Liberty All-Star Equity Fund





Periods Ended September 30, 2014 (Unaudited)


Fund Statistics



Net Asset Value (NAV)





Market Price





















Market Price Trading Range


   $5.69 to $6.09


        $5.50 to $6.09



Premium/(Discount) Range


   -11.8% to -13.1%


        -10.5% to -13.1%






Shares Valued at NAV with Dividends Reinvested







Shares Valued at Market Price with Dividends Reinvested







Dow Jones Industrial Average







Lipper Large-Cap Core Mutual Fund Average







NASDAQ Composite Index







S&P 500® Index









Sources of distributions to shareholders may include ordinary dividends, long-term capital gains and return of capital. Based on current estimates, the distributions will be paid from short-term capital gains, long-term capital gains and return of capital. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Fund’s investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. Pursuant to Section 852 of the Internal Revenue Code, the taxability of these distributions will be reported on Form 1099-DIV for 2014.

Returns for the Fund are total returns, which include dividends. Performance returns are net of management fees and other Fund expenses.

The figures shown for the Lipper Large-Cap Core Mutual Fund Average are based on open-end mutual funds’ total returns, which include dividends, and are net of fund expenses. Figures for the unmanaged Dow Jones Industrial Average, NASDAQ Composite Index and the S&P 500® Index are total returns, including dividends. A description of the Lipper benchmark and the market indices can be found on page 18.

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.

Closed-end funds raise money in an initial public offering and shares are listed and traded on an exchange. Open-end mutual funds continuously issue and redeem shares at net asset value. 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



Fellow Shareholders:

   October 2014

Stocks moved modestly higher in the third quarter, helped domestically by continued economic growth but hurt globally by ongoing geopolitical tensions and investor concern over the key economies of Germany, China and Japan. The S&P 500® Index returned 1.13 percent for the quarter, bringing its advance through the first nine months of 2014 to 8.34 percent. The technology-focused NASDAQ Composite Index returned 2.24 percent, raising its return through nine months to 8.56 percent. The widely-followed Dow Jones Industrial Average gained 1.87 percent to bring its year to date return through September to 4.60 percent.

The S&P 500’s quarterly gain was its seventh in a row, and included a record close above 2000 for the first time ever on August 26, 2014. The NASDAQ Composite also posted its seventh straight quarterly advance, its longest run since 1996.

Indications of an improving U.S. economy, including an upward revision in second quarter GDP to 4.6 percent, combined with the Federal Reserve’s accommodative monetary policy kept equity markets moving forward. Consumer spending rebounded in August after a lackluster July and personal income rose throughout the quarter. Although employers added 209,000 workers to payrolls in July, the level fell to 142,000 in August—the first time since January that monthly job creation fell below 200,000. On the industrial side, orders for durable goods jumped 22.6 percent in July, the largest monthly gain since the Commerce Department began tracking this data in 1992. The news was not all positive, however. Energy stocks were hit hard during the quarter, with the energy sector of the S&P 500 declining 8.6 percent. Growing supplies—chiefly from the newly-resurgent U.S. oil and gas production—and slackening demand in the face of economic weakness abroad saw the price of crude fall to its lowest level in four years early in the fourth quarter. Events abroad also served to restrain U.S. stocks. Tensions remained high in the Ukraine and stunning advances by ISIS militants in the Middle East caught the U.S. and its allies off guard.

Economic weakness in Europe proved to be a double-edge sword. On one hand, it appeared to benefit U.S. stocks, as investors were attracted by U.S. economic growth, in sharp contrast to slack consumer demand and industrial production in the Eurozone. On the other hand, as the quarter progressed, there was growing concern that weakness in Europe—combined with a strengthening U.S. dollar—would ultimately slow the U.S. economy. These fears materialized early in the fourth quarter, as the S&P 500 suffered a 3.1 percent decline during the first full week of October.

