Item
1. Report of Shareholders.
Contents
1 |
|
President’s Letter |
4 |
|
Table of Distributions, Tax Credits & Rights Offerings |
5 |
|
Top 20 Holdings and Economic Sectors |
6 |
|
Major Stock Changes in the Quarter |
7 |
|
Investment Managers/Portfolio Characteristics |
8 |
|
Manager Interview |
11 |
|
Schedule of Investments |
19 |
|
Statement of Assets and Liabilities |
20 |
|
Statement of Operations |
21 |
|
Statements of Changes in Net Assets |
22 |
|
Financial Highlights |
24 |
|
Notes to Financial Statements |
33 |
|
Description of Lipper Benchmark and Market Indices |
Inside Back Cover: Fund Information |
A SINGLE INVESTMENT...
A DIVERSIFIED CORE PORTFOLIO
A single fund that offers:
| ● | A
diversified, multi-managed portfolio of growth and value stocks |
| ● | Exposure
to many of the industries that make the U.S. economy one of the world’s most dynamic |
| ● | Access
to institutional quality investment managers |
| ● | Objective
and ongoing manager evaluation |
| ● | Active
portfolio rebalancing |
| ● | A
quarterly fixed distribution policy |
| ● | Actively
managed, exchange-traded, closed-end fund listed on the New York Stock Exchange (ticker symbol: USA) |
LIBERTY ALL-STAR® EQUITY FUND
The views expressed in the President’s letter
and the Manager Interview reflect the views of the President and Manager as of July 2022 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 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 |
President’s Letter |
(Unaudited)
Fellow Shareholders: |
July 2022 |
The highest inflation in decades,
a hawkish Federal Reserve, a slowing economy, deteriorating consumer sentiment and global fallout from the war in Ukraine combined to
send U.S. equity markets sharply lower in the second quarter and accelerate losses incurred in the first quarter.
A snapshot of the S&P 500® Index
captures equity market turmoil through the first half of 2022:
|
● |
Lower by 16.10 percent in the second quarter after a decline of 4.60 percent in the first quarter for a first half return of -19.96 percent. |
|
● |
The poorest first half performance since 1970. |
|
● |
Declines in 10 of the last 12 weeks of the half and for every S&P sector except energy, which returned 31.82 percent. |
|
● |
Losses of 2 percent or more on 14 occasions in the first half, making it one of the most volatile periods in the last two decades. |
The Dow Jones Industrial Average
(DJIA) fared somewhat better, returning -10.78 percent in the second quarter and -14.44 percent for the half. The NASDAQ Composite Index
saw greater declines, however, as investors shed richly-valued large- and mega-cap growth stocks. The NASDAQ Composite returned -22.28
percent in the quarter and -29.23 percent over the six- month period.
Any search of data underlying
the broad retreat could start with monthly reports of the Consumer Price Index showing annualized increases in the 8 percent-plus range
(the May reading being the highest since December of 1981). Seeking to tamp down the inflationary outbreak, the Federal Open Market Committee
(FOMC) raised the key fed funds rate by 0.50 percent in early May and followed with a 0.75 percent increase in mid-June (with further
increases anticipated). Rates rose in the bond market as well, with the yield on 10-year Treasuries reaching as high as 3.49 percent in
mid-June, having started the year at 1.52 percent. The economy slowed dramatically as well, contracting at an annualized rate of 1.6 percent
in the first quarter after a robust 6.9 percent expansion in the previous quarter. All of this left consumers in a cautious mood, exemplified
by the widely followed University of Michigan consumer sentiment index tumbling to the lowest reading on record in June. The war in Ukraine
had global geopolitical implications but from a purely economic perspective supplies of food and energy headed the list; the annual energy
and food components of the CPI jumped 34.6 percent and 10.1 percent, respectively, in May. Inflation not only hurt consumers but businesses
also as they were pressed to maintain profit margins given the higher cost of energy and other essentials; this gave investors another
worry—the potential for lower corporate earnings in future quarters.
Employment provided the quarter’s
most encouraging news. The U.S. added an average of 397,000 jobs each month in the second quarter, continuing recent strong job growth.
The unemployment rate remained at a modest 3.6 percent while wages and salaries generally rose (e.g., up an annualized 5.5 percent in
April.)
All the unsettled conditions
compelled investors to reprice technology and other high growth stocks, resulting in a quarter and half year in which the value style
outperformed the growth style on a relative basis. The broad market Russell 3000® Value Index returned -12.41 percent in
the second quarter, bringing its year-to-date return as of June 30 to -13.15 percent. By comparison, the Russell 3000®
Growth Index returned -20.83 percent in the second quarter and -28.15 percent for the first half.
Semi-Annual Report (Unaudited) | June 30, 2022 |
1 |
Liberty All-Star® Equity Fund |
President’s Letter |
(Unaudited)
Liberty All-Star® Equity Fund
Liberty All-Star Equity Fund
was buffeted by the negative forces at work in the second quarter but nevertheless turned in mixed results compared with key benchmarks.
The Fund returned -16.02 percent when shares are valued at net asset value (NAV) with dividends reinvested and -20.06 when shares are
valued at market price with dividends reinvested. (Fund returns are net of expenses.) The NAV return moderately lagged the return of its
primary benchmark, the Lipper Large-Cap Core Mutual Fund Average, which returned -15.48 percent. The NAV return was essentially equal
with that of the S&P 500®, as the Fund’s return was 8 basis points to the better (the S&P 500®
returning -16.10 percent). As noted, the DJIA posted the best relative return, -10.78 percent, and the NASDAQ Composite the poorest at
-22.28 percent. The Fund’s market price return more clearly lagged, as it outperformed only the NASDAQ Composite.
For the full first half, the
Fund returned -22.04 percent when shares are valued at NAV with dividends reinvested and -20.81 percent when shares are valued at market
price with dividends reinvested. Both trailed the six-month return of the Lipper benchmark and most of the other indices cited in the
previous paragraph, tracing in part to the first quarter when the NAV return lagged in relative terms.
Over the second quarter, the
range at which Fund shares traded relative to their underlying NAV went from a discount of -0.5 percent to a premium of 10.0 percent.
This compares to a discount/premium range of -1.7 percent to 9.6 percent in the first quarter. For the first half, the range was a discount
of -1.7 percent to a premium of 10.0 percent.
In accordance with the Fund’s
distribution policy, the Fund paid a distribution of $0.18 per share in the second quarter. The Fund’s distribution policy has been
in place since 1988 and is a major component of the Fund’s total return. The Fund has paid distributions of $29.37 per share for
a total of more than $3.4 billion since 1987 (the Fund’s first full calendar year of operations). We continue to emphasize that
shareholders should include these distributions when determining the total return on their investment in the Fund.
As is our custom in semi-annual
reports, in this publication we include a Q&A with one of the Fund’s five investment managers, in this case growth style manager
Sustainable Growth Advisers. We invite shareholders to read this informative interview, which begins on page 8.
The first half of 2022 was difficult
for investors in general and challenging for the Fund as well. Yet first half returns do not necessarily predict full-year results—S&P
500® returns for 2020 are a recent example (-3.08 percent in the first half, +18.40 percent for the full year). That said,
it will take a significant turnaround in the factors that drove markets lower in the first half to bring about a similar outcome in 2022.
At ALPS Advisors, we are not in the prediction business. We are in the business of managing assets in the best interests of investors
seeking a diversified, high-quality core equity holding for the long term. We are steadfast in that commitment.
Sincerely,
William R. Parmentier, Jr.
President and Chief Executive Officer
Liberty All-Star® Equity Fund
Liberty All-Star® Equity Fund |
President’s Letter |
(Unaudited)
Fund Statistics (Periods ended June 30, 2022) |
|
Net Asset Value (NAV) |
$6.05 |
Market Price |
$6.28 |
Premium |
3.8% |
|
Quarter |
Year-to-Date |
Distributions* |
$0.18 |
$0.38 |
Market Price Trading Range |
$5.86 to $8.20 |
$5.86 to $8.50 |
Premium/(Discount) Range |
10.0% to -0.5% |
10.0% to -1.7% |
Performance (Periods ended June 30, 2022) |
Shares Valued at NAV with Dividends Reinvested |
-16.02% |
-22.04% |
Shares Valued at Market Price with Dividends Reinvested |
-20.06% |
-20.81% |
Dow Jones Industrial Average |
-10.78% |
-14.44% |
Lipper Large-Cap Core Mutual Fund Average |
-15.48% |
-20.23% |
NASDAQ Composite Index |
-22.28% |
-29.23% |
S&P 500® Index |
-16.10% |
-19.96% |
| * | Sources
of distributions to shareholders may include ordinary dividends, long-term capital gains and return of capital. The final determination
of the source of all distributions in 2022 for tax reporting purposes will be made after year end. The actual amounts and sources of
the amounts for tax reporting purposes will depend upon the Fund’s investment experience during its fiscal year and may be subject
to changes based on tax regulations. Based on current estimates a portion of the distributions consist of a return of capital. Pursuant
to Section 852 of the Internal Revenue Code, the taxability of these distributions will be reported on Form 1099-DIV for 2022. |
Performance returns for the
Fund are total returns, which include dividends. Returns are net of management fees and other Fund expenses.
The returns 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. Returns 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 33.
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.
