SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section
14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ x ] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
LIBERTY ALL-STAR EQUITY FUND
________________________________________________
(Name of Registrant as Specified In Its Charter)
_______________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date
of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement no.:
3) Filing Party:
4) Date Filed:
[Preliminary]
LIBERTY ALL-STAR EQUITY FUND
Federal Reserve Plaza
Boston, Massachusetts 02210
(617) 722-6000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 19, 2000
To the Shareholders of Liberty All-Star Equity Fund:
NOTICE IS HEREBY GIVEN that the thirteenth 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 19, 2000 at 9:30 a.m., Boston time. The purpose of the
Meeting is to consider and act upon the following matters:
1. To elect two Trustees of the Fund.
2. To approve or disapprove the Fund's Portfolio Management Agreement with TCW
Funds Management, Inc.
3. To approve or disapprove a new Portfolio Management Agreement with
Oppenheimer Capital which will replace the current Portfolio Management
Agreement which will terminate upon change in control of Oppenheimer
Capital upon acquisition by Allianz AG.
4. To ratify the selection by the Board of Trustees of
PricewaterhouseCoopers LLP as the Fund's independent auditors
for the year ending December 31, 2000.
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 1,
2000 as the record date for the determination of the shareholders of the Fund
entitled to notice of, and to vote at, the Meeting and any adjournments thereof.
YOUR BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE FOR ALL THE PROPOSALS.
By order of the Board of Trustees
Nancy L. Conlin, 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.
YOUR BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE FOR ALL OF THE PROPOSALS.
February 28, 2000
LIBERTY ALL-STAR EQUITY FUND
PROXY STATEMENT
Annual Meeting of Shareholders
April 19, 2000
This Proxy Statement is furnished in connection with the solicitation
of proxies on behalf of the Board of 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 19, 2000 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 February 28, 2000 of this Proxy Statement
and the accompanying proxy. Supplementary solicitations may be made by mail,
telephone, telegraph or personal interview by officers and 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 to solicit the return of proxies from,
banks, brokers, nominees and other custodians at a fee of $________ plus
out-of-pocket expenses. Authorization to execute proxies may be obtained through
telephonically or electronically transmitted instructions. The expenses in
connection with preparing this Proxy Statement and of the solicitation of
proxies for the Meeting will be paid by the Fund. The Fund will reimburse
brokerage firms and others for their expenses in forwarding solicitation
material to the beneficial owners of shares. This Proxy Statement is accompanied
by the Fund's 1999 Annual Report to Shareholders.
The Meeting is being held to vote on the matters described below.
PROPOSAL 1. 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 Robert J. Birnbaum and William E. Mayer
as Trustees to hold office until the final adjournment of the Annual Meeting of
Shareholders for the year 2003 (or special meeting in lieu thereof). Messrs.
Birnbaum and Mayer have served as Trustees since November, 1994 and April, 1998,
respectively. Messrs. Birnbaum and Mayer have consented to serve as Trustees
following the Meeting if elected, and are expected to be able to do so. If
either 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:
Name/Age and Address Principal Occupation During Past Five Years Fund Shares Owned(1)
Robert J. Birnbaum (Age 72)(2) Retired (since January, 1994); Special Counsel,
313 Bedford Road Dechert, Price & Rhoads (September, 1988 to December,
Ridgewood, NJ 07450 1993); President and Chief Operating Officer, New
York Stock Exchange, Inc. (May, 1985 to June, 1988).
Director of Dresdner RCM Europe Fund
(investment company).
4,436
William E. Mayer (Age 59) Partner, Development Capital, LLC (since December,
500 Park Avenue, 5th Floor 1996); Dean, College of Business and Management,
New York, New York 10022 University of Maryland (October, 1992 to November,
1996); Dean, Simon Graduate School of Business,
University of Rochester (October, 1991 to July,
1992). Director of Johns Manville Corporation
(building products) and Chart House Enterprises
(restaurant/food).
The following Trustees continue to serve in such capacity until their
terms of office expire and their successors are elected and qualified:
Name/Age and Address Principal Occupation During Past Five Years Fund Shares Owned(1)
-------------------- -------------------------------------------------- --------------------
John V. Carberry (Age 52)(3) Senior Vice President, Liberty Financial Companies,
Liberty Financial Inc. (since February, 1998); Managing Director,
Companies, Inc. Salomon Brothers, Inc. (December, 1974 to February,
600 Atlantic Avenue 1998). 1,084
Boston, MA 02210
James E. Grinnell (Age 70)(2) Private investor (since November, 1988); President
22 Harbor Avenue and Chief Executive Officer, Distribution Management
Marblehead, MA 01945 Systems, Inc. (1983 to May, 1986); Senior Vice
President-Operations, The Rockport Company, importer
and distributor of shoes (May, 1986 to November,
1988). 13,616
Name/Age and Address Principal Occupation During Past Five Years Fund Shares Owned(1)
-------------------- -------------------------------------------------- --------------------
Richard W. Lowry (Age 63)(2) Private investor (since August, 1987); Chairman and
10701 Charleston Drive Chief Executive Officer, U.S. Plywood Corporation,
Vero Beach, FL 32963 manufacturer and distributor of wood products
(August, 1985 to August, 1987). 79,152
John J. Neuhauser (Age 56) Academic Vice President and Dean of Faculties, Boston
84 College Road College (since August, 1999); Dean, Boston College
Chestnut Hill, MA 02467-3838 School of Management (since September, 1977 to
September, 1999). Director of Hyde Athletic
Industries, Inc. (athletic footwear).
-----------------------
(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) "Interested person" of the Fund, as defined in the Investment Company Act of
1940, by reason of his positions with Liberty Financial Companies, Inc., the
indirect parent of Liberty Asset Management, and its affiliates.
(4) Held by the trustee of a trust of which Mr. Lowry is the sole beneficiary.
As of February 1, 2000, ________________ of the Fund, and other
officers of Liberty Financial Companies, Inc. or its affiliates held
_____________ shares of the Fund, representing ______% 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 Messrs. Lowry and Neuhauser will expire on final
adjournment of the Annual Meeting (or special meeting in lieu thereof) in the
year 2001, and the term of office of Messrs. Carberry and Grinnell will expire
on final adjournment of the Annual Meeting (or special meeting in lieu thereof)
in 2002. Mr. Carberry has served as a Trustee since December, 1997, Mr.
Neuhauser has served as Trustees since April, 1998, and Messrs. Grinnell and
Lowry have served as a Trustee since the commencement of the Fund's operations
in 1986. Messrs. Birnbaum, Carberry, Grinnell, Lowry, Mayer and Neuhauser are
also trustees of Colonial Trusts I through VII (the "Liberty Trusts"), the
umbrella trusts for an aggregate of 52 open-end funds (the "Colonial Funds")
managed by Colonial Management Associates, Inc. ("Colonial"), or other
affiliates of Liberty Asset Management, nine closed-end funds managed by
Colonial (the "Colonial Closed-End Funds"), Liberty Funds Trust VIII, an
open-end investment company managed by Stein Roe & Farnham Incorporated, another
affiliate of Liberty Asset Management, Liberty Funds Trust IX, the umbrella
trust for Liberty All-Star Growth and Income Fund, an open-end multi-managed
fund managed by Liberty Asset Management and Liberty Variable Investment Trust
("LVIT"), the umbrella trust for 12 open-end funds managed by Colonial or its
affiliates that serve as investment vehicles for variable annuities and variable
life insurance products, and Liberty All-Star Growth Fund, Inc., another
closed-end multi-manager fund managed by Liberty Asset Management.