Liberty All-Star® Equity Fund

Liberty All-Star® Equity Fund returns lagged most broad indices over the quarter. The Fund returned -1.15 percent with shares valued at net asset value (“NAV”) with dividends reinvested and -1.38 percent with shares valued at market price with dividends reinvested. Year to date, the Fund has returned 4.39 percent with shares valued at NAV with dividends reinvested and 2.71 percent with shares valued at market price with dividends reinvested. For the quarter and nine months through September 30, 2014, the Lipper Large-Cap Core Mutual Fund Average returned 0.40 percent and 6.74 percent, respectively. For the quarter, the discount at which Fund shares traded relative to their NAV widened slightly from the previous quarter, ranging from a low of 11.8 percent to a high of 13.1 percent.





Third Quarter Report (Unaudited)  |  September 30, 2014




President’s Letter

   Liberty All-Star® Equity Fund





The Fund’s quarterly performance was hurt by the previously mentioned decline in the energy sector. In addition, while the U.S. economy has been growing, it has been doing so at a moderate pace over an extended period of time. That has kept some investors sidelined, awaiting a stronger recovery in cyclical and economically-sensitive stocks, which also has contributed to the Fund’s underperformance.

In keeping with policy, the Fund’s distribution for the third quarter was $0.10. 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 $24.57 since 1987 (the Fund’s first full calendar year of operations). We would emphasize that shareholders must include these distributions when determining the return on their investment in the Fund.

We are disappointed that the Fund lagged its primary benchmark and other relevant indices during the quarter, but we do not see any difficulty beyond normal market action and the challenge that many active managers faced during the period, when some stock groups suffered from indiscriminant selling. The extreme volatility that characterized early October set a cautious tone going into the fourth quarter. If it is enough of a correction to drain some frothiness from the market and no more, investors may be well served. Whatever happens, we will remain vigilant yet confident in the Fund’s long-term prospects.




William R. Parmentier, Jr.

President and Chief Executive Officer

Liberty All-Star® Equity Fund


The views expressed in the President’s letter reflect the views of the President as of October 2014 and may not reflect his 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 Fund disclaims 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.






Liberty All-Star® Equity Fund

   Table of Distributions & Rights Offerings


September 30, 2014 (Unaudited)



            Rights Offerings     
    Year    Per Share




Shares Needed to

Purchase One

Additional Share

   Subscription Price    Tax Credits*










   1.07      April    10      $10.05     


   1.07      October    15        10.41    $0.18


   1.00      September    15          9.14     




   1.18                       0.13


   1.33                       0.36


   1.40      April    20        12.83     








   0.88      May    10          8.99     




   0.89      July    10**        8.34     






   0.90      December    10          6.51     















    1st Quarter


    2nd Quarter


    3rd Quarter






The Fund’s net investment income and net realized capital gains exceeded the amount to be distributed under the Fund’s 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.


Effective with the second quarter distribution, the annual distribution rate was changed from 10 percent to 6 percent.



The current policy is to pay distributions on its shares totaling approximately 6 percent of its net asset value per year, payable in four quarterly installments 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. Sources of distributions to shareholders may include ordinary dividends, long-term capital gains and return of capital. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Fund’s investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. If a distribution includes anything other than net investment income, the Fund provides a Section 19(a) notice of the best estimate of its distribution sources at that time. These estimates may not match the final tax characterization (for the full year’s distributions) contained in shareholders’ 1099-DIV forms after the end of the year. If the Fund’s ordinary dividends and long-term capital gains for any year exceed the amount distributed under the distribution policy, the Fund may, in its discretion, retain and not distribute capital gains and pay income tax thereon to the extent of such excess.





Third Quarter Report (Unaudited)  |  September 30, 2014




Top 20 Holdings & Economic Sectors

   Liberty All-Star® Equity Fund


September 30, 2014 (Unaudited)




  Top 20 Holdings*        Percent of Net Assets    

  JPMorgan Chase & Co.

       2.29 %

  Google, Inc., Class A & Class C


  Schlumberger Ltd.

