[Preliminary]
LIBERTY ALL-STAR EQUITY FUND
Federal Reserve Plaza
Boston, Massachusetts 02210
(617) 722-6000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 16, 1997
To the Shareholders of Liberty All-Star Equity Fund:
NOTICE IS HEREBY GIVEN that the eleventh Annual Meeting of Shareholders
of Liberty All-Star Equity Fund (the "Fund") will be held in the New England
Room, 4th Floor, Federal Reserve Plaza, 600 Atlantic Avenue, Boston,
Massachusetts, on April 16, 1997 at 10:00 a.m., Boston time. The purpose of the
Meeting is to consider and act upon the following matters:
1. To elect a Trustee of the Fund.
2. To approve the Fund's Portfolio Management Agreement with J.P. Morgan
Investment Management Inc.
3. To approve the Fund's Portfolio Management Agreement with
Wilke/Thompson Capital Management, Inc.
4. To ratify the selection by the Board of Trustees of KPMG Peat
Marwick LLP as the Fund's independent auditors for the year
ending December 31, 1997.
5. To transact such other business as may properly come before the Meeting
or any adjournments thereof.
The Board of Trustees has fixed the close of business on February 21,
1997 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.
YOUR BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE FOR ALL THE PROPOSALS.
By order of the Board of Trustees
John L. Davenport, Secretary
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.
March 1, 1997
LIBERTY ALL-STAR EQUITY FUND
PROXY STATEMENT
Annual Meeting of Shareholders
April 16, 1997
This Proxy Statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Trustees of Liberty All-Star Equity Fund
(the "Fund") to be used at the Annual Meeting of Shareholders of the Fund to be
held on April 16, 1997 at 10:00 a.m. Boston time in the New England Room, 4th
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 March 3, 1997 of this Proxy Statement and
the accompanying proxy. Supplementary solicitations may be made by mail,
telephone, telegraph or personal interview by officers and Trustees 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. as agent to coordinate the
distribution of proxy material to and the return of proxies from banks, brokers,
nominees and other custodians at a fee of $6,500 plus out-of-pocket expenses.
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 1996 Annual Report to Shareholders.
The Meeting is being held to vote on the matters described below.
PROPOSAL 1. ELECTION OF TRUSTEE
The Fund 's Board of Trustees 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 Robert J. Birnbaum as a Trustee to hold
office until the final adjournment of the Annual Meeting of Shareholders for the
year 2000 (or special meeting in lieu thereof) or until his successor is elected
and qualified. Mr. Birnbaum has served as a Trustee since November, 1994. He has
consented to serve as a Trustee following the Meeting if elected, and is
expected to be able to do so. If Mr. Birnbaum is unable or unwilling to do so at
the time of the Meeting, proxies will be voted for such substitute as the
Trustees may recommend (unless authority to vote for the election of Trustees
has been withheld).
Information about the nominee for election as a Trustee follows:
Principal Occupation During Fund Shares
Name/Age and Address Past Five Years Owned(1)
Robert J. Birnbaum Retired (since January, 1994);
(Age 69)(2) Special Counsel, Dechert, Price
313 Bedford Road & Rhoads (September, 1988 to
Ridgewood, NJ 07450 December 1993); President and Chief
Operating Officer, New York
Stock Exchange, Inc.
(May, 1985 to June, 1988). 3,327
The following Trustees continue to serve in such capacity until their
terms of office expire and their successors are elected and qualified:
Name/Age and Address Principal Occupation During Fund Shares
Past Five Years Owned(1)
Robert E. Grinnell (Age 67)(2) Private investor (since November,
22 Harbor Avenue 1988); Senior Vice
Marblehead, MA 01945 President-Operations, The Rockport
Company, importer and
distributor of shoes (May, 1986
to November, 1988).
9,30
Harold W. Cogger * (Age 60) Executive Vice President and
Liberty Financial Director, Liberty Financial
Companies, Inc. Companies, Inc. (since March, 1995);
600 Atlantic Avenue President (since October, 1994),
Boston, MA 02210 Chief Executive Officer (since
March, 1995) and Director
(since October, 1981), The
Colonial Group, Inc.; President
(since July, 1993), Chief
Executive Officer (since March,
1995) and Director (since
March, 1984), Executive Vice
President (October, 1989 to
July, 1993), Colonial
Management Associates, Inc.;
President (since March 1996),
Vice President (July, 1993 to
March, 1996), Stein Roe &
Farnham Incorporated. 1,053
Richard W. Lowry (Age 60)(2) Private investor (since August,
10701 Charleston Drive 1987); Chairman and Chief Executive
Vero Beach, FL 32963 Officer, U.S. Plywood Corporation,
manufacturer and distributor of wood
products (August, 1985 to August,
1987). 94,060(3)
- -----------------------
(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 Trustees 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) Held by the trustee of a trust of which Mr. Lowry is the sole beneficiary.
