UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM N-CSR

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number

 

 

Liberty All-Star Equity Fund

(Exact name of registrant as specified in charter)

 

1290 Broadway, Suite 1100, Denver, Colorado

 

80203

(Address of principal executive offices)

 

(Zip code)

 

Tane T. Tyler, Secretary

Liberty All-Star Equity Fund

1290 Broadway, Suite 1100

Denver, Colorado 80203

(Name and address of agent for service)

 

Registrant’s telephone number, including area code:

303-623-2577

 

 

Date of fiscal year end:

December 31

 

 

Date of reporting period:

June 30, 2007

 

 



 

Item 1. Report of Shareholders

 


 


 

 



 

LIBERTY ALL-STAR® EQUITY FUND

Data Through June 30, 2007

 

Fund Statistics

 

Period End Net Asset Value (NAV)

 

$

9.09

 

 

 

 

 

Period End Market Price

 

$

8.98

 

 

 

 

 

Period End Discount

 

1.2

%

 

 

 

2nd Quarter 2007

 

Year-to-Date

 

 

 

 

 

 

 

Distributions

 

$0.23

 

$0.46

 

 

 

 

 

 

 

Market Price Trading Range

 

$8.48 to $9.19

 

$8.07 to $9.19

 

 

 

 

 

 

 

Premium/(Discount) Range

 

(0.3) to (2.8)%

 

0.8 to (5.9)%

 

 

Performance

 

Shares Valued at NAV

 

8.6

%

9.2

%

 

 

 

 

 

 

Shares Valued at NAV with Dividends Reinvested

 

8.7

%

9.3

%

 

 

 

 

 

 

Shares Valued at Market Price with Dividends Reinvested

 

8.4

%

14.1

%

 

 

 

 

 

 

S&P 500 Index

 

6.3

%

7.0

%

 

 

 

 

 

 

Lipper Large-Cap Core Mutual Fund Average*

 

6.4

%

6.9

%

 

 

 

 

 

 

NAV Reinvested Percentile Rank (1 = best; 100 = worst)

 

8th

 

11th

 

 

 

 

 

 

 

Number of Funds in Category

 

855

 

843

 

 


*   Percentile ranks calculated using the Fund’s NAV Reinvested results within the Lipper Large-Cap Core Openend Mutual Fund Universe.

 

Figures shown for the Fund and the Lipper Large-Cap Core Mutual Fund Average are total returns, which include dividends, after deducting Fund expenses. The return for the unmanaged S&P 500 Index includes dividends. A description of the Lipper benchmark and the S&P 500 Index can be found on page 28.

 

Past performance cannot predict future results. Performance will fluctuate with market conditions. Current performance may be lower or higher than the performance data shown. Performance information does not reflect the deduction of taxes that shareholders would pay on Fund distributions or the sale of Fund shares. An investment in the Fund involves risk, including loss of principal.

 

Shares of closed-end funds frequently trade at a discount to net asset value. The price of the Fund’s shares is determined by a number of factors, several of which are beyond the control of the Fund. Therefore, the Fund cannot predict whether its shares will trade at, below or above net asset value.

 



 

LIBERTY ALL-STAR® EQUITY FUND

PRESIDENT’S LETTER

July 2007

 

Fellow Shareholders:

 

After a flat first quarter, the stock market advanced in the second quarter and recaptured the momentum that it showed throughout the second half of 2006. The widely followed S&P 500 Index gained 6.3 percent for the quarter, while the growth-oriented NASDAQ Composite Index advanced an even stronger 7.7 percent. The S&P 500 set a new record high during the quarter, finally breaking its previous record – set in March 2000 – on May 30. The quarter played out as a classic example of a strong stock market “climbing a wall of worry.”

 

Certainly, there was plenty to worry about, most of it emanating from higher interest rates. Much of the fallout was related to subprime loans. As interest rates rose, many adjustable rate mortgages were reset to higher rates, raising payments for borrowers and thus increasing the likelihood that defaults would rise. If severe enough, the problem was viewed as one that could spill over to the broader economy. Indeed, in June foreclosures ran 87 percent above the rate of June 2006.

 

Those rising interest rates were a source of concern to financial markets, as well. Rates on the benchmark 10-year Treasury hit a five-year intraday high of 5.3 percent in June. The Federal Reserve left its key Fed funds rate unchanged at 5.25 percent at its June meeting, but the Federal Open Market Committee is still concerned about potential inflationary pressures, and appears ready to raise short-term interest rates if that were to occur. There were also fears that rising rates might undercut the record-setting pace of merger and acquisition activity as plentiful liquidity has encouraged acquirers – particularly private equity firms – to leverage their deals.

 

Liberty All-Star Equity Fund posted a strong quarter, comfortably outperforming its comparable benchmarks. The Fund rose 8.6 percent with shares valued at net asset value (NAV) and 8.7 percent with shares valued at NAV with dividends reinvested. In terms of the Fund’s market price return, it rose 8.4 percent for the quarter. The Fund’s quarterly performance ranked it in the 8th percentile of the Lipper Large-Cap Core Mutual Fund Average, meaning that it outperformed 92 percent of peer funds in that universe.

 

Year to date through June 30, shares valued at NAV are ahead 9.2 percent, and 9.3 percent with shares valued at NAV with dividends reinvested. In terms of the Fund’s market price return year to date, it is ahead 14.1 percent. In terms of peer ranking year to date, the Fund’s NAV with dividends reinvested return is in the 11th percentile (ahead of 89 percent of funds with similar investment style).

 

www.all-starfunds.com

USA

 

1



 

Looking more closely, over the quarter stocks in the Russell 3000 Growth Index outperformed stocks in the Russell 3000 Value Index by the widest margin since the first quarter of 2003. As shareholders know, 40 percent of the Fund’s assets are allocated to growth style managers. Value style stocks have consistently outperformed growth stocks for many years, so it is good to see better balance returning to the market. In fact, with all the risks in the market – as described earlier in this letter – we are seeing investors emphasize not just growth but quality growth, which plays to the Fund’s emphasis on quality.

 

Our interview this quarter is with one of our value style managers, David Katz, CFA, President and Chief Investment Officer of Matrix Asset Advisors. Mentioning the performance relationship between value and growth stocks, Matrix’ relative value strategy enables the firm to invest beyond traditional value industries. To see how, I urge you to read the interview that begins on page 7.

 

We are encouraged that the stock market posted a solid second quarter. And we are most pleased that the Fund’s results have more than kept pace. In a stock market facing so many cross currents, we believe – as we have said in the past – that the best path forward is to pursue the Fund’s investment objectives and consistently adhere to its investment strategy and process.

 

 

Sincerely,

 

 

William R. Parmentier, Jr.