       2.13, Inc.


  Bank of America Corp.


  Citigroup, Inc.


  Starbucks Corp.


  Visa, Inc., Class A


  Hewlett-Packard Co.


  State Street Corp.


  SunTrust Banks, Inc.


  American International Group, Inc.

       1.38, Inc.


  MetLife, Inc.


  Weatherford International Ltd.




  Precision Castparts Corp.


  Microsoft Corp.


  Marriott International, Inc., Class A


  Devon Energy Corp.

       31.36 %
  Economic Sectors*    Percent of Net Assets


       27.29 %

  Information Technology


  Consumer Discretionary




  Health Care




  Consumer Staples






  Other Net Assets

       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.






Liberty All-Star® Equity Fund

   Major Stock Changes in the Quarter


September 30, 2014 (Unaudited)


The following are the major ($3 million or more) stock changes - both purchases and sales - that were made in the Fund’s portfolio during the third quarter of 2014.


  Security Name    Purchases (Sales)      Held as of 9/30/14      



  Alibaba Group Holding Ltd.

     32,166                 32,166               

  CBS Corp., Class B

     68,990                 68,990               

  CoStar Group, Inc.

     23,783                 23,783               

  eBay, Inc.

     59,928                 59,928               

  Murphy Oil Corp.

     66,700                 81,475               

  NorthStar Realty Finance Corp.

     234,000                 234,000               



  Fluor Corp.

     (60,709)                 0               

  Freeport-McMoRan, Inc.

     (109,589)                 0               

  Gilead Sciences, Inc.

     (84,422)                 12,500               

  The Home Depot, Inc.

     (37,516)                 65,318               

  T. Rowe Price Group, Inc.

     (42,355)                 0               

  The Sherwin-Williams Co.

     (21,268)                 0               

  Verisk Analytics, Inc., Class A

     (70,272)                 25,928               





Third Quarter Report (Unaudited)  |  September 30, 2014




Investment Managers/

Portfolio Characteristics

   Liberty All-Star® Equity Fund


September 30, 2014 (Unaudited)










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 As of September 30, 2014 (Unaudited)



S&P 500®


Number of Holdings

   34    39    36    46    32   161*    502    

Percent of Holdings in Top 10

   59%    37%    36%    37%    44%   18%    18%    

Weighted Average Market Capitalization (billions)

   $49    $89    $109    $71    $63   $77    $130    

Average Five-Year Earnings Per Share Growth

   21%    19%    22%    15%    16%   19%    15%    

Dividend Yield

   1.6%    2.0%    2.2%    0.7%    0.6%   1.4%    2.0%    

Price/Earnings Ratio**

   16x    14x    17x    28x    33x   19x    19x    

Price/Book Value Ratio

   1.5x    1.7x    2.1x    3.7x    5.2x   2.5x    2.9x    



Certain holdings are held by more than one manager.


Excludes negative earnings.






Liberty All-Star® Equity Fund

   Schedule of Investments


As of September 30, 2014 (Unaudited)








Auto Components (1.47%)


Johnson Controls, Inc.

     253,564       $ 11,156,816     

TRW Automotive Holdings Corp.(a)

     62,325         6,310,406     







Automobiles (0.61%)


General Motors Co.

     157,600         5,033,744     

Tesla Motors, Inc.(a)

     8,880         2,154,999     







Hotels, Restaurants & Leisure (4.52%)


Carnival Corp.

     238,040         9,562,067     

Chipotle Mexican Grill, Inc.(a)

     8,200         5,466,038     

Marriott International, Inc., Class A

     200,781         14,034,592     

McDonald’s Corp.

     61,500         5,830,815     

Starbucks Corp.

     248,849         18,778,145     







Household Durables (2.09%)


Lennar Corp., Class A

     195,990         7,610,292     

PulteGroup, Inc.

