LIBERTY ALL-STAR EQUITY FUND
Federal Reserve Plaza
Boston, Massachusetts 02210
(617) 722-6000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 22, 1998
To the Shareholders of Liberty All-Star Equity Fund:
NOTICE IS HEREBY GIVEN that the twelfth Annual Meeting of Shareholders of
Liberty All-Star Equity Fund (the "Fund") will be held in Room AV-1, 3rd Floor,
Federal Reserve Plaza, 600 Atlantic Avenue, Boston, Massachusetts, on April 22,
1998 at 9:30 a.m., Boston time. The purpose of the Meeting is to consider and
act upon the following matters:
1. To elect three Trustees of the Fund.
2. To approve the Fund's new Portfolio Management Agreement with
Oppenheimer Capital following a change of control.
3. To approve the Fund's Portfolio Management Agreement with Westwood
Management Corporation.
4. To ratify the selection by the Board of Trustees of KPMG Peat Marwick
LLP as the Fund's independent auditors for the year ending December 31, 1998.
5. To transact such other business as may properly come before the
Meeting or any adjournments thereof.
The Board of Trustees has fixed the close of business on February 23, 1998
as the record date for the determination of the shareholders of the Fund
entitled to notice of, and to vote at, the Meeting and any adjournments thereof.
YOUR BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE FOR ALL THE PROPOSALS.
By order of the Board of Trustees
John L. Davenport, Secretary
YOUR VOTE IS IMPORTANT--PLEASE RETURN YOUR PROXY PROMPTLY.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. WE URGE YOU, WHETHER OR
NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, TO INDICATE YOUR VOTING
INSTRUCTIONS ON THE ENCLOSED PROXY, DATE AND SIGN IT, AND RETURN IT IN THE
ENVELOPE PROVIDED, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. WE ASK
YOUR COOPERATION IN MAILING YOUR PROXY PROMPTLY.
February 23, 1998
LIBERTY ALL-STAR EQUITY FUND
PROXY STATEMENT
Annual Meeting of Shareholders
April 22, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Trustees of Liberty All-Star Equity Fund (the
"Fund") to be used at the Annual Meeting of Shareholders of the Fund to be held
on April 22, 1998 at 9:30 a.m. Boston time in Room AV-1, 3rd Floor, Federal
Reserve Plaza, 600 Atlantic Avenue, Boston, Massachusetts, and at any
adjournments thereof (such meeting and any adjournments being referred to as the
"Meeting").
The solicitation of proxies for use at the Meeting is being made primarily
by the mailing on or about March 2, 1998 of this Proxy Statement and the
accompanying proxy. Supplementary solicitations may be made by mail, telephone,
telegraph or personal interview by officers and Trustees of the Fund and
officers and employees of its manager, Liberty Asset Management Company
("Liberty Asset Management") and its affiliates. In addition, the Fund has
retained Corporate Investor Communications, Inc. as agent to coordinate the
distribution of proxy material to and the return of proxies from banks, brokers,
nominees and other custodians at a fee of $6,500 plus out-of-pocket expenses.
The expenses in connection with preparing this Proxy Statement and of the
solicitation of proxies for the Meeting will be paid by the Fund. The Fund will
reimburse brokerage firms and others for their expenses in forwarding
solicitation material to the beneficial owners of shares. This Proxy Statement
is accompanied by the Fund's 1997 Annual Report to Shareholders.
The Meeting is being held to vote on the matters described below.
PROPOSAL 1. ELECTION OF TRUSTEES
The Fund 's Board of Trustees is divided into three classes, each of which
serves for three years. The term of office of one of the classes expires at the
final adjournment of the Annual Meeting of Shareholders (or special meeting in
lieu thereof) each year. Unless authority is withheld, the enclosed proxy will
be voted for the election of Richard W. Lowry and John J. Neuhauser as Trustees
to hold office until the final adjournment of the Annual Meeting of Shareholders
for the year 2001 (or special meeting in lieu thereof), and William E. Mayer as
an additional Trustee to hold office until the final adjournment of the Annual
Meeting of Trustees for the year 2000. Mr. Lowry has served as a Trustee since
the commencement of the Fund's operations in 1986, and Messrs. Mayer and
Neuhauser have been nominated for election for the first time. Messrs. Lowry,
Mayer and Neuhauser have consented to serve as Trustees following the Meeting if
elected, and are expected to be able to do so. If any of them is unable or
unwilling to do so at the time of the Meeting, proxies will be voted for such
substitute as the Trustees may recommend (unless authority to vote for the
election of Trustees has been withheld).
Information about the nominees for election as a Trustee follows:
Principal Occupation
Name/Age and Address During Past Five Years Fund Shares Owned(1)
==================== ======================== =====================
Richard W. Lowry Private investor (since
(Age 61)(2) August, 1987); Chairman
10701 Charleston and Chief Executive
Drive Officer, U.S. Plywood
Vero Beach, FL Corporation, manufacturer
32963 and distributor of wood
products (August, 1985 to
August, 1987). 101,475(3)