* "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.
As of February 21, 1997, John A. Benning, Assistant Secretary of the
Fund, and other officers of Liberty Financial Companies, Inc. or its affiliates
held 384,140 shares of the Fund, representing 0.46% of the outstanding shares,
as co-trustees of the Liberty Financial Companies, Inc. Savings and Investment
Plan as to which they share voting power.
The term of office of Mr. Lowry will expire on final adjournment of the
Annual Meeting (or special meeting in lieu thereof) in 1998, and the term of
office of Messrs. Cogger and Grinnell will expire on final adjournment of the
Annual Meeting (or special meeting in lieu thereof) in 1999. Mr. Cogger has
served as a Trustee since April, 1996, and Messrs. Grinnell and Lowry have
served as Trustees since the commencement of the Fund's operations in 1986.
Messrs. Birnbaum, Grinnell and Lowry are also trustees of Colonial Trusts I
through VII (the "Colonial Trusts"), the umbrella trusts for an aggregate of 38
open-end funds (the "Colonial Funds") managed by Colonial Management Associates,
Inc. ("Colonial"), an affiliate of Liberty Asset Management, five closed-end
funds managed by Colonial (the "Colonial Closed-End Funds"), and LFC Utilities
Trust, an open-end investment company managed by Stein Roe & Farnham
Incorporated, another affiliate of Liberty Asset Management. Messrs. Birnbaum,
Cogger, Grinnell and Lowry are also directors of Liberty All-Star Growth Fund,
Inc., another closed-end multi-managed fund managed by Liberty Asset Management.
During 1996 the full Board of Trustees of the Fund held five meetings,
and the Audit Committee, which is comprised of all the Trustees who are not
"interested persons" of the Fund, met twice. All Trustees 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. The Fund pays the Trustees who are not affiliated with
Liberty Asset Management (the "independent Trustees") an annual retainer of
$5,000 per annum, plus $1,800 per meeting attended, with a minimum of $14,000
per annum if less than five meetings are held and all meetings are attended,
plus out-of-pocket expenses relating to attendance at meetings. The total fees
accrued to the independent Trustees as a group during the year ended December
31, 1996 by the Fund were $42,000 and out-of-pocket expenses relating to their
attendance at meetings were $6,574.
The following table shows, for the year ended December 31, 1996, the
compensation received from the Fund by each Trustee, and the aggregate
compensation paid to each Trustee for service on the Board of Trustees of the
Fund and the Board of Trustees or Directors of the Colonial Trusts, the Colonial
Closed-End Funds, LFC Utilities Trust and Liberty All-Star Growth Fund, Inc. (of
which Messrs. Birnbaum, Grinnell and Lowry are also trustees or directors). The
Fund has no bonus, profit sharing or retirement plans.
Name Aggregate Compensation Total Compensation from the Fund,
from the Fund the Colonial Funds, the Colonial
Closed-End Funds, LFC Utilities
Trust and Liberty All-Star Growth
Fund, Inc.
Harold W. Cogger -0- -0-
Robert J. Birnbaum $14,000 $92,000
James E. Grinnell $14,000 $93,000
Richard W. Lowry $14,000 $95,000
Officers
The following are the executive officers of the Fund, in addition to Mr.
Harold W. Cogger who serves as Chairman of the Board of Trustees.
Name/Age and Address Position with Principal Occupation During
Fund Past Five Years
Richard R. Christensen (Age 63) President and President of Liberty Asset
Liberty Asset Management Company Chief Management (since January,
600 Atlantic Avenue Executive 1995); President of Liberty
Boston, MA 02210 Officer Investment Services, Inc.
(April, 1987 to March, 1995).
William R. Parmentier (Age 44) Vice President Senior Vice President and
Liberty Asset Management Company - Chief Chief Investment Officer of
600 Atlantic Avenue Investment Liberty Asset Management
Boston, MA 02210 Officer (since May, 1995); 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).
Timothy J. Jacoby (Age 44) Treasurer Senior Vice President, Fund
Administration, Colonial
Management Associates, Inc.
since September, 1996);
Senior Vice President,
Fidelity Accounting and
Custody Services
(September, 1993 to
September, 1996); Assistant
Treasurer, Fidelity Group of
Funds (August, 1990 to
September, 1993).
