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 02111-2621
(617) 772-3626
------------------------
NOTICE OF ANNUAL MEETINGS OF SHAREHOLDERS
APRIL 16, 2003
------------------------
To the Shareholders of the Funds:
NOTICE IS HEREBY GIVEN that the 2003 Annual Meetings of Shareholders of the
Funds will be held in Conference Room A, 2nd Floor, at One Financial Center,
Boston, Massachusetts, on April 16, 2003, at 9:00 a.m. Boston time (Equity Fund)
and 10:00 a.m. Boston time (Growth Fund). The purpose of the Meetings is to
consider and act upon the following matters:
1. To elect Trustees and Directors of the Funds listed below:
a. Two Trustees (Equity Fund)
b. Three Directors (Growth Fund)
2. To approve a new Portfolio Management Agreement for the Equity Fund with
Boston Partners Asset Management, L.P. following a change in control.
3. To transact such other business as may properly come before the Meeting
or any adjournments thereof.
The Boards of Trustees/Directors have fixed the close of business on
January 31, 2003, as the record date for the determination of the shareholders
of the Funds entitled to notice of, and to vote at, the Meetings 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 MEETINGS. WE URGE YOU, WHETHER OR
NOT YOU EXPECT TO ATTEND THE MEETINGS IN PERSON, TO INDICATE YOUR VOTING
INSTRUCTIONS ON THE ENCLOSED PROXY, DATE AND SIGN IT, AND RETURN IT IN THE
ENVELOPE PROVIDED, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. WE ASK
YOUR COOPERATION IN MAILING YOUR PROXY PROMPTLY.
February 28, 2003
LIBERTY ALL-STAR EQUITY FUND (EQUITY FUND)
LIBERTY ALL-STAR GROWTH FUND, INC. (GROWTH FUND)
(COLLECTIVELY, THE FUNDS)
------------------------
PROXY STATEMENT
ANNUAL MEETINGS OF SHAREHOLDERS
APRIL 16, 2003
------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Boards of Trustees/Directors of the Funds to be used at
the Annual Meetings of Shareholders of the Funds to be held in Conference
Room A, 2nd Floor, on April 16, 2003, at 9:00 a.m. Boston time (Equity Fund) and
10:00 a.m. Boston time (Growth Fund) at One Financial Center, Boston,
Massachusetts, and at any adjournments thereof (such meetings and any
adjournments being referred to as the "Meeting").
The solicitation of proxies for use at the Meeting is being made primarily
by the mailing on or about February 28, 2003, of this Proxy Statement and the
accompanying proxy. Supplementary solicitations may be made by mail, telephone
or personal interview by officers and Trustees/Directors of the Funds and
officers and employees of the Funds' investment advisor, Liberty Asset
Management Company (LAMCO) and/or its affiliates. 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 OR 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 2006 (or special meeting in lieu
thereof) with the exception of Mr. Benning who will hold office until final
adjournment of the Growth Fund's Annual Meeting of Shareholders for the year
2005 (or special meeting in lieu thereof):
Equity Fund
-------------------------------
John A. Benning Served as Trustee since October, 2002
William E. Mayer Served as Trustee since April, 1998
Growth Fund
-------------------------------
John A. Benning Served as Director since October, 2002
James E. Grinnell Served as Director since May, 1994
John J. Neuhauser Served as Director since April, 1998
If elected, each of Messrs. Benning, Grinnell, Neuhauser and Mayer has
consented to serve as Trustee or Director following the Meeting and each is
expected to be able to do so. If any of Messrs. Benning, Grinnell, Neuhauser or
Mayer are unable or unwilling to do so at the time of the
1
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).
TRUSTEES/DIRECTORS AND OFFICERS
The names, addresses and ages of the Trustees/Directors and principal
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.
