As filed with the Securities and Exchange Commission on February 22, 2002
1933 Act File No. 333-
1940 Act File No. 811-4809
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-2
(Check appropriate box or boxes)
[X] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. _________
[ ] Post-Effective Amendment No._________
and
[X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X] Amendment No. 18
Liberty All-Star Equity Fund
---------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
One Financial Center
Boston, Massachusetts 02111-2621
-----------------------------------------
(Address of Principal Executive Offices)
(Number, Street, City, State, Zip Code)
(617) 426-3750
--------------------------------------------------
Registrant's Telephone Number, including Area Code
Jean S. Loewenberg Jeremiah J. Bresnahan
Secretary Bingham Dana LLC
Liberty All-Star Equity Fund 150 Federal Street
One Financial Center Boston, MA 02110
Boston, MA 02111
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are offered on a delayed
or continuous basis in reliance on Rule 415 under the Securities Act of 1933,
other than securities offered in connection with a dividend reinvestment plan,
check the following box. [X]
It is proposed that this filing will become effective (check appropriate box)
[X] when declared effective pursuant to section 8(c)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 486
[ ] on (date) pursuant to paragraph (b) of Rule 486
[ ] 60 days after filing pursuant to paragraph (a) of Rule 486
[_] on(date) pursuant to paragraph (a) of Rule 486
[_] This post-effective amendment designates a new effective date for a
previously filed registration statement.
[_] The Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act and the Securities Act
registration number of the earlier effective registration statement is
--------.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICIALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
PROPOSED PROPOSED
TITLE MAXIMUM MAXIMUM AMOUNT OF
OF SECURITIES AMOUNT OFFERING PRICE AGGREGATE REGISTRATION
BEING REGISTERED BEING REGISTERED(1) PER UNIT(1) OFFERING PRICE(1) FEE(1)
---------------- ------------------- -------------- -------------- -------------
Shares of Beneficial
Interest 10,910,830 $11.15 $121,655,755 $11,193
(1) Estimated solely for the purposes of calculating the Registration fee in
accordance with Rule 457(c) under the Securities Act of 1933. Based
on the average of the high and low sales prices reported on the
New York Stock Exchange, Inc. on February 15, 2002.
[ ] Rights for [ ] Shares
LIBERTY ALL-STAR EQUITY FUND
Shares of Beneficial Interest
Liberty All-Star Equity Fund ("All-Star" or the "Fund") is offering rights (the
"Rights") to its shareholders (the "Offer"). These Rights will allow you to
subscribe for new shares of beneficial interest of All-Star (the "Shares"). For
every ten Rights that you receive, you may buy one new All-Star Share. You will
receive one Right for each outstanding All-Star Share you own on [ ], 2002 (the
"Record Date"). Fractional Shares will not be issued upon the exercise of the
Rights. Accordingly, Shares may be purchased only pursuant to the exercise of
Rights in integral multiples of ten. Also, Shareholders on the Record Date may
purchase Shares not acquired by other shareholders in this Rights offering,
subject to limitations discussed in this prospectus. The Rights are not
transferable and will not be admitted for trading on the New York Stock Exchange
("NYSE"). See "The Offer." THE SUBSCRIPTION PRICE PER SHARE WILL BE 95% OF THE
LOWER OF (i) THE LAST REPORTED SALE PRICE ON THE NYSE ON [ ], 2002 (the "Pricing
Date") OF A SHARE OF ALL-STAR, OR (ii) THE NET ASSET VALUE OF A SHARE OF
ALL-STAR ON THAT DATE.
THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON [ ], 2002 (the
"Expiration Date"). SINCE THE CLOSE OF THE OFFERING ON THE EXPIRATION DATE IS
PRIOR TO THE PRICING DATE, SHAREHOLDERS WHO CHOOSE TO EXERCISE THEIR RIGHTS WILL
NOT KNOW THE SUBSCRIPTION PRICE PER SHARE AT THE TIME THEY EXERCISE SUCH RIGHTS.
For additional information, please call Georgeson Shareholder Communications
Inc. (the "Information Agent") toll free at (888) [ ].
All-Star is a multi-managed diversified, closed-end management investment
company that allocates its portfolio assets on an approximately equal basis
among several independent investment organizations (currently five in number)
("Portfolio Managers") having different investment styles recommended and
monitored by Liberty Asset Management Company, All-Star's fund manager ("LAMCO"
or "Fund Manager"). All-Star's investment objective is to seek total investment
return, comprised of long term captial appreciation and current income. It seeks
its investment objective through investment primarily in a diversified portfolio
of equity securities. An investment in All-Star is not appropriate for all
investors. No assurances can be given that All-Star's investment objective will
be achieved. For a discussion of certain risk factors and special considerations
with respect to owning Shares of All-Star, see "Special Considerations and Risk
Factors" beginning on page [ ] and "Investment Objective, Policies and Risks" on
page [ ] of this Prospectus.
The address of All-Star is Federal Reserve Plaza, One Financial Center, Boston,
Massachusetts 02211 and its telephone number is (800) 542-3863. All-Star's
Shares are listed on the NYSE under the symbol "USA."
All-Star announced the terms of the Offer before the opening of trading on the
NYSE on February 13, 2002. The net asset value per Share of beneficial interest
of All-Star at the close of business on February 12, 2002 and [ ], 2002 was
$10.14 and $[ ], respectively, and the last reported sale price of a Share on
such Exchange on those dates was $11.06 and $[ ], respectively.
Neither the Securities and Exchange Commission nor any State securities
commission has approved or disapproved these securities or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
crime.
Subscription Price(1) Sales Load Proceeds to All-Star(2)
---------------------------------------------- --------------------------- ----------------------------- -------------------------
---------------------------------------------- --------------------------- ----------------------------- -------------------------
Per Share..................................... $[ ] NONE $[ ]
---------------------------------------------- --------------------------- ----------------------------- -------------------------
---------------------------------------------- --------------------------- ----------------------------- -------------------------
Total.......................................... $[ ] NONE $[ ]
---------------------------------------------- --------------------------- ----------------------------- -------------------------
(1) Estimated based on assumed Subscription Price of 95% of the net
asset value on [ ], 2002.
(2) Before deduction of expenses payable by All-Star, estimated at $315,000.
Shareholders who do not exercise their Rights should expect that they will, at
the completion of the Offer, own a smaller proportional interest in the Fund
than if they exercised their Rights. As a result of the Offer you may experience
an immediate dilution of the aggregate net asset value of your Shares, which
under certain circumstances, could be substantial. This is because the
Subscription Price per Share and/or the net proceeds to All-Star for each new
Share sold will be less than All-Star's net asset value per Share on the
Expiration Date. All-Star cannot state precisely the extent of this dilution at
this time because it does not know what the net asset value or market price per
Share will be when the Offer expires or what proportion of the Rights will be
exercised.
This Prospectus sets forth concisely the information that a shareholder ought to
know before exercising his or her Rights. Investors are advised to read and
retain it for future reference. A Statement of Additional Information dated [ ],
2002 has been filed with the Securities and Exchange Commission and is
incorporated by reference in its entirety into this Prospectus. The table of
contents of the Statement of Additional Information appears on page [ ] of this
Prospectus, and a copy is available at no charge by calling the Information
Agent at (888) [ ].
The date of this Prospectus is [ ], 2002.
PROSPECTUS SUMMARY
This summary highlights some information that is described more fully elsewhere
in this Prospectus. It may not contain all of the information that is important
to you. To understand the Offer fully, you should read the entire document
carefully, including the risk factors.
Purpose of the Offer
The Board of Trustees of All-Star has determined that it would be in the best
interest of All-Star and its Shareholders to increase the assets of All-Star
available for investment so that it may be in a better position to take
advantage of investment opportunities that may arise. The Offer seeks to reward
existing shareholders in All-Star by giving them the opportunity to purchase
additional Shares at a price below market and/or net asset value and without
incurring any brokerage commissions. See "The Offer-Purpose of the Offer."
Important Terms of the Offer
Total number of Shares available for primary subscription...... [ ] Shares
Number of Rights you will receive for each outstanding
Share you own on the Record Date............................ One Right for every one Share
Number of Shares you may purchase with your Rights at the
Subscription Price per Share............................... One Share for every ten Rights
Subscription Price .......................................... 95% of the lower of (i) the last reported sale price on the
NYSE on [ ], 2002 (the "Pricing Date") of a Share
of All-Star, or (ii) the net asset value of a Share of
All-Star on the Pricing Date.
--------------------------------------------------------------------------------
Shareholders' inquiries should be directed to:
Georgeson Shareholder Communications Inc.
(888) [ ]
--------------------------------------------------------------------------------
Over-Subscription Privilege
The right to acquire during the Subscription Period at the Subscription Price
one additional Share for each ten Rights held is hereinafter referred to as the
"Primary Subscription." Shareholders on the Record Date who fully exercise all
Rights issued to him or her (other than those Rights which cannot be exercised
because they represent the right to acquire less than one Share) are entitled to
subscribe for Shares which were not otherwise subscribed for by others on
Primary Subscription (the "Over-Subscription Privilege"). For purposes of
determining the maximum number of Shares a Shareholder may acquire pursuant to
the Offer, broker-dealers whose Shares are held of record by Cede & Co., Inc.
("Cede"), nominee for Depository Trust Company, or by any other depository or
nominee will be deemed to be the holders of the Rights that are issued to Cede
or such other depository or nominee. If enough Shares are available, all
Shareholder requests to buy Shares that were not bought by other Rights holders
will be honored in full. If the requests for Shares exceed the Shares available,
the available Shares will be allocated pro rata among those shareholders on the
Record Date who over-subscribe based on the number of Rights originally issued
to them by the Fund. Shares acquired pursuant to the Over-Subscription Privilege
are subject to allotment, which is more fully discussed under "The
Offer--Over-Subscription Privilege."
Method for Exercising Rights
Except as described below, subscription certificates evidencing the Rights
("Subscription Certificates") will be sent to shareholders on the Record Date
("Record Date Shareholders") or their nominees. If you wish to exercise your
Rights, you may do so in the following ways:
(1) Complete and sign the Subscription Certificate. Mail it in the envelope
provided or deliver it, together with payment in full to EquiServe Trust
Company, N.A. ("Subscription Agent") at the address indicated on the
Subscription Certificate. Your completed and signed Subscription Certificate and
payment must be received by the Expiration Date.
(2) Contact your broker, banker or trust company, which can arrange, on
your behalf, to guarantee delivery of payment and delivery of a properly
completed and executed Subscription Certificate pursuant to a notice of
guaranteed delivery ("Notice of Guaranteed Delivery") by the close of business
on the third business day after the Expiration Date. A fee may be charged for
this service. The Notice of Guaranteed Delivery must be received by the
Expiration Date.
Rights holders will have no right to rescind a purchase after the Subscription
Agent has received payment. See "The Offer - Method of Exercise of Rights" and
"The Offer - Payment for Shares."
Since the Expiration Date is prior to the Pricing Date, Shareholders who choose
to exercise their Rights will not know at the time they exercise such Rights
what the purchase price for Shares acquired pursuant to such exercise will be.
Shareholders will have no right to rescind their subscription after receipt of
their payment for Shares by the Subscription Agent. Subscription payments will
be held by the Subscription Agent pending completion of the processing of the
subscription. No interest thereon will be paid to subscribers.
The Rights are not transferable. Therefore, only the underlying Shares, and not
the Rights, will be admitted for trading on the NYSE. Since fractional Shares
will not be issued on exercise of Rights, shareholders who receive, or are left
with, fewer than ten Rights will be unable to exercise such Rights and will not
be entitled to receive any cash in lieu of unexercised rights.
Shareholders' inquiries about the Offer should be directed to their broker, bank
or trust company, or to:
Georgeson Shareholder Communications Inc.
(888) [ ]
Important Dates to Remember
Please note that the dates in the table below may change if the Offer is
extended.
-------------------------------------------------------------- --------------------------------
Event Date
-------------------------------------------------------------- --------------------------------
-------------------------------------------------------------- --------------------------------
Record Date [ ], 2002
-------------------------------------------------------------- --------------------------------
-------------------------------------------------------------- --------------------------------
Subscription Period [ ], 2002 through
[ ], 2002*
-------------------------------------------------------------- --------------------------------
-------------------------------------------------------------- --------------------------------
Expiration Date (Deadline for delivery of Subscription
Certificate together with payment of estimated Subscription
Price or for delivery of Notice of Guaranteed Delivery) [ ], 2002
-------------------------------------------------------------- --------------------------------
-------------------------------------------------------------- --------------------------------
Pricing Date [ ], 2002
-------------------------------------------------------------- --------------------------------
-------------------------------------------------------------- --------------------------------
Deadline for payment of final Subscription Price pursuant to
Notice of Guaranteed Delivery [ ], 2002
-------------------------------------------------------------- --------------------------------
-------------------------------------------------------------- --------------------------------
Confirmation to Registered Shareholders [ ], 2002
-------------------------------------------------------------- --------------------------------
-------------------------------------------------------------- --------------------------------
For Registered Shareholders' Subscriptions - deadline for
payment of unpaid balance if final Subscription Price is
higher than Estimated Subscription Price [ ], 2002
-------------------------------------------------------------- --------------------------------
___________________________
* Unless the Offer is extended.
Offering Fees and Expenses
Offering expenses incurred by the Fund are estimated to be $[ ].
Restrictions on Foreign Shareholders
Record date Shareholders whose record addresses are outside the United States
will receive written notice of the Offer; however, Subscription Certificates
will not be mailed to such shareholders. The Rights to which those Subscription
Certificates relate will be held by the subscription agent for such foreign
Record Date Shareholders' accounts until instructions are received in writing
with payment to exercise the Rights. If no such instructions are received by the
Expiration Date, such Rights will expire. See "Subscription Agent."
Information about All-Star
All-Star is a multi-managed diversified, closed-end management investment
company registered under the Investment Company Act of 1940, as amended ("1940
Act") that allocates its assets on an approximately equal basis among a number
of independent investment management organizations (currently five in number)
each having a different investment style. See "The Multi-Manager Concept."
All-Star's investment objective is to seek total investment return, comprised of
long term capital appreciation and current income. It seeks its objective
through investment primarily (at least 80% of total assets under normal
conditions) in a diversified portfolio of equity securities. The portion of
All-Star's portfolio not invested in equity securities (not more than 20% of
total assets under normal conditions) is generally invested in Short-Term Money
Market Instruments. See "Investment Objective, Policies and Risks."
All-Star commenced investment operations in November, 1986. Its outstanding
Shares of beneficial interest are listed and traded on the NYSE (Symbol "USA").
The average weekly trading volume of the Shares on the NYSE during the year
ended December 31, 2001 was [ ] Shares. As of [ ], 2002, All-Star's net assets
were $[ ], and [ ] Shares of All-Star were issued and outstanding.
Information about Liberty Asset Management Company
LAMCO provides selection, evaluation and monitoring services to All-Star and is
responsible for the provision of administrative services to the Fund, some of
which are delegated to LAMCO's affiliate, Colonial Management Associates, Inc.
("Colonial"). See "Management of All-Star" for the fees paid by the Fund to
LAMCO and by LAMCO to the Portfolio Managers. Since the fees of LAMCO and the
Portfolio Managers are based on the average weekly net assets of All-Star, LAMCO
and the Portfolio Managers will benefit from the Offer. See "Management of
All-Star." As of December 31, 2001, LAMCO managed over $1.3 billion in assets.
LAMCO, organized in 1985, is a direct wholly owned subsidiary of Columbia
Management Group, Inc. (formerly known as Fleet/Liberty Holdings, Inc.), which
is a direct wholly owned subsidiary of Fleet National Bank, a national banking
association, which in turn is a direct wholly owned subsidiary of FleetBoston
Financial Corporation, a U.S. financial holding company. The principal executive
offices of LAMCO are located at One Financial Center, Boston, Massachusetts
02111. The principal executive offices of Columbia Management Group, Inc., Fleet
National Bank and FleetBoston Financial Corporation are located at 100 Federal
Street, Boston, Massachusetts 02110.
Special Considerations and Risk Factors
The following summarizes some of the matters that you should consider
before investing in All-Star through the Offer.
Dilution......................Shareholders who do not fully exercise their
Rights should expect that they will, at the completion of the Offer, own a
smaller proportional interest in the Fund than if they exercised their
Rights. As a result of the Offer you may experience an immediate dilution
of the aggregate net asset value of your Shares, which, under certain
circumstances, may be substantial. This is because the Subscription Price
per Share and/or the net proceeds to the Fund for each new Share sold will
be less than the Fund's net asset value per Share on the Expiration Date.
Although it is not possible to state precisely the amount of such dilution
because it is not known at this time how many Shares will be subscribed for
or what the net asset value or market price per Share will be on the
Pricing Date, All-Star estimates that such dilution should not be
substantial. For example, if All-Star's Shares are trading at a premium
from their net asset value of 9.5% (the average premium for the six-month
period ended January 31, 2001), and assuming all Rights are exercised, the
Subscription Price would be 5% below All-Star's net asset value per Share,
resulting in a reduction of such net asset value of approximately $[ ] per
Share, or less than [ ]%. See "Special Considerations and Risk Factors -
Dilution."
Distributions...................... All-Star currently has a policy of paying
distributions on its Shares totaling approximately 10% of its net asset
value per year, payable in four quarterly distributions of 2.5% of its net
asset value at the close of the NYSE on the Friday prior to each quarterly
declaration date. These fixed distributions, which are not related to
All-Star's net investment income or net realized capital gains or losses,
will be treated as ordinary dividend income up to the amount of All-Star's
current and accumulated earnings and profits. If, for any calendar year,
the total distributions made under the 10% pay-out policy exceed All-Star's
net investment income and net realized capital gains, the excess will be
treated as a tax-free return of capital to each shareholder (up to the
amount of the Shareholder's basis in his or her Shares) and thereafter as
gain from the sale of Shares. The amount treated as a tax-free return of
capital will reduce the Shareholder's adjusted basis in his or her Shares,
thereby increasing his or her potential gain or reducing his or her
potential loss on the subsequent sale of his or her Shares.
All-Star may, in the discretion of the Board of Trustees, retain for
reinvestment, and not distribute, net long-term capital gains in
excess of net short-term capital losses ("net capital gain") for any
year to the extent that its net investment income and net realized
gains exceed the minimum amount required to be distributed for such
year under the 10% pay-out policy, although All-Star reserves the
right to distribute such excess. Retained net capital gain will be
taxed to both All-Star and the Shareholders as long-term capital
gains; however, each Shareholder will be able to claim a proportionate
share of the federal income tax paid by All-Star as a credit against
his or her own federal income tax liability and will be entitled to
increase the adjusted tax basis in his or her Shares by the difference
between the amount taxed and the credit. See "Distributions; Automatic
Dividend Reinvestment and Cash Purchase Plan."
Closed-end fund discounts...........................Shares of closed-end
funds frequently trade at a market price that is less than the value
of the net assets attributable to those shares. The possibility that
Shares of All-Star will trade at a discount from net asset value is a
risk separate and distinct from the risk that All-Star's net asset
value will decrease. The risk of purchasing shares of a closed-end
fund that might trade at a discount is more pronounced for investors
who wish to sell their shares in a relatively short period of time
because, for those investors, realization of a gain or loss on their
investments is likely to be more dependent upon the existence of a
premium or discount than upon portfolio performance. See "Share Price
Data."
