N-30B-2 1 fp0042587_n30b2.htm

 

 

 

 

LIBERTY ALL-STAR® EQUITY FUND

Period Ended March 31, 2019 (Unaudited)

 

 

Fund Statistics 1st Quarter 2019
Net Asset Value (NAV) $6.55
Market Price $6.11
Discount -6.7%
Distribution* $0.15
Market Price Trading Range $5.28 to $6.18
Discount Range -5.5% to -10.2%

 

Performance  
Shares Valued at NAV with Dividends Reinvested 13.95%
Shares Valued at Market Price with Dividends Reinvested 16.37%
Dow Jones Industrial Average 11.81%
Lipper Large-Cap Core Mutual Fund Average 12.87%
NASDAQ Composite Index 16.81%
S&P 500® Index 13.65%

 

*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 2019 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. Pursuant to Section 852 of the Internal Revenue Code, the taxability of this distribution will be reported on Form 1099-DIV for 2019.

 

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

 

The return shown for the Lipper Large-Cap Core Mutual Fund Average is 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 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

 

(Unaudited)

 

Fellow Shareholders: April 2019

 

In a mirror image reversal, the equity market generally gained as much in the first quarter of 2019 as it gave up in the fourth quarter of 2018. The S&P 500® Index returned -13.52 percent in 4Q18 but changed direction and rose 13.65 percent in 1Q19. Other key market indices turned in highly positive first quarters as well, with the widely followed Dow Jones Industrial Average (DJIA) returning 11.81 percent and the NASDAQ Composite Index advancing 16.81 percent.

 

The final quarter of 2018 was marked by broad-based investor concerns: rising interest rates and the expectations of further rate hikes by the Federal Reserve; the trade/tariff dispute between the U.S. and China; dysfunction in Washington and the shutdown of the U.S. government; and slowing economic growth in developed and emerging markets around the world. Global growth remains a challenge. But the interest rate picture changed dramatically as the Fed saw the economy slowing more than anticipated and signaled it may not increase rates in 2019. This put an end to five consecutive quarterly increases, which took the fed funds rate to a range of 2.25 percent to 2.5 percent with one rate increase now anticipated for 2020. In December, the Fed had forecast two increases in 2019 and another in 2020. Moreover, the Fed expressed little concern about inflation, which has remained near its 2 percent target. On the trade front, the first quarter saw periodic signs of progress in the U.S.–China trade negotiations and investors were hopeful that the two countries would reach an agreement. Corporate earnings reports did not excite investors, but were better than generally expected, spurring a relief rally; in addition, the 4Q18 sell-off lowered stock prices, which attracted buyers looking for bargains.

 

In terms of economic news, the U.S. Department of Labor in January reported that nonfarm payrolls increased by 312,000 in December—easily topping all forecasts—on the heels of an upwardly revised gain of 196,000 jobs the prior month. Average hourly earnings rose 3.2 percent from a year earlier, which was more than projected and matched the fastest pace since 2009, according to Bloomberg. The January numbers were equally strong, as nonfarm payrolls increased by 312,000; The Wall Street Journal reported that it was the 100th straight month in which nonfarm payrolls increased. The February jobs number was a surprisingly low increase of 33,000, but the unemployment rate fell nevertheless, reaching 3.8 percent.

 

GDP grew at a 2.6 percent annual pace in the fourth quarter, the Commerce Department reported in February. (The figure was later revised to 2.2 percent.) GDP ended up at 2.9 percent for full year 2018, matching 2015 as the largest increase since the end of the 2007-2009 Great Recession. In a potentially negative signal, the yield curve inverted, with three-year treasury notes commanding a slightly higher rate than 10-year notes in the latter part of March. An inverted yield curve is sometimes viewed as a precursor to an economic recession.