TRUSTEES/DIRECTORS
EQUITY FUND GROWTH FUND NUMBER OF
LENGTH OF LENGTH OF PORTFOLIOS IN FUND
SERVICE AND SERVICE AND COMPLEX OVERSEEN
NAME/AGE AND TERM OF TERM OF PRINCIPAL OCCUPATION(S) BY OTHER
ADDRESS(1) OFFICE OFFICE DURING PAST FIVE YEARS TRUSTEE/DIRECTOR(2) DIRECTORSHIPS HELD
------------ ------------ ------------ -------------------------- ------------------- ------------------------
DISINTERESTED
TRUSTEES/DIRECTORS
John A. Benning Oct., 2002 Oct., 2002 Retired since December, 2 TT International USA
(Age 68) 1999; Senior Vice (investment company) and
President, General Counsel ICI Mutual Insurance
and Secretary, Liberty Company (D&O/E&O
Financial Companies, Inc. Insurance)
(July, 1985 to December,
1999); Vice President,
Secretary and Director,
Liberty Asset Management
Company (August, 1985 to
December, 1999)
James E. Grinnell August, 1986 May, 1994 Private investor since 2 None
(Age 73) 2005 2003 November, 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 August, 1986 May, 1994 Private investor since 94 None
(Age 66) 2004 2004 August, 1987 (formerly
Chairman and Chief
Executive Officer, U.S.
Plywood Corporation
(building products
manufacturer))
2
EQUITY FUND GROWTH FUND NUMBER OF
LENGTH OF LENGTH OF PORTFOLIOS IN FUND
SERVICE AND SERVICE AND COMPLEX OVERSEEN
NAME/AGE AND TERM OF TERM OF PRINCIPAL OCCUPATION(S) BY OTHER
ADDRESS(1) OFFICE OFFICE DURING PAST FIVE YEARS TRUSTEE/DIRECTOR(2) DIRECTORSHIPS HELD
------------ ------------ ------------ -------------------------- ------------------- ------------------------
DISINTERESTED
TRUSTEES/DIRECTORS
John J. Neuhauser April, 1998 April, 1998 Academic Vice President 94 Saucony, Inc. (athletic
(Age 58) 2004 2003 and Dean of Faculties footwear) and SkillSoft
since August, 1999, Boston Corp. (E-Learning)
College (formerly Dean,
Boston College School of
Management from September,
1977 to September, 1999)
INTERESTED
TRUSTEE/DIRECTOR
William E. Mayer April, 1998 Dec., 1998 Managing Partner, Park 94 Lee Enterprises (print
(Age 62)(3) 2003 2005 Avenue Equity Partners media); WR Hambrecht +
(private equity) since Co. (financial service
February, 1999 (formerly provider) and First
Founding Partner, Health (healthcare)
Development Capital LLC
from November 1996 to
February, 1999; Dean and
Professor, College of
Business and Management,
University of Maryland
from October, 1992 to
November, 1996)
------------------------------
(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 02111-2621.
(2) At December 31, 2002, Messrs. Lowry, Mayer and Neuhauser also served as
trustees of the Liberty family of funds (Liberty Funds) which consisted of
80 open-end and 14 closed-end management investment company portfolios (the
Liberty Fund Complex) managed by Colonial Management Associates, Inc., Stein
Roe & Farnham Incorporated (Stein Roe) or other affiliates of LAMCO.
(3) "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.
PRINCIPAL OFFICERS
Each officer listed below serves as an officer of each Fund.