William E. Mayer Partner, Development
(Age 57)(4) Capital, LLC (since
500 Park Avenue, December, 1996); Dean,
5th Floor College of Business and
New York, New York Management, University of
10022 Maryland (October, 1992 to
November, 1996); Dean,
Simon Graduate School of
Business, University of
Rochester (October, 1991
to July, 1992). Director
of Johns Manville
Corporation (building
products), Chart House
Enterprises
(restaurant/food) and
Hambrecht & Quist
Incorporated
(broker-dealer). -0-
John J. Neuhauser Dean, Boston College
(Age 54) School of Management
140 Commonwealth (since September, 1977).
Avenue Director of Hyde Athletic
Chestnut Hill, MA Industries, Inc. (athletic
02167 footwear). -0-
The following Trustees continue to serve in such capacity until their terms
of office expire and their successors are elected and qualified:
Principal Occupation
Name/Age and Address During Past Five Years Fund Shares Owned(1)
==================== ======================== =====================
Robert J. Birnbaum Retired (since January,
(Age 70)(2) 1994); Special Counsel,
313 Bedford Road Dechert, Price & Rhoads
Ridgewood, NJ (September, 1988 to
07450 December, 1993);
President and Chief
Operating Officer, New
York Stock Exchange,
Inc. (May, 1985 to
June, 1988). Director
of The Emerging Germany
Fund (investment
company). 3,590
Harold W. Executive Vice
Cogger(5) (Age 62) President and Director,
Liberty Financial Liberty Financial
Companies, Inc. Companies, Inc. (since
600 Atlantic Avenue March, 1995); Director
Boston, MA 02210 (since October, 1981)
and Chairman of the
Board (since March,
1996), The Colonial
Group, Inc.; Director
(since March, 1984),
Executive Vice
President (October,
1989 to July, 1993),
Colonial Management
Associates, Inc.;
President (since March,
1996), Stein Roe &
Farnham Incorporated. 1,164
James E. Grinnell Private investor (since
(Age 68)(2) November, 1988);
22 Harbor Avenue President and Chief
Marblehead, MA 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). 10,292
- -----------------------
(1) Shows all shares owned beneficially, directly or indirectly, on the record
date for the Meeting. Such ownership includes voting and investment control. The
Fund's Trustees and officers as a group then so owned less than 1% of the shares
of the Fund outstanding.
(2) Member of the Audit Committee.
(3) Held by the trustee of a trust of which Mr. Lowry is
the sole beneficiary.
(4) "Interested person" of the Fund, as defined in the Investment Company Act of
1940, by reason of his affiliation with Hambrecht & Quist Incorporated.
(5) "Interested person" of the Fund, as defined in the Investment Company Act of
1940, by reason of his positions with Liberty Financial Companies, Inc., the
indirect parent of Liberty Asset Management, and its affiliates.
As of February 23, 1998, John A. Benning, Assistant Secretary of the Fund,
and other officers of Liberty Financial Companies, Inc. or its affiliates held
457,005 shares of the Fund, representing 0.6% of the outstanding shares, as
co-trustees of the Liberty Financial Companies, Inc. Savings and Investment Plan
as to which they share voting power.
The term of office of Mr. Birnbaum will expire on final adjournment of the
Annual Meeting (or special meeting in lieu thereof) in the year 2000, and the
term of office of Messrs. Cogger and Grinnell will expire on final adjournment
of the Annual Meeting (or special meeting in lieu thereof) in 1999. Mr. Birnbaum
has served as a Trustee since November, 1994, Mr. Cogger has served as a Trustee
since April, 1996, and Mr. Grinnell has served as a Trustee since the
commencement of the Fund's operations in 1986. Messrs. Birnbaum, Grinnell,
Lowry, Meyer and Neuhauser are also trustees of Colonial Trusts I through VII
(the "Colonial Trusts"), the umbrella trusts for an aggregate of 39 open-end
funds (the "Colonial Funds") managed by Colonial Management Associates, Inc.
("Colonial"), an affiliate of Liberty Asset Management, five closed-end funds
managed by Colonial (the "Colonial Closed-End Funds"), and LFC Utilities Trust,
an open-end investment company managed by Stein Roe & Farnham Incorporated,
another affiliate of Liberty Asset Management. Messrs. Birnbaum, Cogger,
Grinnell and Lowry are also directors of Liberty All-Star Growth Fund, Inc.,
another closed-end multi-managed fund managed by Liberty Asset Management, and
Mr. Neuhauser is a nominee for election as such director at its 1998 annual
meeting of shareholders.
During 1997 the full Board of Trustees of the Fund held six meetings, and
the Audit Committee, which is comprised of all the Trustees who are not
"interested persons" of the Fund, met twice. All Trustees were present at all
meetings.
The Audit Committee makes recommendations to the full Board as to the firm
of independent accountants to be selected, reviews the methods, scope and
results of audits and fees charged by such accountants, and reviews the Fund's
internal accounting procedures and controls. The Fund has no nominating or
compensation committee.
Compensation
Liberty Asset Management or its affiliates pay the compensation of all the
officers of the Fund. The Fund pays the Trustees who are not affiliated with
Liberty Asset Management (the "independent Trustees") an annual retainer of
$5,000 per annum, plus $1,800 per meeting attended, with a minimum of $14,000
per annum if less than five meetings are held and all meetings are attended,
plus out-of-pocket expenses relating to attendance at meetings. The total fees
accrued to the independent Trustees as a group during the year ended December
31, 1997 by the Fund were $47,400 and out-of-pocket expenses relating to their
attendance at meetings were $3,797.
The following table shows, for the year ended December 31, 1997, the
compensation received from the Fund by each current Trustee, and the aggregate
compensation paid to each current Trustee for service on the Board of Trustees
of the Fund and the Board of Trustees or Directors of the Colonial Trusts, the
Colonial Closed-End Funds, LFC Utilities Trust and Liberty All-Star Growth Fund,
Inc. (of which Messrs. Birnbaum, Grinnell and Lowry are also trustees or
directors). The Fund has no bonus, profit sharing or retirement plans.
Total Compensation from the
Fund, the Colonial Funds, the
Aggregate Colonial Closed-End Funds, LFC
Compensation Utilities Trust and Liberty
Name from the Fund All-Star Growth Fund, Inc.
========= ============== =============================
Harold W. -0- -0-
Cogger
Robert J. $15,800 $120,749
Birnbaum
James E. $15,800 $121,498
Grinnell
Richard W. $15,800 $121,498
Lowry
Officers
The following are the executive officers of the Fund, in addition to Mr.
Harold W. Cogger who serves as Chairman of the Board of Trustees.
Principal Occupation
Name/Age and Address Position During
with Fund Past Five Years
====================== ========== =====================
Richard R. Christensen President President and Chief Executive
(Age 64) and Chief Officer of Liberty Asset Management
Liberty Asset Manage- Executive (since January 1995); President
ment Company Officer of Liberty Investment Services,
600 Atlantic Avenue Inc. (April, 1987 to March, 1995).
Boston, MA 02210
William R. Parmentier Vice Senior Vice President and
(Age 45) President - Chief Investment Officer,
Liberty Asset Chief Liberty Asset Management
Management Company Investment (since May, 1995);
600 Atlantic Avenue Officer Consultant (October, 1994
Boston, MA 02210 to May, 1995); President,
GQ Asset Management, Inc.
(July, 1993 to October,
1994); Assistant
Treasurer, Grumman
Corporation (December,
1974 to July, 1993).
