Securities Act of 1933 File No. 33-
Investment Company Act of 1940 File No. 811-4809
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 |X|
PRE-EFFECTIVE AMENDMENT NO. |_|
POST-EFFECTIVE AMENDMENT NO. |_|
and/or
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 |X|
AMENDMENT NO. 16 |X|
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LIBERTY ALL-STAR EQUITY FUND
(Exact Name of Registrant as Specified in Declaration of Trust)
Federal Reserve Plaza, Boston, Massachusetts 02210
(Address of Principal Executive Offices)
617-722-6000
(Registrant's Telephone Number, Including Area Code)
John L. Davenport, Esq.
Vice President and Associate General Counsel
Liberty Financial Companies, Inc.
Federal Reserve Plaza
Boston, MA 02210
(Name and Address of Agent for Service)
- --------------------------------------------------------------------------
With copy to:
Jeremiah J. Bresnahan, Esq.
Bingham, Dana & Gould
150 Federal Street, 24th Floor
Boston, MA 02110
Approximate Date of Proposed Offering:
As soon as practicable after the effective date of this Registration
Statement.
If any securities being registered on this form will be offered on a delayed or
continuous basis in reliance on Rule 415 under the Securities Act of 1933, other
than securities offered in connection with a dividend reinvestment plan, check
for the following box. |X|
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
============================================================================
Title of Proposed Proposed Maximum Maximum
Securities Amount Offering Aggregate Amount of
Being Being Price Per Offering Registration
Registered Registered Unit(1) Price (1) Fee
============================================================================
Shares of
Beneficial
Interest 4,318,134 Shares $13.72 $59,244,799 $17,477
Without Par
Value
============================================================================
(1) Calculated pursuant to Rule 457(c) under the Securities Act of 1933,
based on the average of the high and low sale prices reported on the
consolidated reporting system on February 17, 1998.
Registrant hereby amends this Registration Statement under the Securities
Act of 1933 on such date or dates as may be necessary to delay its effective
date until Registrant shall file a further amendment which specifically states
that such Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until such Registration
Statement shall become effective on such date as the Commission, acting pursuant
to Section 8(a), may determine.
============================================================================
LIBERTY ALL-STAR EQUITY FUND
REGISTRATION STATEMENT ON FORM N-2
CROSS REFERENCE SHEET
=====================
Item Number and Heading
- ----------------------
Part A Caption in Prospectus
====== =====================
1. Outside Front Cover Cover Page
2. Inside Front and Cover Page
Outside Back Cover Page
3. Fee Table and Synopsis Expenses; Prospectus Summary
4. Financial Highlights Financial Highlights
5. Plan of Distribution The Offer
6. Selling Shareholders *
7. Use of Proceeds Use of Proceeds
8. General Description of Registrant General; Cover
Page; The Multi-Manager
Concept; Investment
Objective and Policies;
Description of Shares -
Share Price Data
9. Management ALL-STAR; Appendix A
10. Capital Stock, Long-Term Debt, Description of Shares;
and Other Securities Distributions; Automatic Reinvestment
and Cash Purchase Plan; Tax Status
11. Defaults and Arrears on Senior
Securities *
12. Legal Proceedings *
13. Table of Contents of the Statement Statement of Additional Information
of Additional Information
Caption in Statement
Part B of Additional Information
====== =========================
14. Cover Page Cover Page
15. Table of Contents Table of Contents
16. General Information and History *
17. Investment Objective and Policies Investment Objective and Policies
18. Management Trustees and Officers of ALL-STAR
19. Control Persons and Principal Principal Shareholders
Holders of Securities
20. Investment Advisory and Other Investment Advisory and Other Services
Services
21. Brokerage Allocation and Other Portfolio Security Transactions
Practices
22. Tax Status (See "Tax Status" in Prospectus)
23. Financial Statements Financial Statements
- ----------------
* Not applicable
[Preliminary]
PROSPECTUS
[Logo]
4,318,134 Shares of Beneficial Interest
Issuable Upon Exercise of Rights
to Subscribe for such Shares
LIBERTY ALL-STAR EQUITY FUND
Liberty All-Star Equity Fund ("All-Star") is offering to its shareholders
of record as of the close of business on March , 1998 rights ("Rights")
entitling the holders thereof to subscribe for an aggregate of 4,318,134 shares
of beneficial interest (the "Shares") of All-Star (the "Offer") at the rate of
one share for each twenty Rights held, and entitling such shareholders to
subscribe, subject to certain limitations and subject to allotment, for any
shares not acquired by exercise of primary subscription Rights. The Rights are
not transferable and will not be admitted for trading on the New York Stock
Exchange. See "The Offer". THE SUBSCRIPTION PRICE PER SHARE WILL BE 95% OF THE
LOWER OF (i) THE LAST REPORTED SALE PRICE ON THE NEW YORK STOCK EXCHANGE ON
APRIL , 1998 OF A SHARE OF ALL-STAR, OR (ii) THE NET ASSET VALUE OF A SHARE OF
ALL-STAR ON THAT DATE.
THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK TIME, ON APRIL, 1998
(the "Expiration Date"). SINCE THE CLOSE OF THE OFFERING ON THE EXPIRATION
DATE IS PRIOR TO THE PRICING DATE, SHAREHOLDERS WHO CHOOSE TO EXERCISE THEIR
RIGHTS WILL NOT KNOW THE SUBSCRIPTION PRICE PER SHARE AT THE TIME THEY EXERCISE
SUCH RIGHTS.
All-Star is a multi-managed diversified closed-end management investment
company that allocates its portfolio assets on an approximately equal basis
among several independent investment organizations (currently five in number)
having different investment styles recommended and monitored by Liberty Asset
Management Company, All-Star's fund manager. All-Star's investment objective is
to seek total investment return, comprised of long term capital appreciation and
current income, through investment primarily in a diversified portfolio of
equity securities.
The address of All-Star is Federal Reserve Plaza, Boston, Massachusetts
02210 and its telephone number is 1-800-542-3863. All-Star's shares are listed
on the New York Stock Exchange under the symbol "USA".
All-Star announced the terms of the Offer before the opening of trading on
the New York Stock Exchange on December 19, 1997. The net asset value per share
of beneficial interest of All-Star at the close of business on December 18, 1997
and March , 1998 was $13.35 and $________, respectively, and the last reported
sale price of a share on such Exchange on those dates was $13.3125 and $_______,
respectively.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
===============================================================================
Subscription Proceeds to
Price (1) Sales Load All-Star(2)
- -------------------------------------------------------------------------------
Per Share...$___________ NONE $__________
Total.......$___________ NONE $__________
===============================================================================
(1) Estimated based on an assumed Subscription Price of
95% of the net asset value per share on March , 1998.
(2) Before deduction of expenses payable by All-Star, estimated at
$____________.
---------------------------
As a result of the terms of the Offer, shareholders who do not exercise
their Rights will, upon completion of the Offer, own a smaller proportional
interest in All-Star. In addition, because the Subscription Price per share will
be less than the then current net asset value per share, the Offer will result
in some dilution of the aggregate net asset value of the shares owned by
shareholders who do not fully exercise their Rights.
-----------------------------
This Prospectus sets forth concisely the information that a shareholder ought
to know before exercising his or her Rights and should be retained for future
reference. A Statement of Additional Information dated March , 1998 has
been filed with the Securities and Exchange Commission and is
incorporated herein by reference. The table of contents of the Statement of
Additional Information appears on page ___ of this Prospectus, and a
copy is available at no charge by calling or writing All-Star
at 600 Atlantic Avenue, Boston, Massachusetts 02210 (1-800-542-3863)
-------------------------------
The date of this Prospectus
is March , 1998
[End of Cover]
EXPENSES
Shareholder Transaction Expenses
- --------------------------------
These are the expenses that an investor incurs when buying shares of
All-Star, whether in this Offer, in the open-market or through All-Star's
Automatic Dividend Reinvestment and Cash Purchase Plan.
Sales load None(1)
Dividend Reinvestment
and Cash Purchase Plan Fees $1.25 per
voluntary cash
investment
- ----------------
(1) No sales load or commission will be payable in connection with this Offer.
Purchases of shares through brokers in secondary market transactions are subject
to brokers' commissions and charges.
Annual Expenses (as a percentage of net assets attributable to common shares)
- --------------
Management and administrative fees 0.89%
Other Expenses 0.11%
Total Annual Expenses 1.00%
Example: You would pay the following expenses on an investment
(at net asset value) of $1,000, assuming a 5% annual return.
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
$10 $32 $55 $122
These figures are intended to illustrate the effect of All-Star's expenses,
but are not meant to predict its future returns and expenses, which may be
higher or lower than those shown.
The purpose of the above tables is to assist investors in understanding the
various costs and expenses that an investor in All-Star will bear directly or
indirectly. The numbers shown under the Annual Expenses table are projections
based on All-Star's actual expenses, adjusted to reflect current fees, for the
year ended December 31, 1997 and on its projected net assets giving effect to
completion of the Offer, and are shown as a percentage of net assets.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information included elsewhere in this Prospectus.
Purpose of the Offer
The Board of Trustees has determined that it would be in the best interest
of All-Star and its shareholders to increase the assets of All-Star available
for investment. The Offer seeks to reward investors in All-Star by giving
existing shareholders the opportunity to purchase additional Shares at a price
below market value and without brokerage commissions. See "The Offer-Purpose of
the Offer".
Terms of the Offer
Liberty All-Star Equity Fund ("All-Star") is issuing to its shareholders of
record as of the close of business on March , 1998 (the "Record Date") rights
("Rights") to subscribe for an aggregate of 4,318,134 shares (sometimes referred
to herein as the "Shares") of beneficial interest in All-Star. Each such
shareholder is being issued one Right for each full share of beneficial interest
owned on the Record Date. The Rights entitle the holder to acquire, at the
Subscription Price (as hereinafter defined), one Share for each twenty Rights
held. Rights may be exercised at any time during the period (the "Subscription
Period") which commences on the date of this Prospectus and ends at 5:00 p.m.,
New York time, on April , 1998 (the "Expiration Date"). The right to acquire
during the Subscription Period at the Subscription Price one additional Share
for each twenty Rights held is hereinafter referred to as the "Primary
Subscription."
In addition, any shareholder who fully exercises all Rights issued to him
or her (other than those Rights which cannot be exercised because they represent
the right to acquire less than one Share) is entitled to subscribe for Shares
which were not otherwise subscribed for by others on Primary Subscription (the
"Over-Subscription Privilege"). For purposes of determining the number of Shares
a shareholder may acquire pursuant to the Offer, broker-dealers whose shares are
held of record by Cede & Co., Inc. ("Cede"), nominee for Depository Trust
Company, or by any other depository or nominee will be deemed to be the holder
of the Rights that are issued to Cede or such other depository or nominee.
Shares acquired pursuant to the Over-Subscription Privilege are subject to
allotment, which is more fully discussed under "The Offer--Over-Subscription
Privilege."
The subscription price per Share (the "Subscription Price") will be 95% of
the lower of (i) the last reported sale price on the New York Stock Exchange on
April , 1998 (the "Pricing Date") of a share of beneficial interest of All-Star,
or (ii) the net asset value of a share of All-Star on the Pricing Date. Since
the Expiration Date is prior to the Pricing Date, shareholders who choose to
exercise their Rights will not know at the time they exercise such Rights what
the purchase price for Shares acquired pursuant to such exercise will be.
Shareholders will have no right to rescind their subscription after receipt of
their payment for Shares by the Subscription Agent. Subscription payments will
be held by the Subscription Agent pending completion of the processing of the
subscription. No interest thereon will be paid to subscribers.
The Rights are not transferable. Therefore, only the underlying Shares, and
not the Rights, will be admitted for trading on the New York Stock Exchange.
Since fractional shares will not be issued on exercise of Rights, shareholders
who receive, or are left with, fewer than 20 Rights will be unable to exercise
such Rights and will not be entitled to receive any cash in lieu of fractional
shares.
Shareholders' inquiries about the Offer should be directed to:
Liberty All-Star Equity Fund
1-800-542-3863
Important Dates to Remember
Event Date
- ----- ----
Record Date........... March , 1998
Subscription
Period.............. March , 1998 through
April , 1998
Expiration of
the Offer........... April , 1998
Pricing Date.......... April , 1998
Confirmation .........
to Participants..... May , 1998
Final Payment for
Shares May , 1998
Information about All-Star
All-Star is a multi-managed diversified closed-end management investment
company that allocates its assets on an approximately equal basis among a number
of independent investment management organizations (currently five in number)
each having a different investment style. See "The Multi-Manager Concept".
All-Star's investment objective is to seek total investment return, comprised of
long-term capital appreciation and current income, through investment primarily
(at least 65% of total assets under normal conditions) in a diversified
portfolio of equity securities. The portion of All-Star's portfolio not invested
in equity securities (not more than 35% of total assets under normal conditions)
is invested in Short-Term Money Market Instruments. See "Investment Objective
and Policies".
All-Star commenced investment operations in November 1986. Its outstanding
shares of beneficial interest are listed and traded on the New York Stock
Exchange (Symbol USA). The average weekly trading volume of the shares on the
New York Exchange during the year ended December 31, 1997 was 109,226 shares. As
at March , 1998 All-Star's net assets were $___________ and 86,362,669 shares of
All-Star were issued and outstanding.
Information about the Fund Manager
Liberty Asset Management Company (the "Fund Manager") provides Portfolio
Manager selection, evaluation and monitoring services to All-Star, and is
responsible for the provision of administrative services to the Fund, some of
which are delegated to the Fund Manager's affiliate, Colonial Management
Associates, Inc. ("Colonial"). All-Star pays the Fund Manager a monthly fund
management fee at an annual rate of 0.80% of All-Star's average weekly net asset
value up to $400 million, 0.72% of such net asset value exceeding $400 million
up to $800 million, 0.648% of such net asset value exceeding $800 million up to
$1.2 billion, and 0.584% of such net asset value over $1.2 billion. From such
amounts the Fund Manager pays the Portfolio Managers a portfolio management fee
at 50% of the above rates in proportion to the portions of All-Star's investment
portfolio managed by them. All-Star also pays the Fund Manager a monthly
administration fee at an annual rate of 0.20% of its average weekly net asset
value up to $400 million, 0.18% of such net asset value exceeding $400 million
up to $800 million, 0.162% of such net asset value exceeding $800 million up to
$1.2 billion, and 0.146% of such net asset value over $1.2 billion. The fund
management and administration fees payable by All-Star are, in the aggregate,
higher than those of most other investment companies. Since the fees of the Fund
Manager and the Portfolio Managers are based on the average weekly net assets of
All-Star, the Fund Manager and the Portfolio Managers will benefit from the
Offer.
The Fund Manager, organized in 1985, is an indirect wholly-owned subsidiary
of Liberty Financial Companies, Inc. Approximately ___% of the outstanding
shares common stock of Liberty Financial Companies, Inc. are owned by Liberty
Mutual Insurance Company, and the remaining shares are listed on the New York
Stock Exchange.
Special Considerations and Risk Factors
The following summarizes certain matters that should be considered, among
others, in connection with the Offer.
Dilution............. As a result of the terms of the
Offer, shareholders who do not
fully exercise their Rights should
expect that they will, at the
completion of the Offer, own a
smaller proportional interest in
All-Star than if they fully
exercise their Rights. In
addition, some dilution of the
aggregate net asset value of the
shares owned by shareholders who do
not fully exercise their Rights
will be experienced as a result of
the Offer because the Subscription
Price will be less than the net
asset value per share and therefore
the number of shares outstanding
after the Offer will increase by a
greater percentage than the
increase in All-Star's assets.
Although it is not possible to
state precisely the amount of such
dilution because it is not known at
this time how many shares will be
subscribed for or what the net
asset value or market price per
share will be on the Pricing Date,
All-Star estimates that such
dilution should not be
substantial. For example, if the
Subscription Price per Share is 95%
of All-Star's net asset value per
share of $__________ on March ,
1998 and assuming all Rights are
exercised, All-Star's net asset
value per share would be reduced by
approximately $.__ per share as of
that date, or less than ___%.
Anti-takeover
Provisions........ All-Star's Declaration of
Trust has provisions (commonly
referred to as "anti-takeover
provisions") which are intended to
have the effect of limiting the
ability of other entities or
persons to acquire control of
All-Star or to cause it to engage
in certain transactions. For
instance, the vote of the holders
of 75% of the outstanding shares is
required to authorize All-Star's
conversion from a closed-end to an
open-end investment company, unless
such conversion is recommended by
All-Star's Board of Trustees, in
which event such conversion would
only require the majority vote of
All-Star's shareholders, as defined
in the Investment Company Act of
1940 (the "1940 Act"). Certain
merger, sale of assets or similar
transactions with persons owning
five percent or more of All-Star's
shares, unless approved by
All-Star's Board of Trustees, would
require a similar 75% vote. These
provisions cannot be amended
without a similar super-majority
vote. In addition, All-Star's
Board of Trustees is divided into
three classes, each of which has a
term of three years and only one of
which is elected at each annual
meeting of shareholders. See
"Description of Shares--Certain
Provisions of the Declaration of
Trust."
Distributions....... All-Star currently has a policy of paying distributions
on its common shares totalling approximately 10% of its
net asset value per year, payable in four quarterly
distributions of 2.5% of All-Star's net asset value at
the close of the New York Stock Exchange on the Friday
prior to each quarterly declaration date. If, for any
calendar year, the total distributions made under the 10%
pay-out policy exceed All-Star's net investment income
and net realized capital gains, the excess will generally
be treated as a tax-free return of capital to
shareholders (up to the amount of the shareholder's basis
in his or her shares), and thereafter as gain from the
sale of shares. All-Star made distributions from capital
in 1987, 1988, 1989, 1990, 1992, 1993 and 1994 (see
"Financial Highlights"). The amount treated as a tax-free
return of capital will reduce the shareholder's adjusted
basis in his or her shares, thereby increasing his or her
potential gain or reducing his or her potential loss on
the sale of his or her shares. Such excess, however, will
be treated first as ordinary dividend income up to the
amount of All-Star's current and accumulated earnings and
profits, and then as return of capital and capital gain
as set forth above.
All-Star may, in the discretion of the Board of Trustees,
retain for reinvestment net long-term capital gains in
excess of net short-term capital losses for any year to
the extent that its net investment income, net short-term
realized gains, and net long-term realized gains
exceed the minimum amount required to be distributed for
such year under the 10% pay-out policy. Such retained
capital gains will be taxed to both All-Star and the
shareholders as long-term capital gains; however
shareholders will be able to claim their proportionate
share of the federal income taxes paid by All-Star as
a credit against their own federal income tax
liabilities, and will be entitled to increase
the adjusted tax basis of their All-Star shares by the
difference between their pro rata share of the
undistributed capital gains and their tax credit. See
"Distributions; Automatic Dividend Reinvestment and Cash
Purchase Plan".
Closed-end fund
discounts.......... Shares of closed-endinvestment companies such as
All-Star are not redeemable and frequently trade at a
discount from their net asset value. See "Share Price
Data."
FINANCIAL HIGHLIGHTS
The following information as to per share operating performance, total
investment return and ratios for each of the ten years ended December 31, 1997
has been audited by KPMG Peat Marwick LLP, Boston, Massachusetts, independent
auditors. The report of KPMG Peat Marwick LLP, together with the financial
statements of All-Star, are included in the Statement of Additional Information
(see cover page).
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
---------------------------------------------------------------
PER SHARE
OPERATING
PERFORMANCE:
Net asset
value at
beginning
of year $11.95 $11.03 $9.26 $10.40 $10.78 $11.20 $8.92 $9.58 $8.29 $7.90
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from Investment Operations:
Net investment
income 0.05 0.08 0.10 0.11 0.12 0.16 0.17 0.18 0.19 0.16
Net realized
and unrealize
gain (loss)on
investments 3.01(a) 2.15(a) 2.71 (0.20) 0.78(a) 0.54 3.13 0.06 2.05 0.87
Provision for
federal income
tax (0.36) (0.13) -- -- (0.18) -- -- -- -- --
------ ----- ---- ---- ------ ----- ---- ---- ---- -----
Total from
Investment
Operation 2.70 2.10 2.81 (0.09) 0.72 0.70 3.30 0.24 2.24 1.03
Less Distributions:
Dividends
from net
investment
income (0.05) (0.08) (0.10) (0.12) (0.12) (0.18) (0.15)(0.20)(0.20)(0.16)
Distributions
from realized
capital
gains (1.28) (1.10) (0.94) (0.52) (0.58) (0.66) (0.87)(0.47)(0.31) --
Returns of
capital -- -- -- (0.36) (0.37) (0.23) -- (0.23) (0.44) (0.48)
---- ----- ----- ------ ----- ----- ----- ----- ------ -----
Total Dis-
tributions (1.33) (1.18) (1.04) (1.00) (1.07) (1.07) (1.02) (0.90)(0.95)(0.64)
----- ------ ---- ------ ----- ----- ------ ----- ----- ------
Change due to
rights
offerings(b) -- -- -- (0.05) (0.03) (0.05) -- -- -- --
---- ---- ---- ----- ----- ----- ----- ---- ---- -----
Net asset
value
at end
of year $13.32 $11.95 $11.03 $9.26 $10.40 $10.78 $11.20 $8.92 $9.58 $8.29
====== ====== ====== ===== ====== ====== ====== ===== ===== ======
Per share
market value
at end of
year $13.313 $11.250 $10.875 $8.500 $11.125 $11.125 $10.750 $7.750 $8.250 $7.250
======= ======= ======= ====== ======= ======= ======= ====== ====== ======
TOTAL INVESTMENT RETURN FOR SHAREHOLDERS:(C)
Based on
net
asset
value 26.6% 21.7% 31.8% (0.08)% 8.8% 6.9% 39.3% 4.2% 30.0% 14.6%
Based on
market
price 34.4% 16.2% 41.4% (14.9)% 12.7% 14.9% 53.9% 5.1% 28.0% 32.0%
RATIOS AND SUPPLEMENTAL DATA:
Net assets
at end
of year
(millions) $1,15 $988 $872 $710 $725 $665 $601 $479 $514 $445
Ratio of
expenses
to average
net assets 1.01% 1.03% 1.06% 1.07% 1.08% 1.44% 1.16% 1.23% 1.25% 1.33%
Ratio of
net
investment
income to
average
net
assets 0.38% 0.73% 0.92% 1.16% 1.08% 1.44% 1.66% 1.98% 2.07% 1.96%
Portfolio
turnover
rate 99% 70% 54% 44% 72% 72% 70% 57% 68% 73%
Average
commission
rate(d) $0.05 $0.053 -- -- -- -- -- -- -- --
(a) Before provision for federal income tax.
(b) Effect of All-Star's rights offering for shares at a
price below net asset value.
(c) Calculated assuming all distributions reinvested and
all rights exercised.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
SHARE PRICE DATA
Trading in All-Star's shares on the New York Stock Exchange commenced on
October 24, 1986. For the two years ended December 31, 1997 the high and low
sales prices for All-Star's shares, as reported in the consolidated transaction
reporting system, and the highest discount from or premium to net asset value
per share and the net asset value on the day or days when the shares traded at
such high and low sales prices, were as follows:
=============================================================
=============================================================
(Dis- (Dis-
count count
from) from)
or or
Premium Premium
High Net to Net Low Net to Net
Sales Asset Asset Sales Asset Asset
Price Value Value Price Value Value
=============================================================
1996
=============================================================
1st $11.500 $11.42 0.70% $10.500 $10.63 (1.22)%
Quarter
- ------------------------------------------------------------
2nd $11.625 $11.56 0.56% $10.625 $11.47 (7.37)%
Quarter
- ------------------------------------------------------------
3rd $11.125 $11.51 (3.34)% $9.500 $10.64 (10.71)%
Quarter
- ------------------------------------------------------------
4th $11.625 $12.37 (6.02)% $10.875 $11.82 (7.99)%
Quarter
=============================================================
1997
=============================================================
1st $12.125 $11.98 1.21% $11.125 $11.86 (6.20)%
Quarter
- ------------------------------------------------------------
2nd $13.000 $13.31 (2.33)% $11.500 $11.66 (1.37)%
Quarter
- ------------------------------------------------------------
3rd $14.250 $14.01 1.71% $12.875 $13.80 (6.70)%
Quarter
=============================================================
4th $14.750 $14.34 2.86% $11.750 $13.59 (13.54)%
Quarter
=============================================================
Certain features of and steps taken by All-Star may have tended to reduce
the discount from net asset value at which its shares might otherwise have
traded and, for some periods, to cause its shares to trade at a premium over net
asset value, although All-Star is not able to determine what effect, if any,
these various features and steps may have had. All-Star's current 10%
distribution policy (see "Distributions; Automatic Dividend Reinvestment and
Cash Purchase Plan-10% Distribution Policy"), begun in July, 1988, may have
contributed to this effect. This trend may also have resulted in whole or in
part from other factors, such as the Fund's investment performance and increased
attention directed to All-Star by securities analysts and market letters. In
addition, when All-Star's shares are trading at a discount, distributions
declared payable in cash to participants in the Automatic Dividend Reinvestment
and Cash Purchase Plan are used to acquire shares of the Fund on the New York
Stock Exchange. These purchases may have tended temporarily to increase the
market price of All-Star's shares.
The net asset value of a share of All-Star on March , 1998 was $----------.
The last reported sale price of and All-Star share on that day was $-----------,
representing a [premium to][discount from] net asset value of ____%
INVESTMENT PERFORMANCE
The table below shows two measures of All-Star's return to investors for
various periods beginning December 31, 1988 through December 31, 1997. No. 1
("All-Star NAV") shows All-Star's investment performance based on a valuation of
its shares at net asset value ("NAV"). No. 2 ("All-Star Price") shows All-Star's
investment performance based on the market price of All-Star's shares. Both
measures assume reinvestment of all of the Fund's dividends and distributions in
additional shares pursuant to All-Star's Automatic Dividend Reinvestment and
Cash Purchase Plan (see "Distributions; Automatic Dividend Reinvestment and Cash
Purchase Plan" below), and full exercise of primary subscription rights in
All-Star's 1992, 1993 and 1994 rights offerings.
The Lipper Growth and Income Fund Average has been included so that the
Fund's results may be compared with an unweighted average of the total return of
mutual funds classified as growth and income funds (i.e. mutual funds having
investment objectives and policies comparable to All-Star) published by Lipper
Analytical Services, Inc. The record of the S&P 500 Index has also been included
so that All-Star's results may be compared with those of an unmanaged group of
securities widely regarded by investors as representative of the stock market in
general. The S&P 500 Index information reflects the total return (change in the
market price) of the securities included in the index, and the Lipper Growth and
Income Fund Average information reflects the total return (change in net asset
value) of the mutual funds included in the average, in each case assuming
reinvestment of dividends and distributions.
- -------------------------------------------------------------
Lipper
Growth &
All-Star All-Star Income S&P 500
NAV Price Fund Index
Average
-----------------------------------------------
-----------------------------------------------
1 Year Since
12/31/96 26.6% 34.4% 27.1% 33.4%
- -------------------------------------------------------------
- -------------------------------------------------------------
2 Years
Since 24.2% 25.0% 23.9% 28.1%
12/31/95
- -------------------------------------------------------------
- -------------------------------------------------------------
3 Years
Since 26.6% 30.2% 26.1% 31.1%
12/31/94
- -------------------------------------------------------------
- -------------------------------------------------------------
4 Years
Since 19.1% 17.1% 18.6% 22.9%
12/31/93
- -------------------------------------------------------------
- -------------------------------------------------------------
5 Years
Since 17.0% 16.2% 17.1% 20.2%
12/31/92
- -------------------------------------------------------------
- -------------------------------------------------------------
6 Years
Since 15.2% 16.0% 15.6% 18.0%
12/31/91
- -------------------------------------------------------------
- -------------------------------------------------------------
7 Years
Since 18.4% 20.8% 17.4% 19.7%
12/31/90
- -------------------------------------------------------------
- -------------------------------------------------------------
8 Years
Since 16.5% 18.7% 14.4% 16.6%
12/31/89
- -------------------------------------------------------------
- -------------------------------------------------------------
9 Years
Since 18.0% 19.7% 15.3% 18.2%
12/31/88
- -------------------------------------------------------------
- -------------------------------------------------------------
10 Years
Since 17.6% 20.9% 15.2% 18.0%
12/31/87
- -------------------------------------------------------------
- -----------------
* Average annual return for the period indicated to
December 31, 1997.
The above results represent All-Star's past performance and are not
intended as a prediction of its future performance. The investment return, net
asset value and market value of All-Star's shares will fluctuate, so that such
shares when sold may be worth more or less than their original cost.
THE OFFER
Terms of the Offer
All-Star is issuing to the holders of its shares of beneficial interest of
record on the Record Date Rights to subscribe for the Shares. Each such
shareholder is being issued one Right for each share of beneficial interest
owned on the Record Date. The Rights entitle the holder to acquire on Primary
Subscription at the Subscription Price one Share for each twenty Rights held. No
Rights will be issued for fractional shares. Rights may be exercised at any time
during the Subscription Period, which commences on the date of this Prospectus
and ends at 5:00 p.m., New York time, on April , 1998 (the "Expiration Date").
In addition, any shareholder who fully exercises all Rights initially
issued to him (other than those Rights which cannot be exercised because they
represent the right to acquire less than one Share) is entitled to subscribe for
Shares which were not otherwise subscribed for by others on Primary
Subscription. Shares acquired pursuant to the Over-Subscription Privilege are
subject to allotment, which is more fully discussed below under
"Over-Subscription Privilege."
For purposes of determining the maximum number of Shares a shareholder may
acquire pursuant to the Offer, broker-dealers whose shares are held of record on
the Record Date by Cede or by any other depository or nominee will be deemed to
be the holders of the Rights that are issued to Cede or such other depository or
nominee on their behalf.
The Rights are not transferable. Therefore, only the underlying Shares, and
not the Rights, will be admitted for trading on the New York Stock Exchange.
Since fractional shares will not be issued, shareholders who receive, or who are
left with, fewer than twenty Rights will be unable to exercise such Rights and
will not be entitled to receive any cash in lieu of such fractional
shares.
Purpose of the Offer
The Board of Trustees of All-Star has determined that it would be in the
best interests of All-Star and its shareholders to increase the assets of
All-Star available for investment, and that the potential benefits of the Offer
to All-Star and its shareholders will outweigh the dilution to shareholders who
do not fully exercise their rights. The proceeds of the Offer will enable
All-Star's Portfolio Managers to take advantage of perceived investment
opportunities without having to sell existing portfolio holdings which they
otherwise would retain. The Offer seeks to reward investors by giving existing
shareholders the opportunity to purchase additional Shares at a price below
market value and without brokerage commissions. In addition, the Offer will
enhance the likelihood that All-Star will continue to have sufficient assets
remaining after the distributions called for by its current 10% distribution
policy to permit the Fund to maintain the current ratio of its fixed expenses to
its net assets.
All-Star's Fund Manager and Portfolio Managers will benefit from the Offer
because their fees are based on the average weekly net assets of All-Star. See
"Management of All-Star". It is not possible to state precisely the amount of
additional compensation they will receive as a result of the Offer because it is
not known how many Shares will be subscribed for and because the net proceeds of
the Offer will be invested in additional portfolio securities that will
fluctuate in value. One of All-Star's Trustees who voted to authorize the Offer
is an "interested person", within the meaning of the 1940 Act, of the Fund
Manager, and therefore could benefit indirectly from the Offer. The other three
Trustees are not "interested persons" of All-Star.
All-Star may, in the future and at its discretion, choose to make
additional rights offerings from time to time for a number of shares and on
terms which may or may not be similar to the Offer. Any such future rights
offering will be made in accordance with the 1940 Act. In 1992, All-Star
completed a rights offering to shareholders of 5,464,168 additional shares at a
subscription price of $10.05 per share, for proceeds to the Fund after expenses
of $54,683,782. In 1993, All-Star completed a second rights offering to
shareholders of 4,227,570 additional shares at a subscription price of $10.41
per share, for proceeds to the Fund after expenses of $43,759,004. In 1994,
All-Star completed a third rights offering to shareholders of 4,704,931
additional shares at a subscription price of $9.14 per share, for proceeds to
the Fund after expenses of $42,793,069. All three rights offerings were fully
subscribed.
Over-Subscription Privilege
If some shareholders do not exercise all of their Rights, the remaining
unsubscribed Shares ("Excess Shares") will be offered, by means of the
Over-Subscription Privilege, to holders of Rights who have exercised all the
Rights issued to them and who wish to acquire more than the number of Shares to
which their Rights entitle them. Holders of Rights who exercise all their Rights
(other than those Rights which cannot be exercised because they represent the
right to acquire less than one Share) will have the opportunity to indicate on
their Subscription Certificate how many Shares they are willing to acquire
pursuant to this Over-Subscription privilege. If there are sufficient Excess
Shares, all over-subscriptions will be honored in full. If the Excess Shares are
insufficient to honor all over-subscriptions, the available Excess Shares will
be allocated pro rata (subject to the elimination of fractional Shares) among
those holders of Rights exercising the Over-Subscription privilege, in
proportion, not to the number of Shares requested pursuant to the
Over-Subscription Privilege, but to the number of shares held on the Record
Date; provided, however, that if such pro rata allocation results in any holder
being allocated a greater number of Excess Shares than such holder subscribed
for pursuant to the exercise of such holder's Over-Subscription Privilege, then
such holder will be allocated only such number of Excess Shares as such holder
subscribed for and the remaining Excess Shares will be allocated among all other
holders exercising Over-Subscription Privileges. The formula to be used in
allocating the Excess Shares is as follows:
Holder's Record Date Position
-----------------------------
Total Record Date Position x Excess Shares
of all Oversubscribers Remaining
The Fund will not offer or sell any Shares which are not subscribed for
under the Primary Subscription or the Over-Subscription Privilege.
The Subscription Price
The Subscription Price for the Shares to be issued pursuant to the Rights
will be 95% of the lower of (i) the last reported sale price of a share of
beneficial interest of All-Star on the New York Stock Exchange on April , 1998
(the "Pricing Date"), or (ii) the net asset value of a share of All-Star on the
Pricing Date.
All-Star announced the terms of the Offer before the opening of trading on
the New York Stock Exchange on December 19, 1997. The net asset value per share
of All-Star at the close of business on December 18, 1997 and on March , 1998
was $13.35 and $_________, respectively, and the last reported sale price of a
share on such Exchange on those dates was $13.3125 and $_________, respectively.
Expiration of the Offer
The Offer will expire at 5:00 p.m., New York time, on April , 1998 (the
"Expiration Date"). Rights will expire on the Expiration Date and thereafter may
not be exercised. Since the Expiration Date is prior to the Pricing Date,
shareholders who decide to acquire Shares on Primary Subscription or pursuant to
the Over-Subscription Privilege will not know, when they make such decision,
what the purchase price for such Shares will be.
