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Liberty All-Star® Growth Fund		President’s Letter

 

 

Fellow Shareholders:		April 2011

Equity markets proved to be resilient in the first quarter, as they overcame uncertainties that ringed the globe—from turmoil in Libya and the Middle East to the tragedy in Japan to mixed economic signals in the U.S. The S&P 500 Index returned 5.92 percent, rising for the third consecutive quarter and the seventh out of the last eight dating to the start of the market rebound in March 2009. The widely followed Dow Jones Industrial Average gained 7.07 percent—marking its best first quarter advance in percentage terms in 12 years. In terms of Growth indices, the Russell 3000^® Growth Index and the NASDAQ Composite Index gained 6.30 percent and 5.05 percent, respectively, during the first quarter.

Despite the positive conclusion, stocks were volatile over the quarter—which was to be expected given headline events that kept financial markets on edge. The S&P 500 gained 2.37 percent in January and picked up further momentum with a 3.43 percent advance in February. But investors were unnerved by a combination of factors in March, primarily: the catastrophe and ensuing nuclear crisis in Japan, the world’s third-largest economy, beginning on March 11. At the close of the quarter, however, even March was positive, as the S&P 500 eked out a 0.04 percent monthly advance.

In terms of sentiment overall, despite the “wall of worry” over global geopolitical events and domestic economic trends, the market had a positive tone to it. For the first time in two years, investors put more money into stocks than into bonds, according to Thomson Reuters. Equity funds had estimated net inflows of $48.7 billion (bond funds took in an estimated $27.5 billion).

Growth stocks enjoyed a strong quarter, as the Russell 3000^® Growth Index topped the S&P 500 Index returning 6.30 percent versus 5.92 percent. The 5.05 percent return posted by the growth-oriented NASDAQ Composite Index lagged the other indices, however, as some of the mega-cap information technology giants showed flat to moderately negative returns.

For the quarter, Liberty All-Star^® Growth Fund returned 7.92 percent with shares valued at net asset value (NAV), 8.07 percent with shares valued at NAV with dividends reinvested and 10.22 percent with shares valued at market price with dividends reinvested. These returns were strong on both an absolute and relative basis, as all three measures of return topped the previously cited S&P 500 Index, Russell 3000^® Growth Index and NASDAQ Composite Index. The Fund’s performance ranked it in the 18th percentile of its peer group, the Lipper Multi-Cap Growth Mutual Fund Average, which advanced 6.28 percent for the quarter. The Fund’s good first quarter builds on strong absolute and relative returns for 2010, as summarized in the table on the facing page. For the year 2010, the Fund ranked in the 29th percentile among peer funds in the Lipper universe.

The discount at which Fund shares traded relative to their underlying NAV ranged from 5.1 percent to 8.2 percent over the quarter, representing a continuation of the trend toward narrower

 

 

First Quarter Report (Unaudited)  |  March 31, 2011		1

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President’s Letter		Liberty All-Star® Growth Fund

 

discounts that the Fund experienced last year, when the discount was as wide as 16.2 percent at one point. This is a trend within the closed-end fund industry, as well, and is a welcome development that we hope will continue.

We are pleased that the Fund has once again demonstrated its value as a high quality, growth equity holding. And, we are gratified that the equity market continued to make gains in the first quarter of 2011. Be assured that we at Liberty All-Star^® Growth Fund will remain vigilant and committed to managing the Fund in the best long-term interests of shareholders.

Sincerely,

William R. Parmentier, Jr.

President and Chief Executive Officer

Liberty All-Star^® Growth Fund, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The views expressed in the President’s letter reflect the views of the President as of April 2011 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

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

 

 

						Rights Offerings
Year		Per Share Distributions		Month Completed		Shares Needed to Purchase One Additional Share		Subscription Price
1997		$1.24
1998		1.35		July		10		$12.41
1999		1.23
2000		1.34
2001		0.92		September		8		6.64
2002		0.67
2003		0.58		September		8*		5.72
2004		0.63
2005		0.58
2006		0.59
2007		0.61
2008		0.47
2009**		0.24
2010		0.25
2011     1st Quarter		0.07

 

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

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

DISTRIBUTION POLICY

 

Liberty All-Star^® Growth Fund, Inc.’s current policy is to pay distributions on its shares totaling approximately 6 percent of its net asset value per year, payable in four quarterly installments of 1.5 percent of the Fund’s net asset value at the close of the New York Stock Exchange on the Friday prior to each quarterly declaration date. The fixed distributions are not related to the amount of the Fund’s net investment income or net realized capital gains or losses and may be taxed as ordinary income up to the amount of the Fund’s current and accumulated earnings and profits. If, for any calendar year, the total distributions made under the 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.

