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:
LIBERTY ALL-STAR EQUITY FUND
Federal Reserve Plaza
600 Atlantic Avenue
Boston, Massachusetts 02210-2214
(617) 722-6036
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 18, 2001
To the Shareholders of Liberty All-Star Equity Fund:
NOTICE IS HEREBY GIVEN that the fifteenth 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 18, 2001 at 9:30 a.m., Boston time. The purpose of the
Meeting is to consider and act upon the following matters:
1. To elect three Trustees of the Fund.
2. To approve the Fund's Portfolio Management Agreement with Mastrapasqua &
Associates, Inc.
3. To ratify the selection by the Board of Trustees of PricewaterhouseCoopers
LLP the Fund's independent accountants for the year ending December 31,
2001.
4. 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,
2001 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
William J. Ballou, 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 __, 2001
LIBERTY ALL-STAR EQUITY FUND
PROXY STATEMENT
Annual Meeting of Shareholders
April 18, 2001
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 18, 2001 at 9:30 a.m. Boston time in Room AV-1, 3rd Floor, Federal
Reserve Plaza, 600 Atlantic Avenue, Boston, Massachusetts, and at any
adjournments thereof (such meeting and any adjournments being referred to as the
"Meeting").
The solicitation of proxies for use at the Meeting is being made
primarily by the mailing on or about March 1, 2001 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
individuals, banks, brokers, nominees and other custodians at a fee of $5,000
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 2000 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. If the enclosed proxy is returned,
the enclosed proxy will be voted for the election of
Joseph R. Palombo as Trustee to hold office until final adjournment of the
Annual Meeting of Shareholders for the year 2002 and Richard W. Lowry and
John J. Neuhauser as Trustees to hold office until the final adjournment of
the Annual Meeting of Shareholders for the year 2004 (or special meeting in
lieu thereof). Messrs. Lowry, Neuhauser and Palombo have served as Trustees
since August, 1986, April, 1998 and October, 2000, respectively. Messrs.
Lowry, Neuhauser and Palombo have consented to serve as
Trustees following the Meeting if elected, and are expected to be able to do so.
If any of Messrs. Lowry, Neuhauser or Palombo are 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 Principal Occupation
and Address During Past Five Years Fund Shares Owned(1)
----------- --------------------- -----------------
Richard W. Lowry Private Investor since
(Age 64)(2) August 1987 (formerly
10701 Charleston Drive Chairman and Chief
Vero Beach, FL 32963 Executive Officer, U.S. Plywood
Corporation
(building products manufacturer)). ____(4)
John J. Neuhauser Academic Vice President and
(Age 57)(2) Dean of Faculties since August,
84 College Road 1999, Boston College (formerly Dean,
Chestnut Hill, MA Boston College School of Management
02467-3838 from September, 1977 to
September, 1999). ____
Joseph R. Palombo Chief Operations Officer of
(Age 48)(3) Mutual Funds, Liberty Financial
Liberty Funds Group Companies, Inc. (LFC) since
One Financial Center August, 2000; Executive Vice
Boston, MA 02111 President and Director of
Liberty Asset Management since
April, 1999; Executive Vice
President and Chief Administrative
Officer of Liberty Funds Group (LFG)
Director of Stein Roe & Farnham
Incorporated (SR&F)since September 1,
2000; Trustee of the Stein Roe
Mutual Funds since October, 2000;
Manager of Stein Roe Floating Rate
Limited Liability Company since
October, 2000 (formerly Vice
President of the Funds from
April, 1999 to August, 2000 and
Chief Operating Officer, Putnam
Mutual Funds from 1994 to 1998).
The following Trustees continue to serve in such capacity until their
terms of office expire and their successors are elected and qualified:
Name/Age Principal Occupation
and Address During Past Five Years Fund Shares Owned(1)
----------- ---------------------- --------------------
Robert J. Birnbaum Retired (since January, 1994);
(Age 73)(2) Special Counsel, Dechert,
313 Bedford Road Price & Rhoads (September, 1988
Ridgewood, NJ 07450 to December, 1993); President and
Chief Operating Officer, New
York Stock Exchange, Inc.
(May, 1985 to June, 1988).
Director, Dresdner RCM Europe
Fund (investment company);
Director, Options Exchange Board. _______
James E. Grinnell Private investor since November,
(Age71)(2) 1988; President and Chief Executive
2850 South Ocean Blvd. Officer, Distribution Management
#514 Systems, Inc.(1983 to May, 1986);
Palm Beach, FL 33480 Senior Vice President-Operations,
The Rockport Company, importer
and distributor of shoes (May, 1986
to November, 1988). ________
William E. Mayer Managing Partner, Park Avenue
(Age 60) (5) Equity Partners (venture capital)
500 Park Avenue, since 1998 (formerly Founding Partner,
5th Floor Development Capital LLC from 1996 to 1998;
New York, NY, 10022 Dean and Professor, College of Business
and Management, University of Maryland
from October, 1992 to November, 1996);
Director, Johns Manville (building
products manufacturer); Director, Lee
Enterprises (print and on-line media);
Director, WR Hambrecht + Co.
(financial service provider);
Director, Systech Retail Systems ________
-----------------------
(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.
(5) "Interested person" of the Fund, as defined in the Investment Company Act of
1940, because of his affiliation with WR Hambrecht + Co., a registered
broker-dealer.