Christopher S. Carabell Vice Vice
(Age 33) President President-Investments,
Liberty Asset Liberty Asset Management
Management Company (since March, 1996);
600 Atlantic Avenue Associate Director, U.S.
Boston, MA 02210 Equity Research of Rogers
Casey & Associates, investment consultants
(January, 1995 to February, 1996);
Director of Investments, Boy Scouts of
America (June, 1990 to January, 1995).
Timothy J. Jacoby Treasurer Senior Vice President,
(Age 45) and Fund Administration,
Colonial Management Controller Colonial Management
Associates, Inc. Associates, Inc. (since
One Financial Center September, 1996); Senior
Boston, MA 02111 Vice President, Fidelity
Accounting and Custody Services
(September, 1993 to September, 1996);
Assistant Treasurer, Fidelity Group of
Funds (August, 1990 to September, 1993).
John L. Davenport Secretary Vice President and
(Age 61) Associate General
Liberty Financial Counsel, Liberty
Companies, Inc. Financial Companies, Inc.
600 Atlantic Avenue and predecessor (since
Boston, MA 02210 January, 1984).
Mr. Christensen has served as President of the Fund since November 30,
1994; Mr. Cogger has served as Chairman of the Board since April 18, 1996; Mr.
Parmentier has served as Vice President - Chief Investment Officer since October
19, 1995; Mr. Carabell was elected Vice President on April 17, 1997; Mr.
Davenport has served as Secretary since April 18, 1996; and Mr. Jacoby was
appointed Treasurer effective October 10, 1996 and Controller effective October
16,1997. Mr. Christensen also serves as President and a trustee of the Stein Roe
Variable Investment Trust and the Liberty Variable Investment Trust, other
trusts with funds managed by Liberty Asset Management or affiliates thereof; Mr.
Jacoby serves as Treasurer and Controller of the Liberty Variable Investment
Trust, the Colonial Trusts and the Colonial Closed-End Funds; and Messrs.
Christensen, Carabell, Davenport, Jacoby and Parmentier serve as officers of
Liberty All-Star Growth Fund, Inc. Each officer of the Fund serves at the
pleasure of the Board of Trustees.
PROPOSAL 2. TO APPROVE NEW PORTFOLIO MANAGEMENT AGREEMENT WITH OPPENHEIMER
CAPITAL FOLLOWING CHANGE IN CONTROL
Background - The Multi-Manager Methodology
The Fund allocates its portfolio assets on an approximately equal basis
among a number of independent investment management firms ("Portfolio Managers")
recommended by Liberty Asset Management, currently five in number, each of which
employs a different investment style, and from time to time rebalances the
portfolio among the Portfolio Managers so as to maintain an approximately equal
allocation of the portfolio among them throughout all market cycles. The Fund's
multi-manager methodology is based on the premise that most investment
management firms consistently employ a distinct investment style which causes
them to emphasize stocks with particular characteristics, and that, because of
changing investor preferences, any given investment style will move into and out
of market favor and will result in better performance under certain market
conditions but poorer performance under other conditions. The Fund's
multi-manager methodology seeks to achieve more consistent and less volatile
performance over the long-term than if a single Portfolio Manager were employed.
The Portfolio Managers recommended by Liberty Asset Management represent a
blending of different styles which, in its opinion, is appropriate for the
Fund's investment objective and which is sufficiently broad so that at least one
of such styles can reasonably be expected to be in relative market favor in all
reasonably foreseeable market conditions. Liberty Asset Management continuously
analyses and evaluates the investment performance and portfolios of the Fund's
Portfolio Managers and from time to time recommends changes in the Portfolio
Managers, as described in PROPOSAL 3 below. Such recommendations could be based
on factors such as a Portfolio Manager's divergence from the investment style
for which it was selected, changes deemed by Liberty Asset Management to be
potentially adverse in a Portfolio Manager's personnel or ownership or other
structural or organizational changes affecting the Portfolio Manager, or a
deterioration in a Portfolio Manager's investment performance when compared to
that of other investment management firms employing similar investment styles.
Portfolio Manager changes may also be made to change the mix of investment
styles employed by the Fund's Portfolio Managers. Portfolio Manager changes, as
well as rebalancings of the Fund's portfolio among the Portfolio Managers, may
result in portfolio turnover in excess of what would otherwise be the case.
Increased portfolio turnover results in increased brokerage commission and
transaction costs, and may result in the recognition of additional capital
gains.
Change in Control of Oppenheimer Capital
Since last year's annual meeting control of Oppenheimer Capital, a
Portfolio Manager of the Fund since February, 1990, was transferred to new
owners in the transactions described below, resulting in the termination of the
Fund's prior portfolio management agreement with that firm. After reviewing the
proposed change of control transactions and considering Liberty Asset
Management's opinion that they would not have an adverse effect on the nature or
quality of the services being provided by Oppenheimer Capital, the Board of
Directors on April 17, 1997 approved a new portfolio management agreement at the
same fee and on substantially identical other terms and conditions as the prior
agreement, and the new agreement was executed effective with the closing of the
change in control transactions on November 5, 1997. See PROPOSAL 3 below for the
terms and conditions of the Fund's portfolio management agreements with its
current Portfolio Managers, including Oppenheimer Capital.
Under the terms of an exemptive order issued to the Fund and Liberty Asset
Management by the Securities and Exchange Commission, the Fund may, in advance
of shareholder approval, enter into a new portfolio management agreement with a
Portfolio Manager or its successor following a change in control of the
Portfolio Manager, provided that the new agreement is at a fee no higher than,
and is on other terms and conditions substantially similar to, the Fund's
agreements with its other Portfolio Managers, and that its continuance is
subject to approval by shareholders at the Fund's next annual meeting.
Accordingly, the Fund's new portfolio management agreement with Oppenheimer
Capital is being submitted for shareholder approval at the Meeting.
