SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section
14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
[ ] Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
LIBERTY ALL-STAR EQUITY FUND
LIBERTY ALL-STAR GROWTH FUND, INC.
________________________________________________
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date
of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
LIBERTY ALL-STAR EQUITY FUND (EQUITY FUND)
LIBERTY ALL-STAR GROWTH FUND, INC. (GROWTH FUND)
(COLLECTIVELY, THE FUNDS)
ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02111
(617) 772-3626
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 30, 2002
To the Shareholders of the Funds:
NOTICE IS HEREBY GIVEN that the 2002 Annual Meeting of Shareholders of the Funds
will be held in Conference Room A, 2nd Floor, at One Financial Center, Boston,
Massachusetts, on April 30, 2002, at 9:00 a.m. Boston time (Equity Fund) and
10:00 a.m. Boston time (Growth Fund). The purpose of the Meeting is to consider
and act upon the following matters:
1. To elect Trustees and Directors of the Funds listed below:
a. One Trustee (Equity Fund)
b. Two Directors (Growth Fund)
2. To approve the Portfolio Management Agreements for each Fund with the
portfolio managers listed below:
a. TCW Investment Management Company (Equity Fund)
b. TCW Investment Management Company (Growth Fund)
c. Schneider Capital Management Corporation (Equity Fund)
3. To ratify the selection by the Board of Trustees/Directors of
PricewaterhouseCoopers LLP as independent accountants for the year ending
December 31, 2002 as listed below:
a. Board of Trustees (Equity Fund)
b. Board of Directors (Growth Fund)
4. To transact such other business as may properly come before the Meeting or
any adjournments thereof.
The Board of Trustees/Directors has fixed the close of business on February 1,
2002, as the record date for the determination of the shareholders of the Funds
entitled to notice of, and to vote at, the Meeting and any adjournments thereof.
YOUR BOARD OF TRUSTEES/DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL THE PROPOSALS.
By order of the Board of Trustees of the Equity Fund and the Board of Directors
of the Growth Fund
Jean S. Loewenberg, Secretary of the Funds
YOUR VOTE IS IMPORTANT--PLEASE RETURN YOUR PROXY PROMPTLY.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. WE URGE YOU, WHETHER OR NOT YOU
EXPECT TO ATTEND THE MEETING IN PERSON, TO INDICATE YOUR VOTING INSTRUCTIONS ON
THE ENCLOSED PROXY, DATE AND SIGN IT, AND RETURN IT IN THE ENVELOPE PROVIDED,
WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. WE ASK YOUR COOPERATION
IN MAILING YOUR PROXY PROMPTLY.
April 3, 2002
1
LIBERTY ALL-STAR EQUITY FUND (EQUITY FUND)
LIBERTY ALL-STAR GROWTH FUND, INC. (GROWTH FUND)
(COLLECTIVELY, THE FUNDS)
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 30, 2002
This Proxy Statement is furnished in connection with the solicitation of proxies
on behalf of the Board of Trustees/Directors of the Funds to be used at the
Annual Meeting of Shareholders of the Funds to be held in Conference Room A, 2nd
Floor, on April 30, 2002, at 9:00 a.m. Boston time (Equity Fund) and 10:00 a.m.
Boston time (Growth Fund) at One Financial Center, Boston, MA, and at any
adjournments thereof (such meeting and any adjournments being referred to as the
"Meeting").
The solicitation of proxies for use at the Meeting is being made primarily by
the mailing on or about April 3, 2002, of this Proxy Statement and the
accompanying proxy. Supplementary solicitations may be made by mail, telephone,
telegraph or personal interview by officers and Trustees/Directors of the Funds
and officers and employees of its manager, Liberty Asset Management Company
(LAMCO) and its affiliates. In addition, the Funds have retained Georgeson
Shareholder Communications Inc. as agent to coordinate the distribution of proxy
material to, and to solicit the return of proxies from, individuals, banks,
brokers, nominees and other custodians at a fee of $6,500 plus out-of-pocket
expenses for the Equity Fund and a fee of $5,000 plus out-of-pocket expenses for
the Growth Fund. Authorization to execute proxies may be obtained from
shareholders through instructions transmitted by telephone or facsimile. The
expenses in connection with preparing this Proxy Statement and of the
solicitation of proxies for the Meeting will be paid by the Funds. The Funds
will reimburse brokerage firms and others for their expenses in forwarding
solicitation material to the beneficial owners of shares.
The Meeting is being held to vote on the matters described below.
PROPOSAL 1. ELECTION OF TRUSTEES AND DIRECTORS
Each Fund's Board of Trustees/Directors is divided into three classes, each of
which serves for three years. The term of office of one of the classes expires
at the final adjournment of the Annual Meeting of Shareholders (or special
meeting in lieu thereof) each year. Shares represented by duly executed proxies
will be voted as instructed on the proxy. If no instructions are given when the
enclosed proxy is returned, the enclosed proxy will be voted for the election of
the following persons to hold office until final adjournment of the Annual
Meeting of Shareholders for the year 2005 (or special meeting in lieu thereof):
Equity Fund
-----------
James E. Grinnell Served as Trustee since August, 1986
Growth Fund
-----------
Robert J. Birnbaum Served as Director since November, 1995
William E. Mayer Served as Director since December, 1998
Messrs. Birnbaum, Grinnell and Mayer have consented to serve as Trustee or
Director following the Meeting if elected, and are expected to be able to do so.
If any of Messrs. Birnbaum, Grinnell and Mayer are unable or unwilling to do so
at the time of the Meeting, proxies will be voted for such substitute as the
Trustees/Directors may recommend (unless authority to vote for the election of
Trustees/Directors has been withheld).
2
TRUSTEES/DIRECTORS AND OFFICERS
The names, addresses and ages of the Trustees/Directors and officers of the
Funds, the year each was first elected or appointed to office, their term of
office, their principal business occupations during at least the last five
years, the number of portfolios overseen by each Trustee/Director and other
directorships they hold are shown below.
Number of
Equity Fund Growth Fund Portfolios
Length of Length of in Fund Complex
Service and Service and Principal Occupation During Overseen by Other
Name/Age and Address(1) Term of Office Term of Office Past Five Years Trustee/Director Directorships Held
--------------------- -------------- -------------- --------------- ---------------- ------------------
DISINTERESTED
TRUSTEES/DIRECTORS
Robert J. Birnbaum (Age 74) Nov., 1994 Nov., 1995 Retired since January, 1994; 2 Dresdner RCM
2003(2) 2002(2) Special Counsel, Dechert, Price Global Funds
& Rhoads (September, 1988 to (investment
December, 1993); President and companies) and
Chief Operating Officer, New Chicago Options
York Stock Exchange, Inc. (May, Exchange Board
1985 to June, 1988)
James E. Grinnell (Age 71) August, 1986 May, 1994 Private investor since November, 2 None
2002 2003 1988; President and Chief
Executive Officer, Distribution
Management Systems, Inc. (1983
to May, 1986); Senior Vice
President-Operations, The
Rockport Company (importer and
distributor of shoes) (May,
1986 to November, 1988)
Richard W. Lowry (Age 65) August, 1986 August, 1986 Private Investor since August, 105 None
2004 2004 1987 (formerly Chairman and
Chief Executive Officer, U.S.
Plywood Corporation (building
products manufacturer))
----------
(1) All the Trustees/Directors are members of the Audit Committee except for Mr.
Mayer. The address of each Trustee/Director is One Financial Center, Boston, MA
02111.
(2) Mr. Birnbaum will reach mandatory retirement age during his term and will
retire at that time. Upon his retirement, the Board of Trustees/Directors will
determine what action to take.
3
Number of
Equity Fund Growth Fund Portfolios
Length of Length of in Fund Complex
Service and Service and Principal Occupation During Overseen by Other
Name/Age and Address(3) Term of Office Term of Office Past Five Years Trustee/Director Directorships Held
----------------------- -------------- -------------- --------------- ---------------- ------------------
DISINTERESTED
TRUSTEES /DIRECTORS
John J. Neuhauser (Age 58) April, 1998 April, 1998 Academic Vice President and 105 Saucony, Inc.
2004 2003 Dean of Faculties since (athletic
August, 1999, Boston College footwear)and
(formerly Dean, Boston College SkillSoft Corp.
School of Management from (E-Learning)
September, 1977 to September,
1999)
INTERESTED TRUSTEE/DIRECTOR
William E. Mayer (Age 61)(4) April, 1998 Dec., 1998 Managing Partner, Park Avenue 105 Lee Enterprises
2003 2002 Equity Partners (private (print and on-line
equity fund) since February, media); WR
1999 (formerly Founding Hambrecht + Co.
Partner, Development Capital (financial service
LLC from 1996 to February, provider); Systech
1999; Dean and Professor, Retail Systems
College of Business and (retail industry
Management, University of technology
Maryland from October, provider) and
1992 to November, 1996) First Health
(healthcare)
----------
(3) All the Trustees/Directors are members of the Audit Committee except for Mr.
Mayer. The address of each Trustee/Director is One Financial Center, Boston, MA
02111.
(4) "Interested person" of the Funds, as defined in the Investment Company Act
of 1940, because of his affiliation with WR Hambrecht + Co., a registered
broker-dealer.
4
OFFICERS
Each officer listed below serves as an officer of each of the Funds.
Name/Age and Address(6) Position with Funds Principal Occupation During Past Five Years
----------------------- ------------------- -------------------------------------------
William R. Parmentier, Jr. (Age 49) President, Chief Executive President and Chief Executive Officer since June, 1998 and Chief
Officer and Chief Investment Investment Officer since May, 1995, Senior Vice President (May,
Officer 1995 to June, 1998), LAMCO
Christopher S. Carabell (Age 38) Vice President Senior Vice President - Product Development and Marketing since
January, 1999, Vice President - Investments, LAMCO (March, 1996
to January, 1999)
Mark T. Haley, CFA (Age 37) Vice President Vice President-Investments since January, 1999, Director of
Investment Analysis (December, 1996 to December, 1998),
Investment Analyst (January, 1994 to November, 1996), LAMCO
J. Kevin Connaughton (Age 37) Treasurer Treasurer of the Liberty Funds and of the Funds since December,
2000 (formerly Controller of the Liberty Funds and of the Funds
from February, 1998 to October, 2000); Treasurer of the Stein
Roe 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)
----------
(5) The address of each officer is One Financial Center, Boston, MA 02111.
5
Name/Age and Address(5) Position with Funds Principal Occupation During Past Five Years
----------------------- ------------------- -------------------------------------------
Michelle G. Azrialy (Age 32) Controller Controller of the Liberty Funds and of the Funds since May,
2001; Vice President of LFG since March, 2001 (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 L. Benjamin (Age 40) Chief Accounting Officer Chief Accounting Officer of the Liberty Funds and the Funds
since June, 2001; Vice President of LFG since April, 2001
(formerly Vice President, 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 (Age 56) Secretary Secretary of the Liberty Funds and of the Funds since February,
2002; Senior Vice President and Group Senior Counsel, Fleet
National Bank since November, 1996
Mr. Parmentier has served as President, Chief Executive Officer and Chief
Investment Officer since April 29, 1999; Messrs. Haley and Carabell were elected
as Vice Presidents on April 29, 1999 and April 17, 1997, respectively. Mr.
Connaughton was elected Treasurer on December 13, 2000, Ms. Azrialy was elected
Controller on May 9, 2001, Ms. Benjamin was elected Chief Accounting Officer on
June 20, 2001 and Ms. Loewenberg was elected Secretary on February 12, 2002. Mr.
Connaughton and Msses. Azrialy, Benjamin and Loewenberg hold the same offices
with the Liberty Funds Complex. Each officer of the Funds serves at the pleasure
of the Board of Trustees/Directors.
----------
(6) The address of each officer is One Financial Center, Boston, MA 02111.
6
The term of office of each of the Trustees/Directors will expire, as noted in
the above table, on the final adjournment of the Annual Meeting (or special
meeting in lieu thereof) in the specified year.
At December 31, 2001, Messrs. Lowry, Mayer and Neuhauser also served as trustees
of the Liberty family of funds (Liberty Funds) which consisted of 53 open-end
and 9 closed-end management investment company portfolios; the Stein Roe family
of funds (Stein Roe Funds) which consisted of 40 open-end management investment
company portfolios and 1 limited liability company (collectively, the Liberty
Fund Complex) managed by Colonial, Stein Roe & Farnham Incorporated (Stein Roe)
or other affiliates of LAMCO.
During 2001, the full Board of Trustees/Directors of the Funds held six meetings
(four scheduled meetings and two special meetings), and the Audit Committee met
twice. All Trustees/Directors were present at all meetings.
Each Fund has an Audit Committee comprised of only "Independent
Trustees/Directors" (as defined in the regulations of the New York Stock
Exchange (NYSE)) of the Funds, who are also not "interested persons" (as defined
in the Investment Company Act of 1940) of the Fund. Each Audit Committee makes
recommendations to each full Board as to the firm of independent accountants to
be selected, reviews the methods, scope and results of audits and fees charged
by such independent accountants, and reviews the Funds' internal accounting
procedures and controls. The Funds have no nominating or compensation committee.
In discharging its oversight responsibility as to the audit process, the Audit
Committee discussed with management the process for preparation and review of
the audited financial statements for the last fiscal year. The Audit Committee
also reviewed the non-audit services to be provided by the independent
accountants of the Funds. The independent accountants, PricewaterhouseCoopers
LLP (PWC), discussed with each Board the matters required to be discussed by
Statement on Auditing Standards No. 61. In addition, the Audit Committee
obtained from the independent accountants a formal written statement consistent
with Independence Standards Board Standard No. 1, "Independence Discussions with
Audit Committees," describing all relationships between the independent
accountants and the Funds that might bear on the independent accountants'
independence. The Audit Committee also discussed with the independent
accountants any relationships that may impact their objectivity and independence
and satisfied itself as to the independent accountants' independence.
Each Board of Trustees/Directors has adopted a written charter which sets forth
the Audit Committee's structure, duties and powers, and methods of operation
which is attached hereto as Appendix A. Each member of the Audit Committee must
be financially literate and at least one member must have prior accounting
experience or related financial management expertise. Each Board of
Trustees/Directors has determined, in accordance with applicable regulations of
the NYSE, that each member of the Audit Committee is financially literate and
has prior accounting experience or related financial management
7
expertise. The Funds' Audit Committee members for 2001 were Messrs. Birnbaum,
Grinnell, Lowry and Neuhauser. All members of the Audit Committee meet the
independence standards of the NYSE listing standards.
FEES PAID TO INDEPENDENT ACCOUNTANTS
1. AUDIT FEES
For the audit of the Funds' annual financial statements for the fiscal year
ended December 31, 2001, included in each Fund's annual report to shareholders
for that fiscal year, the Equity Fund and the Growth Fund paid or accrued
$29,900 and $21,300, respectively, to PWC.
2. FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
For the fiscal year ended December 31, 2001, the Funds, LAMCO and entities
controlling, controlled by or under common control with LAMCO which provide
services to the Funds did not pay or accrue any fees for financial information
systems design and implementation services by PWC.
3. ALL OTHER FEES
For the fiscal year ended December 31, 2001, the Equity Fund and the Growth Fund
paid or accrued aggregate fees of $4,000 and $9,500, respectively, for tax and
other services provided by PWC. In addition, LAMCO and entities controlling,
controlled by or under common control with LAMCO which provide services to the
Funds, paid or accrued aggregate fees of approximately $296,000 for all other
services provided by PWC, Each Audit Committee has determined that the provision
of the services described above is compatible with maintaining the independence
of PWC.