Anti-takeover Provisions...........................All-Star's
Declaration of Trust and By-Laws have provisions (commonly referred to
as "anti-takeover provisions") which are intended to have the effect
of limiting the ability of other entities or persons to acquire
control of All-Star, to cause it to engage in certain transactions, or
to modify its structure. For instance, the affirmative vote of 75
percent of the Shares of the Fund is required to authorize All-Star's
conversion from a closed-end to an open-end investment company, unless
such conversion is recommended by All-Star's Board of Trustees, in
which event such conversion would only require the majority vote of
All-Star's Shareholders, as defined in the 1940 Act. A similar
Shareholder vote is required to authorize a merger, sale of a
substantial part of the assets or similar transactions with persons
beneficially owning five percent or more of All-Star's Shares, unless
approved by All-Star's Board of Trustees under certain conditions.
These provisions cannot be amended without a similar super-majority
vote. In addition, All-Star's Board of Trustees is divided into three
classes, each of which has a term of three years and only one of which
is elected at each annual meeting of shareholders. See "Description of
Shares--Anti-takeover Provisions of the Declaration of Trust and
By-Laws; Super-majority Vote Requirement for Conversion to Open-End
Status."
Repurchase........................You will be free to dispose of your
Shares on the NYSE or other markets on which the Shares may trade,
but, because the Fund is a closed-end fund, you do not have the right
to redeem your Shares.
You should carefully consider your ability to assume the foregoing risks before
making an investment in the Fund. An investment in Shares of the Fund is not
appropriate for all investors.
EXPENSES
Shareholder Transaction Expenses
These are the expenses that an investor incurs when buying Shares of
All-Star, whether in this Offer, in the open-market or through All-Star's
Automatic Dividend Reinvestment and Cash Purchase Plan, as amended ("Plan").
Sales Load .......................................... None(l)
Automatic Dividend Reinvestment
and Cash Purchase Plan Fees ........ $1.25 per voluntary cash investment
(1) No sales load or commission will be payable in connection with
this Offer. Purchases of Shares through brokers in secondary market
transactions are subject to brokers' commissions and charges.
Annual Expenses (as a percentage of net assets attributable to beneficial
interests)
Management and Administrative Fees .................................. 0.90%
Other Expenses....................................................... 0.13%
Total Annual Expenses ............................................... 1.03%
Example: You would pay the following expenses on an investment
(at net asset value) of $1,000, assuming a 5% annual return.
1 Year 3 Years 5 Years 10 Years
------ ------- ------- ----------
$11 $33 $57 $126
These figures are intended to illustrate the effect of All-Star's
expenses, but are not meant to predict its future returns and expenses, which
may be higher or lower than those shown.
The purpose of the above tables is to assist investors in understanding the
various costs and expenses that an investor in All-Star will bear directly or
indirectly. The numbers shown under the Annual Expenses table are projections
based on All-Star's actual expenses for the year ended December 31, 2001, and on
its projected net assets assuming the Offer is fully subscribed for at an
assumed Subscription Price of $[ ] per Share. See "Financial Highlights" for
All-Star's actual ratio of expenses to average net assets for the year ended
December 31, 2001.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance. Information is shown for the Fund's last ten fiscal
years. Certain information reflects financial results from a single Fund Share.
The information for the fiscal years ended December 31, 2000 and December 31,
2001 has been audited by [ ], independent accountants. The information included
in the Fund's financial statements for periods prior to 1999 had been audited by
[ ], another independent auditor, whose report expressed an unqualified opinion
on those financial statements and financial highlights. The report of the
independent accountants, together with the financial statements of the Fund, are
included in the Fund's December 31, 2001 Annual Report and are incorporated by
reference into the Statement of Additional Information (see cover page).
For the Year Ended December 31,
2001 2000 1999 1998 1997
PER SHARE OPERATING PERFORMANCE:
$13.61 $14.02 $14.22 $13.32 $11.95
Net asset value at beginning of year
Income from Investment Operations:
0.03 0.05 0.05 0.05 0.05
Net investment income
Net realized and unrealized gain (1.79) 0.96 1.22 2.35 3.01(a)
(loss) on investments
---- ---- ---- ---- (0.36)
Provision for federal income tax
(1.76) 1.01 1.27 2.40 2.70
Total from Investment Operations
Less Distributions from:
(0.03) (0.06) (0.05) (0.05) (0.05)
Net investment income
(1.17) (1.36) (1.34) (1.35) (1.28)
Realized capital gains
---- ---- ---- ---- ----
Return of capital
(1.20) (1.42) (1.39) (1.40) (1.33)
Total Distributions
---- ---- ---- (0.10) ----
Change due to rights offering (b)
Impact of Shares issued in dividend reinvestment (c) ---- ---- (0.08) ---- ----
Total Distributions, Reinvestments and Rights Offering (1.20) (1.42) (1.47) (1.50) (1.33)
$10.65 $13.61 $14.02 $14.22 $13.32
Net asset value at end of year
$11.09 $12.375 $11.063 $12.938 $13.313
Market price at end of year
TOTAL INVESTMENT RETURN FOR SHAREHOLDERS: (d)
(12.7)% 8.8% 10.2% 19.8% 26.6%
Based on net asset value
0.0% 25.4% (4.4)% 9.1% 34.4%
Based on market price
RATIOS AND SUPPLEMENTAL DATA:
$1,133 $1,376 $1,396 $1,351 $1,150
Net assets at end of year (millions)
1.03% 0.96% 0.97% 1.00% 1.01%
Ratio of expenses to average net assets
Ratio of net investment income (loss) to average net assets 0.27% 0.37% 0.37% 0.39% 0.38%
Portfolio turnover rate 64% 83% 90% 76% 99%
(a) Before provision for federal income tax
(b) Effect of Fund's rights offering for Shares at a price below net asset
value.
(c) Effect of payment of a portion of distributions in newly issued Shares
valued at a discount from net asset value.
(d) Calculated assuming all distributions reinvested at the actual
reinvestment price and all primary rights exercised.
For the Year Ended December 31,
1996 1995 1994 1993 1992
PER SHARE OPERATING PERFORMANCE:
$11.03 $9.26 $10.40 $10.78 $11.20
Net asset value at beginning of year
Income from Investment Operations:
0.08 0.10 0.11 0.12 0.16
Net investment income (loss)
Net realized and unrealized gains 2.15(a) 2.71 (0.20) 0.78(a) 0.54
(losses) on investments
(0.13) ---- ---- (0.18) ----
Provision for federal income tax
2.10 2.81 (0.09) 0.72 0.70
Total from Investment Operations
Less Distributions from:
(0.08) (0.10) (0.12) (0.12) (0.18)
Net investment income
(1.10) (0.94) (0.52) (0.58) (0.66)
Realized capital gain
---- ---- (0.36) (0.37) (0.23)
Return of capital
(1.18) (1.04) (1.00) (1.07) (1.07)
Total Distributions
---- ---- (0.05) (0.03) (0.05)
Change due to rights offering (b)
Impact of Shares issued in dividend ---- ---- ---- ---- ----
reinvestment (c)
Total Distributions, Reinvestments and Rights (1.18) (1.04) (1.05) (1.10) (1.12)
Offering
$11.95 $11.03 $9.26 $10.40 $10.78
Net asset value at end of year
$11.250 $10.875 $8.500 $11.125 $11.125
Market price at end of year
TOTAL INVESTMENT RETURN FOR SHAREHOLDERS: (d)
21.7% 31.8 (0.8)% 8.8% 6.9 %
Based on net asset value
16.2% 41.4 (14.9)% 12.7% 14.9%
Based on market price
RATIOS AND SUPPLEMENTAL DATA:
$988 $872 $710 $725 $665
Net assets at end of year (millions)
1.03% 1.06% 1.07% 1.08% 1.08%
Ratio of expenses to average net assets
Ratio of net investment income (loss) to average net assets 0.73% 0.92% 1.16% 1.08% 1.44%
Portfolio turnover rate 70% 54% 44% 72% 57%
(a) Before provision for federal income tax
(b) Effect of Fund's rights offering for Shares at a price below net
asset value.
(c) Effect of payment of a portion of distributions in newly issued Shares
valued at a discount from net asset value.
(d) Calculated assuming all distributions reinvested at the actual
reinvestment price and all primary rights exercised.
SHARE PRICE DATA
Trading in All-Star's Shares on the NYSE commenced on October 24, 1986. For the
two years ended December 31, 2001, the high and low sales prices for All-Star's
Shares, as reported in the consolidated transaction reporting system, and the
highest discount from or premium to net asset value per Share and the net asset
value on the day or days when the Shares traded at such high and low sales
prices, were as follows:
Discount from Discount
or Premium to from or
Net Asset Premium to
High Sales Net Asset Value Low Sales Net Asset Net Asset
2000 Price Value Price Value Value
1st Quarter......... $11.75 $14.52 -19.1% $9.75 $12.98 -24.9%
2nd Quarter......... $12.75 $14.17 -10.0% $10.313 $14.10 -26.8%
3rd Quarter......... $13.25 $14.84 -10.7% $12.313 $14.31 -13.9%
4th Quarter......... $13.25 $14.23 -6.9% $11.313 $13.42 -15.7%
2001
1st Quarter ....... $13.57 $13.80 -1.7% $11.50 $11.07 3.9%
2nd Quarter........ $13.55 $12.78 6.0% $11.50 $10.82 6.3%
3rd Quarter........ $13.25 $12.05 9.9% $8.60 $8.83 -2.6%
4th Quarter........ $11.85 $10.33 14.7% $10.40 $9.43 10.2%
All-Star's Shares have traded in certain periods at a discount from their net
asset value. Certain features of and steps taken by All-Star may have tended to
reduce the discount from net asset value at which its Shares might otherwise
have traded, although All-Star is not able to determine what effect, if any,
these various features and steps may have had. All-Star's current 10%
distribution policy (see "Distributions; Automatic Dividend Reinvestment and
Cash Purchase Plan-10% Distribution Policy" below), begun in July, 1988, may
have contributed to this effect. This trend may also have resulted in whole or
in part from other factors, such as the Fund's investment performance and
increased attention directed to All-Star by securities analysts and market
letters.
The net asset value of a Share of All-Star on [ ], 2002 was $[ ]. The last
reported sale price of an All-Star Share on that day was $[ ], representing a
[discount from/premium to] net asset value of [ ]%.
INVESTMENT PERFORMANCE
The table below shows two measures of All-Star's return to investors for the
one, five, ten and fifteen year periods through December 31, 2001. No. 1
("All-Star NAV") shows All-Star's investment performance based on a valuation of
its Shares at net asset value ("NAV"). No. 2 ("All-Star Price") shows All-Star's
investment performance based on the market price of All-Star's Shares. Both
measures assume reinvestment of all of the Fund's dividends and distributions in
additional Shares pursuant to All-Star's Automatic Dividend Reinvestment and
Cash Purchase Plan (see "Distributions; Automatic Dividend Reinvestment and Cash
Purchase Plan" below), and full exercise of primary subscription rights in
All-Star's 1992, 1993, 1994 and 1998 rights offerings.
The Lipper Large-Cap Core Mutual Fund Average has been included so that the
Fund's results may be compared with an unweighted average of the total return of
open-end mutual funds classified as large-cap core funds (i.e., mutual funds
having investment objectives and policies comparable to All-Star) published by
Lipper, Inc. The Lipper Large-Cap Core Average information reflects the total
return of the mutual funds included in the average, in each case assuming
reinvestment of dividends and distributions. The record of the S&P 500 Index has
also been included so that All-Star's results may be compared with those of an
unmanaged group of securities widely regarded by investors as representative of
the stock market in general. The S&P 500 Index is a broad based
capitalization-weighted index which reflects the total return of the securities
included in the index.
No. 1 No. 2 Lipper Large-Cap Core S&P 500
All-Star NAV All-Star Price Mutual Fund Average Index
1 Year beginning January 1, 2001 -12.7% 0.0% -13.8% -11.9%
5 Years beginning January 1, 1996 9.7% 11.9% 8.2% 10.7%
10 Years beginning January 1, 1991 11.4% 12.3% 11.0% 12.9%
15 Years beginning January 1, 1986 13.0% 12.9% 11.9% 13.7%
The above results represent All-Star's past performance and are not intended as
a prediction of its future performance. The investment return, net asset value
and market value of All-Star's Shares will fluctuate, so that such Shares when
sold may be worth more or less than their original cost.
THE OFFER
Terms of the Offer
All-Star is issuing to Record Date Shareholders nontransferable Rights to
subscribe for the Shares, without par value, of the Fund's beneficial interest.
Each such shareholder is being issued one Right for each Share of beneficial
interest owned on the Record Date. The Rights entitle the holder to acquire on
Primary Subscription at the Subscription Price one Share for each ten Rights
held. No Rights will be issued for fractional Shares. Accordingly, Shares may be
purchased only pursuant to the exercise of Rights in integral multiples of ten.
Rights may be exercised at any time during the Subscription Period, which
commences on [ ], 2002 and ends at 5:00 p.m., New York City time, on [ ], 2002,
the Expiration Date.
In addition, any Shareholder who fully exercises all Rights initially issued to
him or her in the Primary Subscription (other than those Rights which cannot be
exercised because they represent the right to acquire less than one Share) is
entitled to subscribe for Shares which were not otherwise subscribed for by
others on Primary Subscription. For purposes of determining the number of Shares
a Shareholder may acquire pursuant to the Offer, broker-dealers whose Shares are
held of record on the Record Date by Cede or by any other depository or nominee
will be deemed to be the holders of the Rights that are issued to Cede or such
other depository or nominee on their behalf. Shares acquired pursuant to the
Over-Subscription Privilege are subject to allotment, which is more fully
discussed below under "Over-Subscription Privilege."
The Rights are not transferable. Therefore, only the underlying Shares, and not
the Rights, will be admitted for trading on the NYSE. Since fractional Shares
will not be issued, shareholders who receive, or who are left with, fewer than
ten Rights will be unable to exercise such Rights and will not be entitled to
receive any cash in lieu of such fractional Shares.
The Rights will be evidenced by Subscription Certificates which will be mailed
to Record Date Shareholders. Rights may be exercised by completing a
Subscription Certificate and delivering it, together with payment by means of
(i) a check or money order, or (ii) a Notice of Guaranteed Delivery, to the
Subscription Agent during the Subscription Period. The method by which Rights
may be exercised and the Shares paid for is set forth below under "Method of
Exercise of Rights" and "Payment for Shares."
Purpose of the Offer
The Board of Trustees of All-Star has determined that it would be in the best
interests of All-Star and its Shareholders to increase the assets of All-Star
available for investment thereby permitting the Fund to be in a better position
to more fully take advantage of investment opportunities that may arise, and
that the potential benefits of the Offer to All-Star and its shareholders will
outweigh the dilution to shareholders who do not fully exercise their Rights.
The proceeds of the Offer will enable All-Star's Portfolio Managers to take
advantage of perceived investment opportunities without having to sell existing
portfolio holdings which they otherwise would retain. The Offer seeks to reward
investors by giving existing shareholders the opportunity to purchase additional
Shares at a price below market and/or net asset value and without brokerage
commissions. In addition, the Offer will enhance the likelihood that All-Star
will continue to have sufficient assets remaining after the distributions called
for by its current 10% distribution policy to permit the Fund to maintain the
current ratio of its fixed expenses to its net assets.
All-Star's Fund Manager and Portfolio Managers will benefit from the Offer
because their fees are based on the average weekly net assets of All-Star. See
"Management of All-Star." It is not possible to state precisely the amount of
additional compensation they will receive as a result of the Offer because it is
not known how many Shares will be subscribed for and because the net proceeds of
the Offer will be invested in additional portfolio securities that will
fluctuate in value. One of All-Star's Trustees who voted to authorize the Offer
is an "interested person," within the meaning of the 1940 Act, of LAMCO, and
therefore could benefit indirectly from the Offer. The other four Trustees are
not "interested persons" of All-Star or LAMCO.
All-Star may, in the future and at its discretion, choose to make additional
rights offerings from time to time for a number of Shares and on terms which may
or may not be similar to the Offer. Any such future rights offering will be made
in accordance with the 1940 Act. In 1992, All-Star completed a rights offering
to shareholders of 5,464,168 additional Shares at a subscription price of $10.05
per Share, for proceeds to the Fund after expenses of $54,683,782. In 1993,
All-Star completed a second rights offering to shareholders of 4,227,570
additional Shares at a subscription price of $10.41 per Share, for proceeds to
the Fund after expenses of $43,759,004. In 1994, All-Star completed a third
rights offering to shareholders of 4,704,931 additional Shares at a subscription
price of $9.14 per Share, for proceeds to the Fund after expenses of
$42,793,069. In 1998, All-Star completed a fourth rights offering to
shareholders of 4,318,134 additional Shares at a subscription price of $12.83
per Share, for proceeds to the Fund after expenses of $55,166,659. All four
rights offerings were oversubscribed. Under the laws of Massachusetts, the state
in which the Fund is organized, the Board of Trustees is authorized to approve
rights offerings without obtaining shareholder approval. The staff of the
Securities and Exchange Commission ("SEC") has interpreted the 1940 Act as not
requiring shareholder approval of a rights offering at a price below the then
current net asset value so long as certain conditions are met, including a good
faith determination by the fund's board of trustees that such offering would
result in a net benefit to existing shareholders.
Over-Subscription Privilege
If all of the Rights initially issued in the Primary Subscription are not
exercised, any Shares for which Subscriptions have not been received ("Excess
Shares") will be offered, by means of the Over-Subscription Privilege, to Record
Date Shareholders who have exercised all the Rights initially issued to them and
who wish to acquire more than the number of Shares for which the Rights issued
to them are exercisable. Record Date Shareholders who exercise all the Rights
initially issued to them will have the opportunity to indicate on the
Subscription Certificate how many Shares they are willing to acquire pursuant to
the Over-Subscription Privilege. If sufficient Excess Shares remain, all
over-subscriptions will be honored in full. If sufficient Excess Shares are not
available to honor all over-subscriptions, the available Excess Shares will be
allocated (subject to elimination of fractional Shares) among those who
over-subscribe based on the number of Rights originally issued to them by the
Fund. The allocation process may involve a series of allocations in order to
assure that the total number of Shares available for over-subscriptions is
distributed on a pro rata basis.
The method by which Excess Shares will be distributed and allocated pursuant to
the Over-Subscription Privilege is as follows. Excess Shares will be available
for purchase pursuant to the Over-Subscription Privilege only to the extent that
the maximum number of Shares is not subscribed for through the exercise of the
Primary Subscription by the Expiration Date. If the Excess Shares are not
sufficient to satisfy all subscriptions pursuant to the Over-Subscription
Privilege, the Excess Shares will be allocated pro rata (subject to the
elimination of fractional Shares) among those holders of Rights exercising the
Over-Subscription Privilege, in proportion, not to the number of Shares
requested pursuant to the Over-Subscription Privilege, but to the number of
Shares held on the Record Date; provided, however, that if this pro rata
allocation results in any holder being allocated a greater number of Excess
Shares than the holder subscribed for pursuant to the exercise of such holder's
Over-Subscription Privilege, then such holder will be allocated only such number
of Excess Shares as such holder subscribed for and the remaining Excess Shares
will be allocated among all other holders exercising Over-Subscription
Privileges. The formula to be used in allocating the Excess Shares is as
follows:
Holder's Record Date Position
------------------------------
Total Record Date Position x Excess Shares
of all Oversubscribers Remaining
The allocation process may involve a series of allocations in order to assure
that the total number of Shares available for Over-Subscription is distributed
on a pro rata basis. The Fund will not offer or sell any Shares which are not
subscribed for under the Primary Subscription or the Over-Subscription
Privilege.