 

First Quarter Report (Unaudited)  |  March 31, 2011		3

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Top 20 Holdings & Economic Sectors		Liberty All-Star® Growth Fund
March 31, 2011 (Unaudited)

 

 

Top 20 Holdings*			Percent of Net Assets
Apple, Inc.			2.04%
C.H. Robinson Worldwide, Inc.			2.04
Salesforce.com, Inc.			2.01
Rockwell Automation, Inc.			1.89
QUALCOMM, Inc.			1.74
Intuitive Surgical, Inc.			1.67
Core Laboratories N.V.			1.66
Oceaneering International, Inc.			1.64
FMC Technologies, Inc.			1.62
IHS, Inc., Class A			1.56
Baidu, Inc.			1.53
VeriFone Systems, Inc.			1.52
Expeditors International of Washington, Inc.			1.46
Google, Inc., Class A			1.43
ARM Holdings Plc			1.40
ACE Ltd.			1.40
Resources Connection, Inc.			1.32
Rue21, Inc.			1.31
Schlumberger Ltd.			1.26
LKQ Corp.			1.26
			31.76%
Economic Sectors*			Percent of Net Assets
Information Technology			25.94%
Industrials			17.38
Health Care			14.33
Consumer Discretionary			11.92
Financials			11.01
Energy			10.21
Consumer Staples			3.17
Materials			2.05
Telecommunication Services			1.23
Utilities			0.67
Other Net Assets			2.09
			100.00%

 

 

 

 

 

 

 

 

 

 

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

 

4		www.all-starfunds.com

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

 

The following are the major ($500,000 or more) stock changes - both purchases and sales - that were made in the Fund’s portfolio during the first quarter of 2011.

 

Security Name		Purchases (Sales)		Shares as of 3/31/11
Purchases
ARM Holdings PLC		18,550		72,750
Baidu, Inc.		7,100		16,200
CARBO Ceramics, Inc.		6,000		6,000
FARO Technologies, Inc.		16,807		19,267
Fossil, Inc.		8,900		8,900
Silver Wheaton Corp.		14,700		14,700
SuccessFactors, Inc.		22,800		22,800
Sales
Akamai Technologies, Inc.		(16,200)		0
Cisco Systems, Inc.		(59,405)		0
Genzyme Corp.		(11,500)		0
IntercontinentalExchange, Inc.		(5,000)		0
Masimo Corp.		(28,242)		26,750
Plains Exploration & Production Co.		(19,300)		17,800
The Procter & Gamble Co.		(11,870)		0
SMART Technologies, Inc., Class A		(77,200)		0

 

First Quarter Report (Unaudited)  |  March 31, 2011		5

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

 

THE FUND’S THREE GROWTH INVESTMENT MANAGERS AND THE MARKET CAPITALIZATION ON WHICH EACH FOCUSES:

 

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 the Fund’s multi-managed portfolio. The characteristics are different for each of the Fund’s three investment managers. These differences are a reflection of the fact that each has a different capitalization focus and investment strategy. The shaded column highlights the characteristics of the Fund as a whole, while the first three columns show portfolio characteristics for the Russell Smallcap, Midcap and Largecap Growth indices. See page 16 for a description of these indices.

PORTFOLIO CHARACTERISTICS As of March 31, 2011 (Unaudited)

 

 

		RUSSELL GROWTH:
		SMALLCAP INDEX		MIDCAP INDEX		LARGECAP INDEX		M.A. WEATHERBIE		TCW (MID-CAP)		TCW (LARGE-CAP)		TOTAL FUND
Number of Holdings		1,252		490		624		60		55		32		130*
Weighted Average Market Capitalization (billions)		$1.6		$8.6		$91.2		$2.8		$6.5		$59.5		$22.0
Average Five-Year Earnings Per Share Growth		14%		12%		11%		12%		20%		25%		19%
Dividend Yield		0.5%		0.8%		1.4%		0.3%		0.4%		0.6%		0.4%
Price/Earnings Ratio**		23x		22x		18x		27x		32x		26x		28x
Price/Book Value Ratio		4.9x		5.1x		4.8x		5.4x		8.1x		5.9x		6.5x

 

*	Certain holdings are held by more than one manager.