Semi-Annual Report (Unaudited) | June 30, 2022 |
3 |
Liberty All-Star® Equity Fund |
Table of Distributions, Tax Credits & Rights Offerings |
(Unaudited)
|
|
Rights Offerings |
|
Year |
Per Share
Distributions |
Month
Completed |
Shares Needed to Purchase
One Additional Share |
Subscription
Price |
Tax Credits1 |
1987 |
$1.18 |
|
|
|
|
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 |
102 |
8.34 |
|
2005 |
0.87 |
|
|
|
|
2006 |
0.88 |
|
|
|
|
2007 |
0.90 |
December |
10 |
6.51 |
|
2008 |
0.65 |
|
|
|
|
20093 |
0.31 |
|
|
|
|
2010 |
0.31 |
|
|
|
|
2011 |
0.34 |
|
|
|
|
2012 |
0.32 |
|
|
|
|
2013 |
0.35 |
|
|
|
|
2014 |
0.39 |
|
|
|
|
20154 |
0.51 |
|
|
|
|
2016 |
0.48 |
|
|
|
|
20175 |
0.56 |
|
|
|
|
2018 |
0.68 |
|
|
|
|
2019 |
0.66 |
|
|
|
|
2020 |
0.63 |
|
|
|
|
2021 |
0.81 |
November |
102 |
7.78 |
|
2022 |
|
|
|
|
|
1st Quarter |
0.20 |
|
|
|
|
2nd Quarter |
0.18 |
|
|
|
|
Total |
$29.37 |
|
|
|
|
| 1 | 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. |
| 2 | The
number of shares offered was increased by an additional 25 percent to cover a portion of the over-subscription requests. |
| 3 | Effective
with the second quarter distribution, the annual distribution rate was changed from 10 percent to 6 percent. |
| 4 | Effective
with the second quarter distribution, the annual distribution rate was changed from 6 percent to 8 percent. |
| 5 | Effective
with the fourth quarter distribution, the annual distribution rate was changed from 8 percent to 10 percent. |
DISTRIBUTION POLICY
The current policy 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. Sources of distributions to shareholders may include ordinary dividends, long-term capital gains and return of capital. The final
determination of the source of all distributions in 2022 for tax reporting purposes will be made after year end. The actual amounts and
sources of the amounts for tax reporting purposes will depend upon the Fund’s investment experience during 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 shareholder 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.
Liberty All-Star® Equity Fund |
Top 20 Holdings & Economic Sectors |
June 30, 2022 (Unaudited)
Top 20 Holdings* |
Percent of
Net Assets |
Alphabet, Inc. |
2.88% |
Microsoft Corp. |
2.40 |
UnitedHealth Group, Inc. |
2.02 |
Amazon.com, Inc. |
2.01 |
Visa, Inc. |
1.84 |
Adobe, Inc. |
1.60 |
Danaher Corp. |
1.53 |
S&P Global, Inc. |
1.45 |
Charles Schwab Corp. |
1.37 |
Sony Group Corp. |
1.34 |
Dollar General Corp. |
1.29 |
Salesforce, Inc. |
1.25 |
Capital One Financial Corp. |
1.24 |
Fresenius Medical Care AG & Co. KGaA |
1.19 |
Berkshire Hathaway, Inc. |
1.16 |
ServiceNow, Inc. |
1.11 |
Ecolab, Inc. |
1.09 |
Booking Holdings, Inc. |
1.07 |
Autodesk, Inc. |
1.07 |
IQVIA Holdings, Inc. |
1.02 |
|
29.93% |
Economic Sectors* |
Percent of
Net Assets |
Information Technology |
20.37% |
Financials |
18.49 |
Consumer Discretionary |
14.30 |
Health Care |
14.30 |
Industrials |
8.09 |
Communication Services |
6.07 |
Materials |
5.16 |
Consumer Staples |
3.25 |
Utilities |
2.91 |
Energy |
2.75 |
Real Estate |
2.59 |
Other Net Assets |
1.72 |
|
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. |
Semi-Annual Report (Unaudited) | June 30, 2022 |
5 |
Liberty All-Star® Equity Fund |
Major Stock Changes in the Quarter |
(Unaudited)
The following are the major
($5 million or more) stock changes - both purchases and sales - that were made in the Fund’s portfolio during the second quarter
of 2022.
Security Name |
SHARES |
Purchases (Sales) |
Held as of 6/30/22 |
Purchases |
|
|
Autodesk, Inc. |
48,255 |
97,619 |
Avery Dennison Corp. |
50,234 |
62,911 |
CDW Corp. |
44,044 |
63,298 |
Ferguson PLC |
85,481 |
85,481 |
IQVIA Holdings, Inc. |
35,442 |
73,809 |
Microsoft Corp. |
30,493 |
147,254 |
Sales |
|
|
American International Group, Inc. |
(93,668) |
209,210 |
Baker Hughes Co. |
(165,705) |
0 |
Dover Corp. |
(62,034) |
0 |
Exxon Mobil Corp. |
(57,314) |
54,865 |
Illumina, Inc. |
(27,590) |
0 |
PayPal Holdings, Inc. |
(108,679) |
98,352 |
PPG Industries, Inc. |
(69,645) |
0 |
Quest Diagnostics, Inc. |
(73,972) |
0 |
Twitter, Inc. |
(149,600) |
0 |
Liberty All-Star® Equity Fund |
Investment Managers/
Portfolio Characteristics |
(Unaudited)
THE FUND’S ASSETS ARE
APPROXIMATELY EQUALLY DISTRIBUTED AMONG THREE VALUE MANAGERS AND TWO GROWTH MANAGERS:
ALPS Advisors, Inc., the investment
advisor to the Fund, has the ultimate authority (subject to oversight by the Board of Trustees) to oversee the investment managers and
recommend their hiring, termination and replacement.
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 As of June 30,
2022 (Unaudited)
|
|
Investment Style Spectrum |
|
|
|
|
Value |
|
|
|
Growth |
|
|
|
|
|
|
|
PZENA |
FIDUCIARY |
ARISTOTLE |
SUSTAINABLE |
TCW |
TOTAL
FUND |
S&P 500®
INDEX |
Number of Holdings |
37 |
32 |
44 |
28 |
31 |
150* |
503 |
Percent of Holdings in Top 10 |
41% |
44% |
31% |
47% |
51% |
18% |
27% |
Weighted Average Market Capitalization (billions) |
$57 |
$173 |
$153 |
$343 |
$362 |
$207 |
$483 |
Average Five-Year Earnings Per Share Growth |
3% |
14% |
16% |
25% |
24% |
16% |
18% |
Dividend Yield |
2.4% |
1.5% |
2.1% |
0.7% |
0.5% |
1.5% |
1.7% |
Price/Earnings Ratio** |
9x |
16x |
16x |
28x |
32x |
16x |
18x |
Price/Book Value Ratio |
1.4x |
2.8x |
2.6x |
6.9x |
7.6x |
2.7x |
3.8x |
| * | Certain
holdings are held by more than one manager. |
| ** | Excludes
negative earnings |
Semi-Annual Report (Unaudited) | June 30, 2022 |
7 |
Liberty All-Star® Equity Fund |
Manager Interview |
(Unaudited)
|
Kishore D. Rao
Principal and Portfolio Manager
Sustainable Growth Advisers, LP |
SUSTAINABLE COUNTERS VOLATILITY
BY FOCUSING ON COMPANIES ABLE TO PROTECT CAPITAL AND DODGE THE GRIP OF GLOBAL ECONOMIC CYCLES
Sustainable Growth Advisers
(SGA) focuses on companies that have unique characteristics that lead to a high degree of predictability, strong profitability and above-average
earnings and cash flow growth over the long term. We recently had the opportunity to talk with Principal and Portfolio Manager Kishore
Rao. The Fund’s Investment Advisor, ALPS Advisors, Inc., conducted the interview.
Sustainable emphasizes companies
with long runways of predictability … that is, consistent, repeatable revenue streams. The current environment, however, is anything
but predictable, having disrupted the business models of some high-profile names. After a long period of relative stability, how does
Sustainable adapt to this change? Does Sustainable adapt or simply stay the course?
Historically, our investment
approach has tended to benefit from rising market volatility as we remain disciplined in our approach to identifying companies with attractive
pricing power, high recurring revenues, strong cash flow, long-term growth drivers and management teams that have proven to be good stewards
of shareholder capital. Companies with such characteristics tend to be less impacted by fluctuations in global economic activity and protect
capital better in weak markets. The decline in 2022 has been relatively unique in that companies without these characteristics in the
commodity and energy space have performed the best, negatively impacting relative returns and our downside protection in the short term.
We see the strength in cyclicals and commodities being a temporary headwind that will be much less of a factor in the second half of 2022
and 2023 as monetary and fiscal policy tightening plays out, slowing economic growth and moderating current inflationary pressures.
There has been some discussion
in the financial media asserting that the decade-long track record of outsized returns for growth stocks may be coming to an end. Reasons:
inflation, interest rates, valuation, a shift in sentiment and no game-changers on the horizon. How would you counter those arguments?
The bout of post-pandemic inflation
that has led to a fundamental shift in monetary policy toward tightening has undoubtedly been difficult for companies with longer pathways
of future growth. However, the significant tightening in monetary policy and rising interest rates around much of the world along with
declining consumer sentiment and slowing economic growth is setting the stage for companies with above-average growth opportunities to
outperform as we move away from the supply and labor problems created by the pandemic. This period has created a wide array of attractive
valuation opportunities in high quality growth businesses, which should be rewarded as cyclical growth slows due to higher rates and slowing
economic growth. Given today’s higher cost of capital, however, we do not expect the more speculative and unprofitable tech companies
that benefited from the zero-interest rate environment and speculative risk-seeking to benefit to the same degree as higher quality growth
in the ensuing slower growth, higher interest rate environment.
Liberty All-Star® Equity Fund |
Manager Interview |
(Unaudited)
Sustainable’s investment
philosophy is rooted in the attributes of quality, growth, and valuation. Let’s focus on valuation. Per the previous question, if
growth stock valuation presented a hurdle at the beginning of the year, it is certainly less of one now. So, if valuations have come down
and Sustainable focuses on valuation to begin with, is it reasonable to assume you are finding attractive opportunities?
Yes, valuations for many high-quality
businesses with attractive long-term growth opportunities have become quite compelling. The weakness in the market and in higher quality
growth companies in particular has created significantly more attractive opportunities to select from on what we call our Qualified Company
List.
“Valuations for many high-quality businesses
with attractive long-term growth opportunities have become quite compelling.”
Give us two examples, from
the portion of the Liberty All-Star Equity Fund that you manage, of Sustainable growth stocks—either recent purchases or long-term
holds.