Subscription Agent
The Subscription Agent is State Street Bank and Trust Company, P.O. Box
8200, Boston, Massachusetts 02266-8200. The Subscription Agent will receive from
All-Star a fee estimated to be $____________ and reimbursement for its
out-of-pocket expenses related to the Offer. Inquiries by all holders of Rights
should be directed to P.O. Box 9061, Boston, Massachusetts 02205-8686 (telephone
1-800-542-3863); holders may also consult their brokers or nominees.
Method of Exercise of Rights
Rights may be exercised by filling in and signing the Subscription
Certificate and mailing it in the envelope provided, or otherwise delivering the
completed and signed Subscription Certificate to the Subscription Agent,
together with payment for the Shares as described below under "Payment for
Shares." Rights may also be exercised through a Rights holder's broker, who may
charge such Rights holder a servicing fee in connection with such exercise.
Fractional Shares will not be issued, and Rights holders who receive, or who are
left with, fewer than twenty Rights will not be able to exercise such Rights.
Completed Subscription Certificates must be received by the Subscription
Agent prior to 5:00 p.m., New York time, on the Expiration Date (unless payment
is effected by means of a notice of guaranteed delivery as described below under
"Payment for Shares"). The Subscription Certificate and payment should be
delivered to STATE STREET BANK AND TRUST COMPANY, Attention: Corporate
Reorganization Department, at the following address:
If by Mail: If by Overnight Courier:
- ---------- ----------------------
P.O. Box 9061 Corporate Reorganization Department
Boston, Massachusetts 02205 70 Campanelli Drive
Braintree, Massachusetts 02184
If By Hand:
- ----------
225 Franklin Street
Concourse Level
Boston, Massachusetts 02110
or
Securities Transfer and Reporting Services, Inc.
One Exchange Place
55 Broadway, 3rd Floor
New York, New York 10006
Delivery by any method or to any address not listed above will not
constitute good delivery.
Payment for Shares
Holders of Rights who acquire Shares on Primary Subscription or pursuant to
the Over-Subscription Privilege may choose between the following methods of
payment:
(1) If, prior to 5:00 p.m., New York time, on the Expiration Date, the
Subscription Agent shall have received a notice of guaranteed delivery by
telegram or otherwise, from a bank or trust company or a New York Stock
Exchange member firm, guaranteeing delivery of (a) payment of the full
Subscription Price for the Shares subscribed for on Primary Subscription
and any additional Shares subscribed for pursuant to the Over-Subscription
Privilege and (b) a properly completed and executed Subscription
Certificate, the subscription will be accepted by the Subscription Agent.
The Subscription Agent will not honor a notice of guaranteed delivery if a
properly completed and executed Subscription Certificate is not received by
the Subscription Agent by the close of business on the ____th business day
after the Expiration Date and full payment for the Shares is not received
by it by the close of business on the __th business day after the
Confirmation Date (as defined below).
(2) Alternatively, a holder of rights can, together with the
Subscription Certificate, send payment for the Shares acquired on Primary
Subscription and any additional shares subscribed for pursuant to the
Over-Subscription Privilege to the Subscription Agent based on an estimated
purchase price of $___ per Share. To be accepted, such payment, together
with the Subscription Certificate, must be received by the Subscription
Agent prior to 5:00 p.m., New York time, on the Expiration Date.
A PAYMENT BY CHECK OR MONEY ORDER, PURSUANT TO THE SECOND METHOD DESCRIBED
ABOVE, MUST ACCOMPANY ANY SUBSCRIPTION CERTIFICATE FOR SUCH EXERCISE TO BE
ACCEPTED. The check or money order must be drawn on a bank located in the United
States and must be made payable to Liberty All-Star Equity Fund.
Within ____ business days following the Pricing Date (the "Confirmation
Date"), a confirmation will be sent by the Subscription Agent to each
shareholder exercising his or her Rights (or, if the All-Star shares on the
Record Date are held by Cede or any other depository or nominee, to Cede or such
other depository or nominee), showing (i) the number of Shares acquired pursuant
to the Primary Subscription; (ii) the number of Shares, if any, acquired
pursuant to the Over-Subscription Privilege; (iii) the per Share and total
purchase price for the Shares; and (iv) any additional amount payable by such
shareholder to All-Star or any excess to be refunded by All-Star to such
shareholder, in each case based on the Subscription Price as determined on the
Pricing Date. Any additional payment required from a shareholder must be
received by the Subscription Agent within __ business days after the
Confirmation Date, and any excess payment to be refunded by All-Star to such
shareholder will be mailed by the Subscription Agent to him or her as soon as
practicable but no later than 20 business days after the Expiration Date. All
payments by a shareholder must be in United States dollars by money order or
check drawn on a bank located in the United States of America and be payable to
Liberty All-Star Equity Fund. Such payments will be held by the Subscription
Agenda pending completion of the processing of the subscription, and will then
be paid to All-Star. Any interest earned on such amounts will accrue to All-Star
and none will be paid to the subscriber.
Whichever of the above two methods of payment is used, issuance and
delivery of the Shares subscribed for are subject to collection of checks and
actual payment pursuant to any notice of guaranteed delivery.
Rights holders will have no right to rescind their subscription after
receipt of their payment for Shares by the Subscription Agent.
If a holder of Rights who acquires Shares pursuant to the Primary
Subscription or the Over-Subscription Privilege does not make payment of any
amounts due, All-Star reserves the right to take any or all of the following
actions: (i) find other purchasers for such subscribed and unpaid for Shares;
(ii) apply any payment actually received by it toward the purchase of the
greatest number of whole Shares which could be acquired by such holder upon
exercise of the Primary Subscription or the Over-Subscription Privilege; (iii)
sell in the open market all or a portion of the Shares purchased by the holder,
and apply the proceeds to the amounts owed; and (iv) exercise any and all other
rights or remedies to which it may be entitled, including, without limitation,
the right to set off against payments actually received by it with respect to
such subscribed Shares to enforce the relevant guaranty of payment or monetary
damages.
Holders who hold All-Star shares for the account of others, such as
brokers, trustees or depositories for securities, should notify the respective
beneficial owners of such shares as soon as possible to ascertain such
beneficial owners' intentions and to obtain instructions with respect to the
Rights. If the beneficial owner so instructs, the record holder of such Right
should complete Subscription Certificates and submit them to the Subscription
Agent with the proper payment. In addition, beneficial owners of shares or
Rights held through such a holder should contact the holder and request the
holder to effect transactions in accordance with the beneficial owner's
instructions.
The instructions accompanying the Subscription Certificate should be read
carefully and followed in detail. DO NOT SEND SUBSCRIPTION CERTIFICATES TO
All-Star. (They should be sent to State Street Bank and Trust Company as
indicated above).
Delivery of Share Certificates
Participants in All-Star's Automatic Dividend Reinvestment and Cash
Purchase Plan (the "Plan") who exercise the Rights issued on the shares held in
their accounts in the Plan will have their Shares acquired on Primary
Subscription and pursuant to the Over-Subscription Privilege credited to their
shareholder distribution reinvestment accounts in the Plan, unless they request
on their Subscription Certificate issuance of stock certificates for the Shares
so acquired. Shareholders whose shares are held of record by Cede or by any
other depository or nominee on their behalf or their broker-dealers' behalf will
have their Shares acquired on Primary Subscription and pursuant to the
Over-Subscription Privilege credited to the account of Cede or such other
depository or nominee. With respect to all other shareholders, share
certificates for all Shares acquired on Primary Subscription and pursuant to the
Over-Subscription Privilege will be mailed within fifteen business days after
the Confirmation Date, provided payment for the Shares subscribed for has
cleared, which clearance may take up to fifteen days from the date of receipt of
the payment. If such payment does not clear within fifteen days from the date of
receipt, All-Star may exercise its rights in the event of non-payment under
"Payment for Shares" above.
Federal Income Tax Consequences
For federal income tax purposes, neither the receipt nor the exercise of
the Rights will result in taxable income to holders of shares, and no loss will
be realized if the Rights expire without being exercised. All-Star will realize
no gain or loss on the issuance, exercise or expiration of the Rights.
The holding period for a Share acquired upon exercise of a Right begins
with the date of exercise. In the absence of a special election by the
shareholder, the shareholder's basis for determining gain or loss upon the sale
of that Share will be the per share Subscription Price. The gain or loss
recognized upon such sale will be capital gain or loss if the Share was held as
a capital asset at the time of sale taxable, in the case of noncorporate
shareholders, at a maximum rate of 20% if the shareholder's holding period for
the Share is more than eighteen months, or 28% if the shareholder's holding
period for the Share is more than twelve months but less than or equal to
eighteen months.
The foregoing does not cover the state or local tax consequences of
receiving or exercising a Right. The foregoing is intended solely as general
information, based on the Internal Revenue Code, applicable regulations and
judicial precedent as of the date hereof, and each shareholder is advised to
consult his or her own tax adviser regarding tax consequences.
Special Considerations and Risk Factors
As a result of the terms of the Offer, shareholders who do not exercise
their Rights will, at the completion of the Offer, own a smaller proportional
interest in All-Star. In addition, because the Subscription Price will be less
than the then current net asset value per Share, the Offer will result in a
dilution of net asset value, which will disproportionately affect shareholders
who do not exercise their Rights.
Possible Suspension of the Offer
All-Star has, as required by the Securities and Exchange Commission's
registration form, undertaken to suspend the Offer until it amends this
Prospectus if subsequent to March __, 1998,- the effective date of the Fund's
Registration Statement,- All-Star's net asset value declines more than 10% from
its net asset value as of March , 1998. Accordingly, All-Star will notify
shareholders of any such decline and thereby permit them to cancel their
exercise of Rights.
USE OF PROCEEDS
The net proceeds of the Offer, assuming that all Shares offered hereby are
sold at an assumed Subscription Price of $________ per share, are estimated to
be approximately $__________, after deducting expenses payable by All-Star
estimated at $________. Such net proceeds will be invested by All-Star's
Portfolio Managers in portfolio securities in accordance with All-Star's
investment objective and policies. It is anticipated that investment of such net
proceeds under normal market conditions will take place during a period of
approximately 30 days from their receipt by All-Star, and would in any event be
completed within three months. Pending such investment the net proceeds will be
invested in Short-Term Money Market Instruments (as defined under "Investment
Objective and Policies" below).
THE MULTI-MANAGER CONCEPT
All-Star allocates its portfolio assets on an approximately equal basis
among a number of independent investment management firms ("Portfolio
Managers"),currently five in number,- recommended by Liberty Asset Management
Company (the "Fund Manager"), each of which employs a different investment
style, and from time to time rebalances the portfolio among the Portfolio
Managers so as to maintain an approximately equal allocation of the portfolio
among them throughout all market cycles.
In the opinion of the Fund Manager, the multi-manager concept provides
advantages over the use of a single manager because of the following primary
factors:
(i) most equity investment management firms consistently employ a
distinct investment style which causes them to emphasize stocks with
particular characteristics;
(ii) because of changing investor preferences, any given investment
style will move into and out of market favor and will result in better
investment performance under certain market conditions but less successful
performance under other conditions;
(iii) consequently, by allocating All-Star's portfolio on an
approximately equal basis among Portfolio Managers employing different
styles, the impact of any one such style on investment performance will be
diluted, and the investment performance of the total portfolio will be more
consistent and less volatile over the long-term than if a single style were
employed throughout the entire period;
(iv) consistent performance at a given annual rate of return over time
produces a higher rate of return for the long-term than more volatile
performance having the same average annual rate of return.
The Fund Manager, based on the foregoing principles and on its analysis and
evaluation of information regarding the personnel and investment styles and
performance of a universe of several hundred professional investment management
firms, has selected for appointment by All-Star a group of Portfolio Managers
representing a blending of different investment styles which, in its opinion, is
appropriate to All-Star's investment objective.
The Fund Manager continuously monitors the performance and investment
styles of All-Star's Portfolio Managers and from time to time recommends changes
of Portfolio Managers based on factors such as changes in a Portfolio Manager's
investment style or a departure by a Portfolio Manager from the investment style
for which it had been selected, a deterioration in a Portfolio Manager's
performance relative to that of other investment management firms practicing a
similar style, or adverse changes in its ownership or personnel. Since inception
All-Star has had seven Portfolio Manager changes.
All-Star Portfolio Manager changes, as well as the periodic rebalancings of
its portfolio among the Portfolio Managers and the possible need to raise cash
for All-Star's quarterly distributions, may result in some portfolio turnover in
excess of what would otherwise be the case (see "Financial Highlights" above).
Increased portfolio turnover would cause increased brokerage commission costs to
the Fund, and may result in realization of capital gains, which are taxable to
shareholders.
Under the terms of an exemptive order issued to All-Star and the Fund
Manager by the Securities and Exchange Commission, a portfolio management
agreement with a new or additional Portfolio Manager may be entered into in
advance of shareholder approval, provided that the new agreement is at a fee no
higher than that provided in, and is on other terms and conditions substantially
similar to, All-Star's agreements with its other Portfolio Managers, and that
its continuance is subject to approval by shareholders at All-Star's regularly
scheduled annual shareholder meeting (normally held in April) next following the
date of the new or additional portfolio management agreement. Information about
Portfolio Manager changes or additions made in advance of shareholder approval
will be announced to the press following Board of Trustee action and will be
included in the next report to shareholders.
All-Star's current Portfolio Managers are:
J.P. Morgan Investment Management Inc.
Oppenheimer Capital
Palley-Needelman Asset Management, Inc.
Westwood Management Corporation
Wilke/Thompson Capital Management, Inc.
See Appendix A for information about these Portfolio Managers, including
the employees primarily responsible for the day-to-day management of the portion
of All-Star's portfolio allocated to each.
INVESTMENT OBJECTIVE AND POLICIES
All-Star's investment objective is to seek total investment return,
comprised of long-term capital appreciation and current income, through
investment primarily in a diversified portfolio of equity securities.
All-Star invests primarily in equity securities, defined as common stocks
and securities convertible into common stocks such as bonds and preferred
stocks, and securities having common stock characteristics such as warrants and
rights to purchase equity securities (although, as a non-fundamental policy, not
more than 35% of the value of All-Star's total assets will be invested in rights
and warrants). All-Star may lend its portfolio securities, write covered call
and put options and engage in options and futures strategies (see "Investment
Practices" below).
Although under normal circumstances All-Star will remain substantially
fully invested in equity securities, up to 35% of the value of All-Star's total
assets may be invested in Short-Term Money Market Instruments, including
certificates of deposit (negotiable certificates issued against bank deposits),
other interest-bearing bank deposits such as savings and money market accounts,
and bankers' acceptances (short-term bank-guaranteed credit instruments used to
finance transactions in goods) of domestic branches of U.S. banks having assets
of not less than $1 billion, obligations issued or guaranteed by the U.S.
Government and its agencies and instrumentalities ("U.S. Government
Securities"), commercial paper (unsecured short-term promissory notes issued by
corporations) rated not lower than A-1 by Standard and Poor's Corporation
("Standard & Poor's") or Prime-1 by Moody's Investors Service, Inc. ("Moody's"),
short-term corporate debt securities rated not lower than AA by Standard &
Poor's or Aa by Moody's, and repurchase agreements with respect to the
foregoing. All-Star may temporarily reduce its investments in equity securities
and invest without limit in Short-Term Money Market Instruments for defensive
purposes when LAMCO or the Portfolio Managers deem that market conditions are
such that a more conservative approach to investment is desirable.
All-Star's investment objective of seeking total investment return and its
policy of investing under normal market conditions at least 65% of the value of
its total assets in equity securities, as well as certain of its investment
restrictions referred to under Reducing Risk below and in the Statement of
Additional Information, are fundamental and may not be changed without a
majority vote of All-Star's outstanding shares. Under the 1940 Act, a "majority
vote" means the vote of the lesser of (a) 67% of the shares of All-Star
represented at a meeting at which the holders of more than 50% of the
outstanding shares of All-Star are present or represented, or (b) more than 50%
of the outstanding shares of All-Star.
Investment Practices
The following describes certain of the investment practices in which one or
more of All-Star's Portfolio Managers may engage, each of which may involve
certain special risks.
Lending of Portfolio Securities
Although All-Star has not to date engaged in securities lending, consistent
with applicable regulatory requirements, All-Star, in order to generate
additional income, may lend its portfolio securities (principally to
broker-dealers) where such loans are callable at any time and are continuously
secured by collateral (cash or U.S. Government Securities) equal to not less
than the market value, determined daily, of the securities loaned. All-Star
would receive amounts equal to the interest on the securities loaned. It will
also be paid for having made the loan. Any cash collateral pursuant to these
loans would be invested in Short-Term Money Market Instruments. All-Star could
be subjected to delays in recovering the loaned securities in the event of
default or bankruptcy of the borrower. All-Star will limit such lending to not
more than 30% of the value of All-Star's total assets. The Fund may pay fees to
its custodian bank or others for administrative services in connection with
securities loans.
Repurchase Agreements
All-Star may enter into repurchase agreements with banks or broker-dealer
firms whereby such institutions sell U.S. Government Securities or other
securities in which it may invest to All-Star and agree at the time of sale to
repurchase them at a mutually agreed upon time and price. The resale price is
greater than the purchase price, reflecting an agreed-upon interest rate which
is effective during the time between the purchase and resale and is not related
to the stated interest rate on the purchased securities. All-Star requires the
seller of the securities to maintain on deposit with All-Star's custodian bank
securities in an amount at all times equal to or in excess of the value of the
repurchase agreement. In the event that the seller of the securities defaults on
its repurchase obligation or becomes bankrupt, All-Star could receive less than
the repurchase price on the sale of the securities to another party or could be
subjected to delays in selling the securities. Under normal market conditions,
not more than 35% of All-Star's total assets will be invested in Short-Term
Money Market Instruments, including repurchase agreements, and not more than 10%
of All-Star's net assets will be invested in repurchase agreements maturing in
more than seven days.
Options and Futures Strategies
All-Star may seek to increase the current return of All-Star's portfolio
by writing covered call or put options with respect to the types of securities
in which All-Star is permitted to invest. Call options written by the Fund give
the purchaser the right for a stated period to buy the underlying securities
from All-Star at a stated price; put options written by the Fund give the
purchaser the right for a stated period to sell the underlying securities to
All-Star at a stated price. By writing a call option, All-Star limits its
opportunity to profit from any increase in the market value of the underlying
security above the exercise price of the option; by writing a put option,
All-Star assumes the risk that it may be required to purchase the underlying
security at a price in excess of its current market value.
All-Star may purchase put options to protect its portfolio holdings in the
underlying security against a decline in market value. It may purchase call
options to hedge against an increase in the prices of portfolio securities that
it plans to purchase. By purchasing put or call options, All-Star, for the
premium paid, acquires the right (but not the obligation) to sell (in the case
of a put option) or purchase (in the case of a call option) the underlying
security at the option exercise price, regardless of the then current market
price.
All-Star may also seek to hedge against declines in the value of securities
owned by it or increases in the price of securities it plans to purchase, or to
gain or maintain market exposure, through the purchase of stock index futures
and related options. For example, All-Star may purchase stock index futures and
related options to enable a newly appointed Portfolio Manager to gain immediate
exposure to underlying securities markets pending the investment of the portion
of All-Star portfolio assigned to it. A stock index future is an agreement in
which one party agrees to deliver to the other an amount of cash equal to a
specific dollar amount times the difference between the value of the specific
stock index at the close of the last trading day of the contract and the price
at which the agreement is made.
Expenses and losses incurred as a result of the hedging strategies
described above will reduce All-Star's current return.
Transactions in options and futures contracts may not achieve the intended
goals of protecting portfolio holdings against market declines or gaining or
maintaining market exposure, as applicable, to the extent that there is an
imperfect correlation between the price movements of the options and futures
contracts and those of the securities to be hedged. In addition, if a Portfolio
Manager's prediction on stock market movements is inaccurate, All-Star may be
worse off than if it had not engaged in such options or futures transactions.
See the Statement of Additional Information for additional information
concerning options and futures transactions and the risk thereof.
Risks
As an investment company that holds common stocks, All-Star's portfolio is
subject to the possibility that common stock prices will decline over short or
even extended periods. All-Star may remain substantially fully invested during
periods when stock prices generally rise and also during periods when they
generally decline. Risks are inherent in investment in equities, and investors
should be able to tolerate significant fluctuations in the value of their
investments. All-Star is intended to be a long-term investment vehicle and is
not designed to provide investors with a means of speculating on short-term
stock market movements. Investors should not consider the Fund a complete
investment program.
In addition to the foregoing investment risks, shares of closed-end
investment companies such as All-Star are not redeemable and frequently trade at
a discount from their net asset value. See "Share Price Data" for information
about the market price and net asset value of All-Star's shares since January 1,
1996.
Reducing Investment Risk
As a matter of fundamental policy, All-Star will not (i), as to 75% of its
total assets, purchase the securities (other than U.S. Government Securities) of
any one issuer if after such purchase more than 5% of its assets would be
invested in the securities of that issuer or if it would own more than 10% of
the outstanding voting securities of such issuer, (ii) invest more than 25% of
its assets in the securities of issuers conducting their principal business
activity in the same industry, or (iii) invest more than 10% of its net assets
in securities which are restricted or not readily marketable. See "Investment
Restrictions" in the Statement of Additional Information.
MANAGEMENT OF ALL-STAR
The management of All-Star's business and affairs is the responsibility of
its Board of Trustees.
All-Star has a Fund Management Agreement with Liberty Asset Management
Company (the "Fund Manager") pursuant to which the Fund Manager provides the
Portfolio Manager selection, evaluation, monitoring and rebalancing services
("investment management services") described above under "The Multi-Manager
Concept". No single individual at the Fund Manager is responsible for the Fund
Manager's management of All-Star.
The Fund Manager is also responsible for the provision of administrative
services to All-Star, including the provision of office space, shareholder and
broker-dealer communications, compensation of all officers of All-Star who are
officers or employees of the Fund Manager or its affiliates, and the supervision
of transfer agency, dividend disbursing, custodial and other services provided
to others. Certain of the Fund Manager's administrative responsibilities have
been delegated to Colonial.
The Fund Manager has its offices at 600 Atlantic Avenue, 23rd Floor,
Boston, Massachusetts 02210. The Fund Manager was organized in 1985 and is an
indirect wholly-owned subsidiary of Liberty Financial Companies, Inc., which in
turn is an indirect majority-owned subsidiary of Liberty Mutual Insurance
Company, an international multi-line insurance carrier.
Under All-Star's Portfolio Management Agreements with each of its Portfolio
Managers and the Fund Manager, each Portfolio Manager has discretionary
authority (including for the selection of brokers and dealers for the execution
of All-Star's portfolio transactions) with respect to the portion of All-Star's
assets allocated to it by the Fund Manager from time to time, subject to
All-Star's investment objective and policies, to the supervision and control of
the Trustees, and to instructions from the Fund Manager. As described under "The
Multi-Manager Concept", the Fund Manager from time to time reallocates
All-Star's portfolio assets in order to maintain an approximately equal
allocation of them among the Portfolio Managers and to preserve an approximately
equal weighting among the different investment styles practiced by the Portfolio
Managers. Although the Portfolio Managers' activities are subject to general
oversight by the Fund Manager and the Trustees and officers of All-Star, neither
the Fund Manager nor such Trustees and officers evaluate the investment merits
of the Portfolio Managers' selections of individual securities.
Although All-Star does not permit a Portfolio Manager to act or have a
broker-dealer affiliate act as broker for Fund portfolio transactions initiated
by it, All-Star's Portfolio Managers are permitted to place portfolio
transactions initiated by them with another Portfolio Manager or its
broker-dealer affiliate for execution on an agency basis, provided the
commission does not exceed the usual and customary broker's commission being
paid to other brokers for comparable transactions and is otherwise in accordance
with All-Star's procedures adopted under Rule 17e-1 under the 1940 Act.
All-Star's Fund Management Agreement with the Fund Manager and its
Portfolio Management Agreements with the Portfolio Managers and Fund Manager
provide that (i) All-Star pay the Fund Manager a fund management fee for its
investment management services at an annual rate of 0.80% of All-Star's average
weekly net asset value up to $400 million, 0.72% of such net asset value
exceeding $400 million up to $800 million, 0.648% of such net asset value
exceeding $800 million up to $1.2 billion, and 0.584% of such net asset value
over $1.2 billion; (ii) the Fund Manager then pay each Portfolio Manager at 50%
of the above rates in proportion to the portions of All-Star's investment
portfolio managed by it, and (iii) All-Star pay the Fund Manager a fee for
administrative services at an annual rate of 0.20% of All-Star's average weekly
net asset value up to $400 million, 0.18% of such net asset value exceeding $400
million up to $800 million, 0.162% of such net asset value exceeding $800
million up to $1.2 billion, and 0.146% of such net asset value over $1.2
billion.
Colonial provides pricing and bookkeeping services to All-Star for an
annual fee of $36,000 plus an annual asset-based fee of 0.0233% of net assets in
excess of $50 million, with breakpoint reductions at $500 million and $1
billion.
Custodian and Transfer Agent
Boston Safe Deposit and Trust Company, One Boston Place, Boston MA
02108-4402 is All-Star's custodian. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110 is the transfer and dividend
disbursing agent and registrar for All-Star.
Expenses of the Fund
The Fund Manager provides the Portfolio Manager selection, evaluation,
monitoring and rebalancing services and assumes responsibility for the
administrative services described above, and pays the compensation of and
furnishes office space for the officers of All-Star who are affiliated with the
Fund Manager and the management fees of the Portfolio Managers. All-Star pays
all its expenses, other than those expressly assumed by the Fund Manager. The
expenses payable by All-Star include: management and administrative fees payable
to the Fund Manager; pricing and bookkeeping fees payable to Colonial; fees and
expenses of independent auditors; fees for transfer agent and registrar,
dividend disbursing, custodian and portfolio recordkeeping services; expenses in
connection with the Automatic Dividend Reinvestment and Cash Purchase Plan;
expenses in connection with obtaining quotations for calculating the value of
All-Star's net assets; taxes (if any) and the preparation of All-Star's tax
returns; brokerage fees and commissions; interest; costs of trustee and
shareholder meetings (including expenses of printing and mailing proxy material
therefor); expenses of printing and mailing reports to shareholders; fees for
filing reports with regulatory bodies and the maintenance of All-Star's
existence; membership dues for investment company industry trade associations;
legal fees; stock exchange listing fees and expenses; fees to federal and state
authorities for the registration of shares; fees and expenses of Trustees who
are not directors, officers, employees or stockholders of the Fund Manager or
its affiliates; insurance and fidelity bond premiums; and any extraordinary
expenses of a non-recurring nature.
DESCRIPTION OF SHARES
General
All-Star's capitalization consists of an unlimited number of shares of
beneficial interest in All-Star without par value, of which 86,362,669 shares
were outstanding on the date of this Prospectus. The currently outstanding
shares are, and the Shares offered hereby when issued and paid for pursuant to
the terms of the Offer will be, fully paid and non-assessable. Shareholders
would be entitled to share pro rata in the net assets of All-Star available for
distribution to shareholders upon liquidation of All-Star.
Shareholders are entitled to one vote for each share held. All-Star's
shares do not have cumulative voting rights, which means that the holders of
more than 50% of the shares of All-Star voting for the election of Trustees can
elect all the Trustees standing for election, and, in such event, the holders of
the remaining shares will not be able to elect any of such Trustees.
Repurchase of Shares
All-Star is a closed-end investment company and as such its shareholders do
not have the right to cause All-Star to redeem their All-Star shares. All-Star,
however, is authorized to repurchase its shares on the open market when its
shares are trading at a discount from their net asset value. All-Star has no
current plans to repurchase its shares.
Anti-takeover Provisions of the Declaration of Trust
All-Star's Declaration of Trust contains provisions (commonly referred to
as "anti-takeover" provisions) which are intended to have the effect of limiting
the ability of other entities or persons to acquire control of All-Star, to
cause it to engage in certain transactions, or to modify its structure. The
Board of Trustees is divided into three classes, each having a term of three
years. On the date of the annual meeting of shareholders in each year the term
of one class expires. This provision could delay for up to three years the
replacement of a majority of the Board of Trustees. The affirmative vote of the
holders of 75% of the shares will be required to authorize All-Star's conversion
from a closed-end to an open-end investment company, unless such conversion is
recommended by All-Star's Board of Trustees, in which event such conversion
would only require the majority vote of All-Star's shareholders (as defined
under "Investment Objectives and Policies" above).
In addition, a 75% vote of All-Star's shareholders will be required
generally to authorize any of the following transactions:
(i) All-Star's merger or consolidation with or into any other corporation;
(ii) the issuance of any securities of All-Star to any person or entity
for cash;
(iii) the sale, lease or exchange of all or any substantial part of
All-Star's assets to any entity or person (except assets having an aggregate
fair market value of less than $1,000,000); or
(iv) the sale, lease or exchange to All-Star, in exchange for securities
of All-Star, of any assets of any entity or person (except assets having an
aggregate fair market value of less than $1,000,000);
if such corporation, person or entity is directly, or indirectly through
affiliates, the beneficial owner of five percent or more of the outstanding
shares of All-Star. (A two-thirds vote would otherwise be required for a merger
or consolidation or a sale, lease or exchange of all or substantially all of
All-Star's assets unless recommended by the trustees, in which case only a
majority vote would be required). However, such 75% vote or consent will not be
required with respect to the transactions listed in (i) through (iv) above where
the Board of Trustees under certain conditions approves the transaction. In
addition, the Declaration of Trust requires the affirmative vote or consent or
the holders of 75% of the shares for the termination and liquidation of
All-Star.
The foregoing super-majority vote requirements may not be amended except by
a similar super-majority vote of the shareholders.
These provisions will make more difficult a change in All-Star's structure
or management or consummation of the foregoing transactions without the
Trustees' approval. The anti-takeover provisions could have the effect of
depriving shareholders of an opportunity to sell their shares at a premium over
prevailing market prices by discouraging a third party from seeking to obtain
control of All-Star in a tender offer or similar transaction. However, the Board
of Trustees continues to believe that the anti-takeover provisions are in the
best interests of All-Star and its shareholders because they provide the
advantage of potentially requiring persons seeking control of All-Star to
negotiate with its management regarding the price to be paid and facilitating
the continuity of All-Star's management and its continuing application of the
multi-manager concept.
The Board also believes that the super majority vote requirement for
conversion to an open-end investment company is in the best interest of All-Star
and its shareholders because it will allow All-Star to continue to benefit from
the advantages of its closed-end structure until such time that, based on
relevant factors including the then current relationship of the market price of
All-Star's shares to their net asset value, the Board determines to recommend to
shareholders All-Star's conversion to an open-end investment company.
In accordance with its Declaration of Trust, the question of conversion to
an open-end investment company was submitted to the vote of shareholders at
All-Star's 1993 annual meeting held on April 6, 1993, such conversion then
requiring only the affirmative vote of a majority of All-Star's shares (as
defined in the 1940 Act). In accordance with the Trustee's recommendation,
shareholders, by substantial majorities, rejected the conversion proposal and
approved an amendment to All-Star's Declaration of Trust instituting the 75%
super-majority vote requirement referred to above for any future conversion to
open-end status.
DISTRIBUTIONS; AUTOMATIC DIVIDEND
REINVESTMENT AND CASH PURCHASE PLAN
10% Distribution Policy
All-Star's current policy is to pay distributions on its common shares
totaling approximately 10% of its net asset value per year, payable in four
quarterly distributions of 2.5% of All-Star's net asset value at the close of
the New York Stock Exchange on the Friday prior to each quarterly declaration
date. If, for any calendar year, the total distributions required by the 10%
pay-out policy exceed net investment income and net realized capital gains, the
excess will generally be treated as a tax-free return of capital to the extent
of the shareholder's basis in his or her shares, and thereafter, to the extent
of any excess over such basis, as capital gain. The amount treated as a tax-free
return of capital will reduce the shareholder's adjusted basis in his or her
shares, thereby increasing his or her potential gain or reducing his or her
potential loss on the sale of his or her shares. All-Star made distributions
from capital in 1987, 1988, 1989, 1990, 1992, 1993 and 1994 (see "Financial
Highlights").
In the event All-Star distributes amounts in excess of its net investment
income and net realized capital gains, such distributions will decrease
All-Star's total assets and, therefore, have the likely effect of increasing
All-Star's expense ratio. In addition, in order to make distributions under the
10% payout policy, All-Star may have to sell portfolio securities at times when
the particular investment styles of its Portfolio Managers would dictate not
doing so.
All-Star may, in the discretion of the Board of Trustees, retain for
reinvestment, and not distribute, net long-term capital gains in excess of net
short-term capital losses for any year to the extent that its net investment
income, net short-term realized gains and net long-term realized gains exceed
the minimum amount required to be distributed for such year under the 10%
pay-out policy, although All-Star reserves the right to distribute such excess.
Any such retained capital gains would be taxed to shareholders as long-term
capital gains and shareholders would be able to claim their proportionate share
of the federal income taxes paid by All-Star with respect to such retained gains
as a credit against their own federal income tax liabilities, and would be
entitled to increase the adjusted tax basis of their All-Star shares by the
difference between their pro rata share of the undistributed capital gains and
their tax credit.
All-Star intends to pay all or a substantial portion of its distributions
in each year to shareholders in the form of newly issued shares (plus cash in
lieu of any fractional shares that would otherwise be issuable), to all
shareholders except those non-participants in All-Star's Automatic Dividend
Reinvestment and Cash Purchase Plan who specifically elect to receive their
distribution in cash by completing and signing an option card, a copy of which
will be enclosed with the notice of each such distribution payable in shares,
and returning it on a timely basis to State Street Bank and Trust Company,
All-Star's transfer agent and dividend paying agent.
The number of shares to be issued in payment of distributions declared
payable in shares will be determined by dividing the total dollar amount of the
distribution payable to the shareholder by the lower of the market value or the
net asset value per share on the valuation date for the distribution (but not at
a discount of more than 5% from the market value). Market value per share for
this purpose will be the last sales price on the New York Stock Exchange on the
valuation date or, if there are no sales on that day, the mean between the
closing bid and closing asked quotations for that date.
Automatic Dividend Reinvestment and Cash Purchase Plan
Under All-Star's Automatic Dividend Reinvestment and Cash Purchase Plan
(the "Plan"), shareholders whose shares are registered in their own name may
elect to participate in the Plan and have all distributions automatically
reinvested by State Street Bank and Trust Company, as agent for participants in
the Plan (the "Plan Agent"), in additional shares of All-Star. Shareholders who
do not elect to participate in the Plan will receive all distributions (other
than those declared payable in shares as described above) in cash.