     367,588         6,491,604     

Taylor Morrison Home Corp., Class A(a)

     71,159         1,154,199     

Toll Brothers, Inc.(a)

     307,516         9,582,198     







Internet & Catalog Retail (2.26%), Inc.(a)

     50,907         16,414,453, Inc.(a)

     7,295         8,451,841     

Shutterfly, Inc.(a)

     40,253         1,961,932     







Media (2.82%)


CBS Corp., Class B

     68,990         3,690,965     

Comcast Corp., Class A

     113,109         6,083,002     

The Interpublic Group of Cos., Inc.

     128,075         2,346,334     

News Corp., Class A(a)

     305,600         4,996,560     

News Corp., Class B(a)

     112,445         1,813,738     

Omnicom Group, Inc.

     93,825         6,460,789     

Time Warner Cable, Inc.

     16,241         2,330,421     

The Walt Disney Co.

     64,597         5,751,071     







Specialty Retail (1.97%)


The Home Depot, Inc.

     65,318         5,992,273     

Office Depot, Inc.(a)

     578,317         2,972,549     

Ross Stores, Inc.

     29,837         2,255,080     

Staples, Inc.

     437,175         5,289,818     




See Notes to Schedule of Investments.



Third Quarter Report (Unaudited)  |  September 30, 2014




Schedule of Investments

   Liberty All-Star® Equity Fund


As of September 30, 2014 (Unaudited)




COMMON STOCKS (continued)


Specialty Retail (continued)


Tiffany & Co.

     70,915       $ 6,829,824     







Textiles, Apparel & Luxury Goods (0.70%)


Kate Spade & Co.(a)

     113,577         2,979,125     

NIKE, Inc., Class B

     59,396         5,298,123     









Beverages (1.49%)


The Coca-Cola Company

     98,000         4,180,680     

Diageo PLC(b)

     23,316         2,690,666     

PepsiCo, Inc.

     62,100         5,780,889     

SABMiller PLC(b)

     91,428         5,079,740     







Food & Staples Retailing (1.29%)


Costco Wholesale Corp.

     75,177         9,421,182     

CVS Caremark Corp.

     73,500         5,849,865     







Food Products (0.75%)


Mead Johnson Nutrition Co.

     71,300         6,860,486     

Whitewave Foods Co.(a)

     56,475         2,051,737     







Household Products (0.67%)


The Procter & Gamble Co.

     95,000         7,955,300     




Personal Products (0.20%)


The Estee Lauder Cos., Inc., Class A

     31,686         2,367,578     




ENERGY (13.03%)


Energy Equipment & Services (4.57%)


Baker Hughes, Inc.

     66,300         4,313,478     

Dril-Quip, Inc.(a)

     46,520         4,158,888     

Oceaneering International, Inc.

     75,875         4,944,774     

Schlumberger Ltd.

     248,338         25,253,491     

Weatherford International Ltd.(a)

     747,508         15,548,166     







Oil, Gas & Consumable Fuels (8.46%)


Anadarko Petroleum Corp.

     27,244         2,763,631     

Arch Coal, Inc.

     2,149,113         4,556,120     


     244,300         10,736,995     

Chesapeake Energy Corp.

     479,016         11,012,578     

Chevron Corp.

     58,000         6,920,560     

Cobalt International Energy, Inc.(a)

     193,032         2,625,235     




See Notes to Schedule of Investments.   



Liberty All-Star® Equity Fund

   Schedule of Investments


As of September 30, 2014 (Unaudited)



COMMON STOCKS (continued)


Oil, Gas & Consumable Fuels (continued)



     86,500       $ 6,618,980     

CONSOL Energy, Inc.

     84,687         3,206,250     

Devon Energy Corp.

     203,731         13,890,380     

Exxon Mobil Corp.

     44,775         4,211,089     

Murphy Oil Corp.

     81,475         4,636,742     

Occidental Petroleum Corp.

     85,000         8,172,750     

Peabody Energy Corp.

     752,006         9,309,834     

Royal Dutch Shell PLC, Class A(b)

     154,493         11,761,552     









Capital Markets (4.99%)


Ameriprise Financial, Inc.