The term of office of Mr. Grinnell will expire on final adjournment of
the Annual Meeting (or special meeting in lieu thereof) in the year 2002, and
the term of office of Messrs. Birnbaum and Mayer will expire on final
adjournment of the Annual Meeting (or special meeting in lieu thereof) in 2003,
Messrs. Birnbaum, Grinnell and Mayer have served as Trustees since November,
1994, August, 1986 and April, 1998, respectively. At December 31, 2000, Messrs.
Lowry, Palombo, Mayer and Neuhauser also served as trustees of Liberty Trusts I
through VII, the umbrella trusts for an aggregate of 49 open-end funds managed
by Colonial Management Associates, Inc. ("Colonial"), or other affiliates of
Liberty Asset Management, nine closed-end funds managed by Colonial and Liberty
Variable Investment Trust, the umbrella trust for 17 open-end funds managed by
Colonial or its affiliates that serve as investment vehicles for variable
annuities and variable life insurance products, (collectively, the "Liberty
Funds") and effective December 27, 2001, trustees of the Liberty Floating Rate
Fund, the Stein Roe Floating Rate Limited Liability Company, Liberty-Stein
Roe Institutional Floating Rate Income Fund, and the following open-end
mutual funds: 4 series of Liberty-Stein Roe Funds Income Trust,
4 series of Liberty-Stein Roe Funds Municipal Trust, 12 series of
Liberty-Stein Roe Funds Investment Trust, 4 series of Liberty-Stein Roe
Advisor Trust, 1 series of Stein Roe Trust, 12 portfolios of SR&F Base Trust,
and 5 series of SteinRoe Variable Investment Trust (collectively referred
to as the "Stein Roe Funds").
As of the shareholder meeting on December 27, 2000, the Liberty Fund
Complex and the Stein Roe Funds were merged into one Fund Complex. Effective on
December 27, 2000, the Trustees serve as Trustees for all the Funds in both the
Liberty Funds and the Stein Roe Funds.
In addition, Messrs. Lowry, Palombo, Neuhauser and Mayer served as a
trustee of 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 served as a director of Liberty All-Star Growth Fund, another
closed-end multi-manager fund managed by Liberty Asset Management (these funds
and the Fund collectively referred to as the "Liberty All-Star Funds." On
January 25, 2001, the shareholders of Liberty All-Star Growth and Income Fund
voted to approve the acquisition of Liberty All-Star Growth and Income Fund by
Liberty Growth & Income Fund. The acquisition was effected on February 9, 2001.
During 2000 the full Board of Trustees of the Fund held four meetings,
and the Audit Committee met three times. With the exception of
Mr. Palombo who was elected a Trustee on October 25, 2000, 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.
The Fund has an Audit Committee comprised of only "Independent
Trustees" (as defined in the regulations of the New York Stock Exchange (NYSE))
who are also not "interested persons" (as defined in the Investment Company Act
of 1940). The Audit Committee reviews financial statements and other
audit-related matters as they arise throughout the year. The Audit Committee
makes recommendations to the full Board as to the firm of independent
accountants to be selected. In making its recommendations, the Audit Committee
reviews the nature and scope of the services to be provided.
In discharging its oversight responsibility as to the audit process,
the Audit Committee discussed and reviewed with management the audited financial
statements for the last fiscal year. The Audit Committee also reviewed the
non-audit services to be provided by the independent auditors of the Fund. The
independent auditors, PricewaterhouseCoopers LLP, discussed with the Board the
matters required to be discussed by Statement on Auditing Standards No. 61. In
addition, the Audit Committee obtained from the independent auditors a formal
written statement consistent with Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees," describing all relationships
between the auditor and the Fund that might bear on the auditor's independence.
The Audit Committee also discussed with the independent auditors any
relationships that may impact their objectivity and independence and satisfied
itself as to the auditors' independence. The Board also reviewed the fees
charged by such accountants for the various services provided and reviewed the
Fund's internal accounting procedures and controls.
The Board of Trustees has adopted a written charter which sets forth
the Audit Committee's structure, duties and powers, and methods of operation
which is attached hereto as Appendix B. Each member of the Audit Committee must
be financially literate and at least one member must have prior accounting
experience or related financial management expertise. The Board of Trustees has
determined, in accordance with applicable regulations of the NYSE, that each
member of the Audit Committee is financially literate and has prior accounting
experience or related financial management expertise. The Audit Committee
members for 2000 were Messrs. Birnbaum, Grinnell, Lowry and Neuhauser. All
members of the Audit Committee meet the independence standards of the NYSE
listing standards.
FEES PAID TO INDEPENDENT AUDITORS
A. AUDIT FEES
For the audit of the Fund's annual financial statements for the fiscal year
ended December 31, 2000 the Fund paid or accrued $29,000 to
PricewaterhouseCoopers LLP.
B. FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
For the fiscal year ended December 31, 2000, the Fund, Liberty Asset Management
and entities controlling, controlled by or under common control with Liberty
Asset Management which provide services to the Fund paid or accrued aggregate
fees of $________ for financial information systems design and implementation
services by PricewaterhouseCoopers LLP.
C. ALL OTHER FEES
For the fiscal year ended December 31, 2000, the Fund, Liberty Asset Management
and entities controlling, controlled by or under common control with Liberty
Asset Management which provide services to the Fund were billed aggregate fees
of $________ for all other services provided by PricewaterhouseCoopers LLP.
Compensation
Beginning January 1, 1999, the aggregate of the fees paid to the
Trustees by the Liberty All-Star Funds that have the same Board of Trustees or
Directors and hold their meetings concurrently consists of Trustees fees of
$125,000 per annum, assuming a minimum of four 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.