Danaher (DHR) provides scientific
instruments and consumables used for testing/manufacturing across multiple industries. Its products advance lifesaving research, improve
health and safety, promote water safety, and reduce packaging waste. Across industries, the company’s businesses share a common
model of leadership in installed base and in regulated applications the company operates a razor and blades consumables model. Danaher’s
consumable products are high margin and often difficult to switch out of as they are part of routine client processes for testing and
manufacturing. The company enjoys recurring revenues due to pull-throughs from its large installed base, and the fact that 75 percent
of its revenues are derived from captive consumables, many with mission critical applications. Danaher’s growth opportunity over
the next 3-5 years results from secular trends such as increased testing of food, water, and drugs, as well as more life sciences research
and increased demand for biological manufacturing. Increased investments into life sciences research by drug companies are also expected
to be a driver of growth. In recent years, the company has benefited from increased demand for COVID testing and manufacturing of COVID
vaccines and treatments. As COVID becomes more endemic, this tailwind will subside; however the company will benefit from an enlarged
installed base of molecular testing instruments, while demand for biologic manufacturing is supported by secular trends beyond COVID
vaccines including continued demand for biologic drugs, both branded and generic.
Semi-Annual Report (Unaudited) | June 30, 2022 |
9 |
Liberty All-Star® Equity Fund |
Manager Interview |
(Unaudited)
We initiated a new position
in creative design and document cloud management company Adobe (ADBE) in Q2. Its key focus is making specialized software tools for graphic
designers. Adobe benefits from strong pricing power given its dominant position in the Creative Cloud segment where no competitor has
a comparable set of offerings. Creating a suite of products with similar breadth would be a huge and long-term task as designers build
their careers around their Creative Cloud skills. For a similar reason, Adobe enjoys strong recurring revenue streams given their dominant
position and the difficulty businesses would face in changing vendors due to their established work processes incorporating Adobe tools.
The company’s growth is ultimately driven by an ever-expanding market of digital content demand, with an estimated 700 million “communicators”
and over 4 billion consumers of the content. Importantly, Asia still only accounts for about 15 percent of the company’s total sales
providing opportunity for further penetration there. Additionally, document digitization remains in an early stage with a significant
proportion of the company’s licensed users not having yet moved to Adobe’s software as a service model. With the company generating
attractive free cash flow, which we forecast to steadily increase over the coming years, the company provides the strong financial characteristics
we seek.
As always, thanks for an informative and insightful
interview.
Liberty All-Star® Equity Fund |
Schedule of Investments |
|
June 30, 2022 (Unaudited) |
|
|
SHARES |
|
|
VALUE |
|
COMMON STOCKS (98.28%) |
|
|
|
|
|
|
|
|
COMMUNICATION SERVICES (6.07%) |
|
|
|
|
|
|
|
|
Entertainment (0.72%) |
|
|
|
|
|
|
|
|
Netflix, Inc.(a) |
|
|
32,407 |
|
|
$ |
5,667,012 |
|
Walt Disney Co.(a) |
|
|
60,495 |
|
|
|
5,710,728 |
|
|
|
|
|
|
|
|
11,377,740 |
|
Interactive Media & Services (4.15%) |
|
|
|
|
|
|
|
|
Alphabet, Inc., Class A(a) |
|
|
6,472 |
|
|
|
14,104,171 |
|
Alphabet, Inc., Class C(a) |
|
|
14,285 |
|
|
|
31,247,723 |
|
Match Group, Inc.(a) |
|
|
104,207 |
|
|
|
7,262,186 |
|
Meta Platforms, Inc., Class A(a) |
|
|
78,506 |
|
|
|
12,659,092 |
|
|
|
|
|
|
|
|
65,273,172 |
|
Media (1.20%) |
|
|
|
|
|
|
|
|
Comcast Corp., Class A |
|
|
256,735 |
|
|
|
10,074,281 |
|
Omnicom Group, Inc. |
|
|
138,145 |
|
|
|
8,787,404 |
|
|
|
|
|
|
|
|
18,861,685 |
|
CONSUMER DISCRETIONARY (14.30%) |
|
|
|
|
|
|
|
|
Auto Components (1.33%) |
|
|
|
|
|
|
|
|
Cie Generale des Etablissements Michelin SCA(b) |
|
|
455,680 |
|
|
|
6,174,464 |
|
Lear Corp. |
|
|
117,329 |
|
|
|
14,770,548 |
|
|
|
|
|
|
|
|
20,945,012 |
|
Hotels, Restaurants & Leisure (1.75%) |
|
|
|
|
|
|
|
|
Booking Holdings, Inc.(a) |
|
|
9,652 |
|
|
|
16,881,251 |
|
Yum! Brands, Inc. |
|
|
94,078 |
|
|
|
10,678,794 |
|
|
|
|
|
|
|
|
27,560,045 |
|
Household Durables (3.20%) |
|
|
|
|
|
|
|
|
Lennar Corp., Class A |
|
|
111,600 |
|
|
|
7,875,612 |
|
Lennar Corp., Class B |
|
|
2,500 |
|
|
|
146,775 |
|
Mohawk Industries, Inc.(a) |
|
|
67,297 |
|
|
|
8,350,885 |
|
Newell Brands, Inc. |
|
|
670,289 |
|
|
|
12,762,302 |
|
Sony Group Corp.(b) |
|
|
258,736 |
|
|
|
21,156,843 |
|
|
|
|
|
|
|
|
50,292,417 |
|
Internet & Direct Marketing Retail (2.01%) |
|
|
|
|
|
|
|
|
Amazon.com, Inc.(a) |
|
|
298,240 |
|
|
|
31,676,071 |
|
|
|
|
|
|
|
|
|
|
Multiline Retail (2.24%) |
|
|
|
|
|
|
|
|
Dollar General Corp. |
|
|
82,428 |
|
|
|
20,231,128 |
|
Dollar Tree, Inc.(a) |
|
|
96,595 |
|
|
|
15,054,331 |
|
|
|
|
|
|
|
|
35,285,459 |
|
Specialty Retail (1.75%) |
|
|
|
|
|
|
|
|
CarMax, Inc.(a) |
|
|
73,715 |
|
|
|
6,669,733 |
|
Home Depot, Inc. |
|
|
26,980 |
|
|
|
7,399,805 |
|
See Notes to Financial Statements. |
|
Semi-Annual Report (Unaudited) | June 30, 2022 |
11 |
Liberty All-Star® Equity Fund |
Schedule of Investments |
|
June 30, 2022 (Unaudited) |
|
|
SHARES |
|
|
VALUE |
|
COMMON STOCKS (continued) |
|
|
|
|
|
|
|
|
Specialty Retail (continued) |
|
|
|
|
|
|
|
|
TJX Cos., Inc. |
|
|
123,846 |
|
|
$ |
6,916,799 |
|
Ulta Beauty, Inc.(a) |
|
|
17,071 |
|
|
|
6,580,529 |
|
|
|
|
|
|
|
|
27,566,866 |
|
Textiles, Apparel & Luxury Goods (2.02%) |
|
|
|
|
|
|
|
|
Gildan Activewear, Inc. |
|
|
377,917 |
|
|
|
10,876,451 |
|
NIKE, Inc., Class B |
|
|
55,860 |
|
|
|
5,708,892 |
|
PVH Corp. |
|
|
107,324 |
|
|
|
6,106,736 |
|
Skechers U.S.A., Inc., Class A(a) |
|
|
254,954 |
|
|
|
9,071,263 |
|
|
|
|
|
|
|
|
31,763,342 |
|
CONSUMER STAPLES (3.25%) |
|
|
|
|
|
|
|
|
Beverages (0.99%) |
|
|
|
|
|
|
|
|
Coca-Cola Co. |
|
|
135,500 |
|
|
|
8,524,305 |
|
Constellation Brands, Inc., Class A |
|
|
30,300 |
|
|
|
7,061,718 |
|
|
|
|
|
|
|
|
15,586,023 |
|
Food & Staples Retailing (0.60%) |
|
|
|
|
|
|
|
|
Costco Wholesale Corp. |
|
|
19,716 |
|
|
|
9,449,484 |
|
|
|
|
|
|
|
|
|
|
Food Products (0.41%) |
|
|
|
|
|
|
|
|
Tyson Foods, Inc., Class A |
|
|
74,900 |
|
|
|
6,445,894 |
|
|
|
|
|
|
|
|
|
|
Household Products (0.50%) |
|
|
|
|
|
|
|
|
Procter & Gamble Co. |
|
|
54,600 |
|
|
|
7,850,934 |
|
|
|
|
|
|
|
|
|
|
Personal Products (0.75%) |
|
|
|
|
|
|
|
|
Unilever PLC(b) |
|
|
258,896 |