**	Excludes negative earnings.

 

6		www.all-starfunds.com

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Liberty All-Star® Growth Fund		Schedule of Investments

 

 

		SHARES				MARKET VALUE
COMMON STOCKS (97.91%)
CONSUMER DISCRETIONARY (11.92%)
Automobiles (0.47%)
Thor Industries, Inc.			20,370				$679,747
Distributors (1.26%)
LKQ Corp.(a)			76,135				1,834,853
Diversified Consumer Services (1.56%)
Capella Education Co.(a)			17,246				858,678
Global Education & Technology Group Ltd.(a)(b)			55,044				337,420
Strayer Education, Inc.(a)			6,400				835,136
Xueda Education Group(a)(b)			26,234				250,797
							2,282,031
Hotels, Restaurants & Leisure (1.11%)
BJ’s Restaurants, Inc.(a)			20,711				814,564
Ctrip.com International Ltd.(a)(b)			19,466				807,644
							1,622,208
Household Durables (0.63%)
Harman International Industries, Inc.			19,704				922,541
Internet & Catalog Retail (2.47%)
Amazon.com, Inc.(a)			9,140				1,646,388
E-Commerce China Dangdang, Inc.(a)(b)			28,873				595,650
priceline.com, Inc.(a)			2,700				1,367,388
							3,609,426
Specialty Retail (2.69%)
CarMax, Inc.(a)			29,200				937,320
Monro Muffler Brake, Inc.			10,702				352,952
Rue21, Inc.(a)			66,232				1,907,482
Ulta Salon, Cosmetics & Fragrance, Inc.(a)			15,340				738,314
							3,936,068
Textiles, Apparel & Luxury Goods (1.73%)
Fossil, Inc.(a)			8,900				833,485
Gildan Activewear, Inc.			23,400				766,818
Under Armour, Inc., Class A(a)			13,510				919,356
							2,519,659
CONSUMER STAPLES (3.17%)
Food & Staples Retailing (1.17%)
Costco Wholesale Corp.			12,500				916,500
CVS Caremark Corp.			23,100				792,792
							1,709,292
Food Products (2.00%)
Green Mountain Coffee Roasters, Inc.(a)			28,100				1,815,541
Mead Johnson Nutrition Co.			19,100				1,106,463
							2,922,004

 

See Notes to Schedule of Investments.
First Quarter Report (Unaudited)  |  March 31, 2011		7

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Schedule of Investments		Liberty All-Star® Growth Fund

 

 

		SHARES				MARKET VALUE
COMMON STOCKS (continued)
ENERGY (10.21%)
Energy Equipment & Services (7.36%)
CARBO Ceramics, Inc.			6,000				$846,720
Core Laboratories N.V.(a)			23,757				2,427,253
Dril-Quip, Inc.(a)			11,114				878,339
FMC Technologies, Inc.(a)			25,000				2,362,000
Oceaneering International, Inc.(a)			26,800				2,397,260
Schlumberger Ltd.			19,795				1,846,082
							10,757,654
Oil, Gas & Consumable Fuels (2.85%)
Brigham Exploration Co.(a)			29,800				1,107,964
Occidental Petroleum Corp.(a)			15,600				1,630,044
Plains Exploration & Production Co.(a)			17,800				644,894
Ultra Petroleum Corp.(a)			15,700				773,225
							4,156,127
FINANCIALS (11.01%)
Capital Markets (4.05%)
Affiliated Managers Group, Inc.(a)			13,383				1,463,699
The Charles Schwab Corp.			49,100				885,273
Duff & Phelps Corp., Class A			25,383				405,620
FXCM, Inc., Class A			15,186				197,874
Janus Capital Group, Inc.			76,400				952,708
SEI Investments Co.			40,100				957,588
T. Rowe Price Group, Inc.(a)			15,800				1,049,436
							5,912,198
Commercial Banks (1.18%)
Signature Bank(a)			30,509				1,720,707
Consumer Finance (0.51%)
Green Dot Corp., Class A(a)			17,300				742,343
Diversified Financial Services (2.34%)
MSCI, Inc., Class A(a)			47,024				1,731,424
Portfolio Recovery Associates, Inc.(a)			19,856				1,690,341
							3,421,765
Insurance (2.00%)
ACE Ltd.(a)			31,600				2,044,520
Greenlight Capital Re Ltd., Class A(a)			31,311				883,283
							2,927,803
Real Estate Management & Development (0.93%)
China Real Estate Information Corp.(a)(b)			32,941				257,269
FirstService Corp.(a)			29,097				1,106,559
							1,363,828