During 1999 the full Board of Trustees of the Fund held four meetings,
and the Audit Committee, which is comprised of all the Trustees who are not
"interested persons" of the Fund, met three times. 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. In 1999, the Fund paid each Trustee not affiliated
with Liberty Asset Management (the "independent Trustees") total fees of
$14,000, consisting of a $5,000 retainer and meeting fees aggregating $9,000.
The total fees accrued to the independent Trustees as a group during the year
ended December 31, 1999 by the Fund were $70,000 and out-of-pocket expenses
relating to their attendance at meetings were $__________.
The following table shows, for the year ended December 31, 1999, the
compensation received from the Fund by each current 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 Liberty Trusts, the
Colonial Closed-End Funds, Liberty Funds Trust VIII, Liberty Funds Trust IX,
LVIT and Liberty All-Star Growth Fund, Inc. (the "Liberty Funds Complex")
comprised of an aggregate of _______ funds (including the Fund). The Fund has no
bonus, profit sharing or retirement plans.
Aggregate Compensation from Total Compensation from
Name the Fund the Liberty Funds Complex
(including the Fund)
------ ---------------------------- -------------------
Robert J. Birnbaum $14,000 $
John V. Carberry -0- -0-
James E. Grinnell $14,000 $
Richard $14,000 $
William E. Mayer $14,000 $
John J. Neuhauser $14,000 $
Beginning January 1, 1999, the aggregate of the fees to be paid to each
Trustee by the Fund and by Liberty All-Star Growth Fund, Inc. and Liberty
All-Star Growth and Income Fund, two other investment companies managed by
Liberty Asset Management that have the same Board of Trustees or Directors as
the Fund and hold their meetings concurrently with those of the Fund, will
consist of a retainer of $10,000, plus a fee of $3,000 per meeting attended with
a minimum of $15,000 per annum if less than five meetings are held and all
meetings are attended. One third of the retainer and the fees for concurrently
held meetings will be allocated among the Fund and the two other funds on a per
fund basis, and the remaining two thirds will be allocated among the three funds
based on their net assets.
Officers
The following are the executive officers of the Fund, in addition to
Mr. John V. Carberry who serves as Chairman of the Board of Trustees.
Principal Occupation During
Name/Age and Address Position with Fund Past Five Years
--------------------- ------------------ ------------------------------
William R. Parmentier, Jr. (Age 47) President, Chief President and Chief Executive Officer (since
Liberty Asset Management Company Executive June, 1998) and Chief Investment Officer (since
600 Atlantic Avenue Officer and Chief May, 1995), Senior Vice President (May, 1995 to
Boston, MA 02210 Investment Officer June, 1998), Liberty Asset Management; Consultant
(October, 1994 to May, 1995); President, GQ Asset
Management, Inc.(July, 1993 to October, 1994);
Assistant Treasurer, Grumman Corporation
(December, 1974 to July, 1993).
Christopher S. Carabell (Age 36) Vice President Senior Vice President - Product Development and
Liberty Asset Management Company Marketing (since January, 1999), Vice
600 Atlantic Avenue President-Investments, Liberty Asset Management
Boston, MA 02210 (March, 1996 to January, 1999); Associate
Director, U.S. Equity Research, Rogers
Casey & Associates, investment consultants
(January, 1995 to February, 1996); Director
of Investments, Boy Scouts of America (June, 1990
to January, 1995).
Mark T. Haley (Age 35) Vice President Vice President-Investments (since January,
Liberty Asset Managewment Company 1999), Director of Investment Analysis
600 Atlantic Avenue (December, 1996 to December, 1998),
Boston, MA 02210 Investment Analyst (January, 1994 to November, 1996),
Liberty Asset Management.
Joseph R. Palombo (Age 46) Vice President Vice President, Liberty Trusts (since April,
Liberty Funds Group 1999); Executive Vice President and Director,
One Financial Center Colonial (since April, 1999); Executive Vice
Boston, MA 02111 President and Chief Administrative Officer,
Liberty Funds Group LLC (LFG)(since April, 1999);
Managing Director, Putnam Investments (from
December, 1993 to January, 1999).
Timothy J. Jacoby (Age 47) Treasurer Treasurer and Chief Financial Officer, Liberty
Liberty Funds Group Trusts (since October, 1996); Senior Vice
245 Summer Street President (since September, 1996), Chief
Boston, MA 02111 Financial Officer and Treasurer (July, 1997 to
December, 1999), Colonial; Senior Vice President,
Fidelity Accounting and Custody Services (October,
1993 to September, 1996); Assistant Treasurer,
Fidelity Group of Funds (August, 1990 to
September, 1993).
J. Kevin Connaughton (Age 35) Controller Controller and Chief Accounting Officer, Liberty
Liberty Funds Group Trusts and Vice President, Colonial (since
245 Summer Street February, 1998); Senior Tax Manager, Coopers &
Boston, MA 02210 Lybrand, LLP (April, 1996 to January, 1998); Vice
President, 440 Financial Group/First Data Investor
Services Group(March, 1994 to April, 1996); Vice
President, The Boston Company (subsidiary of
Mellon Bank)(December, 1993 to March, 1994).
Nancy L. Conlin (Age 46) Secretary Secretary, Liberty Trusts (since April, 1998);
Liberty Funds Group Assistant Secretary, Liberty Trusts (July, 1994
One Financial Center to April, 1998); Director, Senior Vice President,
Boston, MA 02111 General Counsel, Clerk and Secretary, Colonial
(since April, 1998); Vice President, Counsel,
Assistant Secretary and Assistant Clerk,
Colonial (July, 1994 to April, 1998); Vice
President, General Counsel and Secretary,
LFG (since December, 1998); Vice President,
General Counsel and Clerk, LFG (April, 1998 to
December, 1998); Assistant Clerk, LFG (July, 1994
to April, 1998).
Mr. Carberry has served as Chairman of the Board since June 30, 1998;
Mr. Parmentier has served as President, Chief Executive Officer and Chief
Investment Officer since April 29, 1999; Mr. Carabell was elected as a Vice
President on April 17, 1997, and Messrs. Haley and Palombo were elected as Vice
Presidents on April 29, 1999, respectively; Mr. Jacoby was appointed Treasurer
effective October 10, 1996; Mr. Connaughton was elected Controller on April 23,
1998; and Ms. Conlin has served as Secretary since April 29, 1999. Mr. Carberry
is a Director/Trustee of, and Messrs. Jacoby and Connaughton and Ms. Conlin hold
the same offices with, Liberty All-Star Growth Fund, Inc., the Liberty Trusts,
the Colonial Closed-End Funds, LVIT, Liberty Funds Trust VIII and Liberty Funds
Trust IX, and Messrs. Carabell, Haley and Parmentier hold the same offices with
Liberty All-Star Equity Fund and Liberty Funds Trust IX. Each officer of the
Fund serves at the pleasure of the Board of Directors
PROPOSAL 2. TO APPROVEOR DISAPPROVE PORTFOLIO MANAGEMENT AGREEMENT WITH TCW
FUNDS MANAGEMENT, INC.
Background - The Multi-Manager Methodology
The Fund allocates its portfolio assets on an approximately equal basis
among a number of independent investment management firms ("Portfolio Managers")
recommended by Liberty Asset Management, currently five in number, each of which
employs a different investment style, and from time to time rebalances the
portfolio among the Portfolio Managers so as to maintain an approximately equal
allocation of the portfolio among them throughout all market cycles. The Fund's
multi-manager methodology is based on the premise that most investment
management firms consistently employ a distinct investment style which causes
them to emphasize stocks with particular characteristics, and that, because of
changing investor preferences, any given investment style will move into and out
of market favor and will result in better performance under certain market
conditions but poorer performance under other conditions. The Fund's
multi-manager methodology seeks to achieve more consistent and less volatile
performance over the long-term than if a single Portfolio Manager were employed.