 

Liberty All-Star® Equity Fund

Liberty All-Star Equity Fund posted a strong first quarter. The Fund returned 13.95 percent with shares valued at net asset value (NAV) with dividends reinvested and 16.37 percent with shares valued at market price with dividends reinvested. (Fund returns are net of expenses.) The return on Fund shares valued at NAV and valued by market price both exceeded that of the Lipper Large-Cap Core Mutual Fund Average, which returned 12.87 percent for the quarter. The Fund’s first quarter results rank it in the top quartile of the Lipper Large-Cap Core universe. The Fund’s returns also exceeded that of its secondary benchmark, the S&P 500® Index, which, as noted earlier, returned 13.65 percent.

 

 

First Quarter Report (Unaudited) | March 31, 2019

1

 

 

Liberty All-Star® Equity Fund President’s Letter

 

(Unaudited)

 

Over the longer term, Fund shares valued at NAV and market price with dividends reinvested have outperformed the S&P 500® for the trailing three years and rank it in the top 8 percent of funds in the Lipper Large-Cap Core universe for that period.

 

We note that growth style investing continued to produce better relative returns than value style stocks in the first quarter, as it has for most of the past decade. The broad market Russell 3000® Growth Index returned 16.18 percent for the quarter while its value counterpart returned 11.93 percent.

 

The discount at which Fund shares trade relative to their underlying NAV narrowed modestly during the first quarter. For the period, Fund shares traded in a discount range of -5.5 percent to -10.2 percent versus -2.7 percent to -12.1 percent in the fourth quarter.

 

In accordance with the Fund’s distribution policy, the Fund paid a distribution of $0.15 per share in the first quarter. 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 $27.04 per share for a total of more than $2.9 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.

 

We are gratified by the Fund’s strong first quarter performance and the fact that its return exceeded all relevant benchmarks as equities staged a solid rebound from the disappointing fourth quarter of 2018. As well, we are equally pleased with the consistent long-term results. We can’t expect the equity market to continue to benefit from the same tailwinds that propelled it forward in the first quarter, but regardless of market conditions we will remain true to the Fund’s underlying principles and keep shareholder interests first and foremost in all our decisions.

 

Sincerely,

 

 

 

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 April 2019 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. 

 

 

2

 www.all-starfunds.com

 

 

Liberty All-Star® Equity Fund Table of Distributions & Rights Offerings

 

March 31, 2019 (Unaudited)

 

    Rights Offerings  
Year Per Share Distributions Month Completed Shares Needed to Purchase One Additional Share Subscription Price Tax Credits1
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          
1st Quarter 0.15        
Total $25.86        

 

1The 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.
2The number of shares offered was increased by an additional 25 percent to cover a portion of the over-subscription requests.
3Effective with the second quarter distribution, the annual distribution rate was changed from 10 percent to 6 percent.
4Effective with the second quarter distribution, the annual distribution rate was changed from 6 percent to 8 percent.
5Effective 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 2019 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 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 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. 

 

 

First Quarter Report (Unaudited) | March 31, 2019

3

 

 

  Investment Managers/
Liberty All-Star® Equity Fund Portfolio Characteristics

 

March 31, 2019 (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 March 31, 2019 (Unaudited)

 

 

    Investment Style Spectrum      
       
  PZENA MACQUARIE ARISTOTLE SUSTAINABLE TCW TOTAL FUND S&P 500® INDEX
Number of Holdings 41 33 43 28 31 149* 505
Percent of Holdings in Top 10 34% 33% 34% 42% 53% 20% 21%
Weighted Average Market Capitalization (billions) $60 $103 $108 $204 $213 $141 $232
Average Five-Year Earnings Per Share Growth 3% 4% 12% 14% 27% 12% 10%
Dividend Yield 2.6% 2.6% 1.8% 1.0% 0.5% 1.7% 2.0%
Price/Earnings Ratio** 13x 19x 16x 31x 35x 20x 20x
Price/Book Value Ratio 1.3x 2.3x 2.5x 7.5 x 7.3x 2.8x 3.4x

 

*Certain holdings are held by more than one manager.
**Excludes negative earnings.