Under the Plan, distributions declared payable in shares or cash at the
option of shareholders are paid to participants in the Plan entirely in newly
issued full and fractional shares valued at the lower of market value or net
asset value per share on the valuation date for the distribution (but not a
discount of more than 5% from market price). Distributions declared payable only
in cash will be reinvested for the accounts of participants in the Plan in
additional shares purchased by the Plan Agent on the open market, on the New
York Stock Exchange or elsewhere at prevailing market prices. Dividends and
distributions are subject to taxation, whether received in cash or in shares
(see "Tax Status" below).
Participants in the Plan have the option of making additional cash payments
in any amount on a monthly basis for investment in All-Star shares purchased on
the open market. These voluntary cash payments will be invested on or shortly
after the 15th day of each calendar month, and voluntary payments should be sent
so as to be received by the Plan Agent no later than five business days before
the next investment date. Barring suspension of trading, voluntary cash payments
will be invested within 30 days of receipt. A participant may withdraw a
voluntary cash payment by written notice received by the Plan Agent at least 48
hours before such payment is to be invested.
The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in the account, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Plan Agent in non-certificated form in the name
of the participant, and each shareholder's proxy will include those shares
purchased or received pursuant to the Plan.
In the case of shareholders such as banks, brokers or nominees which hold
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
record shareholder as representing the total amount registered in the record
shareholder's name and held for the account of beneficial owners who participant
in the Plan.
There is no charge to participants for reinvesting distributions payable in
either shares or cash. The Plan Agent's fees for handling the reinvestment of
such distributions are paid by All-Star. There are no brokerage charges with
respect to shares issued directly by All-Star as a result of distributions
payable in shares or in cash. However, each participant bears a pro rata share
of brokerage commissions incurred with respect to the Plan Agent's open market
purchases in connection with the reinvestment of distributions declared payable
in cash.
With respect to purchases from voluntary cash payments, the Plan Agent will
charge $1.25 for each such purchase for a participant, plus a pro rata share of
the brokerage commissions. Brokerage charges for purchasing small amounts of
shares for individual accounts through the Plan are expected to be less than the
usual brokerage charges for such transactions, as the Plan Agent will be
purchasing shares for all participants in blocks and prorating the lower
commission thus attainable.
The automatic reinvestment of dividends and distributions will not relieve
plan participants of any income tax which may be payable on such dividends or
distributions. See "Tax Status" below.
Experience under the Plan may indicate that changes are desirable.
Accordingly, All-Star reserves the right to amend or terminate the Plan.
Shareholders must affirmatively elect to participate in the Plan, and may
do so by completing an application and filing it with the Plan Agent.
Shareholders may call or write the Plan Agent, State Street Bank & Trust
Company, P.O. Box 8200, Boston, Massachusetts 02266-8200 (1-800-542-3863) for
information about the Plan.
Shareholders whose All-Star shares are held of record in "street name" by
broker-dealer firms or banks may not be able to participate in the Plan, and
such shareholders who are participating in the Plan may not be able to transfer
their shares to another broker-dealer or bank and continue to participate in the
Plan.
A shareholder may elect to withdraw form the Plan at any time by notifying
the Plan Agent in writing. There will be no penalty for withdrawal from the Plan
and shareholders who have previously withdrawn from the Plan may rejoin it at
any time. A withdrawal will only be effective for subsequent distributions with
a record date at least ten days after the notice of withdrawal is received by
the Plan Agent.
TAX STATUS
The following discussion summarizes the general rules applicable to
taxation of All-Star and its shareholders. Shareholders are urged to consult
with their own tax advisors concerning the tax consequences of their continued
investment in All-Star and of their receipt and exercise of the Rights.
All-Star intends to elect and to qualify each year for federal income tax
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"), and to make distributions to the shareholders in
accordance with the timing requirements set out in the Code. As a result, it is
expected that All-Star will be relieved of federal income taxes on its net
investment income and net realized capital gains to the extent distributed to
shareholders. (See "Distributions; Automatic Dividend Reinvestment and Cash
Purchase Plan--10% Distribution Policy" regarding the authority of All-Star to
retain and pay taxes on, and not distribute, net realized capital gains). If
All-Star should fail to qualify as a regulated investment company in any year,
it would incur a federal corporate income tax upon its taxable income and its
distributions would generally be taxable as ordinary dividend income to the
shareholders.
Dividends and distributions by All-Star from net investment income and net
realized capital gains are subject to taxation whether received by shareholders
in cash or in shares of All-Star. Shareholders receiving a dividend or
distribution in the form of newly issued shares will be treated for federal
income tax purposes as receiving a distribution in an amount equal to the fair
market value, determined as of the distribution date, of the shares received.
Such shareholders will have a cost basis in each newly issued share equal to the
fair market value of a share of All-Star on the distribution date. Distributions
are generally taken into account for tax purposes when paid, except that
distributions paid in January but declared in the last quarter of the preceding
calendar year must be taken into account as if paid on December 31 of such
preceding calendar year. A portion of All-Star's net investment income paid to
corporate shareholders which is attributable to dividends from domestic
corporations may be eligible for the 70% dividends received deduction available
to corporations. Availability of the deduction for particular corporate
shareholders is subject to certain limitations, and deducted amounts may be
subject to the alternative minimum tax or result in certain basis adjustments.
Distributions from net realized capital gains are taxable as long-term capital
gains, regardless of how long the shareholder has held the shares, and are not
eligible for the dividends received deduction for corporations. Net long-term
capital gains are taxable, in the case of noncorporate shareholders, at a
maximum rate of 20% if attributable to the disposition of assets the holding
period for which was more than eighteen months or 28% if attributable to the
disposition of assets the holding period for which was more than twelve months
but less than or equal to eighteen months.
If a shareholder holds shares of All-Star for six months or less, any loss
on the sale of the shares will be treated as a long-term capital loss to the
extent of any amount reportable by the shareholder as long-term capital gain
with respect to such shares. Any loss realized upon a disposition of shares may
also be disallowed under rules relating to wash sales.
At the time of an investor's purchase of All-Star shares, All-Star's net
asset value may reflect undistributed net investment income or capital gains or
net unrealized appreciation of securities held by All-Star. As of March , 1998,
All-Star had net unrealized appreciation of its investments of $----------
million. A subsequent distribution to the investor of such amounts, although it
may in effect constitute a return of his or her investment, would be taxable to
the shareholder as ordinary income or capital gain as described above. For
federal income tax purposes, All-Star is permitted to carry forward its net
realized capital losses, if any, and may realize net capital gains up to the
amount of such losses without being required to pay taxes on or distribute such
gains. As of December 31, 1997, All-Star had no capital loss carryovers.
Under the Interest and Dividend Tax Compliance Act of 1983, certain
non-corporate All-Star shareholders may be subject to 31% withholding on
reportable dividends and capital gains distributions ("back-up withholding").
Generally, shareholders subject to back-up withholding will be those for whom a
taxpayer identification number and certain required certificates are not on file
with All-Star or who, to All-Star's knowledge, have furnished an incorrect
number. In addition, All-Star is required to withhold from distributions to any
shareholder who does not certify to All-Star that such shareholder is not
subject to back-up withholding due to notification by the Internal Revenue
Service that such taxholder has under-reported interest or dividend income.
Distributions from net investment income paid to shareholders who are
non-resident aliens or entities may be subject to 30% United States withholding
tax (but not, in such event, subject to backup withholding) under the existing
provisions of the Code applicable to foreign individuals and entities unless a
reduced rate of withholding or a withholding exemption is provided under an
applicable treaty. Non-U.S. shareholders are urged to consult their own tax
advisors concerning the applicability of the United States withholding tax.
Information concerning the federal income tax status of All-Star dividends
and distributions is mailed to shareholders annually.
Under present law, All-Star is not liable for any Massachusetts personal
income or corporate excise tax so long as it qualifies as a regulated investment
company under the Code. Distributions and the transactions referred to in the
preceding paragraphs may be subject to state and local income taxes, and the
treatment thereof may differ from the federal income tax consequences discussed
herein. Shareholders are advised to consult with their tax advisors concerning
the application of state and local taxes.
See "The Offer-Federal Income Tax Consequences" for a discussion of the
federal income tax consequences of the receipt and exercise of Rights.
GENERAL
All-Star was organized on August 20, 1986 as a "Massachusetts business
trust" and commenced investment operations on November 3, 1986. Under
Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable as partners for its obligations.
However, All-Star's Declaration of Trust contains an express disclaimer of
shareholder liability for the acts or obligations of All-Star and provides for
indemnification and reimbursement of expenses out of All-Star's property for any
shareholder held personally liable for the obligations of All-Star. Thus, the
risk of a shareholder incurring financial loss on account of an All-Star
liability is limited to circumstances in which both inadequate insurance existed
and All-Star itself were unable to meet its obligations from the liquidation of
its portfolio investments.
The Fund Manager is an indirect wholly-owned subsidiary of Liberty
Financial Companies, Inc., itself an indirect majority-owned subsidiary of
Liberty Mutual Insurance Company.
Under the Fund Management Agreement between All-Star and the Fund Manager,
All-Star may use the name "Liberty All-Star" only so long as the Fund Management
Agreement remains in effect. If the Fund Management Agreement is no longer in
effect, All-Star is obligated (to the extent it lawfully can) to cease using
such name or any other name indicating that it is advised by or otherwise
connected with the Fund Manager. In addition, the Fund Manager may grant the
non-exclusive right to use the name "Liberty All-Star" to any other entity,
including any other investment company of which the Fund Manager or any of its
affiliates is the investment adviser or distributor.
STATEMENT OF ADDITIONAL INFORMATION
Additional information about the Fund is contained in the Statement of
Additional Information, a copy of which is available at no charge by calling or
writing Liberty Investment Services, Inc. at the address or telephone number
indicated on the cover of the Prospectus. Set forth below is the Table of
Contents of the Statement of Additional Information.
Table of Contents
Investment Objective and Policies
Investment Restrictions
Investment Advisory and Other Services
Trustees and Officers of All-Star
Portfolio Security Transactions
Principal Shareholders
Financial Statements
APPENDIX A
INFORMATION ABOUT THE PORTFOLIO MANAGERS
J.P. MORGAN INVESTMENT MANAGEMENT INC.
522 Fifth Avenue
New York, NY 10036
J.P. Morgan Investment Management Inc. ("J.P. Morgan") was appointed a
Portfolio Manager of All-Star effective July 1, 1996. 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. As of December 31, 1997,
J.P. Morgan & Co. Incorporated and its subsidiaries had total combined assets
under management of approximately $___ billion, of which J.P. Morgan advises
over $___ billion. J.P. Morgan & Co. Incorporated, through its predecessor
firms, has been in business for over a century and has been managing
investments since 1913.
Henry D. Cavanna, Managing Director of J.P. Morgan, has managed the portion
of All-Star's portfolio assigned to J.P. Morgan since its appointment as an
All-Star Portfolio Manager. Mr. Cavanna has been associated with J.P. Morgan
for over __ years.
OPPENHEIMER CAPITAL
Oppenheimer Tower
World Financial Center
New York, NY 10281
Oppenheimer Capital ("Opp Cap") has been a Portfolio Manager of All-Star
since February 16, 1990. Opp Cap is a Delaware general partnership formed on
July 1, 1987 as the successor to a corporation formed in 1975. PIMCO Advisors
L.P. ("PIMCO"), an investment adviser with approximately $___ billion in assets
under management, holds a 33.2% managing general partner interest in Opp Cap,
and Oppenheimer Capital, L.P., a publicly traded limited partnership of which an
affiliate of PIMCO is the sole 1.0% general partner, owns the remaining 66.8%
interest. PIMCO's sole general partner is PIMCO Partners, G.P., a general
partnership of which the managing general partner is a limited liability company
whose members are the Managing Directors of Pacific Investment Management
Company, and the other general partner of which is a subsidiary of Pacific
Mutual Life Insurance Company. The limited partnership interests in PIMCO are
publicly traded.
As at December 31, 1997, Opp Cap had approximately $__ billion in assets
under management. John Lindenthal, Managing Director of Opp Cap, has managed the
portion of All-Star's portfolio assigned to Opp Cap since its appointment as an
All-Star Portfolio Manager. Mr. Lindenthal has been associated with Opp Cap for
over __ years.
PALLEY-NEEDELMAN ASSET MANAGEMENT, INC.
800 Newport Center Drive, Suite 450
Newport Beach, CA 92660
Palley-Needelman Asset Management, Inc., appointed as an All-Star Portfolio
Manager effective July 1, 1993, was established in 1985 as the successor to a
firm founded in 1973. The firm is owned by Roger B. Palley, President and Senior
Investment Officer, and Chester J. Needelman, Chief Executive Officer, and had
approximately $__ billion in assets under management as at December 31, 1997.
Mr. Palley has managed the portion of All-Star's portfolio assigned to
Palley-Needelman Asset Management, Inc. since its appointment as an All-Star
Portfolio Manager.
WESTWOOD MANAGEMENT CORPORATION
300 Crescent Court, #1320
Dallas, TX 75201
Westwood Management Corporation was appointed as an All-Star Portfolio
Manager effective November 1, 1997. The firm was organized by Susan M. Byrne,
its President and Chief Executive Officer, in June, 1983, and became a wholly
owned subsidiary of Southwest Securities Group, Inc., a New York Stock Exchange
listed securities firm, in June, 1993. Westwood Management had approximately
$__billion in assets under management as at December 31, 1997.
Ms. Byrne manages the portion of All-Star's portfolio assigned to Westwood
Management Corporation.
WILKE/THOMPSON CAPITAL MANAGEMENT, INC.
3800 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Wilke/Thompson Capital Management, Inc., appointed an All-Star Portfolio
Manager effective March 1, 1997, was founded in July, 1987. Mr. Paul L. Hayne,
its President and Chief Executive Officer, owns 40%, and Mark A. Thompson, its
Chairman and Chief Investment Officer, owns 56%, of its outstanding shares. As
at December 31, 1997, the firm had approximately $ __ billion in assets under
management.
Mr. Thompson manages the portion of All-Star's portfolio assigned to
Wilke/Thompson Capital Management, Inc.
[Back Cover]
No person has been authorized to give any information or to make any
representation not contained in this Prospectus and, if given or made, such
information or representation must not be relied upon as having been authorized.
This Prospectus does not constitute an offering of any securities other than the
registered securities to which it relates or an offer to any person in any State
or jurisdiction of the United States or any country where such offer would be
unlawful.
[Logo] LIBERTY
All-Star
EQUITY FUND
TABLE OF CONTENTS
Expenses........................
Prospectus Summary..............
Financial Highlights............
Share Price Data................
Investment Performance..........
The Offer.......................
Use of Proceeds.................
The Multi-Manager Concept....... A Multi-Managed
Investment Investment Objective Company
and Policies..................
Management of All-Star.......... 4,318,134 Shares of Beneficial
Description of Shares........... Interest Issuable upon
Distributions; Automatic Exercise of Rights to
Dividend Reinvestment and Subscribe for such Shares
Cash Purchase Plan............
Tax Status PROSPECTUS
General.........................
Statement of Additional
Information...................
Appendix A--Information about
the Portfolio Managers..........
<PAGE>
[Preliminary]
LIBERTY ALL-STAR EQUITY FUND
STATEMENT OF ADDITIONAL INFORMATION
March , 1998
This Statement of Additional Information is not a prospectus, and should be
read in conjunction with the Prospectus of Liberty All-Star Equity Fund
("All-Star") dated March , 1998. A copy of the Prospectus may be obtained by
calling or writing Liberty Asset Management Company at 600 Atlantic Avenue,
Boston, Massachusetts 02110 (1-800-542-3863).
TABLE OF CONTENTS PAGE
Investment Objectives and Policies...........
Investment Restrictions......................
Investment Advisory and Other Services.......
Trustees and Officers of All-Star............
Portfolio Security Transactions..............
Principal Shareholders.......................
Financial Statements.........................
- --------------------------------------------------------------------
- --------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
A description of All-Star's investment objective, the types of securities
in which it may invest, and certain investment practices in which it may engage
and certain risks associated therewith is contained in the Prospectus under
"Investment Objectives and Policies."
Options and Futures Strategies
The effective use of options and future strategies is dependent, among
other things, on All-Star's ability to terminate options and futures positions
at times when it or its Portfolio Managers deem it desirable to do so. Although
All-Star will not enter into an option or futures position unless it believes
that a liquid secondary market exists for such option or future, there is no
assurance that All-Star will be able to effect closing transactions at any
particular time or at an acceptable price. All-Star generally expects that its
options and futures transactions will be conducted on recognized securities
exchanges. In certain instances, however, All-Star may purchase and sell options
in the over-the-counter market. All-Star's ability to terminate option positions
established in the over-the-counter market may be more limited than in the case
of exchange-traded options and may also involve the risk that securities dealers
participating in such transactions would fail to meet their obligations to
All-Star. All-Star may not purchase or sell future contracts and related options
if immediately thereafter the sum of the amount of initial margin deposits on
All-Star's existing futures and premiums paid for such related options would
exceed 5% of the market value of All-Star's total assets. Such limitation,
however, will not limit All-Star's loss on such contracts and options, which is
potentially unlimited.
Writing Covered Put and Call Options on Securities
All-Star may write covered call options and covered put options on
optionable securities of the types in which it is permitted to invest from
time-to-time as its respective Portfolio Managers determine is appropriate in
seeking to attain its objectives. Call options written by All-Star give the
holder the right to buy the underlying securities from All-Star at a stated
exercise price; put options give the holder the right to sell the underlying
security to All-Star at a stated price.
All-Star may write only covered options, which means that, so long as
All-Star is obligated as the writer of a call option, it will own the underlying
securities subject to the option (or comparable securities satisfying the cover
requirements of securities exchanges). In the case of put options, All-Star will
maintain in a separate account cash or short-term U.S. Government Securities
with a value equal to or greater than the exercise price of the underlying
securities. All-Star may also write combinations or covered puts and calls on
the same underlying security.
All-Star will receive a premium from writing a put or call option, which
increases All-Star's return in the even the option expires unexcercised or is
closed out at a profit. The amount of the premium will reflect, among other
things, the relationship of the market price of the underlying security to the
exercise price of the option, the term of the option and the volatility of the
market price of the underlying security. By writing a call option, All-Star
limits its opportunity to profit from any increase in the market value of the
underlying security above the exercise price of the option. By writing a put
option, All-Star assumes the risk that it may be required to purchase the
underlying security for an exercise price higher than its then current market
value, resulting in a potential capital loss if the purchase price exceeds the
market value plus the amount of the premium received, unless the security
subsequently appreciates in value.
All-Star may terminate an option that it has written prior to its
expiration by entering into a closing purchase transaction in which it purchases
an option having the same terms as the option written. All-Star will realize a
profit or loss from such transaction if the cost of such transaction is less or
more than the premium received from the writing of the option. In the case of a
put option, any loss so incurred may be partially or entirely offset by the
premium received from a simultaneous or subsequent sale of a different put
option. Because increases in the market price or a call option will generally
reflect increases in the market price of the underlying security, any loss
resulting from the repurchase of a call option is likely to be offset in whole
or in part by unrealized appreciation of the underlying security owned by
All-Star.
Purchasing Put and Call Options on Securities
All-Star may purchase put options to protect its portfolio holdings in an
underlying security against a decline in market value. Such hedge protection is
provided during the use of the put options since All-Star, as holder of the put
option, is able to sell the underlying security at the put exercise price
regardless of any decline in the underlying security's market price. In order
for a put option to be profitable, the market price of the underlying security
must decline sufficiently below the exercise price to cover the premium and
transaction costs. By using put options in this manner, All-Star will reduce any
profit it might otherwise nave realized in its underlying security by the
premium paid for the put option and by transaction costs.
All-Star may also purchase call options to hedge against an increase in
prices of securities that it wants ultimately to buy. Such hedge protection is
provided during the life of the call option since All-Star, as holder of the
call option, is able to buy the underlying security at the exercise price
regardless of any increase in the underlying security's market price. In order
for a call option to be profitable, the market price of the underlying security
must rise sufficiently above the exercise price to cover the premium and
transaction costs. By using call options in this manner, All-Star will reduce
any profit it might have realized had it bought the underlying security at the
time it purchased the call option by the premium paid for the call option and by
transaction costs.
Purchase and Sale of Options and Futures on Stock Indices
All-Star may purchase and sell options on stock indices and stock index
futures as a hedge against movements in the equity markets.
Options on stock indices are similar to options on specific securities
except that, rather than the right to take or make delivery of the specific
security at a specified price, an option on a stock index gives the holder the
right to receive, upon exercise of the option, an amount of cash if the closing
level of that stock index is greater than, in the case of a call, or less than,
in the case of a put, the exercise price of the option. This amount of cash is
equal to such difference between the closing price of the index and the exercise
price of the option expressed in dollars times a specified multiple. The writer
of the option is obligated, in return for the premium received, to make delivery
of this amount. Unlike options on specific securities, all settlements of
options on stock indices are in cash and gain or loss depends on general
movements in the stocks included in the index rather than price movements in
particular stocks.
A stock index futures contract is an agreement in which one party agrees to
deliver to the other an amount of cash equal to a specific dollar amount times
the difference between the value of a specific stock index at the close of the
last trading day of the contract and the price at which the agreement is made.
No physical delivery of securities is made.
If a Portfolio Manager of All-Star expects general stock market prices to
rise, it might purchase a call option on a stock index or a futures contract on
that index as a hedge against an increase in prices of particular equity
securities it wants ultimately to buy. If in fact the stock index does rise, the
price of the particular equity securities intended to be purchased may also
increase, but that increase would be offset in part by the increase in the value
of All-Star's index option or futures contract resulting from the increase in
the index. If, on the other hand, the Portfolio Manager expects general stock
market prices to decline, it might purchase a put option or sell a futures
contract on the index. If that index does in fact decline, the value of some or
all of the equity securities in All-Star's portfolio may also be expected to
decline, but that decrease would be offset in part by the increase in the value
of All-Star's position in such put option or future. All-Star may purchase call
options on a stock index or a futures contracts on that index to enable a newly
appointed Portfolio Manager to gain immediate exposure to the underlying
securities market pending the investment in individual securities of the portion
of All-Star's portfolio assigned to it.
In connection with transactions in stock index options, futures and related
options, All-Star will be required to deposit as "initial margin" an amount of
cash and short-term U.S. Government Securities equal to from 5% to 8% of the
contract amount. Thereafter, subsequent payments (referred to as "variation
margin") are made to and from the broker to reflect changes in the value of the
futures contract.
Options on Stock Index Futures Contracts
All-Star may purchase and write call and put options on stock index futures
contracts. All-Star may use such options on futures contracts in connection with
its hedging strategies in lieu of purchasing and writing options directly on the
underlying securities or stock indices or purchasing and selling the underlying
futures. For example, All-Star may purchase put options or write call options on
stock index futures, rather than selling futures contracts, in anticipation of a
decline in general stock market prices, or purchase call options or write put
options on stock index futures, rather than purchasing such futures, to hedge
against possible increases in the price of equity securities which All-Star
intends to purchase.
Risk Factors in Options and Futures Transactions
The effective use of options and futures strategies is dependent, among
other things, on All-Star's ability to terminate options and futures positions
at times when its respective Portfolio Managers deem it desirable to do so.
Although All-Star will not enter into an option or futures position unless its
Portfolio Managers believe that a liquid secondary market exists for such option
or future, there is no assurance that All-Star will be able to effect closing
transactions at any particular time or at an acceptable price. All-Star
generally expects that its option and futures transactions will be conducted on
recognized securities exchanges. In certain instances, however, All-Star may
purchase and sell options in the over-the-counter market. All-Star's ability to
terminate option positions established in the over-the-counter market may be
more limited than in the case of exchange-traded options and may also involve
the risk that securities dealers participating in such transactions would fail
to meet their obligations to All-Star.
The use of options and futures involves the risk of imperfect correlation
between movements in options and future prices and movements in the price of
securities which are the subject of the hedge. Such correlation, particularly
with respect to options on stock indices and stock index futures, is imperfect,
and such risk increases as the composition of All-Star's portfolio diverges from
the composition of the relevant index. The successful use of these strategies
also depends on the ability of the Portfolio Manager to correctly forecast
interest rate or general stock market price movements.
Regulatory Matters
In connection with any futures and options transactions, All-Star has filed
with the Commodity Futures Trading Commission ("CFTC") a notice of eligibility
for exemption from the definition of (and therefore from CFTC regulation as) a
"commodity pool operator" under the Commodity Exchange Act. All-Star has
represented in its notice of eligibility that it will not purchase or sell
futures contracts or options on futures contracts or stock indices otherwise
than for bona fide hedging purposes as defined CFTC Rule 1.3(z)(1) if the
aggregate initial margin and premiums required to establish such positions not
entered into for such hedging purposes would exceed 5% of All-Star's assets
after taking into account unrealized profits and losses on such controls.
The staff of the Securities and Exchange Commission ("SEC") has taken the
position that the purchase and sale of futures contracts and the writing of
related options may involve senior securities for the purposes of the
restrictions contained in Section 18 of the Investment Company Act of 1940 on
investment companies is using senior securities. However, the staff has issued
letters declaring that it will not recommend enforcement action under Section 18
if an investment company:
(i) sells futures contracts to offset expected declines in the value of
the investment company's portfolio securities, provided the value of such
futures contracts does not exceed the total market value of those
securities (plus such additional amount as may be necessary because of
differences in the volatility factor of the portfolio securities vis a vis
the futures contracts);
(ii) writes call options on futures contracts, stock indexes or other
securities, provided that such options are covered by the investment
company's holding of a corresponding long futures position, by its
ownership of portfolio securities which correlate with the underlying stock
index, or otherwise;
(iii) purchases futures contracts, provided the investment company
establishes a segregated account ("cash segregated account")consisting of
cash or cash equivalents in an amount equal to the total market value of
such futures contracts less the initial margin deposited therefor; and
(iv) writes put options on futures contracts, stock indexes or other
securities, provided that such options are covered by the investment
company's holding of a corresponding short futures position, by
establishing a cash segregated account in an amount equal to the value of
its obligation under the option, or otherwise.
All-Star will conduct its purchases and sales of futures contracts and
writing of related options transactions in accordance with the foregoing.
INVESTMENT RESTRICTIONS
Except as indicated otherwise, the following investment restrictions have
been adopted for All-Star as fundamental policies and may be changed only by a
majority vote (as defined under "Investment Objective and Policies" in the
Prospectus) of All-Star's outstanding shares. Non-fundamental policies may be
changed by the Board of Trustees without shareholder approval.
All-Star may not:
(1) Issue senior securities, except as permitted by (2) below.
(2) Borrow money, except that it may borrow in an amount not exceeding
7% of its total assets (including the amount borrowed) taken at market value at
the time of such borrowing, and except that it may make borrowings in amounts up
to an additional 5% of its total assets (including the amount borrowed) taken at
market value at the time of such borrowing to finance the repurchase of its
shares, to obtain such short-term credits as are necessary for the clearance of
securities transactions, or for temporary or emergency purposes, and may
maintain and renew any of the foregoing borrowings, provided that All-Star
maintains asset coverage of 300% with respect to all such borrowings. As a
non-fundamental policy, All-Star will not borrow in an amount in excess of 5% of
its total assets (including the amount borrowed).
(3) Pledge, mortgage or hypothecate its assets, except to secure
indebtedness permitted by paragraph (2) above and then only if such pledging,
mortgaging or hypothecating does not exceed 12% of All-Star's total assets taken
at market value at the time of such pledge, mortgage or hypothecation. The
deposit in escrow of securities in connection with the writing of put and call
options and collateral arrangements with respect to margin for futures contracts
are not deemed to be pledges or hypothecation for this purpose.
(4) Act as an underwriter of securities of other issuers, except to the
extent that, in connection with the disposition of portfolio securities,
All-Star may be deemed to be an underwriter for purposes of the Securities Act
of 1933.
(5) Purchase or sell real estate or any interest therein, except that
All-Star may invest in securities issued or guaranteed by corporate or
governmental entities secured by real estate or interests therein, such as
mortgage pass-throughs and collateralized mortgage obligations, or issued by
companies that invest in real estate or interests therein.
(6) Make loans to other persons except for loans of portfolio
securities (up to 30% of total assets) and except through the use of repurchase
agreements, the purchase of commercial paper or the purchase of all or a portion
of an issue of debt securities in accordance with its investment objective,
policies and restrictions, and provided that not more than 10% of All-Star's
assets will be invested in repurchase agreements maturing in more than seven
days.
(7) Invest in commodities or in commodity contracts (except stock index
futures and options).
(8) Purchase securities on margin (except to the extent that the
purchase of options and futures may involve margin and except that it may obtain
such short-term credits as may be necessary for the clearance of purchases or
sales of securities), or make short sales of securities.
(9) Purchase the securities of issuers conducting their principal
business activity in the same industry (other than securities issued or
guaranteed by the United States, its agencies and instrumentalities) if,
immediately after such purchase, the value of its investments in such industry
would comprise 25% or more of the value of its total assets taken at market
value at the time of each investment.
(10) Purchase securities of any one issuer, if
(a) more than 5% of All-Star's total assets taken at market value
would at the time be invested in the securities of such issuer, except that such
restriction does not apply to securities issued or guaranteed by the United
States Government or its agencies or instrumentalities or corporations sponsored
thereby, and except that up to 25% or All-Star's total assets may be invested
without regard to this limitation; or
(b) such purchase would at the time result in more than 10% of the
outstanding voting securities of such issuer being held by All-Star, except that
up to 25% of All-Star's total assets may be invested without regard to this
limitation.
(11) Invest in securities of another registered investment company,
except (i) as permitted by the Investment Company Act of 1940, as amended from
time to time, or any rule or order thereunder, or (ii) in connection with a
merger, consolidation, acquisition or reorganization.
(12) Purchase any security, including any repurchase agreement maturing
in more than seven days, which is subject to legal or contractual delays in or
restrictions on resale, or which is not readily marketable, if more than 10% of
the net assets of All-Star, taken at market value, would be invested in such
securities.
(13) Invest for the purpose of exercising control over or
management of any company.
(14) Purchase securities unless the issuer thereof or any company on
whose credit the purchase was based, together with its predecessors, has a
record of at least three years' continuous operations prior to the purchase,
except for investments which, in the aggregate, taken at cost do not exceed 5%
of All-Star's total assets.
If a percentage restriction on investment or utilization of assets as set
forth above is adhered to at the time an investment is made, a later change in
percentage resulting from a change in the market values of All-Star's assets
will not be considered a violation of the restriction.
INVESTMENT ADVISORY AND OTHER SERVICES
As stated under "Management of All-Star" in the Prospectus, Liberty Asset
Management Company (the "Fund Manager") performs the investment management
services and is responsible for the administrative services described therein.
The Fund Manager, through Liberty Financial Companies, Inc., is an indirect
majority owned subsidiary of Liberty Mutual Insurance Company, Boston,
Massachusetts.
Reference is made to Appendix A of the Prospectus for the names of the
controlling persons of All-Star's current Portfolio Managers and the names of
the individuals at each Portfolio Manager primarily responsible for the
management of the portion of All-Star's portfolio assigned to it. None of such
Portfolio Managers has any affiliation with the Fund Manager or (except as
Portfolio Manager) with All-Star.
As described under "Management of All-Star" in the Prospectus, All-Star
pays the Fund Manager a fund management fee for its investment management
services at an annual rate of 0.80% of All-Star's average weekly net asset value
up to $400 million, 0.72% of such net asset value exceeding $400 million up to
$800 million, 0.648% of such net asset value exceeding $800 million up to $1.2
billion, and 0.584% of such net asset value over $1.2 billion. The Fund Manager
pays each Portfolio Manager at 50% of the above rates in proportion to the
portions of All-Star's investment portfolio managed by it. All-Star also pays
the Fund Manager a fee for its administrative services at an annual rate of
0.20% of All-Star's average weekly net asset value up to $400 million, 0.18% of
such net asset value in exceeding $400 million up to $800 million, 0.162% of
such net asset value exceeding $800 million up to $1.2 billion, and 0.146% of
such net asset value over $1.2 billion.
For the years ended December 31, 1995, 1996 and 1997 the total fund
management and administrative fees paid to the Fund Manager were $7,433,793,
$8,451,693, and $9,947,093, respectively, of which an aggregate of $2,931,529,
$3,353,614, and $3,961,159, respectively, was paid to the Portfolio Managers.
All-Star's Fund Management Agreement and Portfolio Management Agreements
will continue in effect until July 31, 1998 and will continue in effect
thereafter so long as such continuance is specifically approved annually by (a)
the Board of Trustees or (b) the majority vote of All-Star's outstanding shares
(as defined under "Investment Objective and Policies" in the Prospectus),
provided that, in either event, the continuance is also approved by a majority
of the trustees who are not "interested persons" (as defined in the 1940 Act) of
All-Star, the Fund Manager or the Portfolio Managers by a vote cast in person at
a meeting called for the purpose of voting on such approval. The Fund Management
Agreement may be terminated on 60 days written notice by either party, and the
Portfolio Management Agreements may be terminated on 30 days' notice by any
party, and any such agreements will terminate automatically if assigned.
Custodian and Pricing and Bookkeeping Agent
Boston Safe Deposit and Trust Company (the "Bank"), One Boston Place,
Boston, MA 02108, is the custodian of the portfolio securities and cash of
All-Star. As such, the Bank holds All-Star's portfolio securities and cash in
separate accounts on All-Star's behalf and receives and delivers portfolio
securities and cash in connection with portfolio transactions initiated by
All-Star's Portfolio Managers, collects income due on its portfolio securities
and disburses funds in connection with the payment of distributions and
expenses.
Colonial Management Associates, Inc., an affiliate of the Fund Manager,
performs pricing and bookkeeping services for All-Star (see "Management of
All-Star" in the Prospectus). For the years ended December 31, 1996 and 1997,
All-Star paid pricing and bookkeeping fees to Colonial Management Associates,
Inc. of $211,776 and $239,161, respectively.
Independent Auditors
KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts 02110, are the
independent auditors of All-Star. KPMG Peat Marwick LLP audits and reports on
All-Star's annual financial statements, reviews certain of its regulatory
reports and its Federal income tax returns, and performs such other accounting,
tax and advisory services as All-Star may engage it to do.
TRUSTEES AND OFFICERS OF ALL-STAR
The following is a list of All-Star's Trustees and officers, together with
information about their present positions with All-Star and their principal
occupations during the past five years. The Trustee who is an "interested
person" of All-Star, as defined by the 1940 Act, is indicated with an asterisk.
Position
with Principal Occupation During
Name and Address All-Star Past Five Years
- --------------- -------- ---------------------------
Robert J. Birnbaum Trustee Retired (since January,
313 Bedford Road 1994); Special Counsel,
Ridgewood, NJ Dechert, Price & Rhoads
07450 (September, 1988 to December,
1993); President and Chief
Operating Officer, New York
Stock Exchange, Inc. (May,
1985 to June, 1988).
