UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Investment Company Act File No.: 811-04809
 
Liberty All-Star Equity Fund
 (Exact name of registrant as specified in charter)

1290 Broadway, Suite 1100, Denver, Colorado 80203
(Address of principal executive offices) (Zip code)

Alex Marks
ALPS Fund Services, Inc.
1290 Broadway, Suite 1100
Denver, Colorado 80203
(Name and address of agent for service)


Registrant’s telephone number, including area code: 303-623-2577

Date of fiscal year end:     December 31

Date of reporting period:  January 1 - December 31, 2015

Item 1.
Report of Shareholders.
 
(FRONT COVER)

Contents
 
1
President’s Letter
6
Unique Fund Attributes
8
Investment Managers/ Portfolio Characteristics
9
Investment Growth
10
Table of Distributions and Rights Offerings
11
Major Stock Changes in the Quarter and Distribution Policy
12
Top 20 Holdings and Economic Sectors
13
Manager Roundtable
21
Schedule of Investments
29
Statement of Assets and Liabilities
30
Statement of Operations
31
Statements of Changes in Net Assets
32
Financial Highlights
34
Notes to Financial Statements
43
Report of Independent Registered Public Accounting Firm
44
Automatic Dividend Reinvestment and Direct Purchase Plan
46
Tax Information
47
Trustees and Officers
52
Board Consideration of the Renewal of the Fund Management and Portfolio Management Agreements
65
Privacy Policy
67
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, Unique Fund Attributes and Manager Roundtable reflect the current views of the respective parties. 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 respective parties disclaim 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. References to specific company securities should not be construed as a recommendation or investment advice.

Liberty All-Star® Equity Fund
President's Letter

(Unaudited)
 
                                                 
Fellow Shareholders:
 February 2016
 
Although equity returns were flattish for 2015, market action throughout the year was anything but calm. Periodic downdrafts roiled markets at various times in all four quarters, with the net result being the poorest year since 2008 for U.S. stocks overall.
 
The S&P 500® Index returned 1.38 percent, ending three years of double-digit gains, while the widely-followed Dow Jones Industrial Average returned 0.21 percent. The best performance was turned in by the technology-focused NASDAQ Composite Index, which gained 6.96 percent. Six of the 10 sectors in the S&P 500® posted losses for the year, with energy being the laggard at a decline of 21 percent. These key market metrics saved their best for last in 2015, posting their greatest advance in the fourth quarter, buoyed in particular by a strong month in October. That followed the weakest period, the third quarter, when all three indices declined in a range of 6 – 7 percent.
 
Investors scanning the world for indicators of future equity market conditions found more cause for concern than comfort in 2015 the U.S. was the safest port in the storm, but was not without its own choppiness.
 
Investors scanning the world for indicators of future equity market conditions found more cause for concern than comfort in 2015. A leading source of worry was the sharp decline in energy prices, continuing a trend that, for crude oil, started in mid-year 2014. The domestic benchmark, West Texas Intermediate (WTI) crude, closed 2015 at $37 per barrel versus $94 per barrel in July 2014. Increasing supply as a result of the U.S. “energy revolution,” Saudi reluctance to limit production and the strong U.S. dollar all contributed to oil’s precipitous decline in price. Softer demand affected iron ore, copper and other metals as well. This accounted for a good portion of the weakness in emerging markets. In some emerging markets—like Brazil and Russia—energy and natural resources represent a significant portion of the economy.
 
Another source of worry was China, where reported nominal GDP has fallen into the 6 percent range from 12 percent a few years ago. China surprised financial markets on August 11 by announcing a devaluation of its currency. Its subsequent attempts to intervene and settle its own highly volatile stock market only served to heighten fears that its leadership was losing control of the world’s second-largest economy. Worries over China were reflected in a 6.03 percent decline in the S&P 500® during August, the index’s worst monthly performance in more than three years.
 
The geopolitical situation also served to keep investors on edge. Ongoing conflict in the Middle East was a source of headlines on a daily basis. But there was also fighting in Ukraine in the wake of Russia’s seizure of Crimea in late 2014; the massive influx of refugees across much of Western Europe; and Greece very nearly withdrawing from the Eurozone.
 
While the U.S. was the safest port in the storm, it was not without its own choppiness. There were three sources of concern: lackluster corporate earnings, modest economic growth and the increasing likelihood that the Federal Reserve Board would raise short-term interest rates. To the latter point, after months of speculation, the Fed finally ended the suspense in December with a 0.25 percent increase in the fed funds rate. As to economic expansion, sequential GDP growth through the first three quarters of the year was -0.2 percent, 3.9 percent and 2.0 percent. Preliminary data from the Commerce Department indicated that the domestic economy grew at a 0.7 percent annual rate in the fourth quarter of 2015. Like the first quarter of 2014, the negative 1Q15 GDP could be traced to an extremely harsh winter (exacerbated by a rising U.S. dollar and a West Coast port labor dispute). There were positive offsets to these factors, however. Perhaps the brightest spot was jobs, which showed solid growth throughout the year, including 307,000 new jobs in October, 252,000 in November and 262,000 in December as the unemployment rate dipped to 5.0 percent. Wages also rose, albeit modestly. Auto sales were another bright spot, as was consumer spending in general. In June, new home sales surged to a seven-year high, but this volatile metric weakened for the balance of the year. And inflation as measured by the consumer price index remained muted, rising just 0.7 over the trailing 12 months as of December. Low oil prices were a double-edge sword: good for consumers, but bad for industrial companies supplying capital equipment to the oil and gas industries.
 

Annual Report | December 31, 2015
1

Liberty All-Star® Equity Fund
President's Letter

(Unaudited)
 
Liberty All-Star® Equity Fund
For the full year, Liberty All-Star® Equity Fund marginally underperformed key benchmarks, while moderately outperforming in the fourth quarter. For the year, the Fund returned -1.01 percent with shares valued at net asset value (NAV) with dividends reinvested and -1.98 percent with shares valued at market price with dividends reinvested. (Fund returns are net of expenses.) For the same period, the Lipper Large-Cap Core Mutual Fund Average returned -0.56 percent. As mentioned, for the year the S&P 500®, the Dow Jones Industrial Average and the NASDAQ Composite Index returned 1.38 percent, 0.21 percent and 6.96, respectively. Compared with 2014, the discount at which Fund shares traded relative to their underlying NAV widened, ranging from a low of -11.8 percent to a high of -16.2 percent.
 
The Fund’s fourth quarter NAV results rank in the top quartile of the Lipper Large Cap Core peer group, returning 7.22 percent with shares valued at NAV with dividends reinvested and 7.99 percent with shares valued at market price with dividends reinvested. The Lipper Large-Cap Core Mutual Fund Average returned 6.00 percent for this period. The S&P 500® gained 7.04 percent for the quarter, while the Dow Jones Industrial Average advanced 7.70 percent. The best performance was NASDAQ Composite’s return of 8.71 percent.
 
Once again in 2015, the growth investment style outperformed the value style. To that point, the Russell 1000® Growth Index returned 5.67 percent for the year, while the Russell 1000® Value Index returned -3.83 percent. This detracted from Fund performance for the year, as three of the Fund’s five managers practice the value style. In addition, some of the value managers focused on deep value, cyclical equities, including a number in the energy sector, which, as noted, suffered throughout the year from declining prices for crude oil and natural gas. Fund management chose to replace two of the value managers during the second half, bringing in Delaware Investments as a manager in September and Aristotle Capital in December. The transition to the two new managers went smoothly, as evidenced by the Fund’s good fourth quarter performance.
 
Fund distributions totaled $0.51 per share in 2015. As shareholders may recall, 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 $25.17 since 1987 (the Fund's first full calendar year of operations). We continue to emphasize that shareholders should include these distributions when determining the return on their investment in the Fund.
 
One of the key principles on which the Fund was founded is multi-management, or the practice of allocating the Fund’s assets to carefully selected investment managers representing both value and growth styles of investing. Thus, we are once again offering insights into the managers’ thinking through our annual roundtable question-and-answer exchange, and invite shareholders to read the managers’ comments.
 

2
www.all-starfunds.com

Liberty All-Star® Equity Fund
President's Letter

(Unaudited)
 
On December 3, 2015 Richard Lowry retired as Chairman of the Board of Trustees. Mr. Lowry was a founding member of the Board when the Fund was launched back in October 1986. He deserves special mention not only because of his long association with the Fund - but also for his enthusiastic support and dedication to the Fund’s founding principles for all those years. His guidance and expertise will be missed and we wish him all the best. Thomas Brock who has been a member of the Board since 2005 will succeed Mr. Lowry as your new Chairman. We congratulate and welcome him as the Fund’s new Chair and shareholders will be well served by his vast experience in the investment management industry.
 
As investors are well aware, the volatility that characterized 2015 continued and even greatly heightened as 2016 opened, the concerns being much the same as described in this letter. This is a painful situation for all investors, but we find a small degree of comfort in our recent decision to replace two managers and thus mitigate some of the volatility that has impacted deep cyclical stocks. These decisions underscore a pledge that we have made consistently over many years to our shareholders: That we will remain vigilant, disciplined and focused on our objective of maintaining a well-managed core equity holding for long-term investors. We thank you for your confidence in the Fund, and pledge our continued best efforts on your behalf.
 