President and Chief Executive Officer

Liberty All-Star Equity Fund

 

 

The views express in the President’s letter and the Manager Interview reflect the views of the President and Manager, respectively, as of July 2007 and may not reflect their views on the date this report is first published or anytime thereafter. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for the Fund are based on numerous factors, may not be relied on as an indication of trading intent. References to specific company securities should not be construed as a recommendation or investment advice.

 

SECOND QUARTER REPORT

JUNE 30, 2007

 

2



 

LIBERTY ALL-STAR® EQUITY FUND

TABLE OF DISTRIBUTIONS & RIGHTS OFFERINGS

 

 

 

 

 

RIGHTS OFFERINGS

 

 

 

 

 

 

 

SHARES NEEDED

 

 

 

 

 

 

 

PER SHARE

 

MONTH

 

TO PURCHASE

 

SUBSCRIPTION

 

TAX

 

YEAR

 

DISTRIBUTIONS

 

COMPLETED

 

ONE ADDITIONAL SHARE

 

PRICE

 

CREDITS*

 

1988

 

$

0.64

 

 

 

 

 

 

 

 

 

1989

 

0.95

 

 

 

 

 

 

 

 

 

1990

 

0.90

 

 

 

 

 

 

 

 

 

1991

 

1.02

 

 

 

 

 

 

 

 

 

1992

 

1.07

 

April

 

10

 

$

10.05

 

 

 

1993

 

1.07

 

October

 

15

 

10.41

 

$

0.18

 

1994

 

1.00

 

September

 

15

 

9.14

 

 

 

1995

 

1.04

 

 

 

 

 

 

 

 

 

1996

 

1.18

 

 

 

 

 

 

 

0.13

 

1997

 

1.33

 

 

 

 

 

 

 

0.36

 

1998

 

1.40

 

April

 

20

 

12.83

 

 

 

1999

 

1.39

 

 

 

 

 

 

 

 

 

2000

 

1.42

 

 

 

 

 

 

 

 

 

2001

 

1.20

 

 

 

 

 

 

 

 

 

2002

 

0.88

 

May

 

10

 

8.99

 

 

 

2003

 

0.78

 

 

 

 

 

 

 

 

 

2004

 

0.89

 

July

 

10

*

8.34

 

 

 

2005

 

0.87

 

 

 

 

 

 

 

 

 

2006

 

0.88

 

 

 

 

 

 

 

 

 

2007

 

 

 

 

 

 

 

 

 

 

 

1st quarter

 

0.23

 

 

 

 

 

 

 

 

 

2nd quarter

 

0.23

 

 

 

 

 

 

 

 

 

 


*          The Fund’s net investment income and net realized capital gains exceeded the amount to be distributed under the Fund’s 10 percent distribution policy. In each case, the Fund elected to pay taxes on the undistributed income and passed through a proportionate tax credit to shareholders.

 

**   The number of shares offered was increased by an additional 25% to cover a portion of the over-subscription requests.

 

DISTRIBUTION POLICY - Liberty All-Star Equity Fund’s current policy, in effect since 1988, is to pay distributions on its shares totaling approximately 10 percent of its net asset value per year, payable in four quarterly installments of 2.5 percent of the Fund’s net asset value at the close of the New York Stock Exchange on the Friday prior to each quarterly declaration date. The fixed distributions are not related to the amount of the Fund’s net investment income or net realized capital gains or losses and may be taxed as ordinary income up to the amount of the Fund’s current and accumulated earnings and profits. If, for any calendar year, the total distributions made under the 10 percent pay-out policy exceed the Fund’s net investment income and net realized capital gains, the excess will generally be treated as a non-taxable return of capital, reducing the shareholder’s adjusted basis in his or her shares. If the Fund’s net investment income and net realized capital gains for any year exceed the amount distributed under the 10 percent pay-out policy, the Fund may, in its discretion, retain and not distribute net realized capital gains and pay income tax thereon to the extent of such excess. The Fund retained such excess gains in 1993, 1996 and 1997.

 

DIVIDEND REINVESTMENT PLAN - Through the Fund’s Automatic Dividend Reinvestment and Cash Purchase Plan, the Fund’s shareholders have the opportunity to have their dividends automatically reinvested in additional shares of the Fund. Participants are kept apprised of the status of their account through quarterly statements.

 

For complete information and enrollment forms, please call Investor Assistance toll-free at 1-800- LIB-FUND (1-800-542-3863) weekdays between 9 AM and 5 PM Eastern Time. If your shares are held for you by a broker, bank or other nominee, you should contact the institution holding your shares if you wish to participate in the Plan.

 

3



 

LIBERTY ALL-STAR® EQUITY FUND

TOP 20 HOLDINGS & ECONOMIC SECTORS

as of June 30, 2007 (Unaudited)

 

TOP 20 HOLDINGS*

 

PERCENT OF NET ASSETS

 

Citigroup, Inc.

 

2.40

%

Microsoft Corp.

 

2.14

 

Fannie Mae

 

2.03

 

Schlumberger Ltd.

 

2.00

 

Countrywide Financial Corp.

 

1.96

 

The Progressive Corp.

 

1.72

 

Wal-Mart Stores, Inc.

 

1.60

 

Amazon.com, Inc.

 

1.57

 

Cisco Systems, Inc.

 

1.55

 

Freddie Mac

 

1.42

 

QUALCOMM, Inc.

 

1.42

 

General Electric Co.

 

1.36

 

Pfizer, Inc.

 

1.35

 

Dell, Inc.

 

1.33

 

Bank of America Corp.

 

1.31

 

Google, Inc., Class A

 

1.28

 

Navistar International Corp.

 

1.25

 

Reliant Energy, Inc.

 

1.16

 

Morgan Stanley

 

1.15

 

Annaly Capital Management, Inc.

 

1.07

 

 

 

31.08

%

 

ECONOMIC SECTORS*

 

PERCENT OF NET ASSETS

 

Financials

 

24.20

%

Information Technology

 

21.74

 

Health Care

 

11.93

 

Industrials

 

11.06

 

Consumer Discretionary

 

10.99

 

Energy

 

7.77

 

Consumer Staples

 

4.33

 

Telecommunication Services

 

1.87

 

Utilities

 

1.82

 

Materials

 

1.05

 

Other Net Assets

 

3.24

 

 

 

100.00

%

 


*          Because the Fund is actively managed, there can be no guarantee that the Fund will continue to hold securities of the indicated issuers and sectors in the future.

 

4



 

LIBERTY ALL-STAR® EQUITY FUND

MAJOR STOCK CHANGES IN THE SECOND QUARTER

 

The following are the major ($6.0 million or more) stock changes–both purchases and sales–that were made in the Fund’s portfolio during the second quarter of 2007.