     34,980         4,315,832     

The Charles Schwab Corp.

     267,000         7,847,130     

Franklin Resources, Inc.

     85,600         4,674,616     

The Goldman Sachs Group, Inc.

     37,450         6,874,697     

Morgan Stanley

     379,600         13,122,772     

State Street Corp.

     230,100         16,937,661     


     313,400         5,443,758     







Commercial Banks (4.85%)


Barclays PLC(b)

     258,421         3,827,215     

BB&T Corp.

     205,000         7,628,050     

Comerica, Inc.

     70,225         3,501,419     

First Republic Bank

     102,030         5,038,242     

Huntington Bancshares, Inc.

     115,822         1,126,948     

The PNC Financial Services Group, Inc.

     70,666         6,047,596     

Regions Financial Corp.

     408,078         4,097,103     

SunTrust Banks, Inc.

     444,978         16,922,513     

Wells Fargo & Co.

     181,000         9,388,470     







Consumer Finance (2.53%)


American Express Co.

     42,500         3,720,450     

Capital One Financial Corp.

     101,000         8,243,620     

Visa, Inc., Class A

     84,736         18,080,120     







Diversified Financial Services (6.93%)


Bank of America Corp.

     1,274,064         21,722,791     

Citigroup, Inc.

     408,754         21,181,632     

CME Group, Inc.

     72,045         5,760,358     

JPMorgan Chase & Co.

     451,000         27,168,240     

Voya Financial, Inc.

     163,575         6,395,783     










See Notes to Schedule of Investments.   


Third Quarter Report (Unaudited)  |  September 30, 2014




Schedule of Investments

   Liberty All-Star® Equity Fund


As of September 30, 2014 (Unaudited)




COMMON STOCKS (continued)


Insurance (6.56%)


ACE Ltd.

     86,700       $ 9,092,229     

The Allstate Corp.

     109,067         6,693,442     

American International Group, Inc.

     303,891         16,416,192     

Assured Guaranty Ltd.

     256,286         5,679,298     

Axis Capital Holdings Ltd.

     156,000         7,383,480     

First American Financial Corp.

     102,242         2,772,803     

The Hartford Financial Services Group, Inc.

     231,645         8,628,776     

MetLife, Inc.

     304,725         16,369,827     

Willis Group Holdings PLC

     115,350         4,775,490     







Real Estate Investment Trusts (1.43%)


American Tower Corp.

     120,360         11,269,307     

Columbia Property Trust, Inc.

     68,027         1,623,804     

NorthStar Realty Finance Corp.

     234,000         4,134,780     







HEALTH CARE (10.29%)


Biotechnology (2.11%)


Alexion Pharmaceuticals, Inc.(a)

     22,259         3,690,987     

BioMarin Pharmaceutical, Inc.(a)

     80,245         5,790,479     

Celgene Corp.(a)

     87,430         8,286,616     

Gilead Sciences, Inc.(a)

     12,500         1,330,625     

Pharmacyclics, Inc.(a)

     50,927         5,980,358     







Health Care Equipment & Supplies (1.80%)


Becton, Dickinson & Co.

     43,350         4,933,663     

Hologic, Inc.(a)

     340,000         8,272,200     

Zimmer Holdings, Inc.

     80,500         8,094,275     







Health Care Providers & Services (1.91%)


Catamaran Corp.(a)

     248,244         10,463,485     

Cigna Corp.

     80,500         7,300,545     

Laboratory Corp. of America Holdings(a)

     48,350         4,919,612     







Health Care Technology (1.38%)


athenahealth, Inc.(a)

     47,600         6,268,444     

Cerner Corp.(a)

     170,168         10,136,908     







Life Sciences Tools & Services (1.02%)


Illumina, Inc.(a)

     36,800         6,032,256     

Thermo Fisher Scientific, Inc.

     50,000         6,085,000     










See Notes to Schedule of Investments.   