The following table shows, for the calendar year ended December 31,
2000, the compensation received from the Fund by each current Trustee, and the
aggregate compensation paid to each current Trustee for service on the Boards of
Trustees of the Fund and the Liberty All-Star Funds. The Fund has no bonus,
profit sharing or retirement plans.
Total Compensation from
Aggregate Compensation the Liberty All-Star
Name from the Fund Funds
--------- ---------------------- ----------------------
Robert J. Birnbaum $16,945 $25,000
John V. Carberry(6) N/A N/A
James E. Grinnell $16,945 $127,000
Richard W. Lowry $16,945 $124,000
William E. Mayer $16,945 $125,000
John J. Neuhauser $16,945 $126,210
Joseph R. Palombo(7) 0 0
(6) Retired as Trustee of the Fund on August 4, 2000 and did not receive
compensation because he was an affiliated Trustee and employee of LFC.
(7) Does not receive compensation because he is an affiliated Trustee and
employee of LFC.
Trustees and Trustees' Fees
The following table shows, for the calendar year ended December 31, 2000, the
compensation received from the Liberty Funds by the Trustees. The Liberty Funds
have no bonus, profit sharing or retirement plans.
Name Total Compensation From Liberty Funds
------ -------------------------------------
Robert J. Birnbaum (8) $0
James E. Grinnell(9) 102,000
Richard W. Lowry 99,000
Salvatore Macera 98,000
William E. Mayer 100,000
John J. Neuhauser 101,210
Joseph R. Palombo(10) N/A
(8) Retired as Trustee of Liberty Funds On December 31, 1999.
(9) Resigned as Trustee of the Liberty Funds on December 27, 2000.
(10) Does not receive compensation because he is an affiliated Trustee amd
employee of LFC
Officers
The following are the executive officers of the Fund.
Principal Occupation
Name/Age and Address Position with Fund During Past Five Years
-------------------- ------------------ ----------------------
Joseph R. Palombo Chairman of the Board Chief Operations
(Age 48) Officer of Mutual Funds,
Inc.Liberty Financial
Companies, Inc. (LFC)
Liberty Funds Group since August, 2000;
One Financial Center Executive Vice President and
Boston, MA 02110 Director of Colonial since
April, 1999; Executive
Vice President and Chief
Administrative Officer of
LFG since April, 1999;
Director of SR&F
since September 1, 2000;
Trustee and Chairman
of the Board of the Stein
Roe Funds since October,
2000; Manager of Stein
Roe Floating Rate
Limited Liability Company
since October, 2000
(formerly Vice President
of the Funds from
April, 1999 to August,
2000 and Chief
Operating Officer,
Putnam Mutual Funds
from 1994 to 1998).
William R. Parmentier, Jr. President, Chief President and Chief Executive Officer (since
(Age 48) Executive Officer June, 1998) and Chief Investment Officer (since
Liberty Asset and Chief Investment May, 1995), Senior Vice President (May, 1995 to
Management Company Officer June, 1998), Liberty Asset Management; Consultant
Federal Reserve Plaza (October, 1994 to May, 1995); President, GQ Asset
600 Atlantic Avenue Management, Inc. (July, 1993 to October, 1994);
Boston, MA 02210 Assistant Treasurer, Grumman Corporation
(December, 1974 to July, 1993).
Principal Occupation
Name/Age and Address Position with Fund During Past Five Years
-------------------- ------------------ ----------------------
Kevin M. Carome Executive Vice Executive Vice President of Liberty Funds and of
(Age 44) President the Liberty All-Star Funds since October 2000;
Liberty Funds Group Executive Vice President of the Stein Roe Mutual
One Financial Center Funds since May 1999 (formerly Vice President
Boston, MA 02111 from April, 1998 to May 1999, Assistant Secretary
from April, 1998 to February 2000 and
Secretary from February 2000 to
May 2000); Chief Legal Officer of
LFC since August 2000; Senior Vice President,
Legal since January 1999 of LFG;
Associate General Counsel and Vice
President of LFC through January,
1999; Executive Vice President
and Assistant Secretary of SR&F
since January 2000 (formerly
General Counsel and Secretary of
SR&F from January, 1998 to December, 1999).
Christopher S. Carabell Vice President Senior Vice President - Product Development and
(Age 37) Marketing (since January, 1999), Vice President -
Liberty Asset Investments, Liberty Asset Management (March,
Management Company 1996 to January, 1999); Associate Director, U.S.
Federal Reserve Plaza Equity Research, BARRA Rogers Casey, investment
600 Atlantic Avenue consultants (January, 1995 to February, 1996).
Boston, MA 02210
Mark T. Haley Vice President Vice President-Investments (since January, 1999),
(Age 36) Director of Investment Analysis (December, 1996 to December, 1998),
Liberty Asset Investment Analyst (January, 1994 to November, 1996),
Management Company Liberty Asset Management.
Federal Reserve Plaza
600 Atlantic Avenue
Boston, MA 02210
Michael G. Clarke Controller Controller of the Liberty Funds and of the
(Age 31) Liberty All-Star Funds since December, 2000;
Liberty Funds Group Assistant Vice President of Colonial since
One Financial Center August, 1999; Assistant Vice President of LFG
Boston, MA 02111 since April, 2000 (formerly Audit Manager from
May, 1997 to August, 1999, Audit Senior Accountant
from September, 1995 to May, 1997.