Sincerely,
-s- William R. Parmentier
 
William R. Parmentier, Jr.
President and Chief Executive Officer
Liberty All-Star® Equity Fund
 

Annual Report | December 31, 2015
3

Liberty All-Star® Equity Fund
President's Letter

(Unaudited)
 
FUND STATISTICS AND SHORT-TERM PERFORMANCE
PERIODS ENDED DECEMBER 31, 2015
 
FUND STATISTICS:
 
Net Asset Value (NAV)
$6.18
Market Price
$5.35
Discount
-13.4%

 
Quarter
2015
Distributions*
$0.13
$0.51
Market Price Trading Range
$4.95 to $5.49
$4.43 to $6.04
Premium/(Discount) Range
-13.3% to -16.2%
-11.8% to -16.2%

PERFORMANCE:
   
Shares Valued at NAV with Dividends Reinvested
7.22%
-1.01%
Shares Valued at Market Price with Dividends Reinvested
7.99%
-1.98%
Dow Jones Industrial Average
7.70%
0.21%
NASDAQ Composite Index
8.71%
6.96%
Lipper Large-Cap Core Mutual Fund Average
6.00%
-0.56%
S&P 500® Index
7.04%
1.38%
 

4
www.all-starfunds.com

Liberty All-Star® Equity Fund
President's Letter

(Unaudited)

LONG-TERM PERFORMANCE SUMMARY AND DISTRIBUTIONS
ANNUALIZED RATES OF RETURN
PERIODS ENDED DECEMBER 31, 2015
3 YEARS
5 YEARS
10 YEARS
15 YEARS
25 YEARS
           
LIBERTY ALL-STAR® EQUITY FUND
         
Distributions
$1.25
$1.91
$4.96
$9.58
$21.50
Shares Valued at NAV with Dividends Reinvested
12.98%
9.27%
5.33%
4.14%
8.99%
Shares Valued at Market Price with Dividends Reinvested
11.87%
9.25%
4.52%
3.80%
8.97%
Dow Jones Industrial Average
12.66%  11.30% 7.75% 5.80% 10.46%
Lipper Large-Cap Core Mutual Fund Average
13.38%
10.92%
6.41%
4.53%
9.26%
NASDAQ Composite Index
19.81%
14.91%
9.68%
5.72%
14.89%
S&P 500® Index
15.13%
12.57%
7.31%
5.00%
9.82%

* All 2015 distributions consist of ordinary dividends and long-term capital gains.  A breakdown of each 2015 distribution for federal income tax purposes can be found in the table on page 46.

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. Figures shown 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 67.

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.
 

Annual Report | December 31, 2015
5

Liberty All-Star® Equity Fund
Unique Fund Attributes

(Unaudited)

UNIQUE ATTRIBUTES OF Liberty All-Star® Equity Fund

Several attributes help to make the Fund a core equity holding for investors seeking diversification, income and the potential for long-term appreciation.

 (LOGO)
MULTI-MANAGEMENT FOR INDIVIDUAL INVESTORS

 
Liberty All-Star® Equity Fund is multi-managed, an investment discipline that is followed by large institutional investors to diversify their portfolios. In 1986, Liberty All-Star® Equity Fund became the first closed-end fund to bring multi-management to individual investors.

 (LOGO)
REAL-TIME TRADING AND LIQUIDITY

 
The Fund has a fixed number of shares that trade on the New York Stock Exchange and other exchanges. Share pricing is continuous—not just end-of-day, as it is with open-end mutual funds. In addition, Fund shares offer immediate liquidity and there are no annual sales fees.
 

6
www.all-starfunds.com


Liberty All-Star® Equity Fund
Unique Fund Attributes

(Unaudited)

 (LOGO)
ACCESS TO INSTITUTIONAL MANAGERS

 
The Fund’s investment managers invest primarily for pension funds, endowments, foundations and other institutions. Because institutional managers are closely monitored by their clients, they tend to be more disciplined and consistent in their investment process.

(LOGO)
MONITORING AND REBALANCING

 
ALPS Advisors continuously monitors these investment managers to ensure that they are performing as expected and adhering to their style and strategy, and will replace managers when warranted. Periodic rebalancing maintains the Fund’s structural integrity and is a well-recognized investment discipline.

(LOGO)
ALIGNMENT AND OBJECTIVITY

 
Alignment with shareholders’ best interests and objective decision-making help to ensure that the Fund is managed openly and equitably. In addition, the Fund is governed by a Board of Trustees that is elected by and responsible to shareholders.

(LOGO)
DISTRIBUTION POLICY

 
Since 1988, the Fund has followed a policy of paying annual distributions on its shares at a rate that approximates historical equity market returns. The current annual distribution rate is 8 percent of the Fund’s net asset value (paid quarterly at 2 percent per quarter), providing a systematic mechanism for distributing funds to shareholders.
 

Annual Report | December 31, 2015
7

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

 
(Unaudited)
 
THE FUND’S ASSETS ARE APPROXIMATELY EQUALLY DISTRIBUTED AMONG
THREE VALUE MANAGERS AND TWO GROWTH MANAGERS:

(PIE CHART)

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.

 
INVESTMENT STYLE SPECTRUM
   
PORTFOLIO CHARACTERISTICS AS OF DECEMBER 31, 2015
VALUE (IMAGE) GROWTH
   
           
Total
S&P 500®
 
Pzena
Delaware
Aristotle
Cornerstone
TCW
Fund
Index
Number of Holdings
41
33
41
41
30
164*
504
Percent of Holdings in Top 10
35%
33%
33%
43%
46%
17%
18%
Weighted Average Market Capitalization (billions)
$95
$77
$85
$133
$95
$97
$137
Average Five-Year Earnings Per Share Growth
-1%
6%
5%
8%
15%
6%
8%
Dividend Yield
2.7%
2.7%
2.2%
0.8%
0.5%
1.8%
2.2%
Price/Earnings Ratio**
14x
18x
16x
25x
41x
19x
19x
Price/Book Value Ratio
1.9x
2.3x
2.6x
4.5x
5.9x
3.0x
3.1x

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

8
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Liberty All-Star® Equity Fund
Investment Growth

(Unaudited)

GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT

The graph below illustrates the growth of a hypothetical $10,000 investment assuming the purchase of shares of beneficial interest at the closing market price (NYSE: USA) of $6.00 on December 31, 1987, and tracking its progress through December 31, 2015. For certain information, it also assumes that a shareholder exercised all primary rights in the Fund’s rights offerings (see below). This graph covers the period since the Fund commenced its distribution policy in 1988.
 
(LINE GRAPH)

(BAR)
The growth of the investment assuming all distributions were received in cash and not reinvested back into the Fund. The value of the investment under this scenario grew to $50,017 (including the December 31, 2015 value of the original investment of $8,917 plus distributions during the period of $39,983 and tax credits on retained capital gains of $1,117).

The additional value realized through reinvestment of all distributions and tax credits. The value of the investment under this scenario grew to $143,078.

(BAR)
The additional value realized through full participation in all the rights offerings under the terms of each offering. The value of the investment under this scenario grew to $205,143 excluding the cost to fully participate in all the rights offerings under the terms of each offering which was $49,966.

Past performance cannot predict future results. Performance will fluctuate with changes in 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.
 

Annual Report | December 31, 2015
9


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

(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
       
Total
$23.99
       
 
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.
 

10
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Major Stock Changes in the Quarter
Liberty All-Star® Equity Fund
and Distribution Policy

December 31, 2015 (Unaudited)

The following are the major ($4 million or more) stock changes - both purchases and sales - that were made in the Fund’s portfolio during the fourth quarter of 2015, excluding transactions from the manager replacement of Matrix Asset Advisors, Inc. with Aristotle Capital Management, LLC.

 
SHARES
SECURITY NAME
PURCHASE (SALES)
HELD AS OF 12/31/15
 
PURCHASES
 
 
Envision Healthcare Holdings, Inc.
192,428
263,680
Microsoft Corp.
92,235
384,860
NXP Semiconductors NV
 49,488
49,488
 
SALES
 
 
Dollar General Corp.
(84,629)
0
EI du Pont de Nemours & Co.
(91,500)
109,500
Facebook, Inc., Class A
 (42,877)
188,209
 
DISTRIBUTION POLICY
The current policy is to pay distributions on its shares totaling approximately 8 percent of its net asset value per year, payable in four quarterly installments of 2 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 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 shareholders’ 1099-DIV forms after the end of the year. 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 capital gains and pay income tax thereon to the extent of such excess.
 

Annual Report | December 31, 2015
11

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

December 31, 2015 (Unaudited)

TOP 20 HOLDINGS*
PERCENT OF NET ASSETS
Alphabet, Inc., Class A & C
2.63%
Microsoft Corp.
1.88
Amazon.com, Inc.
1.79
Salesforce.com, Inc.
1.76
Facebook, Inc., Class A
1.73
The Home Depot, Inc.
1.62
Visa, Inc., Class A
1.31
Bank of America Corp.
1.31
Alexion Pharmaceuticals, Inc.
1.30
Intel Corp.
1.28
ACE Ltd.
1.24
Mondelez International, Inc., Class A
1.13
JPMorgan Chase & Co.
1.13
CVS Health Corp.
1.11
American Tower Corp.
1.03
Archer-Daniels-Midland Co.
1.01
Oracle Corp.
1.00
Baxalta, Inc.
0.95
The Coca-Cola Co.
0.94
The Charles Schwab Corp.
0.93
 
27.08%
 
ECONOMIC SECTORS*
PERCENT OF NET ASSETS
Financials
20.26%
Information Technology
20.15
Health Care
16.73
Consumer Discretionary
13.68
Consumer Staples
8.89
Industrials
7.21
Energy
6.81
Materials
1.72
Utilities
1.51
Telecommunication Services
1.27
Other Net Assets
1.77
 
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.
 

12
www.all-starfunds.com


Liberty All-Star® Equity Fund
Manager Roundtable

(Unaudited)

MANAGER ROUNDTABLE
 
Company fundamentals versus global macro events: that was the tension shaping financial markets in 2015. While S&P 500® earnings slowed somewhat, U.S. corporations generally remained in solid financial condition and the domestic economy continued to grow, albeit slowly. But it was the lack of growth in most regions of the world that concerned investors, compounded by geopolitical issues, from continuing conflict in the Middle East to flair-ups in Ukraine, Greece and East Asia to the migrant crisis that engulfed most of Europe. The Fund’s managers—reflecting their value and growth styles—faced this very same investment environment in 2015. Their response: to focus on what they do best ... conduct in-depth research that assesses companies’ prospects one at a time, focus on well-managed high-quality enterprises, take a long-term perspective in the face of emotion-driven volatility, and adhere to their investment style and strategy.
 