James E. Grinnell Trustee Private investor (since
22 Harbor Avenue November, 1988); President
Marblehead, MA and Chief Executive Officer,
01945 Distribution Management
Systems, Inc. (1983 to May
1986); Senior Vice
President-Operations, The
Rockport Company, importer
and distributor of shoes
(May, 1986 to November, 1988).
Harold W. Cogger* Trustee Executive Vice President and
Liberty Financial and Director, Liberty Financial
Companies, Inc. Chairman Companies, Inc. (since March,
600 Atlantic 1995); Director (since
Avenue October, 1981) and Chairman
Boston, MA 02210 of the Board (since March,
1996), The Colonial Group, Inc.;
Executive Vice
President (October, 1989 to July,
1993), Colonial
Management Associates, Inc.;
President (since
March 1996), Stein Roe & Farnham
Incorporated.
Richard W. Lowry Trustee Private investor (since
10701 Charleston August, 1987); Chairman and
Drive Chief Executive Officer, U.S.
Vero Beach, FL Plywood Corporation,
32963 manufacturer and distributor
of wood products (August,
1985 to August, 1987).
Richard R. President President of the Fund Manager
Christensen and Chief (since January, 1995);
Liberty Asset Executive President of Liberty
Management Officer Investment Services, Inc.
Company (April, 1987 to March, 1995).
600 Atlantic
Avenue
Boston, MA 02210
William R. Vice Senior Vice President and
Parmentier President Chief Investment Officer of
Liberty Asset - Chief the Fund Manager (since May,
Management Investment 1995); Consultant (October,
Company Officer 1994 to May, 1995);
600 Atlantic President, GQ Asset
Avenue Management, Inc. (July, 1993
Boston, MA 02210 to October, 1994); Assistant
Treasurer, Grumman
Corporation (December, 1974
to July, 1993).
Christopher S. Vice Vice President-Investments of
Carabell President the Fund Manager (since
Liberty Asset March, 1996); Associate
Management Director, U.S. Equity
Company Research of Rogers Casey &
600 Atlantic Associates, investment
Avenue consultants (January, 1995 to
Boston, MA 02210 February, 1996); Director of
Investments, Boy Scouts of
America (June, 1990 to
January, 1995).
Timothy J. Jacoby Treasurer Senior Vice President, Fund
Colonial and Administration, Colonial
Management Controller Management Associates, Inc.
Associates, (since September, 1996);
Inc. Senior Vice President,
One Financial Fidelity Accounting and
Center Custody Services (September,
Boston, MA 02111 1993 to September, 1996);
Assistant Treasurer, Fidelity
Group of Funds (August, 1990
to September, 1993).
John L. Davenport Secretary Vice President and Associate
Liberty Financial General Counsel of Liberty
Companies, Financial Companies, Inc. and
Inc. predecessor (since January,
600 Atlantic 1984).
Avenue
Boston, MA 02210
- --------
* Interested Trustee
Messrs. Birnbaum, Grinnell and Lowry comprise the Audit Committee
of the Board of Trustees.
All-Star's Board of Trustees is divided into three classes, each of which
has a term of three years expiring with the annual meeting of shareholders in
the third year of the term. All-Star holds annual meetings of shareholders to
vote on, among other things, the election or re-election of the Trustees whose
terms are expiring with that meeting. The term or office of Mr. Lowry will
expire upon the final adjournment of the 1998 annual meeting; the term of office
of Messrs. Grinnell and Cogger will expire upon final adjournment of the 1999
annual meeting; and the term of office of Mr. Birnbaum will expire upon final
adjournment of the annual meeting for the year 2000. Messrs. Birnbaum, Grinnell
and Lowry are also trustees of Colonial Trusts I through VII, the umbrella
trusts for an aggregate of 39 open-end funds managed by Colonial Management
Associates, Inc. ("Colonial"), an affiliate of the Fund Manager, five closed-end
funds managed by Colonial, and LFC Utilities Trust, an open-end investment
company managed by Stein Roe & Farnham Incorporated, another affiliate of the
Fund Manager. Messrs. Birnbaum, Cogger, Grinnell and Lowry are also directors of
Liberty All-Star Growth Fund, Inc., another closed-end multi-managed fund
managed by the Fund Manager.
The Fund Manager or its affiliates pay the compensation of all the officers
of All-Star, including the Trustee who is affiliated with the Fund Manager.
All-Star currently pays the independent Trustees an annual retainer of $5,000,
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. For 1997, All-Star paid the
independent Trustees an aggregate of $47,400 in fees and $3,797 in expenses.
PORTFOLIO SECURITY TRANSACTIONS
Each of All-Star's Portfolio Managers has discretion to select brokers and
dealers to execute portfolio transactions initiated by the Portfolio Manager for
the portion of All-Star's portfolio assets allocated to it, and to select the
markets in which such transactions are to be executed. The Portfolio Management
Agreements with All-Star provide, in substance, that, except as provided in the
following paragraph, in executing portfolio transactions and selecting brokers
or dealers, the primary responsibility of the Portfolio Manager is to seek to
obtain best net price and execution for All-Star. It is expected that securities
will ordinarily be purchased in the primary markets, and that, in assessing the
best net price and execution available to All-Star, the Portfolio Manager will
consider all factors it deems relevant, including the breadth of the market in
the security, the price of the security, the financial condition and execution
capability of the broker or dealer and the reasonableness of the commission, if
any, for the specific transaction and on a continuing basis. Recognizing these
factors, All-Star may pay a brokerage commission in excess of that which another
broker or dealer may have charged for effecting the same transaction.
The Portfolio Management Agreements also provide that the Fund Manager has
the right to request that transactions giving rise to brokerage commissions, in
amounts to be agreed upon from time to time between the Fund Manager and the
Portfolio Manager, be executed by brokers and dealers (to be agreed upon from
time to time between the Fund Manager and the Portfolio Manager) which provide,
directly or through third parties, research products and services to the Fund
Manager or to All-Star. The commissions paid on such transactions may exceed the
amount of commissions another broker would have charged for effecting that
transaction. Research products and services made available to the Fund Manager
through brokers and dealers executing transactions for All-Star involving
brokerage commissions include performance, portfolio characteristics, investment
style and other qualitative and quantitative data relating to investment
managers in general and the Portfolio Managers in particular; data relating to
the historic performance of categories of securities associated with particular
investment styles; mutual fund portfolio, performance and fee and expense data;
data relating to portfolio manager changes by pension plan fiduciaries;
quotation equipment; and related computer hardware and software, all of which
are used by the Fund Manager in connection with its selection and monitoring of
portfolio managers (including the Portfolio Managers) for All-Star and other
multi-managed clients of the Fund Manager, the assembly of a mix of investment
styles appropriate to the investment objectives of All-Star or such other
clients, and the determination of overall portfolio strategies.
The Fund Manager from time to time reaches understandings with each of the
Portfolio Managers as to the amount of the All-Star portfolio transactions
initiated by such Portfolio Manager that are to be directed to brokers and
dealers which provide or make available research products and services to the
Fund Manager and the commissions to be charged to All-Star in connection
therewith. These amounts may differ among the Portfolio Managers based on the
nature of the markets for the types of securities managed by them and other
factors.
These research products and services are used by the Fund Manager in
connection with its management of All-Star, Liberty All-Star Growth Fund, Inc.,
Liberty All-Star Equity Fund, Variable Series, and other multi-managed clients
of the Fund Manager, regardless of the source of the brokerage commissions. In
instances where the Fund Manager receives from broker-dealers products or
services which are used both for research purposes and for administrative or
other non-research purposes, the Fund Manager makes a good faith effort to
determine the relative proportions of such products or services which may be
considered as investment research, based primarily on anticipated usage, and
pays for the costs attributable to the non-research usage in cash.
The Portfolio Managers are authorized to cause All-Star to pay a commission
to a broker or dealer who provides research products and services to the
Portfolio Manager for executing a portfolio transaction which is in excess of
the amount of commission another broker or dealer would have charged for
effecting that transaction. The Portfolio Managers must determine in good faith,
however, that such commission was reasonable in relation to the value of the
research products and services provided to them, viewed in terms of that
particular transaction or in terms of all the client accounts (including
All-Star) over which the Portfolio Manager exercises investment discretion. It
is possible that certain of the services received by a Portfolio Manager
attributable to a particular transaction will primarily benefit one or more
other accounts for which investment discretion is exercised by the Portfolio
Manager.
During 1995, 1996 and 1997, All-Star paid total brokerage commissions of
$1,006,594 and $1,216,875, and $2,039,852 respectively. Approximately $452,000
$578,000 and $1,017,000, respectively, of those commissions on transactions
aggregating $421,791,000, $479,964,000 and $877,914,000, respectively, were paid
to brokerage firms which provided or made available to All-Star's Portfolio
Managers or to the Fund Manager research products and services as described
above.
Although All-Star does not permit a Portfolio Manager to act or have an
affiliate act as broker for Fund portfolio transactions initiated by it, the
Portfolio Managers are permitted to place Fund portfolio transactions initiated
by them with another Portfolio Manager or its broker-dealer affiliate for
execution on an agency basis, provided the commission does not exceed the usual
and customary broker's commission being paid to other brokers for comparable
transactions and is otherwise in compliance with Rule 17e-1 under the 40 Act.
During 1996 aggregate commissions of $17, $359, representing less than 2.0% of
the total commissions paid by All-Star, were paid to J.P. Morgan Securities,
Inc., an affiliate of J.P. Morgan Investment Management Inc., a Portfolio
Manager of the Fund, in connection with the execution of portfolio transactions
for the Fund initiated by Portfolio Managers other then J.P. Morgan Investment
Management Inc. During 1997 aggregate commissions of $1,397, representing less
than one percent of the total commissions paid by All-Star, were paid to
Oppenheimer & Co., Inc., then a broker-dealer affiliate of Oppenheimer Capital,
a Portfolio Manager of the Fund, in connection with the execution of portfolio
transactions initiated by other Portfolio Managers.
PRINCIPAL SHAREHOLDERS
As of March , 1998, Liberty Mutual Insurance Company, the owner of __% of
the common stock of the Fund Manager's indirect parent, Liberty Financial
Companies, Inc., and its affiliate Liberty Mutual Fire Insurance Company,
beneficially owned an aggregate of __________shares of All-Star, comprising
______% of the amount outstanding on that date. To the knowledge of All-Star, no
other shareholder owns beneficially 5% or more of the outstanding shares of
All-Star.
As of February , 1998, all officers and Trustees of All-Star as a group
owned less than 1% of All-Star's outstanding shares.
FINANCIAL STATEMENTS
LIBERTY ALL*STAR EQUITY FUND
................................................................................
Schedule of Investments
As of December 31, 1997
COMMON STOCKS (101.1%) SHARES MARKET VALUE
- --------------------------------------------------------------------------------
AEROSPACE (2.1%)
Boeing Co. 375,200 $ 18,361,350
Lockheed Martin Corp. 57,300 5,644,050
------------
24,005,400
------------
AUTO, TIRES & ACCESSORIES (1.8%)
Chrysler Corp. 88,000 3,096,500
General Motors Corp. 123,500 7,487,188
Goodyear Tire & Rubber Co. 36,800 2,341,400
Lear Corp. (a) 66,700 3,168,250
TRW, Inc. 81,300 4,339,388
------------
20,432,726
------------
BANKS (6.3%)
ABN AMRO Holding NV ADR 136,200 2,655,900
Ahmanson H.F. & Co. 135,200 9,049,950
Banc One Corp. 16,925 919,239
Chase Manhattan Corp. 26,600 2,912,700
Citicorp 100,000 12,643,750
First Hawaiian, Inc. 26,900 1,089,450
First Union Corp. 306,300 15,697,875
Fleet Financial Group, Inc. 149,400 11,186,325
U.S. Bancorp 74,800 8,372,925
Washington Mutual, Inc. 37,400 2,386,588
Wells Fargo & Co. 17,000 5,770,438
------------
72,685,140
------------
BUSINESS SERVICES (6.5%)
Acxiom Corp. (a) 191,600 3,688,300
America Online, Inc. (a) 75,100 6,697,981
Autodesk, Inc. 67,400 2,476,950
Automatic Data Processing, Inc. 144,100 8,844,137
Cabletron Systems, Inc. (a) 140,800 2,112,000
Catalina Marketing Corp. (a) 84,500 3,908,125
Cintas Corp. 155,600 6,068,400
Concord EFS, Inc. (a) 195,400 4,860,575
Fiserv, Inc. (a) 192,500 9,456,562
J.D. Edwards & Co. (a) 72,400 2,135,800
Oracle Corp. (a) 201,650 4,499,316
Robert Half International, Inc. (a) 148,600 5,944,000
Sitel Corp. (a) 519,700 4,742,263
See Notes to Schedule of Investments.
<PAGE>
LIBERTY ALL*STAR EQUITY FUND
................................................................................
Schedule of Investments
COMMON STOCKS (CONT.) SHARES MARKET VALUE
- --------------------------------------------------------------------------------
BUSINESS SERVICES (CONT.)
Sterling Commerce, Inc. (a) 85,800 $ 3,297,937
Sterling Software, Inc. (a) 97,500 3,997,500
Sykes Enterprises, Inc. (a) 120,900 2,357,550
------------
75,087,396
------------
CHEMICALS (2.9%)
Albemarle Corp. 57,600 1,375,200
E.I. du Pont de Nemours & Co. 95,000 5,705,937
Monsanto Co. 260,000 10,920,000
Morton International, Inc. 176,900 6,080,937
Praxair, Inc. 125,200 5,634,000
Union Carbide Corp. 95,700 4,109,119
------------
33,825,193
------------
COMPUTER & BUSINESS EQUIPMENT (6.8%)
Cisco Systems, Inc. (a) 106,950 5,962,462
EMC Corp. (a) 172,000 4,719,250
HBO & Co. 275,200 13,192,400
Ingram Micro, Inc., Class A (a) 173,400 5,050,275
Intel Corp. 100,000 7,025,000
International Business Machines Corp. 173,700 18,162,506
Microsoft Corp. (a) 35,100 4,536,675
Saville Systems Ireland PLC ADR (a) 70,700 2,934,050
Sun Microsystems, Inc. (a) 103,000 4,107,125
Tech Data Corp. (a) 121,600 4,727,200
Xerox Corp. 105,200 7,765,075
------------
78,182,018
------------
CONSTRUCTION (0.9%)
Foster Wheeler Corp. 153,800 4,162,213
Masco Corp. 125,000 6,359,375
------------
10,521,588
------------
CONSUMER PRODUCTS (2.1%)
Electronic Arts, Inc. (a) 61,700 2,333,031
Philip Morris Companies, Inc. 239,100 10,834,219
Procter & Gamble Co. 44,000 3,511,750
Ralston-Ralston Purina Group 46,700 4,340,181
Unilever NV ADR 43,800 2,734,763
------------
23,753,944
------------
See Notes to Schedule of Investments.
<PAGE>
LIBERTY ALL*STAR EQUITY FUND
................................................................................
Schedule of Investments
COMMON STOCKS (CONT.) SHARES MARKET VALUE
- --------------------------------------------------------------------------------
COSMETICS & TOILETRIES (0.9%)
Avon Products, Inc. 135,000 $ 8,285,625
Gillette Co. 23,300 2,340,194
------------
10,625,819
------------
DIVERSIFIED (3.0%)
Allied Signal, Inc. 83,900 3,261,613
Cooper Industries, Inc. 78,700 3,856,300
Eaton Corp. 67,000 5,979,750
General Electric Co. 130,000 9,538,750
Loews Corp. 67,700 7,176,200
Tyco International Ltd. 115,584 5,208,504
------------
35,021,117
------------
DRUGS & HEALTH CARE (10.0%)
Alza Corp. (a) 84,100 2,675,431
American Home Products Corp. 80,000 6,125,000
Crescendo Pharmaceuticals Corp. (a) 4,150 48,244
DENTSPLY International, Inc. 107,600 3,281,800
Elan Corp. ADR (a) 169,700 8,686,519
Eli Lilly & Co. 113,000 7,867,625
Forest Laboratories, Inc. (a) 51,600 2,544,525
Genzyme Corp. (a) 104,800 2,934,400
HEALTHSOUTH Corp. (a) 233,400 6,476,850
Henry Shein, Inc. (a) 78,400 2,744,000
Humana, Inc. (a) 212,000 4,399,000
Medtronic, Inc. 141,500 7,411,062
Merck & Co., Inc. 25,500 2,709,375
Omnicare, Inc. 118,200 3,664,200
Pfizer, Inc. 170,400 12,705,450
R.P. Scherer Corp. (a) 58,700 3,580,700
SmithKline Beecham PLC ADR 52,000 2,674,750
Steris Corp. (a) 124,700 6,016,775
Tenet Healthcare Corp. (a) 187,300 6,204,313
United Healthcare Corp. 86,700 4,307,906
Warner-Lambert Co. 98,800 12,251,200
------------
109,309,125
------------
ELECTRIC & GAS UTILITIES (2.3%)
Dominion Resources, Inc. 59,800 2,545,238
Duke Energy Corp. 179,355 9,931,783
Edison International 58,800 1,598,625
Florida Progress Corp. 56,000 2,198,000
See Notes to Schedule of Investments.
<PAGE>
LIBERTY ALL*STAR EQUITY FUND
................................................................................
Schedule of Investments
COMMON STOCKS (CONT.) SHARES MARKET VALUE
- --------------------------------------------------------------------------------
ELECTRIC & GAS UTILITIES (CONT.)
Houston Industries, Inc. 245,000 $ 6,523,125
P G & E Corp. 69,000 2,100,188
Southern Co. 65,000 1,681,875
------------
26,578,834
------------
ELECTRONICS & ELECTRICAL EQUIPMENT (4.0%)
Anixter International, Inc. (a) 59,300 978,450
Arrow Electronics, Inc. (a) 270,000 8,758,125
Berg Electronics Corp. (a) 102,500 2,331,875
General Semiconductor, Inc. (a) 42,025 485,914
International Game Technology 152,700 3,855,675
Input/Output, Inc. (a) 61,500 1,825,781
Linear Technology Corp. 91,700 5,272,750
Molex, Inc. 154,875 4,975,359
Motorola, Inc. 98,800 5,637,775
Perkin-Elmer Corp. 41,500 2,949,094
Raytheon Co. Class A 9,196 453,460
Raytheon Co. Class B 124,100 6,267,050
Sensormatic Electronics Corp. 153,400 2,511,925
------------
46,303,233
------------
FINANCIAL SERVICES (5.8%)
Beneficial Corp. 88,500 7,356,562
Countrywide Credit Industries, Inc. 150,000 6,431,250
Federal Home Loan Mortgage Corp. 340,000 14,258,750
Federal National Mortgage Co. 98,800 5,637,775
Merrill Lynch & Co., Inc. 18,200 1,327,463
Morgan Stanley, Dean Witter, Discover & Co. 160,000 9,460,000
Paychex, Inc. 157,100 7,953,187
Travelers Group, Inc. 255,000 13,738,125
------------
66,163,112
------------
FOOD, BEVERAGE & RESTAURANTS (4.2%)
Anheuser Busch, Inc. 212,600 9,354,400
Campbell Soup Co. 105,000 6,103,125
Diageo PLC ADR 120,000 4,545,000
Dole Food Co. 150,000 6,862,500
Dreyers Grand Ice Cream 148,800 3,589,800
General Mills, Inc. 80,700 5,780,138
Landry's Seafood Restaurants, Inc. (a) 15,000 360,000
Starbucks Corp. (a) 150,300 5,767,763
Wendy's International, Inc. 256,100 6,162,406
------------
48,525,132
------------
See Notes to Schedule of Investments.
<PAGE>
LIBERTY ALL*STAR EQUITY FUND
................................................................................
Schedule of Investments
COMMON STOCKS (CONT.) SHARES MARKET VALUE
- --------------------------------------------------------------------------------
HOTELS & ENTERTAINMENT / LEISURE (0.4%)
Marriott International, Inc. 25,000 $ 1,731,250
Time Warner, Inc. 54,500 3,379,000
------------
5,110,250
------------
INDUSTRIAL EQUIPMENT (2.4%)
Caterpillar, Inc. 130,000 6,313,125
Deere & Co. 112,500 6,560,156
Fastenal Co. (a) 164,100 6,276,825
JLK Direct Distribution, Inc. (a) 125,200 3,505,600
New Holland NV 207,500 5,485,781
------------
28,141,487
------------
INSURANCE (7.1%)
AEGON NV 33,915 3,039,632
AFLAC, Inc. 200,000 10,225,000
Aon Corp. 155,675 9,126,447
CIGNA Corp. 36,400 6,299,475
Conseco, Inc. 132,100 5,994,038
EXEL Limited 225,000 14,259,375
Marsh & McLennan Companies, Inc. 41,400 3,086,888
Progressive Corp. 85,000 10,189,375
Providian Financial Corp. 236,800 10,700,400
Transamerica Corp. 85,000 9,052,500
------------
81,973,130
------------
METALS & MINING (1.2%)
Allegheny Teledyne, Inc. 166,000 4,295,250
Aluminum Company of America 85,600 6,024,100
Freeport-McMoRan Copper & Gold, Inc., Class A 185,000 2,913,750
------------
13,233,100
------------
OIL & GAS (7.6%)
Atlantic Richfield Co. 16,700 1,338,088
British Petroleum Co. ADR 26,532 2,114,269
Burlington Resources, Inc. 62,500 2,800,781
Elf Aquitaine ADR 113,200 6,636,350
Enron Corp. 63,800 2,643,712
Exxon Corp. 75,300 4,607,419
Kerr-McGee Corp. 107,300 6,793,431
Mobil Corp. 170,400 12,300,750
Pioneer Natural Resources Co. 84,800 2,453,900
See Notes to Schedule of Investments.
<PAGE>
LIBERTY ALL*STAR EQUITY FUND
................................................................................
Schedule of Investments
COMMON STOCKS (CONT.) SHARES MARKET VALUE
- --------------------------------------------------------------------------------
OIL & GAS (CONT.)
Royal Dutch Petroleum Co. ADR 70,100 $ 3,798,544
Schlumberger Ltd. 86,400 6,955,200
Texaco, Inc. 202,400 11,005,500
Tosco Corp. 204,000 7,713,750
Triton Energy Corp. (a) 170,000 4,961,875
Union Pacific Resources Group 275,600 6,683,300
USX-Marathon Group 120,000 4,050,000
------------
86,856,869
------------
PAPER (0.8%)
Champion International Corp. 120,000 5,430,000
Temple-Inland, Inc. 74,400 3,892,050
------------
9,322,050
------------
POLLUTION CONTROL (0.4%)
Waste Management, Inc. 155,800 4,284,500
------------
PUBLISHING (1.4%)
American Greetings Corp., Class A 140,400 5,493,150
Gannett Co., Inc. 98,200 6,069,987
R. R. Donnelley & Sons Co. 120,000 4,470,000
------------
16,033,137
------------
REAL ESTATE INVESTMENT TRUST (1.5%)
Crescent Real Estate Equities Co. 90,000 3,543,750
Equity Office Properties Trust 75,377 2,379,087
Patriot American Hospitality, Inc. 92,000 2,650,750
Starwood Lodging Trust 117,700 6,811,888
Vornado Realty Trust 50,000 2,346,875
------------
17,732,350
------------
RETAIL TRADE (7.4%)
Arbor Drugs, Inc. 242,900 4,493,650
CDW Computer Centers, Inc. (a) 73,500 3,831,187
Circuit City Stores, Inc. 105,100 3,737,619
Corporate Express, Inc. (a) 321,900 4,144,462
CVS Corp. 76,400 4,894,375
Dollar General Corp. 99,900 3,621,375
Family Dollar Stores 132,900 3,895,631
Federated Department Stores, Inc. (a) 52,000 2,239,250
Home Depot, Inc. 103,550 6,096,506
See Notes to Schedule of Investments.
<PAGE>
LIBERTY ALL*STAR EQUITY FUND
................................................................................
Schedule of Investments
COMMON STOCKS (CONT.) SHARES MARKET VALUE
- --------------------------------------------------------------------------------
RETAIL TRADE (CONT.)
May Department Stores Co. 262,000 $ 13,804,125
MSC Industrial Direct Co. (a) 136,900 5,749,800
Quality Food Centers, Inc. (a) 83,700 5,607,900
Safeway, Inc. (a) 44,100 2,783,812
Staples, Inc. (a) 301,200 8,395,950
Toys R Us, Inc. (a) 142,700 4,477,212
Walgreen Co. 154,200 4,838,025
Wal-Mart Stores, Inc. 70,600 2,784,287
------------
85,395,166
------------
TELECOMMUNICATIONS (9.0%)
ADC Telecommunications, Inc. (a) 96,700 4,049,312
Bay Networks, Inc. (a) 153,600 3,926,400
Bell Atlantic Corp. 63,000 5,725,125
Brightpoint, Inc. (a) 153,400 2,118,838
CommScope, Inc. (a) 56,033 752,943
GTE Corp. 152,100 7,947,225
Lucent Technologies, Inc. 78,100 6,238,237
MCI Communications Corp. 130,000 5,565,625
Nextlevel Systems, Inc. (a) 168,000 3,003,000
Nokia Corp. ADR 100,000 7,000,000
SBC Communications, Inc. 243,300 17,821,725
Scientific-Atlanta, Inc. 332,000 5,561,000
Sprint Corp. 229,300 13,399,719
TCI Communications, Inc. (a) 34,800 2,231,550
TCI Pacific, Class A 15,600 2,574,000
TCI Satellite Entertainment, Inc. (a) 84,000 577,500
Tele-Communications -- TCI Ventures Group,
Class A (a) 159,081 4,503,981
US West Media Group (a) 100,700 2,907,712
WorldCom, Inc. (a) 248,200 7,508,050
------------
103,411,942
------------
TRANSPORTATION (2.7%)
AMR Corp. (a) 75,000 9,646,875
Burlington Northern Santa Fe 69,500 6,459,156
CSX Corp. 77,700 4,195,800
Delta Air Lines, Inc. 23,600 2,809,875
Union Pacific Corp. 119,400 7,455,037
------------
30,566,743
------------
See Notes to Schedule of Investments.
<PAGE>
LIBERTY ALL*STAR EQUITY FUND
................................................................................
Schedule of Investments
COMMON STOCKS (CONT.) SHARES MARKET VALUE
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $856,959,325) $1,163,080,501
--------------
PREFERRED STOCKS (0.2%)
ELECTRIC UTILITIES (0.2%)
Houston Industries 7% Convertible
(Cost $2,793,250) 50,000 2,853,125
--------------
CONVERTIBLE BONDS & NOTES (0.4%)
DIVERSIFIED (0.4%) PAR VALUE
Berkshire Hathaway Sr. Note 1.00% 12/03/01 ----------
(Cost $2,828,707) $2,700,000 4,355,640
--------------
SHORT-TERM INVESTMENTS (2.3%) INTEREST MATURITY
COMMERCIAL PAPER (0.3%) RATE DATE
-------- --------
Household Finance Corp. 6.08% 01/02/98 500,000 499,916
Household Finance Corp. 6.10 01/05/98 3,300,000 3,297,763
--------------
TOTAL COMMERCIAL PAPER 3,797,679
--------------
REPURCHASE AGREEMENT (2.0%)
ABN AMRO Chicago Corp., Repurchase Agreement
dated 12/31/97, 6.60% to be repurchased at
$22,576,275 on 01/2/98, collateralized by
U.S. Treasury notes maturing in 2016, with
a current market value of $23,088,561. 22,568,000 22,568,000
--------------
TOTAL SHORT-TERM INVESTMENTS (COST $26,365,679) 26,365,679
--------------
TOTAL INVESTMENTS (104.0%) (COST $888,946,961) (b) 1,196,654,946
OTHER ASSETS AND LIABILITIES, NET (-4.0%) (46,316,263)
--------------
NET ASSETS (100.0%) $1,150,338,683
==============
NET ASSET VALUE PER SHARE (86,362,669 SHARES OUTSTANDING) $13.32
==============
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) The cost of investments for federal income tax purposes is $890,809,749.
Gross unrealized appreciation and depreciation
of investments at December 31, 1997, is as follows:
Gross unrealized appreciation $330,276,412
Gross unrealized depreciation (24,431,215)
-----------
Net unrealized appreciation $305,845,197
============
Acronym Name
- --------- -----------------------------
ADR American Depository Receipt
See Notes to Schedule of Investments.
<PAGE>
LIBERTY ALL*STAR EQUITY FUND
................................................................................
Statement of Assets and Liabilities
December 31, 1997
ASSETS:
Investments at market value (identified cost $888,946,961) $1,196,654,946
Cash 264,644
Receivable for investments sold 5,301,258
Dividends and interest receivable 1,090,467
Other assets 48,201
-------------
TOTAL ASSETS 1,203,359,516
-------------
LIABILITIES:
Payable for investments purchased 9,264,892
Distributions payable to shareholders 12,077,652
Management fees payable 693,210
Administrative and bookkeeping fees payable 193,817
Accrued expenses 116,054
Accrued income tax 30,675,208
-------------
TOTAL LIABILITIES 53,020,833
-------------
NET ASSETS $1,150,338,683
=============
NET ASSETS REPRESENTED BY:
Paid-in capital (unlimited number of shares
of beneficial interest without par value
authorized, 86,362,669 shares outstanding) $ 797,440,139
Accumulated net realized gains on investments
less distributions 45,190,559
Net unrealized appreciation on investments 307,707,985
-------------
TOTAL NET ASSETS APPLICABLE
TO OUTSTANDING SHARES
OF BENEFICIAL INTEREST
($13.32 PER SHARE) $1,150,338,683
=============
See Notes to Financial Statements.
<PAGE>
LIBERTY ALL*STAR EQUITY FUND
................................................................................
Statement of Operations
Year ended December 31, 1997
INVESTMENT INCOME:
Dividends $ 13,479,362
Interest 1,881,322
-------------
TOTAL INVESTMENT INCOME (NET OF
FOREIGN TAXES WITHHELD AT SOURCE
WHICH AMOUNTED TO $151,465) 15,360,684
EXPENSES:
Management fees $ 7,922,024
Administrative fee 2,025,069
Bookkeeping fee 239,161
Custodian and transfer agent fees 284,340
Proxy and shareholder communication expense 329,476
Printing expense 190,021
Legal and audit fees 84,954
Insurance expense 22,795
Trustees' fees and expense 51,197
Miscellaneous expense 5,809
-----------
TOTAL EXPENSE 11,154,846
-------------
NET INVESTMENT INCOME 4,205,838
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Sale of investments 234,528,620
Provision for federal income tax (30,675,208)
-----------
Net realized gain on investments after
provision for federal income tax 203,853,412
Net unrealized appreciation on investments:
Beginning of year 290,828,589
End of year 307,707,985
-----------
Change in unrealized appreciation -- net 16,879,396
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 224,938,646
=============
See Notes to Financial Statements.
<PAGE>
LIBERTY ALL*STAR EQUITY FUND
................................................................................
Statements of Changes in Net Assets
YEAR ENDED DECEMBER 31,
-----------------------------------
1997 1996
- --------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 4,205,838 $ 6,708,437
Net realized gain on investments
after provision for federal income tax 203,853,412 104,260,734
Change in unrealized appreciation -- net 16,879,396 59,017,670
-------------- ------------
Net increase in net assets resulting
from operations 224,938,646 169,986,841
-------------- ------------
DISTRIBUTIONS DECLARED FROM:
Net investment income (4,205,838) (6,708,437)
Net realized gain on investments (107,028,243) (87,663,477)
-------------- ------------
Total distributions (111,234,081) (94,371,914)
-------------- ------------
CAPITAL TRANSACTIONS:
Increase in net assets from capital
share transactions 48,707,853 40,600,510
-------------- ------------
Total increase in net assets 162,412,418 116,215,437
NET ASSETS:
Beginning of year 987,926,265 871,710,828
-------------- ------------
End of year $1,150,338,683 $987,926,265
============== ============
See Notes to Financial Statements.
<PAGE>
LIBERTY ALL*STAR EQUITY FUND
................................................................................
Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value at beginning of year $ 11.95 $ 11.03 $ 9.26 $10.40 $ 10.78
------- ------- ------- ------ -------
Income from Investment Operations:
Net investment income 0.05 0.08 0.10 0.11 0.12
Net realized and unrealized gains
(losses) on investments 3.01(a) 2.15(a) 2.71 (0.20) 0.78(a)
Provision for federal income tax (0.36) (0.13) -- -- (0.18)
------- ------- ------- ------ -------
Total from Investment Operations 2.70 2.10 2.81 (0.09) 0.72
------- ------- ------- ------ -------
Less Distributions:
Dividends from net investment income (0.05) (0.08) (0.10) (0.12) (0.12)
Distributions from realized capital gains (1.28) (1.10) (0.94) (0.52) (0.58)
Return of capital -- -- -- (0.36) (0.37)
------- ------- ------- ------ -------
Total Distributions (1.33) (1.18) (1.04) (1.00) (1.07)
------- ------- ------- ------ -------
Change due to rights offerings (b) -- -- -- (0.05) (0.03)
------- ------- ------- ------ -------
Net asset value at end of year $ 13.32 $ 11.95 $ 11.03 $ 9.26 $ 10.40
======= ======= ======= ====== =======
Per share market value at end of year $13.313 $11.250 $10.875 $8.500 $11.125
======= ======= ======= ====== =======
TOTAL INVESTMENT RETURN FOR SHAREHOLDERS: (c)
Based on net asset value 26.6% 21.7% 31.8% (0.08)% 8.8%
Based on market price 34.4% 16.2% 41.4% (14.9)% 12.7%
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of year (millions) $1,150 $988 $872 $710 $725
Ratio of expenses to average net assets 1.01% 1.03% 1.06% 1.07% 1.08%
Ratio of net investment income to
average net assets 0.38% 0.73% 0.92% 1.16% 1.08%
Portfolio turnover rate 99% 70% 54% 44% 72%
Average commission rate (d) $0.0502 $0.0537 -- -- --
</TABLE>
(a) Before provision for federal income tax.
(b) Effect of All-Star's rights offering for shares at a price below net asset
value.
(c) Calculated assuming all distributions reinvested and all rights exercised.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate paid per share for trades
on which commissions are charged.
See Notes to Financial Statements.
<PAGE>
LIBERTY ALL*STAR EQUITY FUND
................................................................................
Notes to Financial Statements
December 31, 1997
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
Liberty All-Star Equity Fund (All-Star or the Fund), organized as a
Massachusetts business trust on August 20, 1986, is a closed-end, diversified
management investment company. All-Star's investment objective is to seek total
investment return, comprised of long-term capital appreciation and current
income, through investment primarily in a diversified portfolio of equity
securities. All-Star is managed by Liberty Asset Management Company (the
"Manager"). The Manager is a subsidiary of Liberty Financial Companies, Inc., a
publicly traded company of which Liberty Mutual Insurance Company is the
majority shareholder.
The following is a summary of significant accounting policies followed
by All-Star in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results, if different,
are expected to be immaterial to the net assets of the Fund.