 

 

4

 www.all-starfunds.com

 

 

Liberty All-Star® Equity Fund Top 20 Holdings & Economic Sectors

 

March 31, 2019 (Unaudited)

 

Top 20 Holdings* Percent of Net Assets
Visa, Inc. 2.25%
Amazon.com, Inc. 2.20
Adobe, Inc. 2.12
PayPal Holdings, Inc. 2.12
Alphabet, Inc. 2.04
Mondelez International, Inc. 1.72
Microsoft Corp. 1.71
salesforce.com, Inc. 1.70
Facebook, Inc. 1.58
Abbott Laboratories 1.52
Equinix, Inc. 1.42
Halliburton Co. 1.40
American International Group, Inc. 1.26
Lowe's Cos., Inc. 1.21
Bank of America Corp. 1.19
Home Depot, Inc. 1.13
American Tower Corp. 1.11
Edison International 1.08
Ulta Beauty, Inc. 1.05
Capital One Financial Corp. 1.04
  30.85%

 

Economic Sectors* Percent of Net Assets
Information Technology 20.60%
Financials 15.18
Health Care 14.41
Consumer Discretionary 12.87
Communication Services 7.17
Industrials 6.99
Consumer Staples 5.80
Energy 5.71
Real Estate 3.80
Materials 3.07
Utilities 1.50
Other Net Assets 2.90
  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.

 

 

First Quarter Report (Unaudited) | March 31, 2019

5

 

 

Liberty All-Star® Equity Fund Major Stock Changes in the Quarter

 

March 31, 2019 (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 first quarter of 2019.

 

  Shares
Security Name Purchases (Sales) Held as of 3/31/19
Purchases    
Broadcom Ltd. 28,600 28,600
PayPal Holdings, Inc. 72,331 270,731
     
Sales    
Alliance Data Systems Corp. (32,276) 0
Merck & Co., Inc. (67,993) 102,100

 

 

 

6

 www.all-starfunds.com

 

 

Liberty All-Star® Equity Fund Schedule of Investments

 

March 31, 2019 (Unaudited)

 

   SHARES   MARKET VALUE 
COMMON STOCKS (97.10%)        
COMMUNICATION SERVICES (7.17%)        
Diversified Telecommunication Services (1.19%)        
AT&T, Inc.   238,600   $7,482,496 
Verizon Communications, Inc.   141,100    8,343,243 
         15,825,739 
Entertainment (0.77%)          
Walt Disney Co.   91,582    10,168,350 
           
Interactive Media & Services (4.03%)          
Alphabet, Inc., Class C(a)   23,040    27,033,062 
Facebook, Inc., Class A(a)   125,597    20,935,764 
Twitter, Inc.(a)   170,200    5,596,176 
         53,565,002 
Media (1.18%)          
Interpublic Group of Cos., Inc.   329,201    6,916,513 
News Corp., Class A   286,400    3,562,816 
Omnicom Group, Inc.   71,400    5,211,486 
         15,690,815 
CONSUMER DISCRETIONARY (12.87%)          
Auto Components (0.54%)          
Lear Corp.   53,027    7,196,294 
           
Automobiles (0.59%)          
Ford Motor Co.   885,981    7,778,913 
           
Hotels, Restaurants & Leisure (0.90%)          
Yum! Brands, Inc.   119,201    11,897,452 
           
Household Durables (1.61%)          
Lennar Corp., Class A   117,000    5,743,530 
Lennar Corp., Class B   2,500    97,800 
Mohawk Industries, Inc.(a)   37,907    4,781,968 
Newell Brands, Inc.   355,387    5,451,637 
Sony Corp.(b)   126,400    5,339,136 
         21,414,071 
Internet & Direct Marketing Retail (3.23%)          
Amazon.com, Inc.(a)   16,395    29,195,396 
Booking Holdings, Inc.(a)   7,876    13,742,911 
         42,938,307 
Multiline Retail (0.65%)          
Dollar Tree, Inc.(a)   82,200    8,634,288 

 

See Notes to Schedule of Investments.