 

See Notes to Schedule of Investments.
8		www.all-starfunds.com

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Liberty All-Star® Growth Fund		Schedule of Investments

 

 

		SHARES				MARKET VALUE
COMMON STOCKS (continued)
HEALTH CARE (14.33%)
Biotechnology (3.01%)
BioMarin Pharmaceutical, Inc.(a)			58,305				$1,465,205
Dendreon Corp.(a)			25,100				939,493
Human Genome Sciences, Inc.(a)			27,488				754,545
Ironwood Pharmaceuticals, Inc.(a)			20,000				280,000
Vertex Pharmaceuticals, Inc.(a)			19,900				953,807
							4,393,050
Health Care Equipment & Supplies (4.34%)
Accuray, Inc.(a)			54,634				493,345
Intuitive Surgical, Inc.(a)			7,300				2,434,258
Masimo Corp.			26,750				885,425
ResMed, Inc.(a)			10,467				314,010
Varian Medical Systems, Inc.(a)			22,600				1,528,664
Volcano Corp.(a)			26,700				683,520
							6,339,222
Health Care Providers & Services (2.06%)
IPC The Hospitalist Co., Inc.(a)			12,017				545,692
Lincare Holdings, Inc.			25,565				758,258
PSS World Medical, Inc.(a)			34,110				926,086
VCA Antech, Inc.(a)			31,121				783,627
							3,013,663
Health Care Technology (1.82%)
athenahealth, Inc.(a)			22,583				1,019,171
Cerner Corp.(a)			14,700				1,634,640
							2,653,811
Life Sciences Tools & Services (0.84%)
Life Technologies Corp.(a)			23,500				1,231,870
Pharmaceuticals (2.26%)
Allergan, Inc.			18,000				1,278,360
Mylan, Inc.(a)			38,900				881,863
Teva Pharmaceutical Industries Ltd.(b)			22,710				1,139,361
							3,299,584
INDUSTRIALS (17.38%)
Aerospace & Defense (2.70%)
Aerovironment, Inc.(a)			27,200				951,184
HEICO Corp.			14,499				906,478
Precision Castparts Corp.			8,200				1,206,876
TransDigm Group, Inc.(a)			10,570				886,083
							3,950,621
Air Freight & Logistics (3.50%)
C.H. Robinson Worldwide, Inc.(a)			40,200				2,980,026

 

See Notes to Schedule of Investments.
First Quarter Report (Unaudited)  |  March 31, 2011		9

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Schedule of Investments		Liberty All-Star® Growth Fund

 

 

		SHARES				MARKET VALUE
COMMON STOCKS (continued)
Air Freight & Logistics (continued)
Expeditors International of Washington, Inc.			42,500				$2,130,950
							5,110,976
Commercial Services & Supplies (2.20%)
American Reprographics Co.(a)			66,379				687,023
Ritchie Bros. Auctioneers, Inc.			13,305				374,536
Stericycle, Inc.(a)			13,035				1,155,813
Waste Connections, Inc.			34,717				999,502
							3,216,874
Electrical Equipment (2.39%)
II-VI, Inc.(a)			14,974				744,957
Rockwell Automation, Inc.(a)			29,100				2,754,315
							3,499,272
Machinery (0.81%)
Graco, Inc.			20,394				927,723
Watts Water Technologies, Inc., Class A			6,528				249,304
							1,177,027
Professional Services (4.85%)
Huron Consulting Group, Inc.(a)			29,942				829,094
ICF International, Inc.(a)			18,196				373,746
IHS, Inc., Class A(a)			25,713				2,282,029
Resources Connection, Inc.			99,400				1,927,366
Robert Half International, Inc.			32,700				1,000,620
Stantec, Inc.(a)			22,249				667,692
							7,080,547
Road & Rail (0.93%)
Knight Transportation, Inc.			24,846				478,286
Landstar System, Inc.			19,133				873,995
							1,352,281
INFORMATION TECHNOLOGY (25.94%)
Communications Equipment (3.59%)
Aruba Networks, Inc.(a)			31,300				1,059,192
F5 Networks, Inc.(a)			3,800				389,766
InterDigital, Inc.			5,587				266,556
Polycom, Inc.(a)			18,968				983,491
QUALCOMM, Inc.			46,365				2,542,193
							5,241,198
Computers & Peripherals (2.04%)
Apple, Inc.(a)			8,560				2,982,732
Electronic Equipment & Instruments (1.48%)
FARO Technologies, Inc.(a)			19,267				770,680
FLIR Systems, Inc.			18,857				652,641