COMPENSATION
Beginning January 1, 1999, the aggregate of the fees paid to the
Trustees/Directors by the Funds that have the same Board of Trustees/Directors
and hold their meetings concurrently with those of the Funds, consists of
Trustees/Directors 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 equally between the Funds,
and the remaining two-thirds was allocated between the Funds based on their net
assets.
The following table shows, for the calendar year ended December 31, 2001, the
compensation received from the Funds by each current Trustee/Director, and the
aggregate compensation paid to each current Trustee/Director for service on the
Boards of Trustees/Directors of the Funds. The Funds have no bonus, profit
sharing or retirement plans.
Aggregate Aggregate
Compensation Compensation Total Compensation
Name from the Equity Fund from the Growth Fund from the Funds
---- -------------------- -------------------- --------------
Robert J. Birnbaum $19,186.39 $6,113.61 $25,300
James E. Grinnell $19,186.39 $6,113.61 $25,300
Richard W. Lowry $18,806.88 $5,993.12 $24,800
William E. Mayer $18,806.88 $5,993.12 $24,800
8
John J. Neuhauser $18,806.88 $5,993.12 $24,800
Joseph R. Palombo(7) N/A N/A N/A
TRUSTEES'/DIRECTORS' FEES
The following table shows, for the calendar year ended December 31, 2001, the
compensation received from the Liberty Fund Complex by the Trustees/Directors.
The Liberty Fund Complex has no bonus, profit sharing or retirement plans.
Name Total Compensation From Liberty Fund Complex
---- --------------------------------------------
Robert J. Birnbaum $25,300
James E. Grinnell(8) $75,300
Richard W. Lowry $135,300
William E. Mayer $132,300
John J. Neuhauser $132,510
SHARE OWNERSHIP
The following table shows the dollar range of equity securities beneficially
owned by each Trustee/Director as of February 1, 2002 (i) in each of the Funds
and (ii) in all Liberty Funds overseen by the Trustee/Director.
----------
(7) Mr. Palombo did not receive compensation because he was an affiliated
Trustee/Director and an employee of Columbia Management Group, Inc. (Columbia),
an affiliate of LAMCO. Because Mr. Palombo is an "interested person" of LAMCO,
he resigned his position as a Trustee/Director of the Funds on November 1, 2001,
in connection with the acquisition of the asset management business of Liberty
Financial Companies, Inc. (LFC) by Fleet National Bank.
(8) In connection with the combination of the Liberty and Stein Roe boards of
trustees, Mr. Grinnell will receive $50,000 for retiring prior to the Liberty
board's mandatory retirement age. This payment will continue for the lesser of
two years or until the date Mr. Grinnell would otherwise have retired at age 72.
The payments, which began in 2001, are paid quarterly. FleetBoston and the
Liberty Fund Complex will each bear one-half of the cost of the payments. The
portion of the payments borne by FleetBoston was paid by LFC prior to November
1, 2001, when the asset management business of LFC was acquired by Fleet
National Bank, a subsidiary of FleetBoston. The Liberty Fund Complex portion of
the payments will be allocated among the Liberty Fund Complex based on each
fund's share of the Trustee fees for 2000.
9
Aggregate Dollar Range of
Dollar Range of Equity Dollar Range of Equity Equity Securities Owned in All
Securities Owned in the Securities Owned Funds Overseen by Trustee in
Name of Trustee/Director Equity Fund in the Growth Fund Liberty Fund Complex
------------------------ ----------- ------------------ --------------------
DISINTERESTED TRUSTEES /DIRECTORS
Robert J. Birnbaum $50,001-$100,000 $10,001-$50,000 $50,001-$100,000
James E. Grinnell Over $100,000 $50,001-$100,000 Over $100,000
Richard W. Lowry(9) Over $100,000 $10,001-$50,000 Over $100,000
John J. Neuhauser(9) $1-10,000 $1-10,000 Over $100,000
INTERESTED TRUSTEES /DIRECTORS
William E. Mayer(9) $1-$10,000 $1-$10,000 $50,001-$100,000
As of December 31, 2001, no disinterested Trustee/Director or any of their
immediate family members owned beneficially or of record any class of securities
of FleetBoston Financial (FleetBoston), LAMCO, another investment advisor,
sub-advisor or portfolio manager of any of the Liberty Funds or any person
controlling, controlled by or under common control with any such entity.
During the calendar years ended December 31, 2000 and December 31, 2001, Mr.
Lowry had a material interest in a trust (approximately $3.6 million as of
December 31, 2001) which owns units of a limited partnership whose investments
are managed by M.A. Weatherbie & Co., a portfolio manager of the Growth Fund,
and whose general partner is Weatherbie Limited Partnership. During the calendar
years ended December 31, 2000 and 2001, other than Mr. Lowry's interest in this
trust, no disinterested Trustee/Director (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.
REQUIRED VOTE
A plurality of votes cast at the Meeting, if a quorum is represented, is
required for the election of each Trustee/Director. Since the number of Trustees
of the Equity Fund has been fixed at five and since there are four currently
serving Trustees who are not subject to election at the Meeting, this means that
the person receiving the highest number of votes will be elected. Since the
number of Directors of the Growth Fund has been fixed at five and since there
are three currently serving Directors who are not subject to election at this
Meeting, this means that the two persons receiving the highest number of votes
will be elected.
PROPOSAL 2. TO APPROVE PORTFOLIO MANAGEMENT AGREEMENTS
BACKGROUND - THE MULTI-MANAGER METHODOLOGY
The Funds allocate their portfolio assets on an approximately equal basis among
a number of independent investment management firms (Portfolio Managers)
recommended by LAMCO, currently five in number for the Equity Fund and three in
number for the Growth Fund, each of which employs a different investment style
and/or strategy, and from time to time rebalances the portfolio among the
Portfolio Managers so as to maintain an approximately equal allocation of the
portfolio among them throughout all market cycles. The Funds' multi-manager
methodology is based on the premise that most investment management firms
consistently employ a distinct investment style which causes them to emphasize
stocks with particular characteristics, and that, because of changing investor
preferences, any given investment
----------
(9) Trustee/Director also serves as a Trustee of Liberty Fund Complex.
10
style will move into and out of market favor and will result in better
performance under certain market conditions but poorer performance under other
conditions. The Funds' multi-manager methodology seeks to achieve more
consistent and less volatile performance over the long term than if a single
Portfolio Manager were employed.
The Portfolio Managers recommended by LAMCO represent a blending of different
styles which, in its opinion, is appropriate for each Fund's investment
objective and which is sufficiently broad so that at least one of such styles
can reasonably be expected to be in relative market favor in all reasonably
foreseeable market conditions. LAMCO continuously analyzes and evaluates the
investment performance and portfolios of the Funds' Portfolio Managers and from
time to time recommends changes in the Portfolio Managers. Such recommendations
could be based on factors such as a change in a Portfolio Manager's investment
style or a Portfolio Manager's divergence from the investment style for which it
was selected, changes deemed by LAMCO to be potentially adverse in a Portfolio
Manager's personnel or ownership or other structural or organizational changes
affecting the Portfolio Manager, or a deterioration in a Portfolio Manager's
investment performance when compared to that of other investment management
firms employing similar investment styles. Portfolio Manager changes may also be
made to change the mix of investment styles employed by the Funds' Portfolio
Managers. Portfolio Manager changes, as well as rebalancings of the Funds'
portfolio among the Portfolio Managers, may result in portfolio turnover in
excess of what would otherwise be the case. Increased portfolio turnover results
in increased brokerage commission and transaction costs, and may result in the
recognition of additional capital gains.
Under the terms of an exemptive order issued to the Funds and LAMCO by the
Securities and Exchange Commission (SEC) , the Funds may enter into a portfolio
management agreement with a new or additional Portfolio Manager recommended by
LAMCO in advance of shareholder approval, provided that the new agreement is at
a fee no higher than that provided in, and is on other terms and conditions
substantially similar to, the Funds' agreements with its other Portfolio
Managers, and that its continuance is subject to approval by shareholders at the
Funds' regularly scheduled annual meeting next following the date of the
portfolio management agreement with the new or additional Portfolio Manager.
Accordingly, the Funds' portfolio management agreements with TCW Investment
Management Company and the Equity Fund's portfolio management agreement with
Schneider Capital Management Corporation are being submitted for shareholder
approval at the Meeting.
NEW PORTFOLIO MANAGEMENT AGREEMENT: TCW INVESTMENT MANAGEMENT COMPANY
Societe Generale S.A. (Societe Generale) through its wholly-owned subsidiary,
Societe Generale Asset Management, S.A. (SGAM), purchased The TCW Group Inc.
(The TCW Group) and its subsidiaries, including TCW Investment Management
Company (TCW), one of the Funds' Portfolio Managers. Consummation of the
transaction constitutes a change of control of TCW and an automatic termination
of the portfolio management agreement. LAMCO recommended and the Board of
Trustees/Directors of the Funds on June 20, 2001, approved the new portfolio
management agreement. In addition, the Funds' shareholders approved on November
1, 2001 the new portfolio management agreements when the asset management
business of LFC, including LAMCO, was acquired by Fleet National Bank. The
Funds' new portfolio management agreements are identical in substance to the
corresponding current portfolio management agreements.
TCW is located at 865 South Figueroa Street, Los Angeles, CA 90017. Established
in 1971, TCW Group's direct and indirect subsidiaries, including TCW, provide a
variety of trust, investment management and investment advisory services. SGAM
owns 51% of the TCW Group. SGAM is located at 92708 place de la Corpole, 92078
Paris, France. Societe Generale is located at 29 Boulevard Haussman, 75009,
Paris, France. The
11
employees, management and other shareholders of the TCW Group own the remaining
49% of the company. Under the terms of the 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.
The following are the directors and principal executive officers of TCW:
Name and Address Position with TCW Principal Occupation
---------------- ----------------- --------------------
Alvin Robert Albe, Jr. Director, President Director, President and Chief Executive
865 South Figueroa Street and Chief Executive Officer of TCW; Director of TCW Asia
Los Angeles, CA 90017 Officer Limited; Director and Executive Vice
President and Chief Marketing Officer of
TCW Advisors, Inc. (TCWA), Director and
Executive Vice President of TCW London
International, Limited, TCW Asset
Management Company (TAMCO) and Trust
Company of the West (TCofW); Executive
Vice President of TCW Group.
Thomas Ernest Larkin, Jr. Director and Vice Director and Vice Chairman of the Board of
865 South Figueroa Street Chairman of the Board TCW, TCWA, TAMCO, TcofW and TCW Group.
Los Angeles, CA 90017
Marc Irwin Stern Director and Chairman Chairman of the Board of TCW, London and
865 South Figueroa Street of the Board Asia; Director and Managing Director of
Los Angeles, CA 90017 TCW/Latin America Partners, LLC; Director
of TCW/Crescent Mezzanine, LLC; Director
and Vice Chairman of TCofW and TCWA;
Director, Vice Chairman and President of
TAMCO; Director, and President of
TCW Group.
Mr. Glen E. Bickerstaff, Group Managing Director U.S. Equities, manages that
portion of the Equity Fund's portfolio assigned to TCW. Prior to joining TCW in
1998, Mr. Bickerstaff was a portfolio manager at Transamerica Investment
Services.
Mr. Douglas E. Foreman, Group Managing Director and Chief Investment Officer
U.S. Equities, manages that portion of the Growth Fund's portfolio assigned to
TCW.
Reference is made to MANAGEMENT - Portfolio Transactions and Brokerage below for
the direction by the Funds' Portfolio Managers, including TCW, of Fund portfolio
transactions to broker-dealers that make certain research services available to
LAMCO.
TERMS OF PORTFOLIO MANAGEMENT AGREEMENT WITH TCW
The portfolio management agreement with TCW is at the same fee rates and is on
other terms and conditions substantially similar to those of the portfolio
management agreements with the Equity Fund's four other Portfolio Managers and
the Growth Funds' two other Portfolio Managers. A copy of each portfolio
management agreement with TCW is attached to this proxy statement as Appendix B.
12
Under the Funds' portfolio management agreements (including that with TCW), each
Portfolio Manager has discretionary investment authority (including the
selection of brokers and dealers for the execution of the Funds' portfolio
transactions) with respect to the portion of the Funds' assets allocated to it
by LAMCO from time to time, subject to the Funds' investment objective and
policies, to the supervision and control of the Trustees/Directors, and to
instructions from LAMCO. The Portfolio Managers are required to use their best
professional judgment in making timely investment decisions for the Funds. The
Portfolio Managers, however, will not be liable for actions taken or omitted in
good faith and believed to be within the authority conferred by their portfolio
management agreements and without willful misfeasance, bad faith or gross
negligence.
From the fund management fees it receives from the Equity Fund (0.80% per annum
of the Equity Fund's average weekly net asset value up to $400 million, 0.72%
per annum of such average weekly net asset value exceeding $400 million up to
and including $800 million, 0.648% of such average weekly net asset value
exceeding $800 million up to and including $1.2 billion, and 0.584% of such
average weekly net asset value in excess of $1.2 billion), LAMCO pays each of
the Equity Fund's Portfolio Managers 0.40% per annum of the average weekly net
asset value of the portion of the Equity Fund's assets managed by that Portfolio
Manager, with such rate reduced to 0.36% per annum of the Portfolio Managers'
allocable portions of the Equity Fund's average weekly net asset value in excess
of $400 million up to and including $800 million, 0.324% of their allocable
portions of such average weekly net asset value exceeding $800 million up to and
including $1.2 billion, and 0.292% of their allocable portions of such average
weekly net asset value exceeding $1.2 billion. For the fiscal year ended
December 31, 2001, TCW received $802,251 for its portfolio management services
to the Equity Fund. As of December 31, 2001, the Equity Fund's net assets were
$1.1 billion, of which $219 million was managed by TCW.
From the fund management fees it receives from the Growth Fund (0.80% per annum
of the Growth Fund's average weekly net asset value up to $300 million, and
0.72% per annum of the Growth Fund's average weekly net asset value in excess of
$300 million), LAMCO pays each Portfolio Manager a quarterly portfolio
management fee at the rate of 0.10% (0.40% annually) of the Portfolio Manager's
Percentage (as defined in Schedule C of Appendix B) of the average weekly net
assets of the Growth Fund up to and including $300 million, and 0.09% (0.36%
annually) of the Portfolio Manager's Percentage of the average weekly net assets
of the Growth Fund exceeding $300 million. "Portfolio Manager's Percentage"
means the percentage obtained by dividing the average weekly net assets of the
portion of the Growth Fund's assets assigned to that Portfolio Manager by the
total of the Growth Fund's average weekly net assets. For the fiscal year ended
December 31, 2001, TCW received $347,941 for its portfolio management services
to the Growth Fund. As of December 31, 2001, the Growth Fund's net assets were
$161 million, of which $50 million was managed by TCW.
If approved by shareholders at the Meeting, the portfolio management agreements
with TCW will remain in effect until July 31, 2003 and will continue thereafter
until terminated by the Funds or the Portfolio Manager, provided such
continuance is approved at least annually by the Board of Trustees/Directors,
including a majority of the independent Trustees/Directors, or by the vote of a
"majority of the outstanding voting securities" (as defined under Required Vote
below) of the Funds.