VALUATION OF INVESTMENTS -- Portfolio securities listed on an exchange
and over-the-counter securities quoted on the NASDAQ system are valued on the
basis of the last sale on the date as of which the valuation is made, or,
lacking any sales, at the current bid prices. Over-the-counter securities not
quoted on the NASDAQ system are valued on the basis of the mean between the
current bid and asked prices on that date. Securities for which reliable
quotations are not readily available are valued at fair value, as determined in
good faith and pursuant to procedures established by the Board of Trustees.
Short-term instruments maturing in more than 60 days for which market quotations
are readily available are valued at the current market value. Short-term
instruments with remaining maturities of 60 days or less are valued at amortized
cost, unless the Board of Trustees determines that this does not represent fair
value.
PROVISION FOR FEDERAL INCOME TAX -- All-Star qualifies as a "regulated
investment company." As a result, a federal income tax provision is not required
for amounts distributed to shareholders. All-Star has elected to retain a
portion of its net realized long-term capital gains amounting to $87,643,452 and
has recorded a provision for federal income taxes thereon of $30,675,208.
OTHER -- Security transactions are accounted for on the trade date.
Interest income and expenses are recorded on the accrual basis. Dividend income
is recorded on the ex-dividend date.
NOTE 2. FEES PAID TO AFFILIATES
Under All-Star's Management and Portfolio Management Agreements,
All-Star pays the Manager a management fee for its investment management
services at an annual rate of 0.80% of All-Star's average weekly net asset
value. The Manager pays each Portfolio Manager a portfolio management fee at an
annual rate of 0.40% of the average weekly net asset value of the portion of the
investment portfolio managed by it. All-Star also pays the Manager an
administrative fee for its administrative services at an annual rate of 0.20% of
All-Star's average weekly net asset value. The annual fund management and
administrative fees are reduced to 0.72% and 0.18%, respectively, on average
weekly net assets in excess of $400 million, and the aggregate annual fees
payable by the Manager to the Portfolio Managers are reduced to 0.36% of
All-Star's average weekly net assets in excess of $400 million. Effective August
1, 1997, the annual fund management and administrative fees were further reduced
to 0.648% and 0.162%, respectively, on average weekly net assets in excess of
$800 million to $1.2 billion and 0.584% and 0.146%, respectively, on average
weekly net assets in excess of $1.2 billion. The aggregate annual fees payable
by the Manager to the Portfolio Managers are also reduced to 0.324% of the
Fund's average weekly net assets in excess of $800 million to $1.2 billion and
0.292% of the Fund's average net assets in excess of $1.2 billion. Colonial
Management Associates, Inc., an affiliate of the Manager, provides bookkeeping
and pricing
<PAGE>
LIBERTY ALL*STAR EQUITY FUND
................................................................................
Notes to Financial Statements
services for $36,000 per year plus 0.0233% of All-Star's average weekly net
assets over $50 million, 0.0167% in excess of $500 million, and 0.015% in excess
of $1 billion.
Under the terms of a settlement of litigation initiated in 1988, the
Manager, until July 31, 1997, made monthly rebates of a portion of its fee for
investment management services in the amount of 3.875% of such fee. During the
year ended December 31, 1997, $177,551 in rebates was offset against management
fees of the Fund.
NOTE 3. CAPITAL TRANSACTIONS
During the year ended December 31, 1997 and December 31, 1996,
distributions in the amount of $48,707,853 and $40,600,510, respectively, were
paid in newly issued shares valued at market value or net asset value, but not
less than 95% of market value, resulting in the issuance of 3,656,443 and
3,687,524 shares, respectively.
NOTE 4. SECURITIES TRANSACTIONS
Realized gains and losses are recorded on the identified cost basis for
both financial reporting and federal income tax purposes. The cost of
investments purchased and the proceeds from investments sold excluding
short-term debt obligations for the year ended December 31, 1997, were
$1,061,079,219 and $1,122,256,154, respectively.
The Fund may enter into repurchase agreements and require the seller of
the instrument to maintain on deposit with the Fund's custodian bank or in the
Federal Reserve Book-Entry System securities in the amount at all times equal to
or in excess of the value of the repurchase agreement, plus accrued interest.
The Fund may experience costs and delays in liquidating the collateral if the
issuer defaults or enters bankruptcy.
NOTE 5. DISTRIBUTIONS TO SHAREHOLDERS
All-Star currently has a policy of paying distributions on its common
shares totaling approximately 10% of its net asset value per year, payable in
four quarterly distributions of 2.5% of All-Star's net asset value at the close
of the New York Stock Exchange on the Friday prior to each quarterly declaration
date. Distributions to shareholders are recorded on the ex-dividend date. The
characterization of income and capital gain distributions are determined in
accordance with federal income tax regulations, which may differ from generally
accepted accounting principles. Reclassifications are made to the Fund's capital
accounts to reflect income and gains available for distribution (or available
capital loss carryovers) under income tax regulations.
<PAGE>
LIBERTY ALL*STAR EQUITY FUND
................................................................................
Independent Auditors' Report
[Logo: KPMG Peat Marwick LLP]
The Board of Trustees and Shareholders
Liberty All-Star Equity Fund:
We have audited the accompanying statement of assets and liabilities of Liberty
All-Star Equity Fund (the Fund), including the schedule of investments, as of
December 31, 1997, and the related statement of operations for the year then
ended, statements of changes in net assets for each of the years in the two-year
period then ended, and financial highlights for each of the years in the
five-year period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Investment securities held in custody are
confirmed to us by the custodian. As to securities purchased and sold, but not
received or delivered, we request confirmations from brokers and, where replies
are not received, we carry out other appropriate procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Liberty All-Star Equity Fund as of December 31, 1997, the results of its
operations for the year then ended, changes in its net assets for each of the
years in the two-year period then ended, and financial highlights for each of
the years in the five-year period then ended, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Boston, Massachusetts
February 13, 1998
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(1) Financial Statements
Included in Part A
------------------
Financial highlights for ten years ended December 31, 1997
Included in Part B
------------------
Schedule of Investments, December 31, 1997
Statement of Assets and Liabilities, December 31, 1997
Statement of Operations for the year ended December 31, 1997
Statements of Changes in Net Assets for the years ended December 31,1997
and December 31, 1996
Financial Highlights for five years ended December 31, 1997
Notes to Financial Statements
Independent Auditors' Report
(2) Exhibits
(a) Amended and Restated Declaration Trust(2)
(a)(1) Amendment to Declaration of Trust dated May 11, 1993(6)
(b) Restated By-laws, as amended through April 18, 1996
(c) Not applicable
(d)(1) Specimen certificate for shares of beneficial interest(1)
(d)(2) Form of subscription certificate
(e) Automatic Dividend Reinvestment and Cash Purchase
Plan Brochure, as amended effective
October 23, 1995
(f) Inapplicable
(g)(1) Fund Management Agreement dated May 15, 1997 between
Registrant and Liberty Asset Management Company(4)
(g)(1)(a) Agreement of Amendment dated August 1, 1997 to Fund Management
Agreement dated May 15, 1987.
(g)(2)(a) Composite Form of Portfolio
Management Agreement among Registrant, Liberty Asset
Management Company and (i) J.P. Morgan Investment
Management Inc. and (ii) Wilke/Thompson Capital
Management, Inc.(6)
(g)(2)(a)(i) Letter Agreement dated July 1, 1996
between J.P. Morgan Investment Management Inc. and
Liberty Asset Management Company.
(g)(2)(b) Portfolio Management Agreement dated
November 5, 1997 among Registrant, Liberty Asset
Management Company and Oppenheimer Capital
(g)(2)(c) Portfolio Management Agreement dated
July 1, 1993 among Registrant, Liberty Asset
Management Company and Palley-Needelman Asset
Management, Inc.(5)
(g)(2)(d) Portfolio Management Agreement dated
November 1, 1997 among Registrant, Liberty Asset
Management Company and Westwood Management
Corporation.
(g)(2)(e) Form of Amendment dated August 1,
1997 to Portfolio Management Agreements among
Registrant, Liberty Asset Management Company and each
of J.P. Morgan Investment Management, Inc., Palley
Needelman Asset Management, Inc. and Wilke/Thompson
Capital Management, Inc.
(h) Inapplicable
(i) Inapplicable
(j) Custodian Agreement with Boston Safe Deposit and Trust Company
(k)(1) Registrar, Transfer Agency and Service Agreement with
State Street Bank and Trust Company(3)
(2) Pricing and Bookkeeping Agreement
dated January 1, 1996 between Registrant and Colonial
Management Associates, Inc.
(3) Form of Subscription Rights Agency
Agreement between Registrant and State Street
Bank & Trust Company
(l) Opinion of counsel
(m) Inapplicable
(n) Consent of independent auditors
----------------------
(1) Filed as an Exhibit to Amendment No. 3 to Registrant's Registration
Statement on Form N-2 (File No. 811-4809), and incorporated herein by
reference.
(2) Filed as an Exhibit to Pre-Effective
Amendment No. 2 to Registrant's Registration Statement on
Form N-2 (File No. 33-5132), and incorporated herein by
reference.
(3) Filed as an Exhibit to Registrant's
Registration Statement on Form N-2 (File No. 33-5132) as
initially filed August 20, 1986 or to Pre-Effective
Amendment No. 1 thereto, and incorporated herein by
reference.
(4) Filed as an Exhibit to Amendment No.
4 to Registrant's Registration Statement on form N-2
(File No. 811-4809), and incorporated herein by reference.
(5) Filed as an exhibit to Registrant's
Registration Statement (File No. 33-66022).
(6) Attached as Appendix B to Registrant's definitive Proxy Statement dated
March 1, 1997 for its Annual Meeting of Shareholders held April 16,
1997, and incorporated herein by reference.
Item 25. Marketing Arrangements
Not applicable.
Item 26. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses expected to be
incurred in connection with the offering described in this Registration
Statement:
Registration fee. . . . . . . . . . $17,477
New York Stock Exchange Listing fee 15,113
Printing of Prospectus............... 16,000
Mailing.............................. 55,000
Subscription Agent fees.............. 100,00
Accounting fees and expense.......... 5,000
Legal fees and expenses.............. 5,000
Miscellaneous........................ 6,410
-----------
Total $220,000
========
Item 27. Persons Controlled by or Under Common Control of Registrant
Not applicable
Item 28. Number of Holders of Securities
Title of Class No. of Record Holders
(as of February 13, 1998)
Shares of Beneficial Interest,
without par value 7,118
Item 29. Indemnification
Reference is made to Item 3, hereby incorporated by reference, to
Registrant's Registration Statement on Form N-2 (File No. 33-44389) for
provisions of Registrant's Declaration of Trust relating to indemnification and
exculpation.
The Registrant, Liberty Asset Management Company and their respective
trustees, directors and officers are insured by a directors and officers/errors
and omissions liability policy.
Item 30. Business and Other Connections of Investment Adviser
Liberty Asset Management Company, Registrant's Fund Manager, was organized
in August 1985 and is primarily engaged in the corporate administration of and
the provision of its multi-management services (see "The Multi-Manager Concept"
in the Prospectus) for Registrant and Liberty All-Star Growth Fund, Inc.
(formerly "The Charles Allmon Trust, Inc."), another multi-managed closed-end
investment company. It also provides its multi-management services to Liberty
All-Star Equity Fund, Variable Series, a multi-managed open-end investment
company which serves as an investment vehicle for variable annuity contracts
issued by affiliated insurance companies.
Kenneth R. Leibler, Chairman of the Board, Lindsay Cook, Senior Vice
President and a Director, C. Allen Merritt, Jr., Vice President, Treasurer and a
Director, John A. Benning, Vice President and Secretary, and Michael E.
Santilli, Controller, of Liberty Asset Management Company, are each officers
(and in the case of Mr. Leibler, a Director) of and devote substantially all
their time to the business of Liberty Asset Management Company's parent, Liberty
Financial Companies, Inc. The remaining officers and directors of Liberty Asset
Management Company devote all or substantially all of their time to its affairs.
The business and other connections of the officers and directors of the
Portfolio Managers of Registrant are listed in Schedules A and D of their
respective ADV Forms as currently on file with the Commission, which information
is hereby incorporated herein by reference. The file numbers of such ADV Forms
are as follows:
Oppenheimer Capital 801-10708
Palley-Needelman Asset Management, Inc. 801-9755
J.P. Morgan Investment Management Inc. 801-21011
Wilke/Thompson Capital Management, Inc. 801-30224
Westwood Management Corporation 801-18727
Item 31. Location of Accounts and Records
The records of Registrant specified in items (1) through (3) and (5)
through (8) of Rule 31a-1(b) under the Investment Company Act of 1940 are
maintained by Registrant's pricing and bookkeeping agent, Colonial Management
Associates, Inc., One Financial Center, Boston, MA 02111.
The records of Registrant specified in items (4) and (11) of Rule 31a-1(b)
are maintained by Registrant's Fund Manager, Liberty Asset Management Company,
Federal Reserve Plaza, Boston, MA 02210.
The records of Registrant specified in items (9) and (10) of Rule 31a-1(b)
with respect to portfolio transactions initiated by a Portfolio Manager of
Registrant are maintained by that Portfolio Manager (see Appendix A
to Part I).
Item 32. Management Services
Inapplicable
Item 33 Undertakings
(1) Registrant undertakes to suspend the offering of the shares covered
hereby until it amends its prospectus contained herein if (1) subsequent to the
effective date of this Registration Statement, its net asset value per share
declines more than 10 percent from its net assets value per share as of the
effective date of this Registration Statement, or (2) its net asset value
increases to an amount greater than its net proceeds as stated in the prospectus
contained herein.
(2) Not applicable
(3) Not applicable
(4) Not applicable
Rule 415 undertaking
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in the Registration
Statement;"
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement on Form N-2 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Boston and the Commonwealth of Massachusetts on
February 19, 1998.
LIBERTY ALL-STAR EQUITY FUND
By:\s\ RICHARD R. CHRISTENSEN
--------------------------
Richard R. Christensen
Pursuant to the requirements of the Securities Act 1993, this Registration
Statement on Form N-2 has been signed below by the following persons in the
capacities and on the dates indicated. By so signing, each of the undersigned in
his capacity as a Trustee, or Officer, or both, as the case may be, of the
Registrant, does also hereby appoint John A. Benning, Richard R. Christensen,
John L. Davenport, and Jeremiah J. Bresnahan, Jr. and each of them, severally,
or if more than one acts, a majority of them, his true and lawful attorney and
agent to execute in his name, place and stead (in such capacity) any and all
amendments to this Registration Statement and any post-effective amendments
thereto and all instruments necessary or desirable in connection therewith, to
attest to the seal of the Registrant thereon and to file the same with the
Securities and Exchange Commission. Each of said attorneys and agents shall have
power to act with or without the others and have full power and authority to do
and perform in the name and on behalf of each of the undersigned, in any and all
capacities, every act whatsoever necessary or advisable to be done in the
premises as fully and to all intents and purposes as each of the undersigned
might or could in person, hereby ratifying and approving the act of said
attorneys and agents and each of them.
(Signature) (Title and Capacity) (Date)
=========== =================== ================
/s/ RICHARD R. CHRISTENSEN President February 19, 1998
Richard R. Christensen (Chief Executive Officer)
/s/ TIMOTHY J. JACOBY Treasurer and Controller February 19, 1998
Timothy J. Jacoby (Principal Financial and
Accounting Officer)
/s/ ROBERT J. BIRNBAUM Trustee February 19, 1998
Robert J. Birnbaum
/s/ HAROLD W. COGGER Trustee February 19, 1998
Harold W. Cogger
JAMES E. GRINNELL Trustee February 19, 1998
James E. Grinnell
/s/ RICHARD W. LOWRY Trustee February 19, 1998
Richard W. Lowry
INDEX OF EXHIBITS
FILED WITH REGISTRATION STATEMENT
Exhibit
(b) Restated By-laws, as amended through April 18, 1996
(d)(2) Form of subscription certificate
(e) Automatic Dividend Reinvestment and Cash Purchase Plan
Brochure, as amended effective October 23, 1995
(g)(1)(a)Agreement of Amendment dated August 1, 1997 to Fund Management
Agreement dated May 15, 1987.
(g)(2)(a)(i) Letter Agreement dated July 1, 1996 between J.P. Morgan Investment
Management, Inc. and Liberty Asset Management Company
(g)(2)(b) Portfolio Management Agreement dated November 5, 1997
among Registrant, Liberty Asset Management Company and
Oppenheimer Capital.
(g)(2)(d) Portfolio Management Agreement dated November 1, 1997
among Registrant, Liberty Asset Management Company and
Westwood Management Corporation.
(g)(2)(e) Form of Amendment dated August 1, 1997 to Portfolio
Management Agreements among Registrant, Liberty Asset
Management Company and each of J.P. Morgan Investment
Management Inc., Palley-Needelman Asset Management, Inc.
and Wilke/Thompson Capital Management, Inc.
(i) Custodian Agreement with Boston Safe Deposit and Trust
Company
(k)(2) Pricing and Bookkeeping Agreement dated January 1, 1996
between Registrant and Colonial Management Associates,
Inc.
(k)(3) Form of Subscription Rights Agency Agreement between
Registrant and State Street Bank and Trust Company
(l)(d) Opinion of Counsel
(n) Consent of independent auditors
Restated
BY-LAWS
OF
LIBERTY ALL-STAR EQUITY FUND
As amended through April 18, 1996
ARTICLE I
DEFINITIONS
The terms "Commission", "Custodian", "Declaration", "Distributor",
"Investment Adviser", "Majority Shareholder Vote", "1940 Act", "Shareholder",
"Shares", "Transfer Agent", "Trust", "Trust Property" and "Trustees" have the
respective meanings given them in the Declaration of Trust of Liberty All-Star
Equity Fund dated August 20, 1986, as amended from time to time.
ARTICLE II
OFFICES
Section 1. Principal Office. Until changes by the Trustees, the
principal office of the Trust in The Commonwealth of Massachusetts shall be
in the City of Boston, County of Suffolk.
Section 2. Other Offices. The Trust may have offices in such other
places without as well as within The Commonwealth as the Trustees may from
time to time determine.
ARTICLE III
SHAREHOLDERS
Section 1. Meetings. An annual meeting of the Shareholders shall be held
at such place within or without the Commonwealth of Massachusetts on such date
and at such time as the Trustee shall designate. Special meetings of the
Shareholders may be called at any time by a majority of the Trustees and shall
be called by any Trustee upon written request of Shareholders holding in the
aggregate no less than ten percent (10%) of the outstanding Shares having voting
rights, such request specifying the purpose or purposes for which such meeting
is to be called. Any such meeting shall be held within or without the
Commonwealth of Massachusetts on such date and at such time as the Trustees
shall designate. The holders of a majority of outstanding Shares present in
person or by proxy shall constitute a quorum at any meeting of the Shareholders.
Section 2. Notice of Meetings. Notice of all meetings of the Shareholders,
stating the time, place and purposes of the meeting, shall be given by the
Trustees by mail to each Shareholder at his address as recorded on the register
of the Trust, mailed at least ten (10) days and not more than sixty (60) days
before the meeting. Only the business stated in the notice of the meeting shall
be considered at such meeting. Any adjourned meeting may be held as adjourned
without further notice. No notice need be given to any Shareholder who shall
have failed to inform the Trust of his current address or if a written waiver of
notice, executed before or after the meeting by the Shareholder or his attorney
thereunto authorized, is filed with the records of the meeting.
Section 3. Record Date for Meeting. For the purpose of determining the
Shareholders who are entitled to notice of an to vote at any meeting, or to
participate in any distribution, or for the purpose of any other action, the
Trustees may from time to time close the transfer books for such period, not
exceeding thirty (30) days, as the Trustees may determine; or without closing
the transfer books the Trustees may fix a date not more than sixty (60) days
prior to the date of any meeting of Shareholders or distribution or other action
as a record date for the determination of the persons to be treated as
Shareholders of record for such purposes.
Section 4. Proxies. At any meeting of Shareholders, any holder of Shares
entitled to vote thereat may vote by proxy, provided that no proxy shall be
voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote shall be taken.
Pursuant to a resolution of a majority of the Trustees, proxies may be solicited
in the name of one or more Trustees or one or more of the officers of the Trust.
Only Shareholders of record shall be entitled to vote. Each full Share shall be
entitled to one vote and fractional Shares shall be entitled to a vote of such
fraction. When any Share is held jointly by several persons, any one of them may
vote at any meeting in person or by proxy in respect to such Share, but if more
than one of them shall be present at such meeting in person or proxy, and such
joint owners or their proxies so present disagree as to any vote to be cast,
such vote shall not be received in respect of such Share. A proxy purporting to
be executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise, and the burden of proving invalidity
shall rest on the challenger. If the holder of any such Share is a minor or a
person of unsound mind, and subject to guardianship or to the legal control of
any other person as regards the charge or management of such Share, he may vote
by his guardian or such other person appointed or having such control, and such
vote may be given in person or by proxy. The placing of a shareholder's name on
a proxy pursuant to telephonic or electronically transmitted instructions
obtained pursuant to procedures reasonably designed to verify that such
instructions have been authorized by such shareholder shall constitute execution
or signature of such proxy by or on behalf of such shareholder.
Section 5. Inspection of Records. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
shareholders of a Massachusetts business corporation.
ARTICLE IV
TRUSTEES
Section 1. Meetings of the Trustees. The Trustees may in their discretion
provide for regular or stated meetings of the Trustees. Notice of regular or
stated meetings need not be given. Meetings of the Trustees other than regular
or stated meetings shall be held whenever called by the President, or by any one
of the Trustees, at the time being in office. Notice of the time and place of
each meeting other than regular or stated meetings shall be given by the
Secretary or an Assistant Secretary or by the officer or Trustee calling the
meeting and shall be mailed to each Trustee at least two days before the
meeting, or shall be telegraphed, cabled, or wirelessed to each Trustee at his
business address, or personally delivered to him at least one day before the
meeting. Such notice may, however, be waived by any Trustee. Notice of a meeting
need not be given to any Trustee if a written waiver of notice, executed by him
before or after the meeting, is filed with the records of the meeting, or to any
Trustee who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him. A notice or waiver of notice need not
specify the purpose of any meeting. The Trustees may meet by means of a
telephone conference circuit or similar communications equipment by means of
which all persons participating in the meeting can hear each other, which
telephone conference meeting shall be deemed to have been held at a place
designated by the Trustees at the meeting. Participation in a telephone
conference meeting shall constitute presence in person at such meeting. Any
action required or permitted to be taken at any meeting of the Trustees may be
taken by the Trustees without a meeting if all the Trustees consent to the
action in writing and the written consents are filed with the records of the
Trustees' meetings. Such consents shall be treated as a vote for all purposes.
Section 2. Quorum and Manner of Acting. A majority of the Trustees shall
be present in person at any regular or special meeting of the Trustees in order
to constitute a quorum for the transaction of business at such meeting and
(except as otherwise required by law, the Declaration or these By-Laws) the act
of a majority of the Trustees present at any such meeting, at which a quorum is
present, shall be the act of the Trustees. In the absence of a quorum, a
majority of the Trustees present may adjourn the meeting from time to time until
a quorum shall be present. Notice of an adjourned meeting need not be given.
ARTICLE V
COMMITTEES AND ADVISORY BOARD
Section 1. Executive and Other Committees. The Trustees by vote of a
majority of all the Trustees may elect from their own number an Executive
Committee to consist of not less than three (3) to hold office at the pleasure
of the Trustees, which shall have the power to conduct the current and ordinary
business of the Trust while the Trustees are not in session, including the
purchase and sale of securities and such other powers of the Trustees as the
Trustees may, from time to time, delegate to them except those powers which by
law, the Declaration or these By-Laws they are prohibited from delegating. The
Trustees may also elect from their own number other Committees from time to
time, the number composing such Committees, the powers conferred upon the same
(subject to the same limitations as with respect to the Executive Committee) and
the term of membership on such Committees to be determined by the Trustees. The
Trustees may designate a Chairman of any such Committee. In the absence of such
designation the Committee may elect its own Chairman.
Section 2. Meeting, Quorum and Manner of Acting. The Trustees may (1)
provide for stated meetings of any Committees, (2) specify the manner of calling
and notice required for special meetings of any Committee, (3) specify the
number of members of a Committee required to constitute a quorum and the number
of members of a Committee required to exercise specified powers delegated to
such Committee, (4) authorize the making of decisions to exercise specified
powers by written assent of the requisite number of members of a Committee
without a meeting, and (5) authorize the members of a Committee to meet by means
of a telephone conference circuit.
The Executive Committee shall keep regular minutes of its meetings and
records of decisions taken without a meeting and cause them to be recorded in a
book designated for that purpose and kept in the office of the Trust.
Section 3. Advisory Board. The Trustees may appoint an Advisory Board to
consist in the first instance of not less than three (3) members. Members of
such Advisory Board shall not be Trustees or officers and need not be
Shareholders. Members of this Board shall hold office for such period as the
Trustees may by resolution provide. Any member of such Board may resign
therefrom by a written instrument signed by him which shall take effect upon
delivery to the Trustees. The Advisory Board shall have no legal powers and
shall not perform the functions of Trustees in any manner, said Board being
intended merely to act in an advisory capacity. Such Advisory Board shall meet
at such times and upon such notice as the Trustees may by resolution provide.
ARTICLE VI
OFFICERS, AGENTS AND EMPLOYEES
SECTION 1. Number and Qualifications. The officers of the Trust shall be a
Chairman of the Board, a President, a Treasurer, a Controller and a Secretary,
each of whom shall be elected by the Board of Trustees. The Board of Trustees
may also appoint any other officers, agents and employees it deems necessary or
proper. Any two (2) or more offices may be held by the same person, except the
office of President, but no officer shall execute, acknowledge or verify in more
than one (1) capacity any instrument required by law to be executed,
acknowledged or verified in more than one capacity. The Chairman of the Board,
the President, the Treasurer, the Controller and the Secretary shall be elected
by the Board of Trustees each year at its first meeting held after the annual
meeting of the Shareholders, each to hold office until the meeting of the Board
following the next annual meeting of the Shareholders and until his or her
successor shall have been duly elected and shall have qualified, or until his or
her death, or until he or she shall have resigned or have been removed, as
provided in these By-Laws. The Board of Trustees may from time to time elect
such additional officers (including one or more Vice Presidents, one or more
Assistant Vice Presidents, one or more Assistant Treasurers, one or more
Assistant Controllers and one or more Assistant Secretaries) and may appoint, or
delegate to the President the power to appoint, such agents as may be necessary
or desirable for the business of the Trust. Such other officers and agents shall
have such duties and shall hold their offices for such terms as may be
prescribed by the Board or by the appointing authority. Any officer other than
the Chairman of the Board may be but none need be, a Trustee, and any officer
may be, but none need be a Shareholder.
SECTION 2. Resignations. Any officer of the Trust may resign at any time
by giving written notice of his or her resignation to the Board of Trustees, the
Chairman of the Board, the President or the Secretary. Any resignation shall
take effect at the time specified therein or, if the time when it shall become
effective is not specified therein, immediately upon its receipt. The acceptance
of a resignation shall not be necessary to make it effective unless otherwise
stated in the resignation.
SECTION 3. Removal of Officer, Agent or Employee. Any officer, agent or
employee of the Trust may be removed by the Board of Trustees with or without
cause at any time, and the Board may delegate the power of removal as to agents
and employees not elected or appointed by the Board of Trustees.
SECTION 4. Vacancies. A vacancy in any office, whether arising from death,
resignation, removal or any other cause, may be filled for the unexpired portion
of the term of the office that shall be vacant, in the manner prescribed in
these By-Laws for the regular election or appointment to that office.
SECTION 5. Compensation. The compensation, if any, of the officers of the
Trust shall be fixed by the Board of Trustees, but this power may be delegated
to any officer with respect to other officers under his control.
SECTION 6. Bonds or Other Security. If required by the Board, any officer,
agent or employee of the Trust shall give a bond or other security for the
faithful performance of his or her duties, in an amount and with any surety or
sureties as the Board may require.
SECTION 7. Chairman of the Board. The Chairman of the Board shall be a
Trustee of the Trust and, unless the Board shall specify otherwise, shall
preside at meetings of the Board and of the Shareholders.
SECTION 8. President. The President shall be the Chief Executive Officer
of the Trust and shall have, subject to the control of the Board of Trustees,
general charge of the business and affairs of the Trust, and may employ and
discharge employees and agents of the Trust, except those elected or appointed
by the Board, and he or she may delegate these powers.
SECTION 9. Vice President. Each Vice President shall have the powers and
perform the duties that the President or the Board of Trustees may from time to
time prescribe. In the absence or disability of the President, the Vice
President or, if there be more than one Vice President, any Vice President
designated by the Trustees, shall perform all the duties and may exercise any of
the powers of the President, subject to the control of the Board of Trustees.
SECTION 10. Treasurer. The Treasurer shall be the principal financial and
accounting officer of the Trust. He or she shall deliver all funds of the Trust
which may come into his or her hands to such Custodian as the Trustees may
employ pursuant to Article X of these By-Laws. He or she shall render a
statement of condition of the finances of the Trust to the Trustees as often as
they shall require the same, and he or she shall in general perform all the
duties incident to the office of Treasurer and such other duties as from time to
time may be assigned to him or her by the Board of Trustees.
SECTION 11. Assistant Treasurers. In the absence or disability of the
Treasurer, the Assistant Treasurer, or, if there be more than one, any Assistant
Treasurer designated by the Board of Trustees, shall perform all the duties, and
may exercise all the powers, of the Treasurer. The Assistant Treasurers, if any,
shall perform such other duties as from time to time may be assigned to them by
the Treasurer or the Board of Trustees.
SECTION 12. Controller. The Controller shall be the chief accounting
officer of the Trust and shall have control of all its books of account. He or
she shall see that correct and complete books and records of account are kept as
required by law, showing fully, in such form as he or she shall prescribe, all
transactions of the Trust, and he or she shall require, keep and preserve all
vouchers relating thereto for such period as may be necessary. The Controller
shall render periodically such financial statements and such other reports
relating to the Trust's business as may be required by the President or the
Board. He or she shall generally perform all duties appertaining to the office
of Controller of a corporation.
SECTION 13. Assistant Controllers. In the absence or disability of the
Controller, the Assistant Controller, or, if there be more than one, any
Assistant Controller designated by the Board of Trustees, shall perform all of
the duties, and may exercise all of the powers, of the Controller. The Assistant
Controllers, if any, shall perform such other duties as from time to time may be
assigned to them by the Controller or the Board of Trustees.
SECTION 14. Secretary. The Secretary shall keep the minutes of all
meetings of the Trustees and of all meetings of the Shareholders in proper books
provided for that purpose; he or she shall have custody of the seal of the
Trust; he or she shall have charge of the share transfer books, lists and
records unless the same are in the charge of the Transfer Agent. He or she shall
attend to the giving and serving of all notices by the Trust in accordance with
the provisions of these By-Laws and as required by law; and subject to these
By-Laws, he or she shall in general perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him or
her by the Trustees.
SECTION 15. Assistant Secretaries. In the absence or disability of the
Secretary, the Assistant Secretary, or, if there be more than one, any Assistant
Secretary designated by the Board of Trustees, shall perform all of the duties,
and may exercise all of the powers, of the Secretary. The Assistant Secretaries,
if any, shall perform such other duties as from time to time may be assigned to
them by the Secretary or the Board of Trustees.
SECTION 16. Delegation of Duties. In case of the absence or disability of
any officer of the Trust, or for any other reason that the Board of Trustees may
deem sufficient, the Board may confer for the time being the powers or duties,
or any of them, of such officer upon any other officer or upon any Trustee.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Trust shall begin on the 1st day of January in each
year and shall end on the last day of December in each year, provided, however,
that the Trustees may from time to time change the fiscal year.
ARTICLE VIII
SEAL
The Trustees shall adopt a seal which shall be in such form and shall have
such inscription thereon as the Trustee may from time to time prescribe.
ARTICLE IX
WAIVERS OF NOTICE
Whenever any notice whatever is required to be given by law, the
Declaration or these By-Laws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto. A notice shall be deemed to have
been telegraphed, cabled or wirelessed for the purpose of these By-Laws when it
has been delivered to a representative of any telegraph, cable or wireless
company with instruction that it be telegraphed, cabled or wirelessed.
ARTICLE X
CUSTODIAN
Section 1. Appointment and Duties. The Trustees shall at all times employ
a bank or trust company having a capital, surplus and undivided profits of at
least five million dollars ($5,000,000) as Custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements, if
any, as may be contained in the Declaration, these By-Laws and the 1940 Act;
(1) to hold the securities owned by the Trust and deliver the
same upon written order;
(2) to receive and receipt for any monies due to the Trust and
deposit the same in its own banking department or elsewhere as the
Trustees may direct;
(3) to disburse such funds upon orders or vouchers;
(4) if authorized by the Trustees, to keep the books and
accounts of the Trust and furnish clerical and accounting services; and
(5) if authorized to do so by the Trustees, to compute the net
income of the Trust;
all upon such basis of compensation as may be agreed upon between the Trustees
and the Custodian. If so directed by a Majority Shareholder Vote, the Custodian
shall deliver and pay over all property of the Trust held by it as specified in
such vote.
The Trustees may also authorize the Custodian to employ one or more
sub-Custodians from time to time to perform such of the acts and services of the
Custodian and upon such terms and conditions, as may be agreed upon between the
Custodian and such sub-Custodian and approved by the Trustees, provided that in
every case such sub-Custodian shall be a bank or trust company organized under
the laws of the United States or one of the states thereof and having capital,
surplus and undivided profits of at least five million dollars ($5,000,000.00).
Section 2. Central Certificate System. Subject to such rules, regulations
and orders as the Commission may adopt, the Trustees may direct the Custodian to
deposit all or any part of the securities owned by the Trust in a system for the
central handling of securities established by a national securities exchange or
a national securities association registered with the Commission under the
Securities Exchange Act of 1934, or such other person as may be permitted by the
Commission, or otherwise in accordance with the 1940 Act, pursuant to which
system all securities of any particular class or series of any issuer deposited
within the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities, provided that
all such deposits shall be subject to withdrawal only upon the order of the
Trust or its Custodian.
Section 3. Acceptance of Receipts in Lieu of Certificates. Subject to such
rules, regulations and orders as the Commission may adopt, the Trustees may
direct the Custodian to accept written receipts or other written evidence
indicating purchases of securities held in book-entry form in the Federal
Reserve System in accordance with regulations promulgated by the Board of
Governors of the Federal Reserve System and the local Federal Reserve Banks in
lieu of receipt of certificates representing such securities.
Section 4. Provisions of Custodian Contract. The following provisions
shall apply to the employment of a Custodian pursuant to this Article X and to
any contract entered into with the Custodian so employed.