Liberty All-Star Equity Fund’s five investment managers represent long experience, deep knowledge, a proven track record and, given that they represent both growth and value styles of investing, a broad point of view on the stock market and equity investing generally. Thus, once again, we are grateful to be able to call upon this resource to provide Fund shareholders with commentary and insight. The Fund’s Investment Advisor, ALPS Advisors, serves as moderator of the roundtable. Participating investment management firms, the portfolio manager for each, and their respective styles and strategies are:

ARISTOTLE CAPITAL MANAGEMENT, LLC
Portfolio Manager/Howard Gleicher, CFA
CEO and Chief Investment Officer
Investment Style/Value – Aristotle seeks to invest in high quality companies that it believes are selling at a significant discount to their intrinsic value and where a catalyst exists that will lead to a realization by the market of this true value. Aristotle practices a fundamental, bottom-up research-driven process and invests with a long-term perspective.

CORNERSTONE CAPITAL MANAGEMENT LLC
Portfolio Manager/Thomas G. Kamp, CFA
President and Chief Investment Officer
Investment Style/Growth – Cornerstone’s portfolio is focused on stocks in which its research has identified Perception Gaps (underappreciated opportunities) for growth in the key metrics that drive the financial statements of the company. Stock selection is further based on the fundamentals of revenue, earnings, cash flow, and management depth and credibility.

DELAWARE INVESTMENTS
Portfolio Manager/D. Tysen Nutt, Jr.
Senior Vice President, Senior Portfolio Manager, Team Leader
Investment Style/Value – Delaware uses a research-intensive approach to identify companies it believes are undervalued as indicated by multiple factors, including the earnings and cash flow potential or the assets of the company. Delaware seeks to buy companies at times of excessive pessimism and sell at times of undue optimism.
 

Annual Report | December 31, 2015
13

Liberty All-Star® Equity Fund
Manager Roundtable

(Unaudited)

PZENA INVESTMENT MANAGEMENT, LLC
Portfolio Managers/Richard S. Pzena, Founder and Co-Chief Investment Officer
John P. Goetz, Managing Principal and Co-Chief Investment Officer
Benjamin S. Silver, CFA, Principal and Co-Director of Research
Investment Style/Value – Pzena uses fundamental research and a disciplined process to identify good companies with a sustainable business advantage that the firm believes are undervalued on the basis of current price to an estimated normal level of earnings.

TCW INVESTMENT MANAGEMENT COMPANY
Portfolio Manager/Craig C. Blum, CFA
Managing Director
Investment Style/Growth – TCW invests in companies that have superior sales growth, leading and/or rising market shares, and high and/or rising profit margins. TCW’s concentrated growth equity strategy seeks companies with distinct advantages in their business model.

Do you primarily take a bottom-up, top-down or combination of the two approaches when it comes to picking stocks? We ask because in recent years investors have seen macro events have an increasingly negative impact on quality individual stocks with excellent fundamentals and good performance. Tom Kamp and Craig Blum, let’s hear from the growth managers to start.

Kamp (Cornerstone – Growth): Cornerstone is a research-driven, fundamental investor seeking long-term growth of capital through high-growth companies where our research has identified one or more Perception Gaps. Our bottom-up approach is founded on the opportunistic selection of stocks expected to demonstrate underappreciated growth in one or more of the key fundamental factors that drive each company’s financial statements.  Individual stock selection is based on the fundamentals of revenue, earnings, cash flow, and management depth and credibility. Cornerstone views macro analysis as the “framework” of the global, investable environment as it puts interest rates, economic cycles, commodities, currencies and government policy into perspective. Bottom-up, company-specific, fundamental and industry data points provide clarity to the picture within that macro framework. The more data points we can discover, the clearer will be our picture of reality and the greater our confidence can be in making an investment decision or stock selection.

“Our bottom-up approach is founded on the opportunistic selection of stocks expected to demonstrate underappreciated growth in one or more of the key fundamental factors that drive each company’s financial statements.”

Tom Kamp
(Cornerstone – Growth)

Blum (TCW – Growth): The portfolio is constructed one stock at a time, i.e., bottom-up, but our portfolio construction process is top-down. In early 2008, recognizing new realities facing global markets, we elected to employ a light macro overlay to our portfolio construction process whereby about two-thirds of our stocks are “offensive,” or more cyclical, and roughly one-third are “defensive,” or less cyclical and uncorrelated to GDP. Importantly, we are not sacrificing growth with our defensive stocks; these companies still meet our stringent investment criteria but also limit down capture in an increasingly macro, policy-driven stock market.
 

14
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Liberty All-Star® Equity Fund
Manager Roundtable

(Unaudited)

Given the macro forces at work today and the unprecedented amount of global stimulus, we believe it is critical to have a balanced portfolio. For investors with increasingly short-time horizons, it can be easy to get whipsawed by the market’s shift between “risk-on” and “risk-off.” Timing this is almost impossible. We believe our blend of secular growth stocks is a key competitive advantage for the strategy.

“Given the macro forces at work today and the unprecedented amount of global stimulus, we believe it is critical to have a balanced portfolio.”

Craig Blum
(TCW – Growth)
 
Let’s get the value perspective. What’s Pzena’s point of view?

Pzena (Pzena – Value): Our stock selection process is strictly bottom-up, and we adhere to this discipline throughout market cycles. Situations arise when macro factors drive investors to ignore good businesses, and these are precisely the types of opportunities we love to find and use to populate our portfolios. Investor behavior in the short term can be emotional, but over time the value of a good business franchise is recognized, driving returns in a deep value portfolio. The history of value cycles over the last 50 years provides evidence that this approach, though cyclical in nature, works to produce excess returns over both the broad market and a naive value index over the course of an entire market cycle. Today, investor preference for growth and stability has left good businesses in economically sensitive sectors attractively valued, and we have taken advantage, with significant exposures in financial services, mature technology, energy and, to a growing extent, industrial cyclicals.
 
“Today, investor preference for growth and stability has left good businesses in economically sensitive sectors attractively valued, and we have taken advantage.”

Rich Pzena
(Pzena – Value )

Thanks. Let’s welcome Aristotle Capital and Delaware Investments to our annual roundtable and ask for their thoughts.

Gleicher (Aristotle – Value): We take a bottom-up approach to security selection. In the short term, macro events may take a toll on stocks of any quality. We believe, however, that over a market cycle, high-quality companies—those market leaders with disciplined, insightful management teams and sustainable competitive advantages—will outperform their peers, regardless of the environment. These companies should hold up better in the face of adversity as well as lead when the wind is at their backs.

Nonetheless, we understand that no company operates in a vacuum. As part of our rigorous fundamental analysis, we stress-test businesses to analyze how we expect them to perform in market extremes, selecting those companies we believe will outperform. It is also important for us to understand the industry dynamics within which companies operate. Above all, however, we prefer to focus our efforts where we feel we have the most skill: identifying and owning great businesses.

Nutt (Delaware – Value): Our investment process has always included bottom-up fundamental research and a top-down view, or what we call our macroeconomic overlay. While in-depth company research is the driving force in our process, the trade-off between top-down and bottom-up will vary depending on market circumstances. Sometimes our macro view and sector valuations drive the search for securities—sometimes the bottom-up development of compelling purchase ideas drives changes in sector weights. Right now, we’re finding it difficult to identify compelling purchase candidates because of relatively high valuations across much of the U.S. equity market, so we would characterize our current approach as being more bottom-up than usual.
 

Annual Report | December 31, 2015
15

Liberty All-Star® Equity Fund
Manager Roundtable

(Unaudited)

A follow-up question from last year, when we asked about periods of high volatility roiling equity markets: The same thing happened again in 2015, as early as the first quarter—when the S&P 500® Index was up or down by 1 percent or more 19 times—and more recently the 12 percent correction in August. What, in your view, is behind these bouts of high volatility, and is higher volatility the “new normal”? Let’s stay with the value managers.

Gleicher (Aristotle – Value): We at Aristotle Capital believe that with volatility comes opportunity. Typically, the cause of volatility is short-term news—or, as we prefer to think of it, noise. It is precisely when a stock price trades away from the company’s underlying fundamentals that we can add value through bottom-up security selection.

Consistent with our long-term perspective, our investment team endeavors to not be distracted by near-term volatility. Focusing on the long-term can enable us to take advantage of short-term inefficiencies in the market when they arise, as they frequently do, even among large capitalization stocks.

“We believe that with volatility comes opportunity. Typically, the cause of volatility is short-term news—or, as we prefer to think of it, noise.”

Howard Gleicher
(Aristotle – Value)

Given the proliferation of available corporate financial information, trade data, macroeconomic statistics and other information that investors may use to make investment (or trading) decisions, volatility will likely persist. Against this backdrop, we remain committed to identifying what we believe to be high-quality businesses that possess sustainable competitive advantages and that have the ability to outperform their peers in varying environments.

Nutt (Delaware – Value): We’ve often seen that periods of low volatility are followed by higher volatility. Until recently, volatility had been fairly low. When the correction hit last August, it had been about four years since the U.S. stock market experienced a drop of 10 percent or more. Furthermore, the S&P 500® Index had tripled, on a total return basis, since the market bottomed in March 2009. Now, there are a number of risks investors appear to be focused on, including high debt levels, slower economic growth, inflated asset prices, softer corporate revenue and earnings growth, central bank policy changes, and rising geopolitical instability. It wouldn’t surprise us if volatility trended higher in 2016. We don’t know, however, if higher volatility is the “new normal.”

“We’ve often seen that periods of low volatility are followed by higher volatility. Until recently, volatility had been fairly low... It wouldn’t surprise us if volatility trended higher in 2016.”

Ty Nutt
(Delaware – Value)
 
Pzena (Pzena – Value): Volatility tends to spike during periods of uncertainty, which we certainly saw during 2015. Early in the year markets were digesting the potential impact of plunging oil prices, while the August correction reflected investors' anxieties around slowing emerging market economies, particularly China, and how that might impact developed economies. Our view is that bouts of volatility will continue to be a fixture of equity markets, and should be used as opportunities to buy good businesses whose values are temporarily depressed. We are sensitive to extreme volatility, which can be a signal for potential distress, but welcome the chance to pick up bargains when others hesitate.


