USA Liberty All Star Equity Fund

PROPOSAL 1. TO APPROVE AN AMENDMENT TO THE GROWTH FUND'S ARTICLES OF INCORPORATION INCREASING THE NUMBER OF SHARES OF CAPITAL STOCK THE GROWTH FUND IS AUTHORIZED TO ISSUE

Description of this proposal and Board recommendation

The Growth Fund's current Articles of Incorporation (the "Articles") authorize the Growth Fund to issue up to 60 million shares of Common Stock, par value $.10 per share ("Common Stock"), of which [    ] shares are issued and outstanding as of the date of this Proxy Statement, leaving [    ] shares available for future issuance. The Board of Directors is recommending to shareholders that they approve an amendment to the Articles increasing the Growth Fund's authorized capital stock to 200 million shares of Common Stock, thereby increasing the number of shares available for future issuance to [    ].

Purposes for Which Additional Authorized Shares May Be Used

The proposed amendment authorizing an additional 140 million shares of Common Stock will provide the Growth Fund with sufficient shares such that it can continue issuing new shares in connection with its distribution plan and offerings of the Growth Fund.

A portion of such additional authorized Common Stock may be issued as payment of distributions payable under the Growth Fund's distribution policy, as more fully described in the Growth Fund’s annual report to shareholders. Under the distribution policy, the Growth Fund pays distributions on its Common Stock totaling approximately 8% of its net asset value per year, regardless of the amount of its net investment income or loss or its net realized capital gains or losses, in four quarterly payments of 2% of the Growth Fund's net asset value as of the close of business on the New York Stock Exchange on the Friday prior to each quarterly declaration date.

Since the inception of the distribution policy the Fund has paid, and currently intends to continue to pay, all or a substantial portion of its distributions under the policy in the form of newly issued shares of Common Stock (plus cash in lieu of any fractional shares that would otherwise be issuable) to all shareholders except those non-participants in the Fund's Automatic Dividend Reinvestment and Cash Purchase Plan (the "Dividend Reinvestment Plan") who specifically elect to receive their distributions in cash by signing and returning an option card that is enclosed with the notice of each distribution. If the Growth Fund issues all of its outstanding shares prior to an increase in the number of authorized Common Stock, the Growth Fund would be unable to continue to pay all or a substantial portion of its distributions under the policy in the form of newly issued shares of Common Stock.

The benefits to the Fund and its shareholders of paying a portion of the distribution in shares rather than in cash include the following:

(i) The shrinkage in the assets of the Growth Fund that would otherwise result from cash distributions under its fixed distribution policy would be mitigated, and the fixed expenses of the Growth Fund would be spread over a larger asset base, thus reducing the Growth Fund's expense ratio;

(ii) To the extent a distribution is paid in shares, the need of the Growth Fund to sell portfolio securities to raise cash, possibly at a time when the Portfolio Managers of the Growth Fund would prefer to retain those securities from an investment standpoint and possibly resulting in the realization of distributable capital gains and the incurrence of brokerage and other transaction expenses, would be lessened;

(iii) Brokerage costs borne by participants in the Dividend Reinvestment Plan when cash distributions are invested for them in open-market purchases of shares would be avoided.

One of the risks of paying a portion of the distribution in shares rather than in cash is that the Fund's Common Stock is valued for the purposes of payment of distributions under the distribution policy at the lower of the market value or the net asset value per share of Common Stock on the valuation date for the distribution (but not at a discount of more than 5% from the market value). Accordingly, when the Common Stock of the Fund trades in the stock market at a discount from its net asset value, the issuance of shares in payment of distributions at the lower market value results in some dilution of the aggregate net asset value of the shares owned by shareholders who receive their distributions in cash.

A portion of the additional shares of authorized Common Stock may also be issued in connection with possible future offerings to shareholders, including rights offerings. In a rights offering, existing shareholders of the Growth Fund are offered the right, during a subscription period usually of approximately 30 days, to purchase additional shares of Common Stock of the Growth Fund at a discount from market value. The Growth Fund has conducted six such rights offering since 1998 .. In each of the Growth Fund’s rights offerings, shareholders exercising their primary rights in full were also offered the right to subscribe for shares not subscribed for by other shareholders, subject to allotment. Each of the Growth Fund’s rights offering, except one, were fully subscribed. If the Growth Fund issues all of its outstanding shares prior to an increase in the number authorized, the Growth Fund would be unable to offer its shareholders rights or other offerings.