The Portfolio Managers recommended by Liberty Asset Management
represent a blending of different styles which, in its opinion, is appropriate
for the Fund's investment objective and which is sufficiently broad so that at
least one of such styles can reasonably be expected to be in relative market
favor in all reasonably foreseeable market conditions. Liberty Asset Management
continuously analyses and evaluates the investment performance and portfolios of
the Fund's Portfolio Managers and from time to time recommends changes in the
Portfolio Managers. Such recommendations could be based on factors such as a
change in a Portfolio Manager's investment style or 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.
New Portfolio Manager
Due to changes in the investment personnel of Wilke/Thompson Capital
Management, Inc. ("Wilke/Thompson"), a Portfolio Manager of the Fund since March
1, 1997 whose portfolio management agreement with the Fund had been ratified by
shareholders on April 16, 1997, and other related factors, Liberty Asset
Management in early 1999 determined to replace Wilke/Thompson with another
Portfolio Manager practicing a similar _____________ investment style. Liberty
Asset Management first analyzed information regarding the personnel, investment
process and performance of a large number of investment management firms
practicing such an investment style, ultimately reducing the number of potential
candidates to _______. Liberty Asset Management then analyzed the three
candidates in terms of their historic returns, volatility and portfolio
characteristics when combined with those of the Fund's four other 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, 1999 approved, the termination of the Fund's portfolio management
agreement with Wilke/Thompson. and its replacement with TCW Funds Management,
Inc. ("TCW"), effective November 1, 1999.
TCW, 865 South Figueroa Street, Los Angeles, California 90017, was
founded As of December 31, 1999, TCW had over $______ billion in assets under
management. See Appendix A for further information about TCW.
Mr. Glen E. Bickerstaff, Managing Director U.S. Equities, manages that
portion of the Fund's portfolio assigned to TCW. Prior to joining TCW in 1998,
Mr. Bickerstaff was a portfolio manager at Transamerica
Investment Services. Mr. Donovan has over 19 years of investment experience.
Reference is made to MANAGEMENT - Portfolio Transactions and Brokerage
below for the direction by the Fund's Portfolio Managers, including TCW, of Fund
portfolio transactions to broker-dealers that make certain research services
available to Liberty Asset Management.
Under the terms of an exemptive order issued to the Fund and Liberty
Asset Management by the Securities and Exchange Commission, the Fund may enter
into a portfolio management agreement with a new or additional Portfolio Manager
recommended by Liberty Asset Management in advance of shareholder approval,
provided that the new agreement is at a fee no higher than that provided in, and
is on other terms and conditions substantially similar to, the Fund's agreements
with its other Portfolio Managers, and that its continuance is subject to
approval by shareholders at the Fund's regularly scheduled annual meeting next
following the date of the portfolio management agreement with the new or
additional Portfolio Manager. Accordingly, the Fund's portfolio management
agreement with TCW is being submitted for shareholder approval at the Meeting.
Terms of Portfolio Management Agreement with TCW
The portfolio management agreement with TCW 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 TCW is attached to this proxy
statement as Appendix B.
Under the Fund's portfolio management agreements (including that with
TCW), 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 11, 1999, the Fund's net assets were $__________.
If approved by shareholders at the Meeting, the Portfolio Management
Agreement with TCW will remain in effect until October 31, 2001, 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 TCW 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
portfolio management agreement with TCW, the agreement will terminate and
Liberty Asset Management will cause the portfolio assets under management by TCW
to be reallocated to one or more of the other Portfolio Managers or invested in
money market instruments or other cash equivalent holdings pending the
reappointment of TCW 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 TCW.
PROPOSAL 3. TO APPROVE OR DISAPPROVE A NEW PORTFOLIO MANAGEMENT
AGREEMENT WITH OPPENHEIMER CAPITAL WHICH WILL REPLACE THE
CURRENT PORTFOLIO MANAGEMENT AGREEMENT WHICH WILL TERMINATE UPON
CHANGE IN CONTROL OF UPON ACQUISITION BY ALLIANZ AG.
Background
The Fund allocates its portfolio assets on an approximately equal basis
among a number of independent investment management firms ("Portfolio Managers")
recommended by Liberty Asset Management, currently three in number, each of
which employs a different investment style, and from time to time rebalances the
portfolio among the Portfolio Managers so as to maintain an approximately equal
allocation of the portfolio among them throughout all market cycles. The
Portfolio Managers recommended by Liberty Asset Management represent a blending
of different styles which, in its opinion, is appropriate for the Fund's
investment objective. Liberty Asset Management continuously analyzes and
evaluates the investment performance and portfolios of the Fund's Portfolio
Managers and from time to time recommends changes in the Portfolio Managers.
One of the Fund's Portfolio Managers, Oppenheimer Capital, a Portfolio
Manager of the Fund, will undergo a change of control as a result of the
consummation of the Transaction described below under Description of the
Transaction, resulting in the automatic termination of its Portfolio Management
Agreement dated August 1, 1998. After reviewing the proposed change of control
transactions and considering Liberty Asset Management's opinion that they would
not have an adverse effect on the nature or quality of the services being
provided by Oppenheimer Capital, the Board of Trustees on December 15, 1999
approved a new portfolio management agreement at the same fee and on
substantially identical other terms and conditions as the prior agreement, and
the new agreement will be executed effective with the closing of the change in
control transactions.
Under the terms of an exemptive order issued to the Fund and Liberty
Asset Management by the Securities and Exchange Commission, the Fund may, in
advance of shareholder approval, enter into a new portfolio management agreement
with a Portfolio Manager or its successor following a change in control of the
Portfolio Manager, provided that the new agreement is at a fee no higher than,
and is on other terms and conditions substantially similar to, the Fund's
agreements with its other Portfolio Managers, and that its continuance is
subject to approval by shareholders at the Fund's next annual meeting.
Accordingly, the Fund's new portfolio management agreement with Oppenheimer
Capital is being submitted for shareholder approval at the Meeting. See Appendix
C for the new Portfolio Management Agreement.
The Fund's initial portfolio management agreement with Oppenheimer
Capital was approved by shareholders on April 20,1990. Following shareholder
approval on April 22, 1998, the Fund entered into a new portfolio management
agreement with Oppenheimer Capital on August 1, 1998, following a change in
control. For the fiscal year ended December 31, 1999, Oppenheimer Capital
received $______________ for its portfolio management services to the Fund. Mr.
John Lindenthal, Managing Director of Oppenheimer Capital, has managed the
portion of the Fund's portfolio allocated to Oppenheimer Capital since its
initial appointment as a Fund Portfolio Manager in February, 1990, and continues
to do so.
See Appendix D for information regarding other registered investment
companies with investment objectives similar to the Fund's for which a
subsidiary of Oppenheimer Capital provides investment advisory or portfolio
management services.
Description of the Transaction
Description of the Transaction. On October 31, 1999, PIMCO Advisors
L.P. ("PIMCO Advisors"), its two general partners, PIMCO Advisors Holdings L.P.
("PAH") and PIMCO Partners G.P. ("Partners GP"), certain of their affiliates,
Allianz of America, Inc. ("Allianz of America") and certain other parties named
therein entered into an Implementation and Merger Agreement (the "Merger
Agreement") pursuant to which Allianz of America will acquire majority ownership
of PIMCO Advisors.
As a result of the transactions contemplated by the Merger Agreement,
Allianz of America will control PIMCO Advisors, having acquired approximately
70% of the outstanding partnership interests in PIMCO Advisors (together, the
"Transaction"), while the remainder will continue to be held indirectly by
Pacific Life. The Transaction is expected to be completed by the end of the
first quarter of 2000, although there is no assurance that the Transaction will
be completed.