The Subscription Price
The Subscription Price for the Shares to be issued pursuant to the Rights will
be 95% of the lower of (i) the last reported sale price of a Share of All-Star
on the NYSE on [ ], 2002, the Pricing Date, or (ii) the net asset value of a
Share of All-Star on the Pricing Date.
All-Star announced the terms of the Offer before the opening of trading on the
NYSE on February 13, 2002. The net asset value per Share of All-Star at the
close of business on February 12, 2002 and on [ ], 2002 was $10.19 and $[ ],
respectively, and the last reported sale price of a Share on the NYSE on those
dates was $11.06 and $[ ], respectively, representing a [ ]% and a [ ]%
[discount/premium], respectively, in relation to the net asset value per Share
at the close of business on these dates.
Expiration of the Offer
The Offer will expire at 5:00 p.m., New York City time, on [ ], 2002. Rights
will expire on the Expiration Date and thereafter may not be exercised, unless
the Offer is extended. Since the Expiration Date is prior to the Pricing Date,
shareholders who decide to acquire Shares on Primary Subscription or pursuant to
the Over-Subscription Privilege will not know, when they make such decision,
what the purchase price for such Shares will be.
Any extension, termination, or amendment of the Offer will be followed as
promptly as practicable by announcement thereof, such announcement in the case
of an extension to be issued no later than 9:00 a.m., New York City time, on the
next business day following the previously scheduled Expiration Date. The Fund
will not, unless otherwise required by law, have any obligation to publish,
advertise, or otherwise communicate any such announcement other than by making a
release to the Dow Jones News Service or such other means of announcement as the
Fund deems appropriate.
Subscription Agent
The Subscription Agent is EquiServe Trust Company, N.A., P.O. Box 43025,
Providence, RI 02940-3025. EquiServe Trust Company N.A. is also the Fund's
dividend paying agent, transfer agent and registrar. The Subscription Agent will
receive from All-Star a fee estimated to be no more than $[ ] and reimbursement
for its out-of-pocket expenses related to the Offer. Inquiries by all holders of
Rights should be directed to P.O. Box 43025, Providence, RI 02940-3025
(telephone (800) [ ]); holders may also consult their brokers or nominees.
Information Agent
Any questions or requests for assistance regarding the Offer may be directed to
the Information Agent at its telephone number and address listed below:
Georgeson Shareholder Communications Inc.
111 Commerce Road
Carlstadt, New Jersey 07072-2586
Call Toll Free (888) [ ]
The Information Agent will receive a fee estimated at approximately $[ ] plus
reimbursement for its out-of-pocket expenses.
Method of Exercise of Rights
Rights may be exercised by filling in and signing the reverse side of the
Subscription Certificate and mailing it in the envelope provided, or otherwise
delivering the completed and signed Subscription Certificate to the Subscription
Agent, together with payment for the Shares as described below under "Payment
for Shares." Rights may also be exercised through a Rights holder's broker, who
may charge such Rights holder a servicing fee in connection with such exercise.
Fractional Shares will not be issued, and Rights holders who receive, or who are
left with, fewer than ten Rights will not be able to exercise such Rights.
Completed Subscription Certificates and related payments must be received by the
Subscription Agent prior to 5:00 p.m., New York City time, on the Expiration
Date (unless payment is effected by means of a Notice of Guaranteed Delivery as
described below under "Payment for Shares") at the offices of the Subscription
Agent at one of the addresses set forth below.
The Subscription Certificate and payment should be sent to EQUISERVE TRUST
COMPANY, N.A. by one of the following methods:
Subscription Certificate
Delivery Method Address
------------------------ -------------
If By Mail: EquiServe
Att: Corporate Actions
P.O. Box 43025
Providence, RI 02940-3025
If By Hand: Securities Transfer and Reporting Services, Inc.
c/o EquiServe
100 Williams St. Galleria
New York, NY 10038
If By Overnight Courier or EquiServe
Express Mail: Attn: Corporate Actions
40 Campanelli Drive
Braintree, MA 02184
By Broker-Dealer or Shareholders whose Shares are held in a brokerage,
other Nominee: bank or trust account may contact their broker or
(Notice of Guaranteed other nominee and instruct them to submit a Notice
Delivery) of Guaranteed Delivery and payment on their
behalf.
Delivery by any method or to any address not listed above will not constitute
good delivery.
All questions as to the validity, form, eligibility (including times of receipt
and matters pertaining to beneficial ownership) and the acceptance of
subscription forms and the Subscription Price will be determined by All-Star,
which determinations will be final and binding. No alternative, conditional or
contingent subscriptions will be accepted. All-Star reserves the absolute right
to reject any or all subscriptions not properly submitted or the acceptance of
which would, in the opinion of the Fund's counsel, be unlawful. All-Star also
reserves the right to waive any irregularities or conditions, and the Fund's
interpretations of the terms and conditions of the Offer shall be final and
binding. Any irregularities in connection with subscriptions must be cured
within such time, if any, as the Fund shall determine unless waived. Neither
All-Star nor the Subscription Agent shall be under any duty to give notification
of defects in such subscriptions or incur any liability for failure to give such
notification. Subscriptions will not be deemed to have been made until such
irregularities have been cured or waived.
Payment for Shares
Holders of Rights who subscribe for Shares on Primary Subscription or pursuant
to the Over-Subscription Privilege may choose between the following methods of
payment:
(1) A subscription will be accepted by the Subscription Agent if, prior to 5:00
p.m., New York City time, on the Expiration Date, the Subscription Agent shall
have received a Notice of Guaranteed Delivery, by facsimile or otherwise, from a
bank or trust company or a NYSE or National Association of Securities Dealers
member firm, guaranteeing delivery of (a) payment of the full Subscription Price
for the Shares subscribed for on Primary Subscription and any additional Shares
subscribed for pursuant to the Over-Subscription Privilege and (b) a properly
completed and executed Subscription Certificate. The Subscription Agent will not
honor a Notice of Guaranteed Delivery if a properly completed and executed
Subscription Certificate and full payment for the Shares is not received by the
Subscription Agent by [ ], 2002. The Notice of Guaranteed Delivery may be
delivered to the Subscription Agent in the same manner as Subscription
Certificates at the addresses set forth above, or may be transmitted to the
Subscription Agent by facsimile transmission (telecopy number (781) 575-4826;
telephone number to confirm receipt (781) 575-4816).
(2) Alternatively, a holder of Rights can, together with the Subscription
Certificate, send payment for the Shares acquired on Primary Subscription and
any additional Shares subscribed for pursuant to the Over-Subscription Privilege
to the Subscription Agent based on an estimated subscription price of $[ ] per
Share. To be accepted, such payment, together with the Subscription Certificate,
must be received by the Subscription Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. The Subscription Agent will not accept cash as a
means of payment for Shares. Except as otherwise set forth below, a payment
pursuant to this method must be in United States dollars by money order or check
drawn on a bank located in the continental United States, must be payable to the
Liberty All-Star Equity Fund, and must accompany an executed Subscription
Certificate to be accepted.
Within ten business days following the Expiration Date (the "Confirmation Date"
), a confirmation will be sent by the Subscription Agent to each shareholder
exercising his or her Rights (or, if the All-Star Shares on the Record Date are
held by Cede or any other depository or nominee, to Cede or such other
depository or nominee), showing (i) the number of Shares acquired pursuant to
the Primary Subscription; (ii) the number of Shares, if any, acquired pursuant
to the Over-Subscription Privilege; (iii) the per Share and total purchase price
for the Shares; and (iv) any additional amount payable by such shareholder to
All-Star or any excess to be refunded by All-Star to such shareholder, in each
case based on the Subscription Price as determined on the Pricing Date. Any
additional payment required from a shareholder must be received by the
Subscription Agent prior to 5:00 p.m., New York City time, on [ ], 2002, and any
excess payment to be refunded by All-Star to such shareholder will be mailed by
the Subscription Agent with the confirmation. All payments by a shareholder must
be in United States dollars by money order or check drawn on a bank located in
the United States of America and be payable to Liberty All-Star Equity Fund.
Such payments will be held by the Subscription Agent pending completion of the
processing of the subscription, and will then be paid to All-Star. Any interest
earned on such amounts will accrue to All-Star and none will be paid to the
subscriber.
Whichever of the above two methods of payment is used, issuance and delivery of
the Shares subscribed for are subject to collection of checks and actual payment
pursuant to any Notice of Guaranteed Delivery.
Rights holders will have no right to rescind their subscription after receipt of
their payment for Shares by the Subscription Agent.
If a holder of Rights who acquires Shares pursuant to the Primary Subscription
or the Over-Subscription Privilege does not make payment of any amounts due,
All-Star reserves the right to take any or all of the following actions: (i)
find other purchasers for such subscribed and unpaid for Shares; (ii) apply any
payment actually received by it toward the purchase of the greatest number of
whole Shares which could be acquired by such holder upon exercise of the Primary
Subscription or the Over-Subscription Privilege; (iii) sell in the open market
all or a portion of the Shares purchased by the holder, and apply the proceeds
to the amounts owed; and (iv) exercise any and all other rights or remedies to
which it may be entitled, including, without limitation, the right to set off
against payments actually received by it with respect to such subscribed Shares
to enforce the relevant guaranty of payment or monetary damages.
All-Star shareholders whose Shares are held by a broker-dealer, bank, trust
company or other nominee should contact the nominee to exercise their Rights and
request the nominee to exercise their Rights in accordance with their
instructions.
Brokers, banks, trust companies, depositories and other nominees who hold
All-Star Shares for the account of others should notify the respective
beneficial owners of such Shares as soon as possible to ascertain such
beneficial owners' intentions and to obtain instructions with respect to
exercising the Rights. If the beneficial owner so instructs, the record holder
of such Right should complete Subscription Certificates and submit them to the
Subscription Agent with the proper payment.
The instructions contained on the Subscription Certificate should be read
carefully and followed in detail. Do Not Send Subscription Certificates to
All-Star. (They should be sent to EquiServe Trust Company, N.A. as indicated
above).
The method of delivery of Subscription Certificates and payment of the
Subscription Price to the Subscription Agent will be at the election and risk of
the Rights holders, but if sent by mail it is recommended that the certificates
and payments be sent by registered mail, properly insured, with return receipt
requested, and that a sufficient number of days be allowed to ensure delivery to
the Subscription Agent and clearance of payment prior to 5:00 p.m., New York
City time, on the Expiration Date. Because uncertified personal checks may take
at least five business days to clear, you are strongly urged to pay, or arrange
for payment, by means of a certified or cashier's check or money order. Shares
will not be delivered until checks have cleared.
Delivery of Stock Certificates
Participants in All-Star's Automatic Dividend Reinvestment and Cash Purchase
Plan who exercise the Rights issued on the Shares held in their accounts in the
Plan will have their Shares acquired on Primary Subscription and pursuant to the
Over-Subscription Privilege credited to their shareholder distribution
reinvestment accounts in the Plan. Shareholders whose Shares are held of record
by Cede or by any other depository or nominee on their behalf or their
broker-dealers' behalf will have their Shares acquired on Primary Subscription
and pursuant to the Over-Subscription Privilege credited to the account of Cede
or such other depository or nominee. With respect to all other shareholders,
stock certificates for all Shares acquired on Primary Subscription and pursuant
to the Over-Subscription Privilege will be mailed, together with the
confirmation and refund of the amount, if any, paid in excess of the final
Subscription Price, on or about [ ], 2002 if the estimated Subscription Price is
equal to or in excess of the final Subscription Price. If the shareholder's
confirmation shows that an additional amount is payable due to the final
Subscription Price exceeding the estimated Subscription Price, the stock
certificates will be mailed on or about [ ], 2002, provided that such additional
amount has been paid and payment for the Shares subscribed for has cleared,
which clearance may take up to five days from the date of receipt of the
payment. If such payment does not clear within five business days from the date
of receipt, All-Star may exercise its rights in the event of nonpayment under
"Payment for Shares" above.
Record Date Shareholders whose record addresses are outside the United States
will receive written notice of the Offer; however, Subscription Certificates
will not be mailed to such shareholders. The Rights to which those Subscription
Certificates relate will be held by the Subscription Agent for such foreign
Record Date Shareholders' accounts until instructions are received in writing
with payment to exercise the Rights. If no such instructions are received by the
Expiration Date, such Rights will expire. See "Subscription Agent".
Federal Income Tax Consequences
The following is a general summary of the significant federal income tax
consequences of the receipt of Rights by a Record Date Shareholder and a
subsequent lapse or exercise of Rights. The discussion is based on applicable
provisions of the Internal Revenue Code of 1986, as amended ("Code"), the
Treasury Regulations promulgated thereunder and other authorities currently in
effect, all of which are subject to change, possibly with a retroactive effect.
This discussion does not purport to be complete or to deal with all aspects of
federal income taxation that may be relevant to shareholders in light of their
particular circumstances or to shareholders subject to special treatment under
the Code (such as insurance companies, financial institutions, tax-exempt
entities, employee benefit plans, dealers in securities, foreign corporations
and persons who are not U.S. citizens or residents), and does not address any
state, local or foreign tax consequences.
For federal income tax purposes, neither the receipt nor the exercise of the
Rights by Record Date Shareholders will result in taxable income to them, and
they will realize no loss with respect to any Rights that expire without being
exercised. All-Star will realize no gain or loss on the issuance, exercise or
expiration of the Rights.
A Record Date Shareholder's holding period for a Share acquired on exercise of
Rights will begin with the date of exercise, and the shareholder's basis for
determining gain or loss on the sale of that Share will equal the sum of the
shareholder's basis in the exercised Rights, if any, plus the Subscription Price
for the Share. A Record Date Shareholder's basis in Rights will be zero unless
either (1) the Rights' fair market value on the date of distribution is 15% or
more of the fair market value on that date of the Shares with respect to which
the Rights were distributed or (2) the shareholder elects, on his, her or its
federal income tax return for the taxable year in which the Rights are received,
to allocate part of the basis of those Shares to the Rights. If either clause
(1) or (2) applies, then if the Rights are exercised, the shareholder will
allocate his, her or its basis in the Shares with respect which the Rights were
distributed between those Shares and the Rights in proportion to their
respective fair market values on the distribution date. A Record Date
Shareholder's gain or loss recognized on sale of a Share acquired on the
exercise of Rights will be a capital gain or loss (assuming the Share was held
as a capital asset at the time of sale) and will be long-term capital gain or
loss, taxable at a maximum rate of 20% in the case of a noncorporate
shareholder, if the shareholder then held the Share for more than one year.
Employee Benefit Plan Considerations
Shareholders that are employee benefit plans subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") (including separate profit
sharing/retirement and savings plans, and plans for self-employed individuals
and their employees) and individual retirement accounts ("IRAs) (collectively,
"Retirement Plans") should be aware that additional contributions of cash to a
Retirement Plan (other than rollover contributions or trustee-to-trustee
transfers from other Retirement Plans) in order to exercise Rights may, when
taken together with contributions previously made, be treated as excess or
nondeductible contributions subject to excise taxes. In the case of Retirement
Plans qualified under section 401(a) of the Code, additional cash contributions
could cause violations of the maximum contribution limitations of section 415 of
the Code or other qualification rules. Retirement Plans in which contributions
are so limited should consider whether there is an additional source of funds
available within the Retirement Plan, including the liquidation of assets, with
which to exercise the Rights. Because the rules governing Retirement Plans are
extensive and complex, Retirement Plans contemplating the exercise of Rights
should consult with their counsel prior to such exercise.
Retirement Plans and other tax-exempt entities, including governmental plans,
should also be aware that if they borrow to finance their exercise of Right,
they become subject to tax on unrelated business taxable income under Section
511 of the Code. If any portion of an IRA is used as security for a loan, that
portion will be treated as a distribution to the IRA owner.
ERISA contains fiduciary responsibility requirements, and ERISA and the Code
contain prohibited transaction rules, that may impact the exercise of Rights.
Due to the complexity of these requirements and rules and the penalties for
non-compliance, Retirement Plans should consult with their counsel regarding the
consequences of their exercise of Rights under ERISA and the Code.
SPECIAL CONSIDERATIONS AND RISK FACTORS
Dilution
If you do not exercise all of your Rights during the Subscription Period, when
the Offering is over you will own a relatively smaller percentage of the Fund
than if you had exercised all of your Rights. The Fund cannot tell you precisely
how much smaller the percentage of the Fund that you would own because the Fund
does not know how many of the Fund's Record Date Shareholders will exercise
their Rights and how many of their Rights they will exercise.
Shareholders will experience an immediate dilution of the aggregate NAV of
Shares as a result of the completion of the Offer because (i) the Subscription
Price per Share will be less than the Fund's NAV per Share on the Expiration
Date, (ii) the Fund will incur expenses in connection with the Offer, and (iii)
the number of Shares outstanding after the Offer will increase in a greater
percentage than the increase in the size of the Fund's assets. This dilution
also will affect Record Date Shareholders to a greater extent if they do not
exercise their Rights in full. It is not possible to state precisely the amount
of any decreases in either NAV or in ownership interests, because it is not
known at this time what the NAV per Share will be at the Expiration Date or what
proportion of the Shares will be subscribed. Finally, there may be a dilution of
earnings per Share due to the increase in the number of Shares outstanding, but
only to the extent that investments of the proceeds of the Offer do not achieve
the same return as current investments held by the Fund. To the extent such
investments achieve a better return than current investments, earnings per Share
will experience appreciation.
The following example assumes that all of the Shares are sold at the assumed
Subscription Price of $[ ] and after deducting all expenses related to the
issuance of the Shares.
NAV per Share on Dilution Percentage
[ ], 2002 per Share in Dollars Dilution
------------------ --------------------- -----------
Primary Subscription
or [ ] Shares $[ ] $[ ] [ ]%
Market Value and Net Asset Value
The shares of closed-end investment companies frequently trade at a discount
from net asset value. This characteristic of shares of a closed-end fund is a
risk separate and distinct from the risk that the Fund's net asset value may
decrease. Since the commencement of the Fund's operations, the Fund's Shares
have traded in certain periods in the market at a discount to net asset value.
See "Share Price Data." The risk of purchasing shares of a closed-end fund that
might trade at a discount is more pronounced if you wish to sell your shares in
a relatively short period of time. If you do so, realization of a gain or loss
on your investment is likely to be more dependent upon the existence of a
premium or discount than upon portfolio performance. The Fund's Shares are not
subject to redemption. Investors desiring liquidity may, subject to applicable
securities laws, trade their Shares in the Fund on any exchange where such
Shares are then trading at current market value, which may differ from the then
current net asset value. Moreover, Shareholders expecting to sell their Shares
during the course of the Offer should be aware that there is a greater risk that
the potential discount referred to above, which may increase during the Offer,
will adversely affect them. This increased risk is because, among other things,
the market price per Share may reflect the anticipated dilution that will result
from this Offer. The Fund cannot predict whether the Shares will trade at a
discount or premium to NAV after completion of the Offer.
Possible Suspension of the Offer
All-Star has, as required by the Securities and Exchange Commission's
registration form, undertaken to suspend the Offer until it amends this
Prospectus if subsequent to [ ], 2002, the effective date of the Fund's
Registration Statement, All-Star's net asset value declines more than 10% from
its net asset value as of [ ], 2002. Accordingly, All-Star will notify
shareholders of any such decline and thereby permit them to cancel their
exercise of Rights.
