Although roiled by periodic sell-offs, U.S. equity markets rose once again in 2014, as the S&P 500^® Index and the widely followed Dow Jones Industrial Average (DJIA) posted numerous record highs throughout the year. The S&P 500 returned 13.69 percent while the DJIA gained 10.04 percent. The technology-focused NASDAQ Composite Index returned 14.75 percent.

The S&P 500 Index recorded positive returns each quarter in 2014, with the first and third quarters in the range of 1 percent-plus while the second and fourth quarters were in the mid-single digits. The U.S. economy was the main source of strength for equities. An abnormally harsh winter caused gross domestic product (GDP) to decline 2.1 percent in the first quarter. Growth was strong in the second and third quarters, however, when GDP rose 4.6 percent and 5.0 percent, respectively. The employment picture in the U.S. also brightened. Except for January, which was distorted by the weather, every month in 2014 was marked by the creation of more than 200,000 non-farm jobs. The ongoing job growth meant that by May all of the 8.7 million jobs lost during the Great Recession had finally been recouped. Throughout the fiscal year, the Federal Reserve (Fed) kept short-term interest rates at record low levels, even as it continued to wind down its program of quantitative easing (QE), first launched in December 2008. In October, the Fed ended the program altogether. Another powerful theme running throughout the year was the industrial renaissance in the U.S., as auto, capital equipment and energy output gained strength. U.S. energy production stood out as a growth driver, as hydraulic fracturing methodologies unlocked previously inaccessible or economically impractical oil and gas deposits. The price of oil began a gradual descent at mid-year, a move that accelerated in the fourth quarter. From a peak of $106 per barrel in June, the price of West Texas Intermediate (WTI) crude fell to an average of $59 per barrel in December (and continued to slide in early 2015).

The steep, rapid decline in the price of oil was interpreted by many to be a sign of slowing economic growth

worldwide and investors responded by selling equities in one of the several sell-offs that made 2014 a positive, but choppy year. Fears of higher interest rates and geopolitical tensions, chiefly in Ukraine, fueled a retrenchment in the first quarter. A significant sell-off in biotechnology, information technology and social networking stocks hit the NASDAQ Composite in April. And falling oil prices led to a one-week decline of 3.1 percent in the S&P 500 in early October.

One characteristic of the 2014 investment environment that warrants comment was how challenging it was for active managers and actively managed funds. According to data provider Lipper, 2014 was the worst year for active managers relative to the market in three decades, while data from research firm Morningstar indicates that less than 20 percent of U.S. equity fund managers beat their benchmark. As Liberty All-Star^® Equity Fund is actively managed, we asked the Fund’s five investment managers to comment on this in our annual Manager Roundtable, which begins on page 9 of this report. We recommend their thoughts and insights to you.

Liberty All-Star^® Equity Fund

After strongly outperforming the market in 2013, Liberty All-Star^® Equity Fund returns lagged in 2014. The Fund returned 8.87 percent with shares valued at net asset value (NAV) with dividends reinvested and 6.98 percent with shares valued at market price with dividends reinvested. (Fund returns are net of fees.) The Lipper Large-Cap Core Mutual Fund Average returned 11.32 percent. The Fund posted positive returns for three quarters, but experienced a negative return of -1.38 percent in the third quarter, hurt in part by the sell-off in energy stocks. The discount at which Fund shares traded relative to their underlying NAV widened compared with 2013, ranging from a low of -10.5 percent to a high of -13.6 percent.

Looking longer term, the Fund’s average annual returns are in-line with most indices, as they lag the S&P 500 by just 42 basis points for the trailing three-year period (with

shares valued at market price with dividends reinvested) and are ahead of the Lipper average by 87 basis points for the same period. By the same measure, the Fund trails the S&P 500 for the past five years, but once again is ahead of the Lipper.

