Liberty All-Star Equity Fund



Washington, D.C. 20549




Investment Company Act file number: 811-04809


(Exact name of registrant as specified in charter)

1290 Broadway, Suite 1100, Denver, Colorado 80203

(Address of principal executive offices) (Zip code)

Tané T. Tyler, Esq.

ALPS Fund Services, Inc.

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: January 1 – March 31, 2010

Item 1 – Schedule of Investments.



As of March 31, 2010 (Unaudited)







Auto Components (1.52%)


Johnson Controls, Inc.

   122,000    $ 4,024,780

Magna International, Inc., Class A(a)

   179,315      11,090,633

Diversified Consumer Services (0.58%)


Apollo Group, Inc., Class A(a)

   93,620      5,737,970

Hotels, Restaurants & Leisure (1.16%)


Carnival Corp.

   220,330      8,566,430

Yum! Brands, Inc.

   78,600      3,012,738

Household Durables (1.21%)


DR Horton, Inc.

   196,720      2,478,672

Fortune Brands, Inc.

   1,975      95,807

NVR, Inc.(a)

   10,285      7,472,053

Pulte Group, Inc.(a)

   173,871      1,956,049

Internet & Catalog Retail (1.19%), Inc.(a)

   75,870      10,297,835, Inc.(a)

   5,950      1,517,250

Media (2.22%)


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

   87,319      3,175,792

The McGraw-Hill Cos., Inc.

   190,800      6,802,020

Omnicom Group, Inc.

   182,850      7,096,409

Scripps Networks Interactive, Inc., Class A

   52,290      2,319,061

The Walt Disney Co.

   76,889      2,684,195

Multi-Line Retail (1.60%)


J.C. Penney Co., Inc.

   308,830      9,935,061

Nordstrom, Inc.

   57,832      2,362,437

Target Corp.

   68,218      3,588,267

Specialty Retail (1.93%)


Best Buy Co., Inc.

   77,319      3,289,150

Guess?, Inc.

   45,711      2,147,503

The Home Depot, Inc.

   76,600      2,478,010

The Sherwin-Williams Co.

   79,350      5,370,408

Staples, Inc.

   250,000      5,847,500



Beverages (0.19%)


The Coca-Cola Company

   35,000    $ 1,925,000

Food & Staples Retailing (2.18%)


Costco Wholesale Corp.

   127,560      7,616,608

CVS Caremark Corp.

   121,300      4,434,728

Walgreen Co.

   178,500      6,620,565

Wal-Mart Stores, Inc.

   52,700      2,930,120

Food Products (0.98%)


General Mills, Inc.

   39,518      2,797,479

Kraft Foods, Inc.

   133,150      4,026,456

Smithfield Foods, Inc.(a)

   17,040      353,410

Tyson Foods, Inc., Class A

   134,542      2,576,479

Household Products (0.95%)


Colgate-Palmolive Co.

   23,548      2,007,703

The Procter & Gamble Co.

   117,900      7,459,533

Personal Products (0.42%)


Avon Products, Inc.

   123,975      4,199,033

Tobacco (0.70%)


Philip Morris International, Inc.

   132,509      6,911,669

uENERGY (11.70%)


Energy Equipment & Services (2.72%)


FMC Technologies, Inc.(a)

   69,210      4,473,042

Oceaneering International, Inc.(a)

   102,400      6,501,376

Schlumberger Ltd.

   139,621      8,860,349

Tidewater, Inc.

   92,000      4,348,840

Weatherford International Ltd.(a)

   176,584      2,800,622

Oil, Gas & Consumable Fuels (8.98%)


Anadarko Petroleum Corp.

   71,710      5,222,640

Apache Corp.

   37,100      3,765,650

Arch Coal, Inc.

   482,885      11,033,922

BP Plc(b)

   82,629      4,715,637

Chesapeake Energy Corp.

   507,194      11,990,066

Chevron Corp.

   76,000      5,763,080


   129,000      6,600,930

Consol Energy, Inc.

   120,945      5,159,514

Devon Energy Corp.

   105,000      6,765,150

Exxon Mobil Corp.