J. Kevin Connaughton Treasurer Treasurer and Chief Financial Officerof the Liberty Funds and of
(Age 36) the Liberty All-Star Funds since December, 2000
Liberty Funds Group (formerly Controller and Chief Accounting Officer
One Financial Center of the Funds from February, 1998 to October, 2000);
Boston, MA 02211 Vice President of Colonial since February, 1998
(formerly Senior Tax Manager, Coopers & Lybrand, LLP
from April, 1996 to January, 1998; Vice President, 440
Financial Group/First Data Investor Services Group
from March, 1994 to April, 1996).
William J. Ballou Secretary Secretary of the Liberty Funds and of the Liberty
(Age 35) All-Star Funds since October, 2000 (formerly
Liberty Funds Group Assistant Secretary from October, 1997 to
One Financial Center October, 2000); Assistant Secretary of the Stein Roe Mutual
Boston, MA 02111 Funds since October, 2000
Vice President, Assistant Secretary and
Counsel of Colonial since October, 1997;
Vice President and Counsel since April, 2000,
and Assistant Secretary since December, 1998
of LFG (formerly Associate Counsel, Massachusetts
Financial Services Company from May, 1995 to
September, 1997).
Mr. Parmentier has served as President, Chief Executive Officer and
Chief Investment Officer since April 29, 1999; Messrs. Haley and Carabell were
elected as Vice Presidents on April 29, 1999 and April, 17, 1997, respectively.
Mr. Carome was elected as Executive Vice President on October 25, 2000. Mr.
Palombo was elected Chairman of the Board and Trustee on October 25, 2000.
Mr.Connaughton was elected Treasurer effective December 13,2000; Mr. Clarke
was elected Controller on December 13, 2000; and Mr. Ballou was elected
Secretary on October 25, 2000, Messrs. Ballou, Clarke and Connaughton hold
the same offices with the Liberty Funds Complex, and Messrs. Carabell,
Haley and Parmentier hold the same offices with Liberty All-Star
Growth Fund, Inc. and Liberty Funds Trust IX. Each officer of the Fund
serves at the pleasure of the Board of Trustees.
Required Vote
A plurality of votes cast at the Meeting, if a quorum is represented,
is required for the election of each Trustee.
PROPOSAL 2. TO APPROVE PORTFOLIO MANAGEMENT AGREEMENT WITH
MASTRAPASQUA & ASSOCIATES, INC. ("MASTRAPASQUA")
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 the termination of J.P. Morgan Investment Management Inc. ("J.P.
Morgan"), a Portfolio Manager of the Fund since July 1, 1996, whose portfolio
management agreement with the Fund had been ratified by shareholders on April
16, 1997, and other related factors, Liberty Asset Management in October, 2000,
determined to replace J.P. Morgan with Mastrapasqua & Associates, Inc.
("Mastrapasqua"). Liberty Asset Management first analyzed information regarding
the personnel, investment process and performance of a large number of
investment management firms. Liberty Asset Management then analyzed the
candidates in terms of their historic returns, volatility and portfolio
characteristics when combined with those of the Fund's four other Portfolio
Managers. In making its recommendation, the Board has relied upon and given
equal consideration to each of the factors presented to them by Liberty Asset
Management. Based on the foregoing and on Liberty Asset Management's qualitative
analysis, Liberty Asset Management recommended, and the Board of Trustees on
October 25, 2000 approved, the termination of the Fund's portfolio management
agreement with J.P. Morgan and its replacement with Mastrapasqua, effective
November 1, 2000.
Mastrapasqua located at 814 Church Street, Suite 600, Nashville, TN
37203, is an independently owned firm founded in 1993. Mastrapasqua provides a
variety of trust, investment management and investment advisory services.
Ownership of Mastrapasqua lies 100% with its employees. The directors and
principal executive officers of Mastrapasqua are Frank Mastrapasqua, Chairman
and Chief Executive Officer, Thomas A. Trantum, President, and Mauro
Mastrapasqua, First Vice President. As of December 31, 2000, Mastrapasqua had
$2.5 billion in assets under management. Messrs. Mastrapasqua and Trantum manage
that portion of the Fund's portfolio assigned to Mastrapasqua. Both Messrs.
Mastrapasqua and Trantum have over 32 years of investment experience.
Reference is made to MANAGEMENT - Portfolio Transactions and Brokerage
below for the direction by the Fund's Portfolio Managers, includingMastrapasqua,
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 Mastrapasqua is being submitted for shareholder approval at the
Meeting.
Terms of Portfolio Management Agreement with Mastrapasqua
The portfolio management agreement with Mastrapasqua 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 Mastrapasqua is attached to this
proxy statement as Appendix A.
Under the Fund's portfolio management agreements (including that with
Mastrapasqua), 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. For the
fiscal year ended December 31, 2000, Mastrapasqua received $______for its
portfolio management services to the Fund. On February 1, 2001, the Fund's net
assets were $1,395,866,869.56.
If approved by shareholders at the Meeting, the Portfolio Management
Agreement with Mastrapasqua will remain in effect until October 31, 2002, 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 Mastrapasqua
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 Mastrapasqua, the agreement will terminate
and Liberty Asset Management will cause the portfolio assets under management by
Mastrapasqua 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 Mastrapasqua 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 Mastrapasqua.
PROPOSAL 3. RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
By vote of the Board of Trustees, including the vote of the
non-interested Trustees, the firm of PricewaterhouseCoopers LLP ("PWC") has been
selected as independent accountants for the Fund for the year ending December
31, 2001. Such selection is being submitted to the shareholders for
ratification. The employment of PWC is conditioned on the right of the Fund by
majority vote of its shareholders to terminate such employment. Such firm has
acted as independent accountants for the Fund since September 30, 1999. 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 accountants 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 PWC 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.