Oppenheimer Capital, an indirect wholly-owned subsidiary of PIMCO
Advisors, serves as investment manager of the Fund. Oppenheimer Capital will
undergo a change of control as a result of the consummation of the Transaction,
resulting in the automatic termination of its current investment management
agreement with the Fund (the "Existing Management Agreement"). Following
completion of the Transaction, it is expected that Oppenheimer Capital will
continue to serve as investment manager of the Fund. Therefore, in connection
with the Transaction and as required by the Investment Company Act of 1940, as
amended (the "1940 Act"), shareholders of the Fund are being asked in Proposal 5
to approve an investment management agreement between the Fund and PIMCO
Advisors which is substantially identical to the Existing Management Agreement
(the "New Management Agreement"). If the Transaction is not completed for any
reason, the agreement will terminate and Liberty Asset Management will cause the
portfolio assets under management by Oppenheimer Capital to be invested in money
market instruments or other cash equivalent holdings or derivative investments
pending the reappointment of Oppenheimer Capital or the appointment of a new
Portfolio Manager
Post-Transaction Structure and Operations. Upon completion of the
Transaction, PIMCO Advisors and its subsidiaries, including Oppenheimer Capital,
will be controlled by Allianz of America. Allianz of America is a holding
company that owns several insurance and financial service companies and is a
subsidiary of Allianz AG which, together with its subsidiaries, comprise the
world's second largest insurance group as measured by premium income. Allianz of
America will control PIMCO Advisors through its managing member interest in
PacPartners LLC, which will be the sole general partner of PIMCO Advisors
following the Transaction. While Allianz of America will control PacPartners
LLC, Pacific Life will hold a portion of its continuing interest in PIMCO
Advisors through an interest in PacPartners LLC. Allianz of America, through
subsidiaries, will be the managing member of PacPartners LLC and will have full
authority and control over all actions taken by PacPartners LLC as the general
partner of PIMCO Advisors, provided that Pacific Life's consent is required for
certain extraordinary actions.
Operationally, PIMCO Advisors is expected to become a unit of
Allianz Asset Management ("AAM"), the division of Allianz that coordinates
global Allianz asset management activities. PIMCO Advisors and its subsidiaries
are currently expected to continue to operate in the United States under their
existing names.
Description of Allianz and Its Affiliates. Allianz AG, the parent of
Allianz of America, is a publicly traded German Aktiengesellschaft and which,
together with its subsidiaries, comprise the world's second largest insurance
group as measured by premium income. Allianz AG is a leading provider of
financial services, particularly in Europe, and is represented in 68 countries
world-wide through subsidiaries, branch and representative offices, and other
affiliated entities. The Allianz group currently has assets under management of
more than $390 billion, and in its last fiscal year wrote approximately $50
billion in gross insurance premiums. After completion of the Transaction, PIMCO
Advisors and the Alliance group combined will have over $650 billion in assets
under management. Allianz AG's address is: Koniginstrasse 28, D-80802, Munich,
Germany.
Affiliates of Allianz AG currently include Dresdner Bank AG, Deutsche
Bank AG, Munich Re, and HypoVereinsbank. These entities, as well as certain
broker-dealers that might be deemed to be controlled by or affiliated with these
entities, such as Bankers Trust Company, BT Alex. Brown Incorporated, Deutsche
Bank Securities, Inc. and Dresdner Kleinwort Benson North America LLC, may be
considered as "Affiliated Brokers". Once the Transaction is completed, absent an
SEC exemption or other relief, the Fund would generally be precluded from
effecting principal transactions with the Affiliated Brokers, and its ability to
purchase securities from underwriting syndicates including an Affiliated Broker
or to utilize the Affiliated Brokers for agency transactions would be subject to
restrictions. Oppenheimer Capital does not believe that applicable restrictions
on transactions with the Affiliated Brokers described above will materially
adversely affect its ability, post-closing, to provide services to the Fund, the
Fund's ability to take advantage of market opportunities, or the Fund's overall
performance.
Section 15(f) of the 1940 Act. Section 15(f) provides a non-exclusive
safe harbor for an investment adviser or any affiliated persons to receive any
amount or benefit in connection with a change of control of the investment
adviser to an investment company as long as two conditions are satisfied. First,
an "unfair burden" must not be imposed on investment company clients of the
adviser as a result of the transaction, or any express or implied terms,
conditions or understandings applicable to the transaction. The term "unfair
burden" (as defined in the 1940 Act) includes any arrangement during the
two-year period after the transaction whereby the investment advisor (or
predecessor or successor advisor), or any "interested person" (as defined in the
1940 Act) (an "Interested Person") of any such adviser, receives or is entitled
to receive any compensation, directly or indirectly, from such an investment
company or its security holders (other than fees for bona fide investment
advisory or other services) or from any other person in connection with the
purchase or sale of securities or other property to, from or on behalf of such
investment company. The Board of Trustees of the Fund has been advised that
neither PIMCO Advisors nor Oppenheimer Capital is aware of any circumstances
arising from the Transaction that might result in an unfair burden being imposed
on the Fund. Allianz and each of the other parties to the Agreement have agreed
to use their reasonable best efforts to assure compliance with Section 15(f) as
it applies to the Transaction during such two-year period.
The second condition of Section 15(f) is that during the three-year
period after the transaction, at least 75% of each such investment company's
board of directors must not be Interested Persons of the investment advisor (or
predecessor or successor advisor). The Fund has been advised by LAMCO that an
unfair burden will not be placed on the Fund as at least 75% of the Fund's Board
of Trustees are not "Interested Persons" (as defined in the 1940 Act). Moreover,
Allianz has agreed with PIMCO Advisors that it will use its reasonable best
efforts to comply with such 75% requirement during such three-year period
through one or more intermediaries.
Required Vote
Approval of the new portfolio management agreement with Oppenheimer
Capital requires the affirmative vote of a "majority of the outstanding voting
securities" of the Fund which, under the Investment Company Act of 1940, means
the affirmative vote of the lesser of (a) 67% or more of the shares of the Fund
present at the Meeting or represented by proxy if the holders of more than 50%
of the outstanding shares are present or represented by proxy, or (b) more than
50% of the outstanding shares.
The Board of Trustees unanimously recommends that the shareholders vote FOR
approval of the portfolio management agreement with Oppenheimer Capital.
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 Pricewaterhouse LLP has been selected as
independent auditors for the Fund for the year ending December 31, 2000. Such
selection is being submitted to the shareholders for ratification. The
employment of Pricewaterhouse LLP is conditioned on the right of the Fund by
majority vote of its shareholders to terminate such employment. Such firm has
acted as independent auditors for the Fund since September 30, 1999. Prior to
September 30, 1999 and PricewaterhouseCoopers LLP is completing the Fund's
December 31, 1999 audit. Prior to September 30, 1999, KPMG Peat Marwick LLP
acted as independent auditors for the Fund since its commencement of operations
in 1986.
The services provided by the Fund 's independent auditors include
examination of its annual financial statements, assistance and consultation in
connection with Securities and Exchange Commission filings, and review of the
Fund 's annual federal income tax returns. Representatives of
PricewaterhouseCoopers LLP are expected to be present at the Meeting, will be
given the opportunity to make a statement if they should so desire and will be
available to respond to appropriate questions.
OTHER BUSINESS
The Board of 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 72% of the common stock of Liberty Financial
is owned through subsidiaries by Liberty Mutual Insurance Company, Boston,
Massachusetts, and the balance is held by the public and listed on the New York
Stock Exchange. Liberty Asset Management's Chief Executive Officer is William R.