   121,400      8,131,372

Occidental Petroleum Corp.

   74,000      6,255,960

Petrohawk Energy Corp.(a)

   282,858      5,736,360

Valero Energy Corp.

   406,950      8,016,915

uFINANCIALS (20.53%)


Capital Markets (3.98%)


Bank of New York Mellon Corp.

   230,000    $ 7,102,400

The Charles Schwab Corp.

   222,600      4,160,394

The Goldman Sachs Group, Inc.

   20,404      3,481,535

Morgan Stanley

   327,150      9,582,223

State Street Corp.

   201,500      9,095,710


   374,100      6,090,348

Commercial Banks (2.93%)


Comerica, Inc.

   106,625      4,056,015

PNC Financial Services Group, Inc.

   250,476      14,953,417

Wells Fargo & Co.

   324,570      10,100,619

Consumer Finance (2.25%)


American Express Co.

   135,000      5,570,100

Capital One Financial Corp.

   92,125      3,814,896

Mastercard, Inc., Class A

   15,286      3,882,644

Visa, Inc., Class A

   99,600      9,066,588

Diversified Financial Services (5.23%)


Bank of America Corp.

   1,458,371      26,031,922

Citigroup, Inc.(a)

   1,729,313      7,003,718

IntercontinentalExchange, Inc.(a)

   68,218      7,652,695

JPMorgan Chase & Co.

   251,275      11,244,556

Insurance (5.21%)


ACE Ltd.

   77,500      4,053,250

Aflac, Inc.

   19,690      1,068,970

The Allstate Corp.

   382,535      12,359,706

Assured Guaranty Ltd.

   228,219      5,013,972

Axis Capital Holdings Ltd.

   167,350      5,231,361

Brown & Brown, Inc.

   115,325      2,066,624

Fidelity National Financial, Inc.

   251,995      3,734,566

Genworth Financial, Inc., Class A(a)

   144,215      2,644,903

The Hartford Financial Services Group, Inc.

   86,500      2,458,330

RenaissanceRe Holdings Ltd.

   35,145      1,994,830

Torchmark Corp.

   130,325      6,973,691

Willis Group Holdings Plc

   130,025      4,068,482

Real Estate Investment Trusts (0.93%)


Annaly Capital Management, Inc.

   406,339      6,980,904

Redwood Trust, Inc.

   148,420      2,288,636

uHEALTH CARE (10.28%)


Biotechnology (2.72%)


Celgene Corp.(a)

   68,684      4,255,661

Genzyme Corp.(a)

   60,000      3,109,800

Gilead Sciences, Inc.(a)

   327,771      14,907,025

Myriad Genetics, Inc.(a)

   198,368      4,770,750

Health Care Equipment & Supplies (3.38%)


Boston Scientific Corp.(a)

   11,245    $ 81,189

Covidien Ltd.

   86,000      4,324,080

Intuitive Surgical, Inc.(a)

   14,700      5,117,511

Medtronic, Inc.

   57,000      2,566,710

NuVasive, Inc.(a)

   22,601      1,021,565

St. Jude Medical, Inc.(a)

   109,656      4,501,379

Varian Medical Systems, Inc.(a)

   157,700      8,725,541

Zimmer Holdings, Inc.(a)

   121,800      7,210,560

Health Care Providers & Services (1.13%)


Aetna, Inc.

   154,825      5,435,906

Brookdale Senior Living, Inc.(a)

   142,594      2,970,233

WellPoint, Inc.(a)

   42,882      2,760,743

Health Care Technology (0.62%)


Cerner Corp.(a)

   72,332      6,152,560

Life Sciences Tools & Services (0.65%)


Life Technologies Corp.(a)

   123,400      6,450,118

Pharmaceuticals (1.78%)


Allergan, Inc.

   81,000      5,290,920

Bristol-Myers Squibb Co.

   208,442      5,565,401

Johnson & Johnson

   48,375      3,154,050

Teva Pharmaceutical Industries Ltd.(b)

   58,732      3,704,815



Aerospace & Defense (3.29%)


Alliant Techsystems, Inc.(a)

   8,414      684,058

The Boeing Co.