As previously discussed, it had been a challenging environment for active managers’ relative performance during 2014 and, actually, for most years subsequent to the 2008 financial crisis. The massive liquidity provided by the Federal Reserve in response to the crisis certainly pushed stock indices to record highs and interest rates to record lows. It has, however, been a challenging period for active managers, as the transmission mechanism for that liquidity into domestic stocks has been largely through index funds and index exchange-traded funds (ETFs) rather than actively managed products. Looking longer term, there are also periods when active managers, on balance, have outperformed stock indices, which points to the cyclical nature of those performance patterns. The last such period was from 2000-2007, a time frame beginning after the bursting of the technology bubble and, coincidentally, was approximately the same duration as the current post-crisis period. It is worth noting that for the past 15 years, from January 1, 2000, to December 31, 2014, the Fund’s NAV reinvested return after fund expenses exceeds both the Lipper average and the S&P 500. No one can predict the timing of when or for how long active managers generally out- or underperform stock indices, but viewing active managers’ relative performance in the context of a combined cycle is relevant.

Fund distributions totaled $0.39 per share in 2014. As shareholders may recall, the Fund’s distribution policy has been in place since 1988 and is a major component of the Fund’s total return. These distributions add up to $24.66 since 1987 (the Fund’s first full calendar year of operations). We continue to emphasize that shareholders should include these distributions when determining the return on their investment in the Fund.

One of the key principles on which the Fund was founded is multi-management, or the practice of allocating the Fund’s assets to carefully selected investment managers

representing both value and growth styles of investing. Thus, we are once again offering insights into the managers’ thinking through the previously mentioned roundtable discussion, and invite shareholders to read the managers’ comments.

In a difficult environment for active managers, the Fund lagged key benchmarks in 2014. After a strong 2013, however, the Fund’s market price returns over the past two years average 19.52 percent. If the start of the year is any indicator, 2015 may be highly volatile. We are confident in the Fund’s five investment managers’ ability to navigate whatever market conditions prevail in the year ahead. For our part, we will continue to manage the Fund with our sights set on rewarding long-term returns for shareholders.

Sincerely,

William R. Parmentier, Jr.

President and Chief Executive Officer

Liberty All-Star^® Equity Fund

Manager Roundtable

Periods of volatility—brief, but extreme—appeared periodically throughout 2014, the final spasm being driven by sharp declines in the price of oil and its implications for slowing economic growth around the world. How do the Fund’s investment managers view this, and what do they think it portends for 2015? Almost uniformly, their response is to invest in high conviction stocks—quality names with sound fundamentals and competitive business models—at those times when volatility creates buying opportunities.

Liberty All-Star^® Equity Fund’s five investment managers represent long experience, deep knowledge, a proven track record and, given that they represent both growth and value styles of investing, a broad point of view on the stock market and equity investing generally. Thus, once again, we are grateful to be able to call upon this resource to provide Fund shareholders with commentary and insight. The Fund’s Investment Advisor, ALPS Advisors, serves as moderator of the roundtable. Participating investment management firms, the portfolio manager for each, and their respective styles and strategies are:

CORNERSTONE CAPITAL MANAGEMENT LLC

Portfolio Manager/Thomas G. Kamp, CFA

President and Chief Investment Officer

Investment Style/Growth – Cornerstone’s portfolio is focused on stocks in which its research has identified Perception Gaps (underappreciated opportunities) for growth in the key metrics that drive the financial statements of the company. Stock selection is further based on the fundamentals of revenue, earnings, cash flow, and management depth and credibility.

MATRIX ASSET ADVISORS, INC.

Portfolio Manager/David A. Katz, CFA

President and Chief Executive Officer

Investment Style/Value – Matrix follows an opportunistic value-oriented investment philosophy. Matrix believes that value can be found in all sectors of the economy, and thus looks for investment opportunities beyond traditional value industries.

PZENA INVESTMENT MANAGEMENT, LLC

Portfolio Managers:

Richard S. Pzena, Founder and Co-Chief Investment Officer John P. Goetz, Managing Principal and Co-Chief Investment Officer Benjamin S. Silver, CFA, Principal and Co-Director of Research Investment Style/Value – Pzena uses fundamental research and a disciplined process to identify good companies with a sustainable business advantage that the firm believes are undervalued on the basis of current price to an estimated normal level of earnings.

