[Federal Register: March 5, 2007 (Volume 72, Number 42)]
[Notices]
[Page 9792-9794]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05mr07-83]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 27741; 812-13327]
Liberty All-Star Equity Fund, et al.; Notice of Application
February 27, 2007.
AGENCY: Securities and Exchange Commission.
ACTION: Notice of application for an order under section 6(c) of the
Investment Company Act of 1940 (the ``Act'') for an exemption from
section 15(a) of the Act.
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SUMMARY OF APPLICATION: Applicants request an order to permit the two
applicant registered closed-end investment companies to delay
shareholder vote on agreements with sub-advisers (``Portfolio
Managers,'' and the agreements, ``Portfolio Management Agreements'')
until the next annual shareholders meeting. The order would supersede
prior orders (``Prior Orders'').\1\
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\1\ Previous orders received by the Equity Fund (as defined
below) are: Liberty All-Star Equity Fund, et al., Investment Company
Act Release Nos. 19436 (April 26, 1993) (notice) and 19491 (May 25,
1993) (order); Liberty All-Star Equity Fund, et al., Investment
Company Act Release Nos. 20347 (June 8, 1994) (notice) and 20385
(July 6, 1994) (order); and Liberty All-Star Equity Fund, et al.,
Investment Company Act Release Nos. 22498 (February 6, 1997)
(notice) and 22543 (March 4, 1997) (order). Previous orders received
by the Growth Fund (as defined below) are: The Charles Allmon Trust,
Inc., et al., Investment Company Act Release Nos. 20772 (December
15, 1994) (notice) and 20824 (January 10, 1995) (order); and Liberty
All-Star Growth Fund, Inc., et al., Investment Company Act Release
Nos. 22499 (February 6, 1997) (notice) and 22542 (March 4, 1997)
(order).
APPLICANTS: Liberty All-Star Equity Fund (the ``Equity Fund'') and
Liberty All-Star Growth Fund, Inc. (the ``Growth Fund'') (collectively,
the ``Funds''), and ALPS Advisers, Inc. (``ALPS Advisers'').
[[Page 9793]]
FILING DATES: The application was filed on September 18, 2006, and
amended on January 24, 2007. Applicants have agreed to file a final
amendment during the notice period, the substance of which is reflected
in this notice.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing by writing to the Commission's Secretary
and serving applicants with a copy of the request, personally or by
mail. Hearing requests should be received by the Commission by 5:30
p.m. on March 26, 2007, 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 Commission's Secretary.
ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street,
NE., Washington, DC 20549-1090. Applicants, 1625 Broadway, Suite 2200,
Denver, CO 80202.
FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior
Counsel, at (202) 551-6879, or Nadya Roytblat, Assistant Director, at
(202) 551-6821 (Division of Investment Management, Office of Investment
Company Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
Commission's Public Reference Desk, 100 F Street, NE., Washington, DC
20549-0102 (telephone (202) 551-5850).
Applicants' Representations
1. The Equity Fund, a Massachusetts business trust, and the Growth
Fund, a Maryland corporation, are closed-end management investment
companies registered under the Act. Each Fund's shares are currently
listed and traded on the New York Stock Exchange. Each Fund holds an
annual meeting of its shareholders, usually in April. ALPS Advisers, a
Colorado corporation, serves as the investment adviser to the Funds and
is registered as an investment adviser under the Investment Advisers
Act of 1940 (the ``Advisers Act''). ALPS Advisers is a wholly owned
subsidiary of ALPS Holdings, Inc. (``ALPS Holdings''), which in turn is
majority owned by an institutional limited partnership controlled by
Lovell Minnick Partners LLC.
2. On December 15, 2006, ALPS Advisers became the Funds' investment
adviser. Previously, Banc of America Investment Advisers, Inc.
(``BAIA''), formerly known as Liberty Asset Management Company, served
as the Funds' investment adviser and administrator. Pursuant to an
asset purchase agreement dated September 7, 2006, among BAIA, ALPS
Advisers and ALPS Holdings, ALPS Advisers entered into fund management
agreements (``Fund Management Agreements'') with the Funds. At a
special meeting of shareholders held on November 21, 2006, Fund
shareholders approved the Fund Management Agreements with ALPS
Advisers, new Portfolio Management Agreements with each Portfolio
Manager and a policy permitting the Funds and ALPS Advisers to enter
into Portfolio Management Agreements in advance of shareholder
approval.
