of compliance with any of such restrictions or
policies.
4. Transaction Procedures. All portfolio transactions for the
Portfolio Manager Account will be consummated by payment to or delivery by the
custodian of the Fund (the "Custodian"), or such depositories or agents as may
be designated by the Custodian in writing, as custodian for the Fund, of all
cash and/or securities due to or from the Portfolio Manager Account, and the
Portfolio Manager shall not have possession or custody thereof or any
responsibility or liability with respect to such custody. The Portfolio Manager
shall advise and confirm in writing to the Custodian all investment orders for
the Portfolio Manager Account placed by it with brokers and dealers at the time
and in the manner set forth in Schedule A hereto (as amended from time to time
by the Fund Manager). The Fund shall issue to the Custodian such instructions as
may be appropriate in connection with the settlement of any transaction
initiated by the Portfolio manager. The Fund shall be responsible for all
custodial arrangements and the payment of all custodial charges and fees, and,
upon giving proper instructions to the Custodian, the Portfolio Manager shall
have no responsibility or liability with respect to custodial arrangements or
the acts, omissions or other conduct of the Custodian.
5. Allocation of Brokerage. The Portfolio Manager shall have authority
and discretion to select brokers and dealers to execute portfolio transactions
initiated by the Portfolio Manager for the Portfolio Manager Account, and to
select the markets on or in which the transaction will be executed.
A. In doing so, the Portfolio Manager's primary responsibility
shall be to seek to obtain best net price and execution for the Fund.
However, this responsibility shall not obligate the Portfolio Manager
to solicit competitive bids for each transaction or to seek the lowest
available commission cost to the Fund, so long as the Portfolio Manager
reasonably believes that the broker or dealer selected by it can be
expected to obtain a "best execution" market price on the particular
transaction and determines in good faith that the commission cost is
reasonable in relation to the value of the brokerage and research
services (as defined in Section 28(e)(3) of the Securities Exchange Act
of 1934) provided by such broker or dealer to the Portfolio Manager
viewed in terms of either that particular transaction or of the
Portfolio Manager's overall responsibilities with respect to its
clients, including the Fund, as to which the Portfolio Manager
exercises investment discretion, notwithstanding that the Fund may not
be the direct or exclusive beneficiary of any such services or that
another broker may be willing to charge the Fund a lower commission on
the particular transaction.
B. Subject to the requirements of paragraph A above, the Fund
Manager shall have the right to request that transactions giving rise
to brokerage commissions, in an amount to be agreed upon by the Fund
Manager and the Portfolio Manager, shall be executed by brokers and
dealers that provide brokerage or research services to the Fund
Manager, or as to which an on-going relationship will be of value to
the Fund in the management of its assets, which services and
relationship may, but need not, be of direct benefit to the Portfolio
Manager Account.
C. The Portfolio Manager shall not execute any portfolio
transactions for the Portfolio Manager Account with a broker or dealer
which is an "affiliated person" (as defined in the Act) of the Fund,
the Portfolio Manager or any other Portfolio Manager of the Fund
without the prior written approval of the Fund. The Fund Manager will
provide the Portfolio Manager with a list of brokers and dealers which
are "affiliated persons" of the Fund or its Portfolio Managers.
6. Proxies. The Fund will vote or direct the voting of all proxies
solicited by or with respect to the issuers of securities in which assets of the
Portfolio Manager Account may be invested from time to time. At the request of
the Fund, the Portfolio Manager shall provide the Fund with its recommendations
as to the voting of such proxies.
7. Fees for Services. The compensation of the Portfolio Manager for its
services under this Agreement shall be calculated and paid by the Fund Manager
in accordance with the attached Schedule C. Pursuant to the Fund Management
Agreement between the Fund and the Fund Manager, the Fund Manager is solely
responsible for the payment of fees to the Portfolio Manager from the fund
management fees paid to it by the Fund, and the Portfolio Manager agrees to seek
payment of its fees solely from the Fund Manager.
8. Other Investment Activities of Portfolio Manager. The Fund
acknowledges that the Portfolio Manager or one or more of its affiliates has
investment responsibilities, renders investment advice to and performs other
investment advisory services for other individuals or entities ("Client
Accounts"), and that the Portfolio Manager, its affiliates or any of its or
their directors, members, officers, agents or employees may buy, sell or trade
in any securities for its or their respective accounts ("Affiliated Accounts").