On January 14, 1999, PWC consented to the entry of an order of the
Securities and Exchange Commission ("SEC") censuring the firm for violations of
the independence rules related to client stock ownership by certain individuals
of the firm and persons related to them. PWC also agreed to establish a $2.5
million fund for programs to further awareness and education throughout the
accounting profession related to the independence requirements of public
accounting firms. PricewaterhouseCoopers LLP also has agreed to implement a
comprehensive internal program of training and compliance systems and audits
designed to prevent similar violations in the future.
Required Vote
A majority of the votes cast at the Meeting, if a quorum is
represented, is required for the ratification of selection of the independent
accountants.
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 LFC, the address of which is also 600 Atlantic
Avenue, Boston, Massachusetts 02210. Approximately 72% of the common stock of
LFC 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 (see PROPOSAL 1 - Officers), Board of
Directors is comprised of William R. Parmentier, President, Chief Executive
Officer and Chief Investment Officer, Liberty Asset Management and President of
the Fund, Joseph R. Palombo, Chairman of the Board and Trustee of the Fund, and
J. Andrew Hilbert an officer of LFC. 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 recommends to the
Board of Trustees multiple independent investment management firms (currently
five in number) for appointment as Portfolio Managers of the Fund, each of which
employs a different investment style, and from time to time rebalances the
Fund's portfolio among the Portfolio Managers so as to maintain an approximately
equal allocation of the portfolio among the investment styles practiced by them
throughout all market cycles. Liberty Asset Management continuously analyses and
evaluates the investment performance and portfolios of the Fund's Portfolio
Managers and from time to time recommends changes in the Portfolio Managers. On
November 1, 2000, LFC, an intermediate parent of the advisor, announced that it
had retained CS First Boston to help explore strategic alternatives, including
the possible sale of LFC.
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.
Under the Fund's portfolio management agreements, each Portfolio
Manager has discretionary investment authority with respect to the portion of
the Fund's assets allocated to it by Liberty Asset Management from time to time,
subject to the Fund's investment objective and policies, to the supervision and
control of the 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.
The names and addresses of the Fund's current Portfolio Managers, in
addition to Mastrapasqua, are as follows:
Westwood Management Corporation
300 Crescent Court
Dallas, TX 75201
Oppenheimer Capital Boston Partners Asset Management, L.P.
1345 Avenue of the Americas 28 State Street
New York, NY 10105-4800 Boston, MA 02109
TCW Investment Management, Inc. Mastrapasqua & Associates, Inc.
865 South Figueroa Street 814 Church Street
Los Angeles, CA 90017 Suite 600
Nashville, TN 37203
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.
During2000, there were no Fund portfolio transactions placed with a Portfolio
Manager or its affiliate.
On February 15, 2000, the Securities and Exchange Commission issued the
Fund exemptive relief from Sections 10(f), 17(a) and 17(e) and Rule 17e-1
under the Investment Company Act of 1940 to permit (1) broker-dealers which are,
or are affiliated with, Portfolio Managers of the Fund to engage in principal
transactions with, and provide 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 affiliate of a
Portfolio Manager or from an underwriting syndicate of which a principal
underwriter is affiliated with a Portfolio Manager of the Fund.
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
Mastrapasqua referred to under PROPOSAL 2 and FOR ratification of the Board's
selection of the Fund's independent accountants for 2001 referred to under
PROPOSAL 3. 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 of votes cast at the
Meeting. Approval of the Portfolio Management Agreement with Mastrapasqua
requires the affirmative vote of a "majority of the outstanding voting
securities" of the Fund, as defined under PROPOSAL 2- above. Ratification of the
selection of the Fund 's independent accountants requires the affirmative vote
of a majority of the votes cast at the Meeting, a quorum being present. Only
shareholders of record on February 1, 2001 may vote.
Abstentions and broker non-votes will be counted as present for
purposes of determining whether a quorum is present. If a proposal must be
approved by a percentage of votes cast on the proposal, abstentions and broker
non-votes will not be counted as "votes cast" on the proposal and will have no
effect on the result of the vote. If the proposal must be approved by a
percentage of shares present at the meeting or of the Fund's outstanding shares,
abstentions and broker non-votes will have the effect of votes against the
proposal. "Broker non-votes" occur where: (i) shares are held by brokers or
nominees, typically in "street name;" (ii) instructions have not been received
from the beneficial owners or persons entitled to vote; and (iii) the broker or
nominee does not have discretionary voting power on a particular matter.
All shareholders of record on February 1, 2001 are entitled to one vote
for each share held. As of that date ______ 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 LFC, 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 SEC initial
reports of ownership and reports of changes in ownership of Fund shares.
Section 16 reporting persons are required by SEC regulations to furnish the
Fund with copies of all Section 16(a) forms they file. To the Fund 's knowledge,
based solely on a review of the copies of such reports furnished to the Fund
and on representations made, all Section 16 reporting persons complied with all
Section 16(a) filing requirements applicable to them.
SUBMISSION OF CERTAIN SHAREHOLDER PROPOSALS
Under the proxy rules of the Securities and Exchange Commission,
shareholder proposals meeting tests contained in those rules may, under certain
conditions, be included in the Fund's proxy material for a particular annual
shareholders meeting. Under the foregoing proxy rules, proposals submitted for
inclusion in the proxy material for the 2002 Annual Meeting must be received by
the Fund on or before October26, 2001. 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.