16
www.all-starfunds.com

Liberty All-Star® Equity Fund
Manager Roundtable

(Unaudited)

Craig Blum and Tom Kamp, what are the growth managers’ thoughts about volatility?

Blum (TCW – Growth): We are in the midst of conducting, arguably, the greatest monetary experiment in history. There have been over 700 global rate cuts since June 2006, over $57 trillion in new global debt has been added since the financial crisis, and we believe the historical “risk-off” asset, U.S. Treasuries, is in a bubble, guaranteeing a negative return in real terms. December’s 25-basis-point tightening marked the end of the Fed’s operating a zero rate policy for the longest period on record—exceeding the WWII August 1937 – September 1942 zero rate period. While the Fed remains “accommodative,” we are in unchartered waters and we expect an extended period of volatility. As an active manager with a longer-term view, we welcome volatility as we believe it provides opportunity.

Kamp (Cornerstone – Growth): Cornerstone believes that the elevated levels of volatility in the marketplace seen in 2015 represent a transition back to more normalized levels of volatility relative to history. Due to the unprecedented monetary policy experiment of quantitative easing, or QE, including the multi-trillion dollars injected into the financial markets since 2009, valuations in the stock market climbed to abnormally high levels. With the support of QE now largely in the rearview mirror, macro- and geopolitical shocks in the marketplace will have a greater effect on the U.S. market as well as global financial markets. Furthermore, with valuations high and interest rates set to move higher, investors are increasingly jittery. The comments of Hillary Clinton regarding drug prices or Disney CEO Bob Iger about cable TV viewers’ cord-cutting caused significant dislocations in the pharmaceutical/biotech and media industries, respectively. While such volatility in a given industry can be surprising, we actually like to see it since our research process should surface investable opportunities when the crowd has it wrong.

A question for the value managers: Growth has outperformed value in recent years. Now, there is some sentiment that value is poised to rotate into the lead. What are the catalysts that could bring about this change in leadership?

Nutt (Delaware – Value): Growth has tended to outperform value in the latter stages of economic expansions, which is where we are now, six-plus years since the end of the last recession. With slower rates of economic growth affecting much of the world, this trend could continue. Inflated expectations, where unattainable earnings projections get priced into a narrow subset of growth stocks, could bring about a change in leadership favoring value. So could a meaningful change in market valuation levels or a reversal in any number of established trends, such as U.S. dollar strength, low interest rates or low inflation expectations.

Pzena (Pzena – Value): Growth has clearly trounced value over the last five years, with 2015 producing some of the widest performance variances. The low-growth, low-yield environment has created an overwhelming demand for companies that have been able to grow their top lines, pushing their valuations to extreme levels and, conversely, leaving others to languish. We believe this is unsustainable, and further believe that we are positioned for value to enter a period of outperformance. It is never possible to predict the timing of this shift; however, indicators to watch for would be a sustained pickup in nominal GDP growth, accelerating company revenues and rising interest rates.


Annual Report | December 31, 2015
17

Liberty All-Star® Equity Fund
Manager Roundtable

(Unaudited)

Gleicher (Aristotle – Value): At Aristotle Capital, we look at companies not as growth or value stocks, but as operating entities. We have not attempted to position our portion of the Fund to take advantage of an ultimate reversion to value’s favor, as timing such a rotation is all but impossible. Rather, we have made investments, based on in-depth fundamental research, in a diversified portfolio of companies that we believe have the potential to outperform their peers and the market over the coming years.

Notwithstanding these comments, catalysts that could precipitate a shift back to value may include a recovery in commodity prices, as the energy and materials sectors are traditionally considered value sectors, and increased regulation and growing competition in health care, often viewed as a growth sector. Gradually rising interest rates could also benefit financial services companies that are properly positioned for the long-anticipated lift-off, to the benefit of the value indices, which are more heavily weighted in banks than their growth counterparts.

Let’s ask the growth managers, if 2015 could be summed up in one word it may well be “growth” ... or the lack thereof. From China to Europe to the U.S., slow/no growth was the worry that hung over equity markets all year. Where are you focusing as you search for growth opportunities over the next 12 – 18 months?

Kamp (Cornerstone – Growth): The collapse in oil prices that began in late 2014 has led to severe capital spending cutbacks throughout the energy industry. These cutbacks had a ripple effect in other industries both inside and outside the U.S. Certainly, the strong dollar, tough foreign exchange comparisons, slow economic growth around the world and the uncertainty caused by our own Federal Reserve’s monetary policies were additional headwinds for equity market performance.

Cornerstone continues to find investable opportunities in a variety of industries where we believe the consensus has got it wrong. Our research indicates that despite a populist backlash about drug prices, few, if any, changes are likely to become reality or progress through the legislative process in the next few years. Furthermore, those companies that are focusing on innovative, life-altering therapies are less likely to face increased price pressure. Thus, it was our view that the sell-off in our biotech stocks was overdone and we took the opportunity to increase our exposure to the most attractive names in the industry.

We also believe that oil prices are overshooting to the downside and will probably experience a rebound before the end of 2016. Our confidence is driven by the size and magnitude of exploration and production cuts and the narrowness of the current excess supply in the industry.

Blum (TCW – Growth): Global purchasing manager indices are weakening, China remains the elephant in the room, the job growth recovery in the U.S. is one of the weakest on record, yet there are still pockets of strength in the economy. Over a year ago, we began adding to our health care and information technology holdings and aggressively trimming our energy and industrials exposure. Our investment process is unique in that we are somewhat indifferent to which sector offers opportunity; rather, we focus on only owning companies with superior business models with large and growing end markets. It is always difficult to predict the next 12-18 months but over the next 3-5 years we continue to believe compelling organic growth is most likely to be found in the health care and IT sectors.


18
www.all-starfunds.com

Liberty All-Star® Equity Fund
Manager Roundtable

(Unaudited)

What is a stock in the portion of the Liberty All-Star Equity Fund that you manage that did especially well for you in 2015, and what is a stock whose prospects you like for 2016? Let’s ask Cornerstone, Pzena and TCW to respond first, as they were managers for the Fund throughout 2015.

Kamp (Cornerstone – Growth): Amazon.com, Inc. (AMZN) was once again a large positive contributor to performance in the fourth quarter capping off a year where the stock price rose nearly 118 percent. While earnings estimates for major brick-and-mortar retail competitors were collapsing, Amazon’s earnings estimates more than doubled throughout the year and continued to rise in the fourth quarter as Amazon’s competitive moats expanded further. Amazon invested early and heavily into large markets, accepted de minimis margins for years and is now in a position to begin to reap higher margins as competitors fall by the wayside.

We expect Amazon to continue to perform well in 2016. We estimate that subscriber growth for Amazon’s Prime service will continue to be very robust despite rising penetration levels in the U.S. and the price increase to $99/year. In the coming 12-18 months, we also expect to see many leading fashion/sportswear brands open “shop-in-shops” on Amazon.com. This new selling format will further cement Amazon’s dominance in retail as it will allow brands to improve product roll-outs and inventory management while enabling better margin control and reducing the risk of counterfeit goods. Finally Amazon Web Services, Amazon’s Infrastructure as a Service (IaaS) business, continues to dominate its industry and experience hyper-growth of over 70 percent annually.

In the media industry, investors have been laser-focused on reductions in cable affiliate revenue due to cord-cutting and cord-shaving of the cable network bundle. While we acknowledge these subscriber losses, the lost revenue and profitability of Disney (DIS), in particular, will be more than recovered by the superlative performance of the studio division due to the power of the coming movie line-up and the increasing reception for Disney’s movies outside the U.S. Looking ahead, we expect this strong studio performance to create an extremely favorable knock-on effect for the parks and consumer products.

Pzena (Pzena – Value): Health insurer Cigna Corp. (CI) was a particularly strong contributor to the portfolio in 2015, returning 42 percent for the year. We originally bought Cigna on the premise that the Affordable Care Act would benefit the large insurers. Investors drove up Cigna's stock price earlier in the year as membership growth accelerated and medical loss ratios fell, lifting its bottom line. The company then became a takeover target of Anthem, Inc., operator of the largest group of plans in the Blue Cross Blue Shield Association, pushing its stock price up further. Looking forward, we believe the most compelling risk/reward opportunities in our portfolio are among the large financial institutions. A good example is Goldman Sachs (GS), which is trading at book value and generating a 9 percent return on equity in an environment where rising interest rates, increases in securities trading and cost reductions provide multiple paths to earnings improvement.

Blum (TCW – Growth): Starbucks Corporation (SBUX), which we first purchased in August 2012, was our biggest contributor in 2015. Years ago, the company wisely invested for future growth through its acquisitions of Teavana and La Boulange, the “My Starbucks Rewards” program and mobile pay, and these investments were rewarded in 2015. We remain positive on shares of SBUX. A stock that we like for 2016 is CVS Health (CVS). The company provides integrated pharmacy health care services, including the operation of some 8,000 retail drugstore and health care clinics throughout the U.S. Its role in the health care value chain continues to broaden beyond traditional pharmacy benefits management and traditional retail pharmacy through greater specialty pharmacy capabilities, long-term care pharmacy solutions, in-store clinics and additional points of distribution, including a deal to take over Target’s approximately 1,600 pharmacies. Customers today can walk in, see a medical practitioner and get prescriptions filled within the same facility. We believe it is a business that should hold up in a slow-growth economy.
 

Annual Report | December 31, 2015
19

Liberty All-Star® Equity Fund
Manager Roundtable

(Unaudited)

Howard and Ty, Aristotle Capital and Delaware Investments managed assets for the Fund for just a part of 2015, so let us ask you to identify a long-term holding that exemplifies your approach to value style equity investing. And, what is a stock in the portion of the Liberty All-Star Equity Fund that you manage whose prospects you like for 2016?