 

SECURITY NAME

 

PURCHASES (SALES)

 

SHARES AS OF 6/30/07

 

 

 

 

 

 

 

PURCHASES

 

 

 

 

 

 

 

 

 

 

 

Annaly Capital Management, Inc.

 

430,025

 

1,068,025

 

 

 

 

 

 

 

Bank of America Corp.

 

192,075

 

387,075

 

 

 

 

 

 

 

Citigroup, Inc.

 

233,400

 

674,825

 

 

 

 

 

 

 

Covidien Ltd*

 

141,900

 

291,225

 

 

 

 

 

 

 

Hewlett-Packard Co.

 

187,800

 

187,800

 

 

 

 

 

 

 

Microsoft Corp.

 

415,100

 

1,047,975

 

 

 

 

 

 

 

Oracle Corp.

 

292,500

 

709,075

 

 

 

 

 

 

 

Pepsico, Inc.

 

167,600

 

167,600

 

 

 

 

 

 

 

The Progressive Corp.

 

270,850

 

1,037,470

 

 

 

 

 

 

 

Staples, Inc.

 

278,650

 

278,650

 

 

 

 

 

 

 

United Technologies Corp.

 

101,500

 

159,900

 

 

 

 

 

 

 

SALES

 

 

 

 

 

 

 

 

 

 

 

JC Penney Co., Inc.

 

(113,800

)

 

 

 

 

 

 

 

JPMorgan Chase & Co.

 

(399,350

)

181,000

 

 

 

 

 

 

 

Kohl’s Corp.

 

(108,100

)

 

 

 

 

 

 

 

Medimmune

 

(351,800

)

 

 

 

 

 

 

 

News Corp.

 

(293,300

)

 

 

 

 

 

 

 

The Procter & Gamble Co.

 

(137,800

)

 

 

 

 

 

 

 

Reliant Energy, Inc.

 

(379,250

)

619,475

 

 

 

 

 

 

 

Vishay Intertechnology, Inc.

 

(590,000

)

 

 

 

 

 

 

 

Wellpoint, Inc.

 

(82,500

)

74,300

 

 


* Adjusted for spin-off from Tyco International, Ltd.

 

5



 

LIBERTY ALL-STAR® EQUITY FUND

INVESTMENT MANAGERS / PORTFOLIO CHARACTERISTICS

 

THE FUND’S ASSETS ARE APPROXIMATELY EQUALLY DISTRIBUTED AMONG THREE VALUE MANAGERS AND TWO GROWTH MANAGERS:

 

 

MANAGERS’ DIFFERING INVESTMENT STRATEGIES ARE REFLECTED IN PORTFOLIO CHARACTERISTICS

 

The portfolio characteristics table below is a regular feature of the Fund’s shareholder reports. It serves as a useful tool for understanding the value of a multi-managed portfolio. The characteristics are different for each of the Fund’s five investment managers. These differences are a reflection of the fact that each pursues a different investment style. The shaded column highlights the characteristics of the Fund as a whole, while the final column shows portfolio characteristics for the S&P 500 Index.

 

PORTFOLIO

CHARACTERISTICS

INVESTMENT STYLE SPECTRUM

AS OF JUNE 30, 2007
(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

S&P

 

 

 

SCHNEIDER

 

PZENA

 

MATRIX

 

CHASE

 

TCW

 

FUND

 

500 INDEX

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of Holdings

 

47

 

41

 

36

 

39

 

27

 

162

*

500

 

Percent of Holdings In Top 10

 

50

%

40

%

38

%

43

%

62

%

19

%

19

%

Weighted Average Market Capitalization (Billions)

 

$

28

 

$

73

 

$

115

 

$

91

 

$

53

 

$

73

 

$

102

 

Average Five-Year Earnings Per Share Growth

 

16

%

12

%

17

%

29

%

37

%

22

%

21

%

Dividend Yield

 

1.4

%

2.1

%

1.7

%

1.1

%

0.5

%

1.4

%

1.8

%

Price/Earnings Ratio

 

15

x

13

x

15

x

20

x

22

x

17

x

16

x

Price/Book Value Ratio

 

2.9

x

2.6

x

3.2

x

5.9

x

5.4

x

3.9

x

3.8

x

 


* Certain holdings are held by more than one manager.

 

6



 

LIBERTY ALL-STAR® EQUITY FUND

MANAGER INTERVIEW

 



David A. Katz, CFA

President and Chief

Investment Officer

Matrix Asset

Advisors, Inc.

 

 

Matrix constructs portfolios with an optimal balance of diversification and concentration

 

Matrix Asset Advisors, Inc. employs 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. The firm follows a systematic and rigorous investment process – using both quantitative and qualitative analysis – and adheres to a strict sell discipline. We recently had the opportunity to interview the firm’s President and Chief Investment Officer, David A. Katz. The Fund’s Investment Adviser, ALPS Advisers, Inc., moderated the interview.

 

What’s your take on the first half of the year? After a flattish first quarter (+0.6 percent for the S&P 500), the market posted a strong second quarter (+6.3 percent including a new record high for the same S&P 500).

 

Most of the year has played out as we thought it would. The overall equity environment is favorable, we think valuations are pretty reasonable, the economy continues to muddle along, and although there’s a question about what the Federal Reserve will do in the upcoming months and quarters, we think the vast majority of the interest rate increase cycle is behind us. All of that, coupled with a great deal of liquidity in the market and a high level of merger and acquisition activity, has given the market a positive bias.

 

“… because value has done so well in the last half-dozen years and because growth has done so poorly, a lot of growth stocks started to meet our valuation criteria.”

 

The one thing that has not happened that we thought would occur is a continuation of mega-cap companies recapturing some of their lost luster. Our very strong sense is that this is a speed bump rather than a change in direction. Mega-caps were strong in the second half of 2006 and that made ‘06 the first year in a long time that the large caps and mega-caps were either on a par with the small and mid-sized companies or actually a little ahead. While the underlying environment and the outlook for the group have gotten a lot better in the first six months of this year, mega-cap stocks haven’t kept pace and wound up lagging the small and mid-sized capitalization range of the market.

 

Growth outperformed value this quarter. Matrix is not exactly a traditional value manager, so whichever style is in favor may not make much of a difference to you. Is that true?

 

Actually, we are very well positioned for growth coming back into favor. We are a value manager, we look at the world through value glasses and we always pay attention to fundamentals and what a business is worth. Traditionally, we are helped by a value market. That said, however, because

 

7



 

value has done so well in the last half-dozen years and because growth has done so poorly, a lot of growth stocks started to meet our valuation criteria. So, if you look at our portfolio today, we are very heavily weighted toward the fallen growth angels of the past. These are wonderful businesses with great records that in 1999 were selling at 35 to 40 times earnings. Today, they’re selling at about 13 to 15 times earnings. So, our sense going into the year was that growth would start to do better on both an absolute and relative basis. You’re seeing the very early signs of that and that plays very well to the portfolio’s positioning.