Subject to the provisions of paragraph 2 hereof, the Fund agrees that the
Portfolio Manager or its affiliates may give advice or exercise investment
responsibility and take such other action with respect to other Client Accounts
and Affiliated Accounts which may differ from the advice given or the timing or
nature of action taken with respect to the Portfolio Manager Account, provided
that the Portfolio Manager acts in good faith, and provided further, that it is
the Portfolio Manager's policy to allocate, within its reasonable discretion,
investment opportunities to the Portfolio Manager Account over a period of time
on a fair and equitable basis relative to the Client Accounts and the Affiliated
Accounts, taking into account the cash position and the investment objectives
and policies of the Fund and any specific investment restrictions applicable
thereto. The Fund acknowledges that one or more Client Accounts and Affiliated
Accounts may at any time hold, acquire, increase, decrease, dispose of or
otherwise deal with positions in investments in which the Portfolio Manager
Account may have an interest from time to time, whether in transactions which
involve the Portfolio Manager Account or otherwise. The Portfolio Manager shall
have no obligation to acquire for the Portfolio Manager Account a position in
any investment which any Client Account or Affiliated Account may acquire, and
the Fund shall have no first refusal, coinvestment or other rights in respect of
any such investment, either for the Portfolio Manager Account or otherwise.
9. Limitation of Liability. The Portfolio Manager shall not be liable
for any action taken, omitted or suffered to be taken by it in its reasonable
judgment, in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement, or in
accordance with (or in the absence of) specific directions or instructions from
the Fund, provided, however, that such acts or omissions shall not have resulted
from the Portfolio Manager's willful misfeasance, bad faith or gross negligence,
a violation of the standard of care established by and applicable to the
Portfolio Manager in its actions under this Agreement or breach of its duty or
of its obligations hereunder (provided, however, that the foregoing shall not be
construed to protect the Portfolio Manager from liability in violation of
Section 17(i) of the Act).
10. Confidentiality. Subject to the duty of the Portfolio Manager and
the Fund to comply with applicable law, including any demand of any regulatory
or taxing authority having jurisdiction, the parties hereto shall treat as
confidential all information pertaining to the Portfolio Manager Account and the
actions of the Portfolio Manager and the Fund in respect thereof.
11. Assignment. This Agreement shall terminate automatically in the
event of its assignment, as that term is defined in Section 2(a)(4) of the Act.
The Portfolio Manager shall notify the Fund in writing sufficiently in advance
of any proposed change of control, as defined in Section 2(a)(9) of the Act, as
will enable the Fund to consider whether an assignment as defined in Section
2(a)(4) of the Act will occur, and whether to take the steps necessary to enter
into a new contract with the Portfolio Manager.
12. Representations, Warranties and Agreements of the Fund. The Fund
represents, warrants and agrees that:
A. The Portfolio Manager has been duly appointed to provide
investment services to the Portfolio Manager Account as contemplated
hereby.
B. The Fund has delivered to the Portfolio Manager such
instructions governing the investment of the Portfolio Manager Account
as are necessary for the Portfolio Manager to carry out its obligations
under this Agreement.
13. Representations, Warranties and Agreements of the Portfolio
Manager. The Portfolio Manager represents, warrants and agrees that:
A. It is registered as an "Investment Adviser" under the
Investment Advisers Act of 1940 ("Advisers Act").
B. It will maintain, keep current and preserve on behalf of
the Fund, in the manner required or permitted by the Act and the Rules
thereunder, the records identified in Schedule B (as Schedule B may be
amended from time to time by the Fund Manager). The Portfolio Manager
agrees that such records are the property of the Fund, and will be
surrendered to the Fund promptly upon request.