SCHNEIDER CAPITAL MANAGEMENT CORPORATION

Portfolio Manager/Arnold C. Schneider, III, CFA

President and Chief Investment Officer

Investment Style/Value – The firm practices a disciplined, fundamental approach to add value over time. Research focuses on uncovering new ideas and owning undervalued stocks before they experience a rebound in earnings and come to the attention of other investors.

TCW INVESTMENT MANAGEMENT COMPANY

Portfolio Manager/Craig C. Blum, CFA

Managing Director

Investment Style/Growth – TCW seeks to invest in companies that have superior sales growth, leading and/ or rising market shares, and high and/or rising profit margins. TCW’s concentrated growth equity strategy seeks companies with distinct advantages in their business model.

There can be several interpretations of the volatility that hit equity markets in the fourth quarter: Sell-offs in late September/early October—principally taken down by economically sensitive sectors—and in December with the further collapse in world oil prices and its implications for slower growth around the world. But rallies followed both pull-backs. Based on your investment style and strategy, what’s your analysis of these scenarios and their implications for 2015? Let’s start with the growth style managers and hear first from Tom Kamp.

Kamp (Cornerstone – Growth): The upward movement in the market over the last two and a quarter years came with remarkably little volatility. However, we believe the long period of low volatility has ended. We expect the normal “to and fro” of the market to return now that the unprecedented

short-term dislocations in high conviction stock ideas that normally exist.

After the significant upward movement in the equity market over the last six years, accompanied by significant valuation expansion, it is not likely that the equity market will have a strong return in the coming year. However, against a backdrop of near zero interest rates that have nowhere to go but up, the alternatives are not good. Barring a geopolitical crisis with Russia, our current expectation is for a 6 percent total return for the S&P 500 Index in 2015. This expectation is in-line with the current expectation of earnings growth. Current earnings expectations are probably still a bit high considering that energy sector earnings expectations need to fall somewhat further to reflect the current forward oil price curve. Offsetting this expected decline is a 1.9 percent dividend yield on the S&P 500. Therefore, if the valuation multiple of 16.4 times the next 12 months’ earnings per share is maintained, we may see something close to a 6 percent total return for the market in 2015.

in oil drilling potentially declines, earnings for oil service companies will be pressured. The U.S. dollar will likely continue to strengthen, becoming a potential headwind for many multinational corporations, particularly in the technology sector. Encouragingly, the oil price drop equates to cheaper gasoline prices, which should act as a massive tax break for the U.S. consumer. As we enter 2015, we expect higher volatility and, thus, more opportunities to add to our portfolio of companies with pricing power, resilient business models and growing end markets.

Let’s get the value perspective. David Katz, what is your view?

Katz (Matrix – Value): After a multi-year period of little downside volatility, the market returned to a more normal environment of generally favorable returns mixed with periodic macro- or fear-driven sell-offs. Ultimately, favorable fundamentals enabled stock prices to trade higher and overwhelm these pull-backs.

We would not read too much into this return to more typical volatility. Over the last 30-plus years, bouts of market volatility ebbed and flowed around the “hysteria du jour.” All have subsequently been resolved, and stocks have ultimately traded higher, achieving healthy returns

for investors over time. We expect this recently greater volatility to continue in 2015, sparked by concerns about the Fed raising interest rates, international economic growth and geopolitical uncertainty. In the end though, fundamentals and valuations will drive stock prices, similar to the fourth quarter of 2014. We believe these latter considerations are generally favorable and should allow for positive stock returns.

While these scares are unsettling, they create investment opportunities for a disciplined and seasoned investor. We attempt to take advantage of these sell-offs by buying into stocks or sectors where the decline is overdone, and where there is compelling upside potential when the dust settles.