[date]
APPENDIX A
PORTFOLIO MANAGEMENT AGREEMENT
November 1, 2000
Mastrapasqua & Associates, Inc.
814 Church Street
Suite 600
Nashville, TN 37203
Re: Portfolio Management Agreement
Ladies and Gentlemen:
Liberty All-Star Equity (the "Fund") is a diversified closed-end
investment company registered under the Investment Company Act of 1940 (the
"Act"), and is subject to the rules and regulations promulgated thereunder.
Liberty Asset Management Company (the "Fund Manager") evaluates and
recommends portfolio managers for the assets of the Fund, and is responsible for
the day-to-day administration of the Fund.
1. Employment as a Portfolio Manager. The Fund being duly authorized
hereby employs Mastrapasqua & Associates, 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.
C. The Portfolio Manager shall not execute any portfolio transactions
for the Portfolio Manager Account with itself or any 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 except in accordance with SEC Exemptive
Order No. 24288 dated February 15, 2000, a copy of which has been furnished
to the Portfolio Manager, and Rule 17e-1 procedures as approved by the
Fund's Trustees from time to time. The Fund Manager will provide the
Portfolio Manager with a list of brokers and dealers which are "affiliated
persons" of the Fund or its Portfolio Managers.
6. Proxies. The Fund will vote or direct the voting of all proxies
solicited by or with respect to the issuers of securities in which assets of the
Portfolio Manager Account may be invested in accordance with authorization
provided by the Fund Manager from time to time.
7. Fees for Services. The compensation of the Portfolio Manager for its
services under this Agreement shall be calculated and paid by the Fund Manager
in accordance with the attached Schedule C. Pursuant to the Fund Management
Agreement between the Fund and the Fund Manager, the Fund Manager is solely
responsible for the payment of fees to the Portfolio Manager from the fund
management fees paid to it by the Fund, and the Portfolio Manager agrees to seek
payment of its fees solely from the Fund Manager.
8. Other Investment Activities of Portfolio Manager. The Fund
acknowledges that the Portfolio Manager or one or more of its affiliates has
investment responsibilities, renders investment advice to and performs other
investment advisory services for other individuals or entities ("Client
Accounts"), and that the Portfolio Manager, its affiliates or any of its or
their directors, members, officers, agents or employees may buy, sell or trade
in any securities for its or their respective accounts ("Affiliated Accounts").
Subject to the provisions of paragraph 2 hereof, the Fund agrees that the
Portfolio Manager or its affiliates may give advice or exercise investment
responsibility and take such other action with respect to other Client Accounts
and Affiliated Accounts which may differ from the advice given or the timing or
nature of action taken with respect to the Portfolio Manager Account, provided
that the Portfolio Manager acts in good faith, and provided further, that it is
the Portfolio Manager's policy to allocate, within its reasonable discretion,
investment opportunities to the Portfolio Manager Account over a period of time
on a fair and equitable basis relative to the Client Accounts and the Affiliated
Accounts, taking into account the cash position and the investment objectives
and policies of the Fund and any specific investment restrictions applicable
thereto. The Fund acknowledges that one or more Client Accounts and Affiliated
Accounts may at any time hold, acquire, increase, decrease, dispose of or
otherwise deal with positions in investments in which the Portfolio Manager
Account may have an interest from time to time, whether in transactions which
involve the Portfolio Manager Account or otherwise. The Portfolio Manager shall
have no obligation to acquire for the Portfolio Manager Account a position in
any investment which any Client Account or Affiliated Account may acquire, and
the Fund shall have no first refusal, coinvestment or other rights in respect of
any such investment, either for the Portfolio Manager Account or otherwise.
9. Limitation of Liability. The Portfolio Manager shall not be liable
for any action taken, omitted or suffered to be taken by it in its reasonable
judgment, in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement, or in
accordance with (or in the absence of) specific directions or instructions from
the Fund, provided, however, that such acts or omissions shall not have resulted
from the Portfolio Manager's willful misfeasance, bad faith or gross negligence,
a violation of the standard of care established by and applicable to the
Portfolio Manager in its actions under this Agreement or breach of its duty or
of its obligations hereunder (provided, however, that the foregoing shall not be
construed to protect the Portfolio Manager from liability in violation of
Section 17 of the Act).
10. Confidentiality. Subject to the duty of the Portfolio Manager and
the Fund to comply with applicable law, including any demand of any regulatory
or taxing authority having jurisdiction, the parties hereto shall treat as
confidential all information pertaining to the Portfolio Manager Account and the
actions of the Portfolio Manager and the Fund in respect thereof.
11. Assignment. This Agreement shall terminate automatically in the
event of its assignment, as that term is defined in Section 2(a)(4) of the Act.
The Portfolio Manager shall notify the Fund in writing sufficiently in advance
of any proposed change of control, as defined in Section 2(a)(9) of the Act, as
will enable the Fund to consider whether an assignment as defined in Section
2(a)(4) of the Act will occur, and whether to take the steps necessary to enter
into a new contract with the Portfolio Manager.
12. Representations, Warranties and Agreements of the Fund. The Fund
represents, warrants and agrees that:
A. The Portfolio Manager has been duly appointed to provide investment
services to the Portfolio Manager Account as contemplated hereby.
B. The Fund has delivered to the Portfolio Manager such instructions
governing the investment of the Portfolio Manager Account as are necessary
for the Portfolio Manager to carry out its obligations under this
Agreement.