C. It will adopt a written code of ethics complying with the
requirements of Rule l7j-l under the Act and will provide the Fund with
a copy of the code of ethics and evidence of its adoption. Within 45
days of the end of each year while this Agreement is in effect, an
officer or general partner of the Portfolio Manager shall certify to
the Fund that the Portfolio Manager has complied with the requirements
of Rule l7j-l during the previous year and that there has been no
violation of its code of ethics or, if such a violation has occurred,
that appropriate action was taken in response to such violation. Upon
the written request of the Fund, the Portfolio Manager shall permit the
Fund to examine the reports required to be made by the Portfolio
Manager under Rule l7j-l(c)(l).
D. Upon request, the Portfolio Manager will promptly supply
the Fund with any information concerning the Portfolio Manager and its
stockholders, employees and affiliates which the Fund may reasonably
require in connection with the preparation of its Registration
Statement or amendments thereto, proxy material, reports and other
documents required to be filed under the Act, the Securities Act of
1933, or other applicable securities laws.
14. Amendment. This Agreement may be amended at any time, but (except
for Schedules A and B which may be amended by the Fund Manager acting alone)
only by written agreement among the Portfolio Manager, the Fund Manager and the
Fund, which amendment, other than amendments to Schedules A and B, is subject to
the approval of the Board of Directors and the Shareholders of the Fund as and
to the extent required by the Act.
15. Effective Date; Term. This Agreement shall continue in effect until
[DATE] and shall continue in effect thereafter provided such continuance is
specifically approved at least annually by (i) the Fund's Board of Directors or
(ii) a vote of a "majority" (as defined in the Act) of the Fund's outstanding
voting securities, provided that in either event such continuance is also
approved by a majority of the Board of Directors who are not "interested
persons" (as defined in the Act) of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting on such approval. The
aforesaid requirement that continuance of this Agreement be "specifically
approved at least annually" shall be construed in a manner consistent with the
Act and the Rules and Regulations thereunder.
16. Termination. This Agreement may be terminated by any party, without
penalty, immediately upon written notice to the other parties in the event of a
breach of any provision thereof by a party so notified, or otherwise upon not
less than thirty (30) days' written notice to the Portfolio Manager in the case
of termination by the Fund or the Fund Manager, or ninety (90) days' written
notice to the Fund and the Fund Manager in the case of termination by the
Portfolio Manager, but any such termination shall not affect the status,
obligations or liabilities of any party hereto to the other parties.
17. Applicable Law. To the extent that state law is not preempted by
the provisions of any law of the United States heretofore or hereafter enacted,
as the same may be amended from time to time, this Agreement shall be
administered, construed and enforced according to the laws of the Commonwealth
of Massachusetts.
18. Severability. If any term or condition of this Agreement shall be
invalid or unenforceable to any extent or in any application, then the remainder
of this Agreement, and such term or condition except to such extent or in such
application, shall not be affected thereby, and each and every term and
condition of this Agreement shall be valid and enforced to the fullest extent
and in the broadest application permitted by law.
19. Prior Agreement Superceded. This Agreement supercedes and replaces
the Portfolio Management Agreement dated among the Fund, the Fund Manager and
the Portfolio Manager.
LIBERTY ALL-STAR GROWTH FUND, INC.
By:
Title:
LIBERTY ASSET MANAGEMENT COMPANY
By:
Title:
ACCEPTED:
Oppenheimer Capital
By:
Title:
SCHEDULES: A. Operational Procedures For Portfolio Transactions (omitted)
B. Record Keeping Requirements (omitted)
C. Fee Schedule
<PAGE>
SCHEDULE C
PORTFOLIO MANAGER FEE
For services provided to the Portfolio Manager Account, the Fund
Manager will pay to the Portfolio Manager, on or before the fifth business day
of each calendar quarter, a fee for the previous calendar quarter at the rate
of:
.10% (.40% annually) of the Portfolio Manager's Percentage (as defined
below) of the average weekly net assets of the Fund up to and including
$300 million; and
.09% (.36% annually) of the Portfolio Manager's Percentage of the
average weekly net assets of the Fund exceeding $300 million.
Each quarterly payment set forth above shall be based on the average
weekly net assets during such previous calendar quarter. The fee for the period
from the date this Agreement becomes effective to the end of the calendar
quarter in which such effective date occurs will be prorated according to the
proportion that such period bears to the full quarterly period. Upon any
termination of this Agreement before the end of a calendar quarter, the fee for
the part of that calendar quarter during which this Agreement was in effect
shall be prorated according to the proportion that such period bears to the full
quarterly period and will be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to the Portfolio Manager,
the value of the Fund's net assets will be computed at the times and in the
manner specified in the Registration Statement as from time to time in effect.