Gleicher (Aristotle – Value): We have held Texas Instruments (TI) in client portfolios for more than a decade. Launched in 1930 to provide geophysical services to oil companies, TI successfully transitioned to become a manufacturer of laboratory and electronic equipment during one of many oil busts. Over the years, TI has been a leader in microprocessors, memory chips and cell phone components. As each of these businesses became highly competitive, the company continually adapted its business model to achieve higher returns on invested capital. Today, TI is a profitable leader in analog semiconductors, imbedded processors and, still, scientific calculators. More recently, we reinvested in hospital equipment and supply provider Baxter International (BAX). Not only do its dialysis equipment and infusion pumps command leading market shares and enjoy high barriers to entry, but Baxter’s recent spinoff of its biosciences division should enable management to focus on and optimize these steadily growing businesses in 2016 and beyond.

Nutt (Delaware – Value): Express Scripts (ESRX), the largest pharmacy benefits manager (PBM) in the U.S., is a holding that exemplifies our approach. PBMs play an important role in the health care system, delivering cost savings while simultaneously improving health outcomes. Express Scripts had a history of strong growth. Following its acquisition of rival Medco, however, it experienced a period of weak client retention. Accordingly, investor sentiment deteriorated. Express Scripts became attractively valued, trading at or below longer-term average price multiples, and had sound financial attributes, in our view. We saw a number of important trends that could help drive Express Scripts’ business, including: rising demand for prescription drugs based on an aging U.S. population, growing generic usage (more profitable for PBMs) and the pervasive focus on cost containment in health care.

We would be reluctant to identify a holding we like for 2016 because of our long timeframe perspective. As patient, long-term investors, we always consider a horizon of at least three to five years because we believe shorter-term market movements are more unpredictable, driven by human emotion and crowd psychology. Longer term, fundamentals matter most, in our view. This is why the portfolio has equal weighted positions. Our conviction is high for the longer term, but less so over shorter periods.

Many thanks to all for sharing excellent insights into your investment philosophy and for perspective that may be useful to individual investors.


20
www.all-starfunds.com

Liberty All-Star® Equity Fund
Schedule of Investments

December 31, 2015

   
SHARES
   
MARKET VALUE
 
COMMON STOCKS (98.23%)
       
CONSUMER DISCRETIONARY (13.68%)
       
Auto Components (0.58%)
       
Johnson Controls, Inc.
   
166,200
   
$
6,563,238
 
                 
Automobiles (0.48%)
               
Ford Motor Co.
   
385,900
     
5,437,331
 
                 
Hotels, Restaurants & Leisure (1.19%)
               
Chipotle Mexican Grill, Inc.(a)
   
9,876
     
4,738,998
 
Starbucks Corp.
   
146,900
     
8,818,407
 
             
13,557,405
 
Household Durables (1.17%)
               
Lennar Corp., Class A(b)
   
136,000
     
6,651,760
 
PulteGroup, Inc.
   
373,985
     
6,664,413
 
             
13,316,173
 
Internet & Catalog Retail (2.54%)
               
Amazon.com, Inc.(a)
   
30,119
     
20,357,131
 
The Priceline Group, Inc.(a)
   
6,739
     
8,591,888
 
             
28,949,019
 
Media (2.87%)
               
Grupo Televisa SAB(c)
   
83,604
     
2,274,865
 
The Interpublic Group of Cos., Inc.
   
128,075
     
2,981,586
 
News Corp., Class A
   
305,600
     
4,082,816
 
News Corp., Class B
   
112,445
     
1,569,732
 
Omnicom Group, Inc.
   
93,825
     
7,098,800
 
Time Warner, Inc.
   
91,400
     
5,910,838
 
The Walt Disney Co.
   
82,764
     
8,696,841
 
             
32,615,478
 
Specialty Retail (3.85%)
               
The Home Depot, Inc.
   
139,388
     
18,434,063
 
Lowe's Cos., Inc.
   
98,000
     
7,451,920
 
Ross Stores, Inc.
   
156,007
     
8,394,737
 
Staples, Inc.
   
597,507
     
5,658,391
 
Tiffany & Co.
   
50,200
     
3,829,758
 
             
43,768,869
 
Textiles, Apparel & Luxury Goods (1.00%)
               
NIKE, Inc., Class B
   
113,593
     
7,099,562
 
Under Armour, Inc., Class A(a)(b)
   
52,600
     
4,240,086
 
             
11,339,648
 
CONSUMER STAPLES (8.89%)
               
Beverages (1.87%)
               
The Coca-Cola Co.
   
248,358
     
10,669,460
 
Diageo PLC(c)
   
40,800
     
4,450,056
 

See Notes to Schedule of Investments and Financial Statements. 
Annual Report | December 31, 2015
21

Liberty All-Star® Equity Fund
Schedule of Investments

December 31, 2015
 
   
SHARES
   
MARKET VALUE
 
COMMON STOCKS (continued)
       
Beverages (continued)
       
Monster Beverage Corp.(a)
   
40,900
   
$
6,092,464
 
             
21,211,980
 
Food & Staples Retailing (2.84%)
               
Costco Wholesale Corp.
   
39,275
     
6,342,913
 
CVS Health Corp.
   
128,700
     
12,582,999
 
Walgreens Boots Alliance, Inc.
   
83,100
     
7,076,380
 
Wal-Mart Stores, Inc.
   
102,925
     
6,309,302
 
             
32,311,594
 
Food Products (3.43%)
               
Archer-Daniels-Midland Co.
   
311,500
     
11,425,820
 
The Hershey Co.
   
36,500
     
3,258,355
 
The Kraft Heinz Co.
   
93,900
     
6,832,164
 
Mead Johnson Nutrition Co.
   
57,600
     
4,547,520
 
Mondelez International, Inc., Class A
   
287,600
     
12,895,984
 
             
38,959,843
 
Personal Products (0.75%)
               
Coty, Inc., Class A(a)(b)
   
119,000
     
3,049,970
 
Unilever NV
   
126,100
     
5,462,652
 
             
8,512,622
 
ENERGY (6.81%)                
Energy Equipment & Services (0.86%)
               
Halliburton Co.
   
287,500
     
9,786,500
 
Oil, Gas & Consumable Fuels (5.95%)
               
Anadarko Petroleum Corp.
   
112,631
     
5,471,614
 
BP PLC(c)
   
211,926
     
6,624,807
 
Chevron Corp.
   
77,600
     
6,980,896
 
ConocoPhillips
   
137,300
     
6,410,537
 
EOG Resources, Inc.
   
20,697
     
1,465,141
 
Exxon Mobil Corp.
   
123,925
     
9,659,954
 
Marathon Oil Corp.
   
229,700
     
2,891,923
 
Murphy Oil Corp.
   
94,175
     
2,114,229
 
Occidental Petroleum Corp.
   
94,800
     
6,409,428
 
Phillips 66
   
80,300
     
6,568,540
 
Pioneer Natural Resources Co.
   
24,700
     
3,096,886
 
Royal Dutch Shell PLC, Class A(c)
   
215,645
     
9,874,384
 
             
67,568,339
 
FINANCIALS (20.26%)
               
Capital Markets (4.88%)
               
Affiliated Managers Group, Inc.(a)
   
34,554
     
5,520,347
 
Ameriprise Financial, Inc.
   
34,323
     
3,652,654
 
Bank of New York Mellon Corp.
   
166,600
     
6,867,252
 

See Notes to Schedule of Investments and Financial Statements. 
22
www.all-starfunds.com

Liberty All-Star® Equity Fund
Schedule of Investments

December 31, 2015

   
SHARES
   
MARKET VALUE
 
COMMON STOCKS (continued)
       
Capital Markets (continued)
       
The Charles Schwab Corp.
   
320,634
   
$
10,558,478
 
Franklin Resources, Inc.
   
153,875
     
5,665,677
 
The Goldman Sachs Group, Inc.
   
31,875
     
5,744,831
 
Morgan Stanley
   
177,175
     
5,635,937
 
State Street Corp.
   
82,925
     
5,502,903
 
UBS Group AG
   
325,600
     
6,306,872
 
             
55,454,951
 
Commercial Banks (3.90%)
               
Banco Bilbao Vizcaya Argentaria SA(b)(c)
   
559,300
     
4,099,669
 
BB&T Corp.
   
190,800
     
7,214,148
 
BOK Financial Corp.(b)
   
29,100
     
1,739,889
 
Cullen/Frost Bankers, Inc.(b)
   
28,600
     
1,716,000
 
First Republic Bank
   
151,344
     
9,997,784
 
M&T Bank Corp.
   
35,400
     
4,289,772
 
Mitsubishi UFJ Financial Group, Inc.(c)
   
682,100
     
4,242,662
 
The PNC Financial Services Group, Inc.
   
53,541
     
5,102,993
 
Regions Financial Corp.
   
614,950
     
5,903,520
 
             
44,306,437
 
Consumer Finance (1.31%)
               
Visa, Inc., Class A
   
192,712
     
14,944,816
 
                 
Diversified Financial Services (3.66%)
               
Bank of America Corp.
   
885,800
     
14,908,014
 
Citigroup, Inc.
   
160,481
     
8,304,892
 
JPMorgan Chase & Co.
   
195,075
     
12,880,802
 
Voya Financial, Inc.
   
150,750
     
5,564,182
 
             
41,657,890
 
Insurance (4.84%)
               
ACE Ltd.
   
120,900
     
14,127,165
 
The Allstate Corp.
   
113,900
     
7,072,051
 
American International Group, Inc.
   
132,925
     
8,237,362
 
Axis Capital Holdings Ltd.
   
118,750
     
6,676,125
 
Marsh & McLennan Cos., Inc.
   
128,500
     
7,125,325
 
Metlife, Inc.
   
140,725
     
6,784,352
 
Willis Group Holdings PLC
   
102,450
     
4,975,997
 
             
54,998,377
 
Real Estate Investment Trusts (1.67%)
               
American Tower Corp.
   
120,450
     
11,677,628
 
Equinix, Inc.
   
