PORTFOLIO MANAGEMENT AGREEMENT
July 1, 1996
▇.▇. ▇▇▇▇▇▇ Investment Management Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: Portfolio Management Agreement
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 Fund and is responsible for the day-to-day
corporate management and administration of the Fund.
l. Employment as a Portfolio Manager. The Fund being duly authorized hereby
employs ▇.▇. ▇▇▇▇▇▇ Investment Management Inc.(the "Portfolio Manager") as a
discretionary portfolio manager, on the terms and conditions set forth herein,
of those assets of the Fund which the Fund Manager determines to assign to the
Portfolio Manager (those assets being referred to as the "Fund Account"). The
Fund Manager may, from time to time, make additions to and withdrawals from the
Fund Account.
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 Fund
Account in accordance with the provisions of this Agreement.
3. Portfolio Management Services of Portfolio Manager. In providing
portfolio management services to the Fund 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), and the investment restrictions set forth in
the Act and the Rules thereunder (as and to the extent set forth in such
Prospectus or in other documentation furnished to the Portfolio Manager by the
Fund or the Fund Manager), to the supervision and control of the Trustees of the
Fund (the "Trustees"), 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 Fund 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 Fund Account
will be consummated by payment to or delivery by Boston Safe Deposit and Trust
Company or such other custodian of the assets of the Fund as the Fund may
appoint from time to time (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 Fund 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 Fund 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). The Fund shall issue to the
Custodian such instructions as may be appropriate in connection with the
settlement of any transaction initiated by the Portfolio Manager. The Fund shall
be responsible for all custodial arrangements and the payment of all custodial
charges and fees, and, upon giving proper instructions to the Custodian, the
Portfolio Manager shall have no responsibility or liability with respect to
custodial arrangements or the acts, omissions or other conduct of the Custodian.
5. Allocation of Brokerage. The Portfolio Manager shall have authority and
discretion to select brokers and dealers to execute portfolio transactions
initiated by the Portfolio Manager, 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 and the Portfolio
Manager's policies, the Fund Manager shall have the right to request that
transactions giving rise to brokerage commissions shall be executed by
brokers and dealers, to be agreed upon between the Fund Manager and the
Portfolio Manager, that provide brokerage or research services to the Fund
or 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 Fund 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 Fund 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 will provide the Portfolio Manager with a list of
brokers and dealers which are "affiliated persons" of the Fund or its
Portfolio Managers.
6. Proxies. The Fund will vote all proxies solicited by or with respect to
the issuers of securities in which assets of the Fund Account may be invested
from time to time. At the request of the Fund, the Portfolio Manager shall
provide the Fund with its recommendations as to the voting of such proxies.
7. Fees for Services. The compensation of the Portfolio Manager for its
services under this Agreement shall be calculated and paid by the Fund Manager
in accordance with the attached Schedule C. Pursuant to the Fund Management
Agreement between the Fund and the Fund Manager, the Fund Manager is solely
responsible for the payment of fees to the Portfolio Manager, and the Portfolio
Manager agrees to seek payment of its fees solely from the Fund Manager.
8. Other Investment Activities of Portfolio Manager. The Fund acknowledges
that the Portfolio Manager or one or more of its affiliates has investment
responsibilities, renders investment advice to and performs other investment
advisory services for other individuals or entities ("Client Accounts"), and
that the Portfolio Manager, its affiliates or any of its or their directors,
officers, agents or employees may buy, sell or trade in any securities for its
or their respective accounts ("Affiliated Accounts"). Subject to the provisions
of paragraph 2 hereof, the Fund agrees that the Portfolio Manager or its
affiliates may give advice or exercise investment responsibility and take such
other action with respect to other Client Accounts and Affiliated Accounts which
may differ from the advice given or the timing or nature of action taken with
respect to the Fund 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 Fund
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 Fund Account may have an interest from time to time, whether in
transactions which involve the Fund Account or otherwise. The Portfolio Manager
shall have no obligation to acquire for the Fund Account a position in any
investment which any Client Account or Affiliated Account may acquire, and the
Fund shall have no first refusal, coinvestment or other rights in respect of any
such investment, either for the Fund 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 Fund 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 Fund Account as contemplated hereby.
B. The Fund will deliver to the Portfolio Manager a true and complete
copy of its then current registration statement as effective from time to
time and such other documents governing the investment of the Fund Account
and such other information as is necessary for the Portfolio Manager to
carry out its obligations under this Agreement.
13. Representations, Warranties and Agreements of the Portfolio Manager.
The Portfolio Manager represents, warrants and agrees that:
A. It is registered as an "Investment Adviser" under the Investment
Advisers Act of 1940 ("Advisers Act").
B. It will maintain, keep current and preserve on behalf
of the Fund, in the manner required or permitted by the Act and the Rules
thereunder, the records identified in Schedule B (as Schedule B may be
amended from time to time). 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 l7j-l under the 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 l7j-l during the previous year
and that there has been no material violation of its code of ethics
relating to its domestic equity accounts 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, 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 Trustees and the Shareholders of the Fund as and to the extent
required by the Act.
15. Effective Date; Term. This Agreement shall continue in effect until
July 31, 1997 and shall continue in effect 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 the 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 the conditions of the application of the Fund and
the Fund Manager for an exemption from Section 15(a) of the Act (Rel. Nos. IC
19436 and 19491), the continuance of this Agreement shall be subject to approval
by such "majority" vote of the Fund's outstanding voting securities at the
regularly scheduled annual meeting of the shareholders of the Fund next
following the date of this Agreement. The aforesaid requirement that continuance
of this Agreement be "specifically approved at least annually" shall be
construed in a manner consistent with the Act and the Rules and Regulations
thereunder.
16. Termination. This Agreement may be terminated by any party, without
penalty, immediately upon written notice to the other parties in the event of a
breach of any provision thereof by a party so notified, or otherwise upon not
less than thirty (30) days' written notice to the Portfolio Manager in the case
of termination by the Fund or the Fund Manager, or ninety (90) days' written
notice to the Fund and the Fund Manager in the case of termination by the
Portfolio Manager, but any such termination shall not affect the status,
obligations or liabilities of any party hereto to the other parties.
17. Applicable Law. To the extent that state law is not preempted by the
provisions of any law of the United States heretofore or hereafter enacted, as
the same may be amended from time to time, this Agreement shall be administered,
construed and enforced according to the laws of the Commonwealth of
Massachusetts. upon all parties.
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, andeach and every term and condition
of this Agreement shall be valid and enforced to the fullest extent and in the
broadest application permitted by law.
LIBERTY ALL-STAR EQUITY FUND
By: ____________________________
Title: ___________________________
LIBERTY ASSET MANAGEMENT COMPANY
By: ____________________________
Title: ___________________________
ACCEPTED:
▇.▇. ▇▇▇▇▇▇ INVESTMENT MANAGEMENT INC.
By: _____________________________
Title: ____________________________
SCHEDULES: A. Operational Procedures
B. Record Keeping Requirements
C. Fee Schedule
[Schedule A omitted]
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 or 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-a(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.*
4. (Rule 31a-1(f)). Such accounts, books and other documents as a 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.
---------------
* 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.
LIBERTY ALL-STAR EQUITY FUND
Portfolio Management Agreement
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 1/12th 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 $400,000,000, plus 0.36% of the amount obtained by multiplying
the Portfolio Manager's Percentage times the Average Total Fund Net Assets in
excess of $400,000,000. "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.