"Portfolio Manager's Percentage" means the percentage obtained by
dividing the average weekly net assets in the Portfolio
Manager Account by the Fund's average weekly net assets.
<PAGE>
APPENDIX E
<TABLE>
<CAPTION>
OpCap Advisors, a subsidiary of Oppenheimer Capital, is the manager or
sub-advisor to the registered investment companies listed below. These
investment companies have similar investment objectives to the Fund.
Approximate Net Assets (as of Advisory Fee Rate
Fund January XX, 2000) (based on average net asset value)
---- ----------------- ----------------------------------
<S> <C> <C>
Oppenheimer Quest Value $ 1.0% on the first $400 million;
Fund, Inc. .90% on the next $400 million;
Oppenheimer Quest $ .85% of net assets between $800 million
Opportunity Value Fund but less than $4 billion; and .80% on
assets over $4 billion but less than $8
billion and .75% on assets over $8
billion.(1)
Oppenheimer Quest Capital $ 1.0% on the first $400 million; .90% on
Value Fund, Inc. the next $400 million;
.85% of the net assets in excess of $800
million(2)
Enterprise Accumulation Trust:
Equity Portfolio $ .40% of the first $1 billion;
Managed Portfolio $ .30% on assets over $1 billion; and
.25% for assets in excess of $2 billion(3)
Enterprise Group of Funds:
Equity Portfolio $ .40% of the first $100 million;
Managed Portfolio $ .30% on assets in excess of $100
million(4)
Penn Series Funds, Inc.:
Value Equity Fund $ .50%(5)
Endeavor Series Trust:
Value Equity Portfolio $ .40%(6)
Opportunity Value
Portfolio
WNL Series Trust:
Elite Value Asset
Allocation Portfolio $ .40%(7)
The Saratoga Advantage Trust:
Large Capitalization
Value Portfolio $ .30%(7)
OCC Accumulation Trust: .80% of the first $400 million of average
Equity Portfolio $ net assets: .75% of the next $400 million
Managed Portfolio $ of average net assets and .70% of assets
in excess of $800 million(8)
(1) With respect to each of these funds, Oppenheimer Funds, Inc. ("OFI") is
the investment adviser and OpCap Advisors is the sub-adviser. OFI pays
OpCap Advisors monthly an annual fee based on the average daily net
assets of the fund equal to 40% of the advisory fee collected by OFI
based on the total net assets of the fund as of November 22, 1995 (the
"base amount") plus 30% of the investment advisory fee collected by OFI
based on the total net assets of the fund that exceed the base amount.
(2) OFI is the investment advisor and OpCap Advisors is the sub-adviser.
OFI pays OpCap Advisors a sub-advisory fee equal to 40% of the net
advisory fee calculated by OFI for the fund based on the total net
assets of the fund as of February 28, 1997 and remaining 120 days later
(the "base amount") plus 30% of the investment advisory fee collected
by OFI based on the total assets that exceed that base amount. OFI is
waiving the following portion of its advisory fee: .15% of the first
$200 million of average daily net assets, .40% of the next $200
million, .30% of the next $400 million and .25% of average net assets
in excess of $800 million.
(3) These fees are for investment advisory services only. Management
services are provided to the portfolios by a party other than OpCap
Advisors. The manager, which pays the investment advisory fee to OpCap
Advisors, receives a management fee, on an annual basis, of 0.80% of
the first $400 million of the average daily net assets; .75% on the
next $400 million and .70% on assets above $800 million of each of the
portfolios.
(4) This fee is for investment advisory services only. Management services
are provided to the portfolios by a party other than OpCap Advisors.
The manager, which pays the investment advisory fee to OpCap Advisors,
receives a management fee of .75% of the average daily net assets of
the portfolios.
(5) These fees are for investment advisory services only. Administrative
services are provided to these funds by a party other than OpCap
Advisors. The funds are each charged on an annual basis a fee for
administrative services of 0.15% of their respective average daily net
assets.