PRINCIPAL OCCUPATION(S)
NAME/AGE AND ADDRESS(1) POSITION WITH FUNDS DURING PAST FIVE YEARS
----------------------- ------------------------------------ -------------------------------
William R. Parmentier, Jr. President and Chief Executive President since June, 1998 and
(Age 50) Officer Chief Investment Officer since
May, 1995, Senior Vice
President (May, 1995 to June,
1998), LAMCO
Mark T. Haley, CFA Vice President Vice President--Investments
(Age 38) since January, 1999, Director
of Investment Analysis
(December, 1996 to December,
1998), Investment Analyst
(January, 1994 to November,
1996), LAMCO
3
PRINCIPAL OCCUPATION(S)
NAME/AGE AND ADDRESS(1) POSITION WITH FUNDS DURING PAST FIVE YEARS
----------------------- ------------------------------------ -------------------------------
J. Kevin Connaughton Treasurer Treasurer of the Liberty Funds
(Age 38) 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);
Treasurer of the Galaxy Funds
since September, 2002;
(formerly Vice President of
Colonial from February, 1998 to
October, 2000; Senior Tax
Manager, Coopers & Lybrand, LLP
from April, 1996 to January,
1998)
Vicki L. Benjamin Chief Accounting Officer and Controller of the Liberty Funds
(Age 41) Controller and the Funds since June, 2002;
Chief Accounting Officer of the
Liberty Funds and the Funds
since June, 2001; Controller
and Chief Accounting Officer of
the Galaxy Funds since
September, 2002 (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 Secretary Secretary of the Liberty Funds
(Age 57) and of the Funds since
February, 2002; General Counsel
of Columbia Management Group
since December, 2001; Senior
Vice President since November,
1996 and Assistant General
Counsel since September, 2002
of Fleet National Bank
(formerly Senior Vice President
and Group Senior Counsel, Fleet
National Bank from November,
1996 to September, 2002)
------------------------
(1) The address of each officer is One Financial Center, Boston, MA 02111-2621.
Mr. Parmentier has served as President and Chief Executive Officer since
April 29, 1999; Mr. Haley was elected as a Vice President on April 29, 1999.
Mr. Connaughton was elected as Treasurer on December 13, 2000, Ms. Benjamin was
elected Controller on June 18, 2002 and Chief Accounting Officer on June 20,
2001, and Ms. Loewenberg was elected Secretary on February 13, 2002.
4
Mr. Connaughton and Msses. Benjamin and Loewenberg hold the same offices with
the Liberty Funds Complex. Each officer of the Funds serves at the pleasure of
the Boards of Trustees/Directors.
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.
During 2002, the full Board of Trustees/Directors of the Funds held five
meetings (four scheduled meetings and one special meeting), 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. Neither Fund has a nominating or compensation
committee.
In discharging its oversight responsibility as to the audit process, the
Audit Committees discussed with management the process for preparation and
review of the Funds' audited financial statements for the most recently
completed fiscal year. Based on its review and discussion, the Audit Committees
recommended to the Boards of Trustees/Directors that the audited financial
statements for each Fund be included in that Fund's Annual Report to
shareholders. The Audit Committees also reviewed the non-audit services provided
by the independent accountants of the Funds. The independent accountants,
PricewaterhouseCoopers LLP (PWC), discussed with the Audit Committees the
matters required to be discussed by Statement on Auditing Standards No. 61. In
addition, the Audit Committees obtained from PWC 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 Committees also discussed with PWC any
relationships that may impact its 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 Committees' structure, duties and powers, and methods of
operation. Each member of the Audit Committees 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 Committees is financially literate and has prior accounting experience or
related financial management expertise. The Funds' Audit Committee members for
2002 were Messrs. Birnbaum, Grinnell, Lowry and Neuhauser. All members of each
Audit Committee meet the independence standards of the NYSE listing standards.
FEES PAID TO INDEPENDENT ACCOUNTANTS
1. AUDIT FEES
For the audit of each Fund's annual financial statements for the fiscal year
ended December 31, 2002, which are included in each Fund's annual report to
shareholders for that fiscal year, the Equity Fund and the Growth Fund paid or
accrued $31,400 and $22,400, respectively, to PWC.
5
2. FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
For the fiscal year ended December 31, 2002, the Funds, LAMCO and the
entities controlling, controlled by or under common control with LAMCO that
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, 2002, the Equity Fund and the Growth
Fund paid or accrued aggregate fees of $10,200 and $6,200, respectively, for tax
and other services provided by PWC. In addition, LAMCO and the entities
controlling, controlled by or under common control with LAMCO paid or accrued
aggregate fees of approximately $754,950 for all other services provided by PWC.
Each of the Audit Committee's members has determined that the provision of these
services 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 that 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, 2002,
the compensation paid by each Fund to each Trustee/Director, and the total
compensation paid by both Funds to each Trustee/Director for service on the
Boards of Trustees/Directors of the Funds. The Funds have no bonus, profit
sharing or retirement plans.