OTHER FUNDS MANAGED BY TCW
In addition to the management services provided by TCW to the Funds, TCW also
provides management services to other investment companies. Information with
respect to the assets of and management fees payable to TCW by those funds
having investment objectives similar to those of the Funds is set forth below:
13
Equity Fund Total Net Assets at Annual Management
----------- December 31, 2001 as a % of
(in millions) Average Daily Net Assets
------------- ------------------------
Asset Mark Large Cap Growth Fund $16.4 0.45%
AXA Premier Funds Trust -Large Cap Growth Fund $0.0 0.50%(10)
AXA Premier VIP Trust -Large Cap Growth Fund $0.0 0.50%(11)
Consulting Group Capital Markets Fund
Large Capitalization Growth Investments $589.0 0.40%(12)
Enterprise Accumulation Trust Equity Portfolio $347.4 0.40%(13)
Enterprise Group of Funds, Inc. Equity Fund $145.2 0.40%(14)
Frank Russell Investment Company Select Growth
Fund $9.9 0.45%
TCW Galileo Select Equities Fund $1,391.5 0.75%
The Vantagepoint Funds Growth Fund $698.0 0.70%(15)
Growth Fund Total Net Assets at Annual Management
----------- December 31, 2001 as a % of
(in millions) Average Daily Net Assets
------------- ------------------------
Asset Mark Small/Mid Cap Growth Fund $4.2 0.45%
Morgan Stanley Capital Opportunities Trust $878.9 0.75%(16)
MS Select Dimensions Investment Series-Capital
Opportunities Fund $66.8 0.625%(17)
TCW Galileo Aggressive Growth Equities Fund $147.3 1.00%
----------
(10) Under the fund's management agreement, the fund pays TCW a fee at the
annual rate of 0.50% of the first $100 million of the average daily net assets
and 0.40% thereafter.
(11) Under the fund's management agreement, the fund pays TCW a fee at the
annual rate of 0.50% of the first $100 million of the average daily net assets
and 0.40% thereafter.
(12) Under the fund's management agreement, the fund pays TCW a fee at the
annual rate of 0.40% of the first $500 million of the average daily net assets
and 0.35% thereafter.
(13) Under the fund's management agreement, the fund pays TCW a fee at the
annual rate of 0.40% of the first $1 billion of the average daily net assets of
the fund and 0.30% in excess of $1 billion.
(14) Under the fund's management agreement, the fund pays TCW a fee at the
annual rate of 0.40% of the first $100 million of the average daily net assets
of the fund and 0.30% in excess of $100 million.
(15) Under the fund's management agreement, the fund pays TCW a fee at the
annual rate of 0.70% of the first $25 million of the average daily net assets of
the fund, 0.50% of the next $25 million of the average daily net assets of the
fund, 0.45% of the next $50 million of the average daily net assets of the fund,
0.40% of the next $400 million of the average daily net assets of the fund and
0.35% in excess of $400 million.
(16) Under the fund's management agreement, the fund pays the investment manager
a fee at the annual rate of 0.75% of the first $500 million of the average daily
net assets, 0.725% of the next $1.5 billion, 0.70% of the next $1.0 billion and
0.675% in excess of $3 billion. The investment manager pays TCW monthly
compensation equal to 40% of this fee.
(17) Under the fund's management agreement, the fund pays the investment manager
a fee at the annual rate of 0.625% of the first $500 million of the average
daily net assets and 0.60% thereafter. The investment manager pays TCW monthly
compensation equal to 40% of this fee.
14
REQUIRED VOTE
Approval of the portfolio management agreements with TCW requires the
affirmative vote of a "majority of the outstanding voting securities" of each
Fund, which, under the Investment Company Act of 1940, means the affirmative
vote of the lesser of (a) 67% or more of the shares of each Fund present at the
Meeting or represented by proxy if the holders of more than 50% of the
outstanding shares are present or represented by proxy, or (b) more than 50% of
the outstanding shares. See INFORMATION ABOUT THE MEETING below.
In the event that the shareholders of the Funds fail to approve the portfolio
management agreements with TCW, the portfolio management agreements will
terminate and LAMCO will cause the portfolio assets under management by TCW to
be reallocated to one or more of the other Portfolio Managers or invested in
money market instruments or other cash equivalent holdings pending the
reappointment of TCW or the appointment of a new Portfolio Manager.
THE BOARD OF TRUSTEES/DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR APPROVAL OF THE PORTFOLIO MANAGEMENT AGREEMENTS WITH TCW.
NEW PORTFOLIO MANAGEMENT AGREEMENT: SCHNEIDER CAPITAL MANAGEMENT CORPORATION
LAMCO continuously monitors and evaluates the Equity Fund's portfolio managers
on a quantitative and qualitative basis. The evaluation process focuses on, but
is not limited to, the firm's philosophy, investment process, people and
performance. After evaluation based on the aforementioned criteria LAMCO deemed
it was necessary to terminate Westwood Management Corporation Inc. (Westwood), a
Portfolio Manager of the Equity Fund since November 3, 1997, whose portfolio
management agreement with the Equity Fund had been ratified most recently by
shareholders on September 26, 2001. LAMCO in February, 2002, determined to
replace Westwood with Schneider Capital Management Corporation (Schneider).
LAMCO first analyzed information regarding the personnel, investment process and
performance of a large number of investment management firms. LAMCO then
analyzed the candidates in terms of their historic returns, volatility and
portfolio characteristics when combined with those of the Equity Fund's four
other Portfolio Managers. In making its recommendation, the Board has relied
upon and given equal consideration to each of the factors presented to them by
LAMCO. Based on the foregoing and on LAMCO's qualitative analysis, LAMCO
recommended, and the Board of Trustees on February 12, 2002, approved, the
termination of the Equity Fund's portfolio management agreement with Westwood
and its replacement with Schneider, effective March 1, 2002.
Schneider, located at 460 East Swedesford Road, Wayne, PA 19087, is an
independently-owned firm 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 Equity 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.
The following is the director and principal executive officer of Schneider:
Name and Address Position with Schneider Principal Occupation
---------------- ----------------------- --------------------
Arnold C. Schneider III Chairman, President Chairman, President and Chief Investment
and Chief Investment Officer of Schneider
Officer
15
Reference is made to MANAGEMENT - Portfolio Transactions and Brokerage below for
the direction by the Equity Fund's Portfolio Managers, including Schneider, of
Equity Fund portfolio transactions to broker-dealers that make certain research
services available to LAMCO.
TERMS OF PORTFOLIO MANAGEMENT AGREEMENT WITH SCHNEIDER
The portfolio management agreement with Schneider is at the same fee rates and
is on other terms and conditions substantially similar to those of the portfolio
management agreements with the Equity Fund's four other Portfolio Managers and
to those of the portfolio management agreement with Westwood. A copy of the
portfolio management agreement with Schneider is attached to this proxy
statement as Appendix C.
Under the Equity Fund's portfolio management agreements (including that with
Schneider), each Portfolio Manager has discretionary investment authority
(including the selection of brokers and dealers for the execution of the Equity
Fund's portfolio transactions) with respect to the portion of the Equity Fund's
assets allocated to it by LAMCO from time to time, subject to the Equity Fund's
investment objective and policies, to the supervision and control of the
Trustees, and to instructions from LAMCO. The Portfolio Managers are required to
use their best professional judgment in making timely investment decisions for
the Equity Fund. The Portfolio Managers, however, will not be liable for actions
taken or omitted in good faith and believed to be within the authority conferred
by their portfolio management agreements and without willful misfeasance, bad
faith or gross negligence.
From the fund management fees it receives from the Equity Fund (0.80% per annum
of the Equity Fund's average weekly net asset value up to $400 million, 0.72%
per annum of such average weekly net asset value exceeding $400 million up to
and including $800 million, 0.648% of such average weekly net asset value
exceeding $800 million up to and including $1.2 billion, and 0.584% of such
average weekly net asset value in excess of $1.2 billion), LAMCO pays each of
the Equity Fund's Portfolio Managers 0.40% per annum of the average weekly net
asset value of the portion of the Equity Fund's assets managed by that Portfolio
Manager, with such rate reduced to 0.36% per annum of the Portfolio Managers'
allocable portions of the Equity Fund's average weekly net asset value in excess
of $400 million up to and including $800 million, 0.324% of their allocable
portions of such average weekly net asset value exceeding $800 million up to and
including $1.2 billion, and 0.292% of their allocable portions of such average
weekly net asset value exceeding $1.2 billion. As of December 31, 2001, the
Equity Fund's net assets were $1.1 billion.
If approved by shareholders at the Meeting, the portfolio management agreement
with Schneider will remain in effect until July 31, 2003, and will continue
thereafter until terminated by the Equity Fund or the Portfolio Manager,
provided such continuance is approved at least annually by the Board of
Trustees, including a majority of the independent Trustees, or by the vote of a
"majority of the outstanding voting securities" (as defined under Required Vote
below) of the Equity Fund.
OTHER FUNDS MANAGED BY SCHNEIDER
In addition to the management services provided by Schneider to the Equity Fund,
Schneider also provides management services to other investment companies.
Information with respect to the assets of and management fees payable to
Schneider by those funds having investment objectives similar to those of the
Fund is set forth below:
16
Total Net Assets at Annual Management Fee
December 31, 2001 as a % of
Equity Fund (in millions) Average Daily Net Assets
----------- ------------- ------------------------
Impact Total Return Fund $6.3 0.60%
REQUIRED VOTE
Approval of the portfolio management agreement with Schneider requires the
affirmative vote of a "majority of the outstanding voting securities" of the
Equity Fund, which, under the Investment Company Act of 1940, means the
affirmative vote of the lesser of (a) 67% or more of the shares of the Equity
Fund present at the Meeting or represented by proxy if the holders of more than
50% of the outstanding shares are present or represented by proxy, or (b) more
than 50% of the outstanding shares. See INFORMATION ABOUT THE MEETING below.
In the event that the shareholders of the Equity Fund fail to approve the
portfolio management agreement with Schneider, the portfolio management
agreement will terminate and LAMCO will cause the portfolio assets under
management by Schneider to be reallocated to one or more of the other Portfolio
Managers or invested in money market instruments or other cash equivalent
holdings pending the reappointment of Schneider or the appointment of a new
Portfolio Manager.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
APPROVAL OF THE PORTFOLIO MANAGEMENT AGREEMENT WITH SCHNEIDER.
PROPOSAL 3. RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
By vote of the Board of Trustees/Directors, including the vote of the
non-interested Trustees/Directors, the firm of PWC has been selected as
independent accountants for the Funds for the year ending December 31, 2002.
Such selection is being submitted to the shareholders for ratification. The
employment of PWC is conditioned on the right of the Funds by majority vote of
its shareholders to terminate such employment. Such firm has acted as
independent accountants for the Funds since September 30, 1999. Prior to
September 30, 1999, KPMG LLP acted as independent auditors for the Funds since
1986, commencement of operations for the Equity Fund, and 1985, commencement of
operations for the Growth Fund.
The services provided by the Funds' independent accountants include examination
of their annual financial statements, assistance and consultation in connection
with SEC filings, and review of the Funds' annual federal income tax returns.
Representatives of PWC are expected to be present at the Meeting, will be given
the opportunity to make a statement if they should so desire and will be
available to respond to appropriate questions.
REQUIRED VOTE
A majority of the votes cast at the Meeting of each Fund, if a quorum is
represented, is required for the ratification of selection of the independent
accountants for that Fund.
THE BOARD OF TRUSTEES/DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR APPROVAL OF THE RATIFICATION OF PWC.
OTHER BUSINESS
The Board of Trustees/Directors knows of no other business to be brought before
the Meeting. However, if any other matters properly come before the Meeting, it
is the intention of the Board that proxies that do
17
not contain specific instructions to the contrary will be voted on such matters
in accordance with the judgment of the persons designated therein as proxies.
MANAGEMENT
LAMCO, One Financial Center, Boston, MA 02111, is the Funds' manager. On
November 1, 2001, LFC, the former parent of LAMCO, completed the sale of its
asset management business, including LAMCO, to Fleet National Bank, an indirect
wholly owned subsidiary of FleetBoston. FleetBoston is located at 100 Federal
Street, Boston, MA 02210. LAMCO's Board of Directors is comprised of Keith T.
Banks, Chief Investment Officer and Chief Executive Officer of Columbia, an
indirect wholly owned subsidiary of FleetBoston, Joseph R. Palombo, Chief
Operating Officer of Columbia and Roger Sayler, Executive Vice President of
Columbia. Pursuant to the Fund Management Agreements with the Funds, LAMCO
implements and operates the Funds' multi-manager methodology described under
PROPOSAL 2 above and has overall supervisory responsibility for the general
management and investment of the Funds' securities portfolio, subject to the
Funds' investment objective and policies and any directions of the
Trustees/Directors. LAMCO recommends to the Board of Trustees/Directors multiple
independent investment management firms (currently five for the Equity Fund and
currently three for the Growth Fund) for appointment as Portfolio Managers of
the Funds, each of which employs a different investment style, and from time to
time rebalances the Funds' portfolio among the Portfolio Managers so as to
maintain an approximately equal allocation of the portfolio among the investment
styles and/or strategies practiced by them throughout all market cycles. LAMCO
continuously analyzes and evaluates the investment performance and portfolios of
the Fund Portfolio Managers and from time to time recommends changes in the
Portfolio Managers.
LAMCO also is responsible under the Fund Management Agreements for the provision
of administrative services to the Funds, including the provision of office
space, shareholder and broker-dealer communications, compensation of all
officers and employees of the Funds who are officers or employees of LAMCO or
its affiliates, and supervision of transfer agency, dividend disbursing,
custodial and other services provided by others. Certain of LAMCO's
administrative responsibilities to the Funds have been delegated to their
affiliate, Colonial, One Financial Center, Boston, MA 02111. For its
administrative services the Equity Fund pays LAMCO an annual fee at the rate of
0.20% of the Equity Fund's average weekly net asset value up to $400 million,
0.18% of such average weekly net asset value exceeding $400 million up to and
including $800 million, 0.162% of such average weekly net asset value exceeding
$800 million up to and including $1.2 billion, and 0.146% of such average weekly
net asset value in excess of $1.2 billion. For its administrative services the
Growth Fund pays LAMCO an annual fee at the rate of 0.20% of the Growth Fund's
average weekly net asset value up to $300 million and 0.18% of such average
weekly net asset value exceeding $300 million. This administrative service fee
is in addition to each Fund's management fees paid by the Fund to LAMCO
described above.
Under the Funds' portfolio management agreements, each Portfolio Manager has
discretionary investment authority with respect to the portion of the Funds'
assets allocated to it by LAMCO from time to time, subject to the Funds'
investment objective and policies, to the supervision and control of the
Trustees/Directors, and to instructions from LAMCO. The Portfolio Managers are
required to use their best professional judgment in making timely investment
decisions for the Fund. The Portfolio Managers, however, will not be liable for
actions taken or omitted in good faith and believed to be within the authority
conferred by their portfolio management agreements and without willful
misfeasance, bad faith or gross negligence.
The names and addresses of the Funds' current Portfolio Managers, including
Schneider and TCW, are as follows:
18
Equity Fund
Boston Partners Asset Management, L.P.
28 State Street
Boston, MA 02109
Mastrapasqua & Associates, Inc.