   156,565      11,368,185

Honeywell International, Inc.

   133,579      6,047,121

L-3 Communications Holdings, Inc.

   65,625      6,013,219

Northrop Grumman Corp.

   130,525      8,558,524

Air Freight & Logistics (1.26%)


C.H. Robinson Worldwide, Inc.

   150,145      8,385,598

Expeditors International of Washington, Inc.

   113,190      4,178,975

Commercial Services & Supplies (1.20%)


The Dun & Bradstreet Corp.

   28,000      2,083,760

Monster Worldwide, Inc.(a)

   420,000      6,976,200

Quanta Services, Inc.(a)

   148,600      2,847,176

Construction & Engineering (0.44%)


Fluor Corp.

   93,953      4,369,754

Electrical Equipment (1.03%)


Cooper Industries Plc

   85,600    $ 4,103,664

Rockwell Automation, Inc.

   108,150      6,095,334

Industrial Conglomerates (1.13%)


Textron, Inc.

   205,458      4,361,874

Tyco International Ltd.

   179,000      6,846,750

Machinery (1.32%)


Flowserve Corp.

   55,906      6,164,754

Navistar International Corp.(a)

   85,871      3,841,010

Terex Corp.(a)

   134,749      3,060,150



Communications Equipment (4.07%)



   1,321,733      4,123,807

Brocade Communications Systems, Inc.(a)

   265,743      1,517,393

Cisco Systems, Inc.(a)

   254,000      6,611,620

Corning, Inc.

   290,000      5,860,900

Motorola, Inc.(a)

   212,775      1,493,680


   414,242      17,394,022

Research In Motion Ltd.(a)

   45,600      3,372,120

Computers & Peripherals (5.91%)


Apple, Inc.(a)

   107,861      25,339,785

Dell, Inc.(a)

   1,441,140      21,631,511

Hewlett-Packard Co.

   220,431      11,715,908

Electronic Equipment & Instruments (1.73%)


Avnet, Inc.(a)

   214,940      6,448,200

Tyco Electronics Ltd.

   391,625      10,761,855

Internet Software & Services (2.36%)


Baidu, Inc.(a)(b)

   3,362      2,007,114

eBay, Inc.(a)

   256,000      6,899,200

Google, Inc., Class A(a)

   22,688      12,864,323

Yahoo!, Inc.(a)

   101,600      1,679,448

IT Services (2.04%)


Cognizant Technology Solutions Corp.(a)

   149,600      7,626,608

The Western Union Co.

   744,700      12,630,112

Semiconductors & Semiconductor Equipment (2.66%)


Analog Devices, Inc.

   203,000      5,850,460

ASML Holding N.V.

   46,435      1,643,799

International Rectifier Corp.(a)

   348,013      7,969,498

Lam Research Corp.(a)

   135,455    $ 5,055,180

Novellus Systems, Inc.(a)

   235,200      5,880,000

Software (4.05%)


Adobe Systems, Inc.(a)

   275,240      9,735,239

CA, Inc.

   256,750      6,025,922

Microsoft Corp.

   398,763      11,671,793

Oracle Corp.

   327,022      8,401,195, Inc.(a)

   58,200      4,332,990

uMATERIALS (2.53%)


Chemicals (1.75%)


Monsanto Co.

   170,193      12,155,184

Praxair, Inc.

   62,700      5,204,100

Metals & Mining (0.78%)


Alcoa, Inc.

   410,000      5,838,400

United States Steel Corp.

   30,915      1,963,721



Wireless Telecommunication Services (0.33%)


American Tower Corp., Class A(a)

   76,860      3,275,004

uUTILITIES (3.13%)


Electric Utilities (1.34%)


Allegheny Energy, Inc.

   298,930      6,875,390

Edison International

   137,275      4,690,687

FPL Group, Inc.

   35,384      1,710,108

Gas Utilities (0.86%)


EQT Corp.