 

“… from an economic standpoint, the U.S. is slowing while international markets are showing economic strength. That makes mega-cap multinational companies good places to invest.”

 

You mentioned the fallen angels when we spoke for the annual report roundtable. So, it seems you are still finding some of your more attractive opportunities among those stocks.

 

Basically, we think that the fallen angels and the mega-cap growth companies are doing very well on the business front, yet the majority of these stocks have not done anything. So, the fact that they’ve had a mediocre first six months of the year just gives us even greater confidence in the outlook for the balance of the year and into next. Companies like American International Group, Citigroup, Wal-Mart, and Comcast are great businesses with very strong fundamentals whose stocks haven’t done anything. In addition, if you look at where we are from an economic standpoint, the U.S. is slowing while international markets are showing economic strength. That makes mega-cap multinational companies good places to invest.

 

To what extent do you factor in macro or top-down considerations into your investment process, or is it solely a fundamentally-driven, bottom-up process?

 

We are a bottom-up, fundamental manager. The first step in our investment process is quantitative analysis that whittles a universe of 1,500 companies down to 100 or so attractive businesses. Then, we turn to qualitative and fundamental analysis to evaluate that group stock by stock. One facet of our fundamental analysis is a catalyst assessment in which we take into consideration any macro factors that may enter in. But macro factors don’t drive the investment decision. So, for example, when we talk about the mega-cap companies we believe that they’ve become timelier because their fundamentals are more attractive at the same time you’ve got a slowdown in the fundamentals of mid-sized companies. That makes mega-caps more compelling on a relative basis.

 

Your portfolios are usually fairly concentrated both in number of holdings and in sector exposure. Is that a reflection of conviction, a better way to add value or to avoid looking like an index?

 

We’re great believers that you get your best investment returns by having a focused portfolio – diversified, yet focused on your best ideas. The optimal portfolio diversification that we found, in terms of risk and return, comes from having 30 to 40 stocks. That way, you’re diversifying your risk from any

 

8



 

given name, but you really can focus on the stocks that you like best. So, it really is a stock picker’s portfolio. We invest our own money right in our portfolio as we’re all clients of the firm. We happen to believe that if most money managers have their druthers they would prefer to invest in a 30- to 45-stock portfolio. But, many are constrained simply because their firms are too big and they’ve got to buy 100 to 200 stocks simply to put all that money to work.

 

“We’re great believers that you get your best investment returns by having a focused portfolio – diversified, yet focused on your best ideas.”

 

What’s a recent addition to the portion of the Liberty All-Star equity Fund that you manage ... and what’s a recent liquidation from the portfolio?

 

We recently added Covidien, Ltd. To the portfolio in a fairly meaningful way. The company is a spin-out from Tyco International, Ltd., which split into three pieces: Covidien, Tyco Electronics and Tyco International, Ltd. We like all of the pieces but we like Covidien best based on today’s valuation.

 

Covidien is one of the nation’s largest medical products companies, providing instruments, pharmaceuticals and imaging solutions. Generally, we think that the split will allow management to run the business in a much more efficient, shareholder-oriented manner. As a part of Tyco, the business had underperformed in terms of earnings and margins. Now, being a more focused company will allow management to get its act together. The compelling part of the investment case is that medical instrument companies consistently sell north of three and one-half times sales and Covidien is priced at about two times sales. So our strong sense is that as an independent company Covidien will come up and match industry valuations or will be acquired by a strategic partner. So, we look at it as a win/win.

 

That leads into our sale. The last time we spoke for a quarterly report interview we singled out Medimmune as a stock we liked. We thought it was a good business as an independent company, but also felt it made a great deal of sense to be owned by a larger player in the drug group. And in this last quarter Medimmune agreed to be acquired by another large healthcare company, AstraZeneca. Medimmune was one of our largest positions, and our original per-share cost was in the mid-20s. AstraZeneca paid $58 a share for the company and we sold into that strength.

 

Many thanks for the comments.

 

9



 

LIBERTY ALL-STAR® EQUITY FUND

SCHEDULE OF INVESTMENTS

as of June 30, 2007 (unaudited)

 

 

 

SHARES

 

MARKET VALUE

 

 

 

 

 

 

 

COMMON STOCKS (96.76%)

 

 

 

 

 

 

 

 

 

 

 

  CONSUMER DISCRETIONARY (10.99%)

 

 

 

 

 

Auto Components (0.72%)

 

 

 

 

 

Magna International, Inc., Class A

 

87,775

 

$

7,986,647

 

Visteon Corp. (a)

 

302,000

 

2,446,200

 

 

 

 

 

10,432,847

 

 

 

 

 

 

 

Hotels, Restaurants & Leisure (0.93%)

 

 

 

 

 

Carnival Corp.

 

48,925

 

2,386,072

 

McDonald’s Corp.

 

217,300

 

11,030,148

 

 

 

 

 

13,416,220

 

 

 

 

 

 

 

Household Durables (1.67%)

 

 

 

 

 

Centex Corp.

 

146,725

 

5,883,673

 

Pulte Homes, Inc.

 

429,645

 

9,645,530

 

Whirlpool Corp.

 

76,825

 

8,542,940

 

 

 

 

 

27,072,143

 

 

 

 

 

 

 

Internet & Catalog Retail (1.57%)

 

 

 

 

 

Amazon.com, Inc. (a)

 

331,280

 

22,662,865

 

 

 

 

 

 

 

Media (3.36%)

 

 

 

 

 

Comcast Corp., Class A (a)

 

353,000

 

9,869,880

 

Liberty Media Corp.,Capital, Series A (a)

 

44,454

 

5,231,347

 

The McGraw-Hill Companies, Inc.

 

80,300

 

5,466,824

 

Time Warner, Inc.

 

582,000

 

12,245,280

 

The Walt Disney Co.

 

281,100

 

9,596,754

 

XM Satellite Radio Holdings, Inc., Class A (a)

 

501,550

 

5,903,243

 

 

 

 

 

48,313,328

 

 

 

 

 

 

 

Multi-line Retail (0.53%)

 

 

 

 

 

Dollar General Corp.

 

347,000

 

7,606,240

 

 

 

 

 

 

 

Specialty Retail (2.21%)

 

 

 

 

 

GameStop Corp., Class A (a)

 

31,600

 

1,235,560

 

The Gap, Inc.

 

512,000

 

9,779,200

 

Home Depot, Inc.

 

194,600

 

7,657,510

 

Staples, Inc.

 

278,650

 

6,612,365

 

TJX Companies, Inc.