814 Church Street, Suite 600
Nashville, TN 37203
Oppenheimer Capital L.L.C.
1345 Avenue of the Americas
New York, NY 10105-4800
19
Schneider Capital Management Corporation
460 East Swedesford Road
Wayne, PA 19087
TCW Investment Management Company
865 South Figueroa Street
Los Angeles, CA 90017
Growth Fund
M.A. Weatherbie & Co., Inc.
265 Franklin Street
Boston, MA 02110
TCW Investment Management Company
865 South Figueroa Street
Los Angeles, CA 90017
William Blair & Company, L.L.C.
222 West Adams Street
Chicago, IL 60606
PORTFOLIO TRANSACTIONS AND BROKERAGE
Each of the Funds' Portfolio Managers has discretion to select brokers and
dealers to execute portfolio transactions initiated by the Portfolio Manager for
the portion of the Funds' portfolio assets allocated to it, and to select the
markets in which such transactions are to be executed. The portfolio management
agreements with the Funds provide, in substance, that in executing portfolio
transactions and selecting brokers or dealers, the primary responsibility of the
Portfolio Manager is to seek to obtain best net price and execution for the
Funds.
The Portfolio Managers are authorized to cause the Funds to pay a commission to
a broker or dealer who provides research products and services to the Portfolio
Manager for executing a portfolio transaction which is in excess of the amount
of commission another broker or dealer would have charged for effecting that
transaction. The Portfolio Managers must determine in good faith, however, that
such commission was reasonable in relation to the value of the research products
and services provided to them, viewed in terms of that particular transaction or
in terms of all the client accounts (including the Fund) over which the
Portfolio Manager exercises investment discretion. It is possible that certain
of the services received by a Portfolio Manager attributable to a particular
transaction will primarily benefit one or more other accounts for which
investment discretion is exercised by the Portfolio Manager.
In addition, under their portfolio management agreements with the Funds and
LAMCO, the Portfolio Managers, in selecting brokers or dealers to execute
portfolio transactions for the Funds, are authorized to consider (and LAMCO may
request them to consider) brokers or dealers that provide to LAMCO, directly or
through third parties, research products or services such as research reports;
subscriptions to financial publications and research compilations; portfolio
analyses; economic reports; compilations of securities prices, earnings,
dividends and other data; computer hardware and software, quotation equipment
and services used for research; and services of economic or other consultants.
The commissions paid on such transactions may exceed the amount of commission
another broker would have charged for effecting that transaction. Research
products and services made available to LAMCO include performance and other
qualitative and quantitative data relating to investment managers in general and
20
the Portfolio Managers in particular; data relating to the historic performance
of categories of securities associated with particular investment styles; mutual
fund portfolio and performance data; data relating to portfolio manager changes
by pension plan fiduciaries; and related computer hardware and software, all of
which are used by LAMCO in connection with its selection and monitoring of
Portfolio Managers, the assembly of an appropriate mix of investment styles, and
the determination of overall portfolio strategies. These research products and
services may also be used by LAMCO in connection with its management of the
Funds. In instances where LAMCO receives from or through brokers and dealers
products or services which are used both for research purposes and for
administrative or other non-research purposes, 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.
LAMCO from time to time reaches understandings with each of the Funds' Portfolio
Managers as to the amount of the Funds' 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 the Funds in connection therewith. These amounts may differ among
the Portfolio Managers based on the nature of the market for the types of
securities managed by them and other factors.
Although the Funds do not permit a Portfolio Manager to act or have a
broker-dealer affiliate act as broker for Fund portfolio transactions initiated
by it, the Portfolio Managers are permitted to place Fund portfolio transactions
initiated by them with another Portfolio Manager or its broker-dealer affiliate
for execution on an agency basis, provided the commission does not exceed the
usual and customary broker's commission being paid to other brokers for
comparable transactions and is otherwise in accordance with the Funds'
procedures adopted pursuant to Rule 17e-1 under the Investment Company Act.
During 2001, the Funds had no Fund portfolio transactions placed with a
Portfolio Manager or its affiliate.
On February 15, 2000, the SEC issued the Funds exemptive relief from Sections
10(f), 17(a) and 17(e) and Rule 17e-1 under the Investment Company Act of 1940
to permit (1) broker-dealers which are, or are affiliated with, Portfolio
Managers of the Funds to engage in principal transactions with, and provide
brokerage services to portion(s) of the Funds advised by another Portfolio
Manager and (2) the Funds to purchase securities either directly from a
principal underwriter which is an affiliate of a Portfolio Manager or from an
underwriting syndicate of which a principal underwriter is affiliated with a
Portfolio Manager of the Funds.
INFORMATION ABOUT THE MEETING
All proxies solicited by the Board of Trustees/Directors which are properly
executed and returned in time to be voted at the Meeting will be voted at the
Meeting in accordance with the instructions thereon. If no specification is made
on a proxy, it will be voted FOR the election as Trustee of the Equity Fund of
the nominee named under PROPOSAL 1, FOR the election as Director of the Growth
Fund of the nominees named under PROPOSAL 1, FOR approval of each Fund's
Portfolio Management Agreement with TCW referred to under PROPOSAL 2, FOR
approval of the Equity Fund's Portfolio Management Agreement with Schneider
referred to under PROPOSAL 2 and FOR ratification of the Board's selection of
each Fund's independent accountants for 2002 referred to under PROPOSAL 3. Any
proxy may be revoked at any time prior to its use by written notification
received by the Funds' Secretary, by the execution of a later-dated proxy, or by
attending the Meeting and voting in person.
21
For each Fund, a majority of the shares entitled to vote of the Fund,
outstanding on the record date and entitled to vote, present and in person or
represented by proxy, constitutes a quorum for the transaction of business by
the shareholders of that Fund at the Meeting.
The election of the Trustees/Directors is by plurality of votes cast at the
Meeting. Approval of the Portfolio Management Agreements with TCW and Schneider
each require the affirmative vote of a "majority of the outstanding voting
securities" of the Equity Fund, as defined under PROPOSAL 2 above. Approval of
the Portfolio Management Agreement with TCW requires the affirmative vote of a
"majority of the outstanding voting securities" of the Growth Fund, as defined
under PROPOSAL 2 above. Ratification of the selection of each Fund's independent
accountants requires the affirmative vote of a majority of each Fund's votes
cast at the Meeting, a quorum being present. Only shareholders of record on
February 1, 2002 may vote.
Abstentions and broker non-votes will be counted as present for purposes of
determining whether a quorum is present. If a proposal must be approved by a
percentage of votes cast on the proposal, abstentions and broker non-votes will
not be counted as "votes cast" on the proposal and will have no effect on the
result of the vote. If the proposal must be approved by a percentage of shares
present at the meeting or of the Funds' outstanding shares, abstentions and
broker non-votes will have the effect of votes against the proposal. "Broker
non-votes" occur where: (i) shares are held by brokers or nominees, typically in
"street name;" (ii) instructions have not been received from the beneficial
owners or persons entitled to vote; and (iii) the broker or nominee does not
have discretionary voting power on a particular matter.
All shareholders of record on February 1, 2002, are entitled to one vote for
each share held. Based on filings made by such holders pursuant to Sections
13(d) and 16(a) of the Securities Exchange Act of 1934 (Exchange Act), the
following entities owned beneficially more than five percent of the outstanding
shares of the Funds:
Shares Issued and
No. of Shares Percent of Outstanding at
Name and Address Owned Outstanding Shares February 1, 2002
---------------- ----- ------------------ ----------------
Equity Fund
Liberty Mutual Insurance
Company and Liberty Mutual
Fire Insurance Company 7,263,996 6.80% 106,447,090
Growth Fund
N/A N/A N/A 19,654,168
Liberty Mutual Insurance Company (Liberty Mutual) and Liberty Mutual Fire
Insurance Company (Liberty Fire) have sole voting and investment power with
respect to 6,493,870 and 770,126 shares,
22
respectively. Liberty Mutual and Liberty Fire are mutual insurance companies
having identical Boards of Directors and certain common executive officers. To
the knowledge of the Funds, on the record date for the Meeting no other
shareholder owned beneficially, as defined by Rule 13d-3 under the Exchange Act,
more than 5% of the outstanding shares of the Funds.
In the event a quorum is present at the Meeting but sufficient votes to approve
any of the above proposals have not been received, the persons named as proxies
may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. A shareholder vote may be taken on one or more of the
proposals referred to above prior to such adjournment if sufficient votes have
been received and it is otherwise appropriate. Any such adjournment will require
the affirmative vote of a majority of those shares present at the Meeting
(including abstentions and broker non-votes) in person or by proxy. If a quorum
is present, the persons named as proxies will vote those proxies which they are
entitled to vote FOR any such proposal in favor of such adjournment and will
vote those proxies required to be voted for rejection of such proposal against
any such adjournment.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Funds' Trustees /Directors and
officers and persons who own more than ten percent of the Funds' outstanding
shares and certain officers and directors of LAMCO (collectively, "Section 16
reporting persons"), to file with the SEC initial reports of ownership and
reports of changes in ownership of Fund shares. Section 16 reporting persons are
required by SEC regulations to furnish the Funds with copies of all Section
16(a) forms they file. Reports of Messrs. Carabell, Haley and Parmentier, Equity
Fund officers, were inadvertently filed late for transactions occurring in 2001.
The transactions related to the sale of Equity Fund shares in December 2001 due
to FleetBoston's conversion of the LFC 401(k) plan into the FleetBoston 401(k)
plan. The reports were subsequently filed to reflect the transactions. To the
Funds' knowledge, based solely on a review of the copies of such reports
furnished to the Funds and on representations made, all other Section 16
reporting persons complied with all Section 16(a) filing requirements applicable
to them.
OTHER INFORMATION
THE FUNDS HAVE PREVIOUSLY SENT THEIR ANNUAL REPORTS AND ANY SUBSEQUENT QUARTERLY
REPORTS TO THEIR SHAREHOLDERS. YOU CAN OBTAIN A COPY OF THESE REPORTS WITHOUT
CHARGE BY WRITING TO LAMCO AT ONE FINANCIAL CENTER, BOSTON, MA 02111, OR BY
CALLING 800-241-1850.
Certain of LAMCO's administrative responsibilities to the Funds have been
delegated to its affiliate, Colonial, One Financial Center, Boston, MA 02111.
SUBMISSION OF CERTAIN SHAREHOLDER PROPOSALS
Under the proxy rules of the SEC, shareholder proposals meeting tests contained
in those rules may, under certain conditions, be included in the Fund 's proxy
material for a particular annual shareholders meeting. Under the foregoing proxy
rules, proposals (whether or not submitted for inclusion in the proxy material
for the 2003 Annual Meeting) must be received by the Funds on or before October
26, 2002. The fact that the Funds receives a shareholder proposal in a timely
manner does not ensure its inclusion in its proxy material, since there are
other requirements in the proxy rules relating to such inclusion. You may submit
shareholder proposals to the Secretary of the Funds, One Financial Center,
Boston, MA 02111.
23
APPENDIX A
AUDIT COMMITTEE CHARTER
I. Composition of the Audit Committee. The Audit Committee shall be comprised
of at least three trustees/directors, each of whom shall have no
relationship to Liberty All-Star Equity Fund and Liberty All-Star Growth
Fund, Inc. (Funds) that may interfere with the exercise of their
independence from management and the Fund and shall otherwise satisfy the
applicable membership requirements under the rules of the New York Stock
Exchange, Inc.
II. Purposes of the Audit Committee. The purposes of the Audit Committee are
to assist the Board of Trustees/Directors:
1. in its oversight of the Fund's accounting and financial reporting
policies and practices, its internal audit controls and procedures,
and, as appropriate, the internal controls of certain service
providers;
2. in its oversight of the quality and objectivity of the Fund's
financial statements and the independent audit thereof;
3. in selecting (or nominating the outside auditors to be proposed for
shareholder approval in any proxy statement), evaluating and, where
deemed appropriate, replacing the outside auditors; and
4. in evaluating the independence of the outside auditors.
The function of the Audit Committee is oversight. Management for the Fund
is responsible for the preparation, presentation and integrity of the
Fund's financial statements. Management and its internal accounting
department are responsible for maintaining appropriate accounting and
financial reporting principles and policies and internal controls and
procedures designed to assure compliance with accounting standards and
applicable laws and regulations. The outside auditors are responsible for
planning and carrying out a proper audit and reviews. The outside auditor
for the Fund is ultimately accountable to the Board of Trustees/Directors
and Audit Committee of the Fund. The Board of Trustees/Directors and the
Audit Committee have the ultimate authority and responsibility to select,
evaluate and, where appropriate, replace the outside accountant (or to
nominate the outside accountant to be proposed for shareholder approval in
any proxy statement).
III. Meetings of the Audit Committee. The Audit Committee shall meet at least
once annually, or more frequently if circumstances dictate. The Audit
Committee shall set its agenda and the places and times of its meetings.
The Audit Committee may meet alone and outside the presence of management
personnel with any certified public accountant and auditor firm rendering
reports to the Audit Committee or the Board of Trustees/Directors and with
outside legal counsel.
IV. Duties and Powers of the Audit Committee. To carry out its purposes, the
Audit Committee shall have the following duties and powers:
1. The Audit Committee shall review and discuss the audited financial
statements and other financial information with management and the
independent auditors for the Fund.
2. The Audit Committee shall review and discuss with the independent
auditors:
a. the scope of audits and audit reports;
b. the personnel, staffing, qualifications and experience of the
auditor;
c. the compensation of the auditor; and
24
d. the independence of the auditor, regarding which the Audit
Committee shall secure from the auditor the information
required by Independence Standards Board Standard No. 1. The
Audit Committee shall actively engage in a dialogue with the
outside auditor with respect to any disclosed relationships or
services that may impact the objectivity and independence of
the outside auditor. The Audit Committee also shall be
responsible for recommending that the Board of
Trustees/Directors take appropriate action in response to the
outside auditor's report to satisfy itself of the outside
auditor's independence.
3. The Audit Committee also shall review and discuss with the
independent auditors the matters required to be discussed pursuant
to SAS 61, including the following:
a. the quality, not just the acceptability under generally
accepted accounting principles, of the accounting principles
applied by the Fund in its financial reporting;
b. the level of responsibility assumed by the auditors in the
preparation of the audit;
c. the initial selection of and changes in significant accounting
policies or their application, and the effect of significant
accounting policies in controversial or emerging areas for
which there is a lack of authoritative consensus or guidance;
d. the process used by management for the Fund in formulating
particularly sensitive accounting estimates and the basis for
the auditor's conclusions regarding the reasonableness of
those estimates;
e. the auditor's responsibility for other information in
documents containing audited financial statements, any
procedures performed, and the results;
f. any disagreements with management, whether or not
satisfactorily resolved, about matters that individually or in
the aggregate could be significant to the entity's financial
statements or the auditor's report;
g. any consultations with other accountants and significant
matters that were the subject of such consultations;
h. any major issues discussed with management in connection with
the initial or recurring retention of the auditor, including
the application of accounting principles and auditing
standards; and
i. any serious difficulties relating to the performance of the
audit that the auditor encountered with management.
4. The Audit Committee shall provide a recommendation to the Board of
Trustees/Directors regarding whether the audited financial
statements of the Fund should be included in the annual report to
shareholders of the Fund.
5. The Audit Committee shall prepare the report, including any
recommendation of the Audit Committee, required by the rules of the
Securities and Exchange Commission to be included in the Fund's
annual proxy statement.