COMPENSATION COMPENSATION TOTAL COMPENSATION
NAME FROM THE EQUITY FUND FROM THE GROWTH FUND FROM THE FUNDS(1)
---- -------------------- -------------------- ------------------
John A. Benning........................ $ 9,328.80 $2,977.30 $12,306.10
Robert J. Birnbaum(1).................. $18,737.91 $6,067.67 $24,805.58
James E. Grinnell...................... $18,737.91 $6,067.67 $24,805.58
Richard W. Lowry....................... $18,737.91 $6,067.67 $24,805.58
William E. Mayer....................... $18,737.91 $6,067.67 $24,805.58
John J. Neuhauser...................... $18,737.91 $6,067.67 $24,805.58
------------------------
(1) Total compensation from the Funds exceeded the aggregate meeting and
retainer fees of $125,000 per annum because of Mr. Benning's election to the
Boards of Trustees/Directors in October, 2002. Mr. Birnbaum retired from the
Boards of Trustees/Directors effective February, 2003.
6
TRUSTEES'/DIRECTORS' FEES
The following table shows, for the calendar year ended December 31, 2002,
the compensation received from the Liberty Fund Complex by the
Trustees/Directors. The Liberty Fund Complex has no bonus, profit sharing or
retirement plans.
TOTAL COMPENSATION FROM
NAME LIBERTY FUND COMPLEX
---- -----------------------
James E. Grinnell(1)........................... $ 24,806
Richard W. Lowry............................... $124,806
William E. Mayer............................... $127,806
John J. Neuhauser.............................. $124,932
------------------------
(1) 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 Financial Corporation (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 Liberty Financial Companies, Inc.
(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.
SHARE OWNERSHIP
The following table shows the dollar range of equity securities beneficially
owned by each Trustee/Director as of January 31, 2003 (i) in each of the Funds
and (ii) in all Liberty Funds overseen by the Trustee/Director in the Liberty
Fund Complex.
AGGREGATE DOLLAR
RANGE OF EQUITY
SECURITIES OWNED
DOLLAR RANGE OF DOLLAR RANGE OF IN ALL FUNDS
EQUITY SECURITIES EQUITY SECURITIES OVERSEEN BY TRUSTEE
OWNED IN THE OWNED IN THE IN LIBERTY FUND
NAME OF TRUSTEE/DIRECTOR EQUITY FUND GROWTH FUND COMPLEX
------------------------ ----------------- ----------------- -------------------
DISINTERESTED TRUSTEES/DIRECTORS
John A. Benning......................... $50,001-$100,000 $1-$10,000 $50,001-$100,000
Robert J. Birnbaum(1)................... $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(2)..................... Over $100,000 $10,001-$50,000 Over $100,000
John J. Neuhauser(2).................... $1-$10,000 $1-$10,000 Over $100,000
INTERESTED TRUSTEES/DIRECTORS
William E. Mayer(2)..................... $1-$10,000 $1-$10,000 $50,001-$100,000
------------------------
(1) Mr. Birnbaum retired from the Boards of Trustees/Directors effective
February, 2003.
(2) Trustee/Director also serves as a Trustee of Liberty Fund Complex.
As of December 31, 2002, no disinterested Trustee/Director or any of their
immediate family members owned beneficially or of record any class of securities
of 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.
7
During the calendar years ended December 31, 2001 and December 31, 2002, Mr.
Lowry had a material interest in a trust (approximately $2.9 million as of
December 31, 2002) 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, 2001 and 2002, 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. Currently, the number of
Trustees of the Equity Fund is five and since there are three currently serving
Trustees who are not subject to election at the Meeting, this means that the two
persons who receive the highest number of votes will be elected. Currently, the
number of Directors of the Growth Fund is five and since there are two currently
serving Directors who are not subject to election at this Meeting, this means
that the three persons who receive the highest number of votes will be elected.