 

First Quarter Report (Unaudited) | March 31, 2019

7

 

 

Liberty All-Star® Equity Fund Schedule of Investments

 

March 31, 2019 (Unaudited)

 

   SHARES   MARKET VALUE 
COMMON STOCKS (continued)        
Specialty Retail (4.03%)        
Home Depot, Inc.   78,043   $14,975,671 
Lowe's Cos., Inc.   147,153    16,108,839 
TJX Cos., Inc.   158,111    8,413,086 
Ulta Beauty, Inc.(a)   40,095    13,982,330 
         53,479,926 
Textiles, Apparel & Luxury Goods (1.32%)          
Gildan Activewear, Inc.(c)   72,553    2,609,731 
NIKE, Inc., Class B   115,934    9,762,802 
PVH Corp.   42,708    5,208,241 
         17,580,774 
CONSUMER STAPLES (5.80%)          
Beverages (0.96%)          
Coca-Cola Co.   148,000    6,935,280 
Monster Beverage Corp.(a)   106,400    5,807,312 
         12,742,592 
Food & Staples Retailing (1.07%)          
Costco Wholesale Corp.   28,500    6,900,990 
Kroger Co.   102,077    2,511,094 
Walgreens Boots Alliance, Inc.   77,000    4,871,790 
         14,283,874 
Food Products (2.51%)          
Archer-Daniels-Midland Co.   177,300    7,646,949 
Mondelez International, Inc., Class A   458,452    22,885,924 
Tyson Foods, Inc., Class A   40,084    2,783,032 
         33,315,905 
Personal Products (1.26%)          
Estee Lauder Cos., Inc., Class A   60,762    10,059,149 
Unilever NV   114,000    6,645,060 
         16,704,209 
ENERGY (5.71%)          
Energy Equipment & Services (2.12%)          
Baker Hughes a GE Co.   132,657    3,677,252 
Halliburton Co.   632,472    18,531,430 
National Oilwell Varco, Inc.   223,994    5,967,200 
         28,175,882 
Oil, Gas & Consumable Fuels (3.59%)          
Cenovus Energy, Inc.   528,447    4,586,920 
Concho Resources, Inc.   23,500    2,607,560 
ConocoPhillips   118,600    7,915,364 
Exxon Mobil Corp.   38,919    3,144,655 
Marathon Oil Corp.   435,510    7,277,372 

 

See Notes to Schedule of Investments. 

 

8

 www.all-starfunds.com

 

 

Liberty All-Star® Equity Fund Schedule of Investments

 

March 31, 2019 (Unaudited)

 

   SHARES   MARKET VALUE 
COMMON STOCKS (continued)        
Oil, Gas & Consumable Fuels (continued)        
Occidental Petroleum Corp.   102,900   $6,811,980 
Phillips 66   70,000    6,661,900 
Pioneer Natural Resources Co.   25,500    3,883,140 
Royal Dutch Shell PLC, Class A(b)   77,126    4,827,317 
         47,716,208 
FINANCIALS (15.18%)          
Banks (5.20%)          
Banco Bilbao Vizcaya Argentaria SA(b)(c)   810,000    4,641,300 
Bank of America Corp.   572,857    15,805,125 
BB&T Corp.   159,300    7,412,229 
BOK Financial Corp.   42,000    3,425,100 
Citigroup, Inc.   140,297    8,729,279 
Cullen/Frost Bankers, Inc.   38,000    3,688,660 
East West Bancorp, Inc.   94,300    4,523,571 
JPMorgan Chase & Co.   108,487    10,982,139 
Mitsubishi UFJ Financial Group, Inc.(b)   650,000    3,217,500 
Wells Fargo & Co.   137,987    6,667,532 
         69,092,435 
Capital Markets (3.75%)          
Ameriprise Financial, Inc.   48,500    6,212,850 
Bank of New York Mellon Corp.   152,200    7,675,446 
Charles Schwab Corp.   140,600    6,012,056 
Franklin Resources, Inc.   168,889    5,596,982 
Goldman Sachs Group, Inc.   27,035    5,190,450 
KKR & Co., Inc., Class A   140,872    3,309,083 
Morgan Stanley   166,052    7,007,394 
S&P Global, Inc.   23,304    4,906,657 
UBS Group AG   325,600    3,943,016 
         49,853,934 
Consumer Finance (1.04%)          
Capital One Financial Corp.   168,578    13,771,137 
           