   208,461      8,546,901

Independent Power Producers & Energy Traders (0.54%)


RRI Energy, Inc.(a)

   1,463,010      5,398,507

Multi-Utilities (0.39%)


Sempra Energy

   77,150      3,849,785







iShares Russell 1000 Value Index Fund

(COST OF $684,020)

   11,940      729,176






Repurchase agreement with State Street Bank & Trust Co., dated 03/31/10, due 04/01/10 at 0.010%, collateralized by several Fannie Mae and Freddie Mac instruments with various maturity dates, market value of $20,653,283 (Repurchased proceeds of $20,238,006)
(COST OF $20,238,000)

   $ 20,238,000      20,238,000   

(COST OF 997,677,760)(C)




NET ASSETS (100.00%)

      $ 992,952,761   


      $ 5.44   

Notes to Schedule of Investments:


(a)    Non-Income producing security.


(b)    American Depositary Receipt.


(c)    Cost of investments for federal income tax purposes is $1,006,953,245.


         Gross unrealized appreciation and depreciation at March 31, 2010 based on cost of investments for federal income tax purposes is as follows:


Gross unrealized appreciation

      $ 113,048,064   

Gross unrealized depreciation


Net unrealized depreciation

      $ (15,063,500




Liberty All-Star Equity Fund (the “Fund”) is a Massachusetts business trust registered under the Investment Company Act of 1940 (the “Act”), as amended, as a diversified, closed-end management investment company.

Investment Goal

The Fund seeks total investment return comprised of long-term capital appreciation and current income through investing primarily in a diversified portfolio of equity securities.

Fund Shares

The Fund may issue an unlimited number of shares of beneficial interest.


Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements.

Security Valuation

Equity securities are valued at the last sale price at the close of the principal exchange on which they trade, except for securities listed on the NASDAQ, which are valued at the NASDAQ official closing price. Unlisted securities or listed securities for which there were no sales during the day are valued at the closing bid price on such exchanges or over-the-counter markets.

Debt securities generally are valued by pricing services approved by the Fund’s Board of Trustees (the “Board”), based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as broker quotes. Debt securities for which quotations are readily available are valued at an over-the-counter or exchange bid quotation.

Short-term debt obligations maturing in more than 60 days for which market quotations are readily available are valued at current market value. Short-term debt obligations maturing within 60 days are valued at amortized cost, which approximates market value.

Investments for which market quotations are not readily available are valued at fair value as determined in good faith under consistently applied procedures approved by and under the general supervision of the Board.

Foreign Securities

The Fund invests in foreign securities which may involve a number of risk factors and special considerations not present with investments in securities of U.S. corporations.

Security Transactions

Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.

Foreign Currency Translation

The books and records of the Fund are maintained in U.S. dollars. Investment valuations and other assets and liabilities initially expressed in foreign currencies are converted each business day into U.S. dollars based upon current exchange rates. Prevailing foreign exchange rates may generally be obtained at the close of the NYSE, normally 4:00 p.m. Eastern Time. As available and as provided by an appropriate pricing service, translation of foreign security and currency market values may also occur with the use of foreign exchange rates obtained at approximately 11:00 a.m. Eastern Time, which approximates the close of the London Exchange. The portion of unrealized and realized gains or losses on investments due to fluctuations in foreign currency exchange rates is not separately disclosed.

Repurchase Agreements

The Fund may engage in repurchase agreement transactions with institutions that the Fund’s investment advisor has determined are creditworthy. The Fund, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral is at least equal, at all times, to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon a Fund’s ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Fund seeks to assert its rights.

Income Recognition

Interest income is recorded on the accrual basis. Premium and discount are amortized and accreted, respectively, on all debt securities. Corporate actions and dividend income are recorded on the ex-date.

The Fund estimates components of distributions from real estate investment trusts (REIT’s). Distributions received in excess of income are recorded as a reduction of the cost of the related investments. Once the REIT reports annually the tax character of its distributions, the Fund revises its estimates. If the Fund no longer owns the applicable securities, any distributions received in excess of income are recorded as realized gains.

Fair Value Measurements

The Fund discloses the classification of its fair value measurements following the three-tier hierarchy established by the Financial Accounting Standards Board (“FASB”). Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.