 

236,650

 

6,507,875

 

 

 

 

 

31,792,510

 

 

See Notes to Schedule of Investments and Financial Statements

 

10



 

 

 

SHARES

 

MARKET VALUE

 

 

 

 

 

 

 

COMMON STOCKS (continued)

 

 

 

 

 

 

 

 

 

 

 

•  CONSUMER STAPLES (4.33%)

 

 

 

 

 

Beverages (1.53%)

 

 

 

 

 

The Coca-Cola Co.

 

214,700

 

$

11,230,957

 

PepsiCo, Inc.

 

167,600

 

10,868,860

 

 

 

 

 

22,099,817

 

 

 

 

 

 

 

Food & Staples Retailing (1.94%)

 

 

 

 

 

CVS Caremark Corp.

 

73,000

 

2,660,850

 

Walgreen Co.

 

51,900

 

2,259,726

 

Wal-Mart Stores, Inc.

 

480,075

 

23,096,408

 

 

 

 

 

28,016,984

 

 

 

 

 

 

 

Food Products (0.86%)

 

 

 

 

 

Kraft Foods, Inc.

 

174,575

 

6,153,769

 

Sara Lee Corp.

 

191,923

 

3,339,460

 

Smithfield Foods, Inc. (a)

 

14,675

 

451,843

 

Tyson Foods, Inc., Class A

 

104,000

 

2,396,160

 

 

 

 

 

12,341,232

 

 

 

 

 

 

 

  ENERGY (7.77%)

 

 

 

 

 

Energy Equipment & Services (2.00%)

 

 

 

 

 

Schlumberger Ltd.

 

338,430

 

28,746,244

 

 

 

 

 

 

 

Oil, Gas & Consumable Fuels (5.77%)

 

 

 

 

 

Arch Coal, Inc.

 

274,800

 

9,563,040

 

BP PLC (b)

 

88,200

 

6,362,748

 

Cameco Corp.

 

90,900

 

4,612,266

 

Chevron Corp.

 

140,500

 

11,835,720

 

ConocoPhillips

 

143,000

 

11,225,500

 

Consol Energy, Inc.

 

304,175

 

14,025,509

 

Devon Energy Corp.

 

52,000

 

4,071,080

 

Exxon Mobil Corp.

 

158,800

 

13,320,144

 

Massey Energy Co.

 

305,950

 

8,153,568

 

 

 

 

 

83,169,575

 

  FINANCIALS (24.20%)

 

 

 

 

 

Capital Markets (2.05%)

 

 

 

 

 

The Bank of New York Co., Inc.

 

68,100

 

2,822,064

 

Franklin Resources, Inc.

 

24,100

 

3,192,527

 

Lehman Brothers Holdings, Inc.

 

40,275

 

3,001,293

 

Merrill Lynch & Co., Inc.

 

47,300

 

3,953,334

 

Morgan Stanley

 

197,375

 

16,555,815

 

 

 

 

 

29,525,033

 

 

See Notes to Schedule of Investments and Financial Statements

 

11



 

 

 

SHARES

 

MARKET VALUE

 

 

 

 

 

 

 

COMMON STOCKS (continued)

 

 

 

 

 

 

 

 

 

 

 

Commercial Banks (1.24%)

 

 

 

 

 

Comerica, Inc.

 

93,825

 

$

5,579,773

 

Commerce Bancorp, Inc.

 

332,210

 

12,288,448

 

 

 

 

 

17,868,221

 

 

 

 

 

 

 

Consumer Finance (0.56%)

 

 

 

 

 

Capital One Financial Corp.

 

62,375

 

4,892,695

 

SLM Corp.

 

54,000

 

3,109,320

 

 

 

 

 

8,002,015

 

 

 

 

 

 

 

Diversified Financial Services (4.32%)

 

 

 

 

 

Bank of America Corp.

 

387,075

 

18,924,097

 

Citigroup, Inc.

 

674,825

 

34,611,774

 

JPMorgan Chase & Co.

 

181,000

 

8,769,450

 

 

 

 

 

62,305,321

 

 

 

 

 

 

 

Insurance (8.78%)

 

 

 

 

 

The Allstate Corp.

 

182,500

 

11,225,575

 

American International Group, Inc.

 

213,550

 

14,954,906

 

Aon Corp.

 

72,650

 

3,095,617

 

Fidelity National Financial, Inc.

 

252,825

 

5,991,952

 

First American Corp.

 

138,175

 

6,839,662

 

Genworth Financial, Inc., Class A

 

193,625

 

6,660,700

 

Hartford Financial Services Group, Inc.

 

53,700

 

5,289,987

 

Lincoln National Corp.

 

61,500

 

4,363,425

 

MBIA, Inc.

 

31,925

 

1,986,374

 

MetLife, Inc.

 

195,300

 

12,592,944

 

The Progressive Corp.

 

1,037,470

 

24,826,657

 

RenaissanceRe Holdings Ltd.

 

53,225

 

3,299,418

 

Torchmark Corp.

 

166,300

 

11,142,100

 

Unum Group

 

61,850

 

1,614,904

 

XL Capital Ltd., Class A

 

149,025

 

12,561,317

 

 

 

 

 

126,445,538

 

RealEstate Investment Trusts (1.07%)

 

 

 

 

 

Annaly Capital Management, Inc.

 

1,068,025

 

15,400,921

 

 

See Notes to Schedule of Investments and Financial Statements

 

12



 

 

 

SHARES

 

MARKET VALUE

 

 

 

 

 

 

 

COMMON STOCKS (continued)

 

 

 

 

 

 

 

 

 

 

 

Thrifts & Mortgage Finance (6.18%)

 

 

 

 

 

Countrywide Financial Corp.

 

775,875

 

$

28,203,056

 

Fannie Mae

 

448,541

 

29,303,184

 

Freddie Mac

 

336,650

 

20,434,655

 

Hudson City Bancorp, Inc.

 

75,850

 

926,887

 

IndyMac Bancorp, Inc.

 

113,950

 

3,323,921

 

Radian Group, Inc.

 

17,875

 

965,250

 

Washington Mutual, Inc.

 

137,425

 

5,859,802

 

 

 

 

 

89,016,755

 

 

 

 

 

 

 

  HEALTH CARE (11.93%)

 

 

 

 

 

Biotechnology (2.49%)

 

 

 

 

 

Amgen, Inc. (a)

 

82,350

 

4,553,132

 

Cephalon, Inc. (a)

 

51,100

 

4,107,929

 

Genentech, Inc. (a)

 

114,600

 

8,670,636

 

Genzyme Corp. (a)

 

112,900

 

7,270,760

 

Gilead Sciences, Inc. (a)

 

291,400

 

11,297,578

 

 

 

 

 

35,900,035

 

 

 

 

 

 

 

Health Care Equipment & Supplies (3.50%)

 

 

 

 

 

Baxter International, Inc.

 

75,400

 

4,248,036

 

Becton Dickinson & Co.