Name/Age and Address Position Principal Occupation
with Fund During Past Five Years
Peter L. Lydecker (Age 43) Controller Vice President of Colonial
Colonial Management Management Associates, Inc.
Associates, Inc. (formerly Assistant Vice
One Financial Center President).
Boston, MA 02111
John L. Davenport (Age 60) Secretary Vice President and
600 Atlantic Avenue Associate General Counsel
Boston, MA 02210 of Liberty Financial
Companies, Inc. and
predecessor (since January,
1984).
Mr. Christensen has served as President of the Fund since November 30,
1994; Mr. Cogger has served as Chairman of the Board since April 18, 1996; Mr.
Lydecker has served as Controller since March 17, 1995; Mr. Parmentier has
served as Vice President - Chief Investment Officer since October 19, 1995; Mr.
Davenport has served as Secretary since April 18, 1996; and Mr. Jacoby was
appointed Treasurer effective October 10, 1996. Mr. Christensen also serves as
President and a trustee of the Stein Roe Variable Investment Trust and the
Keyport Variable Investment Trust, other investment companies managed by
affiliates of Liberty Asset Management; Messrs. Jacoby and Lydecker serve as
Treasurer and Controller, respectively, of the Keyport Variable Investment
Trust, the Colonial Trusts and the Colonial Closed-End Funds; and Messrs.
Christensen, Davenport, Jacoby, Lydecker and Parmentier serve as officers of
Liberty All-Star Growth Fund, Inc. Each officer of the Fund serves at the
pleasure of the Board of Trustees.
PROPOSALS 2 AND 3. TO APPROVE NEW PORTFOLIO MANAGEMENT AGREEMENTS
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 five 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 Fund's
multi-manager methodology is based on the premise that most investment
management firms consistently employ a distinct investment style which causes
them to emphasize stocks with particular characteristics, and that, because of
changing investor preferences, any given investment style will move into and out
of market favor and will result in better performance under certain market
conditions but poorer performance under other conditions. The Fund's
multi-manager methodology seeks to achieve more consistent and less volatile
performance over the long-term than if a single Portfolio Manager were employed.
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 and which is sufficiently broad so that at
least one of such styles can reasonably be expected to be in relative market
favor in all reasonably foreseeable market conditions. 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. Such recommendations could be based on factors such as a
Portfolio Manager's divergence from the investment style for which it was
selected, changes deemed by Liberty Asset Management to be potentially adverse
in a Portfolio Manager's personnel or ownership or other structural or
organizational changes affecting the Portfolio Manager, or a deterioration in a
Portfolio Manager's investment performance when compared to that of other
investment management firms employing similar investment styles. Portfolio
Manager changes, as well as rebalancings of the Fund's portfolio among the
Portfolio Managers, may result in portfolio turnover in excess of what would
otherwise be the case. Increased portfolio turnover results in increased
brokerage commission and transaction costs, and may result in the recognition of
additional capital gains.
New Portfolio Managers
Since last year's annual meeting two changes in the Fund's Portfolio Managers
have occurred: effective July 1, 1996 J.P. Morgan Investment Management Inc.
replaced Cooke & Bieler, Inc. and effective March 1, 1997 Wilke/Thompson Capital
Management, Inc. replaced Provident Investment Counsel, Inc. Cooke & Bieler,
Inc. and Provident Investment Counsel, Inc. had been Portfolio Managers of the
Fund since its inception in 1986. 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, provided that the new agreement is at a fee no
higher than that provided in, and is on other terms and conditions substantially
similar to, the Fund's agreements with its other Portfolio Managers, and that
its continuance is subject to approval by shareholders at the Fund's regularly
scheduled annual meeting next following the date of the portfolio management
agreement with the new or additional Portfolio Manager. Accordingly, the Fund's
new portfolio management agreements with J.P. Morgan Investment Management Inc.
and Wilke/Thompson Capital Management, Inc. are being submitted for shareholder
approval at the Meeting.
J.P. Morgan Investment Management Inc.
Cooke & Bieler, Inc. is a value manager whose portfolios tend to be
more concentrated and which places less emphasis on control of sector and
industry risk than many other value managers. In the first six months of 1996
Liberty Asset Management determined to recommend the replacement of Cooke &
Bieler, Inc. with a Portfolio Manager practicing a value investment style
emphasizing more control of sector and industry risk. 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
three. Liberty Asset Management analyzed the three candidates in terms of their
returns, volatility and portfolio characteristics when combined with those of
the Fund's other four Portfolio Managers. Based on the foregoing, Liberty Asset
Management recommended, and the Board of Trustees on June 20, 1996 approved, the
termination of the Fund's portfolio management agreement with Cooke & Bieler,
Inc. and its replacement by J.P. Morgan Investment Management Inc. ("J.P.