23,991
     
7,254,878
 
             
18,932,506
 

See Notes to Schedule of Investments and Financial Statements. 
Annual Report | December 31, 2015
23

Liberty All-Star® Equity Fund
Schedule of Investments

December 31, 2015

   
SHARES
   
MARKET VALUE
 
COMMON STOCKS (continued)
       
HEALTH CARE (16.73%)
       
Biotechnology (5.41%)
       
AbbVie, Inc.
   
107,900
   
$
6,391,996
 
Alexion Pharmaceuticals, Inc.(a)
   
77,520
     
14,786,940
 
Baxalta, Inc.
   
277,300
     
10,823,019
 
BioMarin Pharmaceutical, Inc.(a)
   
47,673
     
4,994,223
 
Celgene Corp.(a)
   
76,330
     
9,141,281
 
Gilead Sciences, Inc.
   
62,155
     
6,289,464
 
Puma Biotechnology, Inc.(a)(b)
   
45,212
     
3,544,621
 
Vertex Pharmaceuticals, Inc.(a)
   
43,984
     
5,534,507
 
             
61,506,051
 
Health Care Equipment & Supplies (1.46%)
               
Baxter International, Inc.
   
262,375
     
10,009,606
 
Medtronic PLC
   
86,200
     
6,630,504
 
             
16,640,110
 
Health Care Providers & Services (3.48%)
               
Cardinal Health, Inc.
   
83,200
     
7,427,264
 
Cigna Corp.
   
55,092
     
8,061,612
 
Envision Healthcare Holdings, Inc.(a)
   
263,680
     
6,847,770
 
Express Scripts Holding Co.(a)
   
85,200
     
7,447,332
 
Humana, Inc.
   
12,659
     
2,259,758
 
Quest Diagnostics, Inc.
   
105,800
     
7,526,612
 
             
39,570,348
 
Health Care Technology (1.79%)
               
Athenahealth, Inc.(a)
   
48,200
     
7,758,754
 
Cerner Corp.(a)
   
145,600
     
8,760,752
 
HMS Holdings Corp.(a)
   
309,708
     
3,821,797
 
             
20,341,303
 
Life Sciences Tools & Services (0.66%)
               
Illumina, Inc.(a)
   
39,100
     
7,505,050
 
                 
Pharmaceuticals (3.93%)
               
Abbott Laboratories
   
107,925
     
4,846,912
 
Allergan, PLC(a)
   
22,000
     
6,875,000
 
Johnson & Johnson
   
71,600
     
7,354,752
 
Merck & Co., Inc.
   
134,100
     
7,083,162
 
Novartis AG(b)(c)
   
58,200
     
5,007,528
 
Perrigo Co. PLC
   
46,021
     
6,659,238
 
Pfizer, Inc.
   
211,400
     
6,823,992
 
             
44,650,584
 
INDUSTRIALS (7.21%)
               
Aerospace & Defense (2.22%)
               
General Dynamics Corp.
   
43,300
     
5,947,688
 

See Notes to Schedule of Investments and Financial Statements. 
24
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Liberty All-Star® Equity Fund
Schedule of Investments

December 31, 2015

   
SHARES
   
MARKET VALUE
 
COMMON STOCKS (continued)
       
Aerospace & Defense (continued)
       
Northrop Grumman Corp.
   
39,800
   
$
7,514,638
 
Raytheon Co.
   
59,400
     
7,397,082
 
Textron, Inc.
   
104,385
     
4,385,214
 
             
25,244,622
 
Airlines (0.13%)
               
Delta Air Lines, Inc.
   
28,405
     
1,439,849
 
                 
Building Products (0.09%)
               
Masco Corp.
   
35,498
     
1,004,593
 
                 
Commercial Services & Supplies (0.63%)
               
Waste Management, Inc.
   
133,900
     
7,146,243
 
                 
Industrial Conglomerates (0.50%)
               
General Electric Co.
   
183,200
     
5,706,680
 
                 
Machinery (2.64%)
               
Deere & Co.(b)
   
43,000
     
3,279,610
 
Dover Corp.
   
106,975
     
6,558,637
 
Illinois Tool Works, Inc.
   
51,300
     
4,754,484
 
Oshkosh Corp.
   
104,500
     
4,079,680
 
Parker-Hannifin Corp.
   
56,925
     
5,520,587
 
Stanley Black & Decker, Inc.
   
54,675
     
5,835,463
 
             
30,028,461
 
Road & Rail (0.49%)
               
J.B. Hunt Transport Services, Inc.
   
75,291
     
5,523,348
 
                 
Trading Companies & Distributors (0.51%)
               
HD Supply Holdings, Inc.(a)
   
194,665
     
5,845,790
 
                 
INFORMATION TECHNOLOGY (20.15%)
               
Communications Equipment (1.03%)
               
Cisco Systems, Inc.
   
259,900
     
7,057,585
 
Palo Alto Networks, Inc.(a)
   
26,616
     
4,688,142
 
             
11,745,727
 
Computers & Peripherals (0.33%)
               
Hewlett-Packard Co.
   
315,950
     
3,740,848
 
                 
Electronic Equipment & Instruments (0.34%)
               
Corning, Inc.
   
209,425
     
3,828,289
 

See Notes to Schedule of Investments and Financial Statements. 
Annual Report | December 31, 2015
25

Liberty All-Star® Equity Fund
Schedule of Investments

December 31, 2015
 
   
SHARES
   
MARKET VALUE
 
COMMON STOCKS (continued)
       
Internet Software & Services (5.79%)
       
Alphabet, Inc., Class A(a)
   
18,803
   
$
14,628,922
 
Alphabet, Inc., Class C(a)
   
20,100
     
15,253,488
 
CoStar Group, Inc.(a)
   
12,913
     
2,668,988
 
Criteo SA(a)(c)
   
40,040
     
1,585,584
 
Facebook, Inc., Class A(a)
   
188,209
     
19,697,954
 
LinkedIn Corp., Class A(a)
   
36,250
     
8,159,150
 
Pandora Media, Inc.(a)(b)
   
288,726
     
3,871,816
 
              65,865,902  
IT Services (0.99%)
               
PayPal Holdings, Inc.(a)
   
104,200
     
3,772,040
 
Xerox Corp.
   
706,400
     
7,509,032
 
              11,281,072  
Semiconductors & Semiconductor Equipment (2.59%)
               
ARM Holdings PLC(c)
   
121,300
     
5,487,612
 
Intel Corp.
   
421,450
     
14,518,952
 
NXP Semiconductors NV(a)
   
49,488
     
4,169,364
 
Texas Instruments, Inc.
   
95,000
     
5,206,950
 
              29,382,878  
Software (8.14%)
               
Adobe Systems, Inc.(a)
   
71,900
     
6,754,286
 
CA, Inc.
   
255,400
     
7,294,224
 
Imperva, Inc.(a)
   
42,617
     
2,698,082
 
Microsoft Corp.
   
384,860
     
21,352,033
 
Mobileye NV(a)(b)
   
151,450
     
6,403,306
 
Oracle Corp.
   
311,625
     
11,383,661
 
Salesforce.com, Inc.(a)
   
255,069
     
19,997,410
 
ServiceNow, Inc.(a)
   
92,100
     
7,972,176
 
Splunk, Inc.(a)
   
102,400
     
6,022,144
 
Tableau Software, Inc., Class A(a)
   
27,963
     
2,634,674
 
              92,511,996  
Technology Hardware & Equipment (0.50%)
               
Apple, Inc.
   
53,474
     
5,628,673
 
                 
Technology Hardware, Storage & Equipment (0.44%)
               
Hewlett Packard Enterprise Co.(a)
   
315,950
     
4,802,440
 
Seagate Technology
   
7,000
     
256,620
 
              5,059,060  
MATERIALS (1.72%)
               
Chemicals (1.23%)
               
The Dow Chemical Co.
   
99,100
     
5,101,668
 
Ecolab, Inc.
   
14,136
     
1,616,876
 
 
See Notes to Schedule of Investments and Financial Statements. 

26
www.all-starfunds.com

Liberty All-Star® Equity Fund
Schedule of Investments

December 31, 2015
 
   
SHARES
   
MARKET VALUE
 
COMMON STOCKS (continued)
       
Chemicals (continued)
       
EI du Pont de Nemours & Co.
   
109,500
   
$
7,292,700
 
             
14,011,244
 
Construction Materials (0.49%)
               
Martin Marietta Materials, Inc.
   
40,600
     
5,545,148
 
                 
TELECOMMUNICATION SERVICES (1.27%)
               
Diversified Telecommunication (1.27%)
               
AT&T, Inc.
   
213,500
     
7,346,535
 
Verizon Communications, Inc.
   
154,000
     
7,117,880
 
             
14,464,415
 
UTILITIES (1.51%)
               
Electric Utilities (0.82%)
               
Edison International
   
116,500
     
6,897,965
 
ITC Holdings Corp.
   
61,000
     
2,394,250
 
             
9,292,215
 
Gas Utilities (0.37%)
               
National Fuel Gas Co.(b)
   
98,600
     
4,215,150
 
                 
Independent Power and Renewable Energy Producers (0.32%)
               
AES Corp.
   
378,400
     
3,621,288
 
                 
TOTAL COMMON STOCKS
(COST OF $982,003,999)
           
1,116,539,953
 
 
   
PAR VALUE/
SHARES
   
MARKET VALUE
 
SHORT TERM INVESTMENTS (6.20%)
       
REPURCHASE AGREEMENT (3.27%)
       
Repurchase agreement with State Street Bank & Trust Co., dated 12/31/15, due 01/04/16 at 0.01%, collateralized by Federal Home Loan Mortgage Corp., 3.00%, 03/15/43, market value of $37,877,372 and par value of $56,200,000.  (Repurchase proceeds of $37,125,041).
(COST OF $37,125,000)
 
$
37,125,000
   
$
37,125,000
 
 
See Notes to Schedule of Investments and Financial Statements.