3. Under the terms of the Fund Management Agreements, ALPS Advisers
is responsible for the general management and investment of the Funds,
subject to the authority of the Funds' boards of trustees/directors
(each a ``Board'' and collectively, the ``Boards''). For providing
services to the Funds, ALPS Advisers receives an investment advisory
fee based on the average daily net assets of the Funds.
4. ALPS Advisers, on behalf of the Funds, has entered into
Portfolio Management Agreements with multiple Portfolio Managers. The
Equity Fund currently has five Portfolio Managers and the Growth Fund
currently has three Portfolio Managers. Each Portfolio Manager is and
each new Portfolio Manager will be an investment adviser that is
registered under the Advisers Act. None of the existing Portfolio
Managers is and no new Portfolio Manager will be an affiliated person
of the Funds or ALPS Advisers other than as Portfolio Manager. ALPS
Advisers will evaluate, allocate assets to, and oversee the Portfolio
Managers, and make recommendations about their hiring, termination and
replacement to the Board. ALPS Advisers will recommend Portfolio
Managers based on a number of factors discussed in the application used
to evaluate their skills in managing assets pursuant to particular
investment objectives. ALPS Advisers will compensate the Portfolio
Managers out of the fee paid to ALPS Advisers by the Funds.
5. Applicants request an order to permit ALPS Advisers, subject to
Board approval, to change or add Portfolio Managers, or continue the
services of a Portfolio Manager following an assignment of its
Portfolio Management Agreement, and delay shareholder approval until
the next annual shareholders meeting. Applicants state that the Prior
Orders had granted BAIA, as investment adviser to the Funds,
substantially identical relief.
Applicants' Legal Analysis
1. Section 15(a) of the Act provides, in relevant part, that it is
unlawful for any person to act as an investment adviser to a registered
investment company except under a written contract that has been
approved by the vote of a majority of the company's outstanding voting
securities.
2. Section 6(c) of the Act provides that the Commission may exempt
any person, security, or transaction or any class or classes of
persons, securities, or transactions from any provisions of the Act, or
from any rule thereunder, if and to the extent that such exemption is
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 believe that the requested relief
meets this standard for the reasons discussed below.
3. Applicants state that the Funds have operated under the Prior
Orders for over 10 years. During the time that the Prior Orders have
been in effect, there have been 11 Portfolio Manager changes for the
Equity Fund and four changes for the Growth Fund. Applicants further
state that the Portfolio Manager changes have not had any impact on
premiums or discounts to net asset value at which the Funds' shares
have traded, and that there is no pattern of premiums or discounts
related to Portfolio Manager changes. Applicants state that Portfolio
Manager changes have been frequent enough over the lives of the Funds
that they are not viewed as a significant event by shareholders or in
the securities markets. Applicants state that the Board and ALPS
Advisers believe the ability to quickly fire and hire a Portfolio
Manager have been important to the success of the Funds' investment
strategy and process. Finally, applicants state that the conditions to
the requested relief set forth below will address the concerns
underlying section 15(a) with respect to the Portfolio Management
Agreements.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. Each Fund will hold itself out to the public as employing the
multi-manager investment management structure described in the
application.
[[Page 9794]]
Each Fund's periodic reports to shareholders will prominently disclose
that ALPS Advisers has ultimate responsibility (subject to oversight by
the Board) to oversee the Portfolio Managers and recommend their
hiring, termination, and replacement.
2. Any new Portfolio Management Agreement with respect to a Fund
will be submitted for ratification and approval to the vote of such
Fund's shareholders no later than at the regularly scheduled annual
meeting of shareholders of the Fund next following the effective date
of the new Portfolio Management Agreement, and its continuance after
such vote is conditioned on approval by the majority vote (as defined
in section 2(a)(42) of the Act) of such shareholders.
