[Federal Register Volume 59, Number 114 (Wednesday, June 15, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-14476]
[[Page Unknown]]
[Federal Register: June 15, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20347; 812-8956]
Liberty All-Star Equity Fund, et al.; Notice of Application
June 8, 1994.
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''), on behalf of themselves and
present and future sub-advisers of All-Star.
Relevant Act Sections: Conditional order required under section 6(c)
for an exemption from section 15(a) of the Act.
Summary of Application: Applicants request an order amending an
existing order that permits LAMCO to hire and fire sub-advisers for
All-Star, and delay shareholder approval of the subadvisory contracts
until All-Star's next annual meeting of shareholders. The amended order
would extend that relief so that, in the event of an ``assignment,'' as
that term is defined in section 2(a) (4) of the Act, of a subadvisory
agreement, the parties could enter into a new subadvisory agreement and
delay shareholder approval until All-Star's next annual meeting of
shareholders.
Filing DATE: The application was filed on April 25, 1994.
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 July 5, 1994,
and should be accompanied by proof of service on the 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, NW., Washington, DC 20549.
Applicants, Federal Reserve Plaza, Boston, Massachusetts, 02210.
FOR FURTHER INFORMATION CONTACT:
Fran Pollack-Matz, Senior Attorney, at (202) 942-0570, or C. David
Messman, 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 may be obtained for a fee at the
SEC's Public Reference Branch.
Applications' Representations
1. All-Star is a closed-end diversified management investment
company. LAMCO is a registered investment adviser and an indirect
wholly-owned subsidiary of Liberty Financial Companies, Inc. (``LFC'').
LFC is an indirect wholly-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-Advisers'') selected and recommended by LAMCO based on specific
criteria, including a sufficient diversity and breadth of investment
styles. None of the Sub-Advisers have any affiliation with All-Star or
LAMCO other than as Sub-Adviser.
3. All-Star and LAMCO received an order that permits LAMCO to hire
and fire Sub-Advisers for All-Star and to delay shareholder approval of
such subadvisory agreements until All-Star's next annual meeting of
shareholders (``Order'').\1\ Applicants reaffirm all of the
representations made in the original application, as amended, for the
Order.
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\1\Investment Company Act Release Nos. 19436 (April 27, 1993)
(notice) and 19491 (May 25, 1993) (order).
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4. All-Star and LAMCO seek to amend the Order so that, in addition
to the relief granted by the Order, in the event of a sale of assets,
merger or transfer of voting securities of a Sub-Adviser or other
transaction constituting an ``assignment,'' as that term is defined in
section 2(a)(4) of the Act, of All-Star's subadvisory agreement with
that Sub-Adviser, All-Star, LAMCO, and that Sub-Adviser 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.
Applicants' Legal Analysis
1. Section 15(a) 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 vote of a majority of the outstanding voting securities of such
registered company and which precisely describes all compensation to be
paid thereunder.
2. Section 15(a) (4) also requires that the investment advisory
contract provide, in substance, for its automatic termination in the
event of its assignment. ``Assignment'' is defined in section 2 (a) (4)
to include any direct or indirect transfer of a contract by the
assignor, or of a controlling block of the assignor's outstanding
voting securities by a security holder of the assignor.
3. Rule 15a-4 permits an investment adviser to an investment
company to act under an agreement not approved by shareholders for up
to 120 days after the terminations of an investment advisory agreement
by an event (other than by an assignment by an investment adviser in
connection with which such investment adviser, or a controlling person
thereof, directly or indirectly receives money or other benefit)
described in paragraphs (3) and (4) of section 15(a) of the Act or by
failure to renew such contract. Rule 15a-4 does not provide adequate
relief to All-Star because All-Star is seeking to delay a shareholder
vote in the event that a change in a Sub-Adviser occurs as the result
of an ``assignment'' in which an investment adviser (i.e., the Sub-
Adviser) receives an economic benefit.
4. Applicants assert that because of the lack of affiliation
between LAMCO and the Sub-Advisers (unlike conventionally structured
single-manager investment companies), LAMCO has no interest other than
the efficient and effective functioning of All-Star's multi-manager
methodology and the enhancement of All-Star's investment performance
when recommending the replacement or addition of a Sub-Adviser.
Applicants represent that neither LAMCO nor any of its affiliates will
be parties to the acquisition or other transaction giving rise to the
termination and assignment of the subadvisory agreement or receive any
economic benefit in connection with such transaction.
5. Applicants believe that the SEC excluded assignments in which
the investment adviser receives an economic benefit from the exemption
provided by rule 15a-4 because such assignments are reasonably
foreseeable. Applicants state that LAMCO has no affiliation with All-
Star's Sub-Advisers and has no control or influence over the timing of
possible transfers of controlling interests in them or other
transactions that may result in technical assignment and termination of
their subadvisory agreements with All-Star.
6. Section 6(c) authorizes the Commission to exempt persons or
transactions from the provisions of the Act to the extent that such
exemptions are appropriate in the public interest and consistent with
the protection of investors and the policies and purposes fairly
intended by the policies 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. Each new subadvisory 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 agreement, and
its continuance after such meeting will be conditioned on approval by
the required majority vote 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
subadvisory agreement in accordance with the requirements of section
15(c) of the Act, will specifically determine that entering into a
subadvisory agreement with the new or additional Sub-Adviser in advance
of the next regular annual meeting of shareholders of All-Star and
without prior shareholders approval is in furtherance of All-Star's
multi-manager methodology and is in the best interest of All-Star and
its shareholders.
4. The new subadvisory agreement involved will, when entered into,
affect no more than 25% of All-Star's assets.
5. The new Sub-Adviser will have no affiliation with All-Star or
LAMCO other than as Sub-Adviser, 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
it by LAMCO from time to time and related record keeping and reporting.
6. The new subadvisory agreement will provide for a subadvisory fee
no higher than that provided in All-Star's existing subadvisory
agreements, and, except for the provisions relating to shareholder
approval referred to in condition 1, will be on substantially the same
other terms and conditions as such existing agreements, and, if the new
subadvisory agreement provides for subadvisory fees at rates less than
those provided in the existing subadvisory agreements, the difference
will be passed on to All-Star and its shareholders through a
corresponding voluntary reduction in the fund management fee payable by
All-Star to LAMCO.
7. The appointment of the new Sub-Adviser will be announced by
press release promptly following the trustees' action referred to in
condition 3 above, and a notice of the new subadvisory agreement,
together with a description of the new Sub-Adviser, will be included in
All-Star's next report to shareholders.
8. LAMCO will provide general management and administrative
services to All-Star, including overall supervisory responsibility for
the general management and investment of all of All-Star's securities
portfolio subject to All-Star's investment objectives and policies and
any directions of All-Star's Trustees. In particular, LAMCO will (i)
provide overall investment programs and strategies for All-Star, (ii)
recommend to All-Star's Trustees investment management firms for
appointment or replacement as All-Star Sub-Advisers, (iii) allocate and
reallocate All-Star's portfolio assets among the Sub-Advisers, and (iv)
monitor and evaluate the investment performance of the Sub-Advisers,
including their compliance with All-Star's investment objectives,
policies and restrictions.
9. LAMCO or the Sub-Adviser (or successor Sub-Adviser) will pay the
incremental cost of including the proposal to approve or disapprove the
new subadvisory agreement in the proxy material for the next annual
meeting of All-Star's shareholders.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-14476 Filed 6-14-94; 8:45 am]
BILLING CODE 8010-01-M