USE OF PROCEEDS
The net proceeds of the Offer, assuming that all Shares offered hereby are sold
at an assumed Subscription Price of $[ ] per Share, are estimated to be
approximately $[ ], after deducting expenses payable by All-Star estimated at $[
]. Such net proceeds will be invested by All-Star's Portfolio Managers in
portfolio securities in accordance with All-Star's investment objective and
policies. It is anticipated that investment of such net proceeds under normal
market conditions will take place during a period of approximately 30 days from
their receipt by All-Star, and would in any event be completed within three
months. Pending such investment the net proceeds will be invested in Short-Term
Money Market Instruments (as defined under "Investment Objective, Policies and
Risks" below).
THE MULTI-MANAGER CONCEPT
All-Star allocates its portfolio assets on an approximately equal basis among a
number of independent investment management firms ("Portfolio Managers"),
currently five in number, recommended by LAMCO, each of which employs a
different investment style, and from time to time rebalances the portfolio among
the Portfolio Managers so as to maintain an approximately equal allocation of
the portfolio among them throughout all market cycles.
In the opinion of LAMCO, the multi-manager concept provides advantages over the
use of a single manager because of the following primary factors:
(i) most equity investment management-firms consistently employ
a distinct investment style which causes them to emphasize
stocks with particular characteristics;
(ii) because of changing investor preferences, any given
investment style will move into and out of market favor and
will result in better investment performance under certain
market conditions but less successful performance under
other conditions;
(iii)consequently, by allocating All-Star's portfolio on an
approximately equal basis among Portfolio Managers employing
different styles, the impact of any one such style on
investment performance will be diluted, and the investment
performance of the total portfolio will be more consistent
and less volatile over the long-term than if a single style
were employed throughout the entire period;
(iv) consistent performance at a given annual rate of return over
time produces a higher rate of return for the long-term than
more volatile performance having the same average annual
rate of return.
LAMCO, based on the foregoing principles and on its analysis and evaluation of
information regarding the personnel and investment styles and performance of a
universe of numerous professional investment management firms, has selected for
appointment by All-Star a group of Portfolio Managers representing a blending of
different investment styles which, in its opinion, is appropriate to All-Star's
investment objective.
LAMCO continuously monitors the performance and investment styles of All-Star's
Portfolio Managers and from time to time recommends changes of Portfolio
Managers based on factors such as changes in a Portfolio Manager's investment
style or a departure by a Portfolio Manager from the investment style for which
it had been selected, a deterioration in a Portfolio Manager's performance
relative to that of other investment management firms practicing a similar
style, or adverse changes in its ownership or personnel. Portfolio Manager
changes may also be made to change the mix of investment styles employed by
All-Star's Portfolio Managers. Since its inception, All-Star has had eleven
Portfolio Manager changes.
All-Star Portfolio Manager changes, as well as the periodic rebalancings of its
portfolio among the Portfolio Managers and the need to raise cash for All-Star's
quarterly distributions, may result in some portfolio turnover in excess of what
would otherwise be the case (see "Financial Highlights" above). Increased
portfolio turnover would cause increased brokerage commission costs to All-Star,
and may result in greater realization of capital gains, which are taxable to
shareholders.
Under the terms of an exemptive order issued to All-Star and LAMCO by the
Securities and Exchange Commission, a portfolio management agreement with a new
or additional Portfolio Manager may be entered into in advance of shareholder
approval, provided that the new agreement is at a fee no higher than that
provided in, and is on other terms and conditions substantially similar to,
All-Star's agreements with its other Portfolio Managers, and that its
continuance is subject to approval by shareholders at All-Star's regularly
scheduled annual shareholder meeting (normally held in April) next following the
date of the new or additional portfolio management agreement. Information about
Portfolio Manager changes or additions made in advance of shareholder approval
will be announced to the press following Board of Trustees action and will be
included in the next report to shareholders.
All-Star's current Portfolio Managers are:
Mastrapasqua & Associates, Inc.
Oppenheimer Capital LLC
Boston Partners Asset Management, L.P.
Westwood Management Corp.
TCW Investment Management Company
It is expected that on March 1, 2002, Schneider Capital Managment Corporation
will replace Westwood Management Corp. as a Portfolio Manager of All-Star. On
February 12, 2002, the Board of Trustees approved this change as well as the
proposed Portfolio Management Agreement between All-Star, LAMCO and Schneider
Capital Managment Corporation. The new Portfolio Management Agreement with
Schneider Capital Management Corporation will be substantially identical to one
currently in place with Westwood Management Corp. Under the new Portfolio
Management Agreement, Schneider Capital Management Corporation will be paid the
same portfolio management fee that was paid to Westwood Management Corp. prior
to the effective date of the change (see "Management of All-Star" below).
See Appendix A for information about these Portfolio Managers, including the
employees primarily responsible for the day-to-day management of the portion of
All-Star's portfolio allocated to each.
INVESTMENT OBJECTIVE, POLICIES AND RISKS
All-Star's investment objective is to seek total investment return, comprised of
long term capital appreciation and current income. It seeks its investment
objective through investment primarily in a diversified portfolio of equity
securities.
All-Star invests primarily (at least 80% under normal market conditions) in
equity securities, defined as common stocks and securities convertible into
common stocks such as bonds and preferred stocks, and securities having common
stock characteristics such as warrants and rights to purchase equity securities
(although, as a non-fundamental policy, not more than 20% of the value of
All-Star's total assets will be invested in rights and warrants). All-Star may
lend its portfolio securities, write covered call and put options and engage in
options and futures strategies (see "Investment Practices" below).
Although under normal market conditions All-Star will remain substantially fully
invested in equity securities, up to 20% of the value of All-Star's total assets
may generally be invested in short-term money market instruments, including
certificates of deposit (negotiable certificates issued against bank deposits),
other interest-bearing bank deposits such as savings and money market accounts,
and bankers' acceptances (short-term bank-guaranteed credit instruments used to
finance transactions in goods) of domestic branches of U.S. banks having assets
of not less than $1 billion, obligations issued or guaranteed by the U.S.
Government and its agencies and instrumentalities ("U.S. Government
Securities"), commercial paper (unsecured short-term promissory notes issued by
corporations) rated not lower than A-1 by Standard & Poor's Corporation ("S&P")
or Prime-1 by Moody's Investors Service, Inc. ("Moody's"), short-term corporate
debt securities rated not lower than AA by S&P or Aa by Moody's, and repurchase
agreements with respect to the foregoing (collectively, "Short-Term Money Market
Instruments"). All-Star may temporarily invest without limit in Short-Term Money
Market Instruments for defensive purposes when LAMCO or the Portfolio Managers
deem that market conditions are such that a more conservative approach to
investment is desirable.
All-Star's investment objective of seeking total investment return and its
policy of investing under normal market conditions at least 80% of the value of
its total assets in equity securities, as well as certain of its investment
restrictions referred to under Reducing Risk below and in the Statement of
Additional Information, are fundamental and may not be changed without a
majority vote of All-Star's outstanding Shares. Under the 1940 Act, a "majority
vote" means the vote of the lesser of (a) 67% of the Shares of All-Star
represented at a meeting at which the holders of more than 50% of the
outstanding Shares of All-Star are present or represented, or (b) more than 50%
of the outstanding Shares of All-Star. Non-fundamental policies may be changed
by vote of the Board of Trustees.
Investment Practices
The following describes certain of the investment practices in which one or more
of All-Star's Portfolio Managers may engage, each of which may involve certain
special risks.
Lending of Portfolio Securities. Although All-Star has not to date engaged in
securities lending, consistent with applicable regulatory requirements,
All-Star, in order to generate additional income, may lend its portfolio
securities (principally to broker-dealers) where such loans are callable at any
time and are continuously secured by collateral (cash or U.S. Government
Securities) equal to not less than the market value, determined daily, of the
securities loaned. All-Star would receive amounts equal to the interest on the
securities loaned. It will also be paid for having made the loan. Any cash
collateral pursuant to these loans would be invested in Short-Term Money Market
Instruments. All-Star could be subjected to delays in recovering the loaned
securities in the event of default or bankruptcy of the borrower. All-Star will
limit such lending to not more than 30% of the value of All-Star's total assets.
The Fund may pay fees to its custodian bank or others for administrative
services in connection with securities loans.
Repurchase Agreements. All-Star may enter into repurchase agreements with banks
or broker-dealer firms whereby such institutions sell U.S. Government Securities
or other securities in which it may invest to All-Star and agree at the time of
sale to repurchase them at a mutually agreed upon time and price. The resale
price is greater than the purchase price, reflecting an agreed-upon interest
rate which is effective during the time between the purchase and resale and is
not related to the stated interest rate on the purchased securities. All-Star
requires the seller of the securities to maintain on deposit with All-Star's
custodian bank securities in an amount at all times equal to or in excess of the
value of the repurchase agreement. In the event that the seller of the
securities defaults on its repurchase obligation or becomes bankrupt, All-Star
could receive less than the repurchase price on the sale of the securities to
another party or could be subjected to delays in selling the securities. Upon
normal market conditions, not more than 35% of All-Star's total assets will be
invested in Short-Term Money Market Instruments, including repurchase
agreements, and not more than 10% of All-Star's net assets will be invested in
repurchase agreements maturing in more than seven days.
Options and Futures Strategies. All-Star may seek to increase the current return
of All-Star's portfolio by writing covered call or put options with respect to
the types of securities in which All-Star is permitted to invest. Call options
written by the Fund give the purchaser the right for a stated period to buy the
underlying securities from All-Star at a stated price; put options written by
the Fund give the purchaser the right for a stated period to sell the underlying
securities to All-Star at a stated price. By writing a call option, All-Star
limits its opportunity to profit from any increase in the market value of the
underlying security above the exercise price of the option; by writing a put
option, All-Star assumes the risk that it may be required to purchase the
underlying security at a price in excess of its current market value.
All-Star may purchase put options to protect its portfolio holdings in the
underlying security against a decline in market value. It may purchase call
options to hedge against an increase in the prices of portfolio securities that
it plans to purchase. By purchasing put or call options, All-Star, for the
premium paid, acquires the right (but not the obligation) to sell (in the case
of a put option) or purchase (in the case of a call option) the underlying
security at the option exercise price, regardless of the then current market
price.
All-Star may also seek to hedge against declines in the value of securities
owned by it or increases in the price of securities it plans to purchase, or to
gain or maintain market exposure, through the purchase of stock index futures
and related options. For example, All-Star may purchase stock index futures and
related options to enable a newly appointed Portfolio Manager to gain immediate
exposure to underlying securities markets pending the investment of the portion
of All-Star portfolio assigned to it. A stock index future is an agreement in
which one party agrees to deliver to the other an amount of cash equal to a
specific dollar amount times the difference between the value of the specific
stock index at the close of the last trading day of the contract and the price
at which the agreement is made.
Expenses and losses incurred as a result of the hedging strategies described
above will reduce All-Star's current return.
Transactions in options and futures contracts may not achieve the intended goals
of protecting portfolio holdings against market declines or gaining or
maintaining market exposure, as applicable, to the extent that there is an
imperfect correlation between the price movements of the options and futures
contracts and those of the securities to be hedged. In addition, if a Portfolio
Manager's prediction on stock market movements is inaccurate, All-Star may be
worse off than if it had not engaged in such options or futures transactions.
See the Statement of Additional Information for additional information
concerning options and futures transactions and the risk thereof.
Risks
As an investment company that holds common stocks, All-Star's portfolio is
subject to the possibility that common stock prices will decline over short or
even extended periods. All-Star may remain substantially fully invested during
periods when stock prices generally rise and also during periods when they
generally decline. In addition, All-Star's portfolio is subject to the risks
associated with growth stocks. Growth stock prices may be more sensitive to
changes in current or expected earnings than the prices of other stocks, and
growth stocks may not perform as well as value stocks or the stock market in
general. Risks are inherent in investments in equities, and Fund shareholders
should be able to tolerate significant fluctuations in the value of their
investment in All-Star. All-Star is intended to be a long-term investment
vehicle and is not designed to provide investors with a means of speculating on
short-term stock market movements. Investors should not consider the Fund a
complete investment program.
In addition to the foregoing investment risks, shares of closed-end investment
companies such as All-Star are not redeemable and frequently trade at a discount
from their net asset value. This risk is separate and distinct from the risk
that All-Star's net asset value may decline. See "Share Price Data" for
information about the market price and net asset value of All-Star's Shares
since January 1, 2000.
Reducing Investment Risk
As a matter of fundamental policy, All-Star will not (i), as to 75% of its total
assets, purchase the securities (other than U.S. Government Securities) of any
one issuer if after such purchase more than 5% of its assets would be invested
in the securities of that issuer, (ii) purchase more than 10% of the outstanding
voting securities of such issuer, (iii) invest 25% more of its total assets in
the securities of issuers in the same industry, or (iv) invest more than 10% of
its total assets in securities that at the time of purchase have legal or
contractual restrictions on resale (including unregistered securities that are
eligible for resale to qualified institutional buyers pursuant to Rule 144A
under the Securities Act of 1933). See "Investment Restrictions" in the
Statement of Additional Information.
MANAGEMENT OF ALL-STAR
The management of All-Star's business and affairs is the responsibility of its
Board of Trustees.
All-Star has a Fund Management Agreement with LAMCO pursuant to which LAMCO
provides the Portfolio Manager selection, evaluation, monitoring and rebalancing
services ("investment management services") described above under "The
Multi-Manager Concept." No single individual at LAMCO is responsible for LAMCO's
decisions with respect to the retention or replacement of the Portfolio
Managers.
LAMCO is also responsible for the provision of administrative services to
All-Star, including the provision of office space, shareholder and broker-dealer
communications, compensation of officers of All-Star who are officers or
employees of LAMCO or its affiliates, and the supervision of transfer agency,
dividend disbursing, custodial and other services provided to others. Certain of
LAMCO's administrative responsibilities have been delegated to Colonial.
LAMCO has its offices at One Financial Center, Boston, Massachusetts 02211.
LAMCO was organized in 1985 and is an indirect wholly owned subsidiary of
Columbia Management Group, Inc., which in turn is an indirect majority owned
subsidiary of FleetBoston Financial Corporation, a U.S. financial holding
company.
Under All-Star's Portfolio Management Agreements with each of its Portfolio
Managers and LAMCO, each Portfolio Manager has discretionary authority
(including for the selection of brokers and dealers for the execution of
All-Star's portfolio transactions) with respect to the portion of All-Star's
assets allocated to it by LAMCO from time to time, subject to All-Star's
investment objective and policies, to the supervision and control of the
Trustees, and to instructions from LAMCO. As described under the section
entitled "The Multi-Manager Concept", LAMCO from time to time reallocates
All-Star's portfolio assets in order to maintain an approximately equal
allocation of them among the Portfolio Managers and to preserve an approximately
equal weighting among the different investment styles practiced by the Portfolio
Managers. Although the Portfolio Managers' activities are subject to general
oversight by LAMCO and the Trustees and officers of All-Star, neither LAMCO nor
such Trustees and officers evaluate the investment merits of the Portfolio
Managers' selections of individual securities. See Appendix A for a description
of the Portfolio Managers.
Although All-Star does not permit a Portfolio Manager to act or have a
broker-dealer affiliate act as broker for Fund portfolio transactions initiated
by it, All-Star's Portfolio Managers are permitted to place portfolio
transactions initiated by them with another Portfolio Manager or its
broker-dealer affiliate for execution on an agency basis, provided the
commission does not exceed the usual and customary broker's commission being
paid to other brokers for comparable transactions and is otherwise in accordance
with All-Star's procedures adopted under Rule 17e-1 under the 1940 Act.
Under All-Star's Fund Management Agreement with LAMCO and its Portfolio
Management Agreements with the Portfolio Managers, All-Star pays LAMCO a fund
management fee and an administrative fee, and LAMCO in turn pays the fees of the
Portfolio Managers from the fund management fees paid to it. The annual fees
that are paid under the current agreements are shown below (fees are payable
quarterly based on the indicated percentage of the Fund's average weekly net
assets during the prior quarter).
Fund Management
Fee Paid to LAMCO
and Portfolio Management
Average weekly Fee Paid to Administrative
Net Asset Value Portfolio Managers Fee Paid to LAMCO Total Fees
First $400 million 0.800% (0.400% to Portfolio Managers) 0.200% 1.00%
Next $400 million 0.720% (0.360% to Portfolio Managers) 0.180% 0 90%
Next $400 million 0.648% (0.324% to Portfolio Managers) 0.162% 0.81%
Over $1.2 billion 0.584% (0.292% to Portfolio Managers) 0.146% 0.73%
Colonial provides pricing and bookkeeping services to All-Star for an annual fee
of $10,000 per year plus a fee based on the Fund's average net assets for any
month that such assets are over $50 million. The fee shall be calculated as
follows: $190,000 divided by the sum of the Fund's average monthly net assets
plus the average monthly net assets of Liberty All-Star Growth Fund, Inc. The
Fund also reimburses Colonial for its out-of-pocket expenses, including fees
payable to third parties for pricing services.
Custodian and Transfer Agent
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02110, is All-Star's custodian. EquiServe Trust Company, N.A., 150 Royall
Street, Canton, Massachusetts 02021, is the transfer and dividend disbursing
agent and registrar for All-Star.
Expenses of the Fund
LAMCO provides the Portfolio Manager selection, evaluation, monitoring and
rebalancing services and assumes responsibility for the administrative services
described above, pays the compensation of and furnishes office space for the
officers of All-Star who are affiliated with LAMCO, and pays the management fees
of the Portfolio Managers. All-Star pays all its expenses, other than those
expressly assumed by LAMCO. The expenses payable by All-Star include: management
and administrative fees payable to LAMCO; pricing and bookkeeping fees payable
to Colonial; fees and expenses of independent auditors; fees for transfer agent
and registrar, dividend disbursing, custodian and portfolio recordkeeping
services; expenses in connection with the Automatic Dividend Reinvestment and
Cash Purchase Plan; expenses in connection with obtaining quotations for
calculating the value of All-Star's net assets; taxes (if any) and the
preparation of All-Star's tax returns; brokerage fees and commissions; interest;
costs of Trustee and Shareholder meetings (including expenses of printing and
mailing proxy material therefor); expenses of printing and mailing reports to
shareholders; fees for filing reports with regulatory bodies and the maintenance
of All-Star's existence; membership dues for investment company industry trade
associations; legal fees; stock exchange listing fees and expenses; fees to
federal and state authorities for the registration of Shares; fees and expenses
of Trustees who are not trustees, officers, employees or stockholders of LAMCO
or its affiliates; insurance and fidelity bond premiums; and any extraordinary
expenses of a non-recurring nature.
DESCRIPTION OF SHARES
General
All-Star's authorized capitalization consists of an unlimited number of Shares
of beneficial interest, without par value, of which [ ] Shares were issued and
outstanding on the date of this Prospectus. The currently outstanding Shares
are, and the Shares offered hereby when issued and paid for pursuant to the
terms of the Offer will be, fully paid and non-assessable. Shareholders would be
entitled to share pro rata in the net assets of All-Star available for
distribution to Shareholders upon liquidation of All-Star.
Shareholders are entitled to one vote for each Share held. All-Star's Shares do
not have cumulative voting rights, which means that the holders of more than 50%
of the Shares of All-Star voting for the election of Trustees can elect all the
Trustees standing for election, and, in such event, the holders of the remaining
Shares will not be able to elect any of such Trustees.
Repurchase of Shares
All-Star is a closed-end investment company and as such its Shareholders do not
have the right to cause All-Star to redeem their All-Star Shares. All-Star,
however, is authorized to repurchase its Shares on the open market when its
Shares are trading at a discount from their net asset value. All-Star has no
current plans to repurchase its Shares.