The Transactions
On November 4, 1997, PIMCO Advisors L.P. ("PIMCO Advisors"), a registered
investment adviser with $125 billion in assets under management through various
subsidiaries, and its affiliates acquired control of Oppenheimer Capital for an
aggregate purchase price of approximately $294 million paid in partnership units
and exchangeable debt. On November 30, 1997, Oppenheimer Capital merged with a
subsidiary of PIMCO Advisors and, as a result, Oppenheimer Capital became an
indirect wholly-owned subsidiary of PIMCO Advisors. PIMCO Advisors has two
general partners: PIMCO Partners, G.P. ("PIMCO G.P."), a California general
partnership, and PIMCO Advisors Holdings L.P. (formerly Oppenheimer Capital,
L.P.), a New York Stock Exchange-listed Delaware limited partnership of which
PIMCO G.P. is the sole general partner. PIMCO GP beneficially owns or controls
(through its general partner interest in PIMCO Advisors Holdings, L.P., formerly
Oppenheimer Capital, L.P.), more than 80% of the units of limited partnership
("Units") of PIMCO Advisors. PIMCO GP has two general partners. The first of
these is Pacific Investment Management Company, which is a direct subsidiary of
Pacific Life Insurance Company ("Pacific Life"). The managing general partner of
PIMCO GP is PIMCO Partners L.L.C. ("PPLLC"), a California limited liability
company. PPLLC's members are the Managing Directors (the "PIMCO Managers") of
Pacific Investment Management Company, a subsidiary of PIMCO Advisors (the
"PIMCO Subpartnership"). The PIMCO Managers are: William H. Gross, Dean S.
Meiling, James F. Muzzy, William F. Podlich, III, Brent R. Harris, John L.
Hague, William S. Thompson Jr., William S. Powers, David H. Edington, Benjamin
Trosky, William R. Benz, II and Lee R. Thomas, III. PIMCO Advisors is governed
by a Management Board, which consists of sixteen members, pursuant to a
delegation by its general partners. PIMCO GP has the power to designate up to
nine members of the Management Board and the PIMCO Subpartnership, of which the
PIMCO Managers are the Managing Directors, has the power to designate up to two
members. In addition, PIMCO GP, as the controlling general partner of PIMCO
Advisors, has the power to revoke the delegation to the Management Board and
exercise control of PIMCO Advisors. As a result, Pacific Life and/or the PIMCO
Managers may be deemed to control PIMCO Advisors. Pacific Life and the PIMCO
Managers disclaim such control. Because of direct or indirect power to appoint
25% of the members of the Equity Board, (i) Pacific Life and (ii) the PIMCO
Managers and/or the PIMCO Subpartnership may each be deemed, under applicable
provisions of the Investment Company Act of 1940, to control PIMCO Advisors.
Pacific Life, the PIMCO Subpartnership and the PIMCO Managers disclaim such
control.
The Fund's initial portfolio management agreement with Oppenheimer Capital
was approved by shareholders on April 20, 1990. For the year ended December 31,
1997 Oppenheimer Capital received $828,193 for its portfolio management services
to the Fund. Mr. John Lindenthal, Managing Director of Oppenheimer Capital, has
managed the portion of the Fund's portfolio allocated to Oppenheimer Capital
since its initial appointment as a Fund Portfolio Manager in February, 1990, and
continues to do so.
See Appendix A for information regarding other registered investment
companies with investment objectives similar to the Fund's for which a
subsidiary of Oppenheimer Capital provides investment advisory or portfolio
management services.
Required Vote
Approval of the new portfolio management agreement with Oppenheimer Capital
requires the affirmative vote of a "majority of the outstanding voting
securities" of the Fund which, under the Investment Company Act of 1940, means
the affirmative vote of the lesser of (a) 67% or more of the shares of the Fund
present at the Meeting or represented by proxy if the holders of more than 50%
of the outstanding shares are present or represented by proxy, or (b) more than
50% of the outstanding shares. See INFORMATION ABOUT THE MEETING below.
In the event that the shareholders of the Fund fail to approve the new
portfolio management agreement with Oppenheimer Capital, the agreement will
terminate and Liberty Asset Management will cause the portfolio assets under
management by Oppenheimer Capital to be invested in money market instruments or
other cash equivalent holdings or derivative investments pending the
reappointment of Oppenheimer Capital or the appointment of a new Portfolio
Manager.
The Board of Directors unanimously recommends that the shareholders vote
FOR approval of the new portfolio management agreement with Oppenheimer Capital.
PROPOSAL 3. TO APPROVE THE PORTFOLIO MANAGEMENT AGREEMENT WITH WESTWOOD
MANAGEMENT CORPORATION
New Portfolio Manager
In accordance with Liberty Asset Management's recommendation, effective
November 3, 1997 Westwood Management Corporation ("Westwood") replaced Columbus
Circle Investors, a Portfolio Manager of the Fund since November, 1991. Under
the terms of the exemptive order referred to under PROPOSAL 2 above, the Fund
may enter into a portfolio management agreement with a new or additional
Portfolio Manager recommended by Liberty Asset Management in advance of
shareholder approval, provided that the new agreement is at a fee no higher than
that provided in, and is on other terms and conditions substantially similar to,
the Fund's agreements with its other Portfolio Managers, and that its
continuance is subject to approval by shareholders at the Fund's regularly
scheduled annual meeting next following the date of the portfolio management
agreement with the new or additional Portfolio Manager. Accordingly, the Fund's
portfolio management agreement with Westwood is being submitted for shareholder
approval at the Meeting.
In late 1997 Liberty Asset Management determined to replace Columbus Circle
with a Portfolio Manager practicing a "growth at a reasonable price" investment
style, which would provide greater differentiation from the "premium for
predictable growth" investment style of the Fund's other growth style Portfolio
Manager, Wilke/Thompson Capital Management, Inc. Liberty Asset Management first
analyzed information regarding the personnel, investment process and performance
of a large number of investment management firms practicing such an investment
style, ultimately reducing the number of potential candidates to three. Liberty
Asset Management analyzed the three candidates in terms of their returns,
volatility and portfolio characteristics when combined with those of the Fund's
other four Portfolio Managers. Based on the foregoing and on Liberty Asset
Management's qualitative analysis, Liberty Asset Management recommended, and the
Board of Trustees on October 16, 1997 approved, the termination of the Fund's
portfolio management agreement with Columbus Circle Investors and its
replacement with Westwood, effective November 3, 1997.
Westwood, 300 Crescent Court, Dallas, Texas 75201, is a wholly-owned
subsidiary of Southwest Securities Group, Inc., a New York Stock Exchange listed
company. Founded in June, 1983, it had approximately $1.7 billion in assets
under management as at December 31, 1997. Susan M. Byrne, President and Chief
Executive Officer of Westwood, manages the portion of the Fund's portfolio
assigned to that firm. See Appendix B for further information about Westwood.