3. The Funds will continue to hold annual meetings of their
shareholders, whether or not required to do so by the rules of the New
York Stock Exchange or otherwise.
4. At all times, at least a majority of the Board of each Fund will
be trustees/directors who are not ``interested persons,'' as defined in
section 2(a)(19) of the Act, of the Funds or ALPS Advisers
(``Independent Trustees/Directors''), and the nomination of new or
additional Independent Trustees/Directors will be at the discretion of
the then existing Independent Trustees/Directors.
5. In the case of a previous Portfolio Management Agreement
terminated by an assignment by an investment adviser or a controlling
person of the investment adviser in connection with which assignment
the investment adviser or a controlling person directly or indirectly
receives money or other benefit (``Assignment''), the new Portfolio
Management Agreement will comply with rule 15a-4(b)(2) under the Act.
In any other case, each new Portfolio Management Agreement for a Fund
will provide for a sub-advisory fee no higher than that provided in
that Fund's existing Portfolio Management Agreements and, except for
the provisions relating to shareholder approval referred to in
Condition 2 above, will be on substantially the same other terms and
conditions as such Fund's existing Portfolio Management Agreements. In
all cases, in the event that the new Portfolio Management Agreement
provides for sub-advisory fees at rates less than those provided in the
existing Portfolio Management Agreements, the difference will be passed
on to the Fund and its shareholders through a corresponding voluntary
reduction in the fund management fees payable by the Fund to ALPS
Advisers.
6. A Portfolio Manager will have no affiliation with the Funds or
ALPS Advisers other than as Portfolio Manager, and will have no duties
or responsibilities with respect to the Funds beyond the investment
management of the portion of the Fund's portfolio assets allocated to
it by ALPS Advisers from time to time and related record keeping and
reporting.
7. The Board of each Fund, in addition to approving any new
Portfolio Management Agreement in accordance with the requirements of
section 15(c) of the Act, will specifically determine that entering
into the new Portfolio Management Agreement in advance of the next
regular annual meeting of the shareholders of the Fund and without
prior shareholder approval is in furtherance of the multi-management
methodology as applied to each Fund's multi-managed assets and is in
the best interests of the Fund and its shareholders.
8. ALPS Advisers will have responsibility for the general
management and investment of each Fund's assets, subject to oversight
by the Fund's Board. In particular, ALPS Advisers will (i) provide
overall investment programs and strategies for the Funds, (ii)
recommend to the Fund Boards investment management firms for
appointment or replacement as the Fund's Portfolio Managers, (iii)
allocate and reallocate each Fund's portfolio assets among the
Portfolio Managers, (iv) monitor and evaluate the investment
performance of the Portfolio Managers, including their compliance with
each Fund's investment objectives, policies and restrictions, and (v)
implement procedures reasonably designed to ensure that the Portfolio
Managers comply with each Fund's investment objectives, policies and
restrictions.
9. The appointment of the new or successor Portfolio Manager will
be announced by press release promptly following the Fund's Board's
action referred to in Condition 7 above, and a notice of the new
Portfolio Management Agreement, together with a description of the new
or successor Portfolio Manager, will be included in the applicable
Fund's next report to shareholders.
10. No director/trustee or officer of the Funds nor director or
officer of ALPS Advisers will own directly or indirectly (other than
through a pooled investment vehicle that is not controlled by such
person) any interest in a Portfolio Manager, except for (a) ownership
of interests in ALPS Advisers or any entity that controls, is
controlled by, or is under common control with ALPS Advisers, or (b)
ownership of less than 1% of the outstanding securities of any class of
equity or debt of any publicly traded company that is either a
Portfolio Manager or controls, is controlled by or is under common
control with a Portfolio Manager.
11. In the case of an Assignment of a Fund's Portfolio Management
Agreement with a Portfolio Manager, ALPS Advisers or the Portfolio
Manager (or its successor) will pay the incremental cost of including
the proposal to approve or disapprove the new Portfolio Management
Agreement in the proxy material for the next annual meeting of the
Fund's shareholders.
For the Commission, by the Division of Investment Management,
under delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-3772 Filed 3-2-07; 8:45 am]
BILLING CODE 8010-01-P