Various inputs are used in determining the value of the Fund’s investments as of the end of the reporting period. These inputs are categorized in the following hierarchy under applicable financial accounting standards:

Level 1 – Quoted prices in active markets for identical investments

Level 2 – Other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

Level 3 – Significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The following is a summary of the inputs used to value the Fund’s investments as of March 31, 2010.


Valuation Inputs

   Investments in Securities

Level 1-


Quoted Prices


Common Stocks

   $ 971,288,335

Exchange Traded Fund


Level 2-


Other Significant Observable Inputs


Short Term Investment


Level 3-


Significant Unobservable Inputs



   $ 992,255,511

For the three months ended March 31, 2010, the Fund did not have significant unobservable inputs (Level 3) used in determining fair value. Therefore, a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value is not applicable.

Federal Income Tax Status

For federal income tax purposes, the Fund currently qualifies, and intends to remain qualified, as a regulated investment company under the provisions of Subchaper M of the Internal Revenue Code by distributing substantially all of its investment company taxable net income including realized gain, not offset by capital loss carryforwards, if any, to its shareholders. Accordingly, no provision for federal income or excise taxes has been made.

In accordance with ASC 740 “Accounting for Uncertainty in Income Taxes,” (formerly FIN 48), the financial statement effects of a tax position taken or expected to be taken in a tax return are to be recognized in the financial statements when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. Management has concluded that the Fund has taken no uncertain tax positions that require adjustment to the financial statements to comply with the provisions of ASC 740. The Fund files income tax returns in the U.S. federal jurisdiction and Colorado. For the years ended December 31, 2006 through December 31, 2009 for the federal jurisdiction and for the years ended December 31, 2006 through December 31, 2009 for Colorado, the Fund’s returns are still open to examination by the appropriate taxing authority.

Distributions to Shareholders

The Fund currently has a policy of paying distributions on its shares of beneficial interest totaling approximately 6% of its net asset value per year. The distributions are payable in four quarterly distributions of 1.5% 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. Distributions to shareholders are recorded on ex-date.


In the normal course of business, the Fund enters into contracts that contain a variety of representations and warranties and which provide general indemnities. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims against the Fund. Also, under the Fund’s organizational documents and by contract, the Trustees and Officers of the Fund are indemnified against certain liabilities that may arise out of their duties to the Fund. However, based on experience, the Fund expects the risk of loss due to these warranties and indemnities to be minimal.

Recent Accounting Pronouncements

In June 2009, the FASB issued FASB ASC 105 (formerly FASB Statement No. 168), establishing the FASB Accounting Standards Codification (ASC) as the source of authoritative generally accepted accounting principles (GAAP) to be applied by nongovernmental entities. FASB ASC 105 is effective for annual and interim periods ending after September 15, 2009, and the Company has updated its references to GAAP in this report in accordance with the provisions of this pronouncement. The implementation of FASB ASC 105 did not have a material effect on its financial position or results of operations.

In April 2009, the FASB issued [FASB ASC 820-10-65 (formerly FASB Staff Position No. FAS 157-4)], Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. This standard applies to all assets and liabilities within the scope of accounting pronouncements that require or permit fair value measurements, with certain defined exceptions, and provides additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased. ASC 820-10-65 is effective for interim reporting periods ending after June 15, 2009. The implementation of ASC 820-10-65 did not have a material effect on the Company’s financial position or results of operations.

Item 2 – Controls and Procedures.


  (a) The registrant’s Principal Executive Officer and Principal Financial Officer have evaluated the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) within 90 days of this filing and have concluded that the registrant’s disclosure controls and procedures were effective, as of that date.


  (b) There was no change in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) during registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 3 – Exhibits.

Separate certifications for the registrant’s Principal Executive Officer and Principal Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached as Ex99.CERT.


Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


By:    /s/    WILLIAM PARMENTIER        
  William Parmentier
  President (principal executive officer)
Date:    May 21, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


By:    /s/    WILLIAM PARMENTIER        
  William Parmentier
  President (principal executive officer)
Date:   May 21, 2010
By:    /s/    JEREMY O. MAY        
  Jeremy O. May
  Treasurer (principal financial officer)
Date:   May 21, 2010