Liberty All-Star® Equity Fund

   Schedule of Investments


As of September 30, 2014 (Unaudited)




COMMON STOCKS (continued)


Pharmaceuticals (2.07%)


Abbott Laboratories

     107,925       $  4,488,601     

Allergan, Inc.

     30,955         5,515,871     

Johnson & Johnson

     69,000         7,354,710     

Teva Pharmaceutical Industries Ltd.(b)

     134,200         7,213,250     









Aerospace & Defense (1.97%)


The Boeing Co.

     9,225         1,175,081     

Bombardier, Inc., Class B

     870,308         2,924,235     

Precision Castparts Corp.

     65,006         15,398,621     

Textron, Inc.

     109,217         3,930,720     







Building Products (0.48%)


Masco Corp.

     238,725         5,710,302     




Electrical Equipment (0.63%)


Eaton Corp. PLC

     118,500         7,509,345     




Machinery (1.26%)


Caterpillar, Inc.

     62,000         6,139,860     

Navistar International Corp.(a)

     20,020         658,858     

Parker-Hannifin Corp.

     52,825         6,029,974     

Pentair PLC

     31,548         2,066,078     







Professional Services (0.13%)


Verisk Analytics, Inc., Class A(a)

     25,928         1,578,756     




Trading Companies & Distributors (1.22%)


Fastenal Co.

     244,830         10,992,867     

United Rentals, Inc.(a)

     30,762         3,417,658     







Transportation Infrastructure (0.21%)


Aegean Marine Petroleum Network, Inc.

     271,629         2,490,838     






Communications Equipment (1.99%)


Cisco Systems, Inc.

     321,000         8,079,570     


     207,500         15,514,775     







Computers & Peripherals (1.88%)


Hewlett-Packard Co.

     490,500         17,398,035     




See Notes to Schedule of Investments.   


Third Quarter Report (Unaudited)  |  September 30, 2014




Schedule of Investments

   Liberty All-Star® Equity Fund


As of September 30, 2014 (Unaudited)




COMMON STOCKS (continued)


Computers & Peripherals (continued)


Stratasys Ltd.(a)

     40,642       $ 4,908,741     







Electronic Equipment & Instruments (1.36%)


Corning, Inc.

     229,200         4,432,728     

TE Connectivity Ltd.

     150,475         8,319,763     

Trimble Navigation Ltd.(a)

     111,215         3,392,057     







Internet Software & Services (6.03%)


Alibaba Group Holding Ltd.(a)(b)

     32,166         2,857,949     

CoStar Group, Inc.(a)

     23,783         3,699,208     

eBay, Inc.(a)

     59,928         3,393,723     

Equinix, Inc.(a)

     32,545         6,915,161     

Facebook, Inc., Class A(a)

     123,026         9,723,975     

Google, Inc., Class A(a)

     13,981         8,226,560     

Google, Inc., Class C(a)

     31,353         18,101,968     

LinkedIn Corp., Class A(a)

     33,820         7,027,458     

Mercadolibre, Inc.

     32,920         3,576,758     

Rackspace Hosting, Inc.(a)

     249,540         8,122,527     







IT Services (0.27%)


Teradata Corp.(a)

     76,500         3,206,880     




Semiconductors & Semiconductor Equipment (1.76%)


ARM Holdings PLC(b)

     139,420         6,091,260     

Intel Corp.

     218,275         7,600,335     

Micron Technology, Inc.(a)

     210,577         7,214,368     







Software (5.81%)


Microsoft Corp.

     317,775         14,732,049     

Oracle Corp.

     191,025         7,312,437, Inc.(a)

     416,122         23,939,499     

ServiceNow, Inc.(a)

     97,400         5,725,172     

Splunk, Inc.(a)

     101,300         5,607,968     

Symantec Corp.

     265,482         6,241,482     

VMware, Inc., Class A(a)

     57,600         5,405,184     









Chemicals (0.59%)


EI du Pont de Nemours & Co.