 

37,900

 

2,823,550

 

Boston Scientific Corp. (a)

 

637,175

 

9,774,264

 

Covidien Ltd. (a)

 

291,225

 

12,551,798

 

St. Jude Medical, Inc. (a)

 

99,500

 

4,128,255

 

Stryker Corp.

 

87,700

 

5,532,993

 

Varian Medical Systems, Inc. (a)

 

145,700

 

6,193,707

 

Zimmer Holdings, Inc. (a)

 

60,800

 

5,161,312

 

 

 

 

 

50,413,915

 

 

 

 

 

 

 

Health Care Providers & Services (1.24%)

 

 

 

 

 

AmerisourceBergen Corp.

 

104,625

 

5,175,799

 

Omnicare, Inc.

 

188,100

 

6,782,886

 

WellPoint, Inc. (a)

 

74,300

 

5,931,369

 

 

 

 

 

17,890,054

 

 

 

 

 

 

 

Health Care Technology (0.33%)

 

 

 

 

 

Cerner Corp. (a)

 

84,732

 

4,700,084

 

 

See Notes to Schedule of Investments and Financial Statements

 

13



 

 

 

SHARES

 

MARKET VALUE

 

 

 

 

 

 

 

COMMON STOCKS (continued)

 

 

 

 

 

 

 

 

 

 

 

Pharmaceuticals (4.37%)

 

 

 

 

 

Bristol-Myers Squibb Co.

 

198,775

 

$

6,273,339

 

Johnson & Johnson

 

242,575

 

14,947,471

 

Pfizer, Inc.

 

763,200

 

19,515,024

 

Teva Pharmaceutical Industries Ltd. (b)

 

283,000

 

11,673,750

 

Wyeth

 

185,000

 

10,607,900

 

 

 

 

 

63,017,484

 

 

 

 

 

 

 

  INDUSTRIALS (11.06%)

 

 

 

 

 

Aerospace & Defense (4.34%)

 

 

 

 

 

The Boeing Co.

 

49,950

 

4,803,192

 

Bombardier, Inc., Class B (a)

 

934,325

 

5,613,406

 

General Dynamics Corp.

 

138,800

 

10,856,936

 

Goodrich Corp.

 

64,200

 

3,823,752

 

L-3 Communications Holdings, Inc.

 

25,300

 

2,463,967

 

Lockheed Martin Corp.

 

73,700

 

6,937,381

 

Northrop Grumman Corp.

 

64,675

 

5,036,242

 

Precision Castparts Corp.

 

29,600

 

3,592,256

 

Rockwell Collins, Inc.

 

113,900

 

8,045,896

 

United Technologies Corp.

 

159,900

 

11,341,707

 

 

 

 

 

62,514,735

 

 

 

 

 

 

 

Air Freight & Logistics (0.94%)

 

 

 

 

 

C.H. Robinson Worldwide, Inc.

 

149,845

 

7,869,859

 

Expeditors International of Washington, Inc.

 

135,090

 

5,579,217

 

 

 

 

 

13,449,076

 

 

 

 

 

 

 

Airlines (0.01%)

 

 

 

 

 

Southwest Airlines Co.

 

13,100

 

195,321

 

 

 

 

 

 

 

Industrial Conglomerates (2.47%)

 

 

 

 

 

3M Co.

 

126,500

 

10,978,935

 

General Electric Co.

 

511,300

 

19,572,564

 

Tyco International Ltd.

 

93,250

 

5,005,660

 

 

 

 

 

35,557,159

 

 

See Notes to Schedule of Investments and Financial Statements

 

14



 

 

 

SHARES

 

MARKET VALUE

 

 

 

 

 

 

 

COMMON STOCKS (continued)

 

 

 

 

 

 

 

 

 

 

 

Machinery (2.85%)

 

 

 

 

 

AGCO Corp. (a)

 

191,800

 

$

8,326,038

 

Danaher Corp.

 

59,800

 

4,514,900

 

Deere & Co.

 

84,800

 

10,238,752

 

Navistar International Corp. (a)

 

272,200

 

17,965,200

 

 

 

 

 

41,044,890

 

 

 

 

 

 

 

Road & Rail (0.45%)

 

 

 

 

 

CSX Corp.

 

80,025

 

3,607,527

 

Union Pacific Corp.

 

25,150

 

2,896,022

 

 

 

 

 

6,503,549

 

 

 

 

 

 

 

  INFORMATION TECHNOLOGY (21.74%)

 

 

 

 

 

Communications Equipment (4.25%)

 

 

 

 

 

Alcatel-Lucent (b)

 

901,648

 

12,623,072

 

Cisco Systems, Inc. (a)

 

800,700

 

22,299,495

 

Garmin Ltd.

 

48,200

 

3,565,354

 

Motorola, Inc.

 

130,825

 

2,315,602

 

QUALCOMM, Inc.

 

470,500

 

20,414,995

 

 

 

 

 

61,218,518

 

 

 

 

 

 

 

Computers & Peripherals (3.51%)

 

 

 

 

 

Dell, Inc. (a)

 

671,975

 

19,184,886

 

EMC Corp. (a)

 

585,900

 

10,604,790

 

Hewlett-Packard Co.

 

187,800

 

8,379,636

 

Network Appliance, Inc. (a)

 

421,715

 

12,314,078

 

 

 

 

 

50,483,390

 

 

 

 

 

 

 

Electronic Equipment & Instruments (1.12%)

 

 

 

 

 

AU Optronics Corp. (b)

 

520,803

 

8,957,812

 

Celestica, Inc. (a)

 

298,100

 

1,863,125

 

Tyco Electronics Ltd. (a)

 

137,225

 

5,360,008

 

 

 

 

 

16,180,945

 

 

 

 

 

 

 

Internet Software & Services (2.42%)

 

 

 

 

 

eBay, Inc. (a)

 

316,000

 

10,168,880

 

Google, Inc., Class A (a)

 

35,300

 

18,475,314

 

VeriSign, Inc. (a)

 

197,795

 

6,276,035

 

 

 

 

 

34,920,229

 

 

See Notes to Schedule of Investments and Financial Statements

 

15



 

 

 

SHARES

 

MARKET VALUE

 

 

 

 

 

 

 

COMMON STOCKS (continued)

 

 

 

 

 

 

 

 

 

 

 

IT Services (3.17%)

 

 

 

 

 

Accenture Ltd.

 

217,200

 

$

9,315,708

 

Affiliated Computer Services, Inc., Class A (a)

 

131,375

 

7,451,590

 

BearingPoint, Inc. (a)

 

479,930

 

3,508,288

 

Computer Sciences Corp. (a)

 

50,950

 

3,013,693

 

First Data Corp.

 

356,000

 

11,630,520

 

The Western Union Co.