Morgan") effective July 1, 1996.
J.P. Morgan, located at 522 Fifth Avenue, New York, New York 10036, is an
investment adviser registered under the Investment Advisers Act of
1940, as amended. J.P. Morgan is a wholly-owned subsidiary of J.P.
Morgan & Co. Incorporated, a New York Stock Exchange listed bank
holding company organized under the laws of Delaware. Through offices
in New York City and abroad, J.P. Morgan & Co. Incorporated, through
J.P. Morgan, Morgan Guaranty Trust Company of New York and other
subsidiaries, offers a wide range of services to governmental,
institutional, corporate and individual customers and acts as
investment adviser to individual and institutional clients. As of
December 31, 1996, J.P. Morgan & Co. Incorporated and its subsidiaries
had total combined assets under management of approximately $178
billion, of which J.P. Morgan advises over $176 billion. J.P. Morgan &
Co. Incorporated has a long history of service as adviser, underwriter
and lender to an extensive roster of major companies and as a
financial adviser to national governments. J.P. Morgan & Co.
Incorporated, through its predecessor firms, has been in business for
over a century and has been managing investments since 1913. See
Appendix A for further information about J.P. Morgan.
Wilke/Thompson Capital Management, Inc.
Provident Investment Counsel, Inc.'s investment style is to invest in
the stock of companies having fast growing earnings, with an emphasis on larger
capitalization companies. In late 1996 Liberty Asset Management determined to
recommend the replacement of Provident Investment Counsel, Inc. with a growth
style Portfolio Manager incorporating mid-sized and small-sized capitalization
companies in its portfolio. 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 eight. Liberty Asset Management
then analyzed the performance, volatility and portfolio characteristics of the
eight candidates when combined with those of the Fund's other Portfolio
Managers. Based on the foregoing, Liberty Asset Management recommended, and the
Board of Trustees on February 20, 1997 approved, the termination of the Fund's
portfolio management agreement with Provident Investment Counsel, Inc. and its
replacement by Wilke/Thompson Capital Management, Inc. ("Wilke/Thompson")
effective March 1, 1997.
Wilke/Thompson, 3800 Norwest Center, 90 South Seventh Street,
Minneapolis, Minnesota 55402, is an investment adviser registered under the
Investment Advisers Act of 1940, as amended. The firm was founded in July, 1987.
Mark A. Thompson, its Chief Investment Officer, and Paul L. Hayne, its President
and Chief Executive Officer, own an aggregate of 96% of its stock, and the
balance is owned by four other employees. As of December 31, 1996 it had over
$1.4 billion in assets under management and employed four investment
professionals in addition to Mr. Thompson. See Appendix A for further
information about Wilke/Thompson.
Terms of New Portfolio Management Agreements
The portfolio management agreements with J.P. Morgan and Wilke/Thompson
are at the same fee rates and are on other terms and conditions substantially
similar to those of the portfolio management agreements with the Fund's three
other Portfolio Managers. A composite copy of the new portfolio management
agreements is attached to this proxy statement as Appendix B.
Under the Fund's portfolio management agreements (including those with
J.P. Morgan and Wilke/Thompson), 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 Trustees, 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 $400 million and 0.72%
per annum of its average weekly net assets in excess of that amount), Liberty
Asset Management pays each of the Fund's Portfolio Managers 0.40% per annum of
the average weekly net asset value of the portion of the Fund's assets managed
by that Portfolio Manager, with such rate reduced to 0.36% per annum of the
Portfolio Managers' allocable portions of the Fund's average weekly net asset
value in excess of $400 million, all subject to reduction in the amount of 50%
of the 3.875% rebate of Liberty Asset Management's annual fund management fee
being made until July 31, 1997 under the terms of the settlement of litigation
concluded in July, 1991. Effective January 1, 1997, Liberty Asset Management has
voluntarily agreed until July 31, 1997 to a further reduction in its annual fund
management fee from 0.72% to 0.648% of the Fund's average weekly net asset value
in excess of $1 billion, and the fee payable by Liberty Asset Management to the
Portfolio Managers on their allocable portions of such average net asset value
will be reduced from 0.36% to 0.324%. As at February 18, 1997, the Fund's net
assets were $1,078,000,000.