Parmentier (see PROPOSAL 1 - Officers), and its Board of Directors is comprised
of Richard R. Christensen, Chairman of the Board of Liberty Asset Management and
President of the Fund, 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., One Financial Center, Boston, Massachusetts 02111. 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 above.
The names and addresses of the Fund's current Portfolio Managers, in
addition to TCW, are as follows:
J.P. Morgan Investment Westwood Management Corporation
Management Inc. 300 Crescent Court
522 Fifth Avenue Dallas, TX 75201
New York, NY 10036
Oppenheimer Capital Boston Partners Asset Management, L.P.
Oppenheimer Tower 28 State Street
World Financial Center Boston, MA 02109
New York, NY 10281
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., Liberty All-Star Growth and Income Fund and other
multi-managed clients of Liberty Asset Management. In instances where Liberty
Asset Management receives from or through brokers and dealers products or
services which are used both for research purposes and for administrative or
other non-research purposes, Liberty Asset Management makes a good faith effort
to determine the relative proportions of such products or services which may be
considered as investment research, based primarily on anticipated usage, and
pays for the costs attributable to the non-research usage in cash.
Liberty Asset Management from time to time reaches understandings with
each of the Fund's Portfolio Managers as to the amount of the Fund's portfolio
transactions initiated by such Portfolio Manager that are to be directed to
brokers and dealers which provide or make available research products and
services to Liberty Asset Management and the commissions to be charged to the
Fund in connection therewith. These amounts may differ among the Portfolio
Managers based on the nature of the market for the types of securities managed
by them and other factors.
Although the Fund does not permit a Portfolio Manager to act or have a
broker-dealer affiliate act as broker for Fund portfolio transactions initiated
by it, the Portfolio Managers are permitted to place Fund portfolio transactions
initiated by them with another Portfolio Manager or its broker-dealer affiliate
for execution on an agency basis, provided the commission does not exceed the
usual and customary broker's commission being paid to other brokers for
comparable transactions and is otherwise in accordance with the Fund's
procedures adopted pursuant to Rule 17e-1 under the Investment Company Act.
During 1999, there were Fund portfolio transactions placed with a Portfolio
Manager or its affiliate.
The Fund has applied to the Securities and Exchange Commission for exemptive
relief from Sections 10(f), 17(a) and 17(e) and Rule 17e-1 under the Investment
Company Act of 1940. If exemptive relief is granted, it will permit (1)
broker-dealers which are, or are affiliated with, Portfolio Managers of the Fund
to engage in principal transactions with and brokerage services to portion(s) of
the Fund advised by another Portfolio Manager and (2) the Fund to purchase
securities either directly from a principal underwriter which is an affilate of
a Portfolio Manager or from an underwriting syndicate of which a principal
underwriter is affiliated with a Portfolio Manager of the Fund. It is
anticipated that the requested relief could be granted by the Securities and
Exchange Commission during the period of time this proxy is pending.
INFORMATION ABOUT THE MEETING
All proxies solicited by the Board of 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 portfolio management agreement with
TCW referred to under PROPOSAL 2, FOR the new Portfolio Management Agreement
with Oppenheimer Capital to be effective upon change in control of Oppenheimer
Capital upon acquisition by Allianz AG referred to under PROPOSAL 3, and FOR
ratification of the Board's selection of the Fund's independent auditors for
2000. 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
portfolio management agreements with TCW and Oppenheimer Capital each require
the affirmative vote of a "majority of the outstanding voting securities" of the
Fund, as defined under PROPOSAL 2 and PROPOSAL 3- Required Vote above.
Ratification of the selection of the Fund 's independent auditors requires the
affirmative vote of a majority of the shares voting thereon, provided more than
50% of the outstanding shares are present or represented at the Meeting. Only
shareholders of record may vote.
Broker-dealer firms holding Fund shares in "street name" for the
benefit of their customers and clients will request the instructions of such
customers and clients on how to vote their shares on each proposal before the
Meeting. The Fund understands that, under the rules of the New York Stock
Exchange, if no instructions have been received prior to the date specified in
such broker-dealer firm's request for voting instructions, the broker-dealer
firms may grant authority to the proxies designated by the Fund to vote for the
election of the Trustees, for approval of the portfolio management agreements
with TCW and Oppenheimer Capital, 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 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 1, 2000 are entitled to one vote
for each share held. As of that date 99,577,653 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 ___________shares ______%
Liberty Mutual Insurance Company ("Liberty Mutual") and Liberty Mutual
Fire Insurance Company ("Liberty Fire") have sole voting and investment power
with respect to _______ and __________ 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 at the Meeting but sufficient votes to
approve any of the above proposals have not been received, the persons named as
proxies may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. A shareholder vote may be taken on one or more of the
proposals referred to above prior to such adjournment if sufficient votes have
been received and it is otherwise appropriate. Any such adjournment will require
the affirmative vote of a majority of those shares present at the Meeting in
person or by proxy. If a quorum is present, the persons named as proxies will
vote those proxies which they are entitled to vote FOR any such proposal in
favor of such adjournment and will vote those proxies required to be voted for
rejection of such proposal against any such adjournment.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Fund 's Trustees and
officers and persons who own more than ten percent of the Fund's outstanding
shares and certain officers and directors of Liberty Asset Management
(collectively, "Section 16 reporting persons"), to file with the Securities and
Exchange Commission ("SEC") initial reports of ownership and reports of changes
in ownership of Fund shares. Section 16 reporting persons are required by SEC
regulations to furnish the Fund with copies of all Section 16(a) forms they
file. To the Fund 's knowledge, based solely on a review of the copies of such
reports furnished to the Fund and on representations that no other reports were
required, during the year ended December 31, 1999, all other Section 16
reporting persons complied with all Section 16(a) filing requirements applicable
to them.
SUBMISSION OF CERTAIN SHAREHOLDER PROPOSALS
Under the proxy rules of the Securities and Exchange Commission,
shareholder proposals meeting tests contained in those rules may, under certain
conditions, be included in the Fund 's proxy material for a particular annual
shareholders meeting. Under the foregoing proxy rules, proposals submitted for
inclusion in the proxy material for the 2001 Annual Meeting must be received by
the Fund on or before October 26, 2000. The fact that the Fund receives a
shareholder proposal in a timely manner does not ensure its inclusion in its
proxy material, since there are other requirements in the proxy rules relating
to such inclusion.
February 28, 2000
APPENDIX A
TCW Funds Management, Inc. ("TCW") is also a Portfolio Manager of
Liberty All-Star Equity Fund, Variable Series and Liberty All-Star Growth and
Income Fund, open-end multi-managed investment companies managed by Liberty
Asset Management Company that have the same investment objectives and policies,
and the same Portfolio Managers, as Liberty All-Star Equity Fund. The net assets
of Liberty All-Star Equity Fund, Variable Series and Liberty All-Star Growth and
Income Fund as of December 31, 1999 were $___________ and $__________,
respectively. TCW manages approximately one fifth of each fund's portfolio. TCW
receives from Liberty Asset Management a portfolio management fee at the annual
rate of 0.30% of the daily average net asset value of the portion of each fund's
portfolio managed by it.
APPENDIX B
PORTFOLIO MANAGEMENT AGREEMENT
November 1, 1999
TCW Funds Management, Inc.
865 South Figueroa Street
Los Angeles, CA 90017
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 assets of the Fund, and is responsible for
the day-to-day corporate management and Fund administration of the Fund.
1. Employment as a Portfolio Manager. The Fund being duly authorized
hereby employs TCW Funds Management, Inc. (the "Portfolio Manager") as a
discretionary portfolio manager, on the terms and conditions set forth herein,
of that portion of the Fund's assets which the Fund Manager determines to assign
to the Portfolio Manager (those assets being referred to as the "Portfolio
Manager Account"). The Fund Manager may, from time to time, allocate and
reallocate the Fund's assets among the Portfolio Manager and the other portfolio
managers of the Fund's assets.