Anti-takeover Provisions of the Declaration of Trust; Super-majority Vote
Requirement for Conversion to Open-End Status
All-Star's Declaration of Trust contains provisions (commonly referred to as
"antitakeover" provisions) which are intended to have the effect of limiting the
ability of other entities or persons to acquire control of All-Star, to cause it
to engage in certain transactions, or to modify its structure. The Board of
Trustees is divided into three classes, each having a term of three years. On
the date of the annual meeting of shareholders in each year the term of one
class expires. This provision could delay for up to three years the replacement
of a majority of the Board of Trustees. The affirmative vote of 75% of the
Shares will be required to authorize All-Star's conversion from a closed-end to
an open-end investment company, unless such conversion is recommended by
All-Star's Board of Trustees, in which event such conversion would only require
the majority vote of All-Star's Shareholders (as defined under "Investment
Objective, Policies and Risks" above).
In addition, the affirmative vote of the holders of 75% of the Shares of the
Fund will be required generally to authorize any of the following transactions:
(i) All-Star's merger or consolidation with or into any other corporation;
(ii) the issuance of any securities of All-Star to any person or entity for
cash;
(iii) the sale, lease or exchange of all or any substantial part of All-Star's
assets to any entity or person (except assets having an aggregate fair market
value of less than $1,000,000); or
(iv) the sale, lease or exchange to All-Star, in exchange for securities of
All-Star, of any assets of any entity or person (except assets having an
aggregate fair market value of less than $1,000,000);
if such corporation, person or entity is directly, or indirectly through
affiliates, the beneficial owner of five percent or more of the outstanding
Shares of All-Star. (A 66 2/3% vote would otherwise be required for a merger or
consolidation or a sale, lease or exchange of all or substantially all of
All-Star's assets unless recommended by the Trustees, in which case only a
majority vote would be required). However, such 75% vote will not be required
with respect to the transactions listed in (i) through (iv) above where the
Board of Trustees under certain conditions approves the transaction. However,
depending upon the transaction, a different Shareholder vote may nevertheless be
required under Massachusetts law.
The foregoing super-majority vote requirements may not be amended except with a
similar supermajority vote of the Shareholders.
These provisions will make more difficult a change in All-Star's structure or
management or consummation of the foregoing transactions without the Trustees'
approval. The anti-takeover provisions could have the effect of depriving
Shareholders of an opportunity to sell their Shares at a premium over prevailing
market prices by discouraging a third party from seeking to obtain control of
All-Star in a tender offer or similar transaction. However, the Board of
Trustees continues to believe that the anti-takeover provisions are in the best
interests of All-Star and its Shareholders because they provide the advantage of
potentially requiring persons seeking control of All-Star to negotiate with its
management regarding the price to be paid and facilitating the continuity of
All-Star's management and its continuing application of the multi-manager
concept.
The Board also believes that the super-majority vote requirement for conversion
to an open-end investment company is in the best interest of All-Star and its
shareholders because it will allow All-Star to continue to benefit from the
advantages of its closed-end structure until such time that, based on relevant
factors including the then current relationship of the market price of
All-Star's Shares to their net asset value, the Board determines to recommend to
Shareholders All-Star's conversion to an open-end investment company.
In accordance with the Declaration of Trust, the question of conversion to an
open-end investment company was submitted to the vote of Shareholders at
All-Star's 1993 annual meeting held on April 6, 1993, such conversion then
requiring only the affirmative vote of a majority of All-Star's Shares (as
defined in the 1940 Act). In accordance with the Trustees' recommendation,
Shareholders, by substantial majorities, rejected the conversion proposal and
approved an amendment to All-Star's Declaration of Trust instituting the 75%
super-majority vote referred to above for any future conversion to open-end
status.
DISTRIBUTIONS; AUTOMATIC DIVIDEND
REINVESTMENT AND CASH PURCHASE PLAN
10% Distribution Policy
All-Star's current distribution policy is to pay distributions on its Shares
totaling approximately 10% of its net asset value per year, payable in four
quarterly distributions of 2.5% of its net asset value at the close of the NYSE
on the Friday prior to each quarterly declaration date. These fixed
distributions, which are not related to All-Star's net investment income or net
realized capital gains or losses, will be treated as ordinary dividend income up
to the amount of All-Star's current and accumulated earnings and profits. If,
for any calendar year, the total distributions made under the 10% pay-out policy
exceed All-Star's net investment income and net realized capital gains, the
excess will be treated as a tax-free return of capital to each Shareholder (up
to the amount of the shareholder's basis in his or her Shares) and thereafter as
gain from the sale of Shares. The amount treated as a tax-free return of capital
will reduce the shareholder's adjusted basis in his or her Shares, thereby
increasing his or her potential gain or reducing his or her potential loss on
the subsequent sale of his or her Shares. All-Star made distribution from
capital in 1987, 1988, 1989, 1990, 1992, 1993 and 1994 (See "Financial
Highlights").
To the extent All-Star's 10% payout policy results in distributions in excess of
its net investment income and net realized capital gains, such distributions
will decrease its total assets and increase its expense ratio to a greater
extent than would have been the case without the 10% payout policy. In addition,
in order to make distributions under the 10% payout policy, All-Star may have to
sell portfolio securities at times when the particular investment styles of its
Portfolio Managers would dictate not doing so.
All-Star may, in the discretion of the Board of Trustees, retain for
reinvestment, and not distribute, net capital gain for any year to the extent
that its net investment income and net realized gains exceed the minimum amount
required to be distributed for such year under the 10% pay-out policy, although
All-Star reserves the right to distribute such excess. Retained net capital gain
will be taxed to both All-Star and the Shareholders as long-term capital gains;
however, each shareholder will be able to claim a proportionate share of the
federal income tax paid by All-Star as a credit against his or her own federal
income tax liability and will be entitled to increase the adjusted tax basis in
his or her Shares by the difference between the amount taxed and the credit.
All-Star may pay all or a substantial portion of its distributions in each year
in the form of newly issued Shares (plus cash in lieu of any fractional Shares
that would otherwise be issuable) to all shareholders except those
non-participants in the Plan who specifically elect to receive their
distribution in cash by completing and signing an option card, a copy of which
will be enclosed with the notice of each such distribution payable in Shares,
and returning it on a timely basis to EquiServe Trust Company, N.A., All-Star's
transfer agent and dividend paying agent.
The number of Shares to be issued to a Shareholder in payment of a distribution
declared payable in Shares will be determined by dividing the total dollar
amount of the distribution by the lower of the market value or the net asset
value per Share on the valuation date for the distribution (but not at a
discount of more than 5% from the market value). Market value per Share for this
purpose will be the last sales price on the NYSE on the valuation date or, if
there are no sales on that day, the mean between the closing bid and closing
asked quotations for that date.
Automatic Dividend Reinvestment and Cash Purchase Plan
Under All-Star's Automatic Dividend Reinvestment and Cash Purchase Plan (the
"Plan"), shareholders whose shares are registered in their own name may elect to
participate in the Plan and have all distributions automatically reinvested by
EquiServe Trust Company, as agent for participants in the Plan (the "Plan
Agent"), in additional Shares of All-Star. Shareholders who do not elect to
participate in the Plan will receive all distributions (other than those
declared payable in Shares as described above) in cash.
Under the Plan, distributions declared payable in Shares or cash at the option
of shareholders are paid to participants in the Plan entirely in newly issued
full and fractional Shares valued at the lower of the market value or the net
asset value per Share on the valuation date for the distribution (but not a
discount of more than 5% from the market value). Distributions declared payable
in cash will be reinvested for the accounts of participants in the Plan in
additional Shares purchased by the Plan Agent on the open market, on the NYSE or
elsewhere at prevailing market prices (if the Fund's Shares are trading at a
discount to their net asset value) or in newly issued Shares (if the Fund's
Shares are trading at or above their net asset value). Dividends and
distributions are subject to taxation, whether received in cash or in Shares
(see "Tax Status" below).
Participants in the Plan have the option of making additional cash payments in
any amount [from $100 to $3,000] on a monthly basis for investment in All-Star
Shares purchased on the open market. These voluntary cash payments will be
invested on or about the 15th day of each calendar month, and voluntary payments
should be sent so as to be received by the Plan Agent no later than ten business
days before the next investment date. Barring suspension of trading, voluntary
cash payments will be invested within [30] days of receipt. A participant may
withdraw a voluntary cash payment by written notice received by the Plan Agent
at least 48 hours before such payment is to be invested.
The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in the account, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Plan Agent in non-certificated form in the name
of the participant, and each shareholder's proxy will include those Shares
purchased or received pursuant to the Plan.
In the case of Shareholders such as banks, brokers or nominees that hold Shares
for others who are the beneficial owners, the Plan Agent will administer the
Plan on the basis of the number of Shares certified from time to time by the
record shareholder as representing the total amount registered in the record
shareholder's name and held for the account of beneficial owners who participant
in the Plan.
There is no charge to participants for reinvesting distributions payable in
either Shares or cash. The Plan Agent's fees for handling the reinvestment of
such distributions are paid by All-Star. There are no brokerage charges with
respect to Shares issued directly by All-Star as a result of distributions
payable in Shares or in cash. However, each participant bears a pro rata share
of brokerage commissions incurred with respect to the Plan Agent's open market
purchases in connection with the reinvestment of distributions declared payable
in cash.
With respect to purchases from voluntary cash payments, the Plan Agent will
charge $1.25 for each such purchase for a participant, plus a pro rata share of
the brokerage commissions. Brokerage charges for purchasing small amounts of
Shares for individual accounts through the Plan are expected to be less than the
usual brokerage charges for such transactions, as the Plan Agent will be
purchasing Shares for all participants in blocks and prorating the lower
commission thus attainable.
The automatic reinvestment of dividends and other distributions will not relieve
plan participants of any income tax that may be payable thereon. See "Tax
Status" below.
A participant may elect to withdraw from the Plan at any time by notifying the
Plan Agent in writing. There will be no penalty for withdrawal from the Plan,
and shareholders who have previously withdrawn from the Plan may rejoin it at
any time. A withdrawal will only be effective for subsequent distributions with
a record date at least ten days after the notice of withdrawal is received by
the Plan Agent.
Experience under the Plan may indicate that changes are desirable. Accordingly,
All-Star reserves the right to amend or terminate the Plan.
Shareholders must affirmateively elect to participate in the Plan, and may do so
by completing an application and filing it with the Plan Agent. Shareholders may
call or write the Plan Agent, EquiServe Trust Company, P.O. Box 8200, Boston,
Massachusetts 02266-8200 (800-542-3863) for information about the Plan.
Shareholders whose All-Star Shares are held of record in "street name" by
broker-dealer firms or banks may not be able to participate in the Plan, and
such Shareholders who are participating in the Plan may not be able to transfer
their Shares to another broker-dealer or bank and continue to participate in the
Plan.
A Shareholder may elect to withdraw from the Plan at any time by notifying the
Plan Agent in writing. There will be no penalty for withdrawal from the Plan and
Shareholders who have previously withdrawn from the Plan may rejoin it at any
time. A withdrawal will only be effective for subsequent distributions with a
record date at least ten days after the notice of withdrawal is received by the
Plan Agent.
TAX STATUS
The following discussion briefly summarizes the general rules applicable to
taxation of All-Star and its shareholders. Shareholders are urged to consult
with their own tax advisers concerning the tax consequences of their continued
investment in All-Star and of their receipt and exercise of the Rights.
All-Star has elected to be, and intends to continue to qualify each year for
federal income tax treatment as a regulated investment company under the Code,
and intends to make distributions to the Shareholders in accordance with the
timing requirements set out in the Code. As a result, it is expected that
All-Star will be relieved of federal income tax on its net investment income and
net realized capital gains to the extent it distributes them to its
Shareholders. (See "Distributions; Automatic Dividend Reinvestment and Cash
Purchase Plan--10% Distribution Policy" regarding All-Star's authority to retain
and pay taxes on, and not distribute, net capital gain). All-Star also expects
to make sufficient annual distributions to avoid being subject to a
nondeductible 4% federal excise tax imposed on regulated investment companies.
If All-Star fails to qualify as a regulated investment company in any year, it
would incur federal corporate income tax on its taxable income and its
distributions would be taxable as ordinary dividend income to the Shareholders
to the extent of its net investment income and net capital gain. In addition,
All-Star could be required to recognize unrealized gains, pay substantial taxes
and interest and make substantial distributions before requalifying for
treatment as a regulated investment company.
Distributions by All-Star from net investment income and net realized capital
gains are subject to taxation whether received by shareholders in cash or in
Shares of All-Star. Shareholders receiving a dividend or other distribution in
the form of newly issued Shares will be treated for federal income tax purposes
as receiving a distribution in an amount equal to the fair market value,
determined as of the distribution date, of the Shares received. Such
Shareholders will have a cost basis in each newly issued Share equal to the fair
market value of a Share of All-Star on the distribution date. Distributions are
generally taken into account for tax purposes when paid, except that
distributions paid in January but declared in the last quarter of the preceding
calendar year must be taken into account as if paid on December 31 of such
preceding calendar year. A portion of All-Star's net investment income paid to
corporate shareholders that is attributable to dividends from domestic
corporations may be eligible for the 70% dividends-received deduction available
to corporations. Availability of the deduction for particular corporate
shareholders is subject to certain limitations, and deducted amounts may be
subject to the alternative minimum tax or result in certain basis adjustments.
Distributions from net capital gain are taxable as long-term capital gains,
regardless of how long the Shareholder has held the Shares, and are not eligible
for the dividends-received deduction. Net capital gain is taxable, in the case
of a noncorporate shareholder, at a maximum rate of 20% if attributable to the
disposition of Shares that the shareholder held for more than twelve months.
If a shareholder holds Shares of All-Star for six months or less, any loss on
the sale of the Shares will be treated as a long-term capital loss to the extent
of any amount reportable by the Shareholder as long-term capital gain with
respect to such Shares. Any loss realized on a disposition of Shares may also be
disallowed under rules relating to wash sales.
At the time of an investor's purchase of All-Star Shares, All-Star's net asset
value may reflect undistributed net investment income or capital gains or net
unrealized appreciation of securities it holds. As of December 31, 2001,
All-Star's investments had net unrealized gains of $98,462,182. Realization and
a subsequent distribution to a shareholder of such amount, although it may in
effect constitute a return of his or her investment, would be taxable to the
shareholder as ordinary income or capital gain, as described above. For federal
income tax purposes, All-Star is permitted to carry forward to another taxable
year its net realized capital losses, if any, from earlier taxable years and
thus may realize net capital gains in the later year up to the amount of such
losses without being required to pay taxes on or to distribute such gains. As of
December 31, 2001, the end of its last completed fiscal year, All-Star had no
capital loss carryovers.
Individuals and certain other non-corporate All-Star Shareholders may be subject
to 30.5% withholding on reportable dividends and capital gain distributions
("back-up withholding"). Generally, Shareholders subject to back-up withholding
will be those for whom a taxpayer identification number and certain required
certificates are not on file with All-Star or who, to All-Star's knowledge, have
furnished an incorrect number. In addition, All-Star is required to withhold
from distributions to any Shareholder who does not certify to All-Star that the
Shareholder is not subject to back-up withholding due to notification by the
Internal Revenue Service that the shareholder has under-reported interest or
dividend income.
Distributions from net investment income paid to Shareholders who are
non-resident aliens or foreign entities may be subject to 30% federal
withholding tax (but not, in such event, subject to back-up withholding) unless
a reduced rate of withholding or a withholding exemption is provided under an
applicable treaty. Non-U.S. shareholders are urged to consult their own tax
advisers concerning the applicability of the withholding tax.
Information concerning the federal income tax status of All-Star dividends and
other distributions is mailed to shareholders annually.
Distributions and the transactions referred to in the preceding paragraphs may
be subject to state and local income taxes, and the treatment thereof may differ
from the federal income tax consequences discussed herein. Shareholders are
advised to consult with their tax advisers concerning the application of state
and local taxes.
See "The Offer-Federal Income Tax Consequences" for a discussion of the federal
income tax consequences regarding the Rights.
GENERAL
All-Star was organized on August 20, 1986 as a "Massachusetts business trust"
and commenced investment operations on November 3, 1986. Under Massachusetts
law, shareholders of such a trust may, under certain circumstances, be held
personally liable as partners for its obligations. However, All-Star's
Declaration of Trust contains an express disclaimer of Shareholder liability for
the acts or obligations of All-Star and provides for indemnification and
reimbursement of expenses out of All-Star's property for any shareholder held
personally liable for the obligations of All-Star. Thus, the risk of a
Shareholder incurring financial loss on account of an All-Star liability is
limited to circumstances in which both inadequate insurance existed and All-Star
itself were unable to meet its obligations from the liquidation of its portfolio
investments.
LAMCO is a direct wholly owned subsidiary of Columbia Management Group, Inc., an
indirect majority owned subsidiary of FleetBoston Financial Corporation.
Under the Fund Management Agreement between All-Star and LAMCO, All-Star may use
the name "Liberty All-Star" only so long as the Fund Management Agreement
remains in effect. If the Fund Management Agreement is no longer in effect,
All-Star is obligated (to the extent it lawfully can) to cease using such name
or any other name indicating that it is advised by or otherwise connected with
LAMCO. In addition, LAMCO may grant the non-exclusive right to use the name
"Liberty All-Star" to any other entity, including any other investment company
of which LAMCO or any of its affiliates is the investment adviser or
distributor.
STATEMENT OF ADDITIONAL INFORMATION
Additional information about the Fund is contained in the Statement of
Additional Information, a copy of which is available at no charge by calling the
Information Agent at the telephone number indicated on the cover of the
Prospectus. Set forth below is the Table of Contents of the Statement of
Additional Information.
Table of Contents
Investment Objective and Policies..............................................
Investment Restrictions........................................................
Investment Advisory and Other Services.........................................
Trustees and Officers of All-Star..............................................
Portfolio Security Transactions...............................................
Principal Shareholders.........................................................
Financial Statements...........................................................
A-1
APPENDIX A
INFORMATION ABOUT THE PORTFOLIO MANAGERS
Current Portfolio Managers
Mastrapasqua & Associates, Inc.
814 Church Street, Suite 600
Nashville, Tennessee 37203
Mastrapasqua & Associates, Inc. ("Mastrapasqua") was appointed as an All-Star
Portfolio Manager effective November 1, 2000. Mastrapasqua, an investment
advisor since 1993, is an independently owned firm. Ownership of Mastrapasqua
lies 100% with its officers and trustees. Mastrapasqua's principal executive
officer is Frank Mastrapasqua, Ph.D., Chairman and Chief Executive Officer. Mr.
Mastrapasqua, Thomas A. Trantum, President, and Mauro Mastrapasqua, First Vice
President, may be deemed to be control persons of Mastrapasqua by virtue of
their aggregate ownership of more than 25% of the outstanding voting stock of
Mastrapasqua. As of December 31, 2001, Mastrapasqua managed approximately $1.8
billion in assets.
Oppenheimer Capital LLC
1345 Avenue of the Americas
New York, New York 10105
Oppenheimer Capital LLC ("Oppenheimer") was appointed as an All-Star Portfolio
Manager effective February 15, 1990. Oppenheimer, an investment advisor since
1969, is a Delaware partnership and an indirect subsidiary of Allianz A.G.
Oppenheimer's principal executive officer is Kenneth M. Poovey. As of December
31, 2001, Oppenheimer managed over $37.2 billion in assets.
Boston Partners Asset Management, L.P.
