[Federal Register Volume 62, Number 30 (Thursday, February 13, 1997)]
[Notices]
[Pages 6817-6819]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-3543]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-22498; 812-10430]
Liberty All-Star Equity Fund, et al.; Notice of Application
February 6, 1997.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for exemption under the Investment
Company Act of 1940 (the ``Act'').
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Applicants: Liberty All-Star Equity Fund (``All-Star'') and Liberty
Asset Management Company (``LAMCO'').
RELEVANT ACT SECTIONS: Order requested under section 6(c) for an
exemption from section 15(a) of the Act.
SUMMARY OF APPLICANT: Applicants request an order amending an existing
order, which amended a prior order, that let the Fund's investment
adviser hire and fire sub-advisers and enter new sub-advisory
agreements resulting from an ``assignment,'' as defined in the Act, and
delay shareholder approval until the next annual shareholder meeting.
Among other things, the existing order is subject to a requirement that
the new subadvisory agreement will affect no more than 25% of the
Fund's assets. The amended order would eliminate this condition.
FILING DATES: The application was filed on November 14, 1996, and
amended on February 3, 1997.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the SEC's Secretary and serving
applicants with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on March 3, 1997,
and should be accompanied by proof of service on applicants, in the
form of an affidavit or, for lawyers, a certificate of service. Hearing
requests should state the nature of the writer's interest, the reason
for the request, and the issues contested. Persons who wish to be
notified of a hearing may request notification by writing to the SEC's
Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, DC
20549. Applicants: Federal Reserve Plaza, Boston, MA 02210.
FOR FURTHER INFORMATION CONTACT:
Christine Y. Greenless, Senior Counsel, at (202) 942-0581 or Mary Kay
Frech, Branch Chief, at (202) 942-0564 (Office of Investment Company
Regulation, Division of Investment Management).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application
[[Page 6818]]
may be obtained for a fee at the SEC's Public Reference Branch.
Applicants' Representations
1. All-Star is a closed-end diversified management investment
company. LAMCO, a registered investment adviser, is an indirect wholly-
owned subsidiary of Liberty Financial Companies, Inc. (``LFC''). LFC is
an indirect majority-owned subsidiary of Liberty Mutual Insurance
Company.
2. All-Star employs a multi-manager methodology of portfolio
management. It allocates its investment portfolio on an approximately
equal basis among several independent investment management firms
(``Sub-Advisors''), currently five in number, selected and recommended
from time to time by LAMCO based on specific criteria, inducing a
sufficient diversity and breadth of investment styles. None of the Sub-
Advisors has nay affiliation with All-Star or LAMCO other than as Sub-
Advisor.
3. Applicants received an order that permits All-Star and LAMCO to
enter into new subadvisory agreements incident to a change in Sub-
Advisors or the addition of a Sub-Advisor recommended by LAMCO and to
delay shareholder approval of such agreements until All-Star's next
annual meeting of shareholders (the ``Prior Order'').\1\ Subsequently,
applicants received an order amending the Prior Order to extend the
relief granted therein so that, in the event of a sale of assets,
merger, or transfer of voting securities of a Sub-Advisor or other
transaction constituting an ``assignment'' (as defined in section
2(a)(4) of the Act), of All-Star's subadvisory agreement with such Sub-
Advisor, All-Star, LAMCO, and such Sub-Advisor or its successor could
enter into a new subadvisory agreement and delay shareholder approval
of such agreement until All-Star's next annual meeting of shareholders
(``the Existing Order'').\2\ Applicants reaffirm all of the
representations made in the original applications, as amended, for the
Prior Order and the Existing Order.
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\1\ Investment Company Act Release Nos. 19436 (April 27, 1993)
(notice) and 19491 (May 25, 1993) (order).
\2\ Investment Company Act Release Nos. 20347 (June 8, 1994)
(notice) and 20355 (July 6, 1994) (order).
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4. Among other things, the Existing Order is conditioned upon the
requirement that the new subadvisory agreement involved will, when
entered into, affect no more than approximately 25% of All-Star's
assets. Applicants seek to amend the Existing Order to eliminate such
restriction.
Applicants' Legal Analysis
1. Section 15(a) of the Act makes it unlawful for any person to act
as an investment adviser to a registered investment company except
pursuant to a written contract, whether with such registered company or
with an investment adviser of such registered company, which has been
approved by the majority vote of the outstanding voting securities of
such registered company.
2. Applicants state that All-Star's multi-manager methodology of
portfolio management is based on the premise that most investment
management firms consistently employ a distinctive investment style
that 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 investment performance under certain market conditions, but
less successful performance under other conditions. All-star's multi-
manager methodology, by allocating its portfolio among several Sub-
Advisors employing different investment styles, seeks to achieve more
consistent and less volatile performance over the long term then if an
single investment style was employed throughout the entire period. The
Sub-Advisors recommended by LAMCO represent a blending of different
investment styles, which, in its opinion, is appropriate to All-Star's
investment objective, and which is sufficiently broad so that, insofar
as All-Star's investment objective permits, at least one of such styles
can reasonably be expected to be in market favor in all reasonable
foreseeable market conditions.
