[Federal Register Volume 62, Number 30 (Thursday, February 13, 1997)]
[Notices]
[Pages 6819-6821]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-3542]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-22499; 812-10436]
Liberty All-Star Growth Fund, Inc., 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 Growth Fund, Inc. (``All-Star Growth'')
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 APPLICATION: Applicants request an order amending an
existing order that lets All-Star Growth and LAMCO change or add sub-
advisers, or continue the services of a sub-adviser following an
assignment of its sub-advisory agreement, 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 approximately one-third of All-Star
Growth'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. Greenlees, 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 may be obtained for a fee at the
SEC's Public Reference Branch.
Applicants' Representations
1. All-Star Growth 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 Growth 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 three in number, selected and recommended
from time to time by LAMCO based on specific criteria, including a
sufficient diversity and breadth of investment styles. None of the Sub-
Advisors has any affiliation with All-Star Growth or LAMCO other than
as Sub-Advisor.
3. Applicants received an order that permits All-Star Growth and
LAMCO to change or add Sub-Advisors, or continue the services of a Sub-
Advisor following an assignment of its subadvisory agreement, and delay
shareholder approval of the new sub-advisory agreements with such Sub-
Advisors until All-Star Growth's next annual meeting of shareholders
(the ``Existing Order').\1\ Applications reaffirm all of the
representations made in the original application, as amended for the
Existing Order, except as described below.
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\1\ Investment Company Act Release Nos. 20772 (Dec. 15, 1994)
(notice) and 20824 (Jan. 10, 1995) (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 one-third of All-Star
Growth's assets.\2\ Applicants seek to amend the Existing Order to
eliminate such restriction.
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\2\ Under the Existing Order, LAMCO managed 20% of All-Star
Growth's assets, subject to an increase to include all of All-Star
Growth's assets as provided in an Asset Acquisition and Fund
Management Transition Agreement, dated February 9, 1994, among
LAMCO, Growth Stock Outlook, Inc. (``GSO''), and GSO's principal
stockholder. Pursuant to that Agreement and as approved by All-Star
Growth's shareholders at its 1995 annual meeting: (a) LAMCO assumed
management of the remaining approximately 80% of All-Star Growth's
assets; (b) the fund's name was changed to ``Liberty All-Star Growth
Fund, Inc.;'' and (c) its investment objective was changed to long-
term capital appreciation. Accordingly, since November 6, 1995, the
exemptive relief granted by the Existing Order has been applicable
to 100% of All Star Growth's assets.
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[[Page 6820]]
Applicant's 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 Growth'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 Growth'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 than if a 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 Growth's investment objective, and
which is sufficiently broad so that, insofar as All-Star Growth's
investment objective permits, at least one of such styles can
reasonably be expected to be in market favor in all reasonably
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 Growth's investment objectives may be better
served by allocating more than an equal portion of All-Star Growth'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 one-third of All-Star
Growth's assets, each of the factors that provided the basis for the
granting of 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 Growth and its shareholders.
Applicants' Conditions
Applicants agree that any order granting the requested relief shall
be subject to the following conditions:
1. Each new sub-advisory agreement will be submitted for
ratification and approval to the vote of All-Star Growth's shareholders
no later than at the regularly scheduled annual meeting of shareholders
of All-Star Growth next following the effective date of the new sub-
advisory agreement, and its continuance after such meeting is
conditioned on approval by a majority vote (as defined in section
2(a)(42) of the Act) of such shareholders.
2. All-Star Growth 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 directors of All-Star Growth, 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 the new sub-advisory agreement in advance of the next regular
annual meeting of the shareholders of All-Star Growth, and without
prior shareholder approval is in furtherance of All-Star Growth's
multi-manager methodology, and is in the best interests of All-Star
Growth and its shareholders.
4. The new Sub-Advisor will have no affiliation with All-Star
Growth or LAMCO other than as Sub-Advisor, and will have no duties or
responsibilities with respect to All-Star Growth beyond the investment
management of the portion of All-Star Growth's assets allocated to 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 Growth'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
sub-advisory agreements, the difference will be passed on to All-Star
Growth and its shareholders through a corresponding voluntary reduction
in the fund management fees payable by All-Star Growth to LAMCO.
6. The appointment of the new or successor Sub-Advisor will be
announced by press release promptly following the directors' 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 Growth's next report to
shareholders.
7. LAMCO will provide overall supervisory responsibility for the
general management and investment of All-Star Growth's assets, subject
to All-Star Growth's investment objectives and policies and any
directions of All-Star Growth's directors. In particular, LAMCO will:
(a) provide overall investment programs and strategies for All-Star
Growth's assets; (b) recommend to All-Star Growth's directors
investment management firms for appointment or replacement as Sub-
Advisors for All-Star Growth's assets; (c) allocate and reallocate All-
Star Growth's assets among the Sub-Advisors; and (d) monitor and
evaluate the investment performance of the Sub-Advisors, including
their compliance with All-Star Growth's investment objectives,
policies, and restrictions.
8. In the case of a new sub-advisory 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, of All-Star
Growth'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 ratification of the new
sub-advisory agreement in the proxy material for the next annual
meeting of All-Star Growth's shareholders.
[[Page 6821]]
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-3542 Filed 2-12-97; 8:45 am]
BILLING CODE 8010-01-M