|
|
|
11,865,204 |
|
|
|
|
|
|
|
|
|
|
ENERGY (2.75%) |
|
|
|
|
|
|
|
|
Energy Equipment & Services (1.31%) |
|
|
|
|
|
|
|
|
Halliburton Co. |
|
|
264,253 |
|
|
|
8,286,974 |
|
NOV, Inc. |
|
|
429,929 |
|
|
|
7,270,099 |
|
Schlumberger NV |
|
|
139,668 |
|
|
|
4,994,528 |
|
|
|
|
|
|
|
|
20,551,601 |
|
Oil, Gas & Consumable Fuels (1.44%) |
|
|
|
|
|
|
|
|
Coterra Energy, Inc. |
|
|
326,100 |
|
|
|
8,410,119 |
|
Exxon Mobil Corp. |
|
|
54,865 |
|
|
|
4,698,639 |
|
Phillips 66 |
|
|
65,400 |
|
|
|
5,362,146 |
|
Shell PLC(b) |
|
|
79,884 |
|
|
|
4,177,134 |
|
|
|
|
|
|
|
|
22,648,038 |
|
See Notes to Financial Statements. |
|
Liberty All-Star® Equity Fund |
Schedule of Investments |
|
June 30, 2022 (Unaudited) |
|
|
SHARES |
|
|
VALUE |
|
COMMON STOCKS (continued) |
|
|
|
|
|
|
|
|
FINANCIALS (18.49%) |
|
|
|
|
|
|
|
|
Banks (4.58%) |
|
|
|
|
|
|
|
|
Bank of America Corp. |
|
|
221,632 |
|
|
$ |
6,899,404 |
|
Citigroup, Inc. |
|
|
341,660 |
|
|
|
15,712,944 |
|
Commerce Bancshares, Inc. |
|
|
77,700 |
|
|
|
5,101,005 |
|
Cullen/Frost Bankers, Inc. |
|
|
54,700 |
|
|
|
6,369,815 |
|
JPMorgan Chase & Co. |
|
|
114,623 |
|
|
|
12,907,696 |
|
Mitsubishi UFJ Financial Group, Inc.(b)(c) |
|
|
759,100 |
|
|
|
4,053,594 |
|
PNC Financial Services Group, Inc. |
|
|
48,200 |
|
|
|
7,604,514 |
|
Wells Fargo & Co. |
|
|
341,937 |
|
|
|
13,393,672 |
|
|
|
|
|
|
|
|
72,042,644 |
|
Capital Markets (5.72%) |
|
|
|
|
|
|
|
|
Ameriprise Financial, Inc. |
|
|
33,900 |
|
|
|
8,057,352 |
|
Blackstone Group LP |
|
|
83,200 |
|
|
|
7,590,336 |
|
Charles Schwab Corp. |
|
|
340,079 |
|
|
|
21,486,191 |
|
Goldman Sachs Group, Inc. |
|
|
18,366 |
|
|
|
5,455,069 |
|
MSCI, Inc. |
|
|
26,992 |
|
|
|
11,124,753 |
|
Northern Trust Corp. |
|
|
100,500 |
|
|
|
9,696,240 |
|
S&P Global, Inc. |
|
|
67,733 |
|
|
|
22,830,085 |
|
UBS Group AG |
|
|
231,175 |
|
|
|
3,749,659 |
|
|
|
|
|
|
|
|
89,989,685 |
|
Consumer Finance (1.71%) |
|
|
|
|
|
|
|
|
American Express Co. |
|
|
54,492 |
|
|
|
7,553,681 |
|
Capital One Financial Corp. |
|
|
186,801 |
|
|
|
19,462,796 |
|
|
|
|
|
|
|
|
27,016,477 |
|
Diversified Financial Services (2.26%) |
|
|
|
|
|
|
|
|
Berkshire Hathaway, Inc., Class B(a) |
|
|
66,648 |
|
|
|
18,196,237 |
|
Equitable Holdings, Inc. |
|
|
371,413 |
|
|
|
9,682,737 |
|
Voya Financial, Inc. |
|
|
129,803 |
|
|
|
7,727,172 |
|
|
|
|
|
|
|
|
35,606,146 |
|
Insurance (4.22%) |
|
|
|
|
|
|
|
|
American International Group, Inc. |
|
|
209,210 |
|
|
|
10,696,907 |
|
Arch Capital Group, Ltd.(a) |
|
|
182,061 |
|
|
|
8,281,955 |
|
Axis Capital Holdings, Ltd. |
|
|
171,252 |
|
|
|
9,776,777 |
|
Chubb, Ltd. |
|
|
36,356 |
|
|
|
7,146,863 |
|
Cincinnati Financial Corp. |
|
|
71,000 |
|
|
|
8,447,580 |
|
MetLife, Inc. |
|
|
202,485 |
|
|
|
12,714,033 |
|
Progressive Corp. |
|
|
80,382 |
|
|
|
9,346,015 |
|
|
|
|
|
|
|
|
66,410,130 |
|
HEALTH CARE (14.30%) |
|
|
|
|
|
|
|
|
Biotechnology (1.17%) |
|
|
|
|
|
|
|
|
Amgen, Inc. |
|
|
36,600 |
|
|
|
8,904,780 |
|
See Notes to Financial Statements. |
|
Semi-Annual Report (Unaudited) | June 30, 2022 |
13 |
Liberty All-Star® Equity Fund |
Schedule of Investments |
|
June 30, 2022 (Unaudited) |
|
|
SHARES |
|
|
VALUE |
|
COMMON STOCKS (continued) |
|
|
|
|
|
|
|
|
Biotechnology (continued) |
|
|
|
|
|
|
|
|
Regeneron Pharmaceuticals, Inc.(a) |
|
|
16,011 |
|
|
$ |
9,464,582 |
|
|
|
|
|
|
|
|
18,369,362 |
|
Health Care Equipment & Supplies (3.85%) |
|
|
|
|
|
|
|
|
Abbott Laboratories |
|
|
80,493 |
|
|
|
8,745,564 |
|
Alcon, Inc. |
|
|
101,700 |
|
|
|
7,107,813 |
|
Align Technology, Inc.(a) |
|
|
19,546 |
|
|
|
4,625,952 |
|
Boston Scientific Corp.(a) |
|
|
151,897 |
|
|
|
5,661,201 |
|
Dexcom, Inc.(a) |
|
|
68,444 |
|
|
|
5,101,131 |
|
Intuitive Surgical, Inc.(a) |
|
|
36,365 |
|
|
|
7,298,819 |
|
Koninklijke Philips NV |
|
|
316,403 |
|
|
|
6,812,160 |
|
Medtronic PLC |
|
|
67,700 |
|
|
|
6,076,075 |
|
Smith & Nephew PLC(b)(c) |
|
|
327,567 |
|
|
|
9,145,671 |
|
|
|
|
|
|
|
|
60,574,386 |
|
Health Care Providers & Services (4.14%) |
|
|
|
|
|
|
|
|
Cardinal Health, Inc. |
|
|
88,179 |
|
|
|
4,609,116 |
|
Fresenius Medical Care AG & Co. KGaA(b) |
|
|
748,421 |
|
|
|
18,665,620 |
|
McKesson Corp. |
|
|
30,947 |
|
|
|
10,095,221 |
|
UnitedHealth Group, Inc. |
|
|
61,828 |
|
|
|
31,756,716 |
|
|
|
|
|
|
|
|
65,126,673 |
|
Life Sciences Tools & Services (3.22%) |
|
|
|
|
|
|
|
|
Danaher Corp. |
|
|
95,090 |
|
|
|
24,107,217 |
|
IQVIA Holdings, Inc.(a) |
|
|
73,809 |
|
|
|
16,015,815 |
|
Thermo Fisher Scientific, Inc. |
|
|
19,493 |
|
|
|
10,590,157 |
|
|
|
|
|
|
|
|
50,713,189 |
|
Pharmaceuticals (1.92%) |
|
|
|
|
|
|
|
|
Bristol-Myers Squibb Co. |
|
|
144,486 |
|
|
|
11,125,422 |
|
Elanco Animal Health, Inc.(a) |
|
|
232,800 |
|
|
|
4,569,864 |
|
Pfizer, Inc. |
|
|
95,506 |
|
|
|
5,007,380 |
|
Zoetis, Inc. |
|
|
55,850 |
|
|
|
9,600,056 |
|
|
|
|
|
|
|
|
30,302,722 |
|
INDUSTRIALS (8.09%) |
|
|
|
|
|
|
|
|
Aerospace & Defense (0.55%) |
|
|
|
|
|
|
|
|
General Dynamics Corp. |
|
|
31,200 |
|
|
|
6,903,000 |
|
Textron, Inc. |
|
|
29,545 |
|
|
|
1,804,313 |
|
|
|
|
|
|
|
|
8,707,313 |
|
Building Products (1.44%) |
|
|
|
|
|
|
|
|
Carlisle Cos., Inc. |
|
|
39,110 |
|
|
|
9,332,037 |
|
Masco Corp. |
|
|
262,500 |
|
|
|
13,282,500 |
|
|
|
|
|
|
|
|
22,614,537 |
|
See Notes to Financial Statements. |
|
Liberty All-Star® Equity Fund |
Schedule of Investments |
|
June 30, 2022 (Unaudited) |
|
|
SHARES |
|
|
VALUE |
|
COMMON STOCKS (continued) |
|
|
|
|
|
|
|
|
Commercial Services & Supplies (0.38%) |
|
|
|
|
|
|
|
|
Waste Connections, Inc. |
|
|
48,650 |
|
|
$ |
6,030,654 |
|
|
|
|
|
|
|
|
|
|
Electrical Equipment (0.45%) |
|
|
|
|
|
|
|
|
Eaton Corp. PLC |
|
|
55,793 |
|
|
|
7,029,360 |
|
|
|
|
|
|
|
|
|
|
Industrial Conglomerates (1.49%) |
|
|
|
|
|
|
|
|
General Electric Co. |
|
|
248,922 |
|
|
|
15,848,864 |
|
Honeywell International, Inc. |
|
|
43,300 |
|
|
|
7,525,973 |
|
|
|
|
|
|
|
|
23,374,837 |
|
Machinery (2.77%) |
|
|
|
|
|
|
|
|
Oshkosh Corp. |
|
|
58,000 |
|
|
|
4,764,120 |
|
PACCAR, Inc. |
|
|
136,923 |
|
|
|
11,274,240 |
|
Parker-Hannifin Corp. |
|
|
33,400 |
|
|
|
8,218,070 |
|
Wabtec Corp. |
|
|
152,075 |
|
|
|
12,482,316 |
|
Xylem, Inc. |
|
|
87,000 |
|
|
|
6,801,660 |
|
|
|
|
|
|
|
|
43,540,406 |
|
Professional Services (0.41%) |
|
|
|
|
|
|
|
|
TransUnion |
|
|
81,400 |
|
|
|
6,511,186 |
|
|
|
|
|
|
|
|
|
|
Trading Companies & Distributors (0.60%) |
|
|
|
|
|
|
|
|
Ferguson PLC(c) |
|
|
85,481 |
|
|
|
9,463,602 |
|
|
|
|
|
|
|
|
|
|
INFORMATION TECHNOLOGY (20.37%) |
|
|
|
|
|
|
|
|
Electronic Equipment, Instruments & Components (0.63%) |
|
|
|
|
|
|
|
|
CDW Corp. |
|
|
63,298 |
|
|
|
9,973,233 |
|
|
|
|
|
|
|
|
|
|
IT Services (5.55%) |
|
|
|
|
|
|
|
|
Amdocs, Ltd. |
|
|
168,339 |
|
|
|
14,024,322 |
|
Cognizant Technology Solutions Corp., Class A |