The anticipated benefits to the Growth Fund and its shareholders to continue to have the ability to offer additional rights offerings include the following:

(i) enabling the Growth Fund's Portfolio Managers to take advantage of perceived investment opportunities without having to sell existing portfolio holdings that they would otherwise retain;

(ii) permitting Growth Fund shareholders to increase their investment in the Growth Fund at a discounted price and without commission expense;

(iii) increasing the size of the Growth Fund and resulting in economies of scale that continue to lower the Growth Fund's expense ratio;

(iv) continued support of the Fund’s distribution policy; and

(v) increasing the Growth Fund’s liquidity.

In each of the Growth Fund’s prior rights offering, the Board of Directors has concluded that the above benefits outweighed the potential risks of a rights offering. The risks included the potential dilution of the aggregate net asset value of the shares of the Growth Fund held by shareholders who do not fully exercise their rights if the Growth Fund’s shares were priced at a subscription price below net asset value, the costs associated with the rights offering, and the increase in the amount of fees payable by the Growth Fund to the Adviser.

Required Vote

Approval of the proposed amendment to the Articles requires the affirmative vote of a majority of the shares of Common Stock entitled to vote at the Meeting.

THE BOARD RECOMMENDS THAT SHAREHOLDERS OF THE GROWTH FUND VOTE “FOR” PROPOSAL 1.

PROPOSALS 2 and 3. ELECTION OF TRUSTEES AND DIRECTORS

Introduction

Each Fund’s Board provides broad supervision over the affairs of its respective Fund. AAI is responsible for the investment management of the Funds’ assets and AAI’s affiliate, ALPS Fund Services, Inc., provides a variety of administrative services to each Fund. The officers of each Fund are responsible for its operations.

Each Fund's Board is divided into three classes, each of which serves for three years. The term of office of one of the classes expires at the final adjournment of the Annual Meetings of Shareholders (or special meeting in lieu thereof) each year or such later date as his or her successor shall have been elected and shall have qualified.

Shares of the Funds represented by duly executed proxies will be voted as instructed on the proxy. If no instructions are given when the enclosed proxy is executed and returned, the enclosed proxy will be voted for the election of the following persons to hold office until final adjournment of the Annual Meeting of Shareholders of the applicable Fund for the year set forth below (or special meeting in lieu thereof):

Equity Fund

Growth Fund 

If elected, each of the above-named Trustees and Directors has consented to serve as Trustee or Director following the 2021 Annual Meeting and each is expected to be able to do so. If any of them are unable or unwilling to do so at the time of the 2021 Annual Meeting, proxies will be voted for such substitute as the applicable Board may recommend (unless authority to vote for the election of Trustees or Directors, as the case may be, has been withheld).

The Boards of the Funds

The Funds are governed by their respective Boards. Each Board is responsible for and oversees the overall management and operations of its respective Fund, which includes the general oversight and review of the Fund’s investment activities, in accordance with federal law and the law of the Commonwealth of Massachusetts for the Equity Fund and the State of Maryland for the Growth Fund, as well as such Fund’s stated investment objective and policies. Each Board oversees its respective Fund’s officers and service providers, including AAI, which is responsible for the management of the Funds’ day-to-day operations, based on policies and agreements reviewed and approved by the Boards. In carrying out these responsibilities, the Boards regularly interact with and receive reports from senior personnel of service providers, including AAI’s investment personnel and the Funds’ Chief Compliance Officer (“CCO”). The Boards also are assisted by the Funds’ independent registered public accounting firm (“Auditors”) (who reports directly to each Fund’s Audit Committee), independent counsel and other experts as appropriate, all of whom are selected by the Boards.

The Boards Risk Oversight Responsibilities

Consistent with their responsibility for oversight of the Funds, the Boards oversee the management of risks relating to the administration and operation of the Funds. AAI, as part of its responsibilities for the day-to-day operations of the Funds, is responsible for day-to-day risk management for the Funds. The Boards, in the exercise of their reasonable business judgment, also separately consider potential risks that may impact the Funds. The Boards perform this risk management oversight directly and, as to certain matters, through the Audit Committees and through the Board members who are not “interested persons” of the Funds (“Independent Trustees/Directors”) as defined in Section 2(a)(19) of the 1940 Act. The following provides an overview of the principal, but not all, aspects of the Boards’ oversight of risk management for the Funds.