2. Acceptance of Employment; Standard of Performance. The Portfolio
Manager accepts its employment as a discretionary portfolio manager and agrees
to use its best professional judgment to make timely investment decisions for
the Portfolio Manager Account in accordance with the provisions of this
Agreement.
3. Portfolio Management Services of Portfolio Manager. In providing
portfolio management services to the Portfolio Manager Account, the Portfolio
Manager shall be subject to the investment objectives, policies and restrictions
of the Fund as set forth in its current Registration Statement under the Act, as
the same may be modified from time to time (the "Registration Statement"), and
the investment restrictions set forth in the Act and the Rules thereunder (as
and to the extent set forth in the Registration Statement or in other
documentation furnished to the Portfolio Manager by the Fund or the Fund
Manager), to the supervision and control of the Board of Trustees of the Fund,
and to instructions from the Fund Manager. The Portfolio Manager shall not,
without the prior approval of the Fund or the Fund Manager, effect any
transactions which would cause the Portfolio Manager Account, treated as a
separate fund, to be out of compliance with any of such restrictions or
policies.
4. Transaction Procedures. All portfolio transactions for the
Portfolio Manager Account will be consummated by payment to or delivery by the
custodian of the Fund (the "Custodian"), or such depositories or agents as may
be designated by the Custodian in writing, as custodian for the Fund, of all
cash and/or securities due to or from the Portfolio Manager Account, and the
Portfolio Manager shall not have possession or custody thereof or any
responsibility or liability with respect to such custody. The Portfolio Manager
shall advise and confirm in writing to the Custodian all investment orders for
the Portfolio Manager Account placed by it with brokers and dealers at the time
and in the manner set forth in Schedule A hereto (as amended from time to time
by the Fund Manager). The Fund shall issue to the Custodian such instructions as
may be appropriate in connection with the settlement of any transaction
initiated by the Portfolio Manager. The Fund shall be responsible for all
custodial arrangements and the payment of all custodial charges and fees, and,
upon giving proper instructions to the Custodian, the Portfolio Manager shall
have no responsibility or liability with respect to custodial arrangements or
the acts, omissions or other conduct of the Custodian.
5. Allocation of Brokerage. The Portfolio Manager shall have authority
and discretion to select brokers and dealers to execute portfolio transactions
initiated by the Portfolio Manager for the Portfolio Manager Account, and to
select the markets on or in which the transaction will be executed.
A. In doing so, the Portfolio Manager's primary responsibility
shall be to seek to obtain best net price and execution for the Fund.
However, this responsibility shall not obligate the Portfolio Manager
to solicit competitive bids for each transaction or to seek the lowest
available commission cost to the Fund, so long as the Portfolio Manager
reasonably believes that the broker or dealer selected by it can be
expected to obtain a "best execution" market price on the particular
transaction and determines in good faith that the commission cost is
reasonable in relation to the value of the brokerage and research
services (as defined in Section 28(e)(3) of the Securities Exchange Act
of 1934) provided by such broker or dealer to the Portfolio Manager
viewed in terms of either that particular transaction or of the
Portfolio Manager's overall responsibilities with respect to its
clients, including the Fund, as to which the Portfolio Manager
exercises investment discretion, notwithstanding that the Fund may not
be the direct or exclusive beneficiary of any such services or that
another broker may be willing to charge the Fund a lower commission on
the particular transaction.
B. Subject to the requirements of paragraph A above, the Fund
Manager shall have the right to request that transactions giving rise
to brokerage commissions, in an amount to be agreed upon by the Fund
Manager and the Portfolio Manager, shall be executed by brokers and
dealers that provide brokerage or research services to the Fund
Manager, or as to which an on-going relationship will be of value to
the Fund in the management of its assets, which services and
relationship may, but need not, be of direct benefit to the Portfolio
Manager Account. 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 Portfolio Manager Account with a broker or dealer
which is an "affiliated person" (as defined in the Act) of the Fund,
the Portfolio Manager or any other Portfolio Manager of the Fund
without the prior written approval of the Fund. The Fund Manager will
provide the Portfolio Manager with a list of brokers and dealers which
are "affiliated persons" of the Fund or its Portfolio Managers.
6. Proxies. The Portfolio Manager 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 in accordance with such policies as shall be
determined by the Fund Manager.
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 Portfolio Manager Account, provided that the
Portfolio Manager acts in good faith, and provided further, that it is the
Portfolio Manager's policy to allocate, within its reasonable discretion,
investment opportunities to the Portfolio Manager Account over a period of time
on a fair and equitable basis relative to the Client Accounts and the Affiliated
Accounts, taking into account the cash position and the investment objectives
and policies of the Fund and any specific investment restrictions applicable
thereto. The Fund acknowledges that one or more Client Accounts and Affiliated
Accounts may at any time hold, acquire, increase, decrease, dispose of or
otherwise deal with positions in investments in which the Portfolio Manager
Account may have an interest from time to time, whether in transactions which
involve the Portfolio Manager Account or otherwise. The Portfolio Manager shall
have no obligation to acquire for the Portfolio Manager Account a position in
any investment which any Client Account or Affiliated Account may acquire, and
the Fund shall have no first refusal, coinvestment or other rights in respect of
any such investment, either for the Portfolio Manager Account or otherwise.
9. Limitation of Liability. The Portfolio Manager shall not be liable
for any action taken, omitted or suffered to be taken by it in its reasonable
judgment, in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement, or in
accordance with (or in the absence of) specific directions or instructions from
the Fund, provided, however, that such acts or omissions shall not have resulted
from the Portfolio Manager's willful misfeasance, bad faith or gross negligence,
a violation of the standard of care established by and applicable to the
Portfolio Manager in its actions under this Agreement or breach of its duty or
of its obligations hereunder (provided, however, that the foregoing shall not be
construed to protect the Portfolio Manager from liability in violation of
Section 17(i) of the Act).
10. Confidentiality. Subject to the duty of the Portfolio Manager and
the Fund to comply with applicable law, including any demand of any regulatory
or taxing authority having jurisdiction, the parties hereto shall treat as
confidential all information pertaining to the Portfolio Manager Account and the
actions of the Portfolio Manager and the Fund in respect thereof.
11. Assignment. This Agreement shall terminate automatically in the
event of its assignment, as that term is defined in Section 2(a)(4) of the Act.
The Portfolio Manager shall notify the Fund in writing sufficiently in advance
of any proposed change of control, as defined in Section 2(a)(9) of the Act, as
will enable the Fund to consider whether an assignment as defined in Section
2(a)(4) of the Act will occur, and whether to take the steps necessary to enter
into a new contract with the Portfolio Manager.
12. Representations, Warranties and Agreements of the Fund. The Fund
represents, warrants and agrees that:
A. The Portfolio Manager has been duly appointed to provide
investment services to the Portfolio Manager Account as contemplated
hereby.
B. The Fund 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 by the Fund Manager). The Portfolio Manager
agrees that such records are the property of the Fund, and will be
surrendered to the Fund promptly upon request.
C. It will adopt a written code of ethics complying with the
requirements of Rule l7j-l under the Act. 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 or amendments thereto, proxy material, reports and other
documents required to be filed under the Act, the Securities Act of
1933, or other applicable securities laws.
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 Board of 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
October 31, 2001 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 such 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 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 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:
LIBERTY ASSET MANAGEMENT COMPANY
By:
ACCEPTED:
TCW FUNDS MANAGEMENT, INC.
By:
Title:
TCW FUNDS MANAGEMENT, INC.