|
|
204,848 |
|
|
|
13,825,192 |
|
FleetCor Technologies, Inc.(a) |
|
|
38,829 |
|
|
|
8,158,361 |
|
Mastercard, Inc., Class A |
|
|
30,196 |
|
|
|
9,526,234 |
|
PayPal Holdings, Inc.(a) |
|
|
98,352 |
|
|
|
6,868,904 |
|
Snowflake, Inc., Class A(a) |
|
|
21,125 |
|
|
|
2,937,643 |
|
Twilio, Inc., Class A(a) |
|
|
35,508 |
|
|
|
2,975,925 |
|
Visa, Inc., Class A |
|
|
147,242 |
|
|
|
28,990,477 |
|
|
|
|
|
|
|
|
87,307,058 |
|
Semiconductors & Semiconductor Equipment (3.30%) |
|
|
|
|
|
|
|
|
ASML Holding N.V. |
|
|
13,944 |
|
|
|
6,635,671 |
|
Enphase Energy, Inc.(a) |
|
|
25,153 |
|
|
|
4,910,872 |
|
Microchip Technology, Inc. |
|
|
136,000 |
|
|
|
7,898,880 |
|
See Notes to Financial Statements. |
|
Semi-Annual Report (Unaudited) | June 30, 2022 |
15 |
Liberty All-Star® Equity Fund |
Schedule of Investments |
|
June 30, 2022 (Unaudited) |
|
|
SHARES |
|
|
VALUE |
|
COMMON STOCKS (continued) |
|
|
|
|
|
|
|
|
Semiconductors & Semiconductor Equipment (continued) |
|
|
|
|
|
|
|
|
Micron Technology, Inc. |
|
|
196,933 |
|
|
$ |
10,886,456 |
|
NVIDIA Corp. |
|
|
82,967 |
|
|
|
12,576,967 |
|
QUALCOMM, Inc. |
|
|
70,000 |
|
|
|
8,941,800 |
|
|
|
|
|
|
|
|
51,850,646 |
|
Software (10.48%) |
|
|
|
|
|
|
|
|
Adobe, Inc.(a) |
|
|
68,993 |
|
|
|
25,255,578 |
|
ANSYS, Inc.(a) |
|
|
35,600 |
|
|
|
8,518,724 |
|
Autodesk, Inc.(a) |
|
|
97,619 |
|
|
|
16,786,563 |
|
Crowdstrike Holdings, Inc., Class A(a) |
|
|
30,086 |
|
|
|
5,071,296 |
|
Intuit, Inc. |
|
|
30,394 |
|
|
|
11,715,063 |
|
Microsoft Corp. |
|
|
147,254 |
|
|
|
37,819,245 |
|
Salesforce, Inc.(a) |
|
|
119,501 |
|
|
|
19,722,445 |
|
SAP SE(b) |
|
|
106,599 |
|
|
|
9,670,661 |
|
ServiceNow, Inc.(a) |
|
|
36,715 |
|
|
|
17,458,717 |
|
Trade Desk, Inc., Class A(a) |
|
|
107,901 |
|
|
|
4,519,973 |
|
Workday, Inc., Class A(a) |
|
|
60,132 |
|
|
|
8,393,225 |
|
|
|
|
|
|
|
|
164,931,490 |
|
Technology Hardware, Storage & Peripherals (0.41%) |
|
|
|
|
|
|
|
|
Hewlett Packard Enterprise Co. |
|
|
490,898 |
|
|
|
6,509,307 |
|
|
|
|
|
|
|
|
|
|
MATERIALS (5.16%) |
|
|
|
|
|
|
|
|
Chemicals (3.32%) |
|
|
|
|
|
|
|
|
Corteva, Inc. |
|
|
226,000 |
|
|
|
12,235,640 |
|
Dow Chemical Co. |
|
|
165,041 |
|
|
|
8,517,766 |
|
Ecolab, Inc. |
|
|
112,000 |
|
|
|
17,221,120 |
|
RPM International, Inc. |
|
|
89,000 |
|
|
|
7,006,080 |
|
Sherwin-Williams Co. |
|
|
33,012 |
|
|
|
7,391,717 |
|
|
|
|
|
|
|
|
52,372,323 |
|
Construction Materials (0.51%) |
|
|
|
|
|
|
|
|
Martin Marietta Materials, Inc. |
|
|
26,700 |
|
|
|
7,989,708 |
|
|
|
|
|
|
|
|
|
|
Containers & Packaging (1.33%) |
|
|
|
|
|
|
|
|
Avery Dennison Corp. |
|
|
62,911 |
|
|
|
10,183,404 |
|
Ball Corp. |
|
|
156,038 |
|
|
|
10,730,733 |
|
|
|
|
|
|
|
|
20,914,137 |
|
REAL ESTATE (2.59%) |
|
|
|
|
|
|
|
|
Equity Real Estate Investment Trusts (REITs) (2.59%) |
|
|
|
|
|
|
|
|
American Tower Corp. |
|
|
54,800 |
|
|
|
14,006,332 |
|
Crown Castle International Corp. |
|
|
50,600 |
|
|
|
8,520,028 |
|
Equinix, Inc. |
|
|
15,917 |
|
|
|
10,457,787 |
|
Equity LifeStyle Properties, Inc. |
|
|
55,700 |
|
|
|
3,925,179 |
|
See Notes to Financial Statements. |
|
Liberty All-Star® Equity Fund |
Schedule of Investments |
|
June 30, 2022 (Unaudited) |
|
|
SHARES |
|
|
VALUE |
|
COMMON STOCKS (continued) |
|
|
|
|
|
|
|
|
Equity Real Estate Investment Trusts (REITs) (continued) |
|
|
|
|
|
|
|
|
Sun Communities, Inc. |
|
|
24,200 |
|
|
$ |
3,856,512 |
|
|
|
|
|
|
|
|
40,765,838 |
|
UTILITIES (2.91%) |
|
|
|
|
|
|
|
|
Electric Utilities (2.34%) |
|
|
|
|
|
|
|
|
Edison International |
|
|
226,635 |
|
|
|
14,332,397 |
|
NRG Energy, Inc. |
|
|
336,915 |
|
|
|
12,860,046 |
|
Xcel Energy, Inc. |
|
|
135,034 |
|
|
|
9,555,006 |
|
|
|
|
|
|
|
|
36,747,449 |
|
Gas Utilities (0.57%) |
|
|
|
|
|
|
|
|
Atmos Energy Corp. |
|
|
80,500 |
|
|
|
9,024,050 |
|
|
|
|
|
|
|
|
|
|
TOTAL COMMON STOCKS |
|
|
|
|
|
|
|
|
(COST OF $1,427,141,319) |
|
|
|
|
|
|
1,546,807,535 |
|
|
|
|
|
|
|
|
|
|
SHORT TERM INVESTMENTS (2.51%) |
|
|
|
|
|
|
|
|
MONEY MARKET FUND (1.65%) |
|
|
|
|
|
|
|
|
State Street Institutional US Government Money Market Fund, 1.43%(d) |
|
|
|
|
|
|
|
|
(COST OF $25,952,558) |
|
|
25,952,558 |
|
|
|
25,952,558 |
|
|
|
|
|
|
|
|
|
|
INVESTMENTS PURCHASED WITH COLLATERAL FROM SECURITIES LOANED (0.86%) |
|
|
|
|
|
|
|
|
State Street Navigator Securities Lending Government Money Market Portfolio, 1.56% |
|
|
|
|
|
|
|
|
(COST OF $13,608,956) |
|
|
13,608,956 |
|
|
|
13,608,956 |
|
|
|
|
|
|
|
|
|
|
TOTAL SHORT TERM INVESTMENTS |
|
|
|
|
|
|
|
|
(COST OF $39,561,514) |
|
|
|
|
|
|
39,561,514 |
|
|
|
|
|
|
|
|
|
|
TOTAL INVESTMENTS (100.79%) |
|
|
|
|
|
|
|
|
(COST OF $1,466,702,833) |
|
|
|
|
|
|
1,586,369,049 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES IN EXCESS OF OTHER ASSETS (-0.79%) |
|
|
|
|
|
|
(12,446,299 |
) |
|
|
|
|
|
|
|
|
|
NET ASSETS (100.00%) |
|
|
|
|
|
$ |
1,573,922,750 |
|
|
|
|
|
|
|
|
|
|
NET ASSET VALUE PER SHARE |
|
|
|
|
|
|
|
|
(260,094,643 SHARES OUTSTANDING) |
|
|
|
|
|
$ |
6.05 |
|
See Notes to Financial Statements. |
|
Semi-Annual Report (Unaudited) | June 30, 2022 |
17 |
Liberty All-Star® Equity Fund |
Schedule of Investments |
June 30, 2022 (Unaudited)
| (a) | Non-income
producing security. |
| (b) | American
Depositary Receipt. |
| (c) | Security,
or a portion of the security position, is currently on loan. The total market value of securities on loan is $12,860,177. |
| (d) | Rate
reflects seven-day effective yield on June 30, 2022. |
See Notes to Financial Statements. |
|
Liberty All-Star® Equity Fund |
|
Statement of Assets and Liabilities |
|
|
June 30, 2022 (Unaudited) |
ASSETS: |
|
|
|
Investments at value (Cost $1,466,702,833)(a) |
|
$ |
1,586,369,049 |
|
Receivable for investment securities sold |
|
|
2,050,672 |
|
Dividends and interest receivable |
|
|
1,141,515 |
|
Tax reclaim receivable |
|
|
402,580 |
|
Prepaid and other assets |
|
|
275,740 |
|
TOTAL ASSETS |
|
|
1,590,239,556 |
|
|
|
|
|
|
LIABILITIES: |
|
|
|
|
Payable for investments purchased |
|
|
837,462 |
|
Investment advisory fee payable |
|
|
921,140 |
|
Payable for administration, pricing and bookkeeping fees |
|
|
479,761 |
|
Payable for collateral upon return of securities loaned |
|
|
13,608,956 |
|
Accrued expenses |
|
|
469,487 |
|
TOTAL LIABILITIES |
|
|
16,316,806 |
|
NET ASSETS |
|
$ |
1,573,922,750 |
|
|
|
|
|
|
NET ASSETS REPRESENTED BY: |
|
|
|
|
Paid-in capital |
|
$ |
1,511,068,413 |
|
Total distributable earnings |
|
|
62,854,337 |
|
NET ASSETS |
|
$ |
1,573,922,750 |
|
|
|
|
|
|
Shares of common stock outstanding |
|
|
|
|
(unlimited number of shares of beneficial interest without par value authorized) |
|
|
260,094,643 |
|
NET ASSET VALUE PER SHARE |
|
$ |
6.05 |
|
| (a) | Includes
securities on loan of $12,860,177. |
See Notes to Financial Statements. |