If approved by shareholders at the Meeting, the Portfolio Management
Agreements with J.P. Morgan and Wilke/Thompson will remain in effect until July
31, 1997, 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 Trustees, including a majority of the independent Trustees, or by
the vote of a "majority of the outstanding voting securities" (as defined under
Required Vote below) of the Fund.
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, 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 or make available to Liberty Asset Management 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. 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 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 Growth Fund, Inc. 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.
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 1996 aggregate commissions of $17,359, representing less than 2.0% of the
total commissions paid by the Fund, were paid to J.P. Morgan Securities, Inc., a
broker-dealer affiliate of J.P. Morgan, in connection with the execution of
portfolio transactions for the Fund initiated by Portfolio Managers other than
J.P. Morgan.
Required Vote
Approval of the portfolio management agreements with J.P. Morgan and
Wilke/Thompson each 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. SEE INFORMATION ABOUT THE
MEETING below.
In the event that the shareholders of the Fund fail to approve either
of the portfolio management agreements with J.P. Morgan or Wilke/Thompson, that
portfolio management agreement will terminate and Liberty Asset Management will
reallocate the portfolio assets under management by J.P. Morgan or
Wilke/Thompson, as the case may be, among one or more of the Fund's other
Portfolio Managers pending approval of any portfolio management agreement with a
new Portfolio Manager.
The Board of Trustees unanimously recommends that the shareholders vote FOR
approval of the portfolio management agreement with J.P. Morgan (Proposal No. 2)
and FOR approval of the portfolio management agreement with Wilke/Thompson
(Proposal No. 3).
PROPOSAL 4. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
By vote of the Board of Trustees, including the vote of the
non-interested Trustees, the firm of KPMG Peat Marwick LLP has been selected as
independent auditors for the Fund for the year ending December 31, 1997. Such
selection is being submitted to the shareholders for ratification. The
employment of KPMG Peat Marwick 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 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 KPMG Peat Marwick
LLP are expected to be present at the Meeting and will be given the opportunity
to make a statement if they should so desire.
OTHER BUSINESS
The Board of Trustees 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 81% of the common stock of Liberty Financial
is owned by Liberty Mutual Insurance Company, Boston, Massachusetts, and the
balance is publicly held. Liberty Asset Management implements and operates the
Fund's multi-manager methodology described under Proposals 2 and 3 above and 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 Trustees.
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. For its administrative services the Fund pays Liberty Asset Management an
annual fee at the rate of 0.20% of the Fund's average weekly net asset value up
to $400 million and 0.18% of its average weekly net asset value in excess of
that amount. Effective January 1, 1997, Liberty Asset Management has voluntarily
agreed until July 31, 1997 to a further reduction in its annual administrative
service fee from 0.18% to 0.162% on the Fund's average weekly net asset value in
excess of $1 billion. This administrative service fee is in addition to the fund
management fees paid by the Fund to Liberty Asset Management described on page
10.
The names and addresses of the Fund's current Portfolio Managers, in
addition to J.P. Morgan and Wilke/Thompson, are as follows:
Columbus Circle Investors Palley-Needelman Asset Management, Inc.
One Station Place 800 Newport Center Drive, Suite 450
Stamford, CT 06902 Newport Beach, CA 92660
Oppenheimer Capital
Oppenheimer Tower
World Financial Center
New York, NY 10281
INFORMATION ABOUT THE MEETING
All proxies solicited by the Board of Trustees 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 FOR the election as Trustee of the nominee named
under Proposal 1, FOR approval of the Fund's Portfolio Management Agreements
with J.P. Morgan and Wilke/Thompson, and FOR the ratification of the Board's
selection of the Fund's independent auditors for 1997. 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.
The election of the Trustee is by plurality vote. Approval of the
Portfolio Management Agreements with J.P. Morgan and Wilke/Thompson each
requires the affirmative vote of a "majority of the outstanding voting
securities" of the Fund, as defined under Proposals 2 and 3,- Required Vote
above. Ratification of the selection of the Fund 's independent auditors
requires the affirmative vote of a majority of the shares voting thereon,
provided more than 50% of the outstanding shares are present or represented at
the Meeting. 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 Trustee, for approval of the portfolio management agreements
with J.P. Morgan and Wilke/Thompson, and for the ratification of the selection
of the Fund 's independent auditors.