(a) The Trustees shall cause to be delivered to the Custodian all
securities owned by the Trust or to which it may become entitled, and
shall order the same to be delivered by the Custodian only upon completion
of a sale, exchange, transfer, pledge, loan of portfolio securities to
another person or other disposition thereof, and upon receipt by the
Custodian of the consideration therefor or a certificate of deposit or a
receipt of an issuer or of its Transfer Agent, all as the Trustees may
generally or from time to time require or approve, or to a successor
Custodian; and the Trustees shall cause all funds owned by the Trust or to
which it may become entitled to be paid to the Custodian, and shall order
the same disbursed only for investment against delivery of the securities
acquired, or the return of cash held as collateral for loans of portfolio
securities, or in payment of expenses, including management compensation,
and liabilities of the Trust, including distributions to Shareholders, or
to a successor Custodian; provided, however, that nothing herein shall
prevent delivery of securities for examination to the broker selling the
same in accord with the "street delivery" custom whereby such securities
are delivered to such broker in exchange for a delivery receipt exchanged
for a delivery receipt exchanged on the same day for an uncertified check
of such broker to be presented on the same day for certification.
Notwithstanding anything to the contrary in these By-Laws, upon receipt of
proper instructions, which may be standing instructions, the Custodian may
delivery funds in the following cases. In connection with repurchase
agreements, the Custodian may transmit, prior to receipt on behalf of the
Fund of any securities or other property, funds from the Fund's custodian
account to a special custodian approved by the Trustees of the Fund, which
funds shall be used to pay for securities to be purchased by the Fund
subject to the Fund's obligation to sell and the seller's obligation to
repurchase such securities. In such case, the securities shall be held in
the custody of the special custodian. In connection with the Trust's
purchase or sale of financial futures contracts, the Custodian shall
transmit, prior to receipt on behalf of the Fund of any securities or
other property, funds from the Trust's custodian account in order to
furnish to and maintain funds with brokers as margin to guarantee the
performance of the Trust's futures obligations in accordance with the
applicable requirements of commodities exchanges and brokers.
(b) In case of the resignation, removal or inability to serve of any
such Custodian, the Trust shall promptly appoint another bank or trust
company meeting the requirements of this Article X as successor Custodian.
The agreement with the Custodian shall provide that the retiring Custodian
shall, upon receipt of notice of such appointment, deliver the funds and
property of the Trust in its possession to and only to such successor, and
that pending appointment of a successor Custodian, or a vote of the
Shareholders to function without a Custodian, the Custodian shall not
delivery funds and property of the Trust to the Trust, but may deliver
them to a bank or trust company doing business in Boston, Massachusetts,
of its own selection, having an aggregate capital, surplus and undivided
profits (as shown in its last published report) of at least $5,000,000, as
the property of the Trust to be held under terms similar to those on which
they were held by the retiring Custodian.
ARTICLE XI
SALES OF SHARES OF THE TRUST
The Trustees may from time to time issue and sell or cause to be issued
and sold Shares for cash or other property, which shall in every case be paid or
delivered to the Custodian as agent of the Trust before the delivery of any
certificate for such shares. The Shares, including additional Shares which may
have been purchased by the Trust (herein sometimes referred to as "treasury
shares"), may not be sold at less than the net asset value thereof determined by
or on behalf of the trustees as of a time within forty-eight hours, excluding
Sundays and holidays, next preceding the time of such determination, except (1)
in connection with an offering to the holders of Shares; (2) with the consent of
a majority of the holders of Shares; (3) upon conversion of a convertible
security in accordance with its terms; (4) upon the exercise of any warrant
issued in accordance with the provisions of section 18(d) of the 1940 Act; or
(5) under such other circumstances as the Commission may permit by rules and
regulations or orders for the protection of investors.
No Shares need be offered to existing Shareholders before being offered to
others. No Shares shall be sold by the Trust (although Shares previously
contracted to be sold may be issued upon payment therefor) during any period
when the determination of net asset value is suspended by declaration of the
Trustees. In connection with the acquisition by merger or otherwise of all or
substantially all the assets of an investment company (whether a regulated or
private investment company or a personal holding company), the Trustees may
issue or cause to be issued Shares and accept in payment therefor such assets at
not more than market value in lieu of cash, notwithstanding that the federal
income tax basis to the Trust of any assets so acquired may be less than the
market value, provided that such assets are of the character in which the
Trustees are permitted to invest the funds of the Trust.
ARTICLE XII
DIVIDENDS AND DISTRIBUTIONS
Section 1. Limitations on Distributions. The total of distributions to
Shareholders paid in respect of any one fiscal year, subject to the exceptions
noted below, shall, when and as declared by the Trustees be approximately equal
to the sum of (A) the net income, exclusive of the profits or losses realized
upon the sale of securities or other property, for such fiscal year, determined
in accordance with generally accepted accounting principles (which, if the
trustees so determine, may be adjusted for net amounts included as such accrued
net income in the price of Shares issued or repurchased), but if the net income
exceeds the amount distributed by less than one cent per share outstanding at
the record date for the final dividend, the excess shall be treated as
distributable income of the following year; and (B), in the discretion of the
Trustees, an additional amount which shall not substantially exceed the excess
of profits over losses on sales of securities or other property for such fiscal
year. The decision of the Trustees as to what, in accordance with generally
accepted accounting principles, is income and what is principal shall be final,
and except as specifically provided herein the decision of the Trustees as to
what expenses and charges of the Trust shall be charged against principal and
what against income shall be final, all subject to any applicable provisions of
the 1940 Act and rules, regulations and orders of the Commission promulgated
thereunder. For the purposes of the limitation imposed by this Section 1, Shares
issued pursuant to Section 2 of this Article XII shall be valued at the amount
of cash which the Shareholders would have received if they had elected to
receive cash in lieu of such Shares.
Inasmuch as the computation of net income and gains for federal income tax
purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give to the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce liability for taxes. Any payment made to
Shareholders pursuant to clause (B) of this Section 1 shall be accompanied by a
written statement showing the source or sources of such payment, and the basis
of computation thereof. The Trustees may, in their discretion, elect to retain
the amounts referred to in Clause B of this Section 1 and pay any federal income
taxes thereon.
Section 2. Distributions Payable in Cash or Shares. The Trustees may adopt
and offer to Shareholders such dividend reinvestment plans, cash dividend payout
plans or related plans as the Trustees shall deem appropriate. The Trustees
shall have power, to the fullest extent permitted by the laws of Massachusetts
but subject to the limitation as to cash distributions imposed by Section 1 of
this Article XII, at any time or from time to time to declare and cause to be
paid distributions payable at the election of any of the Shareholders (whether
exercised before or after the declaration of the distribution) either in cash or
in Shares, provided that the sum of (i) the cash distribution actually paid to
any Shareholder and (ii) the net asset value of the Shares which that
Shareholder elects to receive, in effect at such time as the Trustees may
specify, shall not exceed the full amount of cash to which that Shareholder
would be entitled if he elected to receive only cash. In the case of a
distribution payable in cash or Shares, a Shareholder failing to express his
election before a given time shall be deemed to have elected to take Shares
rather than cash.
Section 3. Stock Dividends. Anything in these By-Laws to the contrary
notwithstanding, the Trustees may at any time declare and distribute pro rata
among the Shareholders a "stock dividend" out of either authorized but unissued
Shares or treasury Shares or both.
ARTICLE XIV
AMENDMENTS
These By-Laws, or any of them, may be altered, amended or repealed, or new
By-Laws may be adopted (a) by Majority Shareholder Vote, or (b) by the Trustees,
provided, however, that no By-Law may be amended, adopted or repealed by the
Trustees if such amendment, adoption or repeal requires, pursuant to law, the
Declaration or these By-Laws, a vote of the Shareholders or if such amendment,
adoption or repeal changes or affects the provisions of Sections 1 and 4 of
Article X or the provisions of this Article XIII.
ARTICLE XV
MISCELLANEOUS
The Trust shall not impose any restrictions upon the transfer of the
Shares of the Trust except as provided in the Declaration, but this requirement
shall not prevent the charging of customary transfer agent fees.
The Trust shall not permit any officer or Trustee of the Trust, or any
partner, officer or director of the Investment Adviser or underwriter of the
Trust to deal for or on behalf of the Trust with himself as principal or agent,
or with any partnership, association or corporation in which he has a financial
interest; provided that the foregoing provisions shall not prevent (a) officers
and Trustees of the Trust or partners, officers or directors of the Investment
Adviser or underwriter of the Trust from buying, holding or selling shares in
the Trust, or from being partners, officers or directors or otherwise
financially interested in the Investment Adviser or underwriter of the Trust or
any affiliate thereof; (b) purchases or sales of securities or other property by
the Trust from or to an affiliated person or to the Investment Adviser or
underwriters of the Trust if such transaction is exempt from the applicable
provisions of the 1940 Act; (c) purchases of investments for the portfolio of
the Trust or sales of investments owned by the Trust through a security dealer
who is, or one or more of whose partners, shareholders, officers or directors
is, an officer or Trustee of the Trust, or a partner, officer or director of the
Investment Adviser or underwriter of the Trust, if such transactions are handled
in the capacity of broker only and commissions charged do not exceed customary
brokerage charges for such services; (d) employment of legal counsel, registrar,
Transfer Agent, dividend disbursing agent or Custodian who is, or has a partner,
shareholder, officer, or director who is, an officer or Trustee of the Trust, or
a partner, officer or director of the Investment Adviser or underwriter of the
Trust, if only customary fees are charged for services to the Trust; (e) sharing
statistical research, legal and management expenses and office hire and expenses
with any other investment company in which an officer or Trustee of the Trust,
or a partner, officer or director of the Investment Adviser or underwriter of
the Trust, is an officer or director or otherwise financially interested.
END OF BY-LAWS
[Form of Subscription Certificate]
VOID IF NOT RECEIVED BY THE SUBSCRIPTION AGENT BEFORE
5:00 P.M.
EASTERN TIME ON APRIL , 1998 UNLESS PRECEDED
BY A NOTICE OF GUARANTEED DELIVERY
Rights Issued Shares of Beneficial
Interest available on Primary Subscription _________
LIBERTY ALL-STAR EQUITY FUND
EXERCISE FORM FOR RIGHTS TO SUBSCRIBE FOR SHARES OF
BENEFICIAL INTEREST
Dear Shareholder:
IN ORDER TO EXERCISE YOUR RIGHTS, YOU MUST COMPLETE BOTH
SIDES OF THIS TEAR OFF CARD. PLEASE RETAIN THE TOP
PORTION FOR YOUR RECORDS AND RETURN THE BOTTOM PORTION
As the record holder of rights (the "Rights") to acquire Shares of Beneficial
Interest ("Shares") in Liberty All-Star Equity Fund (the "Fund") you are
entitled to subscribe for the number of Shares of the Fund shown above, pursuant
to the Primary Subscription, upon the terms and conditions and at the
Subscription Price for each Share determined in accordance with the formula
specified in the Prospectus relating thereto. The Rights issued to you also
entitle you to participate in the Over-Subscription Privilege, as described in
the Prospectus. Pursuant to the Over-Subscription Privilege, you may purchase
any number of additional Shares if such Shares are available and you have fully
exercised your rights on Primary Subscription (other than those Rights which
cannot be exercised because they represent the right to acquire less than one
full Share).
NOTE: The Subscription Price of $ referred to below is an estimated price only.
The final Subscription Price, to be determined on April ___, 1998, could be
higher or lower. Additional payment may be required for any new Shares acquired
in the Primary Subscription (and any new Shares acquired through the
Over-Subscription Privilege) when the actual Subscription Price is determined.
Please reference the Control Number appearing on the form below on your check,
money order, or notice of guaranteed delivery.
-----------------------------------------------
How to Calculate Your Full Primary
Subscription Entitlement
No. of Common Shares owned _______ / 20
= ____________ new Shares
(ignore fractions)
-----------------------------------------------
THIS SUBSCRIPTION RIGHT IS NON-TRANSFERABLE
Full payment of the estimated Subscription Price for Shares subscribed for both
on Primary Subscription and pursuant to the Over-Subscription Privilege must
accompany this Exercise Form and must be made payable in United States dollars
by money order or check drawn on a bank located in the United States payable to
________. Alternatively, a Notice of Guaranteed Delivery must be received by the
Subscription Agent before 5:00 p.m. Eastern time on April __, 1998.
SECTION 1: DETAILS OF SUBSCRIPTION - PLEASE PRINT ALL
INFORMATION CLEARLY AND LEGIBLY AND COMPLETE BOTH SIDES
OF THE FORM.
- -------------------------------------------------------------
IF YOU WISH TO SUBSCRIBE FOR YOUR FULL ENTITLEMENT: Control No.__________
Account No._________
A. I apply for my full entitlement of new Shares
__________X $_____= $_______________
(No. of new Shares)
B. I apply for the Over-Subscription Privilege*
__________X $_____ = $______________
(No. of additional Shares)
AMOUNT ENCLOSED $
* You can only exercise your Over-Subscription
Privilege if you have fully exercised your Rights on Primary Subscription,
other than those Rights that would entitle you to subscribe for less than
one full Share.
IF YOU DO NOT WISH TO SUBSCRIBE FOR YOUR FULL ENTITLEMENT:
C. I apply for __________X $ = __________________
(No. of new (AMOUNT ENCLOSED)
Shares)
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TO: State Street Bank and Trust Company
Corporate Reorganization
P.O. Box 9061
Boston, MA 02205-8686
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SECTION 2: TO SUBSCRIBE: I acknowledge that I have received the Prospectus for
this Offer, and I hereby irrevocably subscribe for the number of new Shares
indicated on the front of this card on the terms and conditions set out in the
Prospectus. I understand and agree that I will be obligated to pay an additional
amount to the Fund if the Subscription Price, as determined on the Expiration
Date, is in excess of the estimate Subscription Price of $ .
I hereby agree that if I fail to pay in full for the Shares for which I
have subscribed, the Fund may exercise any of the remedies provided for in the
Prospectus.
Signature of Subscriber(s)
Please give your telephone # ( )
- -------------------------------------------------------------
- -------------------------------------------------------------
If you wish to have the certificates for your Shares and refund
check (if any) delivered to an address other than that listed on this card, you
must have your signature guaranteed by a member firm of the New York Stock
Exchange or a bank or trust company. Please provide the delivery address below
and note if it is a permanent change.
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
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LIBERTY ALL-STAR EQUITY FUND
Federal Reserve Plaza
Boston, Massachusetts 02210
Fund Manager LIBERTY ASSET MANAGEMENT COMPANY
Automatic Dividend Reinvestment and Cash Purchase Plan
Inquiries to: LIBERTY ALL-STAR EQUITY FUND Automatic
Dividend Reinvestment and Cash Purchase Plan
State Street Bank & Trust Company
P.O. Box 8200 Boston, MA
02266-8200 Telephone 800-542-3863 LIBERTY ALL-STAR EQUITY
FUND
Automatic Dividend Reinvestment and Cash Purchase Plan
(as amended effective October 23, 1995)
Dear Shareholder:
We are pleased that you have chosen to invest in Liberty ALL-STAR Equity Fund
and are pleased to offer you a plan for the reinvestment of your dividends and
distributions in additional shares of the Fund. The Plan also allows you to make
optional cash investments in Fund shares on a monthly basis.
The Plan is available to all shareholders of the Fund and provides a convenient
way to acquire additional Fund shares.
This service is entirely voluntary and, subject to the terms of the Plan, you
may join or withdraw at any time.
We invite you to review this brochure describing the features of the Plan. If
you wish to participate and your shares are held in your own name, simply
complete and mail the attached enrollment form.
If your shares are held in the name of a brokerage firm, bank or other nominee,
you should contact your nominee to see if it will participate in the Plan on
your behalf. If you wish to participate in the Plan, but your brokerage firm,
bank or other nominee is unable to participate on your behalf, you should
request your nominee to re-register your shares in your own name, which will
enable you to participate in the Plan.
Sincerely,
Richard R. Christensen
President and Chief Executive Officer
What is the Automatic Dividend Reinvestment and Cash Purchase Plan?
The Automatic Dividend Reinvestment and Cash Purchase Plan offers shareholders
in Liberty ALL-STAR Equity Fund a prompt and simple way to reinvest their
dividends and distributions in additional shares of the Fund.
The Plan also gives shareholders the option of making cash
investments in Fund
shares through the Plan Agent.
State Street Bank and Trust Company acts as Plan Agent for shareholders in
administering the Plan. The complete Terms and Conditions of the Plan appear
later in this brochure.
Who can participate in the Plan?
If you own shares in your own name, you can participate directly in the Plan. If
you own shares that are held in the name of a brokerage firm, bank or other
nominee, you should instruct your nominee to participate
on your behalf.
If you wish to participate in the Plan, but your brokerage firm, bank or other
nominee is unable to participate on your behalf, you should request your nominee
to re-register your shares in your own name which will enable you to participate
in the Plan.
What does the Plan offer?
The Plan has two components: reinvestment of dividends
and distributions, and an optional cash purchase feature.
o Reinvestment of Dividends and Distributions
If you choose to participate in the Plan, your dividends and distributions will
be promptly invested for you, automatically increasing your holdings in the
Fund.
If the Fund declares a dividend or distribution payable at the option of the
shareholder either in cash or in shares of the Fund, the Fund will issue new
shares to you valued at the lower of (i) the market price of the shares on the
valuation date for the dividend or distribution, or (ii) the net asset value of
the shares on such date, provided that the Fund will not issue new shares at a
discount of more than 5% from the then current market price.
If the dividend or distribution is declared payable only in cash, then you will
receive shares purchased with the dividend or distribution on the New York Stock
Exchange or otherwise on the open market. If the market price exceeds net asset
value before the Plan Agent has completed its purchases, the Fund may direct the
Plan Agent to cease purchasing shares, with the Fund issuing the remaining
shares at net asset value (but not at a discount of more than 5% from the then
current market price).
All reinvestments are in full and fractional shares, carried to three decimal
places.
o Voluntary Cash Purchases
Plan participants have the option of making additional investments in Fund
shares through the Plan Agent. You may invest any amount on a monthly basis. The
Plan Agent will purchase shares for you on the New York Stock Exchange or in the
open market on or about the 15th day of each calendar month. If you hold shares
in your own name, you should deal directly with the Plan Agent, State Street
Bank and Trust Company. We suggest you send your check to the following address
to be received on or about the fifth day of the calendar month to allow time for
processing: State Street Bank and Trust Company P.O. Box 8200 Boston, MA
02266-8200
You should not send your check prior to the 15th day of the month prior to the
month in which you want the check invested. You will not receive interest on
uninvested cash payments. You may withdraw a voluntary cash payment by written
notice, if the notice is received by State Street Bank not less than 48 hours
before the investment date.
Is there a cost to participate?
There is no direct charge to participants for reinvesting dividends and
distributions, since the Plan Agent's fees are paid by the Fund. There are no
brokerage charges for shares issued directly by the Fund. Whenever shares are
purchased on the New York Stock Exchange or otherwise on the open market, each
participant will pay a pro rata portion of brokerage commissions.
Brokerage charges for purchasing shares through the Plan, whether with
reinvested dividends and distributions or voluntary cash purchases, are expected
to be less than the usual brokerage charges for individual transactions, because
the Plan Agent will purchase shares for all participants in blocks, resulting in
lower commissions for each individual participant.
Voluntary cash purchases will be subject to a $1.25 service fee for each
investment, in addition to a pro rata share of brokerage commissions.
Brokerage commissions and service fees, if any, will be reflected in the prices
paid for shares.
What are the tax implications for participants?
You will receive tax information annually for your personal records and to help
you prepare your federal income tax return. The automatic reinvestment of
dividends and distributions does not relieve you of any income tax which may be
payable on dividends or distributions.
Once enrolled in the Plan, may I withdraw from it?
You may withdraw from the Plan without penalty at any time by written notice to
State Street Bank. Your withdrawal will be effective as specified in Paragraph
11 of the Terms and Conditions.
If you withdraw, you will receive, without charge, a stock certificate issued in
your name for all full shares; or, if you wish, State Street Bank will sell your
shares and send you the proceeds, less a service fee of $2.50 and less brokerage
commissions. State Street Bank will convert any fractional shares you hold at
the time of your withdrawal to cash at the current market price and send you a
check for the proceeds.
How do participating shareholders benefit?
o You will build holdings in the Fund easily and
automatically, at no brokerage
cost or at reduced costs.
o You will receive a detailed account statement from State Street Bank and Trust
Company, your Plan Agent, showing total dividends and distributions or optional
cash investments, date of investment, shares acquired and price per share, and
total shares of record held by you and by the Plan Agent. Your proxy will
include shares held for you by the Plan Agent pursuant to the Plan.
o As long as you participate in the Plan, State Street Bank, as your Plan Agent,
will hold the shares it is holding for you in safekeeping, in non-certificated
form. This convenience provides added protection against loss, theft, or
inadvertent destruction of certificates.
How to enroll
To enroll in the Automatic Dividend Reinvestment and Cash Purchase Plan, please
review the Terms and Conditions in this brochure.
Then all you need to do is
complete, sign and mail the attached authorization form.
Your reinvestments will begin with the next dividend or distribution payable
after State Street Bank or your nominee, if appropriate, receives your
authorization, provided it is received prior to the record date. Should your
authorization arrive after the record date, your participation in the Plan will
begin with the following dividend or distribution. You may exercise the
voluntary cash purchase option at the next appropriate date.
Whom should I contact for additional information?
If you hold shares in your own name, please address all notices, correspondence,
questions, or other communications regarding the Plan to:
State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
800-542-3863
If your shares are not held in your name, you should contact your brokerage
firm, bank or other nominee for more information and to see if your nominee will
participate in the Plan on your behalf.
Either Liberty ALL-STAR Equity Fund or State Street Bank may amend or terminate
the Plan. Participants will receive written notice at least 90 days before the
effective date of any amendment. In the case of termination, participants will
receive written notice of termination at least 90 days before the record date of
any dividend or distribution by the Fund.
Terms and Conditions of Automatic Dividend Reinvestment and Cash Purchase Plan
(as amended effective October 23, 1995)
1.You, State Street Bank and Trust Company, will act as Agent for me, and will
open an account for me under the Automatic Dividend Reinvestment and Cash
Purchase Plan of Liberty ALL-STAR Equity Fund (the "Fund") in the same name as
my present shares in the Fund are registered, and put into effect for me the
Automatic Dividend Reinvestment Plan as of the first record date for a dividend
or distribution after you receive the Authorization duly executed by me.
2.Whenever the Fund declares a distribution or an income dividend payable in
shares of beneficial interest in the Fund ("shares") or cash at the option of
the shareholders, I hereby elect to take such distribution or dividend entirely
in shares, and you shall automatically receive such shares, including fractions,
for my account. I understand that the number of additional shares to be credited
to my account shall be determined by dividing the dollar amount of the
distribution or income dividend payable on my shares by the lower of (i) the
market price per share of the Fund's shares on the valuation date, or (ii) the
net asset value per share of the Fund's shares on the valuation date. Shares
issued by the Fund will not be issued at a discount of more than 5% from the
then current market value of the Fund's shares. I also understand that the
valuation date will be the payable date for such distribution or such prior date
as may be determined by the Board of Trustees.
3.In the event that the Fund declares an income dividend or distribution payable
only in cash, you shall apply the amount of such dividend or distribution on my
shares (less my pro rata share of brokerage commissions incurred with respect to
your open-market purchases in connection with the reinvestment of such dividend
or distribution) to the purchase on the open market of shares for my account.
Such purchases will be made on or shortly after the payment date for such
dividend or distribution, and in no event more than 30 days after such date
except where temporary curtailment or suspension of purchase is necessary to
comply with applicable provisions of federal securities law.
If, before you have completed your purchases with respect to a dividend or
distribution, the market price exceeds the net asset value of the shares, the
average per share purchase price paid by you may exceed the net asset value of
the shares, resulting in the acquisition of fewer shares than if the dividend or
distribution had been paid in shares issued by the Fund. If the market price
exceeds the net asset value of the shares before you have completed your
purchases with respect to a dividend or distribution, the Fund may direct you to
cease purchasing shares and the Fund may issue the remaining shares at their net
asset value per share (but not at a discount of more than 5% from the then
current market value of the shares).
4.For all purposes of the Plan: (a) the market price of the Fund's shares on a
particular date shall be the last sales price on the New York Stock Exchange on
that date, or if there is no sale on such Exchange on that date, then the mean
between the closing bid and asked quotations for such shares on such Exchange on
such date, and (b) net asset value per share of the Fund's shares on a
particular date shall be as determined by or on behalf of the Fund.
5.I understand that I have the option of sending additional funds, in any amount
on a monthly basis, for the purchase on the open market of shares of the Fund
for my account. These voluntary payments will be invested on or shortly after
the 15th day of each calendar month, and in no event more than 45 days after
such date except where temporary curtailment or suspension of purchases is
necessary to comply with applicable provisions of Federal securities law.
Voluntary cash payments must be sent so as to be received by State Street Bank
no later than five business days before the next investment date. Voluntary cash
payments may be withdrawn in their entirety by written notice received by State
Street Bank not less than 48 hours before such payment is to be invested.
6.The service fee for handling distributions or income dividends will be paid by
the Fund. I will be charged a $1.25 service fee for each voluntary cash
investment and a pro rata share of brokerage commissions on all open market
purchases.
7.Investments of voluntary cash payments and open-market purchases provided for
above may be made on any securities exchange where the Fund's shares are traded,
in the over-the-counter market or in negotiated transactions, and may be on such
terms as to price, delivery and as you shall determine. My funds held by you,
uninvested, will not bear interest, and it is understood that, in any event, you
shall have no liability in connection with any inability to purchase shares
within 30 days after the initial date of such purchase as herein provided, or
with the timing of any purchases effected. You shall have no responsibility as
to the value of the shares of the Fund acquired for my account. For the purposes
of such reinvestment you may commingle my funds with those of other shareholders
of the Fund for whom you similarly act as Agent, and the average price
(including brokerage commissions) of all shares purchased by you as Agent shall
be the price per share allocable to me in connection therewith.
8.You may hold my shares acquired pursuant to my Authorization, together with
the shares of other shareholders of the Fund acquired pursuant to similar
authorizations, in non- certificated form in your name or that of your nominee.
You will forward to me any proxy solicitation material and will vote any shares
so held for me only in accordance with the proxy returned by me to the Fund.
Upon my written request, you will deliver to me, without charge, a certificate
or certificates for the full shares.
9.You will confirm to me each acquisition made for my account as soon as
practicable but not later than 60 days after the date thereof. Although I may
from time to time have an undivided fractional interest (computed to three
decimal places) in a share of the Fund, no certificates for a fractional share
will be issued. However, dividends and distributions on fractional shares will
be credited to my account. In the event of termination of my account under the
Plan, you will adjust for any such undivided fractional interest in cash at the
market value of the Fund's shares at the time of termination.
10.Any stock dividends or split shares distributed by the Fund on shares held by
you for me will be credited to my account. In the event that the Fund makes
available to its shareholders rights to purchase additional shares or other
securities, the shares held for me under the Plan will be added to other shares
held by me in calculating the number of rights to be issued to me.
11.I may terminate my account under the Plan by notifying you in writing. Such
termination will be effective immediately if my notice is received by you not
less than ten days prior to any dividend or distribution record date; otherwise
such termination will be effective on the first trading day after the payment
date for such dividend or distribution with respect to any
LIBERTY ALL-STAR EQUITY FUND AUTOMATIC DIVIDEND REINVESTMENT AND
CASH PURCHASE PLAN
This form is for shareholders who hold shares in their own names. If your shares
are held through a brokerage firm, bank or other nominee, you should instruct
your nominee to participate on your behalf. If you wish to participate in the
Plan, but your brokerage firm, bank or other nominee is unable to participate on
your behalf, you should request it to re-register your shares in your own name
which will enable you to participate in the Plan.
AUTHORIZATION FOR REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS (Please read
carefully before signing.) I hereby authorize Liberty ALL-STAR Equity Fund (the
"Fund") to pay to State Street Bank and Trust Company for my account all
distributions and income dividends payable to me on shares of beneficial
interest ("shares") of the Fund now or hereafter registered in my name, and I
hereby elect to receive in shares of the Fund all such distributions and
dividends payable in shares or cash at the option of shareholders.
I hereby appoint State Street Bank and Trust Company as my Agent, subject to the
Terms and Conditions of the Fund's Automatic Dividend Reinvestment and Cash
Purchase Plan (the "Plan") set forth in the accompanying brochure, and authorize
State Street Bank and Trust Company, as such Agent, in accordance with such
Terms and Conditions, (a) to apply all distributions and income dividends
payable on such shares and on my shares held under the Plan solely in cash, and
any additional cash investments made by me, after deducting the charges as
provided in such Terms and Conditions, to the purchase of shares of the Fund,
and (b) to receive in shares all distributions and income dividends payable on
such shares and on my shares held under the Plan in shares or cash at the option
of the shareholders.
(continued on other side)
subsequent dividend or distribution. The Plan may be terminated by you or the
Fund upon notice in writing mailed to me at least 90 days prior to any record
date for the payment of any dividend or distribution by the Fund. Upon any
termination you will cause a certificate or certificates for the full shares
held for me under the Plan and cash adjustment for any fraction to be delivered
to me without charge. If I elect by notice to you in writing in advance of such
termination to have you sell part or all of my shares and remit the proceeds to
me, you are authorized to deduct a $2.50 fee plus brokerage commission for this
transaction from the proceeds. 12.These terms and conditions may be amended or
supplemented by you or the Fund at any time or times but, except when necessary
or appropriate to comply with applicable law or the rules or policies of the
Securities and Exchange Commission or any other regulatory authority, only by
mailing to me appropriate written notice at least 90 days prior to the effective
date thereof. The amendment or supplement shall be deemed to be accepted by me
unless, prior to the effective date thereof, you receive written notice of the
termination of my account under the Plan. Any such amendment may include an
appointment by you in your place and stead of a successor Agent under these
terms and conditions, with full power and authority to perform all or any of the
acts to be performed by the Agent under these terms and conditions. Upon any
such appointment of any Agent for the purpose of receiving dividends and
distributions, the Fund will be authorized to pay such successor Agent, for my
account, all dividends and distributions payable on shares of the Fund held in
my name or under the Plan for retention or application by such successor Agent
as provided in these terms and conditions.
13. You shall at all times act in good faith and agree to use your best efforts
within reasonable limits to insure the accuracy of all services performed under
this Agreement and to comply with applicable law, but assume no responsibility
and shall not be liable for loss or damage due to errors unless such error is
caused by your negligence, bad faith, or willful misconduct or that of your
employees.
14. The terms and conditions shall be governed by the
laws of the Commonwealth
of Massachusetts.
LIBERTY ALL-STAR EQUITY FUND
This form is for shareholders who hold shares in their own names. If your shares
are held through a brokerage firm, bank or other nominee, you should instruct
your nominee to participate on your behalf. If you wish to participate in the
Plan, but your brokerage firm, bank or other nominee is unable to participate on
your behalf, you should request it to re-register your shares in your own name
which will enable you to participate in the Plan. The authorization and
appointment is given with the understanding that I may terminate it at any time
by terminating my account under the Plan as provided in such Terms and
Conditions.
Stockholder
Stockholder
Date
Please sign exactly as your shares are registered.
All persons whose names
appear on the stock certificates must sign. YOU SHOULD
NOT RETURN THIS FORM IF
YOU WISH TO RECEIVE YOUR DIVIDENDS OR DISTRIBUTIONS IN
CASH. THIS IS NOT A PROXY
This authorization form, when signed, should be
forwarded to: State Street Bank
and Trust Company P.O. Box 8200 Boston, MA 02266-8200
LIBERTY ALL-STAR EQUITY FUND
AGREEMENT OF AMENDMENT
OF
FUND MANAGEMENT AGREEMENT DATED MAY 15, 1987
BETWEEN
LIBERTY ALL-STAR EQUITY FUND
and
LIBERTY ASSET MANAGEMENT COMPANY
AGREEMENT dated as of August 1, 1997 between Liberty All-Star Equity Fund,
a business trust organized under the laws of the Commonwealth of Massachusetts
(the "Company"), and Liberty Asset Management Company, a corporation organized
under the laws of the State of Delaware (the "Manager").
WHEREAS, the Company and the Manager have entered into a Fund Management
Agreement dated May 15, 1987 (the "Agreement") pursuant to which the Manager is
providing certain administrative and investment management services to the
Company, including the recommendation of one or more Portfolio Managers (as
defined in the Agreement) to manage the portions of the Company's assets
allocated to them from time to time by the Manager; and
WHEREAS, Section 6 of the Agreement provides that the compensation of the
Manager for its services under the Agreement shall be calculated and paid in
accordance with Exhibit B to the Agreement, and that the Manager will compensate
the Portfolio Managers as provided in said Exhibit B; and
WHEREAS, the Company and the Manager wish to amend Exhibit B to the
Agreement effective August 1, 1997.
NOW, THEREFORE, the Company and the Manager hereby agree that, effective
August 1, 1997, Exhibit B to the Agreement shall be amended to read in its
entirety as set forth on the attached, and that, as so amended, the Agreement
shall remain in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement of
Amendment to be executed as of the day and year first written above.
LIBERTY ALL-STAR EQUITY FUND
By:
-----------------------------
LIBERTY ASSET MANAGEMENT COMPANY
By:
-----------------------------
<PAGE>
EXHIBIT B
(as amended effective August 1, 1997)
MANAGER FEE
For the corporate management and administrative services provided to the
Company pursuant to Section 2(A) of this Agreement, the Company will pay to the
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 the following percentages of
the average of the net asset values of the Company as of the close of the last
business day of the New York Stock Exchange in each calendar week during the
preceding calendar month: 0.20% of the first $400 million of such average net
asset value; 0.18% of such average net asset value exceeding $400 million up to
and including $800 million; 0.162% of such average net asset value exceeding
$800 million up to and including $1.2 billion; and 0.146% of such average net
asset value exceeding $1.2 billion.
For the investment management services provided to the Company pursuant to
Section 2(B) of this Agreement, the Company will pay to the 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 the following percentages of the
average of the net asset values of the Company as of the close of the last
business day of the New York Stock Exchange in each calendar week during the
preceding calendar month: 0.80% of the first $400 million of such average net
asset value; 0.72% of such average net asset value exceeding $400 million up to
and including $800 million; 0.648% of such average net asset value exceeding
$800 million up to and including $1.2 billion; and 0.584% of such average net
asset value exceeding $1.2 billion.
Pursuant to Section 6 of this Agreement, the Manager will pay each
Portfolio Manager a monthly fee in the amount of 1/12th of: 0.40% of the amount
obtained by multiplying the Portfolio Manager's Percentage times such average
net asset values of the Company on the foregoing dates up to $400 million; 0.36%
of the amount obtained by multiplying the Portfolio Manager's Percentage times
such average net asset value exceeding $400 million up to and including $800
million; 0.324% of the amount obtained by multiplying the Portfolio Manager's
Percentage times such average net asset value exceeding $800 million up to and
including $1.2 billion; and 0.292% of the amount obtained by multiplying the
Portfolio Manager's Percentage times such average net asset value exceeding $1.2
billion.