Diversified Financial Services (0.82%)          
AXA Equitable Holdings, Inc.   300,177    6,045,565 
Voya Financial, Inc.   97,006    4,846,419 
         10,891,984 
Insurance (4.37%)          
Allstate Corp.   83,300    7,845,194 
American International Group, Inc.   389,731    16,781,817 
Axis Capital Holdings, Ltd.   89,225    4,887,746 
Chubb, Ltd.   92,300    12,929,384 
Marsh & McLennan Cos., Inc.   90,500    8,497,950 

 

See Notes to Schedule of Investments.

 

First Quarter Report (Unaudited) | March 31, 2019

9

 

 

Liberty All-Star® Equity Fund Schedule of Investments

 

March 31, 2019 (Unaudited)

 

   SHARES   MARKET VALUE 
COMMON STOCKS (continued)        
Insurance (continued)        
MetLife, Inc.   166,053   $7,068,876 
         58,010,967 
HEALTH CARE (14.41%)          
Biotechnology (2.30%)          
Alexion Pharmaceuticals, Inc.(a)   33,300    4,501,494 
Amgen, Inc.   62,878    11,945,563 
BioMarin Pharmaceutical, Inc.(a)   50,800    4,512,564 
Regeneron Pharmaceuticals, Inc.(a)   23,273    9,556,359 
         30,515,980 
Health Care Equipment & Supplies (4.00%)          
Abbott Laboratories   252,839    20,211,949 
Align Technology, Inc.(a)   23,478    6,675,500 
Becton Dickinson and Co.   39,530    9,871,827 
Danaher Corp.   71,000    9,373,420 
Medtronic PLC   76,500    6,967,620 
         53,100,316 
Health Care Providers & Services (3.63%)          
Acadia Healthcare Co., Inc.(a)   112,000    3,282,720 
Cardinal Health, Inc.   192,857    9,286,065 
Cigna Corp.   40,357    6,490,213 
CVS Health Corp.   123,400    6,654,962 
McKesson Corp.   48,431    5,669,333 
Quest Diagnostics, Inc.   80,000    7,193,600 
UnitedHealth Group, Inc.   38,729    9,576,132 
         48,153,025 
Life Sciences Tools & Services (0.49%)          
Illumina, Inc.(a)   20,861    6,481,304 
           
Pharmaceuticals (3.99%)          
Johnson & Johnson   59,300    8,289,547 
Merck & Co., Inc.   102,100    8,491,657 
Mylan NV(a)   205,038    5,810,777 
Novartis AG(b)   71,400    6,864,396 
Novo Nordisk A/S(b)   160,301    8,385,345 
Pfizer, Inc.   182,000    7,729,540 
Zoetis, Inc.   74,400    7,489,848 
         53,061,110 
INDUSTRIALS (6.99%)          
Aerospace & Defense (1.55%)          
General Dynamics Corp.   36,000    6,094,080 
Northrop Grumman Corp.   26,700    7,198,320 

 

See Notes to Schedule of Investments. 

 

10

 www.all-starfunds.com

 

 

Liberty All-Star® Equity Fund Schedule of Investments

 

March 31, 2019 (Unaudited)

 

   SHARES   MARKET VALUE 
COMMON STOCKS (continued)        
Aerospace & Defense (continued)        
Raytheon Co.   40,300   $7,337,824 
         20,630,224 
Building Products (0.58%)          
Allegion PLC   18,606    1,687,750 
Johnson Controls International PLC   163,000    6,021,220 
         7,708,970 
Commercial Services & Supplies (1.10%)          
Waste Connections, Inc.   68,400    6,059,556 
Waste Management, Inc.   82,700    8,593,357 
         14,652,913 
Industrial Conglomerates (0.63%)          
General Electric Co.   832,759    8,319,263 
           