|
Semi-Annual Report (Unaudited) | June 30, 2022 |
19 |
Liberty All-Star® Equity Fund |
Statement of Operations |
|
For the Six Months Ended June 30, 2022 (Unaudited) |
INVESTMENT INCOME: |
|
|
|
Dividends (Net of foreign taxes withheld at source which amounted to $308,260) |
|
$ |
12,469,394 |
|
Securities lending income |
|
|
20,449 |
|
TOTAL INVESTMENT INCOME |
|
|
12,489,843 |
|
|
|
|
|
|
EXPENSES: |
|
|
|
|
Investment advisory fee |
|
|
6,079,180 |
|
Administration, pricing and bookkeeping fees |
|
|
1,493,412 |
|
Audit fee |
|
|
24,964 |
|
Custodian fee |
|
|
47,363 |
|
Insurance expense |
|
|
26,455 |
|
Legal fees |
|
|
82,837 |
|
NYSE fee |
|
|
127,949 |
|
Proxy fees |
|
|
57,340 |
|
Shareholder communication expenses |
|
|
37,754 |
|
Transfer agent fees |
|
|
68,666 |
|
Trustees' fees and expenses |
|
|
189,442 |
|
Miscellaneous expenses |
|
|
9,237 |
|
TOTAL EXPENSES |
|
|
8,244,599 |
|
NET INVESTMENT INCOME |
|
|
4,245,244 |
|
|
|
|
|
|
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: |
|
|
|
|
Net realized gain on investment transactions |
|
|
83,464,873 |
|
Net realized gain on foreign currency transactions |
|
|
976 |
|
Net change in unrealized depreciation on investments |
|
|
(539,975,695 |
) |
Net change in unrealized depreciation on foreign currency transactions |
|
|
(2,908 |
) |
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS |
|
|
(456,512,754 |
) |
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS |
|
$ |
(452,267,510 |
) |
See Notes to Financial Statements. |
|
Liberty All-Star® Equity Fund |
Statements of Changes in Net Assets |
|
|
For the Six
Months Ended
June 30, 2022
(Unaudited) |
|
|
For the
Year Ended
December 31, 2021 |
|
FROM OPERATIONS: |
|
|
|
|
|
|
|
|
Net investment income |
|
$ |
4,245,244 |
|
|
$ |
4,097,410 |
|
Net realized gain on investments |
|
|
83,465,849 |
|
|
|
123,711,798 |
|
Net change in unrealized appreciation/(depreciation) on investments |
|
|
(539,978,603 |
) |
|
|
245,932,230 |
|
Net Increase/(Decrease) in Net Assets From Operations |
|
|
(452,267,510 |
) |
|
|
373,741,438 |
|
|
|
|
|
|
|
|
|
|
DISTRIBUTIONS TO SHAREHOLDERS: |
|
|
|
|
|
|
|
|
From distributable earnings |
|
|
(97,120,652 |
) |
|
|
(168,419,787 |
) |
Return of capital |
|
|
– |
|
|
|
(10,203,690 |
) |
Total Distributions |
|
|
(97,120,652 |
) |
|
|
(178,623,477 |
) |
|
|
|
|
|
|
|
|
|
CAPITAL SHARE TRANSACTIONS: |
|
|
|
|
|
|
|
|
Proceeds from rights offering, net of offering cost |
|
|
– |
|
|
|
217,233,738 |
|
Dividend reinvestments |
|
|
39,682,138 |
|
|
|
72,142,876 |
|
Net increase resulting from Capital Share Transactions |
|
|
39,682,138 |
|
|
|
289,376,614 |
|
Total Increase/(Decrease) in Net Assets |
|
|
(509,706,024 |
) |
|
|
484,494,575 |
|
|
|
|
|
|
|
|
|
|
NET ASSETS: |
|
|
|
|
|
|
|
|
Beginning of period |
|
|
2,083,628,774 |
|
|
|
1,599,134,199 |
|
End of period |
|
$ |
1,573,922,750 |
|
|
$ |
2,083,628,774 |
|
See Notes to Financial Statements. |
|
Semi-Annual Report (Unaudited) | June 30, 2022 |
21 |
Liberty All-Star®
Equity Fund
Financial Highlights
PER SHARE OPERATING PERFORMANCE: |
Net asset value at beginning of period |
INCOME FROM INVESTMENT OPERATIONS: |
Net investment income(a) |
Net realized and unrealized gain/(loss) on investments |
Total from Investment Operations |
|
LESS DISTRIBUTIONS TO SHAREHOLDERS: |
Net investment income |
Net realized gain on investments |
Return of capital |
Total Distributions |
Change due to rights offering(b) |
Net asset value at end of period |
Market price at end of period |
|
TOTAL INVESTMENT RETURN FOR SHAREHOLDERS:(c) |
Based on net asset value |
Based on market price |
|
RATIOS AND SUPPLEMENTAL DATA: |
Net assets at end of period (millions) |
Ratio of expenses to average net assets |
Ratio of net investment income to average net assets |
Portfolio turnover rate |
|
| (a) | Calculated
using average shares outstanding during the period. |
| (b) | Effect of Fund's rights offering for shares at a price below
net asset value, net of costs. |
| (c) | Calculated assuming all distributions are reinvested at actual
reinvestment prices and all primary rights in the Fund's rights offering were exercised. The net asset value and market price returns
will differ depending upon the level of any discount from or premium to net asset value at which the Fund's shares traded during the
period. Past performance is not a guarantee of future results. |
See Notes to Financial Statements. |
|
Financial Highlights
For the Six |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Months Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2022 |
|
|
|
|
|
For the Year Ended December 31, |
|
|
|
|
(Unaudited) |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 |
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
8.20 |
|
|
$ |
7.37 |
|
|
$ |
6.90 |
|
|
$ |
5.89 |
|
|
$ |
6.87 |
|
|
$ |
6.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.02 |
|
|
|
0.02 |
|
|
|
0.03 |
|
|
|
0.05 |
|
|
|
0.05 |
|
|
|
0.04 |
|
|
(1.79 |
) |
|
|
1.67 |
|
|
|
1.07 |
|
|
|
1.62 |
|
|
|
(0.35 |
) |
|
|
1.26 |
|
|
(1.77 |
) |
|
|
1.69 |
|
|
|
1.10 |
|
|
|
1.67 |
|
|
|
(0.30 |
) |
|
|
1.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.38 |
) |
|
|
(0.02 |
) |
|
|
(0.03 |
) |
|
|
(0.05 |
) |
|
|
(0.05 |
) |
|
|
(0.04 |
) |
|
– |
|
|
|
(0.74 |
) |
|
|
(0.60 |
) |
|
|
(0.59 |
) |
|
|
(0.51 |
) |
|
|
(0.45 |
) |
|
– |
|
|
|
(0.05 |
) |
|
|
– |
|
|
|
(0.02 |
) |
|
|
(0.12 |
) |
|
|
(0.07 |
) |
|
(0.38 |
) |
|
|
(0.81 |
) |
|
|
(0.63 |
) |
|
|
(0.66 |
) |
|
|
(0.68 |
) |
|
|
(0.56 |
) |
|
– |
|
|
|
(0.05 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
$ |
6.05 |
|
|
$ |
8.20 |
|
|
$ |
7.37 |
|
|
$ |
6.90 |
|
|
$ |
5.89 |
|
|
$ |
6.87 |
|
$ |
6.28 |
|
|
$ |
8.38 |
|
|
$ |
6.90 |
|
|
$ |
6.77 |
|
|
$ |
5.38 |
|
|
$ |
6.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22.0 |
%)(d) |
|
|
24.0 |
% |
|
|
18.0 |
% |
|
|
30.1 |
% |
|
|
(4.5 |
%) |
|
|
23.4 |
% |
|
(20.8 |
%)(d) |
|
|
35.3 |
% |
|
|
12.6 |
% |
|
|
39.7 |
% |
|
|
(4.9 |
%) |
|
|
34.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,574 |
|
|
$ |
2,084 |
|
|
$ |
1,599 |
|
|
$ |
1,440 |
|
|
$ |
1,183 |
|
|
$ |
1,330 |
|
|
0.92 |
%(e) |
|
|
0.93 |
% |
|
|
1.02 |
% |
|
|
0.99 |
% |
|
|
1.00 |
% |
|
|
1.01 |
% |
|
0.47 |
%(e) |
|
|
0.23 |
% |
|
|
0.44 |
% |
|
|
0.73 |
% |
|
|
0.72 |
% |
|
|
0.64 |
% |
|
16 |
%(d) |
|
|
22 |
% |
|
|
45 |
% |
|
|
23 |
% |
|
|
22 |
% |
|
|
21 |
% |
Semi-Annual Report (Unaudited) | June 30, 2022 |
23 |
Liberty All-Star® Equity Fund |
Notes to Financial Statements |
June 30, 2022 (Unaudited)
NOTE 1. ORGANIZATION
Liberty All-Star®
Equity Fund (the “Fund”) is a Massachusetts business trust registered under the Investment Company Act of 1940 (the “1940
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.