     97,500         6,996,600     







See Notes to Schedule of Investments.   



Liberty All-Star® Equity Fund

   Schedule of Investments


As of September 30, 2014 (Unaudited)




COMMON STOCKS (continued)


Metals & Mining (0.10%)


Alcoa, Inc.

     72,225       $ 1,162,100     






Electric Utilities (0.08%)


FirstEnergy Corp.

     27,905         936,771     




    (COST OF $932,007,424)







Exchange Traded Fund (0.09%)


iShares® Russell 1000 Value

     10,000         1,000,900     




    (COST OF $1,023,103)




     PAR VALUE         





Repurchase agreement with State Street Bank & Trust Co., dated 9/30/14, due 10/01/14 at 0.01%, collateralized by Federal Home Loan Mortgage Corp., 3.00%, 03/15/43, market value of $35,375,812 and par value of $42,525,000. (Repurchase proceeds of $34,668,010).

(COST OF $34,668,000)

   $ 34,668,000       $ 34,668,000     




    (COST OF $967,698,527)(c)







NET ASSETS (100.00%)

      $ 1,186,902,286     




    (178,172,356 SHARES OUTSTANDING)

      $ 6.66     







See Notes to Schedule of Investments.   

Third Quarter Report (Unaudited)  |  September 30, 2014


Schedule of Investments

   Liberty All-Star® Equity Fund


As of September 30, 2014 (Unaudited)




Non-income producing security.


American Depositary Receipt.


Cost of investments for federal income tax purposes is $974,610,233.

Gross unrealized appreciation and depreciation at September 30, 2014 based on cost of investments for federal income tax purposes is as follows:


        Gross unrealized appreciation

   $ 282,104,956         

        Gross unrealized depreciation


        Net unrealized appreciation

   $       214,972,679         




See Notes to Schedule of Investments.   



Liberty All-Star® Equity Fund

   Notes to Schedule of Investments


September 30, 2014 (Unaudited)


Security Valuation

Equity securities including common stocks and exchange traded funds 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 Stock Market LLC (“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.

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. Repurchase agreements are valued at cost, which approximates fair 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 Fund’s Board of Trustees.

Foreign Securities

The Fund may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible reevaluation of currencies, the inability to repatriate foreign currency, less complete financial information about companies and possible future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. issuers. For the period ended September 30, 2014, the Fund only held American Depositary Receipts and did not hold any securities denominated in foreign currencies.

Security Transactions

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

Repurchase Agreements

The Fund engages 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. These collateral agreements mitigate the counterparty credit risk by providing for a single net settlement with a counterparty of all financial transactions covered by the agreement in an event of default as defined under such agreement.

Repurchase agreements are entered into by the Fund under a Master Repurchase Agreement (“MRA”) which permits the Fund, under certain circumstances, including an event of default (such as bankruptcy or insolvency), to offset payables and/or receivables under the MRA with collateral held and/or posted to the counterparty and create one single net payment due or from the Fund.





Third Quarter Report (Unaudited)  |  September 30, 2014


Notes to Schedule of Investments

   Liberty All-Star® Equity Fund


September 30, 2014 (Unaudited)



Income Recognition

Interest income is recorded on the accrual basis. Corporate actions and dividend income are recorded on the ex-date.

The Fund estimates components of distributions from real estate investment trusts (“REITs”). 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 a three-tier hierarchy based on the inputs used to measure fair value. 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.

Valuation techniques used to value the Fund’s investments by major category are as follows:

Equity securities and exchange traded funds, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the mean of the most recent quoted bid and ask prices on such day and are generally categorized as Level 2 in the hierarchy. Repurchase agreements are valued at cost, which approximates fair value, and are categorized as Level 2 in the hierarchy.

Various inputs are used in determining the value of the Fund’s investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments.