28 State Street
Boston, Massachusetts 02109
Boston Partners Asset Management, L.P. ("Boston Partners") was appointed as an
All-Star Portfolio Manager effective May 11, 1998. Boston Partners has been an
investment advisor since 1995. The Sole General Partner of Boston Partners is
Boston Partners, Inc., a Delaware Subchapter S Corporation. Desmond J. Heathwood
is the President of Boston Partners, Inc. As of December 31, 2001, Boston
Partners managed over $10.2 billion in assets.
Westwood Management Corp.
300 Crescent Court
Dallas, Texas 75201
Westwood Management Corp. ("Westwood") was appointed as an All-Star Portfolio
Manager effective November 1, 1997. Westwood, an investment advisor since 1983,
is a wholly owned subsidiary of Southwest Securities Group, Inc. Westwood's
principal executive officer is Susan M. Byrne and its directors are Ms. Byrne,
Brian Casey, Don A. Buchhotz, David Glatstein, and Patricia R. Fraze. As of
December 31, 2001, Westwood managed over $4.0 billion in assets. Effective March
1, 2002, Westwood is expected to no longer serve as an All-Star Portfolio
Manager.
TCW INVESTMENT MANAGEMENT COMPANY
865 South Figueroa Street
Los Angeles, CA 90017
TCW Investment Management Company ("TCW") was appointed as an All-Star Portfolio
Manager effective April 1, 1999. TCW is a wholly owned subsidiary of The TCW
Group, Inc. ("TCW Group"). Established in 1971, TCW Group's direct and indirect
subsidiaries, including TCW, provide a variety of trust, investment management
and investment advisory services. Societe Generale Asset Management, S.A.
("SGAM") owns 51% of the TCW Group. SGAM is a wholly owned subsidiary of Societe
Generale, S.A. ("Societe Generale "). SGAM is located at 92708 place de la
Corpole, 92078 Paris, France. Societe Generale is located at 29 boulevard
Haussman, 75009, Paris, France. The employees, management, and other
shareholders of the TCW Group own the remaining 49% of the company. Under the
terms of an agreement between the TCW Group and SGAM, SGAM will acquire an
additional 19% interest in the TCW Group over the course of the next five years.
SGAM and TCW have stated their intention to maintain the personnel, processes,
investment strategy and operations of TCW, which will continue to operate under
the TCW brand name. As of December 31, 2001, TCW and its affiliates had over
$87.7 billion in assets under management or committed to management.
Glen E. Bickerstaff, Managing Director U.S. Equities, has managed the portion of
All-Star's portfolio allocated to TCW since its appointment as an All-Star
Portfolio Manager. Mr. Bickerstaff has been with TCW since 1994.
New Portfolio Manager
It is expected that on March 1, 2002, Schneider Capital Managment Corporation
will replace Westwood Management Corp. as a Portfolio Manager of All-Star. On
February 12, 2002, the Board of Trustees approved this change as well as the
proposed Portfolio Management Agreement between All-Star, LAMCO and Schneider
Capital Managment Corporation. A description of Schneider Capital Management is
below.
SCHNEIDER CAPITAL MANAGEMENT CORPORATION
450 East Swedesford Road
Wayne, PA 19087
Schneider Capital Management Corporation ("Schneider") was appointed as an
All-Star Portfolio Manager effective March 1, 2002. Schneider, a registered
investment advisor, was founded in 1996 by Arnold C. Schneider III. Mr.
Schneider serves as President and Chief Investment Officer of Schneider and
manages that portion of the Fund's portfolio assigned to Schneider. Prior to
founding Schneider, Mr. Schneider was a Senior Vice President and Partner of the
Wellington Management Company. Schneider is 100% employee-owned. As of December
31, 2001, Schneider managed approximately $1.6 billion in assets. No person has
been authorized to give any information or to make any representation not
contained in this Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized. This
Prospectus does not constitute an offering of any securities other than the
registered securities to which it relates or an offer to any person in any State
or jurisdiction of the United States or any country where such offer would be
unlawful. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create an implication that there has been no
change in the facts as set forth in the Prospectus or in the affairs of the Fund
since the date hereof.
____________
TABLE OF CONTENTS
Prospectus Summary.............................................................
Expenses.......................................................................
Financial Highlights...........................................................
Share Price Data...............................................................
Investment Performance.........................................................
The Offer......................................................................
Special Considerations and Risk Factors........................................
Use of Proceeds................................................................
The Multi-Manager Concept......................................................
Investment Objective, Policies and Risks.......................................
Management of All-Star ........................................................
Description of Shares..........................................................
Distributions; Automatic Dividend
Reinvestment and Cash Purchase Plan........................................
Tax Status.....................................................................
General........................................................................
Statement of Additional Information............................................
Appendix A--
Information about the Portfolio Managers......A-1
[LOGO HERE]
LIBERTY
ALL-STAR
EQUITY FUND
A Multi-Managed Investment Company
[ ] Shares of Beneficial Interest Issuable upon Exercise
of Rights to Subscribe for Such Shares
___________________
PROSPECTUS
[ ], 2002
___________________
LIBERTY ALL-STAR EQUITY FUND
STATEMENT OF ADDITIONAL INFORMATION
[ ], 2002
This Statement of Additional Information is not a prospectus, and should be read
in conjunction with the Prospectus of Liberty All-Star Equity Fund ("All-Star"
or the "Fund") dated [ ], 2002. A copy of the Prospectus may be obtained,
without charge, by calling or writing Liberty Asset Management Company at One
Financial Center, Boston, Massachusetts 02111(800-542-3863).
TABLE OF CONTENTS PAGE
Investment Objectives and Policies
Investment Restrictions
Investment Advisory and Other Services
Trustees and Officers of All-Star
Portfolio Security Transactions
Principal Shareholders
Financial Statements
INVESTMENT OBJECTIVES AND POLICIES
A description of the investment objective of All-Star and the types of
securities in which it may invest is contained in the Prospectus under
"Investment Objective, Policies and Risks."
Options and Futures Strategies
The effective use of options and future strategies is dependent, among other
things, on All-Star's ability to terminate options and futures positions at
times when it or its Portfolio Managers deem it desirable to do so. Although
All-Star will not enter into an option or futures position unless it believes
that a liquid secondary market exists for such option or future, there is no
assurance that All-Star will be able to effect closing transactions at any
particular time or at an acceptable price. All-Star generally expects that its
options and futures transactions will be conducted on recognized securities
exchanges. In certain instances, however, All-Star may purchase and sell options
in the over-the-counter market. All-Star's ability to terminate option positions
established in the over-the-counter market may be more limited than in the case
of exchange-traded options and may also involve the risk that securities dealers
participating in such transactions would fail to meet their obligations to
All-Star. All-Star may not purchase or sell future contracts and related options
if immediately thereafter the sum of the amount of initial margin deposits on
All-Star's existing futures and premiums paid for such related options would
exceed 5% of the market value of All-Star's net assets. Such limitation,
however, will not limit All-Star's loss on such contracts and options, which is
potentially unlimited.
Writing Covered Put and Call Options on Securities
All-Star may write covered call options and covered put options on optionable
securities of the types in which it is permitted to invest from time-to-time as
its respective Portfolio Managers determine is appropriate in seeking to attain
its objectives. Call options written by All-Star give the holder the right to
buy the underlying securities from All-Star at a stated exercise price; put
options give the holder the right to sell the underlying security to All-Star at
a stated price.
All-Star may write only covered options, which means that, so long as All-Star
is obligated as the writer of a call option, it will own the underlying
securities subject to the option (or comparable securities satisfying the cover
requirements of securities exchanges). In the case of put options, All-Star will
maintain in a separate account cash or short-term U.S. Government Securities
with a value equal to or greater than the exercise price of the underlying
securities. All-Star may also write combinations or covered puts and calls on
the same underlying security.
All-Star will receive a premium from writing a put or call option, which
increases All-Star's return in the event the option expires unexcercised or is
closed out at a profit. The amount of the premium will reflect, among other
things, the relationship of the market price of the underlying security to the
exercise price of the option, the term of the option and the volatility of the
market price of the underlying security. By writing a call option, All-Star
limits its opportunity to profit from any increase in the market value of the
underlying security above the exercise price of the option. By writing a put
option, All-Star assumes the risk that it may be required to purchase the
underlying security for an exercise price higher than its then current market
value, resulting in a potential capital loss if the purchase price exceeds the
market value plus the amount of the premium received, unless the security
subsequently appreciates in value.
All-Star may terminate an option that it has written prior to its expiration by
entering into a closing purchase transaction in which it purchases an option
having the same terms as the option written. All-Star will realize a profit or
loss from such transaction if the cost of such transaction is less or more than
the premium received from the writing of the option. In the case of a put
option, any loss so incurred may be partially or entirely offset by the premium
received from a simultaneous or subsequent sale of a different put option.
Because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security, any loss resulting
from the repurchase of a call option is likely to be offset in whole or in part
by unrealized appreciation of the underlying security owned by All-Star.
Purchasing Put and Call Options on Securities
All-Star may purchase put options to protect its portfolio holdings in an
underlying security against a decline in market value. Such hedge protection is
provided during the use of the put options since All-Star, as holder of the put
option, is able to sell the underlying security at the put exercise price
regardless of any decline in the underlying security's market price. In order
for a put option to be profitable, the market price of the underlying security
must decline sufficiently below the exercise price to cover the premium and
transaction costs. By using put options in this manner, All-Star will reduce any
profit it might otherwise have realized in its underlying security by the
premium paid for the put option and by transaction costs.
All-Star may also purchase call options to hedge against an increase in prices
of securities that it wants ultimately to buy. Such hedge protection is provided
during the life of the call option since All-Star, as holder of the call option,
is able to buy the underlying security at the exercise price regardless of any
increase in the underlying security's market price. In order for a call option
to be profitable, the market price of the underlying security must rise
sufficiently above the exercise price to cover the premium and transaction
costs. By using call options in this manner, All-Star will reduce any profit it
might have realized had it bought the underlying security at the time it
purchased the call option by the premium paid for the call option and by
transaction costs.
Purchase and Sale of Options and Futures on Stock Indices
All-Star may purchase and sell options on stock indices and stock index futures
as a hedge against movements in the equity markets.
Options on stock indices are similar to options on specific securities except
that, rather than the right to take or make delivery of the specific security at
a specified price, an option on a stock index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
that stock index is greater than, in the case of a call, or less than, in the
case of a put, the exercise price of the option. This amount of cash is equal to
such difference between the closing price of the index and the exercise price of
the option expressed in dollars times a specified multiple. The writer of the
option is obligated, in return for the premium received, to make delivery of
this amount. Unlike options on specific securities, all settlements of options
on stock indices are in cash and gain or loss depends on general movements in
the stocks included in the index rather than price movements in particular
stocks.
A stock index futures contract is an agreement in which one party agrees to
deliver to the other an amount of cash equal to a specific dollar amount times
the difference between the value of a specific stock index at the close of the
last trading day of the contract and the price at which the agreement is made.
No physical delivery of securities is made.
If a Portfolio Manager of All-Star expects general stock market prices to rise,
it might purchase a call option on a stock index or a futures contract on that
index as a hedge against an increase in prices of particular equity securities
it wants ultimately to buy. If in fact the stock index does rise, the price of
the particular equity securities intended to be purchased may also increase, but
that increase would be offset in part by the increase in the value of All-Star's
index option or futures contract resulting from the increase in the index. If,
on the other hand, the Portfolio Manager expects general stock market prices to
decline, it might purchase a put option or sell a futures contract on the index.
If that index does in fact decline, the value of some or all of the equity
securities in All-Star's portfolio may also be expected to decline, but that
decrease would be offset in part by the increase in the value of All-Star's
position in such put option or future. All-Star may purchase call options on a
stock index or a futures contracts on that index to enable a newly appointed
Portfolio Manager to gain immediate exposure to the underlying securities market
pending the investment in individual securities of the portion of All-Star's
portfolio assigned to it.
In connection with transactions in stock index options, futures and related
options, All-Star will be required to deposit as "initial margin" an amount of
cash and short-term U.S. Government Securities equal to from 5% to 8% of the
contract amount. Thereafter, subsequent payments (referred to as "variation
margin") are made to and from the broker to reflect changes in the value of the
futures contract.
Options on Stock Index Futures Contracts
All-Star may purchase and write call and put options on stock index futures
contracts. All-Star may use such options on futures contracts in connection with
its hedging strategies in lieu of purchasing and writing options directly on the
underlying securities or stock indices or purchasing and selling the underlying
futures. For example, All-Star may purchase put options or write call options on
stock index futures, rather than selling futures contracts, in anticipation of a
decline in general stock market prices, or purchase call options or write put
options on stock index futures, rather than purchasing such futures, to hedge
against possible increases in the price of equity securities which All-Star
intends to purchase.
Risk Factors in Options and Futures Transactions
The effective use of options and futures strategies is dependent, among other
things, on All-Star's ability to terminate options and futures positions at
times when its respective Portfolio Managers deem it desirable to do so.
Although All-Star will not enter into an option or futures position unless its
Portfolio Managers believe that a liquid secondary market exists for such option
or future, there is no assurance that All-Star will be able to effect closing
transactions at any particular time or at an acceptable price. All-Star
generally expects that its option and futures transactions will be conducted on
recognized securities exchanges. In certain instances, however, All-Star may
purchase and sell options in the over-the-counter market. All-Star's ability to
terminate option positions established in the over-the-counter market may be
more limited than in the case of exchange-traded options and may also involve
the risk that securities dealers participating in such transactions would fail
to meet their obligations to All-Star.
The use of options and futures involves the risk of imperfect correlation
between movements in options and future prices and movements in the price of
securities which are the subject of the hedge. Such correlation, particularly
with respect to options on stock indices and stock index futures, is imperfect,
and such risk increases as the composition of All-Star's portfolio diverges from
the composition of the relevant index. The successful use of these strategies
also depends on the ability of the Portfolio Manager to correctly forecast
interest rate or general stock market price movements.
Regulatory Matters
All-Star will conduct its purchases and sales of futures contracts and writing
of related options transactions in accordance with the rules, regulations and
any exemptions promulgated by the Commodity Futures Trading Commission ("CFTC")
and the Securities and Exchange Commission ("SEC") with respect to such
transactions.
INVESTMENT RESTRICTIONS
Except as indicated otherwise, the following investment restrictions have been
adopted for All-Star as fundamental policies and may be changed only by a
majority vote (as defined under "Investment Objective, Policies and Risks" in
the Prospectus) of All-Star's outstanding shares. Non-fundamental policies may
be changed by the Board of Trustees without shareholder approval.
All-Star may not:
(1) Issue senior securities, except as permitted by (2) below.
(2) Borrow money, except that it may borrow in an amount not exceeding 7% of its
total assets (including the amount borrowed) taken at market value at the time
of such borrowing, and except that it may make borrowings in amounts up to an
additional 5% of its total assets (including the amount borrowed) taken at
market value at the time of such borrowing to finance the repurchase of its
shares, to obtain such short-term credits as are necessary for the clearance of
securities transactions, or for temporary or emergency purposes, and may
maintain and renew any of the foregoing borrowings, provided that All-Star
maintains asset coverage of 300% with respect to all such borrowings. As a
non-fundamental policy, All-Star will not borrow in an amount in excess of 5% of
its total assets (including the amount borrowed).
(3) Pledge, mortgage or hypothecate its assets, except to secure indebtedness
permitted by paragraph (2) above and then only if such pledging, mortgaging or
hypothecating does not exceed 12% of All-Star's total assets taken at market
value at the time of such pledge, mortgage or hypothecation. The deposit in
escrow of securities in connection with the writing of put and call options and
collateral arrangements with respect to margin for futures contracts are not
deemed to be pledges or hypothecation for this purpose.
(4) Act as an underwriter of securities of other issuers, except to the extent
that, in connection with the disposition of portfolio securities, All-Star may
be deemed to be an underwriter for purposes of the Securities Act of 1933.
(5) Purchase or sell real estate or any interest therein, except that All-Star
may invest in securities issued or guaranteed by corporate or governmental
entities secured by real estate or interests therein, such as mortgage
pass-throughs and collateralized mortgage obligations, or issued by companies
that invest in real estate or interests therein.
(6) Make loans to other persons except for loans of portfolio securities (up to
30% of total assets) and except through the use of repurchase agreements, the
purchase of commercial paper or the purchase of all or a portion of an issue of
debt securities in accordance with its investment objective, policies and
restrictions, and provided that not more than 10% of All-Star's net assets will
be invested in repurchase agreements maturing in more than seven days.
(7) Invest in commodities or in commodity contracts (except stock index futures
and options).
(8) Purchase securities on margin (except to the extent that the purchase of
options and futures may involve margin and except that it may obtain such
short-term credits as may be necessary for the clearance of purchases or sales
of securities), or make short sales of securities.
(9) Purchase the securities of issuers conducting their principal business
activity in the same industry (other than securities issued or guaranteed by the
United States, its agencies and instrumentalities) if, immediately after such
purchase, the value of its investments in such industry would comprise 25% or
more of the value of its total assets taken at market value at the time of each
investment.
(10) Purchase securities of any one issuer, if (a) more than 5% of All-Star's
total assets taken at market value would at the time be invested in the
securities of such issuer, except that such restriction does not apply to
securities issued or guaranteed by the United States Government or its agencies
or instrumentalities or corporations sponsored thereby, and except that up to
25% or All-Star's total assets may be invested without regard to this
limitation; or (b) such purchase would at the time result in more than 10% of
the outstanding voting securities of such issuer being held by All-Star, except
that up to 25% of All-Star's total assets may be invested without regard to this
limitation.
(11) Invest in securities of another registered investment company, except (i)
as permitted by the Investment Company Act of 1940, as amended from time to
time, or any rule or order thereunder, or (ii) in connection with a merger,
consolidation, acquisition or reorganization.
(12) Purchase any security, including any repurchase agreement maturing in more
than seven days, which is subject to legal or contractual delays in or
restrictions on resale (including unregistered securities that are eligible for
resale pursuant to Rule 144A under the Securities Act of 1933), or which is not
readily marketable, if more than 10% of the net assets of All-Star, taken at
market value, would be invested in such securities.
(13) Invest for the purpose of exercising control over or management of any
company.
(14) Purchase securities unless the issuer thereof or any company on whose
credit the purchase was based, together with its predecessors, has a record of
at least three years' continuous operations prior to the purchase, except for
investments which, in the aggregate, taken at cost do not exceed 5% of
All-Star's total assets.
If a percentage restriction on investment or utilization of assets as set forth
above is adhered to at the time an investment is made, a later change in
percentage resulting from a change in the market values of All-Star's assets
will not be considered a violation of the restriction.
INVESTMENT ADVISORY AND OTHER SERVICES
As stated under "Management of All-Star" in the Prospectus, Liberty Asset
Management Company ("LAMCO") performs the investment management services and is
responsible for the administrative services described therein. LAMCO, through
Columbia Management Group, Inc. ("Columbia"), is an indirect majority owned
subsidiary of FleetBoston Financial Corporation, Boston, Massachusetts. As
indicated under "Trustees and Officers of All-Star" below, one of All-Star's
Trustees and all of its officers are officers of LAMCO, Colonial Management
Associates, Inc., Columbia or other affiliates of Columbia.
Reference is made to Appendix A of the Prospectus for the names of the
controlling persons of All-Star's current and new Portfolio Managers and the
names of the individuals at each Portfolio Manager primarily responsible for the
management of the portion of All-Star's portfolio assigned to it. None of such
Portfolio Managers has any affiliation with LAMCO or (except as Portfolio
Manager) with All-Star.