 

513,000

 

10,685,790

 

 

 

 

 

45,605,589

 

 

 

 

 

 

 

Semiconductors & Semiconductor Equipment (1.50%)

 

 

 

 

 

Analog Devices, Inc.

 

90,800

 

3,417,712

 

Intel Corp.

 

385,000

 

9,147,600

 

International Rectifier Corp. (a)

 

110,553

 

4,119,205

 

Novellus Systems, Inc. (a)

 

74,800

 

2,122,076

 

NVIDIA Corp. (a)

 

66,300

 

2,738,853

 

 

 

 

 

21,545,446

 

 

 

 

 

 

 

Software (5.77%)

 

 

 

 

 

Autodesk, Inc. (a)

 

241,660

 

11,377,353

 

CA, Inc.

 

330,675

 

8,541,335

 

Microsoft Corp.

 

1,047,975

 

30,883,824

 

Oracle Corp. (a)

 

709,075

 

13,975,868

 

Salesforce.com, Inc. (a)

 

331,700

 

14,216,662

 

Symantec Corp. (a)

 

205,200

 

4,145,040

 

 

 

 

 

83,140,082

 

 

 

 

 

 

 

  MATERIALS (1.05%)

 

 

 

 

 

Chemicals (0.79%)

 

 

 

 

 

Cytec Industries, Inc.

 

29,850

 

1,903,535

 

Potash Corp. of Saskatchewan, Inc.

 

43,500

 

3,391,695

 

Praxair, Inc.

 

84,700

 

6,097,553

 

 

 

 

 

11,392,783

 

 

 

 

 

 

 

Metals & Mining (0.26%)

 

 

 

 

 

Allegheny Technologies, Inc.

 

36,000

 

3,775,680

 

 

See Notes to Schedule of Investments and Financial Statements

 

16



 

 

 

SHARES

 

MARKET VALUE

 

 

 

 

 

 

 

COMMON STOCKS (continued)

 

 

 

 

 

 

 

 

 

 

 

  TELECOMMUNICATION SERVICES (1.87%)

 

 

 

 

 

Wireless Telecommunication Services (1.87%)

 

 

 

 

 

America Movil, S.A.B. de C.V. (b)

 

232,300

 

$

14,386,339

 

China Mobile Ltd. (b)

 

119,000

 

6,414,100

 

Mobile TeleSystems (b)

 

52,700

 

3,192,039

 

Sprint Nextel Corp.

 

140,200

 

2,903,542

 

 

 

 

 

26,896,020

 

 

 

 

 

 

 

  UTILITIES (1.82%)

 

 

 

 

 

Electric Utilities (1.16%)

 

 

 

 

 

Reliant Energy, Inc. (a)

 

619,475

 

16,694,851

 

 

 

 

 

 

 

Multi-Utilities (0.66%)

 

 

 

 

 

Sempra Energy

 

78,675

 

4,659,920

 

Wisconsin Energy Corp., Series C

 

110,200

 

4,874,146

 

 

 

 

 

9,534,066

 

 

 

 

 

 

 

TOTAL COMMON STOCKS (COST OF $1,208,788,386)

 

 

 

$

1,393,807,707

 

 

 

 

 

 

 

EXCHANGETRADED FUNDS (0.04%)

 

 

 

 

 

 

 

 

 

 

 

  EXCHANGE TRADED FUNDS (0.04%)

 

 

 

 

 

iShares Russell 1000 Value Index Fund
(COST OF $558,268)

 

6,350

 

550,799

 

 

See Notes to Schedule of Investments and Financial Statements

 

17



 

 

 

PAR VALUE

 

MARKET VALUE

 

 

 

 

 

 

 

SHORT TERM INVESTMENTS (3.16%)

 

 

 

 

 

 

 

 

 

 

 

  REPURCHASE AGREEMENT (3.16%)

 

 

 

 

 

Repurchase agreement with State Street Bank & Trust Co., dated 06/29/2007, due 07/02/2007 at 4.65%, collateralized by several U.S. Treasury Bonds with various maturity dates, market value of $46,426,378 (repurchase proceeds of $45,523,634) (COST OF $45,506,000)

 

$

45,506,000

 

$

45,506,000

 

 

 

 

 

 

 

TOTAL INVESTMENTS (99.96%) (COST $1,254,852,654)(C)

 

 

 

$

1,439,864,509

 

OTHER ASSETS IN EXCESS OF LIABILITIES (0.04%)

 

 

 

632,022

 

NET ASSETS (100.00%)

 

 

 

$

1,440,496,531

 

NET ASSETS PER SHARE (158,519,711 SHARES OUTSTANDING)

 

 

 

$

9.09

 

 


Notes to Schedule of Investments:

 

 

 

(a)

 

Non-income producing security

 

 

 

(b)

 

American Depositary Receipt

 

 

 

(c)

 

Cost of investments for federal income tax purposes is $1,262,364,527

 

 

 

 

 

 

 

 

 

 

 

Gross unrealized appreciation and depreciation at June 30, 2007 based on cost of investments for federal income tax purposes is as follows:

 

 

 

 

 

 

 

 

 

 

 

Gross unrealized appreciation

 

$

222,603,682

 

 

 

Gross unrealized depreciation

 

(45,103,700

)

 

 

Net unrealized appreciation

 

$

177,499,982

 

 

See Notes to Financial Statements

 

18



 

LIBERTY ALL-STAR® EQUITY FUND

STATEMENTS OF ASSETS AND LIABILITIES

June 30, 2007 (Unaudited)

 

ASSETS:

 

 

 

Investments at market value (identified cost $1,254,852,654)

 

$

1,439,864,509

 

Cash

 

2,456

 

Receivable for investments sold

 

8,437,050

 

Dividends and interest receivable

 

997,979

 

Prepaid and other assets

 

124,520

 

 

 

 

 

TOTAL ASSETS

 

1,449,426,514

 

 

 

 

 

LIABILITIES:

 

 

 

Payable for investments purchased

 

7,476,361

 

Investment advisory fees payable

 

822,694

 

Payable for administration, pricing and bookkeeping fees

 

169,470

 

Accrued expenses

 

461,458

 

 

 

 

 

TOTAL LIABILITIES

 

8,929,983

 

 

 

 

 

NET ASSETS

 

$

1,440,496,531

 

 

 

 

 

NET ASSETS REPRESENTED BY:

 

 

 

Paid-in capital (unlimited number of shares of beneficial interest without par value authorized; 158,519,711 shares outstanding)

 

$

1,243,035,951

 

Undistributed net investment loss on investments and foreign currency transactions

 

(68,304,806

)

Accumulated net realized gain on investments and foreign currency transactions

 

80,753,531

 

Net unrealized appreciation on investments and foreign currency translations

 

185,011,855

 

 

 

 

 