6. The Audit Committee shall review this charter at least annually and
recommend any changes to the full Board of Trustees/Directors; and
7. The Audit Committee shall report its activities to the full Board of
Trustees/Directors on a regular basis and make such recommendations
with respect to the above and other matters as the Audit Committee
may deem necessary or appropriate.
25
V. Resources and Authority of the Audit Committee. The Audit Committee shall
have the resources and authority appropriate to discharge its
responsibilities, including the authority to engage outside auditors for
special audits, reviews and other procedures and to retain special counsel
and other experts or consultants at the expense of the Fund.
26
APPENDIX B
PORTFOLIO MANAGEMENT AGREEMENT (EQUITY FUND)
November 1, 2001
TCW Investment Management Company
865 South Figueroa Street
Los Angeles, CA 90017
Re: Portfolio Management Agreement
Ladies and Gentlemen:
Liberty All-Star Equity Fund (the "Fund") is a diversified closed-end
investment company registered under the Investment Company Act of 1940 (the
"Act"), and is subject to the rules and regulations promulgated thereunder.
Liberty Asset Management Company (the "Fund Manager") evaluates and
recommends portfolio managers for the assets of the Fund, and is responsible for
the day-to-day corporate management and Fund administration of the Fund.
1. Employment as a Portfolio Manager. The Fund being duly authorized
hereby employs TCW Investment Management Company (the "Portfolio Manager") as a
discretionary portfolio manager, on the terms and conditions set forth herein,
of that portion of the Fund's assets which the Fund Manager determines to assign
to the Portfolio Manager (those assets being referred to as the "Portfolio
Manager Account"). The Fund Manager may, from time to time, allocate and
reallocate the Fund's assets among the Portfolio Manager and the other portfolio
managers of the Fund's assets.
2. Acceptance of Employment; Standard of Performance. The Portfolio
Manager accepts its employment as a discretionary portfolio manager and agrees
to use its best professional judgment to make timely investment decisions for
the Portfolio Manager Account in accordance with the provisions of this
Agreement.
3. Portfolio Management Services of Portfolio Manager. In providing
portfolio management services to the Portfolio Manager Account, the Portfolio
Manager shall be subject to the investment objectives, policies and restrictions
of the Fund as set forth in its current Registration Statement under the Act, as
the same may be modified from time to time (the "Registration Statement"), and
the investment restrictions set forth in the Act and the Rules thereunder (as
and to the extent set forth in the Registration Statement or in other
documentation furnished to the Portfolio Manager by the Fund or the Fund
Manager), to the supervision and control of the Board of Trustees of the Fund,
and to instructions from the Fund Manager. The Portfolio Manager shall not,
without the prior approval of the Fund or the Fund Manager, effect any
transactions which would cause the Portfolio Manager Account, treated as a
separate fund, to be out of compliance with any of such restrictions or
policies.
4. Transaction Procedures. All portfolio transactions for the Portfolio
Manager Account will be consummated by payment to or delivery by the custodian
of the Fund (the "Custodian"), or such depositories or agents as may be
designated by the Custodian in writing, as custodian for the Fund, of all cash
and/or securities due to or from the Portfolio Manager Account, and the
Portfolio Manager shall not have possession or custody thereof or any
responsibility or liability with respect to such custody. The Portfolio Manager
shall advise and confirm in writing to the Custodian all investment orders for
the
27
Portfolio Manager Account placed by it with brokers and dealers at the time and
in the manner set forth in Schedule A hereto (as amended from time to time by
the Fund Manager). The Fund shall issue to the Custodian such instructions as
may be appropriate in connection with the settlement of any transaction
initiated by the Portfolio Manager. The Fund shall be responsible for all
custodial arrangements and the payment of all custodial charges and fees, and,
upon giving proper instructions to the Custodian, the Portfolio Manager shall
have no responsibility or liability with respect to custodial arrangements or
the acts, omissions or other conduct of the Custodian.
5. Allocation of Brokerage. The Portfolio Manager shall have authority and
discretion to select brokers and dealers to execute portfolio transactions
initiated by the Portfolio Manager for the Portfolio Manager Account, and to
select the markets on or in which the transaction will be executed.
A. In doing so, the Portfolio Manager's primary responsibility shall
be to seek to obtain best net price and execution for the Fund. However,
this responsibility shall not obligate the Portfolio Manager to solicit
competitive bids for each transaction or to seek the lowest available
commission cost to the Fund, so long as the Portfolio Manager reasonably
believes that the broker or dealer selected by it can be expected to
obtain a "best execution" market price on the particular transaction and
determines in good faith that the commission cost is reasonable in
relation to the value of the brokerage and research services (as defined
in Section 28(e)(3) of the Securities Exchange Act of 1934) provided by
such broker or dealer to the Portfolio Manager viewed in terms of either
that particular transaction or of the Portfolio Manager's overall
responsibilities with respect to its clients, including the Fund, as to
which the Portfolio Manager exercises investment discretion,
notwithstanding that the Fund may not be the direct or exclusive
beneficiary of any such services or that another broker may be willing to
charge the Fund a lower commission on the particular transaction.
B. Subject to the requirements of paragraph A above, the Fund
Manager shall have the right to request that transactions giving rise to
brokerage commissions, in an amount to be agreed upon by the Fund Manager
and the Portfolio Manager, shall be executed by brokers and dealers that
provide brokerage or research services to the Fund Manager, or as to which
an on-going relationship will be of value to the Fund in the management of
its assets, which services and relationship may, but need not, be of
direct benefit to the Portfolio Manager Account. Notwithstanding any other
provision of this Agreement, the Portfolio Manager shall not be
responsible under paragraph A above with respect to transactions executed
through any such broker or dealer.
C. The Portfolio Manager shall not execute any portfolio
transactions for the Portfolio Manager Account with a broker or dealer
which is an "affiliated person" (as defined in the Act) of the Fund, the
Portfolio Manager or any other Portfolio Manager of the Fund without the
prior written approval of the Fund. The Fund Manager will provide the
Portfolio Manager with a list of brokers and dealers which are "affiliated
persons" of the Fund or its Portfolio Managers.
6. Proxies. The Portfolio Manager will vote all proxies solicited by or
with respect to the issuers of securities in which assets of the Portfolio
Manager Account may be invested from time to time in accordance with such
policies as shall be determined by the Fund Manager.
28
7. Fees for Services. The compensation of the Portfolio Manager for its
services under this Agreement shall be calculated and paid by the Fund Manager
in accordance with the attached Schedule C. Pursuant to the Fund Management
Agreement between the Fund and the Fund Manager, the Fund Manager is solely
responsible for the payment of fees to the Portfolio Manager, and the Portfolio
Manager agrees to seek payment of its fees solely from the Fund Manager.
8. Other Investment Activities of Portfolio Manager. The Fund acknowledges
that the Portfolio Manager or one or more of its affiliates has investment
responsibilities, renders investment advice to and performs other investment
advisory services for other individuals or entities ("Client Accounts"), and
that the Portfolio Manager, its affiliates or any of its or their directors,
officers, agents or employees may buy, sell or trade in any securities for its
or their respective accounts ("Affiliated Accounts"). Subject to the provisions
of paragraph 2 hereof, the Fund agrees that the Portfolio Manager or its
affiliates may give advice or exercise investment responsibility and take such
other action with respect to other Client Accounts and Affiliated Accounts which
may differ from the advice given or the timing or nature of action taken with
respect to the Portfolio Manager Account, provided that the Portfolio Manager
acts in good faith, and provided further, that it is the Portfolio Manager's
policy to allocate, within its reasonable discretion, investment opportunities
to the Portfolio Manager Account over a period of time on a fair and equitable
basis relative to the Client Accounts and the Affiliated Accounts, taking into
account the cash position and the investment objectives and policies of the Fund
and any specific investment restrictions applicable thereto. The Fund
acknowledges that one or more Client Accounts and Affiliated Accounts may at any
time hold, acquire, increase, decrease, dispose of or otherwise deal with
positions in investments in which the Portfolio Manager Account may have an
interest from time to time, whether in transactions which involve the Portfolio
Manager Account or otherwise. The Portfolio Manager shall have no obligation to
acquire for the Portfolio Manager Account a position in any investment which any
Client Account or Affiliated Account may acquire, and the Fund shall have no
first refusal, co-investment or other rights in respect of any such investment,
either for the Portfolio Manager Account or otherwise.
9. Limitation of Liability. The Portfolio Manager shall not be liable for
any action taken, omitted or suffered to be taken by it in its reasonable
judgment, in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement, or in
accordance with (or in the absence of) specific directions or instructions from
the Fund, provided, however, that such acts or omissions shall not have resulted
from the Portfolio Manager's willful misfeasance, bad faith or gross negligence,
a violation of the standard of care established by and applicable to the
Portfolio Manager in its actions under this Agreement or breach of its duty or
of its obligations hereunder (provided, however, that the foregoing shall not be
construed to protect the Portfolio Manager from liability in violation of
Section 17(i) of the Act).
10. Confidentiality. Subject to the duty of the Portfolio Manager and the
Fund to comply with applicable law, including any demand of any regulatory or
taxing authority having jurisdiction, the parties hereto shall treat as
confidential all information pertaining to the Portfolio Manager Account and the
actions of the Portfolio Manager and the Fund in respect thereof.
11. Assignment. This Agreement shall terminate automatically in the event
of its assignment, as that term is defined in Section 2(a)(4) of the Act. The
Portfolio Manager shall notify the Fund in writing sufficiently in advance of
any proposed change of control, as defined in Section 2(a)(9) of the Act, as
will enable the Fund to consider whether an assignment as defined in Section
2(a)(4) of the Act will occur, and whether to take the steps necessary to enter
into a new contract with the Portfolio Manager.
12. Representations, Warranties and Agreements of the Fund. The Fund
represents, warrants and agrees that:
29
A. The Portfolio Manager has been duly appointed to provide
investment services to the Portfolio Manager Account as contemplated
hereby.
B. The Fund will deliver to the Portfolio Manager a true and
complete copy of its then current registration statement as effective from
time to time and such other documents governing the investment of the Fund
Account and such other information as is necessary for the Portfolio
Manager to carry out its obligations under this Agreement.
13. Representations, Warranties and Agreements of the Portfolio Manager.
The Portfolio Manager represents, warrants and agrees that:
A. It is registered as an "Investment Adviser" under the Investment
Advisers Act of 1940 ("Advisers Act").
B. It will maintain, keep current and preserve on behalf of the
Fund, in the manner required or permitted by the Act and the Rules
thereunder, the records identified in Schedule B (as Schedule B may be
amended from time to time by the Fund Manager). The Portfolio Manager
agrees that such records are the property of the Fund, and will be
surrendered to the Fund promptly upon request.
C. It will adopt a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act. Within 45 days of the end
of each year while this Agreement is in effect, an officer or general
partner of the Portfolio Manager shall certify to the Fund that the
Portfolio Manager has complied with the requirements of Rule 17j-1 during
the previous year and that there has been no violation of its code of
ethics or, if such a violation has occurred, that appropriate action was
taken in response to such violation.
D. Upon request, the Portfolio Manager will promptly supply the Fund
with any information concerning the Portfolio Manager and its
stockholders, employees and affiliates which the Fund may reasonably
require in connection with the preparation of its Registration Statement
or amendments thereto, proxy material, reports and other documents
required to be filed under the Act, the Securities Act of 1933, or other
applicable securities laws.
E. Reference is hereby made to the Declaration of Trust dated August
20, 1986 establishing the Fund, a copy of which has been filed with the
Secretary of the Commonwealth of Massachusetts and elsewhere as required
by law, and to any and all amendments thereto so filed or hereafter filed.
The name Liberty All-Star Equity Fund refers to the Trustees under said
Declaration of Trust, as Trustees and not personally, and no Trustee,
shareholder, officer, agent or employee of the Fund shall be held to any
personal liability hereunder or in connection with the affairs of the
Fund, but only the trust estate under said Declaration of Trust is liable
under this Agreement. Without limiting the generality of the foregoing,
neither the Portfolio Manager nor any of its officers, directors,
partners, shareholders or employees shall, under any circumstances, have
recourse or cause or willingly permit recourse to be had directly or
indirectly to any personal, statutory, or other liability of any
shareholder, Trustee, officer, agent or employee of the Fund or of any
successor of the Fund, whether such liability now exists or is hereafter
incurred for claims against the trust estate, but shall look for payment
solely to said trust estate, or the assets of such successor of the Fund.
30
14. Amendment. This Agreement may be amended at any time, but only by
written agreement among the Portfolio Manager, the Fund Manager and the Fund,
which amendment, other than amendments to Schedules A and B, is subject to the
approval of the Board of Trustees and the Shareholders of the Fund as and to the
extent required by the Act.
15. Effective Date; Term. This Agreement shall continue until July 31,
2003 and from year to year thereafter provided such continuance is specifically
approved at least annually by (i) the Fund's Board of Trustees or (ii) a vote of
a "majority" (as defined in the Act) of the Fund's outstanding voting
securities, provided that in either event such continuance is also approved by a
majority of the Board of Trustees who are not "interested persons" (as defined
in the Act) of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval and provided further that, in
accordance with the conditions of the application of the Fund and Fund Manager
for an exemption from 15(a) of the Act (Rel. Nos. IC 19436 and 19491), the
continuance of this Agreement shall be subject to approval by such "majority" of
the Fund's outstanding voting securities at the regularly scheduled annual
meeting of shareholders of the Fund next following the date of this Agreement.
The aforesaid requirement that continuance of this Agreement be "specifically
approved at least annually" shall be construed in a manner consistent with the
Act and the Rules and Regulations thereunder.
16. Termination. This Agreement may be terminated by any party, without
penalty, immediately upon written notice to the other parties in the event of a
breach of any provision thereof by a party so notified, or otherwise upon not
less than thirty (30) days' written notice to the Portfolio Manager in the case
of termination by the Fund or the Fund Manager, or ninety (90) days' written
notice to the Fund and the Fund Manager in the case of termination by the
Portfolio Manager, but any such termination shall not affect the status,
obligations or liabilities of any party hereto to the other parties.
17. Applicable Law. To the extent that state law is not preempted by the
provisions of any law of the United States heretofore or hereafter enacted, as
the same may be amended from time to time, this Agreement shall be administered,
construed and enforced according to the laws of the Commonwealth of
Massachusetts.
18. Severability. If any term or condition of this Agreement shall be
invalid or unenforceable to any extent or in any application, then the remainder
of this Agreement, and such term or condition except to such extent or in such
application, shall not be affected thereby, and each and every term and
condition of this Agreement shall be valid and enforced to the fullest extent
and in the broadest application permitted by law.