NOTE 2. SIGNIFICANT ACCOUNTING
POLICIES
The following is a summary of
significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The Fund is considered
an investment company under U.S. generally accepted accounting principles (“GAAP”) and follows the accounting and reporting
guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic
946.
Use of Estimates
The preparation of financial
statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from these estimates.
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 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.
Cash collateral from securities
lending activity is reinvested in the State Street Navigator Securities Lending Government Money Market Portfolio (“State Street
Navigator”), a registered investment company under the 1940 Act, which operates as a money market fund in compliance with Rule 2a-7
under the 1940 Act. Shares of registered investment companies are valued daily at that investment company’s net asset value per
share.
The Fund’s investments
are valued at market value or, in the absence of market value with respect to any portfolio securities, at fair value according to procedures
adopted by the Fund’s Board of Trustees (the “Board”). When market quotations are not readily available, or in management’s
judgment they do not accurately reflect fair value of a security, or an event occurs after the market close but before the Fund is priced
that materially affects the value of a security, the securities will be valued by the Fund’s Fair Valuation Committee using fair
valuation procedures established by the Board. Examples of potentially significant events that could materially impact the value of a
security include, but are not limited to: single issuer events such as corporate actions, reorganizations, mergers, spin-offs, liquidations,
acquisitions and buyouts; corporate announcements on earnings or product offerings; regulatory news; and litigation and multiple issuer
events such as governmental actions; natural disasters or armed conflicts that affect a country or a region; or significant market fluctuations.
Potential significant events are monitored by the Advisor ALPS Advisors Inc. (the “Advisor” and “AAI”), Sub-Advisers
and/or the Valuation Committee through independent reviews of market indicators, general news sources and communications from the Fund’s
custodian. As of June 30, 2022, the Fund held no securities that were fair valued.
Liberty All-Star® Equity Fund |
Notes to Financial Statements |
June 30, 2022 (Unaudited)
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.
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.
Lending of Portfolio Securities
The Fund may lend its portfolio
securities only to borrowers that are approved by the Fund’s securities lending agent, State Street Bank & Trust Co. (“SSB”).
The Fund will limit such lending to not more than 30% of the value of its total assets. The borrower pledges and maintains with the Fund
collateral consisting of cash (U.S. Dollar only), securities issued or guaranteed by the U.S. government or its agencies or instrumentalities,
or by irrevocable bank letters of credit issued by a person other than the borrower or an affiliate of the borrower. The initial collateral
received by the Fund is required to have a value of no less than 102% of the market value of the loaned securities for securities traded
on U.S. exchanges and a value of no less than 105% of the market value for all other securities. The collateral is maintained thereafter,
at a market value equal to no less than 100% of the current value of the securities on loan. The market value of the loaned securities
is determined at the close of each business day and any additional required collateral is delivered to the Fund on the next business day.
During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities. Loans of securities
are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for
settlement of securities transactions.
Any cash collateral received
is reinvested in State Street Navigator. Non-cash collateral, in the form of securities issued or guaranteed by the U.S. government or
its agencies or instrumentalities, is not disclosed in the Fund’s Statement of Assets and Liabilities as it is held by the lending
agent on behalf of the Fund and the Fund does not have the ability to re-hypothecate these securities. Income earned by the Fund from
securities lending activity is disclosed in the Statement of Operations.
Semi-Annual Report (Unaudited) | June 30, 2022 |
25 |
Liberty All-Star® Equity Fund |
Notes to Financial Statements |
June 30, 2022 (Unaudited)
Market Value of Securities on Loan |
|
|
Cash Collateral Received |
|
|
Non-Cash Collateral Received |
|
|
Total Collateral Received |
|
$ |
12,860,177 |
|
|
$ |
13,608,956 |
|
|
$ |
– |
|
|
$ |
13,608,956 |
|
The risks of securities lending
include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate
these risks, the Fund benefits from a borrower default indemnity provided by SSB. SSB’s indemnity allows for full replacement of
securities lent wherein SSB will purchase the unreturned loaned securities on the open market by applying the proceeds of the collateral,
or to the extent such proceeds are insufficient or the collateral is unavailable, SSB will purchase the unreturned loan securities at
SSB’s expense. However, the Fund could suffer a loss if the value of the investments purchased with cash collateral falls below
the value of the cash collateral received.
The following table reflects
a breakdown of transactions accounted for as secured borrowings, the gross obligation by the type of collateral pledged or securities
loaned, and the remaining contractual maturity of those transactions as of June 30, 2022:
|
|
|
Remaining contractual maturity of the agreements |
|
|
|
|
|
|
|
|
|
|
Securities Lending Transactions |
|
|
Overnight & Continuous |
|
Up to 30 days |
|
|
30-90 days |
|
|
Greater than 90 days |
|
|
Total |
|
Common Stocks |
|
|
$ |
13,608,956 |
|
$ |
– |
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
13,608,956 |
|
Total Borrowings |
|
|
$ |
13,608,956 |
|
Gross amount of recognized liabilities for securities lending (collateral received) |
|
|
$ |
13,608,956 |
|
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 that are valued
based on unadjusted quoted prices in active markets 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. Investments in open-end mutual funds are valued at their closing NAV each business
day and are categorized as Level 1 in the hierarchy.
Liberty All-Star® Equity Fund |
Notes to Financial Statements |
June 30, 2022 (Unaudited)
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 |
|
|
|
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 June 30, 2022:
|
|
Valuation Inputs |
|
|
|
|
|
Investments in Securities at Value |
|
|
Level 1 |
|
|
|
Level 2 |
|
|
|
Level 3 |
|
|
|
Total |
|
Common Stocks* |
|
$ |
1,546,807,535 |
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
1,546,807,535 |
|
Short Term Investments |
|
|
39,561,514 |
|
|
|
– |
|
|
|
– |
|
|
|
39,561,514 |
|
Total |
|
$ |
1,586,369,049 |
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
1,586,369,049 |
|
| * | See
Schedule of Investments for industry classifications. |
The Fund did not have any securities
that used significant unobservable inputs (Level 3) in determining fair value during the period.
Distributions to Shareholders
The Fund currently has a policy
of paying distributions on its shares of beneficial interest totaling approximately 10% of its net asset value per year. The distributions
are payable in four quarterly distributions of 2.5% 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.
NOTE 3. RISKS
Investment and Market Risk
An investment in shares is subject
to investment risk, including the possible loss of the entire amount invested. An investment in shares represents an indirect investment
in the securities owned by the Fund, most of which are anticipated to be traded on a national securities exchange or in the over-the-counter
markets. The value of these securities, like other market investments, may move up or down, sometimes rapidly and unpredictably. Shares
at any point in time may be worth less than their original cost, even after taking into account the reinvestment of dividends and other
distributions.
Semi-Annual Report (Unaudited) | June 30, 2022 |
27 |
Liberty All-Star® Equity Fund |
Notes to Financial Statements |
June 30, 2022 (Unaudited)
Common Stock Risk
The Fund is not limited in the
percentage of its assets that may be invested in common stocks and other equity securities, and therefore a risk of investing in the Fund
is common stock or equity risk. Equity risk is the risk that the market value of securities held by the Fund will fall due to general
market or economic conditions, perceptions regarding the industries in which the issuers of securities held by the Fund participate, and
the particular circumstances and performance of particular companies whose securities the Fund holds. In addition, common stock of an
issuer in the Fund’s portfolio may decline in price if the issuer fails to make anticipated dividend payments because, among other
reasons, the issuer of the security experiences a decline in its financial condition. Common equity securities in which the Fund will
invest are structurally subordinated to preferred stocks, bonds and other debt instruments in a company’s capital structure, in
terms of priority to corporate income, and therefore will be subject to greater payment risk than preferred stocks or debt instruments
of such issuers. In addition, while broad market measures of common stocks have historically generated higher average returns than fixed
income securities, common stocks have also experienced significantly more volatility in their returns.
Growth stocks are stocks of
companies believed to have above-average potential for growth in revenue and earnings. In certain market conditions, prices of growth
stocks may be more sensitive to changes in current or expected earnings than the prices of other stocks. Growth stocks may not perform
as well as the stock market in general.
Market Disruption and Geopolitical
Risk
Social, political, and economic
events, such as natural disasters and health emergencies (e.g., epidemics and pandemics, such as the recent COVID-19 outbreak), ongoing
U.S military activities and political developments, as well as the threat of terrorist attacks, could have significant adverse effects
on the U.S. economy, the stock market, world economies and markets generally, and may lead to volatility in the value of the Fund’s
investments. These types of events may develop quickly and unexpectedly and could significantly impact issuers, industries, governments
and other systems, including financial markets. Global systems are increasingly interconnected, and an event in one area of the world
may have adverse effects in other economies and financial markets. It is difficult to predict the timing or duration of an event, or its
impact on the Fund and its shareholders.
NOTE 4. FEDERAL TAX INFORMATION
AND TAX BASIS INFORMATION
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications
are made to the Fund’s capital accounts for permanent tax differences to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations. If, for any calendar year, the total distributions made under the
distribution 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 distribution 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.
Liberty All-Star® Equity Fund |
Notes to Financial Statements |
June 30, 2022 (Unaudited)
Classification of Distributions
to Shareholders
Net investment income/(loss)
and net realized gain/(loss) may differ for financial statement and tax purposes. The character of distributions made during the year
from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. Due to
the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income
or realized gain was recorded by the Fund. The amounts and characteristics of tax basis distributions and composition of distributable
earnings/(accumulated losses) are determined at the time in which distributions are paid, which may occur after the fiscal year end. Accordingly,
tax basis balances have not been determined as of June 30, 2022.