In general, the Funds’ risks include, among others, investment performance and investment risk, credit risk, liquidity risk, valuation risk, compliance risk and operational risk. The Boards have adopted, and periodically review, policies and procedures designed to address these and other risks to the Funds. In addition, under the general oversight of the Boards, AAI and other service providers to the Funds have themselves adopted a variety of policies, procedures and controls designed to address particular risks to the Funds. Different processes, procedures and controls are employed with respect to different types of risks. Further, AAI, as the Funds’ investment manager, oversees and regularly monitors the investments, operations and compliance of the Funds’ investment sub-advisers (referred to herein as “Portfolio Managers”).

The Boards also oversee risk management of the Funds through review of regular reports, presentations and other information from officers of the Funds and other persons. Senior officers of the Funds, senior officers of AAI and the Funds’ CCO regularly report to the Boards on a range of matters, including those relating to risk management. The Boards also regularly receive reports from AAI with respect to the investments and securities trading activities of the Funds, as well as the premium or discount to net asset value at which the Funds’ shares are trading on the New York Stock Exchange (“NYSE”). In addition to regular reports from AAI, the Boards receive reports regarding other service providers to the Funds, either directly or through AAI or the Funds’ CCO, on a periodic or regular basis. At least annually, the Boards receive a report from the Funds’ CCO regarding the effectiveness of the Funds’ compliance program. Also, on an annual basis, the Boards receive reports, presentations and other information from AAI in connection with the Boards’ consideration of the renewal of the Funds’ agreements with AAI and the Portfolio Managers.

Senior officers of the Funds and senior officers of AAI also report regularly to each Fund’s Audit Committee on valuation matters and on the Funds’ internal controls and accounting and financial reporting policies and practices. In addition, the Audit Committees receive regular reports from the Funds’ Auditors on internal control and financial reporting matters. On at least a quarterly basis, the Independent Trustees/Directors meet with the Funds’ CCO to discuss matters relating to the Funds’ compliance programs. The Boards’ oversight role does not make the Boards a guarantor of the Funds’ investments or activities.

Board Structure and Related Matters

The 1940 Act requires that at least 40% of the Equity Fund’s Trustees and the Growth Fund’s Directors be Independent Trustees/Directors. In addition, to rely on certain exemptive rules under the 1940 Act, a majority of each Fund’s Board must be composed of Independent Trustees/Directors. Currently, five of each Fund’s six Trustees or Directors are Independent Trustees/Directors. Thomas W. Brock, an Independent Trustee/Director, serves as Chairman of each Board. The Chairman’s responsibilities include presiding at all meetings of the Boards and serving as a liaison with other Trustees/Directors, the Funds’ officers and other management personnel and counsel to the Funds. The Chairman also performs such other duties as the Boards may from time to time determine.

The Trustees/Directors discharge their responsibilities collectively as a Board, as well as through the Audit Committees, which operate pursuant to a charter approved by the respective Board. As summarized below, the Audit Committees oversee specific matters related to oversight of the Funds’ Auditors. The members and responsibilities of each Board are summarized below.

Each Board periodically evaluates its structure and composition as well as various aspects of its operations. Each Board believes that its leadership structure, including its Chairman position, is appropriate for its respective Fund in light of, among other factors, such Fund’s asset size and nature of its operations and the Board’s responsibilities. The Boards also believe that the fact that the Chairman is not affiliated with AAI is appropriate in light of the services that AAI and its affiliates provide to the Funds and the potential conflicts of interest that could arise from these relationships. On an annual basis, the Boards and the Audit Committees conduct a self-evaluation that considers, among other matters, whether the Boards and the Audit Committees are functioning effectively and whether, given the size and composition of the Boards and the Audit Committees, the Trustees/Directors are able to effectively oversee the Funds.

The Boards hold four regularly scheduled meetings each year. The Boards may hold special meetings, as needed, either in person or by telephone, to address matters arising between regular meetings. The Independent Trustees/Directors also hold at least one in-person meeting each year during a portion of which management is not present and may hold special meetings, as needed, either in person or by telephone.

The table below sets forth the names, addresses and years of birth of the Trustees/Directors of the Funds, the year each was first elected or appointed to office, their term of office (which will end on the final adjournment of the annual meeting (or special meeting in lieu thereof) held in the year set forth in the table), their principal business occupations during at least the last five years, the number of portfolios overseen by each Trustee/Director in the Fund Complex and their other directorships of public companies.

The Boards believe that the significance of each Trustee’s/Director’s experience, qualifications, attributes or skills is an individual matter (meaning that experience that is important for one Trustee/Director may not have the same value for another) and that these factors are best evaluated at the board level, with no single Trustee/Director, or particular factor, being indicative of board effectiveness. In addition to the information set forth in the tables above and other relevant qualifications, experience, attributes or skills applicable to a particular Trustee/Director, the following provides further information about the qualifications and experience of each Trustee/Director.