By:
Title:
SCHEDULES: A. Operational Procedures For Portfolio Transactions (omitted)
B. Record Keeping Requirements (omitted)
C. Fee Schedule
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; 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.
APPENDIX C
PORTFOLIO MANAGEMENT AGREEMENT
[DATE]
Oppenheimer Capital
1 World Financial Center
New York, NY 10281-1098
Re: Portfolio Management Agreement
Ladies and Gentlemen:
Liberty All-Star 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 assets of the Fund, and is responsible for
the day-to-day corporate management and Fund administration of the Fund.
1. Employment as a Portfolio Manager. The Fund being duly authorized
hereby employs Oppenheimer Capital (the "Portfolio Manager") as a discretionary
portfolio manager, on the terms and conditions set forth herein, of that portion
of the Fund's assets which the Fund Manager determines to assign to the
Portfolio Manager (those assets being referred to as the "Portfolio Manager
Account"). The Fund Manager may, from time to time, allocate and reallocate the
Fund's assets among the Portfolio Manager and the other portfolio managers of
the Fund's assets.
2. Acceptance of Employment; Standard of Performance. The Portfolio
Manager accepts its employment as a discretionary portfolio manager and agrees
to use its best professional judgment to make timely investment decisions for
the Portfolio Manager Account in accordance with the provisions of this
Agreement.
3. Portfolio Management Services of Portfolio Manager. In providing
portfolio management services to the Portfolio Manager Account, the Portfolio
Manager shall be subject to the investment objectives, policies and restrictions
of the Fund as set forth in its current Registration Statement under the Act, as
the same may be modified from time to time (the "Registration Statement"), and
the investment restrictions set forth in the Act and the Rules thereunder (as
and to the extent set forth in the Registration Statement or in other
documentation furnished to the Portfolio Manager by the Fund or the Fund
Manager), to the supervision and control of the Board of Trustees of the Fund,
and to instructions from the Fund Manager. The Portfolio Manager shall not,
without the prior approval of the Fund or the Fund Manager, effect any
transactions which would cause the Portfolio Manager Account, treated as a
separate fund, to be out of compliance with any of such restrictions or
policies.
4. Transaction Procedures. All portfolio transactions for the
Portfolio Manager Account will be consummated by payment to or delivery by the
custodian of the Fund (the "Custodian"), or such depositories or agents as may
be designated by the Custodian in writing, as custodian for the Fund, of all
cash and/or securities due to or from the Portfolio Manager Account, and the
Portfolio Manager shall not have possession or custody thereof or any
responsibility or liability with respect to such custody. The Portfolio Manager
shall advise and confirm in writing to the Custodian all investment orders for
the Portfolio Manager Account placed by it with brokers and dealers at the time
and in the manner set forth in Schedule A hereto (as amended from time to time
by the Fund Manager). The Fund shall issue to the Custodian such instructions as
may be appropriate in connection with the settlement of any transaction
initiated by the Portfolio Manager. The Fund shall be responsible for all
custodial arrangements and the payment of all custodial charges and fees, and,
upon giving proper instructions to the Custodian, the Portfolio Manager shall
have no responsibility or liability with respect to custodial arrangements or
the acts, omissions or other conduct of the Custodian.
5. Allocation of Brokerage. The Portfolio Manager shall have authority
and discretion to select brokers and dealers to execute portfolio transactions
initiated by the Portfolio Manager for the Portfolio Manager Account, and to
select the markets on or in which the transaction will be executed.
A. In doing so, the Portfolio Manager's primary responsibility
shall be to seek to obtain best net price and execution for the Fund.
However, this responsibility shall not obligate the Portfolio Manager
to solicit competitive bids for each transaction or to seek the lowest
available commission cost to the Fund, so long as the Portfolio Manager
reasonably believes that the broker or dealer selected by it can be
expected to obtain a "best execution" market price on the particular
transaction and determines in good faith that the commission cost is
reasonable in relation to the value of the brokerage and research
services (as defined in Section 28(e)(3) of the Securities Exchange Act
of 1934) provided by such broker or dealer to the Portfolio Manager
viewed in terms of either that particular transaction or of the
Portfolio Manager's overall responsibilities with respect to its
clients, including the Fund, as to which the Portfolio Manager
exercises investment discretion, notwithstanding that the Fund may not
be the direct or exclusive beneficiary of any such services or that
another broker may be willing to charge the Fund a lower commission on
the particular transaction.
B. Subject to the requirements of paragraph A above, the Fund
Manager shall have the right to request that transactions giving rise
to brokerage commissions, in an amount to be agreed upon by the Fund
Manager and the Portfolio Manager, shall be executed by brokers and
dealers that provide brokerage or research services to the Fund
Manager, or as to which an on-going relationship will be of value to
the Fund in the management of its assets, which services and
relationship may, but need not, be of direct benefit to the Portfolio
Manager Account. 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 Portfolio Manager Account with a broker or dealer
which is an "affiliated person" (as defined in the Act) of the Fund,
the Portfolio Manager or any other Portfolio Manager of the Fund
without the prior written approval of the Fund. The Fund Manager will
provide the Portfolio Manager with a list of brokers and dealers which
are "affiliated persons" of the Fund or its Portfolio Managers.
6. Proxies. The Portfolio Manager 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 in accordance with such policies as shall be
determined by the Fund Manager.
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 Portfolio Manager Account, provided that the
Portfolio Manager acts in good faith, and provided further, that it is the
Portfolio Manager's policy to allocate, within its reasonable discretion,
investment opportunities to the Portfolio Manager Account over a period of time
on a fair and equitable basis relative to the Client Accounts and the Affiliated
Accounts, taking into account the cash position and the investment objectives
and policies of the Fund and any specific investment restrictions applicable
thereto. The Fund acknowledges that one or more Client Accounts and Affiliated
Accounts may at any time hold, acquire, increase, decrease, dispose of or
otherwise deal with positions in investments in which the Portfolio Manager
Account may have an interest from time to time, whether in transactions which
involve the Portfolio Manager Account or otherwise. The Portfolio Manager shall
have no obligation to acquire for the Portfolio Manager Account a position in
any investment which any Client Account or Affiliated Account may acquire, and
the Fund shall have no first refusal, coinvestment or other rights in respect of
any such investment, either for the Portfolio Manager Account or otherwise.
9. Limitation of Liability. The Portfolio Manager shall not be liable
for any action taken, omitted or suffered to be taken by it in its reasonable
judgment, in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement, or in
accordance with (or in the absence of) specific directions or instructions from
the Fund, provided, however, that such acts or omissions shall not have resulted
from the Portfolio Manager's willful misfeasance, bad faith or gross negligence,
a violation of the standard of care established by and applicable to the
Portfolio Manager in its actions under this Agreement or breach of its duty or
of its obligations hereunder (provided, however, that the foregoing shall not be
construed to protect the Portfolio Manager from liability in violation of
Section 17(i) of the Act).
10. Confidentiality. Subject to the duty of the Portfolio Manager and
the Fund to comply with applicable law, including any demand of any regulatory
or taxing authority having jurisdiction, the parties hereto shall treat as
confidential all information pertaining to the Portfolio Manager Account and the
actions of the Portfolio Manager and the Fund in respect thereof.
11. Assignment. This Agreement shall terminate automatically in the
event of its assignment, as that term is defined in Section 2(a)(4) of the Act.
The Portfolio Manager shall notify the Fund in writing sufficiently in advance
of any proposed change of control, as defined in Section 2(a)(9) of the Act, as
will enable the Fund to consider whether an assignment as defined in Section
2(a)(4) of the Act will occur, and whether to take the steps necessary to enter
into a new contract with the Portfolio Manager.