Annual Report | December 31, 2015
27

Liberty All-Star® Equity Fund
Schedule of Investments

December 31, 2015
 
   
PAR VALUE/
SHARES
   
MARKET VALUE
 
SHORT TERM INVESTMENTS (continued)
       
INVESTMENTS PURCHASED WITH COLLATERAL FROM
       
SECURITIES LOANED (2.93%)
       
State Street Navigator Securities Lending Prime Portfolio, 0.31%
(COST OF $33,286,486)
 
$
33,286,486
   
$
33,286,486
 
                 
TOTAL SHORT TERM INVESTMENTS
(COST OF $70,411,486)
           
70,411,486
 
 
               
TOTAL INVESTMENTS (104.43%)
(COST OF $1,052,415,485)(d)
           
1,186,951,439
 
                 
LIABILITIES IN EXCESS OF OTHER ASSETS (-4.43%)
           
(50,359,674
)
                 
NET ASSETS (100.00%)
         
$
1,136,591,765
 
                 
NET ASSET VALUE PER SHARE
(184,052,350 SHARES OUTSTANDING)
         
$
6.18
 
 
Notes to Schedule of Investments:
 
(a)
Non-income producing security.
(b)
Security, or a portion of the security position, is currently on loan. The total market value of securities on loan is $32,909,298.
(c)
American Depositary Receipt.
(d)
Cost of investments for federal income tax purposes is $1,056,153,234.

Gross unrealized appreciation and depreciation at December 31, 2015 based on cost of investments for federal income tax purposes is as follows:
 
Gross unrealized appreciation
 
$
179,150,473
 
Gross unrealized depreciation
   
(48,352,268
)
Net unrealized appreciation
 
$
130,798,205
 
 
 See Notes to Schedule of Investments and Financial Statements.
28
www.all-starfunds.com

Liberty All-Star® Equity Fund
Statement of Assets and Liabilities

December 31, 2015

ASSETS:
   
Investments at market value (Cost $1,052,415,485)
 
$
1,186,951,439
 
Cash
   
2,334
 
Receivable for investment securities sold
   
2,019,535
 
Dividends and interest receivable
   
1,646,616
 
Prepaid and other assets
   
59,417
 
TOTAL ASSETS
   
1,190,679,341
 
         
LIABILITIES:
       
Payable for investments purchased
   
2,576,666
 
Distributions payable to shareholders
   
17,112,583
 
Investment advisory fee payable
   
702,322
 
Payable for administration, pricing and bookkeeping fees
   
188,281
 
Payable for collateral upon return of securities loaned
   
33,286,486
 
Accrued expenses
   
221,238
 
TOTAL LIABILITIES
   
54,087,576
 
NET ASSETS
 
$
1,136,591,765
 
         
NET ASSETS REPRESENTED BY:
       
Paid-in capital
 
$
1,011,466,781
 
Distributions in excess of net investment income
   
(1,541,450
)
Accumulated net realized loss on investments
   
(7,869,520
)
Net unrealized appreciation on investments
   
134,535,954
 
NET ASSETS
 
$
1,136,591,765
 
       
Shares of common stock outstanding (unlimited number of shares of beneficial interest without par value authorized)
   
184,052,350
 
NET ASSET VALUE PER SHARE
 
$
6.18
 
 
See Notes to Financial Statements.
Annual Report  |  December 31, 2015
29

Liberty All-Star® Equity Fund
Statement of Operations

For the Year Ended December 31, 2015

INVESTMENT INCOME:
   
Dividends (Net of foreign taxes withheld at source which amounted to $73,973 )
 
$
19,000,139
 
Securities lending income
   
326,481
 
Interest
   
3,040
 
TOTAL INVESTMENT INCOME
   
19,329,660
 
         
EXPENSES:
       
Investment advisory fee
   
8,552,300
 
Administration fee
   
2,138,075
 
Pricing and bookkeeping fees
   
199,712
 
Audit fee
   
47,187
 
Custodian fee
   
115,837
 
Insurance expense
   
60,290
 
Legal fees
   
378,916
 
NYSE fee
   
169,265
 
Shareholder communication expenses
   
133,709
 
Transfer agent fees
   
111,266
 
Trustees' fees and expenses
   
255,217
 
Miscellaneous expenses
   
119,122
 
TOTAL EXPENSES
   
12,280,896
 
NET INVESTMENT INCOME
   
7,048,764
 
         
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
       
Net realized gain on investment transactions
   
99,752,650
 
Net change in unrealized depreciation on investments
   
(130,429,134
)
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
   
(30,676,484
)
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS
 
$
(23,627,720
)

See Notes to Financial Statements.
30
www.all-starfunds.com

Liberty All-Star® Equity Fund
Statements of Changes in Net Assets

 
   
For the
Year Ended December 31, 2015
   
For the
Year Ended December 31, 2014
 
FROM OPERATIONS:
       
Net investment income
 
$
7,048,764
   
$
3,781,928
 
Net realized gain on investment transactions
   
99,752,650
     
47,267,828
 
Net change in unrealized appreciation/(depreciation) on investments
   
(130,429,134
)
   
44,084,187
 
Net Increase/(Decrease) in Net Assets From Operations
   
(23,627,720
)
   
95,133,943
 
                 
DISTRIBUTIONS TO SHAREHOLDERS:
               
From net investment income
   
     
(14,835,410
)
From net realized gains on investments
   
(92,237,880
)
   
(52,825,167
)
Tax return of capital
   
     
(1,286,981
)
Total Distributions
   
(92,237,880
)
   
(68,947,558
)
                 
CAPITAL SHARE TRANSACTIONS:
               
Dividend reinvestments
   
27,755,527
     
21,199,279
 
Net Increase/(Decrease) in Net Assets
   
(88,110,073
)
   
47,385,664
 
                 
NET ASSETS:
               
Beginning of period
   
1,224,701,838
     
1,177,316,174
 
End of period (Includes distributions in excess of net investment income of $(1,541,450) and $(11,053,482), respectively)
 
$
1,136,591,765
   
$
1,224,701,838
 
 
See Notes to Financial Statements.
Annual Report  |  December 31, 2015
31

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
Tax return of capital
Total Distributions
Change due to tender offer(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 after reimbursement
Ratio of expenses to average net assets before reimbursement
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 tender offer for shares at a price below net asset value, net of costs.
(c) Calculated assuming all distributions are reinvested at actual reinvestment prices. 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.
32
www.all-starfunds.com


Financial Highlights

For the Year Ended December 31,
 
2015
   
2014
   
2013
   
2012
   
2011
 
                 
$
6.84
   
$
6.71
   
$
5.35
   
$
4.99
   
$
5.69
 
                                     
 
0.04
     
0.02
     
0.03
     
0.04
     
0.02
 
 
(0.19
)
   
0.50
     
1.66
     
0.64
     
(0.38
)
 
(0.15
)
   
0.52
     
1.69
     
0.68
     
(0.36
)
                                     
                                     
 
     
(0.08
)
   
(0.31
)
   
(0.32
)
   
(0.26
)
 
(0.51
)
   
(0.30
)
   
(0.04
)
   
     
 
 
     
(0.01
)
   
     
     
(0.08
)
 
(0.51
)
   
(0.39
)
   
(0.35
)
   
(0.32
)
   
(0.34
)
 
     
     
0.02
     
     
 
$
6.18
   
$
6.84
   
$
6.71
   
$
5.35
   
$
4.99
 
$
5.35
   
$
5.98
   
$
5.97
   
$
4.77
   
$
4.22
 
                                     
                                     
 
(1.0
%)
   
8.9
%
   
33.8
%
   
14.7
%
   
(5.8
%)
 
(2.0
%)
   
7.0
%
   
33.5
%
   
20.9
%
   
(8.1
%)
                                     
                                     
$
1,137
   
$
1,225
   
$
1,177
   
$
991
   
$
912
 
 
N/
A
   
N/
A
   
N/
A
   
1.07
%
   
N/
A
 
1.04
%
   
1.03
%
   
1.05
%
   
1.08
%
   
1.05
%
 
0.60
%
   
0.32
%
   
0.44
%
   
0.72
%
   
0.33
%
 
76
%
   
36
%
   
41
%
   
45
%
   
48
%


Annual Report | December 31, 2015
33


Liberty All-Star® Equity Fund
Notes to Financial Statements

December 31, 2015

NOTE 1. ORGANIZATION
Liberty All-Star® Equity Fund (the “Fund”) is a Massachusetts business trust registered under the Investment Company Act of 1940 (the “Act”), as amended, as a diversified, closed-end management investment company.

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

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

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. 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 accounting principles generally accepted in the United States of America (“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 Prime Portfolio, 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. Repurchase agreements are valued at cost, which approximates fair value.

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 Advisor, ALPS Advisors Inc. (the "Advisor") 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, 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 December 31, 2015, the Fund held no securities that were fair valued.
 

34
www.all-starfunds.com

Liberty All-Star® Equity Fund
Notes to Financial Statements

December 31, 2015

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.

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

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

At December 31, 2015, the open repurchase agreement with the counterparty State Street Bank & Trust Co., and subject to a MRA on a net payment basis, was as follows:

               
Gross Amounts Not Offset
In The Statement Of Financial Position
 
Description
 
Gross Amounts of Recognized Assets
   
Gross Amounts Offset in the Statements of Assets and Liabilities
   
Net Amounts Presented in the Statements of Assets and Liabilities
   
Financial Instruments Collateral Received
   
Cash Collateral Received
   
Net Amount
 
Repurchase Agreement
 
$
37,125,000
   
$
   
$
37,125,000
   
$
(37,125,000
)
 
$
   
$
 
Total
 
$
37,125,000
   
$
   
$
37,125,000
   
$
(37.125,000
)
 
$
   
$
 


Annual Report | December 31, 2015
35

Liberty All-Star® Equity Fund
Notes to Financial Statements

December 31, 2015
 
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 a money market fund managed by SSB as disclosed in the Fund’s Schedule of Investments and is reflected in the Statement of Assets and Liabilities as a payable for collateral upon return of securities loaned. 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 Statements 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. As of December 31, 2015, the market value of securities on loan was $32,909,298 and the total cash collateral and non-cash collateral received was $33,286,486 and $595,842, respectively. Income earned by the Fund from securities lending activity is disclosed in the Statement of Operations.