3. LAMCO believes that the investment styles of certain investment
management firms may result in more volatile performance than those of
other firms. Accordingly, it believes that the objectives of reducing
volatility and providing a blending of different investment styles
appropriate for All-Star's investment objectives may be better served
by allocating more than an equal portion of All-Star's assets to a Sub-
Advisor whose investment style is expected to result in less volatile
performance than those of the other Sub-Advisors, and allocating the
remaining assets among the other Sub-Advisors (not necessarily on an
equal basis). The relative allocations among the Sub-Advisors, once
established, would be maintained through rebalancings at approximately
the same levels until the next change or addition of a Sub-Advisor.
4. Applicants submit that, except for the fact that any order
granting the requested relief will not contain the Existing Order's
requirement that the new subadvisory agreement involved will, when
entered into, affect no more than approximately 25% of All-Star's
assets, each of the factors that provided the basis for the granting of
the Prior Order and the Existing Order would continue to apply.
5. Section 6(c) of the Act authorizes the SEC to exempt persons or
transactions from the provisions of the Act to the extent that such
exemptions are necessary or appropriate in the public interest and
consistent with the protection of investors and the purposes fairly
intended by the policy and provisions of the Act. Applicants submit
that the requested amendment to the exemption from section 15(a) of the
Act granted by the Existing Order would be consistent with the
standards set forth in section 6(c) of the Act and would be in the best
interests of All-Star and its shareholders.
Applicants' Conditions
Applicants agree that any order granting the requested relief shall
be subject to the following conditions:
1. The new sub-advisory agreement will be submitted for
ratification and approval to the vote of All-Star's shareholders no
later than at the regularly scheduled annual meeting of shareholders of
All-Star next following the effective date of the new sub-advisory
agreement, and its continuance after such meeting will be conditioned
on approval by a majority vote (as defined in section 2(a) (42) of the
Act) of such shareholders.
2. All-Star will continue to hold annual meetings of its
shareholders, whether or not required to do so by the rules of the New
York Stock Exchange, Inc. or otherwise.
3. The trustees of All-Star, in addition to approving the new sub-
advisory agreement in accordance with the requirements of section 15(c)
of the Act, will specifically determine that entering into a sub-
advisory agreement in advance of the next regular annual meeting of the
shareholders of All-Star, and without prior shareholder approval is in
furtherance of All-Star's multi-manager methodology, and is in the best
interests of All-Star and its shareholders.
4. The new Sub-Advisor will have no affiliation with All-Star or
LAMCO other than as Sub-Advisor, and will have no duties or
responsibilities with respect to All-Star beyond the investment
management of the portion of All-Star's portfolio assets allocated to
[[Page 6819]]
it by LAMCO from time to time and related record keeping and reporting.
5. The new sub-advisory agreement will provide for a sub-advisory
fee no higher than that provided in All-Star's existing sub-advisory
agreements and, except for the provisions relating to shareholder
approval referred to in condition 1 above, will be on substantially the
same other terms and conditions as such existing agreements. In the
event that the new sub-advisory agreement provides for sub-advisory
fees at rates less than those provided in the existing agreements, the
difference will be passed on to All-Star and its shareholders through a
corresponding voluntary reduction in the fund management fees payable
by All-Star to LAMCO.
6. The appointment of the new or successor Sub-Advisor will be
announced by press release promptly following the trustees' action
referred to in condition 3 above, and a notice of the new sub-advisory
agreement, together with a description of the new or successor sub-
Advisor, will be included in All-Star's next report to shareholders.
7. In the case of a new subadvisory agreement with an existing Sub-
Advisor or its successor following an ``assignment,'' as defined in
section 2(a)(4) of the Act and the rules thereunder, off All-Star's
sub-advisory agreement with that Sub-Advisor, LAMCO or the Sub-Advisor
(or its successor) will pay the incremental cost of including the
proposal to approve or disapprove the new sub-advisory agreement in the
proxy material for the next annual meeting of All-Star Growth's
shareholders.
8. LAMCO will provide overall supervisory responsibility for the
general management and investment of All-Star's assets, subject to All-
Star's investment objectives and policies and any directions of All-
Star's trustees. In particular, LAMCO will: (a) Provide overall
investment programs and strategies for All-Star; (b) recommend to All-
Star's trustees investment management firms for appointment or
replacement as All-Star Sub-Advisors; (c) allocate and reallocate All-
Star's portfolio assets among the Sub-Advisors; and (d) monitor and
evaluate the investment performance of the Sub-Advisors, including
their compliance with All Star's investment objectives, policies, and
restrictions.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-3543 Filed 2-12-97; 8:45 am]
BILLING CODE 8010-01-M