(6) This fee is for investment advisory services only. Management services
are provided to the portfolios by a party other than OpCap Advisors.
The manager, which pays the investment advisory fee to OpCap Advisors,
receives a management fee of .80% of average daily net assets of the
portfolios.
(7) This fee is for investment advisory services only. Management services
are provided to the portfolio by a party other than OpCap Advisors. The
manager, which pays the investment advisory fee to OpCap Advisors,
receives a management fee of 0.65% of the average daily net assets of
the portfolio.
(8) OpCap Advisors has agreed to waive its management fee and
reimburse expenses so that the total operating expenses (net of any
expense offsets and excluding the amount of any interest, taxes,
brokerage commissions and extraordinary expenses) of such portfolios
do not exceed 1.00% of their respective average daily net assets.
</TABLE>
<PAGE>
LIBERTY ALL-STAR GROWTH FUND, INC. PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF LIBERTY ALL-STAR GROWTH FUND, INC.
PROXY FOR 2000 ANNUAL MEETING OF SHAREHOLDERS
The undersigned, revoking previous proxies, hereby appoints Suzan M. Barron,
William J. Ballou, Nancy L. Conlin, Timothy J. Jacoby and William R.
Parmentier, Jr., or any one or more of them, attorneys, with power of
substitution, to vote all shares of Liberty All-Star Growth Fund, Inc. (the
"Fund") which the undersigned is entitled to vote at the 2000 Annual Meeting
of the Fund to be held in Room AV-1, 3rd Floor, Federal Reserve Plaza, 600
Atlantic Avenue, Boston, Massachusetts on April 19, 2000 at 11:00 a.m. and
at any adjournments thereof. All powers may be exercised by a majority of
said proxy holders or substitutes voting or acting or, if only one votes or
acts, then by that one. The undersigned directs said proxy holders to vote as
specified upon the proposals shown below, each of which is described in the
proxy statement for the Meeting, receipt of which is acknowledged.
SAID PROXIES WILL VOTE THIS PROXY AS DIRECTED, OR IF NO DIRECTION IS INDICATED,
AGAINST PROPOSALS 1 AND 2, AND FOR THE NOMINEES LISTED IN IN PROPOSAL 3 UNLESS
AUTHORITY TO DO SO IS SPECIFICALLY WITHHELD IN THE MANNER PROVIDED, AND FOR
PROPOSALS 4, 5 AND 6, AND WILL USE THEIR DISCRETION WITH RESPECT TO ANY
MATTERS REFERRED TO IN ITEM 7.
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PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE DO NOT FOLD, STAPLE OR MUTILATE CARD.
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<PAGE>
LIBERTY ALL-STAR GROWTH FUND, INC.
RECORD DATE SHARES:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. To approve or disapprove the conversion of the Fund from a closed-end
investment company to an open-end investment company. FOR / / AGAINST / / ABSTAIN / /
2. To approve or disapprove a Distribution Plan. FOR / / AGAINST / / ABSTAIN / /
3. To elect two Directors of the Fund. FOR ALL
NOMINEES WITHHOLD FOR ALL EXCEPT
--------- -------- ---------------
James E. Grinnell
John J. Neuhauser
---------------- -------- --------------
4. To approve or disapprove the Fund's Portfolio Management Agreement with M.A.
Weatherbie & Co., Inc. FOR / / AGAINST / / ABSTAIN / /
5. To approve or disapprove a new Portfolio Management Agreement with
Oppenheimer Capital which will replace the current Portfolio Management
Agreement which will terminate upon change in control of Oppenheimer
Capital upon acquisition by Allianz AG. FOR / / AGAINST / / ABSTAIN / /
6. To ratify the selection by the Board of Directors of
PricewaterhouseCoopers LLP as the Fund's independent auditors for the
year ending December 31, 2000. FOR / / AGAINST / / ABSTAIN / /
7. In their discretion, upon such other business as may properly come before
the Meeting.
----------------
Date
Please sign exactly as your name(s) appear(s) above.
Corporate proxies should be signed by an authorized officer.
- ------------------------------------------------------------------------------
Shareholder sign here Co-owner sign here
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</TABLE>