The shares as to which the Fund is granted authority by broker-dealer
firms to vote on the election of the Trustee, as well as shares as to which
properly executed proxies are returned by the record shareholders, will be
counted as represented at the Meeting. Because of the effect of the New York
Stock Exchange rules referred to above, the failure of any Fund shareholder
whose shares are held in "street name" by a broker-dealer firm to timely furnish
his or her instructions on how to vote such shares on the election of the
Trustee, the approval of the new portfolio management agreements and the
ratification of the selection of independent auditors will have the same effect
as a vote for such proposals. An abstention on the approval of the new Portfolio
management agreements will have the same effect as vote against such proposal
and the withholding of a vote on the election of the Trustee or an abstention on
the ratification of the selection of auditors will have no effect on such
proposals.
All shareholders of record on February 21, 1997 are entitled to one
vote for each share held. As of that date 82,706,226 shares of beneficial
interest of the Fund were issued and outstanding. Based on filings made by such
holders pursuant to Sections 13(d) and 16(a) of the Securities Exchange Act of
1934 (the "Exchange Act"), the following entities owned beneficially more than
five percent of the outstanding shares of the Fund:
Percent of
Name and Address No. of Shares Owned Outstanding Shares
Liberty Mutual Insurance
Company and Liberty Mutual
Fire Insurance Company
175 Berkeley Street
Boston, MA 02117 8,615,749 shares 10.4 %
Liberty Mutual Insurance Company ("Liberty Mutual") and Liberty Mutual
Fire Insurance Company ("Liberty Fire") have sole voting and investment power
with respect to 7,754,177 and 861,572 shares, respectively. Liberty Mutual and
Liberty Fire are mutual insurance companies having identical Boards of Directors
and certain common executive officers. Liberty Mutual indirectly owns a majority
of the outstanding common stock of Liberty Financial, which indirectly owns all
of the stock of Liberty Asset Management (see MANAGEMENT above). To the
knowledge of the Fund, on the record date for the Meeting no other 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 but votes sufficient for approval of
any proposals recommended by the Trustees have not been received, those proxies
that have been received may be voted on adjournment of the Meeting in a manner
considered to be consistent with the intention of the shareholders submitting
such proxies.
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 1998 Annual Meeting must be received by the Fund on
or before October 31, 1997. 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.
March 1, 1997
Appendix A
Information about J.P. Morgan Investment Management Inc.
and Wilke/Thompson Capital Management, Inc.
J.P. Morgan Investment Management Inc.
J.P. Morgan Investment Management Inc.
522 Fifth Avenue
New York, NY 10036
J.P. Morgan Investment Management Inc. ("J.P. Morgan") is a
wholly-owned subsidiary of J.P. Morgan & Co. Incorporated, a New York Stock
Exchange listed bank holding company the principal banking subsidiary of
which is Morgan Guaranty Trust Company of New York. J.P. Morgan's principal
executive officer is Keith M. Schappert, and its directors are Mr.
Schappert and Messrs. William L. Cobb, Jr., C. Nicolas Potter, Michael R.
Granito, John R. Thomas, Thomas M. Luddy, Michael E. Patterson, Jean Louis
Pierre Brunel, Robert A. Anselmi, Milan Steven Soltis and K. Warren
Anderson, the principal occupation of all of whom is as officers or
managing directors of J.P. Morgan and its affiliates.
The following table sets forth certain information regarding registered
investment companies with investment objectives similar to the Fund's for which
J.P. Morgan or its affiliates provide investment advisory or portfolio
management services.
Investment Advisory Approximate
fee as a Percentage Net Assets
Name of Fund of Average Daily Net Assets (in millions)
Northwestern Mutual Investment .45% on first $100 million
Services - Growth and .40% on next $100 million
Income Stock Portfolio .35% on next $200 million
.30% on balance $253.2
Cova Investment Advisory .50% on first $50 million
Corporation .40% on balance $29.0
Select Equity Portfolio
Wilke/Thompson Capital Management, Inc.
Wilke/Thompson Capital Management, Inc.
3800 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Wilke/Thompson Capital Management, Inc. ("Wilke/Thompson") is a
corporation of which Paul L. Hayne, its President and Chief Executive
Officer, owns 40%, and Mark A. Thompson, its Chief Investment Officer,
owns 56%, of its outstanding shares. Messrs. Thompson and Hayne
comprise its Board of Directors.
The following table sets forth certain information regarding registered
investment companies with investment objectives similar to the Fund's for which
Wilke/Thompson provides investment advisory or portfolio management services.