As described under "Management of All-Star" in the Prospectus, All-Star pays
LAMCO a fund management fee for its investment management services (from which
LAMCO pays the Portfolio Managers' fee), and an administrative fee for its
administrative services.
For the years ended December 31, 2000 and 2001 the total fund management and
administrative fees paid to LAMCO were $12,256,060 and $10,701,655,
respectively, of which an aggregate of $4,900,684 and $4,268,503, respectively,
was paid to the Portfolio Managers.
All-Star's current Fund Management Agreement and Portfolio Management Agreements
will continue in effect until July 31, 2003 and will continue in effect
thereafter so long as such continuance is specifically approved annually by (a)
the Board of Trustees or (b) the majority vote of All-Star's outstanding shares
(as defined under "Investment Objective, Policies and Risks" in the Prospectus),
provided that, in either event, the continuance is also approved by a majority
of the Trustees who are not "interested persons" (as defined in the 1940 Act) of
All-Star (the "Disinterested Trustees"), LAMCO or the Portfolio Managers by a
vote cast in person at a meeting called for the purpose of voting on such
approval. The Fund Management Agreement may be terminated on 60 days written
notice by either party, and the Portfolio Management Agreements may be
terminated on 30 days' notice by any party, and any such agreements will
terminate automatically if assigned.
It is expected that on March 1, 2002, Schneider Capital Managment will replace
Westwood Management Corp. as a Portfolio Manager of All-Star. On February 12,
2002, the Board of Trustees approved this change as well as the proposed
Portfolio Management Agreement between All-Star, LAMCO and Scheider Capital
Managment. The new Portfolio Management Agreement with Schneider Capital
Management will be substantially identical to one currently in place with
Westwood Management Corp. Under the new Portfolio Management Agreement,
Schneider Capital Management will be paid the same portfolio management fee that
was paid to Westwood Management Corp. prior to the effective date of the change.
The Fund and LAMCO have adopted Codes of Ethics pursuant to the requirements of
the Investment Company Act of 1940, as amended. These Codes of Ethics permit
personnel subject to the Codes to invest in securities, including securities
that may be purchased or held by the funds. Copies of the Codes of Ethics of the
Fund and LAMCO can be reviewed and copied at the Commission's Public Reference
Room in Washington, D.C. Information on the operation of the Public Reference
Room may be obtained by calling the Commission at 1-202-942-8090. The Codes of
Ethics are also available on the EDGAR database on the Commission's Internet
site at www.sec.gov, or may be obtained, after paying a duplicating fee, by
electronic request at publicinfo@sec.gov, or by writing the Commission's Public
Reference Section, Washington, D.C. 20549-0102.
Custodian and Pricing and Bookkeeping Agent
State Street Bank and Trust Company (the "Bank"), 225 Franklin Street, Boston,
Massachusetts 02110, is the custodian of the portfolio securities and cash of
All-Star. As such, the Bank holds All-Star's portfolio securities and cash in
separate accounts on All-Star's behalf and receives and delivers portfolio
securities and cash in connection with portfolio transactions initiated by
All-Star's Portfolio Managers, collects income due on its portfolio securities
and disburses funds in connection with the payment of distributions and
expenses.
Colonial Management Associates, Inc. ("Colonial"), an affiliate of LAMCO,
performs pricing and bookkeeping services for All-Star (see "Management of
All-Star" in the Prospectus). For the years ended December 31, 2000 and 2001,
All-Star paid pricing and bookkeeping fees to Colonial Management Associates,
Inc. of $283,283 and $221,055 respectively.
Independent Accountants
[ ], are the independent accountants of All-Star. The independent accountants
audit and report on the annual financial statements and provide tax return
preparation services and assistance and consultation in connection with the
review of various SEC filings.
TRUSTEES AND OFFICERS
The names of the Trustees and officers of the Liberty All-Star Equity Fund, the
date each was first elected or appointed to office, their term of office, their
principal business occupations and other directorships they have held during at
least the last five years, are shown below.
Position with Term of Office Number of Portfolios Other
Name, Address Liberty All-Star and Length of Principal Occupation(s) in Fund Complex Directorships
and Age Equity Fund Service During Past Five Years Overseen by Trustee Held
-------------- ---------------- -------------- ----------------------- --------------------- ------------
Disinterested Trustee(s)
Robert J. Birnbaum Trustee Trustee Since 1994; Retired since January, 1994; 2 Dresdner RCM
(Age 74) Term Expires 2003 Special Counsel, Dechert Price Global Funds
c/o Liberty Asset & Rhoads (September 1988 to (investment
Management Company December 1993); President and companies and
One Financial Center Chief Operating Officer, New Chicago Options
Boston, MA 02111 York Stock Exchange, Inc. (May Exchange Board
1995 to June 1988).
James E. Grinnell Trustee Trustee Since 1986; Private investor since November 2 None
(Age 71) Term Expires 2002 1988; President and Chief
c/o Liberty Asset Executive Officer, Distribution
Managment Company Management Systems, Inc. (1983
One Financial Center to May 1986); Senior Vice President,
Boston, MA 02111 Operations, The Rockport Company
(importer and distributor of shoes)
(May 1986 to November 1988).
Richard W. Lowry Trustee Trustee Since 1986; Private Investor since 1987 105 None
(Age 65) Term Expires 2004 (formerly Chairman and Chief
c/o Liberty Asset Executive Officer, U.S. Plywood
Management Company Corporation (building products
One Financial Center manufacturer)).
Boston, MA 02111
John J. Neuhauser Trustee Trustee Since 1998; Academic Vice President and Dean 105 Saucony, Inc.
(Age 58) Term Expires 2004 of Faculties since August 1999, (athletic
c/o Liberty Asset Boston College (formerly Dean, footwear);
Management Company Boston College School of Management SkillSoft
One Financial Center from September 1977 to September 1999). Corp.
Boston, MA 02111 (E-Learning)
Interested Trustee
William E. Mayer* Trustee Trustee Since 1998; Managing Partner, Park Avenue Equity Johns Manville
(Age 61) Term Expires 2003 Partners (venture capital) since (building
c/o Liberty Asset February q1999 (formerly Founding products
Management Company Partner, Development Capital LLC from manufacturer)
One Financial Center November 1996 to February 1999; Dean and Lee Enter-
Boston, MA 02111 Professor, College of Business and prises (print
Management, University of Maryland from and on-line
October 1992 to November 1996). media); WR
Hambrecht +
Co.
(financial
service
provider);
First Health
(healthcare);
Systech
Retail
Systems
(retail
industry
technology
provider)).
*A Trustee who is an "interested person" (as defined in the Investment
Company Act of 1940 ("1940 Act")) of the Trust or LAMCO. Mr. Mayer is an
interested person by reason of his affiliation with WR Hambrecht + Co.
Officers
Position with
Liberty All-Star Year First Elected or Principal Occupation(s)
Name, Address and Age Equity Fund Appointed to Office During Past Five Years
-------------------------- ---------------- ---------------------- -----------------------
William R. Parmentier, Jr. President 1998 President and Chief Executive Officer
(Age 49) (since June 1998) and Chief Invest-
Liberty Asset Management ment Officer (since May 1995), Senior
Company Vice President (May 1995 to June 1998);
One Financial Center Liberty Asset Management Company.
Boston, MA 02111
Christopher S. Carabell Vice President 1997 Senior Vice President, Product Develop-
(Age 38) ment and Marketing (since January 1999),
Liberty Asset Management Vice President, Investments, Liberty
Company Asset Management Company (March 1996 to
One Financial Center Janaury 1999); Associate Director, U.S.
Boston, MA 02111 Equity Research, BARRA Rogers Casey,
investment consultants (January 1995 to
February 1996).
Mark T. Haley, CFA Vice President 1999 Vice President-Investments (since
(Age 37) January 1998), Director of Investment
Liberty Asset Management Analysis (December 1996 to December
Company 1998), Investment Analyst (January 1994
One Financial Center to November 1996), Liberty Asset
Boston, MA 02111 Management Company.
J. Kevin Connaughton Treasurer 2000 Treasurer of the Liberty Funds and of the
(Age 37) Liberty All-Star Funds since December
One Financial Center 2000 (formerly Controller of the
Boston, MA 02111 Liberty Funds and of the Liberty All-
Star Funds from February 1998 to October
2000); Treasurer of the Stein oe Funds
since February 2001 (formerly Controller
from May 2000 to February 2001); Senior
Vice President of Liberty Funds Group
LLC ("LFG") since January 2001 (formerly
Vice President from April 2000 to
January 2001; Vice President of Colonial
Management Associates, Inc. ("Colonial")
from February 1998 to October 2000;
Senior Tax Manager, Coopers & Lybrand,
LLP from April 1996 to January 1998.
Michelle G. Azrailly Controller 2001 Controller of the Liberty Funds and of
(Age 32) Liberty All-Star Funds since May 2001;
One Financial Center Vice President of LFG since March 2001
Boston, MA 02111 (formerly Assistant Vice President of
Fund Administration from September, 2000
to February 2001; Compliance Manager
of Fund Administration from September
1999 to August 2000) (formerly
Assistant Vice President and Assistant
Treasurer, Chase Global Fund Services -
Boston from August 1996 to September
1999.
Vicki Benjamin Chief Accounting Officer 2001 Chief Accounting Officer of the Liberty
(Age 40) Funds and of the Liberty All-Star Funds
One Financial Center since June 2001; Vice President of LFG
Boston, MA 02111 since April 2001 (formerly Vice Presi-
dent, Corporate Audit, State Street
Bank and Trust Company from May 1998 to
April 2001; Audit Manager from July 1994
to June 1997; Senior Audit Manager from
July 1997 to May 1998, Coopers &
Lybrand, LLP).
Jean S. Loewenberg Secretary 2002 Secretary of the Liberty Funds and of
(Age 56) the Liberty All-Star Funds since
One Financial Center February 2002; Senior Vice President and
Boston, MA 02111 Group Senior Counsel, Fleet National
Bank since November 1996.
Role of the Board of Trustees
The Trustees of All-Star are responsible for the overall management and
supervision of All-Star's affairs and for protecting the interests of the
shareholders. The Trustees meet periodically throughout the year to oversee
All-Star's activities, review contractual arrangements with service providers
for All-Star and review All-Star's performance.
Audit Committee
Messrs. Birnbaum, Grinnell, Lowry and Neuhauser are members of the Audit
Committee of the Board of Trustees of All-Star. The Audit Committee's functions
include making recommendations to the Trustees regarding the selection and
performance of the independent accountants, and reviewing matters relative to
accounting and auditing practices and procedures, accounting records, and the
internal accounting controls, of All-Star, and certain service providers. In the
fiscal year ended December 31, 2001, the Audit Committee convened [ ] times.
Share Ownership
The following table shows the dollar range of equity securities beneficially
owned by each Trustee in All-Star and in all Liberty Funds overseen by the
Trustee as of December 31, 2001.
Aggregate Dollar Range of Equity Securities Owned in
Dollar Range of Equity All Registered Funds Overseen by Trustee in Liberty
Securities Owned in All-Star Family of Funds
Name of Trustee
Disinterested Trustees
Robert J. Birnbaum $ $
James E. Grinnell $ $
Richard W. Lowry $ $
John J. Neuhauser $ $
Interested Trustees
William E. Mayer $ $
As of December 31, 2001, no disinterested Trustee or any of their immediate
family members owned beneficially or of record any class of securities of LAMCO,
a portfolio manager or any person controlling, controlled by or under common
control with LAMCO or a portfolio manager.
During the calendar years ended December 31, 2000 and December 31, 2001, Mr.
Lowry had a material interest in a trust which owns units of a limited
partnership whose investments are managed by M.A. Weatherbie & Co., a portfolio
manager of Liberty All-Star Growth Fund, Inc., and whose general partner is
Weatherbie Limited Partnership, an affiliate of M.A. Weatherbie & Co., Inc. As
of December 31, 2001, the Trust's interest in this limited partnership was
valued at approximately $3.6 million. During the calendar years ended December
31, 2000 and December 31, 2001, other than Mr. Lowry's interest in this trust,
no disinterested Trustee (or their immediate family members) had any direct or
indirect interest in LAMCO, a portfolio manager or any person controlling,
controlled by or under common control with LAMCO or a portfolio manager.
During the calendar years ended December 31, 2000 and December 31, 2001, no
disinterested Trustee (or their immediate family members) had any direct or
indirect material interest in any transaction or series of similar transactions
with (i) All-Star; (ii) another fund managed by LAMCO, a portfolio manager or a
person controlling, controlled by or under common control with LAMCO or a
portfolio manager; (iii) LAMCO or a portfolio manager; (iv) any person
controlling, controlled by or under common control with LAMCO or a portfolio
manager; or (v) an officer of any of the above.
During the calendar years ended December 31, 2000 and December 31, 2001, no
disinterested Trustee (or their immediate family members) had any direct or
indirect relationship with (i) All-Star; (ii) another fund managed by LAMCO,a
portfolio manager or a person controlling, controlled by or under common control
with LAMCO or a portfolio manager; (iii) LAMCO or a portfolio manager; (iv) a
person controlling, controlled by or under common control with LAMCO or a
portfolio manager; or (v) an officer of any of the above.
During the calendar years ended December 31, 2000 and December 31, 2001, no
officer of LAMCO, a portfolio manager or any person controlling, controlled by
or under common control with LAMCO or a portfolio manager served on the board of
directors of a company where a disinterested Trustee of All-Star or any of their
immediate family members served as an officer.
Approving the Investment Advisory Contracts
In determining to approve the most recent annual extension of the Fund's Fund
Management Agreement and Portfolio Management Agreements, the Trustees met over
the course of the year with the relevant investment advisory personnel from
LAMCO and the Portfolio Managers and considered information provided by LAMCO
and the Portfolio Managers relating to the education, experience and number of
investment professionals and other personnel providing services under that
agreement. See "Management of All-Star" in the Fund's Prospectus and "Trustees
and Officers" in this SAI. The Trustees also took into account the time and
attention devoted by senior management of LAMCO and the Portfolio Managers to
the Fund and the other funds in the complex. The Trustees evaluated the level of
skill required to manage the Fund and concluded that the human resources devoted
by LAMCO and the Portfolio Managers to the Fund were appropriate to fulfill
effectively each of their duties under the agreements. The Trustees also
considered the business reputation of LAMCO and the Portfolio Managers and each
of their respective financial resources, and concluded that each of them would
be able to meet any reasonably foreseeable obligations under the agreements.
The Trustees received information concerning the investment philosophy and
investment process applied by LAMCO and the Portfolio Managers in managing the
Fund. See "Investment Objective, Policies and Risks" in the Fund's Prospectus.
In this connection, the Trustees considered the in-house research capabilities
of LAMCO and the Portfolio Managers as well as other resources available to
their personnel, including research services available to LAMCO and the
Portfolio Managers as a result of securities transactions effected for the Fund
and other investment advisory clients. The Trustees concluded that investment
process, research capabilities and philosophy of each Portfolio Manager and
LAMCO were well suited to the Fund, given the Fund's investment objectives and
policies.
The Trustees considered the scope of the services provided by LAMCO and each
Portfolio Manager to the Fund under the agreements relative to services provided
by third parties to other mutual funds. See "Investment Advisory and Other
Services." The Trustees concluded that the scope of the services provided by
LAMCO and each Portfolio Manager to the Fund was consistent with the Fund's
operational requirements, including, in addition to its investment objective,
compliance with the Fund's investment restrictions, tax and reporting
requirements and related shareholder services.
The Trustees considered the quality of the services provided by LAMCO and each
Portfolio Manager to the Fund. The Trustees evaluated each of their records with
respect to regulatory compliance and compliance with the investment policies of
the Fund. The Trustees also evaluated the procedures of LAMCO and each Portfolio
Manager designed to fulfill their fiduciary duty to the Fund with respect to
possible conflicts of interest, including each of their codes of ethics
(regulating the personal trading of its officers and employees) (see "Investment
Advisory and Other Services"), the procedures by which LAMCO and each Portfolio
Manager allocates trades among its various investment advisory clients and the
record of LAMCO and each Portfolio Manager in these matters. The Trustees also
received information concerning standards of LAMCO and each Portfolio Manager
with respect to the execution of portfolio transactions. See "Portfolio Security
Transactions."
The Trustees considered LAMCO's management of non-advisory services provided by
persons other than LAMCO by reference, among other things, to the Fund's total
expenses and the reputation of the Fund's other service providers. See
"Expenses" in the Fund's Prospectus. The Trustees also considered information
provided by third parties relating to the Fund's investment performance relative
to its performance benchmark(s), relative to other similar funds managed by
LAMCO and each Portfolio Manager and relative to funds managed similarly by
other advisors. The Trustees reviewed performance over various periods,
including the Fund's one, five and ten year calendar year periods and/or the
life of the Fund, as applicable (See "Investment Performance" in the Fund's
Prospectus), as well as factors identified by LAMCO as contributing to the
Fund's performance. See the Fund's most recent annual and semi-annual reports.
The Trustees concluded that the scope and quality of the services provided by
LAMCO and each Portfolio Manager was sufficient to merit reapproval of each
agreement for another year.
In reaching that conclusion, the Trustees also gave substantial consideration to
the fees payable under the agreements. The Trustees reviewed information
concerning fees paid to investment advisors of similarly managed funds. The
Trustees also considered the fees of the Fund as a percentage of assets at
different asset levels and possible economies of scale to LAMCO and each
Portfolio Manager. The Trustees evaluated the profitability of LAMCO with
respect to the Fund, concluding that such profitability appeared to be generally
consistent with levels of profitability that had been determined by courts to be
"not excessive." For these purposes, the Trustees took into account not only the
actual dollar amount of fees paid by the Fund directly to LAMCO, but also
so-called "fallout benefits" to the Advisor such as reputational value derived
from serving as fund manager to the Fund and the research services available to
LAMCO and each Portfolio Manager by reason of brokerage commissions generated by
the Fund's turnover. In evaluating the Fund's advisory fees, the Trustees also
took into account the complexity of investment management for the Fund relative
to other types of funds. Based on challenges associated with less readily
available market information about foreign issuers and smaller capitalization
companies, limited liquidity of certain securities, and the specialization
required for focused funds, the Trustees concluded that generally greater
research intensity and trading acumen is required for equity funds, and for
international or global funds, as compared to funds investing, respectively, in
debt obligations or in U.S. issuers. See "The Fund" in the Fund's Prospectus.
Based on the foregoing, the Trustees concluded that the fees to be paid to LAMCO
and each Portfolio Manager under the advisory agreement were fair and
reasonable, given the scope and quality of the services rendered by LAMCO and
each Portfolio Manager.
General
All-Star's Board of Trustees is divided into three classes, each of which has a
term of three years expiring with the annual meeting of shareholders in the
third year of the term. All-Star holds annual meetings of shareholders to vote
on, among other things, the election or re-election of the Trustees whose terms
are expiring with that meeting. The term or office of Messrs. Birnbaum and Mayer
will expire upon the final adjournment of the 2002 annual meeting; the term of
office of Messrs. Grinnell and Neuhauser will expire upon final adjournment of
the annual meeting for the year 2003; and the term of office of Mr. Palombo will
expire upon final adjournment of the annual meeting for the year 2004. Messrs.