Terms of Portfolio Management Agreement with Westwood
The portfolio management agreement with Westwood is at the same fee rates
and is on other terms and conditions substantially similar to those of the
portfolio management agreements with the Fund's four other Portfolio Managers. A
copy of the portfolio management agreement with Westwood is attached to this
proxy statement as Appendix C.
Under the Fund's portfolio management agreements (including that with
Westwood), each Portfolio Manager has discretionary investment authority
(including the selection of brokers and dealers for the execution of the Fund's
portfolio transactions) with respect to the portion of the Fund's assets
allocated to it by Liberty Asset Management from time to time, subject to the
Fund's investment objective and policies, to the supervision and control of the
Trustees, and to instructions from Liberty Asset Management. The Portfolio
Managers are required to use their best professional judgment in making timely
investment decisions for the Fund. The Portfolio Managers, however, will not be
liable for actions taken or omitted in good faith and believed to be within the
authority conferred by their portfolio management agreements and without willful
misfeasance, bad faith or gross negligence.
From the fund management fees it receives from the Fund (0.80% per annum of
the Fund's average weekly net asset value up to $400 million, 0.72% per annum of
such average weekly net asset value exceeding $400 million up to $800 million,
0.648% of such average weekly net asset value exceeding $800 million up to $1.2
billion, and 0.584% of such average weekly net asset value in excess of $1.2
billion), Liberty Asset Management pays each of the Fund's Portfolio Managers
0.40% per annum of the average weekly net asset value of the portion of the
Fund's assets managed by that Portfolio Manager, with such rate reduced to 0.36%
per annum of the Portfolio Managers' allocable portions of the Fund's average
weekly net asset value in excess of $400 million up to $800 million, 0.324% of
their allocable portions of such average weekly net asset value exceeding $800
million up to $1.2 billion, and 0.292% of their allocable portions of such
average weekly net asset value exceeding $1.2 billion. As at February 17, 1998,
the Fund's net assets were $1,211,963,000.
If approved by shareholders at the Meeting, the Portfolio Management
Agreement with Westwood will remain in effect until July 31, 1998, and will
continue thereafter until terminated by the Fund or the Portfolio Manager,
provided such continuance is approved at least annually by the Board of
Trustees, including a majority of the independent Trustees, or by the vote of a
"majority of the outstanding voting securities" (as defined under Required Vote
below) of the Fund.
Required Vote
Approval of the portfolio management agreement with
Westwood requires the affirmative vote of a "majority of
the outstanding voting securities" of the Fund, as
defined under PROPOSAL 2 - Required Vote. SEE
INFORMATION ABOUT THE MEETING below.
In the event that the shareholders of the Fund fail to approve the
portfolio management agreement with Westwood, the agreement will terminate and
Liberty Asset Management will cause the portfolio assets under management by
Westwood to be invested in money market instruments or other cash equivalent
holdings pending the reappointment of Westwood or the appointment of a new
Portfolio Manager.
The Board of Trustees unanimously recommends that the shareholders vote FOR
approval of the portfolio management agreement with Westwood.
PROPOSAL 4. RATIFICATION OF SELECTION OF INDEPENDENT
AUDITORS
By vote of the Board of Trustees, including the vote of the non-interested
Trustees, the firm of KPMG Peat Marwick LLP has been selected as independent
auditors for the Fund for the year ending December 31, 1998. Such selection is
being submitted to the shareholders for ratification. The employment of KPMG
Peat Marwick LLP is conditioned on the right of the Fund by majority vote of its
shareholders to terminate such employment. Such firm has acted as independent
auditors for the Fund since its commencement of operations in 1986.
The services provided by the Fund 's independent auditors include
examination of its annual financial statements, assistance and consultation in
connection with Securities and Exchange Commission filings, and review of the
Fund 's annual federal income tax returns. Representatives of KPMG Peat Marwick
LLP are expected to be present at the Meeting and will be given the opportunity
to make a statement if they should so desire.
OTHER BUSINESS
The Board of Trustees knows of no other business to be brought before the
Meeting. However, if any other matters properly come before the Meeting, it is
the intention of the Board that proxies that do not contain specific
instructions to the contrary will be voted on such matters in accordance with
the judgment of the persons designated therein as proxies.
MANAGEMENT
Liberty Asset Management, 600 Atlantic Avenue, Boston, Massachusetts 02210,
is the Fund's manager. Liberty Asset Management is an indirect wholly-owned
subsidiary of Liberty Financial Companies, Inc. ("Liberty Financial"), the
address of which is also 600 Atlantic Avenue, Boston, Massachusetts 02210.
Approximately 75% of the common stock of Liberty Financial is owned by Liberty
Mutual Insurance Company, Boston, Massachusetts, and the balance is listed on
the New York Stock Exchange. Liberty Asset Management's Chief Executive Officer
is Richard R. Christensen (see PROPOSAL 1 Officers), and its Board of Directors
is comprised of Mr. Christensen and Kenneth R. Leibler, C. Allen Merritt Jr. and
Lindsay Cook, officers of Liberty Financial. Pursuant to its fund management
agreement with the Fund, Liberty Asset Management implements and operates the
Fund's multi-manager methodology described under PROPOSAL 2 above and has
overall supervisory responsibility for the general management and investment of
the Fund 's securities portfolio, subject to the Fund's investment objective and
policies and any directions of the Trustees.
Liberty Asset Management is also responsible under the Fund Management
Agreement for the provision of administrative services to the Fund, including
the provision of office space, shareholder and broker-dealer communications,
compensation of all officers and employees of the Fund who are officers or
employees of Liberty Asset Management or its affiliates, and supervision of
transfer agency, dividend disbursing, custodial and other services provided by
others. Certain of Liberty Asset Management's administrative responsibilities to
the Fund have been delegated to its affiliate, Colonial Management Associates,
Inc. For its administrative services the Fund pays Liberty Asset Management an
annual fee at the rate of 0.20% of the Fund's average weekly net asset value up
to $400 million, 0.18% of such average weekly net asset value exceeding $400
million up to $800 million, 0.162% of such average weekly net asset value
exceeding $800 million up to $1.2 billion, and 0.146% of such average weekly net
asset value in excess of $1.2 billion. This administrative service fee is in
addition to the fund management fees paid by the Fund to Liberty Asset
Management described on page 11.