LIBERTY ALL-STAR EQUITY FUND
By: ________________________________________
Title:
LIBERTY ASSET MANAGEMENT COMPANY
By: ________________________________________
Title:
ACCEPTED:
31
TCW INVESTMENT MANAGEMENT COMPANY
By: ________________________________________
Title:
TCW INVESTMENT MANAGEMENT COMPANY
By: ________________________________________
Title:
SCHEDULES: A. Operational Procedures For Portfolio Transactions [omitted]
B. Record Keeping Requirements
C. Fee Schedule
32
LIBERTY ALL-STAR EQUITY FUND
PORTFOLIO MANAGEMENT AGREEMENT
SCHEDULE B
RECORDS TO BE MAINTAINED BY THE PORTFOLIO MANAGER
1. (Rule 31a-1(b)(5) and (6)) A record of each brokerage order, and all other
portfolio purchases and sales, given by the Portfolio Manager on behalf of the
Fund for, or in connection with, the purchase or sale of securities, whether
executed or unexecuted. Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any modifications or
cancellation thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time of receipt of a report of execution; and
F. The name of the person who placed the order on behalf of the Fund.
2. (Rule 31a-1(b)(9)) A record for each fiscal quarter, completed within ten
(10) days after the end of the quarter, showing specifically the basis or bases
upon which the allocation of orders for the purchase and sale of portfolio
securities to named brokers or dealers was effected, and the division of
brokerage commissions or other compensation on such purchase and sale orders.
Such record:
A. Shall include the consideration given to:
(i) The sale of shares of the Fund by brokers or dealers.
(ii) The supplying of services or benefits by brokers or dealers
to:
(a) The Fund;
(b) The Manager (Liberty Asset Management Company);
(c) The Portfolio Manager; and
(d) Any person other than the foregoing.
(iii) Any other consideration other than the technical
qualifications of the brokers and dealers as such.
B. Shall show the nature of the services or benefits made available.
33
C. Shall describe in detail the application of any general or specific
formula or other determinant used in arriving at such allocation of
purchase and sale orders and such division of brokerage commissions
or other compensation.
D. The name of the person responsible for making the determination of
such allocation and such division of brokerage commissions or other
compensation.
3. (Rule 31a-1(b)(10)) A record in the form of an appropriate memorandum
identifying the person or persons, committees or groups authorizing the purchase
or sale of portfolio securities. Where an authorization is made by a committee
or group, a record shall be kept of the names of its members who participate in
the authorization. There shall be retained as part of this record: any
memorandum, recommendation or instruction supporting or authorizing the purchase
or sale of portfolio securities and such other information as is appropriate to
support the authorization.(1)
4. (Rule 31a-1(f)) Such accounts, books and other documents as are required to
be maintained by registered investment advisers by rule adopted under Section
204 of the Investment Advisers Act of 1940, to the extent such records are
necessary or appropriate to record the Portfolio Manager's transactions with the
Fund.
----------
(1) Such information might include: the current Form 10-K, annual and quarterly
reports, press releases, reports by analysts and from brokerage firms (including
their recommendation: i.e., buy, sell, hold) or any internal reports or
portfolio manager reviews.
34
SCHEDULE C
PORTFOLIO MANAGER FEE
For services provided to the Fund Account, the Fund Manager will pay to
the Portfolio Manager, on or before the 10th day of each calendar month, a
monthly fee for the previous calendar month in the amount of 1/12(th) of: 0.40%
of the amount obtained by multiplying the Portfolio Manager's Percentage (as
hereinafter defined) times the Average Total Fund Net Assets (as hereinafter
defined) up to $400 million; 0.36% of the amount obtained by multiplying the
Portfolio Manager's Percentage times the Average Total Fund Net Assets exceeding
$400 million up to and including $800 million; 0.324% of the amount obtained by
multiplying the Portfolio Manager's Percentage times the Average Total Fund Net
Assets exceeding $800 million up to and including $1.2 billion; 0.292% of the
amount obtained by multiplying the Portfolio Manager's Percentage times the
Average Total Fund Net Assets exceeding $1.2 billion.
"Portfolio Manager's Percentage" means the percentage obtained by dividing
(i) the average of the net asset values of the Fund Account as of the close of
the last business day of the New York Stock Exchange in each calendar week
during the preceding calendar month, by (ii) the Average Total Fund Net Assets.
"Average Total Fund Net Assets" means the average of the net asset values
of the Fund as a whole as of the close of the last business day of the New York
Stock Exchange in each calendar week during the preceding calendar month.
The fee shall be pro-rated for any month during which this Agreement is in
effect for only a portion of the month.
35
PORTFOLIO MANAGEMENT AGREEMENT (GROWTH FUND)
November 1, 2001
TCW Investment Management Company
865 South Figueroa Street
Los Angeles, CA 90017
Re: Portfolio Management Agreement
Ladies and Gentlemen:
Liberty All-Star Growth Fund, Inc. (the "Fund") is a diversified
closed-end investment company registered under the Investment Company Act of
1940 (the "Act"), and is subject to the rules and regulations promulgated
thereunder.
Liberty Asset Management Company (the "Fund Manager") evaluates and
recommends portfolio managers for the assets of the Fund, and is responsible for
the day-to-day administration of the Fund.
1. Employment as a Portfolio Manager. The Fund being duly authorized
hereby employs TCW Investment Management Company (the "Portfolio Manager") as a
discretionary portfolio manager, on the terms and conditions set forth herein,
of that portion of the Fund's assets which the Fund Manager determines to assign
to the Portfolio Manager (those assets being referred to as the "Portfolio
Manager Account"). The Fund Manager may, from time to time, allocate and
reallocate the Fund's assets among the Portfolio Manager and the other portfolio
managers of the Fund's assets.
2. Acceptance of Employment; Standard of Performance. The Portfolio
Manager accepts its employment as a discretionary portfolio manager and agrees
to use its best professional judgment to make timely investment decisions for
the Portfolio Manager Account in accordance with the provisions of this
Agreement.
3. Portfolio Management Services of Portfolio Manager. In providing
portfolio management services to the Portfolio Manager Account, the Portfolio
Manager shall be subject to the investment objectives, policies and restrictions
of the Fund as set forth in its current Registration Statement under the Act, as
the same may be modified from time to time (the "Registration Statement"), and
the investment restrictions set forth in the Act and the Rules thereunder (as
and to the extent set forth in the Registration Statement or in other
documentation furnished to the Portfolio Manager by the Fund or the Fund
Manager), to the supervision and control of the Board of Directors of the Fund,
and to instructions from the Fund Manager. The Portfolio Manager shall not,
without the prior approval of the Fund or the Fund Manager, effect any
transactions which would cause the Portfolio Manager Account, treated as a
separate fund, to be out of compliance with any of such restrictions or
policies.
4. Transaction Procedures. All portfolio transactions for the Portfolio
Manager Account will be consummated by payment to or delivery by the custodian
of the Fund (the "Custodian"), or such depositories or agents as may be
designated by the Custodian in writing, as custodian for the Fund, of all cash
and/or securities due to or from the Portfolio Manager Account, and the
Portfolio Manager shall not have possession or custody thereof or any
responsibility or liability with respect to such custody. The Portfolio Manager
shall advise and confirm in writing to the Custodian all investment orders for
the
36
Portfolio Manager Account placed by it with brokers and dealers at the time and
in the manner set forth in Schedule A hereto (as amended from time to time by
the Fund Manager). The Fund shall issue to the Custodian such instructions as
may be appropriate in connection with the settlement of any transaction
initiated by the Portfolio Manager. The Fund shall be responsible for all
custodial arrangements and the payment of all custodial charges and fees, and,
upon giving proper instructions to the Custodian, the Portfolio Manager shall
have no responsibility or liability with respect to custodial arrangements or
the acts, omissions or other conduct of the Custodian.
5. Allocation of Brokerage. The Portfolio Manager shall have authority and
discretion to select brokers and dealers to execute portfolio transactions
initiated by the Portfolio Manager for the Portfolio Manager Account, and to
select the markets on or in which the transaction will be executed.
A. In doing so, the Portfolio Manager's primary responsibility shall
be to seek to obtain best net price and execution for the Fund. However,
this responsibility shall not obligate the Portfolio Manager to solicit
competitive bids for each transaction or to seek the lowest available
commission cost to the Fund, so long as the Portfolio Manager reasonably
believes that the broker or dealer selected by it can be expected to
obtain a "best execution" market price on the particular transaction and
determines in good faith that the commission cost is reasonable in
relation to the value of the brokerage and research services (as defined
in Section 28(e)(3) of the Securities Exchange Act of 1934) provided by
such broker or dealer to the Portfolio Manager viewed in terms of either
that particular transaction or of the Portfolio Manager's overall
responsibilities with respect to its clients, including the Fund, as to
which the Portfolio Manager exercises investment discretion,
notwithstanding that the Fund may not be the direct or exclusive
beneficiary of any such services or that another broker may be willing to
charge the Fund a lower commission on the particular transaction.
B. Subject to the requirements of paragraph A above, the Fund
Manager shall have the right to request that transactions giving rise to
brokerage commissions, in an amount to be agreed upon by the Fund Manager
and the Portfolio Manager, shall be executed by brokers and dealers that
provide brokerage or research services to the Fund Manager, or as to which
an on-going relationship will be of value to the Fund in the management of
its assets, which services and relationship may, but need not, be of
direct benefit to the Portfolio Manager Account.
C. The Portfolio Manager shall not execute any portfolio
transactions for the Portfolio Manager Account with itself or any broker
or dealer which is an "affiliated person" (as defined in the Act) of the
Fund, the Portfolio Manager or any other Portfolio Manager of the Fund
without the prior written approval of the Fund except in accordance with
SEC Exemptive Order No. 24288 dated February 15, 2000, a copy of which has
been furnished to the Portfolio Manager, and Rule 17e-1 procedures as
approved by the Fund's Directors from time to time. The Fund Manager will
provide the Portfolio Manager with a list of brokers and dealers which are
"affiliated persons" of the Fund or its Portfolio Managers.
6. Proxies. The Fund will vote or direct the voting of all proxies
solicited by or with respect to the issuers of securities in which assets of the
Fund Account may be invested in accordance with authorization provided by the
Fund Manager from time to time.
37
7. Fees for Services. The compensation of the Portfolio Manager for its
services under this Agreement shall be calculated and paid by the Fund Manager
in accordance with the attached Schedule C. Pursuant to the Fund Management
Agreement between the Fund and the Fund Manager, the Fund Manager is solely
responsible for the payment of fees to the Portfolio Manager, and the Portfolio
Manager agrees to seek payment of its fees solely from the Fund Manager.
8. Other Investment Activities of Portfolio Manager. The Fund acknowledges
that the Portfolio Manager or one or more of its affiliates has investment
responsibilities, renders investment advice to and performs other investment
advisory services for other individuals or entities ("Client Accounts"), and
that the Portfolio Manager, its affiliates or any of its or their directors,
members, officers, agents or employees may buy, sell or trade in any securities
for its or their respective accounts ("Affiliated Accounts"). Subject to the
provisions of paragraph 2 hereof, the Fund agrees that the Portfolio Manager or
its affiliates may give advice or exercise investment responsibility and take
such other action with respect to other Client Accounts and Affiliated Accounts
which may differ from the advice given or the timing or nature of action taken
with respect to the Portfolio Manager Account, provided that the Portfolio
Manager acts in good faith, and provided further, that it is the Portfolio
Manager's policy to allocate, within its reasonable discretion, investment
opportunities to the Portfolio Manager Account over a period of time on a fair
and equitable basis relative to the Client Accounts and the Affiliated Accounts,
taking into account the cash position and the investment objectives and policies
of the Fund and any specific investment restrictions applicable thereto. The
Fund acknowledges that one or more Client Accounts and Affiliated Accounts may
at any time hold, acquire, increase, decrease, dispose of or otherwise deal with
positions in investments in which the Portfolio Manager Account may have an
interest from time to time, whether in transactions which involve the Portfolio
Manager Account or otherwise. The Portfolio Manager shall have no obligation to
acquire for the Portfolio Manager Account a position in any investment which any
Client Account or Affiliated Account may acquire, and the Fund shall have no
first refusal, co-investment or other rights in respect of any such investment,
either for the Portfolio Manager Account or otherwise.
9. Limitation of Liability. The Portfolio Manager shall not be liable for
any action taken, omitted or suffered to be taken by it in its reasonable
judgment, in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement, or in
accordance with (or in the absence of) specific directions or instructions from
the Fund, provided, however, that such acts or omissions shall not have resulted
from the Portfolio Manager's willful misfeasance, bad faith or gross negligence,
a violation of the standard of care established by and applicable to the
Portfolio Manager in its actions under this Agreement or breach of its duty or
of its obligations hereunder (provided, however, that the foregoing shall not be
construed to protect the Portfolio Manager from liability in violation of
Section 17 of the Act).
10. Confidentiality. Subject to the duty of the Portfolio Manager and the
Fund to comply with applicable law, including any demand of any regulatory or
taxing authority having jurisdiction, the parties hereto shall treat as
confidential all information pertaining to the Portfolio Manager Account and the
actions of the Portfolio Manager and the Fund in respect thereof.
11. Assignment. This Agreement shall terminate automatically in the event
of its assignment, as that term is defined in Section 2(a)(4) of the Act. The
Portfolio Manager shall notify the Fund in writing sufficiently in advance of
any proposed change of control, as defined in Section 2(a)(9) of the Act, as
will enable the Fund to consider whether an assignment as defined in Section
2(a)(4) of the Act will occur, and whether to take the steps necessary to enter
into a new contract with the Portfolio Manager.
38
12. Representations, Warranties and Agreements of the Fund. The Fund
represents, warrants and agrees that:
A. The Portfolio Manager has been duly appointed to provide
investment services to the Portfolio Manager Account as contemplated
hereby.
B. The Fund has delivered to the Portfolio Manager such instructions
governing the investment of the Portfolio Manager Account as is necessary
for the Portfolio Manager to carry out its obligations under this
Agreement.
C. Upon certification by the Portfolio Manager that it has adopted a
written code of ethics and procedures reasonably necessary to prevent
access persons, as defined by said code of ethics, from violating the
anti-fraud provisions of Rule 17j-1 under the Act, the Fund will not
unreasonably withhold its approval of the code of ethics adopted by the
Portfolio Manager provided that the Portfolio Manager certifies to the
Fund that in all other material respects the Portfolio Manager's code of
ethics complies with Rule 17j-1.
13. Representations, Warranties and Agreements of the Portfolio Manager.
The Portfolio Manager represents, warrants and agrees that:
A. It is registered as an "Investment Adviser" under the Investment
Advisers Act of 1940 ("Advisers Act").
B. It will maintain, keep current and preserve on behalf of the
Fund, in the manner required or permitted by the Act and the Rules
thereunder, the records identified in Schedule B (as Schedule B may be
amended from time to time by the Fund Manager). The Portfolio Manager
agrees that such records are the property of the Fund, and will be
surrendered to the Fund promptly upon request.
C. It will adopt and maintain a written code of ethics complying
with the requirements of Rule 17j-1 and submit same and any amendments
thereto promptly to the Fund, but not less often than annually. The
Portfolio Manager agrees that it will notify the Fund within 15 days of
adopting material changes to its code of ethics. While this Agreement is
in effect, an officer or general partner of the Portfolio Manager shall
certify annually to the Fund that the Portfolio Manager has complied with
the requirements of Rule 17j-1 during the previous year and has procedures
reasonably necessary to prevent access persons from violating the
Portfolio Manager's code of ethics. On an annual basis, the Portfolio
Manager shall provide a written report to the Fund describing any issues
arising under its code of ethics or procedures since the last report was
so submitted, including information about material violations of the code
or procedures and any action taken in response to such violations. Upon
the written request of the Fund, the Portfolio Manager shall permit the
Fund to examine the reports required to be maintained by the Portfolio
Manager under Rule 17j-1(c)(l).