Investment Advisory Approximate
fees as a Percentage Net Assets
Name of Fund of Average Daily Net Assets (in millions)
American 0.40% on first $100 million; $185
Odyssey 0.30% on balance
Emerging
Opportunities Fund
Appendix B
Composite Form of Portfolio Management Agreement
J.P. Morgan Investment Management Inc. ("JPMIM")
Wilke/Thompson Capital Management, Inc. ("W/T")*
[July 1, 1996 (JPMM)]
[March 1, 1997 (W/T)]
[J.P. Morgan Investment
Management Inc.
522 Fifth Avenue
New York, NY 10036]
[Wilke/Thomspon Capital
Management, Inc.
3800 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402]
Re: Portfolio Management Agreement
Gentlemen:
Liberty All-Star Equity Fund (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 Fund and is responsible for the day-to-day
corporate management and Fund administration of the Fund.
- --------------
* Bracketed text shows differences between text of Portfolio Management
Agreements with J.P. Morgan Investment Management, inc. and Wilke/Thompson
Capital Management, Inc.
l. Employment as a Portfolio Manager. The Fund being duly authorized
hereby employs [J.P. Morgan Investment Management, Inc.] [Wilke/Thompson Capital
Management, Inc.] (the "Portfolio Manager") as a discretionary portfolio
manager, on the terms and conditions set forth herein, of those assets of the
Fund which the Fund Manager determines to assign to the Portfolio Manager (those
assets being referred to as the "Fund Account"). The Fund Manager may, from time
to time, make additions to and withdrawals from the Fund Account.
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 Fund Account in accordance with the provisions of this Agreement.
3. Portfolio Management Services of Portfolio Manager. In providing
portfolio management services to the Fund 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), and the investment restrictions set forth in
the Act and the Rules thereunder (as and to the extent set forth in such
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
Trustees of the Fund (the "Trustees"), 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 Fund 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 Fund
Account will be consummated by payment to or delivery by Boston Safe Deposit and
Trust Company or such other custodian of the assets of the Fund as the Fund may
appoint from time to time (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 Fund 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 Fund 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). 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, 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 [and the
Portfolio Manager's policies (JPMM)], the Fund Manager shall have the
right to request that transactions giving rise to brokerage commissions
shall be executed by brokers and dealers, to be agreed upon between the
Fund Manager and the Portfolio Manager, that provide brokerage or
research services to the Fund or 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 Fund Account. Notwithstanding any other provision
of this Agreement, the Portfolio Manager shall not be responsible under
paragraph A above with respect to transactions executed through any
such broker or dealer.
C. The Portfolio Manager shall not execute any portfolio
transactions for the Fund 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 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 all proxies solicited by or with respect
to the issuers of securities in which assets of the Fund 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, 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, 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 Fund 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 Fund 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 Fund Account may have an interest from
time to time, whether in transactions which involve the Fund Account or
otherwise. The Portfolio Manager shall have no obligation to acquire for the
Fund 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 Fund 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 Fund 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 Fund Account as contemplated hereby.
B. The Fund will deliver to the Portfolio Manager a true and
complete copy of its then current registration statement as effective
from time to time and such other documents governing the investment of
the Fund Account and such other information as is 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). 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. 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 [relating to its domestic equity accounts (JPMM)] or, if
such a violation has occurred, that appropriate action was taken in
response to such violation.
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, proxy material, reports and other documents required to be
filed under the Act, the Securities Act of 1933, or other applicable
securities laws.
E. Reference is hereby made to the Declaration of Trust dated
August 20, 1986 establishing the Fund, a copy of which has been filed
with the Secretary of the Commonwealth of Massachusetts and elsewhere
as required by law, and to any and all amendments thereto so filed or
hereafter filed. The name Liberty All-Star Equity Fund refers to the
Trustees under said Declaration of Trust, as Trustees and not
personally, and no Trustee, shareholder, officer, agent or employee of
the Fund shall be held to any personal liability hereunder or in
connection with the affairs of the Fund, but only the trust estate
under said Declaration of Trust is liable under this Agreement. Without
limiting the generality of the foregoing, neither the Portfolio Manager
nor any of its officers, directors, partners, shareholders or employees
shall, under any circumstances, have recourse or cause or willingly
permit recourse to be had directly or indirectly to any personal,
statutory, or other liability of any shareholder, Trustee, officer,
agent or employee of the Fund or of any successor of the Fund, whether
such liability now exists or is hereafter incurred for claims against
the trust estate, but shall look for payment solely to said trust
estate, or the assets of such successor of the Fund.