PROPOSAL 2. TO APPROVE A PORTFOLIO MANAGEMENT AGREEMENT
FOR THE EQUITY FUND
BACKGROUND--THE MULTI-MANAGER METHODOLOGY
The Equity Fund allocates its 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,
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 Equity Fund's multi-manager methodology is
based on the premise that most investment management firms consistently employ a
distinct investment style which causes them to emphasize stocks with particular
characteristics, and that, because of changing investor preferences, any given
investment style will move into and out of market favor and will result in
better performance under certain market conditions but poorer performance under
other conditions. The Equity Fund's multi-manager methodology seeks to achieve
more consistent and less volatile performance over the long term than if a
single Portfolio Manager were employed.
The Portfolio Managers recommended by LAMCO represent a blending of
different styles which, in LAMCO's opinion, is appropriate for the Equity 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 Equity Fund's
Portfolio Managers and from time to time recommends changes in the Portfolio
Managers. Such recommendations could be based on factors such as a change in a
Portfolio Manager's investment style or a Portfolio Manager's divergence from
the investment style for which it was selected, changes deemed by 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 Equity Fund's Portfolio Managers. Portfolio Manager
changes, as well as rebalancings of the Equity Fund's portfolio among the
Portfolio Managers, may result in portfolio turnover in excess of what would
otherwise be
8
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 Equity Fund and LAMCO by
the Securities and Exchange Commission (SEC), the Equity Fund 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 Equity Fund's agreements with its other
Portfolio Managers, and that its continuance is subject to approval by
shareholders at the Equity Fund's regularly scheduled annual meeting next
following the date of the portfolio management agreement with the new or
additional Portfolio Manager. The terms of the exemptive order also allow the
Equity Fund to enter into a new portfolio management agreement in the event of a
sale of assets of a Portfolio Manager. Accordingly, the Equity Fund's portfolio
management agreement with Boston Partners Asset Management, L.P. is being
submitted for shareholder approval at the Meeting.
NEW PORTFOLIO MANAGEMENT AGREEMENT -- BOSTON PARTNERS ASSET MANAGEMENT, L.P.
Robeco USA, Inc. (Robeco USA), a subsidiary of Robeco Nederland, B.V., which
is a subsidiary of Robeco Groep N.V., which is a subsidiary of Robobank
Nederland, acquired partnership interests of Boston Partners Asset Management,
L.P. (Boston Partners), one of the Equity Fund's Portfolio Managers.
Consummation of the transaction constitutes a change of control of Boston
Partners and an automatic termination of the portfolio management agreement
(Prior Agreement) between LAMCO and Boston Partners. On August 13, 2002, LAMCO
recommended, and the Board of Trustees of the Equity Fund, approved a new
portfolio management agreement. On November 1, 2001, the Equity Fund's
shareholders approved the Prior Agreement when the asset management business of
Liberty Financial Companies, Inc., including LAMCO, was acquired by Fleet
National Bank. The Equity Fund's new portfolio management agreement is identical
in substance to the portfolio management agreement in effect prior to the change
in control.
Boston Partners is located at 28 State Street, Boston, MA 02109. Established
in 1995, Boston Partners is an institutional asset manager providing services
primarily to corporations, state and local pension funds, foundations,
endowments and registered investment companies. Robeco USA acquired 58.37% of
the partnership interests of Boston Partners on September 18, 2002 and an
additional 1.63% of partnership interest on February 10, 2003. Upon the initial
acquisition, Robeco USA became the Class B general partner of Boston Partners.
The general partner, Boston Partners Asset Management LLC, prior to the
acquisition, will continue as Class A general partner of Boston Partners. Robeco
USA is located at c/o Weiss, Peck & Greer, L.L.C., One New York Plaza, New York,
NY 10004; Robeco Nederland, B.V. is located at Croeselaan 18 3521 CB Utrecht,
The Netherlands; Robeco Groep, N.V. is located at Coolsingel 120, NI 3001 AG
Rotterdam, The Netherlands and Robobank Nederland is located at Croeselaan 18,
P.O. Box 17100, 3500 HG, Utrecht, The Netherlands. Under the terms of the
agreement between Robeco USA and Boston Partners, Robeco USA has been given a
call option to purchase the remaining 40% of the partnership interests of Boston
Partners in 2006. In the event that Robeco USA does not exercise its call
option, Boston Partners has a put option to sell to Robeco USA the remaining 40%
of the partnership interests of Boston Partners in 2006. Upon exercise of the
call or put option by either of Robeco USA or Boston Partners and upon final
payment of the purchase price for the remaining 40% of partnership interests,
Boston Partners Asset Management LLC will withdraw from the partnership as a
general partner and Robeco USA will become the sole general partner of Boston
Partners. Boston Partners has stated its intention to maintain the personnel,
processes, investment strategy and operations of Boston Partners, which will
continue to operate under the Boston Partners brand name. As of December 31,
2002, Boston Partners and Boston Partners and its affiliates had approximately
$8.4 billion and $103 billion, respectively, in assets under management or
committed to management.