C. Upon certification by the Portfolio Manager that it has adopted a
written code of ethics and procedures reasonably necessary to prevent
access persons, as defined by said code of ethics, from violating the
anti-fraud provisions of Rule 17j-1 under the Act, the Fund will not
unreasonably withhold its approval of the code of ethics adopted by the
Portfolio Manager provided that the Portfolio Manager certifies to the Fund
that in all other material respects the Portfolio Manager's code of ethics
complies with Rule 17j-1.
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 and maintain a written code of ethics complying with
the requirements of Rule 17j-1 and submit same and any amendments thereto
promptly to the Fund, but not less often than annually. The Portfolio
Manager agrees that it will notify the Fund within 15 days of adopting
material changes to its code of ethics. While this Agreement is in effect,
an officer or general partner of the Portfolio Manager shall certify
annually to the Fund that the Portfolio Manager has complied with the
requirements of Rule l7j-1 during the previous year and has procedures
reasonably necessary to prevent access persons from violating the Portfolio
Manager's code of ethics. On an annual basis, the Portfolio Manager shall
provide a written report to the Fund describing any issues arising under
its code of ethics or procedures since the last report was so submitted,
including information about material violations of the code or procedures
and any action taken in response to such violations. Upon the written
request of the Fund, the Portfolio Manager shall permit the Fund to examine
the reports required to be maintained by the Portfolio Manager under Rule
l7j-l(c)(l).
D. Upon request, the Portfolio Manager will promptly supply the Fund
with any information concerning the Portfolio Manager and its stockholders,
employees and affiliates which the Fund may reasonably require in
connection with the preparation of its Registration Statement or amendments
thereto, proxy material, reports and other documents required to be filed
under the Act, the Securities Act of 1933, or other applicable securities
laws.
14. Amendment. This Agreement may be amended at any time, but (except
for Schedules A and B which may be amended by the Fund Manager acting alone)
only by written agreement among the Portfolio Manager, the Fund Manager and the
Fund, which amendment, other than amendments to Schedules A and B, is subject to
the approval of the Board of 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
November 1, 2002 and shall continue in effect thereafter provided such
continuance is specifically approved at least annually by (i) the Fund's Board
of Directors or (ii) a vote of a "majority" (as defined in the Act) of the
Fund's outstanding voting securities, provided that in either event such
continuance is also approved by a majority of the Board of 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. 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.
IN WITNESS WHEREOF, the parties have hereunto set their hands as of the
date first written above.
LIBERTY ALL-STAR EQUITY FUND
By:
---------------------------------------
Name: William J. Ballou
Title: Secretary
LIBERTY ASSET MANAGEMENT COMPANY
By:
---------------------------------------
Name: William R. Parmentier
Title: President and Chief Executive Officer
ACCEPTED:
MASTRAPASQUA & ASSOCIATES
By:
-------------------------------------------------------------------
Name: Thomas A. Trantum
Title: President
SCHEDULES: A. Operational Procedures For Portfolio Transactions
B. Record Keeping Requirements
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 B
LIBERTY ALL-STAR EQUITY FUND
LIBERTY ALL-STAR GROWTH FUND, INC.
AUDIT COMMITTEE CHARTER
I. Composition of the Audit Committee. The Audit Committee shall be
--------------------------------------
comprised of at least three directors, each of whom shall have no
relationship to Liberty All-Star Equity Fund and Liberty All-Star
Growth Fund, Inc. (the "Funds") that may interfere with the exercise of
their independence from management and the Fund and shall otherwise
satisfy the applicable membership requirements under the rules of the
New York Stock Exchange, Inc.
II. Purposes of the Audit Committee. The purposes of the Audit Committee
---------------------------------
are to assist the Board of Trustees/Directors:
1. in its oversight of the Fund's accounting and financial
reporting policies and practices, its internal audit controls
and procedures, and, as appropriate, the internal controls
of certain service providers;
2. in its oversight of the quality and objectivity of the Fund's
financial statements and the independent audit thereof;
3. in selecting (or nominating the outside auditors to be
proposed for shareholder approval in any proxy statement),
evaluating and, where deemed appropriate, replacing the
outside auditors; and
4. in evaluating the independence of the outside auditors.
The function of the Audit Committee is oversight. Management for the
Fund is responsible for the preparation, presentation and integrity of
the Fund's financial statements. Management and its internal accounting
department are responsible for maintaining appropriate accounting and
financial reporting principles and policies and internal controls and
procedures designed to assure compliance with accounting standards and
applicable laws and regulations. The outside auditors are responsible
for planning and carrying out a proper audit and reviews. The outside
auditor for the Fund is ultimately accountable to the Board of
Trustees/Directors and Audit Committee of the Fund. The Board of
Trustees/Directors and the Audit Committee have the ultimate authority
and responsibility to select, evaluate and, where appropriate, replace
the outside accountant (or to nominate the outside accountant to be
proposed for shareholder approval in any proxy statement).
III. Meetings of the Audit Committee. The Audit Committee shall meet at
-------------------------------
least once annually, or more frequently if circumstances dictate. The
Audit Committee shall set its agenda and the places and times of its
meetings. The Audit Committee may meet alone and outside the presence
of management personnel with any certified public accountant and
auditor firm rendering reports to the Audit Committee or the Board of
Trustees/Directors and with outside legal counsel.
IV. Duties and Powers of the Audit Committee. To carry out its purposes,
---------------------------------------------
the Audit Committee shall have the following duties and powers:
1. The Audit Committee shall review and discuss the audited
financial statements and other financial information with
management and the independent auditors for the Fund.