"Portfolio Manager's Percentage" means the percentage obtained by dividing
the average of the net asset values on the foregoing dates of the portion of the
portfolio assets of the Company assigned to that Portfolio Manager by the
average of the net asset values on such dates of the Company as a whole.
The foregoing fees shall be pro-rated for any month during which this
Agreement is in effect for only a portion of the month.
<PAGE>
PORTFOLIO MANAGEMENT AGREEMENT
July 1, 1996
J.P. Morgan Investment Management Inc.
522 Fifth Avenue
New York, NY 10036
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 administration of the Fund.
l. Employment as a Portfolio Manager. The Fund being duly authorized hereby
employs J.P. Morgan Investment 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
Prospectus 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, 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 material violation of its code of ethics
relating to its domestic equity accounts 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 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. upon all parties.
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, andeach 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.
By: _____________________________
Title: ____________________________
SCHEDULES: A. Operational Procedures
B. Record Keeping Requirements
C. Fee Schedule
[Schedule A omitted]
LIBERTY ALL-STAR EQUITY FUND
Portfolio Management Agreement
SCHEDULE B
RECORDS TO BE MAINTAINED BY THE PORTFOLIO MANAGER
1. (Rule 31a-1(b)(5) and (6)). A record of each brokerage order, and all other
portfolio purchases and sales, given by the Portfolio Manager on behalf of
the Fund for, or in connection with , the purchase or sale of securities,
whether executed or unexecuted. Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any modifications or
cancellation thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time or receipt of a report of execution; and
F. The name of the person who placed the order on behalf of the Fund.
2. (Rule 31a-1(b)(9)). A record for each fiscal
quarter, completed within ten (10) days after the end
of the quarter, showing specifically the basis or
bases upon which the allocation of orders for the
purchase and sale of portfolio securities to named
brokers or dealers was effected, and the division of
brokerage commissions or other compensation on such
purchase and sale orders. Such record:
A. Shall include the consideration given to:
(i) The sale of shares of the Fund by brokers or
dealers.
(ii) The supplying of services or benefits by
brokers or dealers to:
(a) The Fund;
(b) The Manager (Liberty Asset Management Company);
(c) The Portfolio Manager; and
(d) Any person other than the foregoing.
(iii) Any other consideration other than the technical
qualifications of the brokers and dealers as such.
B. Shall show the nature of the services or benefits made available.
C. Shall describe in detail the application of any general
or specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of brokerage
commissions or other compensation.
D. The name of the person responsible for making
the determination of such allocation and such
division of brokerage commissions or other
compensation.
3. (Rule 31a-a(b)(10)). A record in the form of an
appropriate memorandum identifying the person or
persons, committees or groups authorizing the
purchase or sale of portfolio securities. Where an
authorization is made by a committee or group, a
record shall be kept of the names of its members who
participate in the authorization. There shall be
retained as part of this record: any memorandum,
recommendation or instruction supporting or
authorizing the purchase or sale of portfolio
securities and such other information as is
appropriate to support the authorization.*
4. (Rule 31a-1(f)). Such accounts, books and other documents as a required to
be maintained by registered investment advisers by rule adopted under
Section 204 of the Investment Advisers Act of 1940, to the extent such
records are necessary or appropriate to record the Portfolio Manager's
transactions with the Fund.
- ---------------
* Such information might include: the current Form 10-K, annual and quarterly
reports, press releases, reports by analysts and from brokerage firms (including
their recommendation; i.e., buy, sell, hold) or any internal reports or
portfolio manager reviews.
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.
PORTFOLIO MANAGEMENT AGREEMENT
November 5, 1997
Oppenheimer Capital
1 World Financial Center
New York, NY 10281-1098
Re: Portfolio Management Agreement
Ladies and 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.
l. 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 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, 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.
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 such instructions
governing the investment of the Fund 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). 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 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, 1998 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, as amended Rel. Nos. IC 20347 and 20355), 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:
[Name of Portfolio Manager]
By: _____________________________
Title: __________________________
SCHEDULES: A. Operational Procedures
B. Record Keeping Requirements
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 million; 0.36% of the amount obtained by multiplying the
Portfolio Manager's Percentage times the Average Total Fund Net Assets exceeding
$400 million up to and including $800 million; 0.324% of the amount obtained by
multiplying the Portfolio Manager's Percentage times the Average Total Fund Net
Assets exceeding $800 million up to and including $1.2 billion; and 0.292% of
the amount obtained by multiplying the Portfolio Manager's Percentage times the
Average Total Fund Net Assets exceeding $1.2 billion.
"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.
PORTFOLIO MANAGEMENT AGREEMENT
November 3, 1997
Westwood Management Corporation
300 Crescent Court, #1320
Dallas, TX 75201
Re: Portfolio Management Agreement
Ladies and 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.
l. Employment as a Portfolio Manager. The Fund being duly authorized hereby
employs Westwood Management Corporation (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, 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 such instructions
governing the investment of the Fund 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). 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 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, 1998 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:
WESTWOOD MANAGEMENT CORPORATION
By: _____________________________
Title: __________________________
SCHEDULES: A. Operational Procedures
B. Record Keeping Requirements
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 million; 0.36% of the amount obtained by multiplying the
Portfolio Manager's Percentage times the Average Total Fund Net Assets exceeding
$400 million up to and including $800 million; 0.324% of the amount obtained by
multiplying the Portfolio Manager's Percentage times the Average Total Fund Net
Assets exceeding $800 million up to and including $1.2 billion; and 0.292% of
the amount obtained by multiplying the Portfolio Manager's Percentage times the
Average Total Fund Net Assets exceeding $1.2 billion.
"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.
FORM OF
AMENDMENT TO
PORTFOLIO MANAGEMENT AGREEMENT
August 1, 1997
[Name and address of Portfolio Manager]
Re: Portfolio Management Agreement
Gentlemen:
Reference is made to the Portfolio Management Agreement (the "Agreement")
dated ____ 1, 1996 among you, Liberty All-Star Equity Fund (the "Fund") and
Liberty Asset Management Company (the "Fund Manager") pursuant to which you are
providing portfolio management services with respect to those assets of the Fund
assigned to you from time to time by the Fund Manager as provided in the
Agreement (such assets being referred to as the "Fund Account") and pursuant to
which the Fund Manager pays you fees calculated and paid in accordance with
Schedule C to the Agreement based on the net asset value of the Fund Account.
Upon your execution of the enclosed copy of this letter at the place
indicated below, this letter will constitute the agreement of you, the Fund and
the Fund Manager to amend Schedule C to the Agreement so as to read in its
entirety as set forth on the attached, effective August 1, 1997 (the Agreement,
as so amended, to remain in full force and effect in accordance with its terms).
Very truly yours,
LIBERTY ALL-STAR EQUITY FUND
By:
-----------------------------
LIBERTY ASSET MANAGEMENT COMPANY
By:-----------------------------
ACCEPTED AND AGREED TO
AS OF AUGUST 1, 1997
[Name of Portfolio Manger]
By: _________________________
<PAGE>
LIBERTY ALL-STAR EQUITY FUND
Portfolio Management Agreement
SCHEDULE C
(as amended effective August 1, 1997)
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 million; 0.36% of the amount obtained by multiplying the
Portfolio Manager's Percentage times the Average Total Fund Net Assets exceeding
$400 million up to and including $800 million; 0.324% of the amount obtained by
multiplying the Portfolio Manager's Percentage times the Average Total Fund Net
Assets exceeding $800 million up to and including $1.2 billion; and 0.292% of
the amount obtained by multiplying the Portfolio Manager's Percentage times the
Average Total Fund Net Assets exceeding $1.2 billion.
"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.
CUSTODY AGREEMENT
AGREEMENT dated as of January 1, 1996, between LIBERTY ALL-STAR EQUITY FUND,
a business trust organized under the laws of the Commonwealth of Massachusetts
(the "Fund"), having its principal office and place of business at 600 Atlantic
Avenue, Boston, Massachusetts 02111-2214, and BOSTON SAFE DEPOSIT AND TRUST
COMPANY (the "Custodian"), a Massachusetts trust company with its principal
place of business at One Boston Place, Boston, Massachusetts 02108.
W I T N E S S E T H:
That for and in consideration of the mutual promises hereinafter set forth,
the Fund and the Custodian agree as follows:
1. Definitions.
Whenever used in this Agreement or in any Schedules to this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
(a) "Affiliated Person" shall have the meaning of the term within Section
2(a)3 of the 1940 Act.
(b) "Authorized Person" shall be deemed to include the Chairman of the
Board of Trustees, the President, and any Vice President, the Secretary,
the Treasurer or any other person, whether or not any such person is an
officer or employee of the Fund, duly authorized by the Board of Trustees
of the Fund to give Oral Instructions and Written Instructions on behalf of
the Fund and listed in the certification annexed hereto as Appendix A or
such other certification as may be received by the Custodian from time to
time.
(c) "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry
system for United States and federal agency Securities, its successor or
successors and its nominee or nominees.
(d) "Business Day" shall mean any day on which the Fund, the Custodian, the
Book-Entry System and appropriate clearing corporation(s) are open for business.
(e) "Certificate" shall mean any notice, instruction or other instrument in
writing, authorized or required by this Agreement to be given to the
Custodian, which is actually received by the Custodian and signed on behalf
of the Fund by any two Authorized Persons or any two officers thereof.
(f) "Trust Agreement" shall mean the Declaration of Trust of the Fund dated
August 20, 1986 as the same has been or may be amended from time to time.
g) "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission
under Section 17(a) of the Securities Exchange Act of 1934, as amended, its
successor or successors and its nominee or nominees, in which the Custodian
is hereby specifically authorized to make deposits. The term "Depository"
shall further mean and include any other person to be named in a
Certificate authorized to act as a depository under the 1940 Act, its
successor or successors and its nominee or nominees.
(h) "Money Market Security" shall be deemed to include, without limitation,
debt obligations issued or guaranteed as to interest and principal by the
government of the United States or agencies or instrumentalities thereof
("U.S. government securities"), commercial paper, bank certificates of
deposit, bankers' acceptances and short-term corporate obligations, where
the purchase or sale of such securities normally requires settlement in
federal funds on the same day as such purchase or sale, and repurchase and
reverse repurchase agreements with respect to any of the foregoing types of
securities.
(i) "Oral Instructions" shall mean verbal instructions actually received by
the Custodian from a person reasonably believed by the Custodian to be an
Authorized Person.
(j) "Prospectus" shall mean the Fund's current registration statement on
Form N-2 relating to the registration of the Fund under the 1940 Act, as
amended.
(k)"Shares" refers to shares of beneficial interest, no
par value per share, of the Fund.
(l) "Security" or "Securities" shall be deemed to include bonds,
debentures, notes, stocks, shares, evidences of indebtedness, and other
securities, commodities interests and investments from time to time owned
by the Fund.
(m) "Transfer Agent" shall mean the person which performs the transfer
agent, dividend disbursing agent and shareholder servicing agent functions
for the Fund.
(n) "Written Instructions" shall mean a written communication actually
received by the Custodian from a person reasonably believed by the
Custodian to be an Authorized Person by any system, including, without
limitation, electronic transmissions, facsimile and telex.
(o) The "1940 Act" refers to the Investment Company Act of 1940, and the
Rules and Regulations thereunder, all as amended from time to time.
2. Appointment of Custodian.
(a) The Fund hereby constitutes and appoints the Custodian as custodian of
all the Securities and monies at the time owned by or in the possession of
the Fund during the period of this Agreement.
(b) The Custodian hereby accepts appointment as such custodian and agrees
to perform the duties thereof as hereinafter set forth.
3. Compensation.
(a) The Fund will compensate the Custodian for its services rendered under
this Agreement in accordance with the fees set forth in the Fee Schedule
annexed hereto as Schedule A and incorporated herein. Such Fee Schedule
does not include out-of-pocket disbursements of the Custodian for which the
Custodian shall be entitled to bill separately. Out-of-pocket disbursements
shall include, but shall not be limited to, the items specified in the
Schedule of Out-of-Pocket charges annexed hereto as Schedule B and
incorporated herein, which schedule may be modified by the Custodian upon
not less than thirty days prior written notice to the Fund.
(b) Any compensation agreed to hereunder may be adjusted from time to time
by attaching to Schedule A of this Agreement a revised Fee Schedule, dated
and signed by an Authorized Person or authorized representative of each
party hereto.
(c) The Custodian will bill the Fund as soon as practicable after the end
of each calendar month, and said billings will be detailed in accordance
with Schedule A, as amended from time to time. The Fund will promptly pay
to the Custodian the amount of such billing.
4. Custody of Cash and Securities.
(a) Receipt and Holding of Assets. The Fund will deliver or cause to be
delivered to the Custodian all Securities and monies owned by it at any
time during the period of this Agreement. The Custodian will not be
responsible for such Securities and monies until actually received by it.
The Fund shall instruct the Custodian from time to time in its sole
discretion, by means of Written Instructions, or, in connection with the
purchase or sale of Money Market Securities, by means of Oral Instructions
confirmed in writing in accordance with Section 11(i) hereof or Written
Instructions, as to the manner in which and in what amounts Securities and
monies are to be deposited on behalf of the Fund in the Book-Entry System
or the Depository; provided, however, that prior to the deposit of
Securities of the Fund in the Book-Entry System or the Depository,
including a deposit in connection with the settlement of a purchase or
sale, the Custodian shall have received a Certificate specifically
approving such deposits by the Custodian in the Book-Entry System or the
Depository. Securities and monies of the Fund deposited in the Book-Entry
System or the Depository will be represented in accounts which include only
assets held by the Custodian for customers, including but not limited to
accounts for which the Custodian acts in a fiduciary or representative
capacity.
(b) Accounts and Disbursements. (i) The Custodian shall establish and
maintain a separate account for the Fund and shall credit to the separate
account all monies received by it for the account of such Fund and shall
disburse the same only:
1. In payment for Securities purchased for the Fund,
as provided in Section 5 hereof;
2. In payment of dividends or distributions with
respect to the Shares, as provided in Section 7
hereof;
3. In payment of original issue or other taxes with
respect to the Shares, as provided in Section 8
hereof;
4. In payment for Shares which have been redeemed by
the Fund, as provided in Section 8 hereof;
5. Pursuant to Written Instructions setting forth the name and address
of the person to whom the payment is to be made, the amount to be paid
and the purpose for which payment is to be made, provided that in the
event of disbursements pursuant to this sub-section 4(b)(5), the Fund
shall indemnify and hold the Custodian harmless from any claims or
losses arising out of such disbursements in reliance on such Written
Instructions which it, in good faith, believes to bereceived from duly
Authorized Persons; or
6. In payment of fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to the Fund, as provided in
Sections 11(h) and 11(j).
(ii)In addition to the separate account for the Fund as a whole to
be established and maintained pursuant to subsection 4(b)(i) above, the
Custodian shall establish and maintain a separate account ("Portfolio
Manager Account") for each portfolio management firm ("Portfolio
Manager") appointed by the Fund to manage the assets of the Fund, each
Portfolio Manager Account to contain the Securities and monies allocated
to that Portfolio Manager by Liberty Asset Management Company (the "Fund
Manager") from time to time by Written Instructions from the Fund
Manager to the Custodian. All Securities received and delivered and all
payments made and received for the account of the Fundpursuant to or as
a result of Written Instructions received from a Portfolio Manager with
respect to the purchase or sale of such Securities shall be credited to
or debited from that Portfolio Manager's Portfolio Manager Account,
together with all investment earnings on the Securities in such Account
and all other amounts paid on or with respect to, and all Securities
received in exchange for, such Securities. All other receipts and
expenditures by the Fund shall be allocated among the Portfolio Manager
Accounts in accordance with Written Instructions from the Fund Manager.
(c) Confirmation and Statements. Promptly after the close of business on
each day, the Custodian shall furnish the Fund with confirmations and a
summary of all transfers to or from the account of the Fund and to or from
each Portfolio Manager Account during said day. Where securities purchased
by the Fund are in a fungible bulk of securities registered in the name of
the Custodian (or its nominee) or shown on the Custodian's account on the
books of the Depository or the Book-Entry System, the Custodian shall by
book entry or otherwise identify the quantity of those securities belonging
to the Fund. At least monthly, the Custodian shall furnish the Fund with a
detailed statement of the Securities and monies held for the Fund and in
each Portfolio Manager Account under this Agreement.
(d) Registration of Securities and Physical Separation. All Securities held
for the Fund which are issued or issuable only in bearer form, except such
Securities as are held in the Book-Entry System, shall be held by the
Custodian in that form; all other Securities held for the Fund may be
registered in the name of the Fund, in the name of the Custodian, in the
name of any duly appointed registered nominee of the Custodian as the
Custodian may from time to time determine, or in the name of the Book-Entry
System or the Depository or their successor or successors, or their nominee
or nominees. The Fund reserves the right to instruct the Custodian as to
the method of registration and safekeeping of the Securities. The Fund
agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to register in
the name of its registered nominee or in the name of the Book-Entry System
or the Depository, any Securities which it may hold for the account of the
Fund and which may from time to time be registered in the name of the Fund.
The Custodian shall hold all such Securities specifically allocated to the
Fund which are not held in the Book-Entry System or the Depository in a
separate account for the Fund in the name of the Fund physically segregated
at all times from those of any other person or persons.
(e) Segregated Accounts. Upon receipt of a Written Instruction the
Custodian will establish segregated accounts on behalf of the Fund to hold
liquid or other assets as it shall be directed by a Written Instruction and
shall increase or decrease the assets in such segregated accounts only as
it shall be directed by subsequent Written Instruction.
(f) Collection of Income and Other Matters Affecting Securities. Unless
otherwise instructed to the contrary by a Written Instruction, the
Custodian by itself, or through the use of the Book-Entry System or the
Depository with respect to Securities therein deposited, shall with respect
to all Securities held for the Fund in accordance with this Agreement:
1. Collect all income due or payable;
2. Present for payment and collect the amount payable upon all Securities
which may mature or be called, redeemed, retired or otherwise become
payable. Notwithstanding the foregoing, the Custodian shall have no
responsibility to the Fund for monitoring or ascertaining any call,
redemption or retirement dates with respect to put bonds which are owned by
the Fund and held by the Custodian or its nominees. Nor shall the Custodian
have any responsibility or liability to the Fund for any loss by the Fund
for any missed payments or other defaults resulting therefrom; unless the
Custodian received timely notification from the Fund specifying the time,
place and manner for the presentment of any such put bond owned by the Fund
and held by the Custodian or its nominee. The Custodian shall not be
responsible and assumes no liability to the Fund for the accuracy or
completeness of any notification from a third party the Custodian may
furnish to the Fund with respect to put bonds;
3. Surrender Securities in temporary form for
definitive Securities;
4. Execute any necessary declarations or
certificates of ownership under the Federal income
tax laws or the laws or regulations of any other
taxing authority now or hereafter in effect; and
5. Hold directly, or through the Book-Entry System or the Depository with
respect to Securities therein deposited, for the account of the Fund all
rights and similar Securities issued with respect to any Securities held by
the Custodian hereunder for the Fund.
6. Promptly transmit to the Fund to the attention of the Controller at
the address listed in Section 14, Paragraph (d) hereof, and to the
Portfolio Manager in whose Portfolio Manager Account such Security is
held, any communication relating to a security held by the Custodian
for the Fund. The Fund shall notify the Custodian in writing to whom at
the Fund any communications relating to a security should be directed.
7. The Custodian shall promptly notify the Fund and the Portfolio Manager
in whose Portfolio Manager Account such Security is held, in writing by
facsimile transmission or in such other manner as such Fund and Custodian
may agree in writing if any amount payable with respect to Securities or
other assets of such Fund is not received by the Custodian when due. In the
event the Custodian has not exercised reasonable care and diligence, it
shall advance to the appropriate Fund any amounts with respect to which
reasonable care and diligence was not exercised.
(g) Delivery of Securities and Evidence of Authority. Upon receipt of a
Written Instruction and not otherwise, except for subparagraphs 5, 6, 7,
and 8 of this section 4(g) which may be effected by Oral or Written
Instructions, the Custodian, directly or through the use of the Book-Entry
System or the Depository, shall:
1. Execute and deliver or cause to be executed and delivered to such
persons as may be designated in such Written Instructions, proxies,
consents, authorizations, and any other instruments whereby the authority
of the Fund as owner of any Securities may be exercised;
2. Deliver or cause to be delivered any Securities held for the Fund in
exchange for other Securities or cash issued or paid in connection with the
liquidation, reorganization, refinancing, merger, consolidation or
recapitalization of any corporation, or the exercise of any conversion
privilege;
3. Deliver or cause to be delivered any Securities held for the Fund to any
protective committee, reorganization committee or other person in
connection with the reorganization, refinancing, merger, consolidation or
recapitalization or sale of assets of any corporation, and receive and hold
under the terms of this Agreement in the separate account for the Fund such
certificates of deposit, interim receipts or other instruments or documents
as may be issued to it to evidence such delivery;
4. Make or cause to be made such transfers or exchanges of the assets
specifically allocated to the separate account of the Fund and take such
other steps as shall be stated in Written Instructions to be for the
purpose of effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of the Fund;
5. Deliver Securities upon sale of such Securities
for the account of the Fund pursuant to Section 5;
6. Deliver Securities upon the receipt of payment in
connection with any repurchase agreement related to
such Securities entered into by the Fund;
7. Deliver Securities owned by the Fund to the issuer thereof or its agent
when such Securities are called, redeemed, retired or otherwise become
payable; provided, however, that in any such case the cash or other
consideration is to be delivered to the Custodian. Notwithstanding the
foregoing, the Custodian shall have no responsibility to the Fund for
monitoring or ascertaining any call, redemption or retirement dates with
respect to the put bonds which are owned by the Fund and held by the
Custodian or its nominee. Nor shall the Custodian have any responsibility
or liability to the Fund for any loss by the Fund for any missed payment or
other default resulting therefrom; unless the Custodian received timely
notification from the Fund specifying the time, place and manner for the
presentment of any such put bond owned by the Fund and held by the
Custodian or its nominee. The Custodian shall not be responsible and
assumes no liability to the Fund for the accuracy or completeness of any
notification the Custodian may furnish to the Fund with respect to put
bonds;
8. Deliver Securities for delivery in connection with any loans of
Securities made by the Fund but only against receipt of adequate collateral
as agreed upon from time to time by the Custodian and the Fund which may be
in the form of cash or U.S. government securities or a letter of credit;
9. Deliver Securities for delivery as security in
connection with any borrowings by the Fund requiring
a pledge of Fund assets, but only against receipt of
amounts borrowed;
10. Deliver Securities upon receipt of Written Instructions from the Fund
for delivery to the Transfer Agent or to the holders of Shares in
connection with distributions in kind, as may be described from time to
time in the Fund's Prospectus, in satisfaction of requests by holders of
Shares for repurchase or redemption;
11. Deliver Securities as collateral in connection with short sales by the
Fund of common stock for which the Fund owns the stock or owns preferred
stocks or debt securities convertible or exchangeable, without payment or
further consideration, into shares of the common stock sold short;
12. Deliver Securities for any purpose expressly
permitted by and in accordance with procedures
described in the Fund's Prospectus; and
13. Deliver Securities for any other proper business purpose, but only upon
receipt of, in addition to Written Instructions, a certified copy of a
resolution of the Board of Directors signed by an Authorized Person and
certified by the Secretary of the Fund, specifying the Securities to be
delivered, setting forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper business purpose, and naming the
person or persons to whom delivery of such Securities shall be made.
(h) Endorsement and Collection of Checks, Etc. The Custodian is hereby
authorized to endorse and collect all checks, drafts or other orders for
the payment of money received by the Custodian for the account of the Fund.
5. Purchase and Sale of Investments of the Fund.
(a) Promptly after each purchase of Securities for the Fund, the Fund shall
deliver to the Custodian (i) with respect to each purchase of Securities
which are not Money Market Securities, a Written Instruction, and (ii) with
respect to each purchase of Money Market Securities, either a Written
Instruction or Oral Instruction, in either case specifying with respect to
each purchase: (1) the name of the issuer and the title of the Securities;
(2) the number of shares or the principal amount purchased and accrued
interest, if any; (3) the date of purchase and settlement; (4) the purchase
price per unit; (5) the total amount payable upon such purchase; (6) the
name of the person from whom or the broker through whom the purchase was
made, if any; (7) whether or not such purchase is to be settled through the
Book-Entry System or the Depository; and (8) whether the Securities
purchased are to be deposited in the Book-Entry System or the Depository.
The Custodian shall receive the Securities purchased by or for the Fund and
upon receipt of Securities shall pay out of the monies held for the account
of the Fund the total amount payable upon such purchase, provided that the
same conforms to the total amount payable as set forth in such Written or
Oral Instruction.
(b) Promptly after each sale of Securities of the Fund, the Fund shall
deliver to the Custodian (i) with respect to each sale of Securities which
are not Money Market Securities, a Written Instruction, and (ii) with
respect to each sale of Money Market Securities, either Written Instruction
or Oral Instructions, in either case specifying with respect to such sale:
(1) the name of the issuer and the title of the Securities; (2) the number
of shares or principal amount sold, and accrued interest, if any; (3) the
date of sale; (4) the sale price per unit; (5) the total amount payable to
the Fund upon such sale; (6) the name of the broker through whom or the
person to whom the sale was made; and (7) whether or not such sale is to be
settled through the Book-Entry System or the Depository. The Custodian
shall deliver or cause to be delivered the Securities to the broker or
other person designated by the Fund upon receipt of the total amount
payable to the Fund upon such sale, provided that the same conforms to the
total amount payable to the Fund as set forth in such Written or Oral
Instruction. Subject to the foregoing, the Custodian may accept payment in
such form as shall be satisfactory to it, and may deliver Securities and
arrange for payment in accordance with the customs prevailing among dealers
in Securities.
6. Lending of Securities.
If the Fund is permitted by the terms of the Trust Agreement and as
disclosed in its Prospectus to lend securities, within 24 hours after each
loan of Securities, the Fund shall deliver to the Custodian a Written
Instruction specifying with respect to each such loan: (a) the name of the
issuer and the title of the Securities; (b) the number of shares or the
principal amount loaned; (c) the date of loan and delivery; (d) the total
amount to be delivered to the Custodian, and specifically allocated against
the loan of the Securities, including the amount of cash collateral and the
premium, if any, separately identified; (e) the name of the broker, dealer
or financial institution to which the loan was made; and (f) whether the
Securities loaned are to be delivered through the Book-Entry System or the
Depository.
Promptly after each termination of a loan of Securities, the Fund shall
deliver to the Custodian a Written Instruction specifying with respect to
each such loan termination and return of Securities: (a) the name of the
issuer and the title of the Securities to be returned; (b) the number of
shares or the principal amount to be returned; (c) the date of termination;
(d) the total amount to be delivered by the Custodian (including the cash
collateral for such Securities minus any offsetting credits as described in
said Written Instruction); (e) the name of the broker, dealer or financial
institution from which the Securities will be returned; and (f) whether
such return is to be effected through the Book-Entry System or the
Depository. The Custodian shall receive all Securities returned from the
broker, dealer or financial institution to which such Securities were
loaned and upon receipt thereof shall pay the total amount payable upon
such return of Securities as set forth in the Written Instruction.
Securities returned to the Custodian shall be held as they were prior to
such loan.
7. Payment of Dividends or Distributions.
(a) The Fund shall furnish to the Custodian the vote of the Board of
Trustees of the Fund certified by the Secretary (i) authorizing the
declaration of distributions on a specified periodic basis and authorizing
the Custodian to rely on Oral or Written Instructions specifying the date
of the declaration of such distribution, the date of payment thereof, the
record date as of which shareholders entitled to payment shall be
determined, the amount payable per share to the shareholders of record as
of the record date and the total amount payable to the Transfer Agent on
the payment date, or (ii) setting forth the date of declaration of any
distribution by the Fund, the date of payment thereof, the record date as
of which shareholders entitled to payment shall be determined, the amount
payable per share to the shareholders of record as of the record date and
the total amount payable to the Transfer Agent on the payment date.
(b) Upon the payment date specified in such vote, Oral Instructions or
Written Instructions, as the case may be, the Custodian shall pay out the
total amount payable to the Transfer Agent of the Fund.
8. Sale and Redemption of Shares of the Fund.
(a) Whenever the Fund shall sell any Shares, the Fund shall deliver or
cause to be delivered to the Custodian a Written Instruction duly
specifying:
1. The number of Shares sold, trade date, and price;
and
2. The amount of money to be received by the
Custodian for the sale of such Shares.
The Custodian understands and agrees that Written Instructions may be
furnished subsequent to the purchase of Shares and that the information
contained therein will be derived from the sales of Shares as reported to
the Fund by the Transfer Agent.
(b) Upon receipt of money from the Transfer Agent, the Custodian shall
credit such money to the separate account of the Fund.
(c) Upon issuance of any Shares in accordance with the foregoing provisions
of this Section 8, the Custodian shall pay all original issue or other
taxes required to be paid in connection with such issuance upon the receipt
of a Written Instruction specifying the amount to be paid.
(d) Except as provided hereafter, whenever any Shares are redeemed, the
Fund shall cause the Transfer Agent to promptly furnish to the Custodian
Written Instructions, specifying:
1. The number of Shares redeemed; and
2. The amount to be paid for the Shares redeemed.
The Custodian further understands that the information contained in such
Written Instructions will be derived from the redemption of Shares as
reported to the Fund by the Transfer Agent.
(e) Upon receipt from the Transfer Agent of advice setting forth the number
of Shares received by the Transfer Agent for redemption and that such
Shares are valid and in good form for redemption, the Custodian shall make
payment to the Transfer Agent of the total amount specified in a Written
Instruction issued pursuant to paragraph (d) of this Section 8.
(f) Notwithstanding the above provisions regarding the redemption of
Shares, whenever such Shares are redeemed pursuant to any check redemption
privilege which may from time to time be offered by the Fund, the
Custodian, unless otherwise instructed by a Written Instruction shall, upon
receipt of advice from the Fund or its agent stating that the redemption is
in good form for redemption in accordance with the check redemption
procedure, honor the check presented as part of such check redemption
privilege out of the monies specifically allocated to the Fund in such
advice for such purpose.
9. Indebtedness.
(a) The Fund will cause to be delivered to the Custodian by any bank
(excluding the Custodian) from which the Fund borrows money for temporary
administrative or emergency purposes using Securities as collateral for
such borrowings, a notice or undertaking in the form currently employed by
any such bank setting forth the amount which such bank will loan to the
Fund against delivery of a stated amount of collateral. The Fund shall
promptly deliver to the Custodian Written Instructions stating with respect
to each such borrowing: (1) the name of the bank; (2) the amount and terms
of the borrowing, which may be set forth by incorporating by reference an
attached promissory note, duly endorsed by the Fund, or other loan
agreement; (3) the time and date, if known, on which the loan is to be
entered into (the "borrowing date"); (4) the date on which the loan becomes
due and payable; (5) the total amount payable to the Fund on the borrowing
date; (6) the market value of Securities to be delivered as collateral for
such loan, including the name of the issuer, the title and the number of
shares or the principal amount of any particular Securities; (7) whether
the Custodian is to deliver such collateral through the Book-Entry System
or the Depository; and (8) a statement that such loan is in conformance
with the 1940 Act and the Fund's Prospectus.
(b) Upon receipt of the Written Instruction referred to in subparagraph (a)
above, the Custodian shall deliver on the borrowing date the specified
collateral and the executed promissory note, if any, against delivery by
the lending bank of the total amount of the loan payable, provided that the
same conforms to the total amount payable as set forth in the Written
Instruction. The Custodian may, at the option of the lending bank, keep
such collateral in its possession, but such collateral shall be subject to
all rights therein given the lending bank by virtue of any promissory note
or loan agreement. The Custodian shall deliver as additional collateral in
the manner directed by the Fund from time to time such Securities as may be
specified in Written Instruction to collateralize further any transaction
described in this Section 9. The Fund shall cause all Securities released
from collateral status to be returned directly to the Custodian, and the
Custodian shall receive from time to time such return of collateral as may
be tendered to it. In the event that the Fund fails to specify in Written
Instruction all of the information required by this Section 9, the
Custodian shall not be under any obligation to deliver any Securities.
Collateral returned to the Custodian shall be held hereunder as it was
prior to being used as collateral.
10. Persons Having Access to Assets of the Fund.
(a) No trustee or agent of the Fund, and no officer, director, employee or
agent of the Fund's investment adviser, of any sub-investment adviser of
the Fund, or of the Fund's administrator, shall have physical access to the
assets of the Fund held by the Custodian or be authorized or permitted to
withdraw any investments of the Fund, nor shall the Custodian deliver any
assets of the Fund to any such person. No officer, director, employee or
agent of the Custodian who holds any similar position with the Fund's
investment adviser, with any sub-investment adviser of the Fund or with the
Fund's administrator shall have access to the assets of the Fund.
(b) Nothing in this Section 10 shall prohibit any duly authorized officer,
employee or agent of the Fund, or any duly authorized officer, director,
employee or agent of the investment adviser, of any sub-investment adviser
of the Fund or of the Fund's administrator, from giving Oral Instructions
or Written Instructions to the Custodian or executing a Certificate so long
as it does not result in delivery of or access to assets of the Fund
prohibited by paragraph (a) of this Section 10.
11. Concerning the Custodian.
(a) Standard of Conduct. Notwithstanding any other provision of this
Agreement, neither the Custodian nor its nominee shall be liable for any
loss or damage, including counsel fees, resulting from its action or
omission to act or otherwise, except for any such loss or damage arising
out of the negligence or willful misconduct of the Custodian or any of its
employees, sub-custodians or agents. The Custodian may, with respect to
questions of law, apply for and obtain the advice and opinion of counsel to
the Fund or of its own counsel, at the expense of the Fund, and shall be
fully protected with respect to anything done or omitted by it in good
faith in conformity with such advice or opinion. The Custodian shall not be
liable to the Fund for any loss or damage resulting from the use of the
Book-Entry System or the Depository, except for any loss or damage arising
by reason of any negligence or willful misconduct on the part of the
Custodian or any of its employees, subcustodians or agents.
(b) Limit of Duties. Without limiting the generality of the foregoing, the
Custodian shall be under no duty or obligation to inquire into, and shall
not be liable for:
1. The validity of the issue of any Securities
purchased by the Fund, the legality of the purchase
thereof, or the propriety of the amount paid therefor;
2. The legality of the sale of any Securities by the
Fund or the propriety of the amount for which the
same are sold;
3. The legality of the issue or sale of any Shares,
or the sufficiency of the amount to be received
therefor;
4. The legality of the redemption of any Shares, or
the propriety of the amount to be paid therefor;
5. The legality of the declaration or payment of any
distribution of the Fund;
6. The legality of any borrowing for temporary or
emergency administrative purposes.