 

See Notes to Schedule of Investments.
10		www.all-starfunds.com

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Liberty All-Star® Growth Fund		Schedule of Investments

 

 

		SHARES				MARKET VALUE
COMMON STOCKS (continued)
Electronic Equipment & Instruments (continued)
National Instruments Corp.			22,455				$735,850
							2,159,171
Internet Software & Services (5.11%)
Baidu, Inc.(a)(b)			16,200				2,232,522
comScore, Inc.(a)			12,327				363,770
Cornerstone OnDemand, Inc.(a)			2,091				38,119
Google, Inc., Class A(a)			3,575				2,095,701
Monster Worldwide, Inc.(a)			55,194				877,584
Qihoo 360 Technology Co. Ltd.(a)(b)			1,100				32,549
VistaPrint Ltd.(a)			15,832				821,681
Youku.com, Inc.(a)(b)			21,164				1,005,501
							7,467,427
IT Services (4.09%)
Alliance Data Systems Corp.(a)			10,100				867,489
Cognizant Technology Solutions Corp., Class A(a)			20,100				1,636,140
FleetCor Technologies, Inc.(a)			9,327				304,620
ServiceSource International, Inc.(a)			1,000				12,180
VeriFone Systems, Inc.(a)			40,376				2,218,661
Visa, Inc., Class A			12,715				936,078
							5,975,168
Semiconductors & Semiconductor Equipment (2.75%)
ARM Holdings PLC(b)			72,750				2,049,368
Cavium Networks, Inc.(a)			21,588				969,949
Hittite Microwave Corp.(a)			15,642				997,490
							4,016,807
Software (6.88%)
ANSYS, Inc.(a)			23,330				1,264,253
Concur Technologies, Inc.(a)			12,781				708,707
QLIK Technologies, Inc.(a)			38,077				990,002
RealPage, Inc.(a)			24,727				685,680
Salesforce.com, Inc.(a)			22,000				2,938,760
Solera Holdings, Inc.			23,363				1,193,849
SuccessFactors, Inc.(a)			22,800				891,252
VMware, Inc., Class A(a)			16,860				1,374,764
							10,047,267
MATERIALS (2.05%)
Chemicals (1.61%)
CF Industries Holdings, Inc.			6,200				848,098
Praxair, Inc.(a)			14,800				1,503,680
							2,351,778
Metals & Mining (0.44%)
Silver Wheaton Corp.			14,700				637,392

 

See Notes to Schedule of Investments.
First Quarter Report (Unaudited) | March 31, 2011		11

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Schedule of Investments		Liberty All-Star® Growth Fund

 

 

		SHARES				MARKET VALUE
COMMON STOCKS (continued)
TELECOMMUNICATION SERVICES (1.23%)
Wireless Telecommunication Services (1.23%)
American Tower Corp., Class A(a)			34,600				$1,792,972
UTILITIES (0.67%)
Electric Utilities (0.67%)
ITC Holdings Corp.(a)			13,953				975,315
TOTAL COMMON STOCKS (COST OF $107,192,024)							143,006,279
			PAR VALUE
SHORT TERM INVESTMENT (2.27%)
REPURCHASE AGREEMENT (2.27%)
Repurchase agreement with State Street Bank & Trust Co., dated 03/31/11, due 04/01/11 at 0.01%, collateralized by several Fannie Mae and Freddie Mac instruments with various maturity dates, market value of $3,383,019 (Repurchase proceeds of $3,309,001)			$3,309,000				3,309,000
TOTAL SHORT TERM INVESTMENT (COST OF $3,309,000)							3,309,000
TOTAL INVESTMENTS (100.18%) (COST OF $110,501,024)(c)							146,315,279
LIABILITIES IN EXCESS OF OTHER ASSETS (-0.18%)							(258,445)
NET ASSETS (100.00%)							$146,056,834
NET ASSET VALUE PER SHARE (30,080,350 SHARES OUTSTANDING)							$4.86

 

(a)	Non-income producing security.

(b)	American Depositary Receipt.

(c)	Cost of investments for federal income tax purposes is $110,840,294.

Gross unrealized appreciation and depreciation at March 31, 2011 based on cost of investments for federal income tax purposes is as follows:

 

Gross unrealized appreciation		$	38,863,758
Gross unrealized depreciation			(3,388,773)
Net unrealized appreciation		$	35,474,985

For Fund compliance purposes, the Fund’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry sub-classifications for reporting ease. Industries are shown as a percent of net assets. These industry classifications are unaudited.