D. Upon request, the Portfolio Manager will promptly supply the Fund
with any information concerning the Portfolio Manager and its
stockholders, employees and affiliates which the Fund may reasonably
require in connection with the preparation of its Registration Statement
or amendments thereto, proxy material, reports and other documents
required to be filed under the Act, the Securities Act of 1933, or other
applicable securities laws.
14. Amendment. This Agreement may be amended at any time, but (except for
Schedules A and B which may be amended by the Fund Manager acting alone) only by
written agreement among the Portfolio Manager, the Fund Manager and the Fund,
which amendment, other than amendments to
39
Schedules A and B, is subject to the approval of the Board of Trustees and the
Shareholders of the Fund as and to the extent required by the Act.
15. Effective Date; Term. This Agreement shall continue until July 31,
2003 and from year to year thereafter provided such continuance is specifically
approved at least annually by (i) the Fund's Board of Directors or (ii) a vote
of a "majority" (as defined in the Act) of the Fund's outstanding voting
securities, provided that in either event such continuance is also approved by a
majority of the Board of Directors who are not "interested persons" (as defined
in the Act) of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval. The aforesaid requirement
that continuance of this Agreement be "specifically approved at least annually"
shall be construed in a manner consistent with the Act and the Rules and
Regulations thereunder.
16. Termination. This Agreement may be terminated by any party, without
penalty, immediately upon written notice to the other parties in the event of a
breach of any provision thereof by a party so notified, or otherwise upon not
less than thirty (30) days' written notice to the Portfolio Manager in the case
of termination by the Fund or the Fund Manager, or ninety (90) days' written
notice to the Fund and the Fund Manager in the case of termination by the
Portfolio Manager, but any such termination shall not affect the status,
obligations or liabilities of any party hereto to the other parties.
17. Applicable Law. To the extent that state law is not preempted by the
provisions of any law of the United States heretofore or hereafter enacted, as
the same may be amended from time to time, this Agreement shall be administered,
construed and enforced according to the laws of the Commonwealth of
Massachusetts.
18. Severability. If any term or condition of this Agreement shall be
invalid or unenforceable to any extent or in any application, then the remainder
of this Agreement, and such term or condition except to such extent or in such
application, shall not be affected thereby, and each and every term and
condition of this Agreement shall be valid and enforced to the fullest extent
and in the broadest application permitted by law.
IN WITNESS WHEREOF, the parties have hereunto set their hands as of the date
first written above.
LIBERTY ALL-STAR GROWTH FUND, INC.
By: ________________________________________
Title:
LIBERTY ASSET MANAGEMENT COMPANY
By: ________________________________________
Title:
40
ACCEPTED:
TCW INVESTMENT MANAGEMENT COMPANY
By: ________________________________________
Title:
TCW INVESTMENT MANAGEMENT COMPANY
By: ________________________________________
Title:
SCHEDULES: A. Operational Procedures For Portfolio Transactions [omitted]
B. Record Keeping Requirements
C. Fee Schedule
41
LIBERTY ALL-STAR GROWTH FUND, INC.
PORTFOLIO MANAGEMENT AGREEMENT
SCHEDULE B
RECORDS TO BE MAINTAINED BY THE PORTFOLIO MANAGER
1. (Rule 31a-1(b)(5) and (6)) A record of each brokerage order, and all other
portfolio purchases and sales, given by the Portfolio Manager on behalf of the
Fund for, or in connection with, the purchase or sale of securities, whether
executed or unexecuted. Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any modifications or
cancellation thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time of receipt of a report of execution; and
F. The name of the person who placed the order on behalf of the Fund.
2. (Rule 31a-1(b)(9)) A record for each fiscal quarter, completed within ten
(10) days after the end of the quarter, showing specifically the basis or bases
upon which the allocation of orders for the purchase and sale of portfolio
securities to named brokers or dealers was effected, and the division of
brokerage commissions or other compensation on such purchase and sale orders.
Such record:
A. Shall include the consideration given to:
(i) The sale of shares of the Fund by brokers or dealers.
(ii) The supplying of services or benefits by brokers or dealers to:
(a) The Fund;
(b) The Manager (Liberty Asset Management Company);
(c) The Portfolio Manager; and
(d) Any person other than the foregoing.
(iii) Any other consideration other than the technical
qualifications of the brokers and dealers as such.
B. Shall show the nature of the services or benefits made available.
42
C. Shall describe in detail the application of any general or specific
formula or other determinant used in arriving at such allocation of purchase and
sale orders and such division of brokerage commissions or other compensation.
D. The name of the person responsible for making the determination of such
allocation and such division of brokerage commissions or other compensation.
3. (Rule 31a-1(b)(10)) A record in the form of an appropriate memorandum
identifying the person or persons, committees or groups authorizing the purchase
or sale of portfolio securities. Where an authorization is made by a committee
or group, a record shall be kept of the names of its members who participate in
the authorization. There shall be retained as part of this record: any
memorandum, recommendation or instruction supporting or authorizing the purchase
or sale of portfolio securities and such other information as is appropriate to
support the authorization.(1)
4. (Rule 31a-1(f)) Such accounts, books and other documents as are required to
be maintained by registered investment advisers by rule adopted under Section
204 of the Investment Advisers Act of 1940, to the extent such records are
necessary or appropriate to record the Portfolio Manager's transactions with the
Fund.
----------
(1) Such information might include: the current Form 10-K, annual and quarterly
reports, press releases, reports by analysts and from brokerage firms (including
their recommendation: i.e., buy, sell, hold) or any internal reports or
portfolio manager reviews.
43
SCHEDULE C
PORTFOLIO MANAGER FEE
For services provided to the Portfolio Manager Account, the Fund Manager
will pay to the Portfolio Manager, on or before the fifth business day of each
calendar quarter, a fee for the previous calendar quarter at the rate of:
- 0.10% (0.40% annually) of the Portfolio Manager's Percentage (as
defined below) of the average weekly net assets of the Fund up to
and including $300 million; and
- 0.09% (0.36% annually) of the Portfolio Manager's Percentage of the
average weekly net assets of the Fund exceeding $300 million.
Each quarterly payment set forth above shall be based on the average
weekly net assets during such previous calendar quarter. The fee for the period
from the date this Agreement becomes effective to the end of the calendar
quarter in which such effective date occurs will be prorated according to the
proportion that such period bears to the full quarterly period. Upon any
termination of this Agreement before the end of a calendar quarter, the fee for
the part of that calendar quarter during which this Agreement was in effect
shall be prorated according to the proportion that such period bears to the full
quarterly period and will be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to the Portfolio Manager,
the value of the Fund's net assets will be computed at the times and in the
manner specified in the Registration statement as from time to time in effect.
"Portfolio Manager's Percentage" means the percentage obtained by dividing
the average weekly net assets in the Portfolio Manager Account by the Fund's
average weekly net assets.
44
APPENDIX C
PORTFOLIO MANAGEMENT AGREEMENT (EQUITY FUND)
March 1, 2002
Schneider Capital Management Corporation
460 East Swedesford Road
Wayne, PA 19087
Re: Portfolio Management Agreement
Ladies and Gentlemen:
Liberty All-Star Equity Fund (the "Fund") is a diversified closed-end
investment company registered under the Investment Company Act of 1940 (the
"Act"), and is subject to the rules and regulations promulgated thereunder.
Liberty Asset Management Company (the "Fund Manager") evaluates and
recommends portfolio managers for the assets of the Fund, and is responsible for
the day-to-day corporate management and Fund administration of the Fund.
1. Employment as a Portfolio Manager. The Fund being duly authorized
hereby employs Schneider Capital Management Corporation (the "Portfolio
Manager") as a discretionary portfolio manager, on the terms and conditions set
forth herein, of that portion of the Fund's assets which the Fund Manager
determines to assign to the Portfolio Manager (those assets being referred to as
the "Portfolio Manager Account"). The Fund Manager may, from time to time,
allocate and reallocate the Fund's assets among the Portfolio Manager and the
other portfolio managers of the Fund's assets.
2. Acceptance of Employment; Standard of Performance. The Portfolio
Manager accepts its employment as a discretionary portfolio manager and agrees
to use its best professional judgment to make timely investment decisions for
the Portfolio Manager Account in accordance with the provisions of this
Agreement.
3. Portfolio Management Services of Portfolio Manager. In providing
portfolio management services to the Portfolio Manager Account, the Portfolio
Manager shall be subject to the investment objectives, policies and restrictions
of the Fund as set forth in its current Registration Statement under the Act, as
the same may be modified from time to time (the "Registration Statement"), and
the investment restrictions set forth in the Act and the Rules thereunder (as
and to the extent set forth in the Registration Statement or in other
documentation furnished to the Portfolio Manager by the Fund or the Fund
Manager), to the supervision and control of the Board of Trustees of the Fund,
and to instructions from the Fund Manager. The Portfolio Manager shall not,
without the prior approval of the Fund or the Fund Manager, effect any
transactions which would cause the Portfolio Manager Account, treated as a
separate fund, to be out of compliance with any of such restrictions or
policies.
4. Transaction Procedures. All portfolio transactions for the Portfolio
Manager Account will be consummated by payment to or delivery by the custodian
of the Fund (the "Custodian"), or such depositories or agents as may be
designated by the Custodian in writing, as custodian for the Fund, of all
45
cash and/or securities due to or from the Portfolio Manager Account, and the
Portfolio Manager shall not have possession or custody thereof or any
responsibility or liability with respect to such custody. The Portfolio Manager
shall advise and confirm in writing to the Custodian all investment orders for
the Portfolio Manager Account placed by it with brokers and dealers at the time
and in the manner set forth in Schedule A hereto (as amended from time to time
by the Fund Manager). The Fund shall issue to the Custodian such instructions as
may be appropriate in connection with the settlement of any transaction
initiated by the Portfolio Manager. The Fund shall be responsible for all
custodial arrangements and the payment of all custodial charges and fees, and,
upon giving proper instructions to the Custodian, the Portfolio Manager shall
have no responsibility or liability with respect to custodial arrangements or
the acts, omissions or other conduct of the Custodian.
5. Allocation of Brokerage. The Portfolio Manager shall have authority and
discretion to select brokers and dealers to execute portfolio transactions
initiated by the Portfolio Manager for the Portfolio Manager Account, and to
select the markets on or in which the transaction will be executed.
A. In doing so, the Portfolio Manager's primary responsibility shall
be to seek to obtain best net price and execution for the Fund. However,
this responsibility shall not obligate the Portfolio Manager to solicit
competitive bids for each transaction or to seek the lowest available
commission cost to the Fund, so long as the Portfolio Manager reasonably
believes that the broker or dealer selected by it can be expected to
obtain a "best execution" market price on the particular transaction and
determines in good faith that the commission cost is reasonable in
relation to the value of the brokerage and research services (as defined
in Section 28(e)(3) of the Securities Exchange Act of 1934) provided by
such broker or dealer to the Portfolio Manager viewed in terms of either
that particular transaction or of the Portfolio Manager's overall
responsibilities with respect to its clients, including the Fund, as to
which the Portfolio Manager exercises investment discretion,
notwithstanding that the Fund may not be the direct or exclusive
beneficiary of any such services or that another broker may be willing to
charge the Fund a lower commission on the particular transaction.
B. Subject to the requirements of paragraph A above, the Fund
Manager shall have the right to request that transactions giving rise to
brokerage commissions, in an amount to be agreed upon by the Fund Manager
and the Portfolio Manager, shall be executed by brokers and dealers that
provide brokerage or research services to the Fund Manager, or as to which
an on-going relationship will be of value to the Fund in the management of
its assets, which services and relationship may, but need not, be of
direct benefit to the Portfolio Manager Account. Notwithstanding any other
provision of this Agreement, the Portfolio Manager shall not be
responsible under paragraph A above with respect to transactions executed
through any such broker or dealer.
C. The Portfolio Manager shall not execute any portfolio
transactions for the Portfolio Manager Account with a broker or dealer
which is an "affiliated person" (as defined in the Act) of the Fund, the
Portfolio Manager or any other Portfolio Manager of the Fund without the
prior written approval of the Fund except in accordance with SEC Exemptive
Order No. 24288 dated February 15, 2000, a copy of which has been
furnished to the Portfolio Manager, and Rule 17e-1 procedures as approved
by the Fund's Trustees from time to time. The Fund Manager will provide
the Portfolio Manager with a list of brokers and dealers which are
"affiliated persons" of the Fund or its Portfolio Managers.
6. Proxies. The Portfolio Manager will vote all proxies solicited by or
with respect to the issuers of securities in which assets of the Portfolio
Manager Account may be invested from time to time in accordance with such
policies as shall be determined by the Fund Manager.
46
7. Fees for Services. The compensation of the Portfolio Manager for its
services under this Agreement shall be calculated and paid by the Fund Manager
in accordance with the attached Schedule C. Pursuant to the Fund Management
Agreement between the Fund and the Fund Manager, the Fund Manager is solely
responsible for the payment of fees to the Portfolio Manager, and the Portfolio
Manager agrees to seek payment of its fees solely from the Fund Manager.
8. Other Investment Activities of Portfolio Manager. The Fund acknowledges
that the Portfolio Manager or one or more of its affiliates has investment
responsibilities, renders investment advice to and performs other investment
advisory services for other individuals or entities ("Client Accounts"), and
that the Portfolio Manager, its affiliates or any of its or their directors,
officers, agents or employees may buy, sell or trade in any securities for its
or their respective accounts ("Affiliated Accounts"). Subject to the provisions
of paragraph 2 hereof, the Fund agrees that the Portfolio Manager or its
affiliates may give advice or exercise investment responsibility and take such
other action with respect to other Client Accounts and Affiliated Accounts which
may differ from the advice given or the timing or nature of action taken with
respect to the Portfolio Manager Account, provided that the Portfolio Manager
acts in good faith, and provided further, that it is the Portfolio Manager's
policy to allocate, within its reasonable discretion, investment opportunities
to the Portfolio Manager Account over a period of time on a fair and equitable
basis relative to the Client Accounts and the Affiliated Accounts, taking into
account the cash position and the investment objectives and policies of the Fund
and any specific investment restrictions applicable thereto. The Fund
acknowledges that one or more Client Accounts and Affiliated Accounts may at any
time hold, acquire, increase, decrease, dispose of or otherwise deal with
positions in investments in which the Portfolio Manager Account may have an
interest from time to time, whether in transactions which involve the Portfolio
Manager Account or otherwise. The Portfolio Manager shall have no obligation to
acquire for the Portfolio Manager Account a position in any investment which any
Client Account or Affiliated Account may acquire, and the Fund shall have no
first refusal, co-investment or other rights in respect of any such investment,
either for the Portfolio Manager Account or otherwise.
9. Limitation of Liability. The Portfolio Manager shall not be liable for
any action taken, omitted or suffered to be taken by it in its reasonable
judgment, in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement, or in
accordance with (or in the absence of) specific directions or instructions from
the Fund, provided, however, that such acts or omissions shall not have resulted
from the Portfolio Manager's willful misfeasance, bad faith or gross negligence,
a violation of the standard of care established by and applicable to the
Portfolio Manager in its actions under this Agreement or breach of its duty or
of its obligations hereunder (provided, however, that the foregoing shall not be
construed to protect the Portfolio Manager from liability in violation of
Section 17(i) of the Act).
10. Confidentiality. Subject to the duty of the Portfolio Manager and the
Fund to comply with applicable law, including any demand of any regulatory or
taxing authority having jurisdiction, the parties hereto shall treat as
confidential all information pertaining to the Portfolio Manager Account and the
actions of the Portfolio Manager and the Fund in respect thereof.