The tax character of distributions
paid during the year ended December 31, 2021 were as follows:
Distributions Paid From: |
|
December 31,
2021 |
|
Ordinary Income |
|
$ |
33,916,617 |
|
Long-term capital gains |
|
|
93,874,301 |
|
Return of Capital |
|
|
10,203,690 |
|
Total |
|
$ |
137,994,608 |
|
As of June 30, 2022, the cost
of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments was as follows:
Cost of Investments |
|
|
Gross unrealized
Appreciation (excess of
value over tax cost) |
|
|
Gross unrealized
Depreciation (excess of
tax cost over value) |
|
|
Net Unrealized
Appreciation |
|
$ |
1,466,923,439 |
|
|
$ |
305,945,177 |
|
|
$ |
(186,499,567 |
) |
|
$ |
119,445,610 |
|
The differences between book-basis
and tax-basis are primarily due to deferral of losses from wash sales and the differing treatment of certain other investments.
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 Subchapter M
of the Internal Revenue Code of 1986, as amended, 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.
As of and during the six months
ended June 30, 2022, the Fund did not have a liability for any unrecognized tax benefits. The Fund files U.S. federal, state, and local
tax returns as required. The Fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the
applicable statute of limitations, which is generally three years after the filing of the tax return. Tax returns for open years have
incorporated no uncertain tax positions that require a provision for income taxes.
Semi-Annual Report (Unaudited) | June 30, 2022 |
29 |
Liberty All-Star® Equity Fund |
Notes to Financial Statements |
June 30, 2022 (Unaudited)
NOTE 5. FEES AND COMPENSATION PAID TO AFFILIATES
Investment
Advisory Fee
AAI serves as the investment
advisor to the Fund. AAI receives a monthly investment advisory fee based on the Fund’s average daily net assets at the following
annual rates:
Average Daily Net Assets |
Annual Fee Rate |
First $400 million |
0.800% |
Next $400 million |
0.720% |
Next $400 million |
0.648% |
Over $1.2 billion |
0.584% |
Investment Advisory Fees for
the six months ended June 30, 2022 are reported on the Statement of Operations.
AAI retains multiple Portfolio
Managers to manage the Fund’s investments in various asset classes. AAI pays each Portfolio Manager a portfolio management fee based
on the assets of the investment portfolio that they manage. The portfolio management fee is paid from the investment advisory fees collected
by AAI and is based on the Fund’s average daily net assets at the following annual rates:
Average Daily Net Assets |
Annual Fee Rate |
First $400 million |
0.400% |
Next $400 million |
0.360% |
Next $400 million |
0.324% |
Over $1.2 billion |
0.292% |
Administration, Bookkeeping
and Pricing Services
ALPS Fund Services, Inc. (“ALPS”)
serves as the administrator to the Fund and the Fund has agreed to pay expenses incurred in connection with this service. Pursuant to
an Administrative, Bookkeeping and Pricing Services Agreement, ALPS provides operational services to the Fund including, but not limited
to, fund accounting and fund administration and generally assists in the Fund’s operations. The Fund’s administration fee
is accrued on a daily basis and paid monthly. Administration, Pricing and Bookkeeping fees paid by the Fund for the six months ended June
30, 2022 are disclosed in the Statement of Operations.
The Fund also reimburses ALPS
for out-of-pocket expenses and charges, including fees payable to third parties for pricing the Fund’s portfolio securities and
direct internal costs incurred by ALPS in connection with providing fund accounting oversight and monitoring and certain other services.
Fees Paid to Officers
All officers of the Fund, including
the Fund’s Chief Compliance Officer, are employees of AAI or its affiliates, and receive no compensation from the Fund. The Board
of Trustees has appointed a Chief Compliance Officer to the Fund in accordance with federal securities regulations.
Liberty All-Star® Equity Fund |
Notes to Financial Statements |
June 30, 2022 (Unaudited)
NOTE 6. PORTFOLIO INFORMATION
Purchases
and Sales of Securities
For the six-month period ended
June 30, 2022, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $284,442,814 and $323,169,645,
respectively.
NOTE 7. CAPITAL TRANSACTIONS
In
a rights offering, which expired on November 22, 2021, shareholders exercised rights to purchase 27,979,915 shares at a subscription
price of $7.78 per share for proceeds, net of expenses of $450,000, of $217,233,738. If the shares would have been issued at the NAV
the proceeds would have been $228,705,504, net of expenses.
During the six months ended
June 30, 2022 and year ended December 31, 2021, distributions in the amounts of $39,682,138 and $72,142,876, respectively, were paid in
newly issued shares valued at market value or net asset value, but not less than 95% of market value. Such distributions resulted in the
issuance of 5,847,185 and of 9,175,859 shares, respectively.
Under the Fund’s Automatic
Dividend Reinvestment and Direct Purchase Plan (the “Plan”), shareholders automatically participate and have all their Fund
dividends and distributions reinvested. Under the Plan, all dividends and distributions will be reinvested in additional shares of the
Fund. Distributions declared payable in cash will be reinvested for the accounts of participants in the Plan in additional shares purchased
by the Plan Agent on the open market at prevailing market prices, subject to certain limitations as described more fully in the Plan.
Distributions declared payable in shares are paid to participants in the Plan entirely in newly issued full and fractional shares valued
at the lower of market value or net asset value per share on the valuation date for the distribution (but not at a discount of more than
5 percent from market price). Dividends and distributions are subject to taxation, whether received in cash or in shares.
NOTE 8. INDEMNIFICATION
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.
NOTE 9. CHANGE IN INDEPENDENT
AUDITOR
Effective
as of the close of business on March 31, 2022, Deloitte & Touche LLP (“Deloitte”) resigned as the independent registered
public accounting firm for the Fund. The report of Deloitte on the Fund’s financial statements as of and for the fiscal years ended
December 31, 2021 and December 31, 2020 did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified
as to uncertainties, audit scope or accounting principles. During the Fund’s fiscal years ended December 31, 2021 and December
31, 2020, and through March 31, 2022, there were no disagreements between the Fund and Deloitte on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction
of Deloitte, would have caused it to make reference to the subject matter of the disagreements in its report on the financial statements
of the Fund for such year or period. During the Fund’s fiscal years ended December 31, 2021 and December 31, 2020, there were no
“reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)).
Semi-Annual Report (Unaudited) | June 30, 2022 |
31 |
Liberty All-Star® Equity Fund |
Notes to Financial Statements |
June 30, 2022 (Unaudited)
During the Fund’s fiscal
year ended December 31, 2021 and December 31, 2020, and the subsequent interim period through March 31, 2022, neither the Fund, nor anyone
on its behalf, consulted with Deloitte, on behalf of the Fund, regarding any matter that was either the subject of a “disagreement,”
as defined in Item 304(a)(1)(iv) of Regulation S-K under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
and the instructions thereto, or a “reportable event,” as defined in Item 304(a)(1)(v) of Regulation S-K under the Exchange
Act.
On June 9, 2022, upon the recommendation
of the Fund’s Audit Committee, the Board of Trustees of the Fund approved the engagement of Cohen & Company, Ltd. (“Cohen”)
as the independent registered public accounting firm for the Fund for the fiscal year ending December 31, 2022. The Board and its Audit
Committee considered the engagement of Cohen in connection with the resignation of Deloitte.
Liberty All-Star® Equity Fund |
Description of Lipper
Benchmark and Market Indices |
(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 average characteristics 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.
Russell 3000®
Growth Index
Measures the performance of
those Russell 3000® companies with lower book-to-price ratios and higher growth values. The Russell 3000®
Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately
96% of the investable U.S. equity market.
Russell 3000®
Value Index
Measures the performance of
those Russell 3000® companies with higher book-to-price ratios and lower growth values.
S&P 500®
Index
A large-cap U.S. equities index
that includes 500 leading companies and represents approximately 80% of the total domestic U.S. equity market capitalization.
An investor cannot invest
directly in an index.
Semi-Annual Report (Unaudited) | June 30, 2022 |
33 |
Item
11. Controls and Procedures.
(a)
The Registrant’s Principal Executive Officer and Principal Financial Officer have concluded that the Registrant’s disclosure
controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) are effective based on their
evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.
(b)
There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act of 1940, as amended) that occurred during the period covered by this report that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting.
Item
12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not
applicable to the semi-annual report.
Item
13. Exhibits.
(a)(1) Not
applicable to this report.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 attached hereto as Exhibit 99.302CERT.
(a)(3) Not
applicable.
(a)(4) Letter from Deloitte & Touche, LLP.
Effective
as of the close of business on March 31, 2022, Deloitte & Touche LLP (“Deloitte”) resigned as the independent
registered public accounting firm for the Fund. The report of Deloitte on the Fund’s financial statements as of and for
the fiscal years ended December 31, 2021 and December 31, 2020 did not contain an adverse opinion or a disclaimer of opinion,
and was not qualified or modified as to uncertainties, audit scope or accounting principles. During the Fund’s fiscal years
ended December 31, 2021 and December 31, 2020, and through March 31, 2022, there were no disagreements between the Fund and Deloitte
on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements,
if not resolved to the satisfaction of Deloitte, would have caused it to make reference to the subject matter of the disagreements
in its report on the financial statements of the Fund for such year or period. During the Fund’s fiscal years ended December
31, 2021 and December 31, 2020, there were no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)).
During
the Fund’s fiscal year ended December 31, 2021 and December 31, 2020, and the subsequent interim period through March 31,
2022, neither the Fund, nor anyone on their behalf, consulted with Deloitte, on behalf of the Fund, regarding any matter that
was either the subject of a “disagreement,” as defined in Item 304(a)(1)(iv) of Regulation S-K under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and the instructions thereto, or a “reportable event,”
as defined in Item 304(a)(1)(v) of Regulation S-K under the Exchange Act
On
June 9, 2022, upon the recommendation of the Fund’s Audit Committee, the Board of Trustees of the Fund approved the engagement
of Cohen & Company, Ltd. (“Cohen”) as the independent registered public accounting firm for the Fund for the fiscal
year ending December 31, 2022. The Board and its Audit Committee considered the engagement of Cohen in connection with the resignation
of the Fund’s former independent registered accounting firm on March 31, 2022.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 attached hereto as Exhibit 99.906CERT.