Liberty All-Star Equity Fund announces amount of capital gain retention.

BOSTON--(BUSINESS WIRE)--Dec. 31, 1996--Liberty All-Star Equity Fund (NYSE:USA), announces that the amount of its 1996 net long-term realized capital gains to be retained in the Fund is $0.38 per share.

As previously announced, the Fund will pay federal income taxes on these retained gains. The accrual of the tax will result in a reduction of the Fund's net asset value of approximately $0.13 per share effective at the close of business on December 31, 1996. Shareholders of record on that date will be required to include their pro rata share of the retained gains on their 1996 Federal income tax returns, but will be able to receive credit for the taxes paid by the Fund. Shareholders will receive information by January 31, 1996 on how to take this credit on their tax returns.

Liberty All-Star Equity Fund has a fixed distribution policy providing for four quarterly distributions of 2.5 percent of its net asset value, for a total of approximately 10 percent per year, regardless of the amount of the Fund's net investment income and realized gains. According to Richard Christensen, President of Liberty All-Star Equity Fund, the Fund is retaining its realized long-term capital gains in excess of the amount required to be distributed under the fixed distribution policy in order to be able to maintain the distribution policy.

Liberty All-Star Equity Fund is a multi-managed, closed-end investment company. Its shares are listed on the New York Stock Exchange under the symbol USA.

CONTACT: Jeffrey Cathie/Liberty Financial

617-371-2268