9
Reference is made to MANAGEMENT--PORTFOLIO TRANSACTIONS AND BROKERAGE below
for the direction by the Funds' Portfolio Managers, including Boston Partners,
of Fund portfolio transactions to broker-dealers that make certain research
services available to LAMCO.
TERMS OF PORTFOLIO MANAGEMENT AGREEMENT WITH BOSTON PARTNERS
The portfolio management agreement with Boston Partners 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. A copy of the new portfolio management agreement with Boston Partners,
which was approved by the Fund's Board of Trustees, is attached to this proxy
statement as APPENDIX A.
Under the Equity Fund's portfolio management agreements (including the
agreement with Boston Partners), 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 management fees LAMCO 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, 2002, Boston Partners received $816,551 for its portfolio
management services to the Equity Fund. As of December 31, 2002, the Equity
Fund's net assets were $868.5 million, of which $181.6 million was managed by
Boston Partners.
If approved by shareholders at the Meeting, the portfolio management
agreement with Boston Partners will remain in effect until July 31, 2003 and
will continue thereafter until terminated by the Equity Fund or the Portfolio
Manager, provided that 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.
REQUIRED VOTE
Approval of the portfolio management agreement with Boston Partners 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.
10
In the event that the shareholders of the Equity Fund fail to approve the
portfolio management agreement with Boston Partners, the portfolio management
agreement will terminate and LAMCO will cause the portfolio assets under
management by Boston Partners 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 Boston Partners 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 BOSTON PARTNERS.
OTHER BUSINESS
The Boards of Trustees/Directors know 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 Boards that proxies that do not contain
specific instructions to the contrary will be voted on such matters in
accordance with the judgment of the persons designated therein as proxies.
MANAGEMENT
LAMCO, One Financial Center, Boston, MA 02111, is the Funds' manager. LAMCO
is a wholly owned subsidiary of Columbia Management Group, Inc., (Columbia)
which is a wholly owned subsidiary of Fleet National Bank, a national banking
association, which in turn is a wholly owned subsidiary of FleetBoston, a U.S.
financial holding company. Columbia is located at One Financial Center, Boston,
MA 02111 and each of Fleet National Bank and 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, Joseph R. Palombo, Chief Operating Officer of Columbia, and Roger
Sayler, an Executive Vice President of Columbia. Pursuant to its Fund Management
Agreements with the Funds, LAMCO implements and operates the Funds'
multi-manager methodology as described under PROPOSAL 2 above and has overall
supervisory responsibility for the general management and investment of the
Funds' assets, subject to the Funds' investment objectives and policies and any
directions of the Trustees/Directors. LAMCO recommends to the Boards of
Trustees/Directors the 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 is responsible under its 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 the
administrative services provided to the Equity Fund, the 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 the
administrative services provided to the Growth Fund, the 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
11
exceeding $300 million. The fees for administrative services are in addition to
the Funds' management fees paid to LAMCO.
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 objectives 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.
The names and addresses of the Funds' current Portfolio Managers, including
Boston Partners, are as follows:
EQUITY FUND
Boston Partners Asset Management, L.P.
28 State Street
Boston, MA 02109
Mastrapasqua Asset Management, Inc.
814 Church Street, Suite 600
Nashville, TN 37203
Oppenheimer Capital L.L.C.