TOTAL NET ASSETS APPLICABLETO OUTSTANDING SHARES OF BENEFICIAL INTEREST
($9.09 PER SHARE)

 

$

1,440,496,531

 

 

See Notes to Financial Statements

 

19



 

LIBERTY ALL-STAR® EQUITY FUND

STATEMENT OF OPERATIONS

June 30, 2007 (Unaudited)

 

INVESTMENT INCOME:

 

 

 

 

 

Dividends

 

 

 

$

9,185,494

 

Interest

 

 

 

1,450,213

 

 

 

 

 

 

 

TOTAL INVESTMENT INCOME (NETOF FOREIGN TAXES WITHHELD AT SOURCE WHICH AMOUNTED TO $26,143)

 

 

 

10,635,707

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

Investment advisory fee

 

$

4,870,537

 

 

 

Administrative fee

 

1,217,167

 

 

 

Pricing and bookkeeping fees

 

83,420

 

 

 

Audit fees

 

25,063

 

 

 

Custodian fee

 

44,811

 

 

 

Legal fees

 

163,129

 

 

 

NYSE fees

 

64,033

 

 

 

Shareholder communication expenses

 

199,216

 

 

 

Transfer agent fees

 

46,177

 

 

 

Trustees’ fees and expenses

 

87,856

 

 

 

Miscellaneous expenses

 

70,989

 

 

 

 

 

 

 

 

 

TOTAL EXPENSES

 

 

 

6,872,398

 

 

 

 

 

 

 

NET INVESTMENT INCOME

 

 

 

3,763,309

 

 

 

 

 

 

 

REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY:

 

 

 

 

 

Net realized gain on:

 

 

 

 

 

Investments

 

91,509,929

 

 

 

Foreign currency transactions

 

154,312

 

 

 

 

 

 

 

 

 

Net realized gain on investment transactions and foreign currency

 

 

 

91,664,241

 

 

 

 

 

 

 

Net unrealized appreciation on investments and foreign currency:

 

 

 

 

 

Beginning of the year

 

156,123,347

 

 

 

End of year

 

185,011,855

 

 

 

 

 

 

 

 

 

Net change in unrealized appreciation

 

 

 

28,888,508

 

 

 

 

 

 

 

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

 

 

 

$

124,316,058

 

 

See Notes to Financial Statements

 

20



 

LIBERTY ALL-STAR® EQUITY FUND

STATEMENT OF CHANGES IN NET ASSETS

 

 

 

SIX MONTHS ENDED

 

YEAR ENDED

 

 

 

JUNE 30, 2007

 

DECEMBER 31,

 

 

 

(UNAUDITED)

 

2006

 

 

 

 

 

 

 

OPERATIONS

 

 

 

 

 

Net investment income

 

$

3,763,309

 

$

5,752,110

 

Net realized gain on investment transactions

 

 

 

 

 

and foreign currency

 

91,664,241

 

124,743,447

 

Net change in unrealized appreciation

 

28,888,508

 

(7,579,082

)

Net increase in net assets resulting from operations

 

124,316,058

 

122,916,475

 

 

 

 

 

 

 

DISTRIBUTIONS DECLARED FROM:

 

 

 

 

 

Net investment income

 

(72,068,115

)

(5,753,686

)

Net realized gain on investments

 

 

(124,889,788

)

Paid-in capital

 

 

(5,402,964

)

Total distributions

 

(72,068,115

)

(136,046,438

)

 

 

 

 

 

 

CAPITAL TRANSACTIONS

 

 

 

 

 

Dividend reinvestments

 

16,482,541

 

16,734,378

 

Total increase in net assets

 

68,730,484

 

3,604,415

 

 

 

 

 

 

 

NET ASSETS:

 

 

 

 

 

Beginning of year

 

1,371,766,047

 

1,368,161,632

 

End of year (including undistributed net investment income (loss) of $(68,304,806) and $0, respectively)

 

$

1,440,496,531

 

$

1,371,766,047

 

 

See Notes to Financial Statements

 

21



 

LIBERTY ALL-STAR® EQUITY FUND

FINANCIAL HIGHLIGHTS

 

 

 

SIX MONTHS ENDED

 

 

 

JUNE 30, 2007

 

 

 

(UNAUDITED)

 

 

 

 

 

PER SHARE OPERATING PERFORMANCE:

 

 

 

Net asset value at beginning of year

 

$

8.76

 

Income from Investment Operations:

 

 

 

Net investment income

 

0.03

 

Net realized and unrealized gain (loss) on investments and foreign currency

 

0.76

 

Total from Investment Operations

 

0.79

 

Less Distributions from:

 

 

 

Net investment income

 

(0.46

)

Net realized gain

 

 

Paid-in capital

 

 

Total Distributions

 

(0.46

)

Change due to rights offering (a)

 

 

Total Distributions and Rights Offering

 

(0.46

)

Net asset value at end of period

 

$

9.09

 

Market price at end of period

 

$

8.98

 

TOTAL INVESTMENT RETURN FOR SHAREHOLDERS: (b)

 

 

 

Based on net asset value

 

9.3

%(d)

Based on market price

 

14.1

%(d)

RATIO AND SUPPLEMENTAL DATA:

 

 

 

Net assets at end of period (millions)

 

$

1,440

 

Ratio of expenses to average net assets (c)

 

0.99

%(e)

Ratio of net investment income to average net assets (c)

 

0.54

%(e)

Portfolio turnover rate

 

32

%(d)

 


(a)

Effect of All-Star’s rights offerings for shares at a price below net asset value.

(b)

Calculated assuming all distributions reinvested at actual reinvestment price and all rights offerings were fully subscribed under the terms of each offering.

(c)

The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%.

(d)

Not Annualized.

(e)

Annualized.

 

See Notes to Financial Statements

 

22

 



 

LIBERTY ALL-STAR® EQUITY FUND

FINANCIAL HIGHLIGHTS

 

YEAR ENDED DECEMBER 31,

 

2006

 

2005

 

2004

 

2003

 

2002

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

8.85

 

$

9.30

 

$

9.13

 

$

7.14

 

$

10.65

 

 

 

 

 

 

 

 

 

 

 

0.04

 

0.02

 

0.02

 

0.01

 

0.01

 

0.75

 

0.40

 

1.09

 

2.76

 

(2.56

)

0.79

 

0.42

 

1.11

 

2.77

 

(2.55

)

 

 

 

 

 

 

 

 

 

 

(0.04

)

(0.02

)

(0.02

)

(0.01

)

(0.01

)

(0.81

)

(0.56

)

(0.66

)

(0.30

)

(0.02

)

(0.03

)

(0.29

)

(0.21

)

(0.47

)

(0.85

)

(0.88

)

(0.87

)

(0.89

)

(0.78

)

(0.88

)

 

 

(0.05

)

 

(0.08

)

(0.88