Machinery (2.25%)          
Dover Corp.   26,689    2,503,428 
Oshkosh Corp.   90,500    6,799,265 
Parker-Hannifin Corp.   39,000    6,693,180 
Stanley Black & Decker, Inc.   51,049    6,951,342 
Wabtec Corp.   14,772    1,088,992 
Xylem, Inc.   73,500    5,809,440 
         29,845,647 
Professional Services (0.88%)          
IHS Markit, Ltd.(a)   97,900    5,323,802 
TransUnion   94,400    6,309,696 
         11,633,498 
INFORMATION TECHNOLOGY (20.60%)          
Communications Equipment (0.65%)          
Cisco Systems, Inc.   159,700    8,622,203 
           
IT Services (6.97%)          
Automatic Data Processing, Inc.   53,506    8,547,048 
Cognizant Technology Solutions Corp., Class A   95,884    6,946,796 
FleetCor Technologies, Inc.(a)   40,306    9,939,057 
Mastercard, Inc., Class A   38,355    9,030,685 
PayPal Holdings, Inc.(a)   270,731    28,112,707 
Visa, Inc., Class A   191,686    29,939,436 
         92,515,729 
Semiconductors & Semiconductor Equipment (2.28%)          
Broadcom Ltd.   28,600    8,600,306 
Intel Corp.   155,800    8,366,460 
Microchip Technology, Inc.(c)   89,000    7,383,440 

 

See Notes to Schedule of Investments.

 

First Quarter Report (Unaudited) | March 31, 2019

11

 

 

Liberty All-Star® Equity Fund Schedule of Investments

 

March 31, 2019 (Unaudited)

 

   SHARES   MARKET VALUE 
COMMON STOCKS (continued)        
Semiconductors & Semiconductor Equipment (continued)        
NVIDIA Corp.   33,143   $5,951,157 
         30,301,363 
Software (10.18%)          
Adobe, Inc.(a)   105,745    28,179,985 
ANSYS, Inc.(a)   40,500    7,399,755 
Autodesk, Inc.(a)   70,808    11,033,303 
Intuit, Inc.   37,307    9,752,423 
Microsoft Corp.   192,875    22,747,677 
Oracle Corp.   248,853    13,365,895 
salesforce.com, Inc.(a)   142,328    22,540,485 
ServiceNow, Inc.(a)   55,197    13,605,509 
Splunk, Inc.(a)   52,300    6,516,580 
         135,141,612 
Technology Hardware, Storage & Peripherals (0.52%)          
Hewlett Packard Enterprise Co.   446,563    6,890,467 
           
MATERIALS (3.07%)          
Chemicals (2.60%)          
DowDuPont, Inc.   131,331    7,001,255 
Ecolab, Inc.   73,157    12,915,137 
Linde PLC   46,429    8,168,254 
PPG Industries, Inc.   57,000    6,433,590 
         34,518,236 
Construction Materials (0.47%)          
Martin Marietta Materials, Inc.   31,000    6,236,580 
           
REAL ESTATE (3.80%)          
Equity Real Estate Investment Trusts (REITs) (3.80%)          
American Tower Corp.   74,700    14,720,382 
Equinix, Inc.   41,681    18,888,162 
Equity LifeStyle Properties, Inc.   36,800    4,206,240 
Equity Residential   112,200    8,450,904 
Sun Communities, Inc.   35,100    4,160,052 
         50,425,740 
UTILITIES (1.50%)          
Electric Utilities (1.08%)          
Edison International   231,988    14,364,697 

 

See Notes to Schedule of Investments. 