Pzena (Pzena – Value): Resilience of the U.S. economy, as witnessed by strong GDP and employment growth, helped U.S. markets recover from bouts of uncertainty driven by questionable economic prospects outside the U.S. during 2014. Inevitably, markets will continue to react to economic and geopolitical news in the coming year, but our advice is to stick to a valuation-based investment approach that filters out the day-to-day noise and focuses on the long-term prospects of a company based on the strength of its underlying business franchise. Volatility has increased from abnormally low levels, and our experience has shown that investors tend to overreact to near-term events, thereby creating opportunities to invest in leading businesses at a fraction of their underlying value. We see these types of opportunities today in financial services, mature technology and energy companies, which make up the bulk of our portfolio’s exposures.

Schneider (Schneider Capital Management – Value): The sharp market movements in the latter portion of 2014 were symptomatic of investors’ shortened investment horizons. The resulting volatility caused some stock prices to move, either up or down, more than the underlying fundamentals support. However, low oil prices have widened overall credit spreads markedly in the second half of the year, which is a modest negative for equities and will likely lead to more episodes like these. Additionally, these oil prices have unleashed powerful geopolitical strains that will add to volatility.

As deep-value investors, we are constantly in search of stocks where our research indicates that a company is selling well below what we believe to be its true intrinsic value and where earnings will be improving in the next 12 months. Market volatility creates opportunities to purchase such stocks at temporarily lowered prices or, in some cases, to sell stocks at shorter-lived elevated prices.

Thank you very much. A question for the value style managers: The fact that you base buy/sell decisions on stock-by-stock bottom-up analysis notwithstanding, we would still like to inquire whether you believe the sell-off in the energy sector creates buying opportunities, or whether you view the decline in energy prices as more of a secular phenomenon that is likely to persist for some time to come. Let’s start with Arnie Schneider.

Schneider (Schneider Capital Management – Value): The market’s dramatic reaction to the short-term collapse in energy prices has created some very compelling investment opportunities in oil, gas and other energy-related companies that we believe offer significant upside potential.

At current prices, the industry cannot remotely begin to economically offset its 5 percent supply curve decline. We continue to maintain our long-term economic view of $90 per barrel for West Texas Intermediate crude, but expect the recovery to take a few years. In the interim, the modest 4 percent current spare capacity of nearly 4 million barrels per day will begin to dissipate as U.S. production growth slows and global demand increases.

The Saudis have remained steadfast in their statements and actions that they will not cut production to support prices. While they have the financial wherewithal to survive with oil at or below $60 per barrel for possibly five years, many other oil producing countries, especially Venezuela, Iran, Nigeria and Russia, require oil at or above $100 per barrel to keep their fragile economies going.

oil-consuming economies see a major expense falling sharply. We are already seeing this play out: New well permits are down significantly, capital expenditure programs for many drillers have been slashed by billions of dollars, consumers are driving more and new SUV and truck sales are growing. In addition, many OPEC nations have a strong incentive to see higher prices, and we think OPEC might change its current course over the next few months in a manner aimed at achieving that objective. Ultimately, we think the microeconomics of energy production argue for an oil price closer to $80 plus, and we expect movement toward that level during 2015.

After the recent sell-off, we believe that many energy stocks are selling at very attractive valuations. We hold very high quality, production-related companies that are well-situated to navigate these very low prices and their stock prices should be significantly higher in the more normal environment we foresee over the coming year. As we get greater clarity on the timing of oil’s recovery—and/ or believe catalysts are in place to realize value sooner—we might add to positions or add names in other areas of the sector.

Pzena (Pzena – Value): It is our belief that the market dynamic that led to the recent collapse in oil prices and ensuing sell-off in the energy sector is straightforward: consistently high oil prices attracted capital investment that stimulated production that has resulted in the supply of oil exceeding demand. Although we believe that oil prices should ultimately normalize at higher levels, it will take time for the market to stabilize and there are structural reasons why supply is not likely to be curtailed in the near future. As a result, there remains downside risk to both the oil price and to related equities in the near term. The bulk of our investments in the energy sector are in the integrated oil companies that have strong balance sheets and diversified business models that can also benefit should weaker players exit the market. Although our original investment thesis on the integrateds was not based on a forecast of high oil prices, we believe our holdings are attractive even if oil prices remain low for an extended period. Our research will continue to focus on businesses across the energy sector that have downside protection and are attractively valued based on a range of oil prices.