The names and addresses of the Fund's current Portfolio Managers, in
addition to Westwood, are as follows:
J.P. Morgan Investment Palley-Needelman Asset Management, Inc.
Management Inc. 800 Newport Center Drive, Suite 450
522 Fifth Avenue Newport Beach, CA 92660
New York, NY 10036
Oppenheimer Capital Wilke/Thompson Capital Management, Inc.
Oppenheimer Tower 3800 Norwest Center
World Financial Center 90 South Seventh Street
New York, NY 10281 Minneapolis, MN 55402
Portfolio Transactions and Brokerage
Each of the Fund's Portfolio Managers has discretion to select brokers and
dealers to execute portfolio transactions initiated by the Portfolio Manager for
the portion of the Fund's portfolio assets allocated to it, and to select the
markets in which such transactions are to be executed. The portfolio management
agreements with the Fund provide, in substance, that in executing portfolio
transactions and selecting brokers or dealers, the primary responsibility of the
Portfolio Manager is to seek to obtain best net price and execution for the
Fund.
The Portfolio Managers are authorized to cause the Fund to pay a commission
to a broker or dealer who provides research products and services to the
Portfolio Manager for executing a portfolio transaction which is in excess of
the amount of commission another broker or dealer would have charged for
effecting that transaction. The Portfolio Managers must determine in good faith,
however, that such commission was reasonable in relation to the value of the
research products and services provided to them, viewed in terms of that
particular transaction or in terms of all the client accounts (including the
Fund) over which the Portfolio Manager exercises investment discretion. It is
possible that certain of the services received by a Portfolio Manager
attributable to a particular transaction will primarily benefit one or more
other accounts for which investment discretion is exercised by the Portfolio
Manager.
In addition, under their portfolio management agreements with the Fund and
Liberty Asset Management, the Portfolio Managers, in selecting brokers or
dealers to execute portfolio transactions for the Fund, are authorized to
consider (and Liberty Asset Management may request them to consider) brokers or
dealers that provide to Liberty Asset Management, directly or through third
parties, research products or services such as research reports; subscriptions
to financial publications and research compilations; portfolio analyses;
economic reports; compilations of securities prices, earnings, dividends and
other data; computer hardware and software, quotation equipment and services
used for research; and services of economic or other consultants. The
commissions paid on such transactions may exceed the amount of commission
another broker would have charged for effecting that transaction. Research
products and services made available to Liberty Asset Management include
performance and other qualitative and quantitative data relating to investment
managers in general and the Portfolio Managers in particular; data relating to
the historic performance of categories of securities associated with particular
investment styles; mutual fund portfolio and performance data; data relating to
portfolio manager changes by pension plan fiduciaries; and related computer
hardware and software, all of which are used by Liberty Asset Management in
connection with its selection and monitoring of Portfolio Managers, the assembly
of an appropriate mix of investment styles, and the determination of overall
portfolio strategies. These research products and services may also be used by
Liberty Asset Management in connection with its management of Liberty All-Star
Growth Fund, Inc. and other multi-managed clients of Liberty Asset Management.
In instances where Liberty Asset Management receives from or through brokers and
dealers products or services which are used both for research purposes and for
administrative or other non-research purposes, Liberty Asset Management makes a
good faith effort to determine the relative proportions of such products or
services which may be considered as investment research, based primarily on
anticipated usage, and pays for the costs attributable to the non-research usage
in cash.
Liberty Asset Management from time to time reaches understandings with each
of the Fund's Portfolio Managers as to the amount of the Fund's portfolio
transactions initiated by such Portfolio Manager that are to be directed to
brokers and dealers which provide or make available research products and
services to Liberty Asset Management and the commissions to be charged to the
Fund in connection therewith. These amounts may differ among the Portfolio
Managers based on the nature of the market for the types of securities managed
by them and other factors.
Although the Fund does not permit a Portfolio Manager to act or have a
broker-dealer affiliate act as broker for Fund portfolio transactions initiated
by it, the Portfolio Managers are permitted to place Fund portfolio transactions
initiated by them with another Portfolio Manager or its broker-dealer affiliate
for execution on an agency basis, provided the commission does not exceed the
usual and customary broker's commission being paid to other brokers for
comparable transactions and is otherwise in accordance with the Fund's
procedures adopted pursuant to Rule 17e-1 under the Investment Company Act.
During 1997 aggregate commissions of $1,397, representing less than one percent
of the total commissions paid by the Fund, were paid to Oppenheimer & Co., Inc.,
then a broker-dealer affiliate of Oppenheimer Capital, and J.P. Morgan
Securities, Inc., a broker-dealer affiliate of J.P. Morgan Investment Management
Inc., in connection with the execution of portfolio transactions for the Fund
initiated by other Portfolio Managers.
INFORMATION ABOUT THE MEETING
All proxies solicited by the Board of Trustees which are properly executed
and returned in time to be voted at the Meeting will be voted at the Meeting in
accordance with the instructions thereon. If no specification is made on a
proxy, it will be voted FOR the election as Trustee of the nominees named under
Proposal 1, FOR approval of the Fund's new portfolio management agreement with
Oppenheimer Capital, FOR approval of the Fund's portfolio management agreement
with Westwood, and FOR ratification of the Board's selection of the Fund's
independent auditors for 1998. Any proxy may be revoked at any time prior to its
use by written notification received by the Fund's Secretary, by the execution
of a later-dated proxy, or by attending the Meeting and voting in person.
The election of the Trustees is by plurality vote. Approval of the new
portfolio management agreement with Oppenheimer Capital and the portfolio
management agreement with Westwood each requires the affirmative vote of a
"majority of the outstanding voting securities" of the Fund, as defined under
PROPOSAL 2 - Required Vote above. Ratification of the selection of the Fund 's
independent auditors requires the affirmative vote of a majority of the shares
voting thereon, provided more than 50% of the outstanding shares are present or
represented at the Meeting. Only shareholders of record may vote.