11. Assignment. This Agreement shall terminate automatically in the event
of its assignment, as that term is defined in Section 2(a)(4) of the Act. The
Portfolio Manager shall notify the Fund in writing sufficiently in advance of
any proposed change of control, as defined in Section 2(a)(9) of the Act, as
will enable the Fund to consider whether an assignment as defined in Section
2(a)(4) of the Act will occur, and whether to take the steps necessary to enter
into a new contract with the Portfolio Manager.
47
12. Representations, Warranties and Agreements of the Fund. The Fund
represents, warrants and agrees that:
A. The Portfolio Manager has been duly appointed to provide
investment services to the Portfolio Manager Account as contemplated
hereby.
B. The Fund will deliver to the Portfolio Manager a true and
complete copy of its then current registration statement as effective from
time to time and such other documents governing the investment of the Fund
Account and such other information as is necessary for the Portfolio
Manager to carry out its obligations under this Agreement.
13. Representations, Warranties and Agreements of the Portfolio Manager.
The Portfolio Manager represents, warrants and agrees that:
A. It is registered as an "Investment Adviser" under the Investment
Advisers Act of 1940 ("Advisers Act").
B. It will maintain, keep current and preserve on behalf of the
Fund, in the manner required or permitted by the Act and the Rules
thereunder, the records identified in Schedule B (as Schedule B may be
amended from time to time by the Fund Manager). The Portfolio Manager
agrees that such records are the property of the Fund, and will be
surrendered to the Fund promptly upon request.
C. It will adopt a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act. Within 45 days of the end
of each year while this Agreement is in effect, an officer or general
partner of the Portfolio Manager shall certify to the Fund that the
Portfolio Manager has complied with the requirements of Rule 17j-1 during
the previous year and that there has been no violation of its code of
ethics or, if such a violation has occurred, that appropriate action was
taken in response to such violation.
D. Upon request, the Portfolio Manager will promptly supply the Fund
with any information concerning the Portfolio Manager and its
stockholders, employees and affiliates which the Fund may reasonably
require in connection with the preparation of its Registration Statement
or amendments thereto, proxy material, reports and other documents
required to be filed under the Act, the Securities Act of 1933, or other
applicable securities laws.
E. Reference is hereby made to the Declaration of Trust dated August
20, 1986 establishing the Fund, a copy of which has been filed with the
Secretary of the Commonwealth of Massachusetts and elsewhere as required
by law, and to any and all amendments thereto so filed or hereafter filed.
The name Liberty All-Star Equity Fund refers to the Trustees under said
Declaration of Trust, as Trustees and not personally, and no Trustee,
shareholder, officer, agent or employee of the Fund shall be held to any
personal liability hereunder or in connection with the affairs of the
Fund, but only the trust estate under said Declaration of Trust is liable
under this Agreement. Without limiting the generality of the foregoing,
neither the Portfolio Manager nor any of its officers, directors,
partners, shareholders or employees shall, under any circumstances, have
recourse or cause or willingly permit recourse to be had directly or
indirectly to any personal, statutory, or other liability of any
shareholder, Trustee, officer, agent or employee of the Fund or of any
successor of the Fund, whether such liability now exists or is hereafter
incurred for claims against the trust estate, but shall look for payment
solely to said trust estate, or the assets of such successor of the Fund.
48
14. Amendment. This Agreement may be amended at any time, but only by
written agreement among the Portfolio Manager, the Fund Manager and the Fund,
which amendment, other than amendments to Schedules A and B, is subject to the
approval of the Board of Trustees and the Shareholders of the Fund as and to the
extent required by the Act.
15. Effective Date; Term. This Agreement shall continue until July 31,
2003 and from year to year thereafter provided such continuance is specifically
approved at least annually by (i) the Fund's Board of Trustees or (ii) a vote of
a "majority" (as defined in the Act) of the Fund's outstanding voting
securities, provided that in either event such continuance is also approved by a
majority of the Board of Trustees who are not "interested persons" (as defined
in the Act) of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval and provided further that, in
accordance with the conditions of the application of the Fund and Fund Manager
for an exemption from Section 15(a) of the Act (Rel. Nos. IC 19436 and 19491),
the continuance of this Agreement shall be subject to approval by such
"majority" of the Fund's outstanding voting securities at the regularly
scheduled annual meeting of shareholders of the Fund next following the date of
this Agreement. The aforesaid requirement that continuance of this Agreement be
"specifically approved at least annually" shall be construed in a manner
consistent with the Act and the Rules and Regulations thereunder.
16. Termination. This Agreement may be terminated by any party, without
penalty, immediately upon written notice to the other parties in the event of a
breach of any provision thereof by a party so notified, or otherwise upon not
less than thirty (30) days' written notice to the Portfolio Manager in the case
of termination by the Fund or the Fund Manager, or ninety (90) days' written
notice to the Fund and the Fund Manager in the case of termination by the
Portfolio Manager, but any such termination shall not affect the status,
obligations or liabilities of any party hereto to the other parties.
17. Applicable Law. To the extent that state law is not preempted by the
provisions of any law of the United States heretofore or hereafter enacted, as
the same may be amended from time to time, this Agreement shall be administered,
construed and enforced according to the laws of the Commonwealth of
Massachusetts.
18. Severability. If any term or condition of this Agreement shall be
invalid or unenforceable to any extent or in any application, then the remainder
of this Agreement, and such term or condition except to such extent or in such
application, shall not be affected thereby, and each and every term and
condition of this Agreement shall be valid and enforced to the fullest extent
and in the broadest application permitted by law.
LIBERTY ALL-STAR EQUITY FUND
By: ________________________________________
Name:
Title:
LIBERTY ASSET MANAGEMENT COMPANY
By: ________________________________________
Name:
Title:
49
ACCEPTED:
SCHNEIDER CAPITAL MANAGEMENT CORPORATION
By: ________________________________________
Name:
Title:
SCHNEIDER CAPITAL MANAGEMENT CORPORATION
By: ________________________________________
Name:
Title:
SCHEDULES: A. Operational Procedures For Portfolio Transactions [omitted]
B. Record Keeping Requirements
C. Fee Schedule
50
LIBERTY ALL-STAR EQUITY FUND
PORTFOLIO MANAGEMENT AGREEMENT
SCHEDULE B
RECORDS TO BE MAINTAINED BY THE PORTFOLIO MANAGER
1. (Rule 31a-1(b)(5) and (6)) A record of each brokerage order, and all other
portfolio purchases and sales, given by the Portfolio Manager on behalf of the
Fund for, or in connection with, the purchase or sale of securities, whether
executed or unexecuted. Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any modifications or
cancellation thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time of receipt of a report of execution; and
F. The name of the person who placed the order on behalf of the Fund.
2. (Rule 31a-1(b)(9)) A record for each fiscal quarter, completed within ten
(10) days after the end of the quarter, showing specifically the basis or bases
upon which the allocation of orders for the purchase and sale of portfolio
securities to named brokers or dealers was effected, and the division of
brokerage commissions or other compensation on such purchase and sale orders.
Such record:
A. Shall include the consideration given to:
(i) The sale of shares of the Fund by brokers or dealers.
(ii) The supplying of services or benefits by brokers or
dealers to:
(a) The Fund;
(b) The Fund Manager (Liberty Asset Management Company);
(c) The Portfolio Manager; and
(d) Any person other than the foregoing.
(iii) Any other consideration other than the technical
qualifications of the brokers and dealers as such.
B. Shall show the nature of the services or benefits made available.
51
C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at such allocation
of purchase and sale orders and such division of brokerage commissions or
other compensation.
D. The name of the person responsible for making the determination
of such allocation and such division of brokerage commissions or other
compensation.
3. (Rule 31a-1(b)(10)) A record in the form of an appropriate memorandum
identifying the person or persons, committees or groups authorizing the purchase
or sale of portfolio securities. Where an authorization is made by a committee
or group, a record shall be kept of the names of its members who participate in
the authorization. There shall be retained as part of this record: any
memorandum, recommendation or instruction supporting or authorizing the purchase
or sale of portfolio securities and such other information as is appropriate to
support the authorization.(1)
4. (Rule 31a-1(f)) Such accounts, books and other documents as are
required to be maintained by registered investment advisers by rule adopted
under Section 204 of the Investment Advisers Act of 1940, to the extent such
records are necessary or appropriate to record the Portfolio Manager's
transactions with the Fund.
----------
(1) Such information might include: the current Form 10-K, annual and quarterly
reports, press releases, reports by analysts and from brokerage firms (including
their recommendation: i.e., buy, sell, hold) or any internal reports or
portfolio manager reviews.
52
SCHEDULE C
PORTFOLIO MANAGER FEE
For services provided to the Fund Account, the Fund Manager will pay to
the Portfolio Manager, on or before the 10th day of each calendar month, a
monthly fee for the previous calendar month in the amount of 1/12(th) of: 0.40%
of the amount obtained by multiplying the Portfolio Manager's Percentage (as
hereinafter defined) times the Average Total Fund Net Assets (as hereinafter
defined) up to $400 million; 0.36% of the amount obtained by multiplying the
Portfolio Manager's Percentage times the Average Total Fund Net Assets exceeding
$400 million up to and including $800 million; 0.324% of the amount obtained by
multiplying the Portfolio Manager's Percentage times the Average Total Fund Net
Assets exceeding $800 million up to and including $1.2 billion; 0.292% of the
amount obtained by multiplying the Portfolio Manager's Percentage times the
Average Total Fund Net Assets exceeding $1.2 billion.
"Portfolio Manager's Percentage" means the percentage obtained by dividing
(i) the average of the net asset values of the Fund Account as of the close of
the last business day of the New York Stock Exchange in each calendar week
during the preceding calendar month, by (ii) the Average Total Fund Net Assets.
"AverageTotal Fund Net Assets" means the average of the net asset values
of the Fund as a whole as of the close of the last business day of the New York
Stock Exchange in each calendar week during the preceding calendar month.
The fee shall be pro-rated for any month during which this Agreement is in
effect for only a portion of the month.
53
LIBERTY ALL-STAR EQUITY FUND
PROXY SOLICITED BY THE BOARD OF TRUSTEES OF LIBERTY ALL-STAR EQUITY FUND
PROXY FOR 2002 ANNUAL MEETING OF SHAREHOLDERS
The undersigned, revoking previous proxies, hereby appoints Ellen Harrington,
Kevin S. Jacobs, Russell L. Kane, Robert R. Leveille, William R. Parmentier, Jr.
and Vincent P. Pietropaolo, or any one or more of them, attorneys, with power of
substitution, to vote all shares of Liberty All-Star Equity Fund (the "Fund")
which the undersigned is entitled to vote at the 2002 Annual Meeting of the Fund
to be held in Conference Room A, 2nd Floor, One Financial Center, Boston,
Massachusetts on April 30, 2002 at 9:00 a.m. and at any adjournments thereof.
All powers may be exercised by a majority of said proxy holders or substitutes
voting or acting or, if only one votes or acts, then by that one. The
undersigned directs said proxy holders to vote as specified upon the proposals
shown below, each of which is described in the proxy statement for the Meeting,
receipt of which is acknowledged.
SAID PROXIES WILL VOTE THIS PROXY AS DIRECTED, OR IF NO DIRECTION IS INDICATED,
FOR ALL PROPOSALS.
--------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
PLEASE DO NOT FOLD, STAPLE OR MUTILATE CARD.
--------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED?
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
--------------------------------------------------------------------------------
LIBERTY ALL-STAR EQUITY FUND
--------------------------------------------------------------------------------
Mark box at right if an address change has been noted on the reverse side of
this card.
[ ]
CONTROL NUMBER:
RECORD DATE SHARES:
Please sign exactly as your name(s) appear(s) above. Corporate proxies should be
signed by an authorized officer.
-----------------------
Date
-------------------------------------
Shareholder sign here
-------------------------------------
Co-owner sign here
1. To elect one Trustee of the Fund (Item 1.a. of Notice).
James E. Grinnell
For Nominee Withhold
[ ] [ ]
2. To approve the Fund's Portfolio Management Agreement with TCW Investment
Management Company (Item 2.a. of Notice).
For Against Abstain
[ ] [ ] [ ]
3. To approve the Fund's Portfolio Management Agreement with Schneider
Capital Management (Item 2.c. of Notice).
For Against Abstain
[ ] [ ] [ ]
4. To ratify the selection by the Board of Trustees of PricewaterhouseCoopers
LLP as the Fund's independent accountants for the year ending December 31,
2002 (Item 3.a. of Notice).
For Against Abstain
[ ] [ ] [ ]
5. In their discretion, upon such other business as may properly come before
the Meeting.
LIBERTY ALL-STAR GROWTH FUND, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF
LIBERTY ALL-STAR GROWTH FUND, INC.
PROXY FOR 2002 ANNUAL MEETING OF SHAREHOLDERS
The undersigned, revoking previous proxies, hereby appoints Ellen Harrington,
Kevin S. Jacobs, Russell L. Kane, Robert R. Leveille, William R. Parmentier, Jr.
and Vincent P. Pietropaolo, or any one or more of them, attorneys, with power of
substitution, to vote all shares of Liberty All-Star Growth Fund, Inc. (the
"Fund") which the undersigned is entitled to vote at the 2002 Annual Meeting of
the Fund to be held in Conference Room A, 2nd Floor, One Financial Center,
Boston, Massachusetts on April 30, 2002 at 10:00 a.m. and at any adjournments
thereof. All powers may be exercised by a majority of said proxy holders or
substitutes voting or acting or, if only one votes or acts, then by that one.
The undersigned directs said proxy holders to vote as specified upon the
proposals shown below, each of which is described in the proxy statement for the
Meeting, receipt of which is acknowledged.
SAID PROXIES WILL VOTE THIS PROXY AS DIRECTED, OR IF NO DIRECTION IS INDICATED,
FOR ALL PROPOSALS.
--------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
PLEASE DO NOT FOLD, STAPLE OR MUTILATE CARD.
--------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED?
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
--------------------------------------------------------------------------------
LIBERTY ALL-STAR GROWTH FUND, INC.
--------------------------------------------------------------------------------
Mark box at right if an address change has been noted on the reverse side of
this card.
[ ]
CONTROL NUMBER:
RECORD DATE SHARES:
Please sign exactly as your name(s) appear(s) above. Corporate proxies should be
signed by an authorized officer.
-----------------------
Date
-------------------------------------
Shareholder sign here
-------------------------------------
Co-owner sign here
1. To elect two Directors of the Fund (Item 1.b. of Notice)
(01) Robert J. Birnbaum
(02) William E. Mayer
For All Nominees Withhold For All Except
[ ] [ ] [ ]
NOTE: If you do not wish your shares voted "FOR" one of the nominees, mark the
"FOR ALL EXCEPT" box and strike a line through the name of the nominee. Your
shares will be voted "For" the other nominee.
2. To approve the Fund's Portfolio Management Agreement with TCW Investment
Management Company (Item 2.b. of Notice).
For Against Abstain
[ ] [ ] [ ]
3. To ratify the selection by the Board of Directors of
PricewaterhouseCoopers LLP as the Fund's independent accountants for the
year ending December 31, 2002 (Item 3.b. of Notice).
For Against Abstain
[ ] [ ] [ ]
4. In their discretion, upon such other business as may properly come before
the Meeting.