Now, a question for the growth style managers: The recent sell-off in equities spread way beyond the energy sector owing to its implications for slower economies around the world and, in some cases, outright deflation. Shouldn’t that have favorable implications for the stocks of companies that have strong positions in high growth markets? Or are investors saying that their growth will be impacted as well? Craig Blum, will you start us off?

Blum (TCW – Growth): Global central banks have been pumping money into the system for years, yet deflation has become the bigger risk of late given the precipitous drop in the price of oil. QE tapering concluded late last year and interest rates should arguably be higher, but the world is flush with cash and searching for yield with a backdrop of slower global growth, falling inflation and low liquidity. There are risks and we expect some

volatility but note that the fundamentals for a majority of our companies are very strong. We view the recent volatility as a net positive for our concentrated portfolio of companies with defensible business models, pricing power, best of breed management teams and growing end markets.

Kamp (Cornerstone – Growth): The recent sell-off reflected fears that growth expectations—for revenue, earnings and cash flow—would have to be revised downward. Some industries and companies were affected more than others, however, because some are more likely to be impacted than others. The tension in the market is one of trying to determine when the negative estimate revisions are fully reflected in a given stock. Until those estimates have bottomed, the greatest risk exists in the stocks of those companies with the largest negative revisions. These stocks are often the fastest growers. Safety can be found in the stocks of less affected companies that can plow through the economic difficulty due to any of a variety of factors. Once the estimates have bottomed, however, investors will most highly prize those companies that can generate superior earnings growth in a slow growth environment, especially in one accompanied by low interest rates. Such is the focus of our research.

Two thousand fourteen was a challenging year for active managers, active management referring to investment funds for which a portfolio manager or team makes decisions about which stocks and in what weight will be held. The opposite is passive management or indexing, in which portfolio holdings mirror the components of a market index. From your perspective, why was 2014 such a difficult year for active managers? Let’s stay with the growth managers and invite Tom Kamp to go first.

Kamp (Cornerstone – Growth): The S&P 500 beat the expectations of many investors for a low double-digit return, in-line with earnings growth. Although I don’t have the data to support this statement, I suspect that most managers underperformed the most in the first quarter, which continued the momentum-driven market environment of valuation expansion that we saw in 2013. The subsequent quarters provided greater volatility, which benefits active managers with superior research-based insights.

It is also worth mentioning that the large size of Apple Computer in the benchmark makes it very difficult for active managers to take a positive active weight. This stock represents 6.24 percent of the Russell 1000^®

Growth Index. Few managers had a positive active weight in this stock, which was a superb performer in 2014.

Craig Blum, what about TCW’s thoughts?

Blum (TCW – Growth): First, six years of QE has led to asset reflation and a global thirst for yield; currently about one-third of the stocks in the S&P 500 carry dividend yields greater than 10-year U.S. Treasuries. Second, interest rates have plummeted, boosting the performance of stocks seen as bond proxies, a majority of which come from the utility, telecom and consumer staples sectors. It is very unusual for defensive stocks to lead an advance in the S&P 500 of more than 14 percent. Third, although much has been made of stock correlations coming down, which is true, most people are unaware that during the majority of 2014 the delta, or difference, between the top and bottom decile performing stocks within the S&P 500 was near the lowest it has been in over 25 years, according to a study by Bank of America Merrill Lynch. This means there is little investor differentiation between the quality and business model advantages of companies. Lastly, and probably most obviously, as money has more moved to passive investing, the stocks in these market-cap weighted indices are unnaturally bid up.

Value managers, let’s hear from you on this question. David Katz, please lead off.