Broker-dealer firms holding Fund shares in "street name" for the benefit of
their customers and clients will request the instructions of such customers and
clients on how to vote their shares on each proposal before the Meeting. The
Fund understands that, under the rules of the New York Stock Exchange, if no
instructions have been received prior to the date specified in such
broker-dealer firm's request for voting instructions, the broker-dealer firms
may grant authority to the proxies designated by the Fund to vote for the
election of the Trustees, for approval of the portfolio management agreements
with Oppenheimer Capital and Westwood, and for the ratification of the selection
of the Fund 's independent auditors.
The shares as to which the Fund is granted authority by broker-dealer firms
to vote on the election of the Trustees, as well as shares as to which properly
executed proxies are returned by the record shareholders, will be counted as
represented at the Meeting. Because of the effect of the New York Stock Exchange
rules referred to above, the failure of any Fund shareholder whose shares are
held in "street name" by a broker-dealer firm to timely furnish his or her
instructions on how to vote such shares on the election of the Trustees, the
approval of the new portfolio management agreements and the ratification of the
selection of independent auditors will have the same effect as a vote for such
proposals. An abstention on the approval of the new portfolio management
agreements will have the same effect as vote against such proposals, and the
withholding of a vote on the election of the Trustees or an abstention on the
ratification of the selection of auditors will have no effect on such proposals.
All shareholders of record on February 23, 1998 are entitled to one vote
for each share held. As of that date 86,362,669 shares of beneficial interest of
the Fund were issued and outstanding. Based on filings made by such holders
pursuant to Sections 13(d) and 16(a) of the Securities Exchange Act of 1934 (the
"Exchange Act"), the following entities owned beneficially more than five
percent of the outstanding shares of the Fund:
Percent of
Name and Address No. of Shares Owned Outstanding Shares
Liberty Mutual Insurance
Company and Liberty Mutual
Fire Insurance Company
175 Berkeley Street
Boston, MA 02117 7,300,349 shares 8.45%
Liberty Mutual Insurance Company ("Liberty Mutual") and Liberty Mutual Fire
Insurance Company ("Liberty Fire") have sole voting and investment power with
respect to 6,570,267 and 730,082 shares, respectively. Liberty Mutual and
Liberty Fire are mutual insurance companies having identical Boards of Directors
and certain common executive officers. Liberty Mutual indirectly owns a majority
of the outstanding common stock of Liberty Financial, which indirectly owns all
of the stock of Liberty Asset Management (see MANAGEMENT above). To the
knowledge of the Fund, on the record date for the Meeting no other shareholder
owned beneficially, as defined by Rule 13d-3 under the Exchange Act, more than
5% of the outstanding shares of the Fund.
In the event a quorum is present but votes sufficient for approval of any
proposals recommended by the Trustees have not been received, those proxies that
have been received may be voted on adjournment of the Meeting in a manner
considered to be consistent with the intention of the shareholders submitting
such proxies.
SUBMISSION OF CERTAIN SHAREHOLDER PROPOSALS
Under the proxy rules of the Securities and Exchange Commission, shareholder
proposals meeting tests contained in those rules may, under certain conditions,
be included in the Fund 's proxy material for a particular annual shareholders
meeting. Under the foregoing proxy rules, proposals submitted for inclusion in
the proxy material for the 1998 Annual Meeting must be received by the Fund on
or before October 27, 1998. The fact that the Fund receives a shareholder
proposal in a timely manner does not ensure its inclusion in its proxy material,
since there are other requirements in the proxy rules relating to such
inclusion.
February 23, 1998
APPENDIX A
OpCap Advisors, a subsidiary of Oppenheimer Capital, is the manager or
sub-advisor to the registered investment companies listed below. These
investment companies have similar investment objectives to the Fund.
Approximate Net Advisory Fee Rate
Assets (as of (based on average net
Fund January 23, 1998) asset value)
================== ================ ================
Oppenheimer Quest 1.0% on the first
Value Fund, Inc. $1,168,166,193 $400 million;
.90% on the next $400
Oppenheimer Quest million;
Opportunity Value .85% of net assets
Fund $4,202,234,526 between $800 million
but less than $4
billion; and .80% on
assets over $4
billion but less than
$8 billion and .75%
on assets over $8
billion.(1)
Oppenheimer Quest $266,293,562 1.0% on the first
Capital Value Fund, $400 million; .90% on
Inc. the next $400
million;
.85% of the net
assets in excess of
$800 million(2)
Enterprise Accumulation
Trust:
Equity Portfolio $511,021,880 .40% of the first $1
Managed Portfolio $2,624,372,848 billion;
.30% on assets over
$1 billion; and
.25% for assets in
excess of $2
billion(3)
Enterprise Group of Funds:
Equity Portfolio $5,332,414 .40% of the first $100 million;
Managed Portfolio $349,493,760 .30% on assets in excess of $100
million(4)
Penn Series Funds, Inc.:
Value Equity Fund $297,506,114 .50%(5)
Endeavor Series Trust:
Value Equity Portfolio $210,253,204 .40%(6)
Opportunity Value
Portfolio $27,190,603
WNL Series Trust:
Elite Value Asset
Allocation Portfolio $9,583,891 .40%(7)
The Saratoga Advantage Trust:
Large Capitalization
Value Portfolio $33,003,232 .30%(7)
OCC Accumulation Trust:
Equity Portfolio $28,400,402 .80% of the first $400 million of
Managed Portfolio $474,973,835 average net assets:
.75% of the next $400
million of average
net assets and .70%
of assets in excess
of $800 million(8)
(1) With respect to each of these funds, Oppenheimer Funds, Inc. ("OFI") is the
investment adviser and OpCap Advisors is the sub-adviser. OFI pays OpCap
Advisors monthly an annual fee based on the average daily net assets of the
fund equal to 40% of the advisory fee collected by OFI based on the total
net assets of the fund as of November 22, 1995 (the "base amount") plus 30%
of the investment advisory fee collected by OFI based on the total net
assets of the fund that exceed the base amount.
(2) OFI is the investment advisor and OpCap Advisors is the sub-adviser. OFI
pays OpCap Advisors a sub-advisory fee equal to 40% of the net advisory fee
calculated by OFI for the fund based on the total net assets of the fund as
of February 28, 1997 and remaining 120 days later (the "base amount") plus
30% of the investment advisory fee collected by OFI based on the total
assets that exceed that base amount. OFI is waiving the following portion
of its advisory fee: .15% of the first $200 million of average daily net
assets, .40% of the next $200 million, .30% of the next $400 million and
.25% of average net assets in excess of $800 million.