1345 Avenue of the Americas
New York, NY 10105-4800
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 that Portfolio Manager
for the portion of a Fund's portfolio assets allocated to it, and to select the
markets in which such transactions are to be executed. The portfolio
12
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 the same 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
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. LAMCO
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 to 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 that 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 of
1940. During 2002, the Funds had no Fund portfolio transactions placed with a
Portfolio Manager or its affiliate.
13
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
Each proxy solicited by the Boards of Trustees/Directors which is properly
executed and returned in time to be voted at the Meeting will be voted at the
Meeting in accordance with the instructions on the proxy. If no specification is
made on a proxy, it will be voted FOR the election as Trustee of the Equity Fund
of the nominees named under PROPOSAL 1, FOR the election as Director of the
Growth Fund of the nominees named under PROPOSAL 1 and FOR approval of the
Equity Fund's Portfolio Management Agreement with Boston Partners referred to
under PROPOSAL 2. 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.
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 Agreement with Boston Partners
requires the affirmative vote of a "majority of the outstanding voting
securities" of the Equity Fund, as defined under PROPOSAL 2 -- Required Vote.
Only shareholders of record of a Fund on January 31, 2003 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 the shares; and (iii) the broker or nominee
does not have discretionary voting power on a particular matter.
All shareholders of record of a Fund on January 31, 2003, 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 JANUARY 31, 2003
---------------- ------------- ------------------ -----------------
EQUITY FUND
Liberty Mutual Insurance Company and Liberty 7,263,996 5.97% 121,627,547
Mutual Fire Insurance Company
GROWTH FUND
N/A N/A N/A 20,618,488
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 of
14
the Equity Fund, 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 of 1934, 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 that 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 beneficial
ownership and reports of changes in beneficial 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. To the Funds' knowledge,
based solely on a review of the copies of such reports furnished to the Funds
and on representations made, all Section 16 reporting persons complied with all
Section 16(a) filing requirements applicable to them.
OTHER INFORMATION
THE FUNDS' ANNUAL REPORTS ARE ENCLOSED WITH THIS PROXY STATEMENT. ANY
SUBSEQUENT QUARTERLY REPORTS OF THE FUNDS WERE PREVIOUSLY SENT TO SHAREHOLDERS.
YOU CAN OBTAIN A COPY OF THESE REPORTS WITHOUT CHARGE BY WRITING TO LAMCO AT ONE
FINANCIAL CENTER, BOSTON, MA 02111-2621, OR BY CALLING 1-800-241-1850.
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
Funds' 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 2004 Annual Meeting) must be received by the Funds on or
before October 24, 2003. 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 02111-2621.
15
APPENDIX A
PORTFOLIO MANAGEMENT AGREEMENT
September 18, 2002
Boston Partners Asset Management, L.P.
28 State Street
Boston, MA 02109
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 Boston Partners Asset Management, L.P. ("Portfolio Manager") as a
discretionary portfolio manager, on the terms and conditions set forth herein,
of that portion of the Fund's assets which the Fund Manager determines to assign
to the Portfolio Manager (those assets being referred to as the "Portfolio
Manager Account"). The Fund Manager may, from time to time, allocate and
reallocate the Fund's assets among the Portfolio Manager and the other portfolio
managers of the Fund's assets.
2. ACCEPTANCE OF EMPLOYMENT; STANDARD OF PERFORMANCE. The Portfolio
Manager accepts its employment as a discretionary portfolio manager and agrees
to use its best professional judgment to make timely investment decisions for
the Portfolio Manager Account in accordance with the provisions of this
Agreement.
3. PORTFOLIO MANAGEMENT SERVICES OF PORTFOLIO MANAGER. In providing
portfolio management services to the Portfolio Manager Account, the Portfolio
Manager shall be subject to the investment objectives, policies and restrictions
of the Fund as set forth in its current Registration Statement under the Act, as
the same may be modified from time to time (the "Registration Statement"), and
the investment restrictions set forth in the Act and the Rules thereunder (as
and to the extent set forth in the Registration Statement or in other
documentation furnished to the Portfolio Manager by the Fund or the Fund
Manager), to the supervision and control of the Board of Trustees of the Fund,
and to instructions from the Fund Manager. The Portfolio Manager shall not,
without the prior approval of the Fund or the Fund Manager, effect any
transactions which would cause the Portfolio Manager Account, treated as a
separate fund, to be out of compliance with any of such restrictions or
policies.