Katz (Matrix – Value): The past year was a difficult one for active managers, with a number of crosscurrents that rendered fundamental stock selection for both growth and value less effective over the period. Some of these factors follow:

While it was a “risk-on” year for stocks, the lower risk sectors, such as utilities and consumer staples, had the best returns. Both generally have a low revenue and earnings growth outlook, yet are selling at the upper ends of their historical valuation parameters. The valuations and fundamentals of these groups were unattractive to both value and growth investors, and their underweights hurt relative returns. Conversely, certain groups with very attractive valuation metrics, like energy and industrials, had a difficult period, which resulted in the cheap getting cheaper. This also hurt relative returns. Next, owning small and mid-sized companies likely hurt returns as these capitalizations lagged the major indices. Finally, specific industries like social media and biotech started the year selling at very rich valuations. Many extended their gains to levels that value investors found questionable but where growth investors thought there were more attractive alternatives.

The silver lining to the difficult 2014 environment is that it has further stretched some valuations to extremes. As in previous cycles, we believe this phenomenon has set the stage for active managers to produce very attractive returns in the upcoming year.

easing program wound down and the U.S. economy continued its gradual improvement. Instead, interest rates on 10-year treasuries fell from 3.0 percent to 2.2 percent, creating challenges for managers underexposed to stocks that typically do well in falling interest rate environments.

After three years of relatively stable prices, oil plunged 48 percent from $110 to $57 per barrel for Brent crude during the year as increases in the supply of oil outpaced slowing demand growth. As a result, energy was the worst performing sector for 2014, which may have also created challenges for active managers overexposed to this sector.

Schneider (Schneider Capital Management – Value):

The largest, mega-capitalization stocks were among the best performers, and diversification, especially in regard to sector weights, i.e., overweights or underweights, was a detriment to performance. The perceived “safe” sectors of health care, utilities and consumer staples performed much better than the broad market.

High active share¹ was a drag on returns as the benchmark names tended to outperform non-benchmark names. Lastly, a lack of exposure to the top performing stocks in the indexes was a drag on returns for most active managers.

What is a stock in the portion of the Liberty All-Star Equity Fund that you manage that did especially well for you in 2014, and what is a stock whose prospects you like for 2015? Arnie Schneider, please go first for the value managers.

Schneider (Schneider Capital Management – Value): Our position in Marriott International helped performance in 2014. Strong demand and continued low supply drove revenue and margin improvement for Marriott and the hotel industry. The outlook for growth in rooms carrying Marriott brands also improved in 2014, driven by new hotels (primarily in international markets) as well as brand conversions and acquisitions of smaller brands. Marriott also continued to use growing free cash flow to reduce the share count.

We expect Citigroup to be a strong performer in 2015. Last year Citigroup was hurt by litigation and repositioning charges, a weak trading environment and its qualitative failure of the Fed stress test despite strong capital levels. We expect Citigroup to pass the stress test and begin share repurchases in 2015, as already strong capital ratios have continued to improve. Additionally, the completed repositioning or exiting of several underperforming businesses will drive significantly improved operating efficiency and earnings in 2015 and beyond.

Katz (Matrix – Value): One strong performer was Teva Pharmaceutical, which benefited from many positive factors, including investor and board activism, to drive shareholder value, favorable fundamentals and significant multiple expansion. After years of underperformance, Teva’s board reacted to shareholder pressure and named a new CEO charged with increasing value through stringent cost controls and aggressive portfolio repositioning. The company also had a number of favorable clinical and legal developments benefiting its flagship product, Copaxone. Consequently, the stock saw significant appreciation. While it was one of our top 2014 performers, it is still attractively valued and should continue its gains this year.

Qualcomm is particularly well positioned for 2015. It is the premier wireless communication equipment player worldwide, and a significant beneficiary of the continued rollout of smartphones. The company’s technological superiority and the global growth of the end market led

to a decade-plus of strong revenue growth, double-digit earnings growth and massive free cash flow generation, accumulating to nearly $19 a share in net cash as of September 30, 2014. While Qualcomm’s dominant position and long-term outlook continue to be very favorable, the stock was only modestly higher last year, lagging the market and its peers. As a result of short-term setbacks, the stock didn’t participate in the technology sector’s strong gains in 2014 and sells at a modest 14.2 times 2015 earnings. Management is very shareholder oriented and has been aggressively both growing its dividend, currently at 2.3 percent, and executing a multi-billion dollar share repurchase program. We expect that business will continue to grow and that China’s regulatory investigation of the company’s pricing will be resolved. While we anticipate considerable fines and concessions to settle the dispute, we believe that the stock is poised for a meaningful move higher as these overhangs dissipate and the company delivers strong and growing earnings and cash flows.