Independent Trustees/Directors

Thomas W. Brock: Mr. Brock has extensive investment management and organizational management experience as chief executive officer of an SEC-registered investment adviser, chairperson and trustee of an open-end investment company, adjunct graduate business school professor and several years of service as a Trustee of the Equity Fund and Director of the Growth Fund.

George R. Gaspari: Mr. Gaspari has significant investment management and financial markets experience as a director and chairperson of exchange-traded funds, a financial services consultant and multiple years of service as a Trustee of the Equity Fund and a Director of the Growth Fund.

Milton M. Irvin: Mr. Irvin has extensive experience in the financial services industry. He has served as a board member for universities and graduate schools. Mr. Irvin has also served as an investment committee member for a not-for-profit entity.

John J. Neuhauser: Dr. Neuhauser has extensive investment management experience as an investment company trustee and executive management experience in higher education as a university president, vice president, dean and professor and multiple years of service as a Trustee of the Equity Fund and Director of the Growth Fund.

Maureen K. Usifer: Ms. Usifer has extensive financial accounting experience as an audit committee chairperson and SEC financial expert of a business development fund. She has served as a board member in a financial regulatory oversight position for the state of Vermont and a trustee for a private college, serving on the operations and audit committee. Ms. Usifer has also served as chief financial officer of both public and private companies.

Interested Trustee/Director

Edmund J. Burke: Mr. Burke has extensive management and operational experience in the investment management industry as chief executive officer and president of AAI’s parent company, a financial services holding company, a director of AAI and certain of its affiliated companies, trustee, chairman and president of an open-end investment company, trustee and president of closed-end investment companies and several years of service as a Trustee of the Equity Fund and a Director of the Growth Fund.

During the fiscal year ended December 31, 2020, the Boards held four meetings, and the Audit Committee held four meetings. Each of these Board and Committee meetings was held jointly by the Funds. All sitting Trustees/Directors were present at all meetings. The Funds do not have a formal policy on Trustee/Director attendance at annual meetings of shareholders. None of the Trustees/Directors attended the Funds' 2020 annual meetings of shareholders.

Shareholders may communicate with the Trustees/Directors as a group or individually. Any such communications should be sent to the Funds’ Boards or an individual Trustee/Director in writing, c/o the Secretary of the Liberty All-Star Funds, 1290 Broadway, Suite 1000, Denver, CO 80203. The Secretary may determine not to forward any letter to the Board or a Trustee/Director that does not relate to the business of the Funds.

Principal Officers

Each person listed below serves as an officer of the Funds. The Boards elect the Funds' officers each year. Each Fund officer holds office until his or her successor is duly elected by the Board and qualified or his or her removal, resignation or death. Each Fund officer serves at the pleasure of the Board. The following table provides basic information about the officers of the Funds as of the date of this Proxy Statement, including their principal occupations during the past five years, although their specific titles may have varied over that period.

Audit Committee

The Funds have separately designated Audit Committees. Messrs. Brock, Gaspari, Irvin, Neuhauser and Ms. Usifer (Committee Chairman) are members of the Audit Committee of each Fund. Each Fund's Audit Committee is comprised only of Board members who are "independent^" (as defined in the NYSE Listing Standards for trustees/directors of closed-end investment companies) of the Funds and who are also not "interested persons" (as defined under the 1940 Act) of the Fund. Each Board has determined, in accordance with NYSE Listing Standards that each member of the Audit Committees is financially literate and has determined that Ms. Usifer is each Fund’s “audit committee financial expert,” as defined in the rules promulgated by the SEC, and as required by NYSE Listing Standards.

Each Audit Committee has adopted a written Audit Committee charter that sets forth the Audit Committee's structure, duties and powers and methods of operation. A copy of the Audit Committee Charter is available on the Funds’ website at www.all-starfunds.com. The principal function of each Audit Committee is to assist Board oversight of: (1) the integrity of the Funds’ financial statements; (2) the Funds’ compliance with legal and regulatory requirements; (3) the qualifications and independence of the independent registered public accounting firm (also referred to herein as the Auditors); (4) the performance of AAI’s internal audit function; and (5) the performance of the Auditors. Each Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of the Auditors (including the resolution of disagreements between management and the Auditors regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other review or attest services for the Fund.