 

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Liberty All-Star® Equity Fund Schedule of Investments

 

March 31, 2019 (Unaudited)

 

   SHARES   MARKET VALUE 
COMMON STOCKS (continued)        
Gas Utilities (0.42%)        
National Fuel Gas Co.   91,000   $5,547,360 
           
TOTAL COMMON STOCKS          
(COST OF $1,023,743,025)        1,289,395,295 
           
SHORT TERM INVESTMENTS (2.92%)          
MONEY MARKET FUND (2.91%)          
State Street Institutional US Government Money Market Fund, 2.373%(d)          
(COST OF $38,586,847)   38,586,847    38,586,847 
           
INVESTMENTS PURCHASED WITH COLLATERAL FROM          
SECURITIES LOANED (0.01%)          
State Street Navigator Securities Lending Government Money Market Portfolio, 2.46%          
(COST OF $70,350)   70,350    70,350 
           
TOTAL SHORT TERM INVESTMENTS          
(COST OF $38,657,197)        38,657,197 
           
TOTAL INVESTMENTS (100.02%)          
(COST OF $1,062,400,222)        1,328,052,492 
           
LIABILITIES IN EXCESS OF OTHER ASSETS (-0.02%)        (259,177)
           
NET ASSETS (100.00%)       $1,327,793,315 
           
NET ASSET VALUE PER SHARE          
(202,620,825 SHARES OUTSTANDING)       $6.55 

 

(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 $7,450,799.
(d)Rate reflects seven-day effective yield on March 31, 2019.

 

See Notes to Schedule of Investments.

 

First Quarter Report (Unaudited) | March 31, 2019

13

 

 

Liberty All-Star® Equity Fund Notes to Schedule of Investments

 

March 31, 2019 (Unaudited)

 

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, a registered investment company under the Investment Company Act of 1940 (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 security will be valued by the Fund’s Valuation Committee using fair valuation procedures established by the Board. Examples of potentially significant events that could materially impact a Fund’s net asset value 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”), 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 March 31, 2019, the Fund held no securities that were fair valued.

 

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.

 

 

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Liberty All-Star® Equity Fund Notes to Schedule of Investments

 

March 31, 2019 (Unaudited)

 

Any cash collateral received is reinvested in a money market fund managed by SSB as disclosed in the Fund’s Schedule of Investments. 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 Schedule of Investments 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.

 

The following is a summary of the Fund’s securities lending positions and related cash and non-cash collateral received as of March 31, 2019:

 

Market Value of Securities on Loan Cash Collateral Received Non-Cash Collateral Received Total Collateral Received
$ 7,450,799 $ 70,350 $ 7,387,000 $ 7,457,350

 

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.

 

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. 

 

 

First Quarter Report (Unaudited) | March 31, 2019

15

 

 

Liberty All-Star® Equity Fund Notes to Schedule of Investments

 

March 31, 2019 (Unaudited)

 

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 shares of registered investment companies are valued at their closing NAV each business day and are categorized as Level 1 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
     
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 March 31, 2019:

 

   Valuation Inputs     
Investments in Securities at Value*  Level 1   Level 2   Level 3   Total 
Common Stocks  $1,289,395,295  $  –   $–   $1,289,395,295 
Short Term Investments   38,657,197    –    –    38,657,197 
Total  $1,328,052,492  $  –   $–   $1,328,052,492 

 

*See Schedule of Investments for industry classifications.

 

The Fund did not have any securities which used significant unobservable inputs (Level 3) in determining fair value during the period.

 

 

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Liberty All-Star® Equity Fund Notes to Schedule of Investments

 

March 31, 2019 (Unaudited)

 

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.

 

 

First Quarter Report (Unaudited) | March 31, 2019

17

 

 

  Description of Lipper Benchmark
Liberty All-Star® Equity Fund And Market Indices

 

March 31, 2019 (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 1000® Growth Index

Measures the performance of those Russell 1000®companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000®Index measures the performance of the 1,000 largest companies in the Russell 3000®Index.

 

Russell 1000® Value Index

Measures the performance of those Russell 1000®companies with lower price-to-book ratios and lower forecasted growth values. The Russell 1000®Index measures the performance of the 1,000 largest companies in the Russell 3000®Index.

 

Russell 3000® Index

Measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market.

 

Russell 3000® Growth Index

Measures the performance of those Russell 3000® companies with higher price-to-book-ratios and higher forecasted growth values.

 

Russell 3000® Value Index

Measures the performance of those Russell 3000® companies with lower price-to-book-ratios and lower forecasted growth values.

 

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.

 

 

18

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