12. Representations, Warranties and Agreements of the Fund. The Fund
represents, warrants and agrees that:
A. The Portfolio Manager has been duly appointed to provide
investment services to the Portfolio Manager Account as contemplated
hereby.
B. The Fund 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 by the Fund Manager). The Portfolio Manager
agrees that such records are the property of the Fund, and will be
surrendered to the Fund promptly upon request.
C. It will adopt a written code of ethics complying with the
requirements of Rule l7j-l under the Act. 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 or amendments thereto, proxy material, reports and other
documents required to be filed under the Act, the Securities Act of
1933, or other applicable securities laws.
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 Board of 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
[DATE] 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 such 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 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 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.
19. Prior Agreement Superceded. This Agreement supercedes and replaces
the Portfolio Management Agreement dated among the Fund, the Fund Manager and
the Portfolio Manager.
LIBERTY ALL-STAR EQUITY FUND
By:
Title: Secretary
LIBERTY ASSET MANAGEMENT COMPANY
By:
Title: President and Chief Executive Officer
ACCEPTED:
Oppenheimer Capital
By:
Title:
Oppenheimer Capital
By:
Title:
SCHEDULES: A. Operational Procedures For Portfolio Transactions (omitted)
B. Record Keeping Requirements (omitted)
C. Fee Schedule
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; 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.
APPENDIX D
OpCap Advisors, a subsidiary of Oppenheimer Capital, is the manager or
sub-advisor to the registered investment companies listed below. These
investment companies have similar investment objectives to the Fund.
Approximate Net Assets (as of Advisory Fee Rate
Fund January XX, 2000) (based on average net asset value)
---- ----------------- ----------------------------------
Oppenheimer Quest Value $ 1.0% on the first $400 million;
Fund, Inc. .90% on the next $400 million;
Oppenheimer Quest $ .85% of net assets between $800 million
Opportunity Value Fund but less than $4 billion; and .80% on
assets over $4 billion but less than $8
billion and .75% on assets over $8
billion.(1)
Oppenheimer Quest Capital $ 1.0% on the first $400 million; .90% on
Value Fund, Inc. the next $400 million;
.85% of the net assets in excess of $800
million(2)
Enterprise Accumulation Trust:
Equity Portfolio $ .40% of the first $1 billion;
Managed Portfolio $ .30% on assets over $1 billion; and
.25% for assets in excess of $2 billion(3)
Enterprise Group of Funds:
Equity Portfolio $ .40% of the first $100 million;
Managed Portfolio $ .30% on assets in excess of $100
million(4)
Penn Series Funds, Inc.:
Value Equity Fund $ .50%(5)
Endeavor Series Trust:
Value Equity Portfolio $ .40%(6)
Opportunity Value
Portfolio
WNL Series Trust:
Elite Value Asset
Allocation Portfolio $ .40%(7)
The Saratoga Advantage Trust:
Large Capitalization
Value Portfolio $ .30%(7)
OCC Accumulation Trust: .80% of the first $400 million of average
Equity Portfolio $ net assets: .75% of the next $400 million
Managed Portfolio $ of average net assets and .70% of assets
in excess of $800 million(8)
(1) With respect to each of these funds, Oppenheimer Funds, Inc. ("OFI") is
the investment adviser and OpCap Advisors is the sub-adviser. OFI pays
OpCap Advisors monthly an annual fee based on the average daily net
assets of the fund equal to 40% of the advisory fee collected by OFI
based on the total net assets of the fund as of November 22, 1995 (the
"base amount") plus 30% of the investment advisory fee collected by OFI
based on the total net assets of the fund that exceed the base amount.
(2) OFI is the investment advisor and OpCap Advisors is the sub-adviser.
OFI pays OpCap Advisors a sub-advisory fee equal to 40% of the net
advisory fee calculated by OFI for the fund based on the total net
assets of the fund as of February 28, 1997 and remaining 120 days later
(the "base amount") plus 30% of the investment advisory fee collected
by OFI based on the total assets that exceed that base amount. OFI is
waiving the following portion of its advisory fee: .15% of the first
$200 million of average daily net assets, .40% of the next $200
million, .30% of the next $400 million and .25% of average net assets
in excess of $800 million.
(3) These fees are for investment advisory services only. Management
services are provided to the portfolios by a party other than OpCap
Advisors. The manager, which pays the investment advisory fee to OpCap
Advisors, receives a management fee, on an annual basis, of 0.80% of
the first $400 million of the average daily net assets; .75% on the
next $400 million and .70% on assets above $800 million of each of the
portfolios.
(4) This fee is for investment advisory services only. Management services
are provided to the portfolios by a party other than OpCap Advisors.
The manager, which pays the investment advisory fee to OpCap Advisors,
receives a management fee of .75% of the average daily net assets of
the portfolios.
(5) These fees are for investment advisory services only. Administrative
services are provided to these funds by a party other than OpCap
Advisors. The funds are each charged on an annual basis a fee for
administrative services of 0.15% of their respective average daily net
assets.
(6) This fee is for investment advisory services only. Management services
are provided to the portfolios by a party other than OpCap Advisors.
The manager, which pays the investment advisory fee to OpCap Advisors,
receives a management fee of .80% of average daily net assets of the
portfolios.
(7) This fee is for investment advisory services only. Management services
are provided to the portfolio by a party other than OpCap Advisors. The
manager, which pays the investment advisory fee to OpCap Advisors,
receives a management fee of 0.65% of the average daily net assets of
the portfolio.
(8) OpCap Advisors has agreed to waive its management fee and
reimburse Expenses so that the total operating expenses (net of any
expense offsets and excluding the amount of any interest, taxes,
brokerage commissions and extraordinary expenses) of such portfolios
do not exceed 1.00% of their respective average daily net assets.
LIBERTY ALL-STAR EQUITY FUND PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF LIBERTY ALL-STAR EQUITY FUND
PROXY FOR 2000 ANNUAL MEETING OF SHAREHOLDERS
The undersigned, revoking previous proxies, hereby appoints Suzan M. Barron,
William J. Ballou, Nancy L. Conlin, Timothy J. Jacoby and William R.
Parmentier, Jr., or any one or more of them, attorneys, with power of
substitution, to vote all shares of Liberty All-Star Equity Fund (the
"Fund") which the undersigned is entitled to vote at the 2000 Annual Meeting
of the Fund to be held in Room AV-1, 3rd Floor, Federal Reserve Plaza, 600
Atlantic Avenue, Boston, Massachusetts on April 19, 2000 at 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. The undersigned directs said proxy holders to vote as
specified upon the proposals shown below, each of which is described in the
proxy statement for the Meeting, receipt of which is acknowledged.
SAID PROXIES WILL VOTE THIS PROXY AS DIRECTED, OR IF NO DIRECTION IS INDICATED,
FOR THE NOMINEES LISTED IN 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. To elect two Trustees of the Fund. FOR ALL
NOMINEES WITHHOLD FOR ALL EXCEPT
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Robert J. Birnbaum
William E. Mayer
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2. To approve or disapprove the Fund's Portfolio Management Agreement with TCW
Funds Management, Inc. FOR / / AGAINST / / ABSTAIN / /
3. To approve or disapprove a new Portfolio Management Agreement with
Oppenheimer Capital which will replace the current Portfolio Management
Agreement which will terminate upon change in control of Oppenheimer
Capital upon acquisition by Allianz AG. FOR / / AGAINST / / ABSTAIN / /
4. To ratify the selection by the Board of Trustees of
PricewaterhouseCoopers LLP as the Fund's independent auditors for the
year ending December 31, 2000. FOR / / AGAINST / / ABSTAIN / /
5. In their discretion, upon such other business as may properly come before
the Meeting.
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Date
Please sign exactly as your name(s) 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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