Pzena (Pzena – Value): Hewlett-Packard (symbol: HPQ), a global leader in technology products and services, advanced 46 percent during the year as investors realized their fears of this strong franchises’ demise had been overblown. In addition, an increase in corporate spending on PCs helped the company deliver consensus-beating earnings results. Although we have harvested some profits, HPQ remains an attractive opportunity. Regarding opportunities heading into 2015, we believe the global banks, such as Bank of America, Citigroup and JPMorgan, represent some of the best risk/reward opportunities in our investment universe today. Although investors are focused on regulatory and legal uncertainties, we believe there is a real case for significant earnings upside through normalization of interest rates, securities trading activity and expense rationalization. Coupled with depressed valuations, we see these as compelling investment opportunities.

Craig Blum and Tom Kamp, wrap it up for us with insights into your growth portfolios.

Blum (TCW – Growth): Allergan, which we first purchased in December 2008, was our best performing stock in 2014. We were initially attracted to the company’s cash flow generation and strong portfolio of therapeutic products. In April, Valeant Pharmaceuticals (with Pershing Square in its corner) made an unsolicited bid for the company, valuing it at $47 billion. Seven months later, Actavis entered into an agreement to purchase Allergan for about $66 billion. For 2015 and beyond, we are particularly constructive on Illumina, the market leader in the rapidly growing end market of next generation

gene sequencing. Illumina’s technology is widely used in genetic research and increasingly used for broader functions, such as drug discovery, clinical diagnostics, forensics, agbio and personalized medicine. The pace of innovation in the industry has been staggering: 13 years ago, the sequencing cost per genome was about $100 million. Today, with Illumina’s HiSeqX, the human genome can now be sequenced in under three hours for about $1,000 per genome.

Kamp (Cornerstone – Growth): One of the top performing stocks in the portfolio was Gilead Sciences. We successfully traded around a core position in this name, driven by the fundamentals as we understood them throughout the year. We began the year with a modest position as a result of a trim in late 2013 as the reward-to-risk ratio declined in anticipation of the launch of the company’s blockbuster drug for Hepatitis C, Sovaldi. We used the pull-back in April and May that hit many biotech/pharma stocks and the fears that doctors would hold off treatment in advance of the anticipated all-oral version of the drug to add to our Gilead holdings. As the stock recovered to record levels, we trimmed and ultimately exited in early September, very close to the top in the stock’s price. We exited since the stock price was full relative to each of our valuation methodologies and competition from another company, Abbvie, was coming. Once the competitive product was announced and pharma benefits company Express Scripps signed Abbvie to an exclusive arrangement, Gilead’s stock price sank almost 20 percent. We used that weakness to re-enter the stock since we believed the reaction was overdone.

One of the stocks that we are most excited about is Affiliated Managers Group, Inc. (symbol: AMG), a global asset management company that invests in leading boutique investment management firms. We purchased AMG on a pullback in the company’s valuation in December caused by a slowing in net inflows, a slower rate of acquisitions and a choppy equity market. While net inflows have slowed somewhat, inflows remain well above peer levels. Management recently indicated that the acquisition pipeline is strong, setting up 2015 for a big year. Emerging catalysts of share repurchases and a structurally declining tax rate are also underappreciated by the market. As a result, we believe that AMG should regain its historical average relative market multiple of 1.1 to 1.2x versus its current multiple of 0.9x. With a high reward–risk-ratio, AMG is very attractive to us.

Many thanks to all for sharing excellent insights into your investment philosophy and for perspective that may be useful to individual investors.