 

See Notes to Schedule of Investments.
12		www.all-starfunds.com

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

 

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 National Association of Securities Dealers Automated Quotations (“NASDAQ”) exchange, which are valued at the NASDAQ official closing price. Unlisted securities or listed securities for which there were no sales during the day are valued at the closing bid price on such exchanges or over-the-counter markets.

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

Investments for which market quotations are not readily available are valued at fair value as determined in good faith under consistently applied procedures approved by and under the general supervision of the Liberty All-Star^® Growth Fund’s (the “Fund”) Board of Directors (the “Board”).

Foreign Securities

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

Security Transactions

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

Repurchase Agreements

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

Income Recognition

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

Fair Value Measurements

The Fund discloses the classification of its fair value measurements following the 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, 2011		13

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Notes to Schedule of Investments		Liberty All-Star® Growth Fund
March 31, 2011 (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 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
Level 2 –		Other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
Level 3 –		Significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The following is a summary of the inputs used to value the Fund’s investments as of March 31, 2011:

 

		Valuation Inputs
Investments in Securities at
Value*		Level 1				Level 2				Level 3				Total
Common Stocks		$	143,006,279			$	–			$	–			$	143,006,279
Short Term Investment			–				3,309,000				–				3,309,000
Total		$	143,006,279			$	3,309,000			$	–			$	146,315,279

*See	Schedule of Investments for industry classifications

For the three months ended March 31, 2011, the Fund did not have any significant transfers between Level 1 and Level 2 securities. The Fund did not have any securities which used significant unobservable inputs (Level 3) in determining fair value.

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 Directors 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.

Maryland Statutes

By resolution of the Board of Directors, the Fund has opted into the Maryland Control Share Acquisition Act and the Maryland Business Combination Act. In general, the Maryland Control Share Acquisition Act provides that “control shares” of a Maryland corporation acquired in a control share acquisition may not be voted except to the extent approved by shareholders at a meeting by a vote of two-thirds of the votes entitled to be cast on the matter (excluding shares owned by the acquiror and by officers or directors who are employees of the corporation). “Control shares” are voting shares of stock which, if aggregated with all other shares of stock owned by the acquiror or in respect of which the acquiror is able to exercise or direct the exercise of voting power (except solely by virtue

 

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

 

of a revocable proxy), would entitle the acquiror to exercise voting power in electing directors within certain statutorily-defined ranges (one-tenth but less than one-third, one-third but less than a majority, and more than a majority of the voting power). In general, the Maryland Business Combination Act prohibits an interested shareholder (a shareholder that holds 10% or more of the voting power of the outstanding stock of the corporation) of a Maryland corporation from engaging in a business combination (generally defined to include a merger, consolidation, share exchange, sale of a substantial amount of assets, a transfer of the corporation’s securities and similar transactions to or with the interested shareholder or an entity affiliated with the interested shareholder) with the corporation for a period of five years after the most recent date on which the interested shareholder became an interested shareholder. At the time of adoption, March 19, 2009, the Board and the Fund were not aware of any shareholder that held control shares or that was an interested shareholder under the statutes.

 

First Quarter Report (Unaudited)  |  March 31, 2011		15

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Description of Lipper Benchmark and Market Indices		Liberty All-Star® Growth Fund

 

Lipper Multi-Cap Growth Mutual Fund Average

The average of funds that, by portfolio practice, invest in a variety of market capitalization ranges without concentrating 75% of their equity assets in any one market capitalization range over an extended period of time. Multi-Cap growth funds typically have an above-average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P SuperComposite 1500 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 higher price-to-book-ratios and higher forecasted 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 98% of the investable U.S. equity market.

Russell 1000^® Growth Index (Largecap)

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 Midcap^® Growth Index

Measures the performance of those Russell Midcap^® companies with higher price-to-book ratios and higher forecasted growth values. The Russell Midcap^® Index measures the performance of the 800 smallest companies in the Russell 1000^® Index.

Russell 2000^® Growth Index (Smallcap)

Measures the performance of those Russell 2000^® companies with higher price-to-book ratios and higher forecasted growth values. The Russell 2000^® Index measures the performance of the 2,000 smallest companies in the Russell 3000^® Index.

S&P 500 Index

A representative sample of 500 leading companies in leading industries of the U.S. economy. Focuses on the large-cap segment of the market with approximately 75% coverage of U.S. equities.

 

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