2. The Audit Committee shall review and discuss with the
independent auditors:
a. the scope of audits and audit reports;
b. the personnel, staffing, qualifications and
experience of the auditor;
c. the compensation of the auditor; and
d. the independence of the auditor, regarding which the
Audit Committee shall secure from the auditor the
information required by Independence Standards Board
Standard No. 1. The Audit Committee shall actively
engage in a dialogue with the outside auditor with
respect to any disclosed relationships or services
that may impact the objectivity and independence of
the outside auditor. The Audit Committee also shall
be responsible for recommending that the Board of
Trustees/Directors take appropriate action in
response to the outside auditor's report to satisfy
itself of the outside auditor's independence.
3. The Audit Committee also shall review and discuss with the
independent auditors the matters required to be discussed
pursuant to SAS 61, including the following:
a. the quality, not just the acceptability under
generally accepted accounting principles, of the
accounting principles applied by the Fund in its
financial reporting;
b. the level of responsibility assumed by the auditors
in the preparation of the audit;
c. the initial selection of and changes in significant
accounting policies or their application, and the
effect of significant accounting policies in
controversial or emerging areas for which there is a
lack of authoritative consensus or guidance;
d. the process used by management for the Fund in
formulating particularly sensitive accounting
estimates and the basis for the auditor's conclusions
regarding the reasonableness of those estimates;
e. the auditor's responsibility for other information in
documents containing audited financial statements,
any procedures performed, and the results;
f. any disagreements with management, whether or not
satisfactorily resolved, about matters that
individually or in the aggregate could be significant
to the entity's financial statements or the auditor's
report;
g. any consultations with other accountants and
significant matters that were the subject of such
consultations;
h. any major issues discussed with management in
connection with the initial or recurring retention
of the auditor, including the application of
accounting principles and auditing standards; and
i. any serious difficulties relating to the performance
of the audit that the auditor encountered with
management.
4. The Audit Committee shall provide a recommendation to the
Board of Trustees/Directors regarding whether the audited
financial statements of the Fund should be included in the
annual report to shareholders of the Fund.
5. The Audit Committee shall prepare the report, including any
recommendation of the Audit Committee, required by the rules
of the Securities and Exchange Commission to be included in
the Fund's annual proxy statement.
6. The Audit Committee shall review this charter at least
annually and recommend any changes to the full Board of
Trustees/Directors; and
7. The Audit Committee shall report its activities to the full
Board of Trustees/Directors on a regular basis and make such
recommendations with respect to the above and other matters as
the Audit Committee may deem necessary or appropriate.
V. Resources and Authority of the Audit Committee. The Audit Committee
----------------------------------------------
shall have the resources and authority appropriate to discharge its
responsibilities, including the authority to engage outside auditors
for special audits, reviews and other procedures and to retain special
counsel and other experts or consultants at the expense of the Fund.
LIBERTY ALL-STAR EQUITY FUND
PROXY SOLICITED BY THE BOARD OF TRUSTEES OF LIBERTY ALL-STAR EQUITY FUND
PROXY FOR 2001 ANNUAL MEETING OF SHAREHOLDERS
The undersigned, revoking previous proxies, hereby appoints William J. Ballou,
Suzan M. Barron, Russell L. Kane, William R. Parmentier and Vincent P.
Pietropaolo, 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 2001 Annual Meeting of the Fund to be
held in Room AV-1, 3rd Floor, Federal Reserve Plaza, 600 Atlantic Avenue,
Boston, Massachusetts on April 18, 2001 at 9:30 a.m. and at any adjournments
thereof. All powers may be exercised by a majority of said proxy holders or
substitutes voting or acting or, if only one votes or acts, then by that one.
This undersigned directs said proxy holders to vote as specified upon the
proposals shown below, each of which is described in the proxy statement for the
Meeting, receipt of which is acknowledged.
SAID PROXIES WILL VOTE THIS PROXY AS DIRECTED, OR IF NO DIRECTION IS INDICATED,
FOR ALL PROPOSALS.
--------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE DO NOT FOLD, STAPLE OR MUTILATE CARD.
--------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED?
--------------------------------------------------------------------------------
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
----------------------------------------------------
LIBERTY ALL-STAR EQUITY FUND
----------------------------------------------------
Mark box at right if an address change
has been noted on the reverse side
of this card. [ ]
CONTROL NUMBER:
RECORD DATE SHARES:
Please sign exactly as your name(s) appear(s) above. Corporate proxies should be
signed by an authorized officer.
-----------------------
Date
-------------------------------------
Shareholder sign here
-------------------------------------
Co-owner sign here
To elect three Trustees of the Fund
(01) Richard W. Lowry
(02) John J. Neuhauser
(03) Joseph R. Palombo
For All Nominees Withhold For All Except
[ ] [ ] [ ]
NOTE: If you do not wish your shares voted "FOR" one of the nominees, mark the
"FOR ALL EXCEPT" box and strike a line through the name of the nominee. Your
shares will be voted "For" the other nominees.
2. To approve the Fund's Portfolio Management Agreement with
Mastrapasqua & Associates, Inc.
For Against Abstain
[ ] [ ] [ ]
3. To ratify the selection by the Board of Trustees of
PricewaterhouseCoopers LLP as the Fund's independent auditors for the
year ending December 31, 2001.
For Against Abstain
[ ] [ ] [ ]
4. In their discretion, upon such other business as may properly come
before the Meeting.