Lowry, Mayer, and Neuhauser are also Trustees of Liberty Funds Trusts I through
VII (the "Liberty Trusts"), the umbrella trusts for an aggregate of 49 open-end
funds managed by affiliates of LAMCO, nine closed-end funds managed by Colonial
(the "Colonial Closed-End Funds"), 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; Liberty Floating Rate Fund; Stein Roe Floating Rate Limited Liability
Company, Liberty-Stein Roe Institutional Floating Rate Income Fund and
Liberty-Stein Roe Funds Income Trust, Liberty-Stein Roe Funds Municipal Trust,
Liberty-Stein Roe Funds Investment Trust, Liberty-Stein Roe Advisor Trust, Stein
Roe Trust, SR&F Base Trust and Stein Roe Variable Investment Trust, the umbrella
trusts for 42 open-end funds managed by Stein Roe & Farnham Incorporated, a
LAMCO affiliate. The All Star's Board of Trustees are also directors of Liberty
All-Star Growth Fund, Inc., another closed-end multi-managed fund managed by
LAMCO.
Trustee Compensation
LAMCO or its affiliates pay the compensation of all the officers of All-Star,
including the Trustees who are affiliated with LAMCO. Beginning January 1, 1999,
the aggregate of the fees paid to the Trustees by All-Star that have the same
Board of Directors as the Liberty All-Star Growth Fund, Inc., and Liberty
All-Star Growth and Income Fund and hold their meetings concurrently with those
of the Fund, consists of Trustee 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 was allocated among the
Fund and the two other funds on a per fund basis, and the remaining two thirds
was allocated among the three funds based on their net assets. Effective
February 9, 2001, Liberty All-Star Growth and Income Fund was merged into
another open-end fund in the Liberty Trusts and the retainer and meeting fees
will be allocated between the Fund and Liberty All-Star Equity Fund. For 2001,
All-Star paid the independent Trustees an aggregate of $[ ]in fees and expenses.
The following table shows, for the year ended December 31, 2001, 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 two All-Star Funds. The Fund has no bonus, profit sharing or
retirement plans.
Aggregate
Compensation from Total Compensation from the
Name the Fund Liberty All-Star Funds (including the Fund)
Robert J. Birnbaum $19,186.39 $25,300
James E. Grinnell $19,186.39 $25,300
Richard W. Lowry $18,806.88 $24,800
William E. Mayer $18,806.88 $24,800
John J. Neuhauser $18,806.88 $24,800
Joseph R. Palombo(1) N/A N/A
(1) For the fiscal year ended December 31, Mr. Palombo did not receive
compensation because he was an affiliated Trustee and an employee of LFC,
an affiliate of LAMCO. Mr. Palombo resigned as Trustee of the Liberty All-Star
Funds effective November 1, 2001.
The following table shows, for the calendar year ended December 31, 2001, 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 $ 25,300
James E. Grinnell(2) $100,300
Richard W. Lowry $135,300
William E. Mayer $135,300
John J. Neuhauser $132,510
Joseph R. Palombo(3) N/A
(2) Resigned as Trustee of the Liberty Funds on December 27, 2000.
(3) For the fiscal year ended December 31, Mr. Palombo did not
receive compensation because he was an affiliated Trustee and an
employee of LFC.
PORTFOLIO SECURITY TRANSACTIONS
Each of All-Star's Portfolio Managers has discretion to select brokers and
dealers to execute portfolio transactions initiated by the Portfolio Manager for
the portion of All-Star's portfolio assets allocated to it, and to select the
markets in which such transactions are to be executed. The Portfolio Management
Agreements with All-Star provide, in substance, that, except as provided in the
following paragraph, in executing portfolio transactions and selecting brokers
or dealers, the primary responsibility of the Portfolio Manager is to seek to
obtain best net price and execution for All-Star. It is expected that securities
will ordinarily be purchased in the primary markets, and that, in assessing the
best net price and execution available to All-Star, the Portfolio Manager will
consider all factors it deems relevant, including the breadth of the market in
the security, the price of the security, the financial condition and execution
capability of the broker or dealer and the reasonableness of the commission, if
any, for the specific transaction and on a continuing basis. Recognizing these
factors, All-Star may pay a brokerage commission in excess of that which another
broker or dealer may have charged for effecting the same transaction.
The Portfolio Management Agreements also provide that LAMCO has the right to
request that transactions giving rise to brokerage commissions, in amounts to be
agreed upon from time to time between LAMCO and the Portfolio Manager, be
executed by brokers and dealers (to be agreed upon from time to time between
LAMCO and the Portfolio Manager) which provide, directly or through third
parties, research products and services to LAMCO or to All-Star. The commissions
paid on such transactions may exceed the amount of commissions another broker
would have charged for effecting that transaction. Research products and
services made available to LAMCO through brokers and dealers executing
transactions for All-Star involving brokerage commissions include performance,
portfolio characteristics, investment style and other qualitative and
quantitative data relating to investment managers in general and the Portfolio
Managers in particular; data relating to the historic performance of categories
of securities associated with particular investment styles; mutual fund
portfolio, performance and fee and expense data; data relating to portfolio
manager changes by pension plan fiduciaries; quotation equipment; and related
computer hardware and software, all of which are used by LAMCO in connection
with its selection and monitoring of portfolio managers (including the Portfolio
Managers) for All-Star and other multi-managed clients of LAMCO, the assembly of
a mix of investment styles appropriate to the investment objectives of All-Star
or such other clients, and the determination of overall portfolio strategies.
LAMCO from time to time reaches understandings with each of the Portfolio
Managers as to the amount of the All-Star portfolio transactions initiated by
such Portfolio Manager that are to be directed to brokers and dealers which
provide or make available research products and services to LAMCO and the
commissions to be charged to All-Star in connection therewith. These amounts may
differ among the Portfolio Managers based on the nature of the markets for the
types of securities managed by them and other factors.
These research products and services are used by LAMCO in connection with its
management of All-Star, Liberty All-Star Growth Fund, Inc., Liberty All-Star
Equity Fund, Varlable Series, and other multi-managed clients of LAMCO,
regardless of the source of the brokerage commissions. In instances where LAMCO
receives from broker-dealers products or services which are used both for
research purposes and for administrative or other non-research purposes, LAMCO
makes a good faith effort to determine the relative proportions of such products
or services which may be considered as investment research, based primarily on
anticipated usage, and pays for the costs attributable to the non-research usage
in cash.
The Portfolio Managers are authorized to cause All-Star to pay a commission to a
broker or dealer who provides research products and services to the Portfolio
Manager for executing a portfolio transaction which is in excess of the amount
of commission another broker or dealer would have charged for effecting that
transaction. The Portfolio Managers must determine in good faith, however, that
such commission was reasonable in relation to the value of the research products
and services provided to them, viewed in terms of that particular transaction or
in terms of all the client accounts (including All-Star) over which the
Portfolio Manager exercises investment discretion. It is possible that certain
of the services received by a Portfolio Manager attributable to a particular
transaction will primarily benefit one or more other accounts for which
investment discretion is exercised by the Portfolio Manager.
During 1999, 2000 and 2001, All-Star paid total brokerage commissions of $[ ],
$[ ] and $[ ], respectively. Approximately $[ ] of the commissions paid in 1999,
and $[ ] and $[ ], respectively, of the commissions paid in 2000 and 2001 on
transactions aggregating approximately $[ ] and $[ ], respectively, were paid to
brokerage firms which provided or made available to All-Star's Portfolio
Managers or to LAMCO research products and services as described above.
Although All-Star does not permit a Portfolio Manager to act or have an
affiliate act as broker for Fund portfolio transactions initiated by it, the
Portfolio Managers are permitted to place Fund portfolio transactions initiated
by them with another Portfolio Manager or its broker-dealer affiliate for
execution on an agency basis, provided the commission does not exceed the usual
and customary broker's commission being paid to other brokers for comparable
transactions and is otherwise in compliance with Rule 17e-1 under the Investment
Company Act of 1940. [During 1999, 2000 and 2001 no Fund portfolio transactions
were placed with any Portfolio Manager or its broker-dealer affiliate.]
PRINCIPAL SHAREHOLDERS
On [ ], 2002, Cede & Co. Fast, Depository Trust Company, 55 Water Street, New
York, NY 10004 owned beneficially [ ] Shares, representing [ ] of All-Star's
then outstanding Shares.
FINANCIAL STATEMENTS
[ ], are the independent accountants for the Fund. [ ] provides audit and tax
return preparation services and assistance and consultation in connection with
the review of various Securities and Exchange Commission filings. Prior to
September, 1999, [ ] were the independent auditors for the Fund. The financial
statements incorporated by reference in this SAI have been so incorporated, and
the financial statements in the Prospectus have been so included, in reliance
upon the reports of [ ] and [ ] given on authority of said firms as experts in
accounting and auditing. The Fund's Annual Report, which includes financial
statements for the fiscal year ended December 31, 2001, is incorporated herein
by reference with respect to all information other than the information set
forth on pages [ ] through [ ] thereof. Any statement contained in the Fund's
Annual Report that was incorporated herein shall be deemed modified or
superseded for purposes of the Prospectus or this Statement of Additional
Information to the extent a statement contained in the Prospectus or this
Statement of Additional Information varies from such statement. Any such
statement so modified or superseded shall not, except as so modified or
superseded, be deemed to constitute a part of the Prospectus or this Statement
of Additional Information. The Fund will furnish, without charge, a copy of its
Annual Report, upon request to Liberty Asset Management Company, One Financial
Center, Boston, Massachusetts 02111, telephone (800) 542-3863.
PART C.
Other Information.
Item 24. Financial Statements and Exhibits
(1) Financial Statements:
Included in Part A:
Financial statements included in Part A of this
registration statement: Financial Highlights
Included in Part B:
Financial statements included in Part B - to
be filed by Amendment
(2) Exhibits
(a)(1) Amended and Restated Declaration of Trust*
(a)(2) Amendment to Declaration of Trust dated 5/11/93*
(b) Amended By-Laws
(c) Not Applicable
(d)(1) Form of Specimen Certificate for Shares of
Beneficial Interest*
(d)(2) Form of Subscription Certificate*
(d)(3) Form of Notice of Guaranteed Delivery*
(e) Automatic Dividend Reinvestment and Cash
Purchase Plan Brochure, as amended(1)
(f) Not Applicable
(g)(1) Fund Management Agreement between Registrant and
Liberty Asset Management Company dated 11/1/01
(g)(2) Portfolio Management Agreement between Registrant,
Liberty AssetManagement Company and Boston
Partners Asset Management, L.P. dated 11/1/01
(g)(3) Portfolio Management Agreement between Registrant,
Liberty Asset Management Company and Mastrapasqua
& Associates, Inc. dated 11/1/01
(g)(4) Portfolio Management Agreement between Registrant,
Liberty Asset Management Company and TCW
Investment Management Company dated 11/1/01
(g)(5) Portfolio Management Agreement between Registrant,
Liberty Asset Management Company and Oppenheimer
Capital dated 11/1/01
(g)(6) Portfolio Management Agreement between Registrant,
Liberty Asset Management Company and Westwood
Management Corporation dated 11/1/01
(g)(7) Portfolio Management Agreement between Registrant,
Liberty Asset Management Company and Schneider
Capital Management Corporation*
(h) Not Applicable
(i) Not Applicable
(j)(1) Form of Custodian Agreement with State Street
Bank and Trust Company dated October 10, 2001 -
filed as Exhibit (g) in Part C, Item 23 of Post-
Effective Amendment No. 56 to the Registration
Statement on Form N-1A of Liberty Funds Trust II
(File Nos. 2-66976 & 811-3009), filed with the
Commission on or about October 26, 2001, and is
hereby incorporated by reference and made a part
of this Registration Statement
(k)(1) Registrar, Transfer Agency and Service Agreement
between Registrant and State Street Bank & Trust
Company dated 10/1/86*
(k)(2) Pricing and Bookkeeping Agreement between
Registrant and Colonial Management Associates,
Inc. dated 1/1/96 (1)
(k)(3) Form of Amendment dated 7/1/01 to Pricing and
Bookkeeping Agreement between Registrant and
Colonial Management Associates, Inc.
(k)(4) Form of Subscription Agreement between Registrant
and EquiServe Trust Company, N.A.*
(k)(5) Form of Information Agent Agreement between
Registrant and Georgeson Shareholder
Communications, Inc.*
(l) Opinion and Consent of Counsel*
(m) Not Applicable
(n) Consent of Independent Accountants*
(o) Not Applicable
(p) Not Applicable
(q) Not Applicable
(r) Code of Ethics - filed in Part C, Item 23 of
Post-Effective Amendment No. 56 to the Registration
Statement on Form N-1A of Liberty Funds Trust II
(File Nos. 2-66976 & 811-3009), filed with the
Commission on or about October 26, 2001, and is
hereby incorporated and made a part of this
Registration Statement
-------------------------------------------------------------------------------
Power of Attorney for: Robert J. Birnbaum, James E. Grinnell, Richard W. Lowry,
William E. Mayer, John J. Neuhauser and Joseph R. Palombo
---------------------------------------------------------------------------
*To be filed by Amendment.
(1) Incorporated by reference to the Registration Statement on Form N-2
filed with the Commission on February 23, 1998.
Item 25. Marketing Arrangements
Not Applicable.
Item 26. Other Expenses of Issuance and Distribution
The following table sets forth the expenses to be incurred in connection
with the offering described in this Registration Statement:
Registration fee $ 11,500
New York Stock Exchange listing fee 38,500
Printing 25,000
Accounting fees and expenses 7,000
Legal fees and expenses 50,000
Information Agent fees and expenses 13,000
Subscription Agent fees and expenses 90,000
Miscellaneous 80,000
----------
Total $315,000
==========
Item 27. Persons Controlled By or Under Common Control with Registrant
None.
Item 28. Number of Holders of Securities
Number of Record Holders
as of 1/31/02: 6,300
Item 29. Indemnification
See Article V to the Amended Declaration of Trust as filed
as Exhibit (a)(1) hereto.
The Registrant, its advisor, Liberty Asset Management Company,
and its Administrator, Colonial Management Associates, Inc.
(Colonial), and their respective trustees, directors and
officers are insured by a Directors and Officers/Errors and
Omissions Liability insurance policy through ICI Mutual
Insurance Company. The policy provides indemnification to
the Registrant's Trustees and Officers.
ITEM 30. Business and Other Connections of Investment Adviser.
Liberty Asset Management Company ("LAMCO"), the Registrant's
Fund Manager, was organized on August 16, 1985 and is primarily engaged in the
corporate administration of and the provision of its multi-management services
for the Registrant and Liberty All-Star Growth Fund, Inc., another
multi-managed closed-end investment company. It also provides its multi-
management services to Liberty All-Star Equity Fund, Variable Series, a multi-
managed open-end investment company which serves as an investment vehicle for
variable annuity contracts issued by affiliated insurance companies. As of
December 31, 2001, LAMCO had $1.4 billion assets under management.
The following sets forth the business and other connections of each director
and officer of LAMCO:
(1) (2) (3) (4)
Name and principal
business
addresses* Affiliation
of officers and with Other business, profession,
directors of investment vocation or employment
investment adviser adviser connection Affiliation
------------------ ---------- ------------------------------ -----------
Banks, Keith T. Director Liberty Variable Investment Trust President
Palombo, Joseph R. Director Liberty Variable Investment Trust Trustee
Sayler, Roger Director None
Parmentier, Jr., William R. President, Chief Liberty All-Star Growth Fund, Inc. Pres., Chief
Executive Officer & Exec. Officer &
Chief Investment Officer Chief Investment
Officer
Carabell, Christopher S. Senior Vice President Liberty All-Star Growth Fund, Inc. Vice President
Mark T. Haley Vice President Liberty All-Star Growth Fund, Inc. Vice President
Loewenberg, Jean S. Secretary Liberty Variable Investment Trust Secretary
Liberty All-Star Growth Fund, Inc. Secretary
Iudice, Philip J., Jr. Treasurer None
--------------------------------
*The principal address of the officers and directors of the Investment Adviser
is One Financial Center, Boston, MA 02111.
Item 31. Location of Accounts and Records:
Registrant maintains the records required to be maintained by it
under Rules 31a-1(a), 31a-1(b), and 31a-2(a) under the Investment
Company Act of 1940 at its principal executive offices at One
Financial Center, Boston, MA 02111. Certain records, including
records relating to Registrant's shareholders and the physical
possession of its securities, may be maintained pursuant to Rule
31a-3 at the main office of Registrant's transfer agent or
custodian.
Item 32. Management Services
None
Item 33. Undertakings
(1) The Registrant undertakes to suspend the offering of shares
until the prospectus is amended, if subsequent to the
effective date of this Registration Statement, its net
asset value declines more than ten percent from its net
asset value, as of the effective date of the Registration
Statement or its net asset value increases to an amount
greater than its net proceeds as stated in the prospectus.
(2) Not applicable.
(3) Not applicable.
(4) Not applicable.
(5) Registrant undertakes that, for the purpose of determining
any liability under the Securities Act, the information
omitted from the form of prospectus filed as part of the
Registration Statement in reliance upon Rule 430A and
contained in the form of prospectus filed by the Registrant
pursuant to Rule 497(h) will be deemed to be a part of the
Registration Statement as of the time it was declared
effective.
Registrant undertakes that, for the purpose of determining
any liability under the Securities Act, each post-effective
amendment that contains a form of prospectus will be deemed
to be a new Registration Statement relating to the
securities offered therein, and the offering of such
securities at that time will be deemed to be the initial
bona fide offering thereof.
(6) Registrant undertakes to send by first class mail or other
means designed to ensure equally prompt delivery, within
two business days of receipt of a written or oral request,
any Statement of Additional Information constituting Part B
of this Registration Statement.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant has duly caused
this Amendment to its Registration Statement on Form N-2 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City
of Boston and the Commonwealth of Massachusetts on the 22nd day of February,
2002.
LIBERTY ALL-STAR EQUITY FUND
/s/ WILLIAM R. PARMENTIER, JR.
By: ------------------------------
/s/ William R. Parmentier, Jr.
President, Chief Executive
Officer & Chief Investment
Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in their capacities and
on the date indicated.
SIGNATURES TITLE DATE
---------- ----- ----
/s/WILLIAM R. PARMENTIER, JR. President (chief February 22, 2002
----------------------------- executive officer)
/s/William R. Parmentier, Jr.
/s/J. KEVIN CONNAUGHTON Treasurer February 22, 2002
----------------------- (principal financial officer)
/s/J. Kevin Connaughton
/s/ VICKI L. BENJAMIN Chief Accounting Officer February 22, 2002
--------------------- (principal accounting officer)
/s/Vicki L. Benjamin
ROBERT R. BIRNBAUM* Trustee
------------------
Robert R. Birnbaum
JAMES E. GRINNELL* Trustee
---------------------
James E. Grinnell
RICHARD W. LOWRY* Trustee */s/ ROBERT R. LEVEILLE
----------------- ----------------------
Richard W. Lowry Robert R. Leveille
Attorney-in-fact
For each Trustee
February 22, 2002
WILLIAM E. MAYER* Trustee
-----------------
William E. Mayer
JOHN J. NEUHAUSER* Trustee
------------------
John J. Neuhauser
INDEX OF EXHIBITS FILED WITH THIS AMENDMENT
Exhibit
Number Exhibit
-------- --------------------------------------------------
(b) By-Laws
(g)(1) Fund Management Agreement with Liberty Asset Management Company
(g)(2) Portfolio Management Agreement with Boston Partners Asset
Management, L.P.
(g)(3) Portfolio Management Agreement with Mastrapasqua & Associates, Inc.
(g)(4) Portfolio Management Agreement with TCW Investment Management
Company
(g)(5) Portfolio Management Agreement with Oppenheimer Capital
(g)(6) Portfolio Management Agreement with Westwood Management Corporation
(k)(3) Form of Amendment to Pricing and Bookkeeping Agreement
Power of Attorneys