4. TRANSACTION PROCEDURES. All portfolio transactions for the Portfolio
Manager Account will be consummated by payment to or delivery by the custodian
of the Fund (the "Custodian"), or such depositories or agents as may be
designated by the Custodian in writing, as custodian for the Fund, of all cash
and/or securities due to or from the Portfolio Manager Account, and the
Portfolio Manager shall not have possession or custody thereof or any
responsibility or liability with respect to such custody. The Portfolio Manager
shall advise and confirm in writing to the Custodian all investment orders for
the Portfolio Manager Account placed by it with brokers and dealers at the time
and in the manner set forth in Schedule A hereto (as amended from time to time
by the Fund Manager). The Fund shall issue to the Custodian such instructions as
may be appropriate in connection with the settlement of any transaction
initiated by the Portfolio Manager. The Fund shall be responsible for all
custodial arrangements and the payment of all custodial charges and fees, and,
upon giving proper
A-1
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.
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
A-2
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:
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").
A-3
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.
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.
A-4
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:
ACCEPTED:
BOSTON PARTNERS ASSET MANAGEMENT, L.P.
BY: BPAM (GP), LLC, THE SOLE GENERAL PARTNER
BY: BPAM HOLDING COMPANY, ITS SOLE MEMBER
By:
-------------------------------------------
Name:
Title:
SCHEDULES: A. Operational Procedures For Portfolio Transactions [omitted]
B. Record Keeping Requirements
C. Fee Schedule
A-5
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.
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)
A-6
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.
A-7
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.
A-8
LIBERTY ALL-STAR EQUITY FUND
PROXY SOLICITED BY THE BOARD OF TRUSTEES OF LIBERTY ALL-STAR EQUITY FUND
PROXY FOR 2003 ANNUAL MEETING OF SHAREHOLDERS
The undersigned, revoking previous proxies, hereby appoints Heidi A. Hoefler,
Russell L. Kane, Jean S. Loewenberg, William R. Parmentier, Jr., Vincent P.
Pietropaolo, Joseph T. Turo and Rosemary D. Van Antwerp, 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 2003 Annual Meeting of the Fund to be held in Conference Room A, 2nd Floor,
One Financial Center, Boston, Massachusetts on April 16, 2003 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
----------------------------------------------------
[LOGO] LIBERTY ALL-STAR EQUITY FUND
----------------------------------------------------
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 Trustees of the Fund (Item 1.a. of Notice).
(01) John A. Benning
(02) William E. Mayer
For Nominee 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 a new Portfolio Management Agreement with Boston Partners Asset
Management, Inc. following a change in control (Item 2. of Notice).
For Against Abstain
[ ] [ ] [ ]
3. In their discretion, upon such other business as may properly come before the
Meeting.
Mark box at right if an address change
has been noted on the reverse side
of this card. [ ]
LIBERTY ALL-STAR GROWTH FUND, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF LIBERTY ALL-STAR GROWTH FUND, INC.
PROXY FOR 2003 ANNUAL MEETING OF SHAREHOLDERS
The undersigned, revoking previous proxies, hereby appoints Heidi A. Hoefler,
Russell L. Kane, Jean S. Loewenberg, William R. Parmentier, Jr., Vincent P.
Pietropaolo, Joseph T. Turo and Rosemary D. Van Antwerp, 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 2003 Annual Meeting of the Fund to be held in Conference Room A, 2nd
Floor, One Financial Center, Boston, Massachusetts on April 16, 2003 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
----------------------------------------------------
[LOGO] LIBERTY ALL-STAR GROWTH FUND, INC.
----------------------------------------------------
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 three Directors of the Fund (Item 1.b. of Notice).
(01) John A. Benning (02) James E. Grinnell
(03) John J. Neuhauser
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. In their discretion, upon such other business as may properly come before the
Meeting.
Mark box at right if an address change
has been noted on the reverse side
of this card. [ ]