14. Amendment. This Agreement may be amended at any time, but 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 Trustees 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, 1997 and shall continue in effect thereafter provided such continuance
is specifically approved at least annually by (i) the Fund's Board of Trustees
or (ii) a vote of a "majority" (as defined in the Act) of the Fund's outstanding
voting securities, provided that in either event the continuance is also
approved by a majority of the Board of Trustees 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, and provided
further that, in accordance the conditions of the application of the Fund and
the Fund Manager for an exemption from Section 15(a) of the Act (Rel. Nos. IC
19436 and 19491), the continuance of this Agreement shall be subject to approval
by the such "majority" vote of the Fund's outstanding voting securities at the
regularly scheduled annual meeting of the shareholders of the Fund next
following the date of this Agreement. 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 EQUITY FUND
By: ______________________________
Title: ___________________________
LIBERTY ASSET MANAGEMENT COMPANY
By: ______________________________
Title: ___________________________
ACCEPTED:
[J.P. MORGAN INVESTMENT MANAGEMENT, INC.]
[WILKE/THOMPSON CAPITAL MANAGEMENT, INC.
By: _____________________________
Title: __________________________
SCHEDULES: A. Operational Procedures (not included)
B. Record Keeping Requirements (not included)
C. Fee Schedule
LIBERTY ALL-STAR EQUITY FUND
Portfolio Management Agreement
SCHEDULE C
PORTFOLIO MANAGER FEE
For services provided to the Fund Account, the Fund Manager will pay to the
Portfolio Manager, on or before the 10th day of each calendar month, a monthly
fee for the previous calendar month in the amount of 1/12th of: 0.40% of the
amount obtained by multiplying the Portfolio Manager's Percentage (as
hereinafter defined) times the Average Total Fund Net Assets (as hereinafter
defined) up to $400,000,000, plus 0.36% of the amount obtained by multiplying
the Portfolio Manager's Percentage times the Average Total Fund Net Assets in
excess of $400,000,000. "Portfolio Manager's Percentage" means the percentage
obtained by dividing (i) the average of the net asset values of the Fund Account
as of the close of the last business day of the New York Stock Exchange in each
calendar week during the preceding calendar month, by (ii) the Average Total
Fund Net Assets. "Average Total Fund Net Assets" means the average of the net
asset values of the Fund as a whole as of the close of the last business day of
the New York Stock Exchange in each calendar week during the preceding calendar
month. The fee shall be pro-rated for any month during which this Agreement is
in effect for only a portion of the month.
PROXY PROXY
The undersigned, revoking previous proxies, hereby appoints Richard R.
Christensen, John A. Benning and John L. Davenport, or any one or more of them,
attorneys, with power of substitution, to vote all shares of Liberty All-Star
Equity Fund (the "Fund") which the undersigned is entitled to vote at the 1997
Annual Meeting of the Fund to be held in the New England Room, 4th Floor,
Federal Reserve Plaza, 600 Atlantic Avenue, Boston, Massachusetts on April 16,
1997 at 10:00 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.
1. ELECTION OF TRUSTEE
Nominee - Robert J. Birnbaum
(Class of 2000) [ ] VOTE FOR nominee [ ] VOTE WITHHELD
2. APPROVAL OF PORTFOLIO
MANAGEMENT AGREEMENT WITH
J.P. MORGAN INVESTMENT
MANAGEMENT, INC. FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. APPROVAL OF PORTFOLIO MANAGEMENT
AGREEMENT WITH WILKE/THOMPSON CAPITAL
MANAGEMENT, INC. FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. RATIFICATION OF SELECTION OF
INDEPENDENT AUDITORS FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. In their discretion, upon such other business as may properly come before
the Meeting.
(TO BE DATED AND SIGNED ON REVERSE SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
Account Number No. of Shares Proxy No.
PROXY PROXY SOLICITED BY THE BOARD OF TRUSTEES OF LIBERTY ALL-STAR EQUITY
FUND PROXY
FOR 1997 ANNUAL MEETING OF SHAREHOLDERS
SAID PROXIES WILL VOTE THIS PROXY AS DIRECTED, OR IF NO DIRECTION IS INDICATED,
FOR PROPOSALS 1, 2 3 AND 4 UNLESS AUTHORITY TO DO SO IS SPECIFICALLY WITHHELD IN
THE MANNER PROVIDED, AND WILL USE THEIR DISCRETION WITH RESPECT TO ANY MATTERS
REFERRED TO IN ITEM 5.
Dated _________________________, 1997
(Please date this proxy)
_________________________ _________________________
(Signature) (Signature)
Please sign exactly as your name appears
at left. Corporate proxies should be
signed by an authorized officer.
________________________________________________________________________________
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE. PLEASE DO NOT FOLD, STAPLE OR MUTILATE
________________________________________________________________________________