(c) No Liability Until Receipt. The Custodian shall not be liable for, or
considered to be the Custodian of, any money, whether or not represented by
any check, draft, or other instrument for the payment of money, received by
it on behalf of the Fund until the Custodian actually receives and collects
such money directly or by the final crediting of the account representing
the Fund's interest in the Book-Entry System or the Depository.
(d) Amounts Due from Transfer Agent. The Custodian shall not be under any
duty or obligation to take action to effect collection of any amount due to
the Fund from the Transfer Agent nor to take any action to effect payment
or distribution by the Transfer Agent of any amount paid by the Custodian
to the Transfer Agent in accordance with this Agreement.
(e) Collection Where Payment Refused. The Custodian shall not be under any
duty or obligation to take action to effect collection of any amount, if
the Securities upon which such amount is payable are in default, or if
payment is refused after due demand or presentation, unless and until (i)
it shall be directed to take such action by a Certificate and (ii) it shall
be assured to its satisfaction of reimbursement of its costs and expenses
in connection with any such action.
(f) Appointment of Agents and Sub-Custodians. The Custodian may appoint one
or more banking institutions, including but not limited to banking
institutions located in foreign countries, to act as Depository or
Depositories or as sub-custodian or as sub-custodians of Securities and
monies at any time owned by the Fund. The Custodian shall use reasonable
care in selecting a Depository and/or sub-custodian located in a country
other than the United States ("Foreign Sub-Custodian"), and shall oversee
the maintenance of any Securities or monies of the Fund by any Foreign
Sub-Custodian. In addition, the Custodian shall hold the Fund harmless
from, and indemnify the Fund against, any loss that occurs as a result of
the failure of any Foreign Sub-Custodian to exercise reasonable care with
respect to the safekeeping of Securities and monies of the Fund.
Notwithstanding the generality of the foregoing, however, the Custodian
shall not be liable for any losses resulting from or caused by events or
circumstances beyond its reasonable control, including, but not limited to,
losses resulting from nationalization, expropriation, devaluation,
revaluation, confiscation, seizure, cancellation, destruction or similar
action by any governmental authority, de facto or de jure; or enactment,
promulgation, imposition or enforcement by any such governmental authority
of currency restrictions, exchange controls, taxes, levies or other charges
affecting the Fund's property; or acts of war, terrorism, insurrection or
revolution; or any other similar act or event beyond the Custodian's
control.
(g) No Duty to Ascertain Authority. The Custodian shall not be under any
duty or obligation to ascertain whether any Securities at any time
delivered to or held by it for the Fund are such as may properly be held by
the Fund under the provisions of the Trust Agreement and the Prospectus.
(h) Compensation of the Custodian. The Custodian shall be entitled to
receive, and the Fund agrees to pay to the Custodian, such compensation as
may be agreed upon from time to time between the Custodian and the Fund.
The Custodian may charge against any monies held on behalf of the Fund
pursuant to this Agreement such compensation and any expenses incurred by
the Custodian in the performance of its duties pursuant to this Agreement.
The Custodian shall also be entitled to charge against any money held on
behalf of the Fund pursuant to this Agreement the amount of any loss,
damage, liability or expense incurred with respect to the Fund, including
counsel fees, for which it shall be entitled to reimbursement under the
provisions of this Agreement. The expenses which the Custodian may charge
against such account include, but are not limited to, the expenses of
sub-custodians and foreign branches of the Custodian incurred in settling
transactions outside of Boston, Massachusetts or New York City, New York
involving the purchase and sale of Securities.
(i) Reliance on Certificates and Instructions. The Custodian shall be
entitled to rely upon any Certificate, notice or other instrument in
writing received by the Custodian and reasonably believed by the Custodian
to be genuine and to be signed by an officer or Authorized Person of the
Fund. The Custodian shall be entitled to rely upon any Written Instructions
or Oral Instructions actually received by the Custodian pursuant to the
applicable Sections of this Agreement and reasonably believed by the
Custodian to be genuine and to be given by an Authorized Person. The Fund
agrees to forward to the Custodian Written Instructions from an Authorized
Person confirming such Oral Instructions in such manner so that such
Written Instructions are received by the Custodian, whether by hand
delivery, telex or otherwise, by the close of business on the same day that
such Oral Instructions are given to the Custodian. The Fund agrees that the
fact that such confirming instructions are not received by the Custodian
shall in no way affect the validity of the transactions or enforceability
of the transactions hereby authorized by the Fund. The Fund agrees that the
Custodian shall incur no liability to the Fund in acting upon Oral
Instructions given to the Custodian hereunder concerning such transactions
provided such instructions reasonably appear to have been received from a
duly Authorized Person.
(j) Overdraft Facility and Security for Payment. In the event that the
Custodian is directed by Written Instruction (or Oral Instructions
confirmed in writing in accordance with Section 11(i) hereof) to make any
payment or transfer of monies on behalf of the Fund for which there would
be, at the close of business on the date of such payment or transfer,
insufficient monies held by the Custodian on behalf of the Fund, the
Custodian may, in its sole discretion, provide an overdraft (an
"Overdraft") to the Fund in an amount sufficient to allow the completion of
such payment or transfer. Any Overdraft provided hereunder: (a) shall be
payable on the next Business Day, unless otherwise agreed by the Fund and
the Custodian; and (b) shall accrue interest from the date of the Overdraft
to the date of payment in full by the Fund at a rate agreed upon in
writing, from time to time, by the Custodian and the Fund. The Custodian
and the Fund
acknowledge that the purpose of such Overdraft is to temporarily finance
the purchase of Securities for prompt delivery in accordance with the terms
hereof, to meet unanticipated or unusual redemptions, to allow the
settlement of foreign exchange contracts or to meet other emergency
expenses not reasonably foreseeable by the Fund. The Custodian shall
promptly notify the Fund in writing (an "Overdraft Notice") of any
Overdraft by facsimile transmission or in such other manner as the Fund and
the Custodian may agree in writing. To secure payment of any Overdraft, the
Fund hereby grants to the Custodian a continuing security interest in and
right of setoff against the Securities and cash in the Fund's account from
time to time in the full amount of such Overdraft. Should the Fund fail to
pay promptly any amounts owed hereunder, the Custodian shall be entitled to
use available cash in the Fund's account and to liquidate Securities in the
account as is necessary
to meet the Fund's obligations under the Overdraft. In any such case, and
without limiting the foregoing, the Custodian shall be entitled to take
such other actions(s) or exercise such other options, powers and rights as
the Custodian now or hereafter has as a secured creditor under the
Massachusetts Uniform Commercial Code or any other applicable law.
(k) Inspection of Books and Records. The books and records of the Custodian
shall be open to inspection and audit at reasonable times by officers and
auditors employed by the Fund and by the appropriate employees of the
Securities and Exchange Commission.
The Custodian shall provide the Fund with any report obtained by the
Custodian on the system of internal accounting control of the Book-Entry
System or the Depository and with such reports on its own systems of
internal accounting control as the Fund may reasonably request from time to
time.
12. Term and Termination.
(a) This Agreement shall become effective on the date first set forth above
(the "Effective Date") and shall continue in effect thereafter until such
time as this Agreement may be terminated in accordance with the provisions
hereof.
(b) Either of the parties hereto may terminate this Agreement by giving to
the other party a notice in writing specifying the date of such
termination, which shall be not less than 60 days after the date of receipt
of such notice. In the event such notice is given by the Fund, it shall be
accompanied by a certified vote of the Board of Trustees of the Fund,
electing to terminate this Agreement and designating a successor custodian
or custodians, which shall be a person qualified to so act under the 1940
Act.
In the event such notice is given by the Custodian, the Fund shall, on or
before the termination date, deliver to the Custodian a certified vote of
the Board of Trustees of the Fund, designating a successor custodian or
custodians. In the absence of such designation by the Fund, the Custodian
may designate a successor custodian, which shall be a person qualified to
so act under the 1940 Act. If the Fund fails to designate a successor
custodian, the Fund shall upon the date specified in the notice of
termination of this Agreement and upon the delivery by the Custodian of all
Securities (other than Securities held in the Book-Entry System which
cannot be delivered to the Fund) and monies then owned by the Fund, be
deemed to be its own custodian and the Custodian shall thereby be relieved
of all duties and responsibilities pursuant to this Agreement, other than
the duty with respect to Securities held in the Book-Entry System which
cannot be delivered to the Fund.
(c) Upon the date set forth in such notice under paragraph (b) of this
Section 12, this Agreement shall terminate to the extent specified in such
notice, and the Custodian shall upon receipt of a notice of acceptance by
the successor custodian on that date deliver directly to the successor
custodian all Securities and monies then held by the Custodian on behalf of
the Fund, after deducting all fees, expenses and other amounts for the
payment or reimbursement of which it shall then be entitled.
13. Limitation of Liability.
The Fund and the Custodian agree that the obligations of the Fund under
this Agreement shall not be binding upon any of the Trustees, shareholders,
nominees, officers, employees or agents, whether past, present or future,
of the Fund, individually, but are binding only upon the assets and
property of the Fund, as provided in the Trust Agreement. The execution and
delivery of this Agreement have been authorized by the Trustees of the
Fund, and signed by an authorized officer of the Fund, acting as such, and
neither such authorization by such Trustees nor such execution and delivery
by such officer shall be deemed to have been made by any of them or any
shareholder of the Fund individually or to impose any liability on any of
them or any shareholder of the Fund personally, but shall bind only the
assets and property of the Fund as provided in the Trust Agreement.
14. Miscellaneous.
(a) Annexed hereto as Appendix A is a certification signed by the Secretary
of the Fund setting forth the names and the signatures of the present
Authorized Persons. The Fund agrees to furnish to the Custodian a new
certification in similar form in the event that any such present Authorized
Person ceases to be such an Authorized Person or in the event that other or
additional Authorized Persons are elected or appointed. Until such new
certification shall be received, the Custodian shall be fully protected in
acting under the provisions of this Agreement upon Oral Instructions or
signatures of the present Authorized Persons as set forth in the last
delivered certification.
(b) Annexed hereto as Appendix B is a certification signed by the Secretary
of the Fund setting forth the names and the signatures of the present
officers of the Fund. The Fund agrees to furnish to the Custodian a new
certification in similar form in the event any such present officer ceases
to be an officer of the Fund or in the event that other or additional
officers are elected or appointed. Until such new certification shall be
received, the Custodian shall be fully protected in acting under the
provisions of this Agreement upon the signature of an officer as set forth
in the last delivered certification.
(c) Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at
One Boston Place, Boston, Massachusetts 02108 or at such other place as the
Custodian may from time to time designate in writing.
(d) Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund, shall be sufficiently given if
addressed to the Fund and mailed or delivered to its Controller, c/o
Colonial Management Association, Inc., One Financial Center, Boston,
Massachusetts 02111 with a copy to its President, c/o Liberty Asset
Management Company, 600 Atlantic Avenue, Boston, Massachusetts 02110, or at
such other place as the Fund may from time to time designate in writing.
(e) This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties with the same formality as this
Agreement, (i) authorized, or ratified and approved by a vote of the Board
of Trustees of the Fund, or (ii) authorized, or ratified and approved by
such other procedures as may be permitted or required by the 1940 Act.
(f) This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by the Fund without the written
consent of the Custodian, or by the Custodian without the written consent
of the Fund authorized or approved by a vote of the Board of Trustees of
the Fund provided, however, that any attempted assignment without such
written consent shall be null and void. Nothing in this Agreement shall
give or be construed to give or confer upon any third party any rights
hereunder.
(g) The Fund represents that a copy of the Trust Agreement is on file with
the Secretary of the Commonwealth of Massachusetts and with the Boston City
Clerk.
(h) This Agreement shall be construed in accordance with
the laws of the Commonwealth of Massachusetts.
(i) The captions of the Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
(j) This agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective representatives duly authorized as of the day and
year first above written.
LIBERTY ALL-STAR EQUITY FUND
By:
Name:
Title:
BOSTON SAFE DEPOSIT AND TRUST COMPANY
By:
Name:
Title:
APPENDIX A
XXXXXXXXXXXX, the Secretary, of XXXXXXXXXXXXXXXXX, a business trust
organized under the laws of the Commonwealth of Massachusetts (the "Fund"), do
hereby certify that:
The following individuals have been duly authorized as Authorized Persons to
give Oral Instructions and Written Instructions on behalf of the Fund and the
specimen signatures set forth opposite there respective names are their true and
correct signatures:
Name Signature
Secretary
Dated:
<PAGE>
APPENDIX B
XXXXXXXXXXXXXXXX, the Secretary of XXXXXXXXXXXXXXXXXXXXXX, a business trust
organized under the laws of the Commonwealth of Massachusetts (the "Fund"), do
hereby certify that:
The following individuals serve in the following positions with the Fund and
each individual has been duly elected or appointed to each such position and
qualified therefor in conformity with the Fund's Trust Agreement and the
specimen signatures set forth opposite their respective names are their true and
correct signatures:
Name Position Signature
<PAGE>
SCHEDULE A
[omitted]
<PAGE>
SCHEDULE B
[omitted]
PRICING AND BOOKKEEPING AGREEMENT
AGREEMENT dated as of January 1, 1996, between Liberty All-Star Equity Fund
(Fund) and Colonial Management Associates, Inc. (Colonial), a Massachusetts
corporation. The Fund and Colonial agree as follows:
1. Appointment. The Fund appoints Colonial as agent to perform the
services described below, such appointment to take effect January 1,
1996.
2. Services. Colonial shall (i) determine and timely communicate to persons
designated by the Fund the Fund's net asset value per share in accordance with
the applicable provisions of the Fund's Registration Statement on Form N-2; and
(ii) maintain and preserve in a secure manner the accounting records of the
Fund, including all such accounting records as the Fund is obligated to maintain
and preserve under the Investment Company Act of 1940 and the rules thereunder,
applicable federal and state tax laws and any other applicable laws, rules or
regulations. In addition to the accounting records of the Fund as a whole,
Colonial will maintain and preserve in a secure manner separate portfolio
accounts ("Portfolio Manager Accounts") for the assets of the Fund allocated by
Liberty Asset Management Company to each of the Fund's Portfolio Managers. All
records shall be the property of the Fund. Colonial will provide disaster
planning to minimize possible service interruption.
3. Audit, Use and Inspection. Colonial shall make available on its premises
during regular business hours all records of a Fund for reasonable audit, use
and inspection by the Fund, its agents and any regulatory agency having
authority over the Fund.
4. Compensation. The Fund will pay Colonial a monthly fee of $1,750 plus $250
for each Portfolio Manager Account, plus a percentage fee for each month at the
following annual rates: 0.0233% of the average weekly net assets of the Fund for
such month in excess of $50 million up to $500 million; 0.0167% of the average
weekly net assets of the Fund for such month in excess of $500 million up to $1
billion; 0.015% of the average weekly net assets of the Fund for such month in
excess of $1 billion up to $3 billion; and 0.001% of the average weekly net
assets of the Fund for such month in excess of $3 billion.
5. Compliance. Colonial shall comply with applicable
provisions in the Fund's Registration Statement on Form N-2 relating
to pricing and bookkeeping.
6. Limitation of Liability. In the absence of willful misfeasance, bad faith
or gross negligence on the part of Colonial, or reckless disregard of its
obligations and duties hereunder, Colonial shall not be subject to any liability
to the Fund, to any shareholder of the Fund or to any other person, firm or
organization, for any act or omission in the course of, or connected with,
rendering services hereunder.
7. Amendments. The Fund shall submit to Colonial a reasonable time in advance
of filing with the Securities and Exchange Commission copies of any changes in
its Registration Statements. If a change in documents or procedures materially
increases the cost to Colonial of performing its obligations, Colonial shall be
entitled to receive reasonable additional compensation.
8. Duration and Termination, etc. This Agreement may be changed only by
writing executed by each party. This Agreement: (a) shall continue in effect
from year to year so long as approved annually by vote of a majority of the
Trustees who are not affiliated with Colonial; (b) may be terminated at any time
without penalty by sixty days' written notice to either party; and (c) may be
terminated at any time for cause by either party if such cause remains
unremedied for a reasonable period not to exceed ninety days after receipt of
written specification of such cause. Paragraph 6 of this Agreement shall survive
termination. If the Fund designates a successor to any of Colonial's
obligations, Colonial shall, at the expense and direction of the Fund, transfer
to the successor all Fund records maintained by Colonial.
9. Miscellaneous. This Agreement shall be governed by the laws of
The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the day and year first above.
LIBERTY ALL-STAR EQUITY FUND
By: Peter L. Lydecker, Controller
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: Arthur O. Stern, Executive Vice President
A copy of the document establishing the Fund is filed with the Secretary of The
Commonwealth of Massachusetts. This Agreement is executed by officers not as
individuals and is not binding upon any of the Trustees, officers or
shareholders of the Fund individually but only upon the assets of the Fund.
SUBSCRIPTION AGENT AGREEMENT (Company)
This Subscription Agent Agreement (the "Agreement") is made as of
__________________, 1996 between _____________________ (the "Company") and State
Street Bank & Trust Company, as subscription agent (the "Agent"). All terms not
defined herein shall have the meaning given in the prospectus (the "Prospectus")
included in the (Registration Statement on Form N-2 (File No. 811-4800) filed by
the Company with the Securities and Exchange Commission on ____________, 1996,
as amended by any amendment filed with respect thereto (the "Registration
Statement").
WHEREAS, the Company proposes to make subscription offer by issuing
certificates or other evidences of subscription rights, in the form designated
by the Company (the "Subscription Certificates") to shareholders of record (the
"Shareholders") of its Common Stock, par value $0.001 per share ("Common
Stock"), as of a record date specified by the Company (the "Record Date"),
pursuant to which each Shareholder will have certain rights (the "Rights") to
subscribe for shares of Common Stock, as described in and upon such terms as are
set forth in the Prospectus, a final copy of which has been or, upon
availability will promptly be, delivered to the Agent; and
WHEREAS, the Company wishes the Agent to perform certain acts on behalf of
the Company, and the Agent is willing to so act, in connection with the
distribution of the Subscription Certificates and the issuance and exercise of
the Rights to subscribe therein set forth, all upon the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
agreements set forth herein, the parties agree as follows:
1. Appointment. The Company hereby appoints the Agent to act as subscription
agent in connection with the distribution of Subscription Certificates and the
issuance and exercise of the Rights in accordance with the terms set forth in
this Agreement and the Agent hereby accepts such appointment.
2. Form and Execution of Subscription Certificates.
(a) Each Subscription Certificate shall be irrevocable and
non-transferable. The Agent shall, in its capacity as Transfer Agent of the
Company, maintain a register of Subscription Certificates and the holders of
record thereof (each of whom shall be deemed a "Shareholder" hereunder for
purposes of determining the rights of holders of Subscription Certificates).
Each Subscription Certificate shall, subject to the provisions thereof, entitle
the Shareholder in whose name it is recorded to the following:
(1) With respect to Record Date Shareholders only, the right to acquire
during the Subscription Period, as defined in the Prospectus, at the
Subscription Price, as defined in the Prospectus, a number of shares of Common
Stock equal to one share of Common Stock for every one Right (the "Primary
Subscription Right"); and
(2) With respect to Record Date Shareholders only, the right to
subscribe for additional shares of Common Stock, subject to the availability of
such shares and to the allotment of such shares as may be available among Record
Date Shareholders who exercise Over-Subscription Rights on the basis specified
in the Prospectus; provided, however, that such Record Date Shareholder has
exercised all Primary Subscription Rights issued to him or her (the
"Over-Subscription Privilege").
3. Rights and Issuance of Subscription Certificates.
(a) Each Subscription Certificate shall evidence the Rights of the
Shareholder therein named to purchase Common Stock upon the terms and conditions
therein and herein set forth.
(b) Upon the written advice of the Company, signed by any of its duly
authorized officers, as to the Record Date, the Agent shall, from a list of the
Company Shareholders as of the Record Date to be prepared by the Agent in its
capacity as Transfer Agent of the Company, prepare and record Subscription
Certificates in the names of the Shareholders, setting forth the number of
Rights to subscribe for the Company's Common Stock calculated on the basis of
one Right for four shares of Common Stock recorded on the books in the name of
each such Shareholder as of the Record Date. The number of Rights that are
issued to Record Date Shareholders will be rounded down, by the Agent, to the
nearest number of Full Rights as Fractional Rights will not be issued. Each
Subscription Certificate shall be dated as of the Record Date and shall be
executed manually or by facsimile signature of a duly authorized officer of the
Subscription Agent. Upon the written advice, signed as aforesaid, as to the
effective date of the Registration Statement, the Agent shall promptly
countersign and deliver the Subscription Certificates, together with a copy of
the Prospectus, instruction letter and any other document as the Company deems
necessary or appropriate, to all Shareholders with record addresses in the
United States (including its territories and possessions and the District of
Columbia). Delivery shall be by first class mail (without registration or
insurance), except for those Shareholders having a registered address outside
the United States (who will only receive copies of the Prospectus, instruction
letter and other documents as the Company deems necessary or appropriate, if
any), delivery shall be by air mail (without registration or insurance) and by
first class mail (without registration or insurance) to those Shareholders
having APO or FPO addresses. No Subscription Certificate shall be valid for any
purpose unless so executed.
(c) The Agent will mail a copy of the Prospectus, instruction letter, a
special notice and other documents as the Company deems necessary or
appropriate, if any, but not Subscription Certificates to Record Date
Shareholders whose record addresses are outside the United States (including its
territories and possessions and the District of Columbia ) ("Foreign Record Date
Shareholders"). The Rights to which such Subscription Certificates relate will
be held by the Agent for such Foreign Record Date Shareholders' accounts until
instructions are received to exercise, sell or transfer the Rights.
4. Exercise.
(a) Record Date Shareholders may acquire shares of Common Stock on Primary
Subscription and pursuant to the Over-Subscription Privilege by delivery to the
Agent as specified in the Prospectus of (i) the Subscription Certificate with
respect thereto, duly executed by such Shareholder in accordance with and as
provided by the terms and conditions of the Subscription Certificate, together
with (ii) the estimated purchase price of as disclosed in the Prospectus for
each share of Common Stock subscribed for by exercise of such Rights, in U.S.
dollars by money order or check drawn on a bank in the United States, in each
case payable to the order of the Company or the Agent.
(b) Rights may be exercised at any time after the date of issuance of the
Subscription Certificates with respect thereto but no later than 5:00 P.M. New
York time on such date as the Company shall designate to the Agent in writing
(the "Expiration Date"). For the purpose of determining the time of the exercise
of any Rights, delivery of any material to the Agent shall be deemed to occur
when such materials are received at the Shareholder Services Division of the
Agent specified in the Prospectus.
(c) Notwithstanding the provisions of Section 4 (a) and 4 (b) regarding
delivery of an executed Subscription Certificate to the Agent prior to 5:00 P.M.
New York time on the Expiration Date, if prior to such time the Agent receives a
Notice of Guaranteed Delivery by facsimile (telecopy) or otherwise from a bank,
a trust company or a New York Stock Exchange member guaranteeing delivery of (i)
payment of the full Subscription Price for the shares of Common Stock subscribed
for on Primary Subscription and any additional shares of Common Stock subscribed
for pursuant to the Over-Subscription Privilege, and (ii) a properly completed
and executed Subscription Certificate, then such exercise of Primary
Subscription Rights and Over-Subscription Rights shall be regarded as timely,
subject, however, to receipt of the duly executed Subscription Certificate and
full payment for the Common Stock by the Agent within three Business Days (as
defined below) after the Expiration Date (the "Protect Period") and full payment
for their Common Stock within ten Business Days after the Confirmation Date (as
defined in Section 4(d)). For the purposes of the Prospectus and this Agreement,
"Business Day" shall mean any day on which trading is conducted on the New York
Stock Exchange.
(d) The Fund will determine the Subscription Price by taking 95% of the
average of the last reported sale prices of shares of Common Stock on the New
York Stock Exchange on the fourth Business Day following the Expiration Date
(the "Pricing Date") and the three Business Days. Within five Business Days
after five Business Days following the Pricing Date (the "Confirm Date") the
Agent shall send to each exercising shareholder (or, if shares of Common Stock
on the Record Date are held by Cede & Co. or any other depository or nominee, to
Cede & Co. or such other depository or nominee) a confirmation showing the
number of shares of Common Stock acquired pursuant to the Primary Subscription,
and, if applicable, the Over-Subscription Privilege, the per share and total
purchase price for such shares, and any additional amount payable to the Fund by
such shareholder or any excess to be refunded by the Fund to such shareholder,
along with a letter explaining the allocation of shares of Common Stock pursuant
to the Over-Subscription Privilege.
(e) Any additional payment required from a shareholder must be received by
the Agent within ten Business Days after the Confirmation Date and any excess
payment to be refunded by the Fund to a shareholder will be mailed by the Agent
within ten Business Days after the Confirmation Date. If a shareholder does not
make timely payment of any additional amounts due in accordance with Section
4(d), the Agent will consult with the Fund in accordance with Section 5 as to
the appropriate action to be taken. The Agent will not issue or deliver
certificates for shares subscribed for until payment in full therefore has been
received, including collection of checks and payment pursuant to notices of
guaranteed delivery.
5. Validity of Subscriptions. Irregular subscriptions not otherwise covered by
specific instructions herein shall be submitted to an appropriate officer of the
Company and handled in accordance with his or her instructions. Such
instructions will be documented by the Agent indicating the instructing officer
and the date thereof.
6. Over-Subscription. If, after allocation of shares of Common Stock to Record
Date Shareholders, there remain unexercised Rights, then the Agent shall allot
the shares issuable upon exercise of such unexercised Rights (the "Remaining
Shares") to shareholders who have exercised all the Rights initially issued to
them and who wish to acquire more than the number of shares for which the Rights
issued to them are exercisable. Shares subscribed for pursuant to the
Over-Subscription Privilege will be allocated in the amounts of such
over-subscriptions. If the number of shares for which the Over-Subscription
Privilege has been exercised is greater than the Remaining Shares, the Agent
shall allocate the Remaining Shares to Record Date Shareholders exercising
Over-Subscription Privilege based on the number of shares of Common Stock owned
by them on the Record Date. Any remaining shares to be issued shall be allocated
to holders of Rights acquired in the secondary market based on the number of
Rights exercised by such holders of Rights. The percentage of Remaining Shares
each over-subscribing Record Date Shareholder or other Rights holder may acquire
will be rounded up or down to result in delivery of whole shares of Common
Stock. The Agent shall advise the Company immediately upon the completion of the
allocation set forth above as to the total number of shares subscribed and
distributable.
7. Delivery of Certificates. The Agent will deliver (i) certificates
representing those shares of Common Stock purchased pursuant to exercise of
Primary Subscription Rights as soon as practicable after the corresponding
Rights have been validly exercised and full payment for such shares has been
received and cleared and (ii) certificates representing those shares purchased
pursuant to the exercise of the Over-Subscription Privilege as soon as
practicable after the Expiration Date and after all allocations have been
effected.
8. Holding Proceeds of Rights Offering in Escrow.
(a) All proceeds received by the Agent from Shareholders in respect of the
exercise of Rights shall be held by the Agent, on behalf of the Company, in a
segregated, interest-bearing escrow account (the "Escrow Account"). Pending
disbursement in the manner described in Section 4(e) above, funds held in the
Escrow Account shall be invested by the Agent at the direction of the Company.
(b) The Agent shall deliver all proceeds received in respect of the
exercise of Rights (including interest earned thereon) to the Company as
promptly as practicable, but in no event later than ten business days after the
Confirmation Date. Proceeds held in respect of Excess Payments (including
interest earned thereon) shall belong to the Company.
9. Reports.
(a) Daily, during the period commencing on __________, until termination of
the Subscription Period, the Agent will report by telephone or telecopier (by
2:00 p.m., New York time), confirmed by letter, to an Officer of the Company,
data regarding Rights exercised, the total number of shares of Common Stock
subscribed for, and payments received therefor, bringing forward the figures
from the previous day's report in each case so as to show the cumulative totals
and any such other information as may be mutually determined by the Company and
the Agent.
10. Loss or Mutilation. If any Subscription Certificate is lost, stolen,
mutilated or destroyed, the Agent may, on such terms which will indemnify and
protect the Company and the Agent as the Agent may in its discretion impose
(which shall, in the case of a mutilated Subscription Certificate include the
surrender and cancellation thereof), issue a new Subscription Certificate of
like denomination in substitution for the Subscription Certificate so lost,
stolen, mutilated or destroyed.
11. Compensation for Services. The Company agrees to pay to the Agent
compensation for its services as such in accordance with its Fee Schedule to act
as Agent, dated ___________________ and set forth hereto as Exhibit A. The
Company further agrees that it will reimburse the Agent for its reasonable
out-of-pocket expenses incurred in the performance of its duties as such.
12. Instructions and Indemnification. The Agent undertakes
the duties and obligations imposed by this Agreement upon the
following terms and conditions:
(a) The Agent shall be entitled to rely upon any instructions or directions
furnished to it by an appropriate officer of the Company, whether in conformity
with the provisions of this Agreement or constituting a modification hereof or a
supplement hereto. Without limiting the generality of the foregoing or any other
provision of this Agreement, the Agent, in connection with its duties hereunder,
shall not be under any duty or obligation to inquire into the validity or
invalidity or authority or lack thereof of any instruction or direction from an
officer of the Company which conforms to the applicable requirements of this
Agreement and which the Agent reasonably believes to be genuine and shall not be
liable for any delays, errors or loss of data occurring by reason of
circumstances beyond the Agent's control.
(b) The Company will indemnify the Agent and its nominees against, and hold
it harmless from, all liability and expense which may arise out of or in
connection with the services described in this Agreement or the instructions or
directions furnished to the Agent relating to this Agreement by an appropriate
officer of the Company, except for any liability or expense which shall arise
out of the negligence, bad faith or willful misconduct of the Agent or such
nominees.
13. Changes in Subscription Certificate. The Agent may, without the consent or
concurrence of the Shareholders in whose names Subscription Certificates are
registered, by supplemental agreement or otherwise, concur with the Company in
making any changes or corrections in a Subscription Certificate that it shall
have been advised by counsel (who may be counsel for the Company) is appropriate
to cure any ambiguity or to correct any defective or inconsistent provision or
clerical omission or mistake or manifest error therein or herein contained, and
which shall not be inconsistent with the provision of the Subscription
Certificate except insofar as any such change may confer additional rights upon
the Shareholders.
14. Assignment, Delegation.
(a) Neither this Agreement nor any rights or obligations hereunder may be
assigned or delegated by either party without the written consent of the other
party.
(b) This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns. Nothing in this
Agreement is intended or shall be construed to confer upon any other person any
right, remedy or claim or to impose upon any other person any duty, liability or
obligation.
15. Governing Law. The validity, interpretation and
performance of this Agreement shall be governed by the law of
the State of Massachusetts.
16. Severability. The parties hereto agree that if any of the provisions
contained in this Agreement shall be determined invalid, unlawful or
unenforceable to any extent, such provisions shall be deemed modified to the
extent necessary to render such provisions enforceable. The parties hereto
further agree that this Agreement shall be deemed severable, and the invalidity,
unlawfulness or unenforceability of any term or provision thereof shall not
affect the validity, legality or enforceability of this Agreement or of any term
or provision hereof.
17. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original
and all of which together shall be considered one and the same
agreement.
18. Captions. The captions and descriptive headings herein
are for the convenience of the parties only. They do not in
any way modify, amplify, alter or give full notice of the
provisions hereof.
19. Facsimile Signatures. Any facsimile signature of any
party hereto shall constitute a legal, valid and binding
execution hereof by such party.
20. Further Actions. Each party agrees to perform such
further acts and execute such further documents as are
necessary to effect the purposes of this Agreement.
21. Additional Provisions. Except as specifically modified
by this Agreement, the Agent's rights and responsibilities set
forth in the Agreement for Stock Transfer Services between the
Company and the Agent are hereby ratified and confirmed and
continue in effect.
STATE STREET BANK & TRUST COMPANY
COMPANY
- -------------------------------
Signature
Title
February 20, 1998
Liberty All-Star Equity Fund
Federal Reserve Plaza
600 Atlantic Avenue
Boston, MA 02110
Ladies and Gentlemen:
We have acted as counsel to Liberty All-Star Equity Fund, a Massachusetts
business trust (the "Trust"), in connection with the Trust's Registration
Statement on Form N-2 filed with the Securities and Exchange Commission (the
"Commission") on February 20, 1998 (the "Registration Statement"), with respect
to the registration of an aggregate of 4,318,134 authorized but previously
unissued shares of beneficial interest of the Trust, without par value (the
"Shares").
In connection with this opinion, we have examined the following described
documents:
(a) the Registration Statement;
(b) a certificate of the Secretary of State of the
Commonwealth of Massachusetts as to the existence of the
Trust;
(c) copies, certified by the Secretary of State of the Commonwealth of
Massachusetts, of the Trust's Declaration of Trust and of all amendments thereto
on file in the office of the Secretary of State; and
(d) Certificates executed by John L. Davenport, Secretary of the Trust,
certifying, and attaching copies of, the By-laws of the Trust and certain votes
of the Trustees of the Trust authorizing the issuance of the Shares.
In such examination, we have assumed the genuineness of all signatures, the
conformity to the originals of all of the documents reviewed by us as copies,
the authenticity and completeness of all original documents reviewed by us in
original or copy form and the legal competence of each individual executing any
document.
This opinion is based entirely on our review of the documents listed above.
We have made no other review or investigation of any kind whatsoever, and we
have assumed, without independent inquiry, the accuracy of the information set
forth in such documents.
This opinion is limited solely to the laws of the Commonwealth of
Massachusetts as applied by courts in such Commonwealth, except that we express
no opinion as to any Massachusetts securities law.
We understand that all of the foregoing assumptions and
limitations are
acceptable to you.
Based upon and subject to the foregoing, please be advised that it is our
opinion that the Shares, when issued and sold in accordance with the
Registration Statement and the Trust's Declaration of Trust and By-laws, will be
legally issued, fully paid and non-assessable, except that, as set forth in the
Registration Statement, shareholders of the Fund may under certain circumstances
be held personally liable for the Trust's obligations.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
BINGHAM DANA LLP
CONSENT TO INDEPENDENT AUDITORS
The Trustees and Shareholders
Liberty All-Star Equity Fund
We consent to the use of our report dated February 13, 1998 included herein and
to the references to our firm under the captions "Financial Highlights" in the
prospectus and "Independent Auditors" in the statement of additional
information.
\s\ KPMG Peat Markwick, LLP
KPMG Peat Marwick LLP
Boston, Massachusetts
February 20, 1998