These inputs are categorized in the following hierarchy under applicable financial accounting standards:


Level 1 —


Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that a Fund has the ability to access at the measurement date;

Level 2 —


Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and






Liberty All-Star® Equity Fund

   Notes to Schedule of Investments


September 30, 2014 (Unaudited)


Level 3 —


Significant unobservable prices or inputs (including the Fund’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date.

The following is a summary of the inputs used to value the Fund’s investments as of September 30, 2014:


     Valuation Inputs         
Investments in Securities at Value*    Level 1      Level 2      Level 3      Total  

Common Stocks

   $ 1,153,914,012       $       $       $ 1,153,914,012   

Exchange Traded Fund

     1,000,900                         1,000,900   

Short Term Investment

             34,668,000                 34,668,000   


   $     1,154,914,912       $     34,668,000       $           –       $     1,189,582,912   



  See Schedule of Investments for industry classifications.

The Fund recognizes transfers between levels as of the end of the period. For the period ended September 30, 2014, the Fund did not have any transfers between Level 1 and Level 2 securities. The Fund did not have any securities which used significant unobservable inputs (Level 3) in determining fair value during the period.


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.

Shareholder Meeting Results

On August 28, 2014, the Annual Meeting of Shareholders of the Fund was held to elect two Trustees. On May 30, 2014, the record date for the meeting, the Fund had outstanding 176,415,903 shares of beneficial interest. The votes cast at the meeting were as follows:

Proposal 1 – Proposal to elect two Trustees:


      For                    Withheld              

Thomas W. Brock

     141,353,328.311              7,695,372.078           

George R. Gaspari

     145,502,864.621              3,545,835.768           




Third Quarter Report (Unaudited)  |  September 30, 2014


Description of Lipper Benchmark

And Market Indicies

   Liberty All-Star® Equity Fund

September 30, 2014 (Unaudited)



Dow Jones Industrial Average

A price-weighted measure of 30 U.S. blue-chip companies.

Lipper Large-Cap Core Mutual Fund Average

The average of funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) above Lipper’s U.S. domestic equity large-cap floor. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P 500® Index.

NASDAQ Composite Index

Measures all NASDAQ domestic and international based common type stocks listed on the NASDAQ Stock Market.

S&P 500® Index

A large cap U.S. equities index that includes 500 leading companies and captures approximately 80% coverage of available market capitalization.

An investor cannot invest directly in an index.







Page Intentionally Left Blank








ALPS Advisors, Inc.


K&L Gates LLP

1290 Broadway, Suite 1100


1601 K Street, NW

Denver, Colorado 80203


Washington, DC 20006






John A. Benning*


Thomas W. Brock*



Edmund J. Burke



George R. Gaspari*

Deloitte & Touche LLP


Richard W. Lowry*, Chairman

555 Seventeenth Street, Suite 3600


Dr. John J. Neuhauser*

Denver, Colorado 80202


Richard C. Rantzow*




State Street Bank & Trust Company


William R. Parmentier, Jr., President

One Lincoln Street


Mark T. Haley, CFA, Senior Vice President

Boston, Massachusetts 02111


Edmund J. Burke, Vice President


Kimberly R. Storms, Treasurer


Erin D. Nelson, Secretary



Alex J. Marks, Assistant Secretary



Melanie H. Zimdars, Chief Compliance Officer




* Member of the Audit Committee


Computershare Trust Company, N.A.



P.O. Box 30170



College Station, Texas 77842-3170



1-800-LIB-FUND (1-800-542-3863)


A description of the Fund’s proxy voting policies and procedures is available (i) on the Securities and Exchange Commission’s (“SEC”) website at, and (ii) without charge, upon request, by calling 1-800-542-3863. Information regarding how the Fund voted proxies relating to portfolio securities during the 12-month period ended June 30th is available from the SEC’s website at

The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Q’s are available on the SEC’s website at and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that the Fund may purchase at market prices from time to time shares of its own common stock in the open market.

This report is transmitted to shareholders of Liberty All-Star® Equity Fund for their information. It is not a prospectus or other document intended for use in the purchase of Fund shares.

LAS000621 5/31/15