(3) These fees are for investment advisory services only. Management services
are provided to the portfolios by a party other than OpCap Advisors. The
manager, which pays the investment advisory fee to OpCap Advisors, receives
a management fee, on an annual basis, of 0.80% of the first $400 million of
the average daily net assets; .75% on the next $400 million and .70% on
assets above $800 million of each of the portfolios.
(4) This fee is for investment advisory services only. Management services are
provided to the portfolios by a party other than OpCap Advisors. The
manager, which pays the investment advisory fee to OpCap Advisors, receives
a management fee of .75% of the average daily net assets of the portfolios.
(5) These fees are for investment advisory services only. Administrative
services are provided to these funds by a party other than OpCap Advisors.
The funds are each charged on an annual basis a fee for administrative
services of 0.15% of their respective average daily net assets.
(6) This fee is for investment advisory services only. Management services are
provided to the portfolios by a party other than OpCap Advisors. The
manager, which pays the investment advisory fee to OpCap Advisors, receives
a management fee of .80% of average daily net assets of the portfolios.
(7) This fee is for investment advisory services only. Management services are
provided to the portfolio by a party other than OpCap Advisors. The
manager, which pays the investment advisory fee to OpCap Advisors, receives
a management fee of 0.65% of the average daily net assets of the portfolio.
(8) OpCap Advisors has agreed to waive its management fee and reimburse
expenses so that the total operating expenses (net of any expense offsets
and excluding the amount of any interest, taxes, brokerage commissions and
extraordinary expenses) of such portfolios do not exceed 1.00% of their
respective average daily net assets.
APPENDIX B
Information about Westwood Management Corporation
Westwood Management Corporation ("Westwood") is the subadviser for the
Gebelli Westwood Equity Fund, a registered investment company with an investment
objective similar to the Fund's with net assets of approximately $150.5 million
at December 31, 1997, as well as for other investment companies sponsored by
Gabelli Advisers, Inc. (Gebelli Westwood Equity Fund and such other investment
companies being referred to collectively as the "Funds"). The management fee
paid to Westwood Equity Fund's adviser is at an annual rate of 1.00% of average
net assets. The adviser in turn pays Westwood an annual fee equal to the greater
of (i) $150,000 for all of the Funds or (ii) 35% of the net revenues to the
adviser from the Funds.
Westwood's Board of Directors is comprised of Susan M. Byrne, President and
Chief Executive Officer, and Raymond E. Wooldridge, Don A. Bucholz, David M.
Glatstein, and Patricia R. Fraze, all of whom are officers of Westwood or its
parent, Southwest Securities Group, Inc.
APPENDIX C
PORTFOLIO MANAGEMENT AGREEMENT
November 3, 1997
Westwood Management Corporation
300 Crescent Court, #1230
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: \s\ William R. Parmentier
Title:Vice President
LIBERTY ASSET MANAGEMENT COMPANY
By: \s\ William R. Parmentier
Title:Vice President
ACCEPTED:
WESTWOOD MANAGEMENT CORPORATION
By: \s\ Susan M. Byrne
Title:President
SCHEDULES: A. Operational Procedures (omitted)
B. Record Keeping Requirements (omitted)
C. Fee Schedule
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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.
LIBERTY ALL-STAR EQUITY FUND
PROXY SOLICITED BY THE BOARD OF TRUSTEES OF LIBERTY
ALL-STAR EQUITY FUND
PROXY FOR 1998 ANNUAL MEETING OF SHAREHOLDERS
The undersigned, revoking previous proxies, hereby appoints Richard R.
Christensen, John A. Benning and John L. Davenport, or any one or more of them,
attorneys, with power of substitution, to vote all shares of Liberty All-Star
Equity Fund (the "Fund") which the undersigned is entitled to vote at the 1998
Annual Meeting of the Fund to be held in Room AV-1, 3rd Floor, Federal Reserve
Plaza, 600 Atlantic Avenue, Boston, Massachusetts on April 22, 1998 at 9:30 a.m.
and at any adjournments thereof. All powers may be exercised by a majority of
said proxy holders or substitutes voting or acting or, if only one votes or
acts, then by that one. This undersigned directs said proxy holders to vote as
specified upon the proposals shown below, each of which is described in the
proxy statement for the Meeting, receipt of which is acknowledged.
SAID PROXIES WILL VOTE THIS PROXY AS DIRECTED, OR IF NO DIRECTION IS INDICATED,
FOR THE NOMINEES LISTED IN PROPOSAL 1 UNLESS AUTHORITY TO DO SO IS SPECIFICALLY
WITHHELD IN THE MANNER PROVIDED, AND FOR PROPOSALS 2, 3 AND 4, AND WILL USE
THEIR DISCRETION WITH RESPECT TO ANY MATTERS REFERRED TO IN ITEM 5.
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PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
PLEASE DO NOT FOLD, STAPLE OR MUTILATE CARD.
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LIBERTY ALL-STAR EQUITY FUND
RECORD DATE SHARES:
1. ELECTION OF TRUSTEES
Nominees: For All Nominees Withhold For All Except
Richard W. Lowry (Class of 2001)
John J. Neuhauser (Class of 2001)
William E. Mayer (Class of 2000)
NOTE: If you do not wish your shares voted "FOR" a particular nominee,
mark the "FOR ALL EXCEPT" box and strike a line through the name(s) of
the nominee(s). Your shares will be voted "For" the remaining
nominee(s).
2. APPROVAL OF NEW PORTFOLIO MANAGEMENT AGREEMENT WITH OPPENHEIMER CAPITAL
FOR / / AGAINST / / ABSTAIN / /
3. APPROVAL OF NEW PORTFOLIO MANAGEMENT AGREEMENT WITH WESTWOOD MANAGEMENT
CORPORATION
FOR / / AGAINST / / ABSTAIN / /
4. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
FOR / / AGAINST / / ABSTAIN / /
5. In their discretion, upon such other business as may properly come
before the Meeting.
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Please sign exactly as your name(s) Date appear(s)
above. Corporate proxies should be signed by an
authorized officer.
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Shareholder sign here
Co-owner sign here
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DETACH CARD DETACH CARD
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