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 indicates the total amount of securities loaned by type, reconciled to gross liability payable upon return of the securities loaned by the Fund as of December 31, 2015:
 
   
Remaining contractual maturity of the lending agreement
 
                     
Securities Lending Transactions
 
Overnight & Continuous
   
Up to 30 days
   
30-90 days
   
Greater
than 90 days
   
Total
 
Common Stocks
 
$
32,909,298
   
$
   
$
   
$
   
$
32,909,298
 
Total Loans
                                   
32,909,298
 
Gross amount of recognized liabilities for securities lending (collateral received)
   
$
33,286,486
 
Amounts due to counterparty
   
$
377,188
 


36
www.all-starfunds.com

Liberty All-Star® Equity Fund
Notes to Financial Statements

December 31, 2015

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 value 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. Repurchase agreements are valued at cost, which approximates fair value, and are categorized as Level 2 in the hierarchy.

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

These inputs are categorized in the following hierarchy under applicable financial accounting standards:
 
Level 1
Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that a Fund has the ability to access at the measurement date;
     
Level 2
Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and
     
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.


Annual Report | December 31, 2015
37

Liberty All-Star® Equity Fund
Notes to Financial Statements

December 31, 2015
 
The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2015:
 
   
Valuation Inputs
     
Investments in Securities at Value*
 
Level 1
   
Level 2
   
Level 3
   
Total
 
Common Stocks
 
$
1,116,539,953
   
$
   
$
   
$
1,116,539,953
 
Short Term Investment
   
     
37,125,000
     
     
37,125,000
 
Investments Purchased with Collateral from Securities Loaned
   
33,286,486
     
     
     
33,286,486
 
Total
 
$
1,149,826,439
   
$
37,125,000
   
$
   
$
1,186,951,439
 
 
*
See Schedule of Investments for industry classifications.
 
The Fund recognizes transfers between the levels as of the end of the period. For the year ended December 31, 2015, the Fund did not have any transfers between Level 1 and Level 2 securities. The Fund did not have any securities which used significant unobservable inputs (Level 3) in determining fair value during the period.
 
Distributions to Shareholders
The Fund currently has a policy of paying distributions on its shares of beneficial interest totaling approximately 8% of its net asset value per year. The distributions are payable in four quarterly distributions of 2% of the Fund’s net asset value at the close of the NYSE on the Friday prior to each quarterly declaration date. Distributions to shareholders are recorded on ex-date.
 
NOTE 3. 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.
 
Classification of Distributions to Shareholders
Net investment income 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. The amounts and characteristics of tax basis distributions and composition of distributable earnings/(accumulated losses) are finalized at fiscal year-end. Also, 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.
 

38
www.all-starfunds.com

Liberty All-Star® Equity Fund
Notes to Financial Statements

December 31, 2015
 
For the year ended December 31, 2015, permanent book and tax basis differences resulting primarily from excess distributions were identified and reclassified among the components of the Fund’s net assets as follows:
 
Accumulated Net Investment Income
Accumulated Net Realized Loss
Paid-In Capital
$2,463,268
$(2,463,268)
$–
 
The tax character distributions paid during the years ended December 31, 2015 and December 31, 2014 were as follows:
 
Distributions Paid From:
 
12/31/2015
   
12/31/2014
 
Ordinary Income
 
$
   
$
27,469,252
 
Long-term capital gains
   
92,237,880
     
40,191,325
 
Return of Capital
   
     
1,286,981
 
Total
 
$
92,237,880
   
$
68,947,558
 
 
As of December 31, 2015, the components of distributable earnings on a tax basis were as follows:
 
Accumulated Capital Loss
Net Unrealized Appreciation
Other Cumulative Effect of Timing Differences
Total
 $(4,131,771)
$130,798,205
$(1,541,450)
$125,124,984
 
As of December 31, 2015, the costs of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments were 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
 $1,056,153,234
$179,150,473
$(48,352,268)
$130,798,205
 
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.

The fund elects to defer to the fiscal year ending December 31, 2016, capital losses recognized during the period from November 1, 2015 to December 31, 2015 in the amount of $4,131,771.

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.
 

Annual Report | December 31, 2015
39


Liberty All-Star® Equity Fund
Notes to Financial Statements

December 31, 2015
 
As of and during the year ended December 31, 2015, 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.
 
NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES
Investment Advisory Fee
ALPS Advisors, Inc. (“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 year ending December 31, 2015 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. Officers of the Trust are employees of ALPS. 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 year ended December 31, 2015 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.
 

40
www.all-starfunds.com

Liberty All-Star® Equity Fund
Notes to Financial Statements

December 31, 2015
 
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.

NOTE 5. PORTFOLIO INFORMATION
Purchases and Sales of Securities
For the year ended December 31, 2015, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $883,611,272 and $931,946,442, respectively.

NOTE 6. CAPITAL TRANSACTIONS
During the years ended December 31, 2015 and December 31, 2014, distributions in the amounts of $27,755,527 and $21,199,279, 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 5,021,023 and of 3,609,021 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 7. 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 8. TRUSTEES FEES
As of December 31, 2015, there were six Trustees, five of whom are not “interested persons” of the Fund within the meaning of that term under the 1940 Act (each, an “Independent Trustee”). The Independent Chairman of the Board receives a quarterly retainer of $8,250; the Independent Audit Chairman receives a quarterly retainer of $5,750; all other Independent Trustees receive a quarterly retainer of $4,500. Each Independent Trustee also receives a meeting fee of $4,500 for attendance in person at a regular scheduled meeting or a special meeting; $4,500 for attendance by telephone at a regular meeting; $1,000 for attendance by telephone for a special meeting; and reimbursement for all reasonable out-of-pocket expenses relating to attendance at meetings. Trustees’ fees are allocated between the Fund and the Liberty All-Star® Growth Fund, Inc. One-third of the Trustees’ fees are equally shared and the remaining two-thirds are allocated based on each Fund’s proportionate share of total net assets. Trustees’ fees and expenses accrued by the Fund for the year ending December 31, 2015 are reported on the Statement of Operations.


Annual Report | December 31, 2015
41


Liberty All-Star® Equity Fund
Notes to Financial Statements

December 31, 2015

NOTE 9. SHAREHOLDER MEETING RESULTS
On November 19, 2015, a Special Meeting of Shareholders of the Fund was held to approve a new Portfolio Management Agreement with Delaware Investments Fund Advisers, a series of Delaware Business Management Trust (“Delaware Investments”). On September 16, 2015, the record date for the meeting, the Fund had outstanding 182,754,403 shares of beneficial interest. The votes cast at the meeting were as follows:

Proposal - To approve a new Portfolio Management Agreement with Delaware Investments:

For
Against
Abstain
Broker Non-Votes
92,009,517
11,760,838
2,596,478
None


42
www.all-starfunds.com


 
Report of Independent Registered
Liberty All-Star® Equity Fund
Public Accounting Firm

 
To the Board of the Trustees and Shareholders of Liberty All-Star® Equity Fund:
 
We have audited the accompanying statement of assets and liabilities of Liberty All-Star® Equity Fund (the “Fund”), including the schedule of investments, as of December 31, 2015, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2015, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Liberty All-Star® Equity Fund as of December 31, 2015, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP
 
Denver, Colorado
February 18, 2016


Annual Report | December 31, 2015
43


 
Automatic Dividend Reinvestment and
Liberty All-Star® Equity Fund
Direct Purchase Plan

(Unaudited)

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 by Computershare Trust Company, N.A., as agent for participants in the Plan (the “Plan Agent”), in additional shares of the Fund. For further information, call Investor Assistance at 1-800-LIB-FUND (1-800-542-3863) weekdays between 9 a.m. and 5 p.m. Eastern Time.

Shareholders whose shares are held in the name of a brokerage firm, bank or other nominee can participate in the Plan only if their brokerage firm, bank or nominee is able to do so on their behalf. Shareholders participating in the Plan through a brokerage firm may not be able to transfer their shares to another brokerage firm and continue to participate in the Plan.

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. If, prior to the Plan Agent’s completion of such open market purchases, the market price of a share plus estimated brokerage commissions exceeds the net asset value, the remainder of the distribution will be paid in newly issued shares valued at net asset value (but not at a discount of more than 5% from market price). Distributions declared payable in shares (or cash at the option of shareholders) 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.

Plan participants have the option of making additional investments of $100 or more on a monthly basis up to a maximum of $120,000 in a calendar year. These direct purchases will be invested on or shortly after the 15th of each month and direct purchases should be sent so as to be received by the Plan Agent at least two business days prior to the next investment date. Barring suspension of trading, direct purchases will be invested within 35 days after such date. Alternatively, participants can authorize an automatic monthly deduction from a checking or savings account at a U.S. bank or other financial institution. A participant may withdraw a direct purchase by written notice received by the Plan Agent at least two business days before such payment is to be invested.

The Plan Agent maintains all shareholder accounts in the Plan and furnishes confirmations of all transactions in the account, including information needed by shareholders for tax records. Shares in the account of each Plan participant will be held by the Plan Agent in book-entry or noncertificated form in the name of the participant, and each shareholder’s proxy will include those shares purchased or received pursuant to the Plan.

There is no charge to participants for reinvesting distributions pursuant to the Plan. The Plan Agent’s fees are paid by the Fund, therefore indirectly by shareholders. There are no brokerage charges with respect to shares issued directly by the Fund as a result of dividends or distributions declared payable in shares. However, each participant bears a per share fee (which includes any brokerage commissions the Plan Agent is required to pay) incurred with respect to the Plan Agent’s open market purchases in connection with the reinvestment of distributions declared payable in cash.


44
www.all-starfunds.com


 
Automatic Dividend Reinvestment and
Liberty All-Star® Equity Fund
Direct Purchase Plan

(Unaudited)

With respect to direct purchases, the Plan Agent will charge $1.25 for purchase by check and $2.00 for automatic investment transactions, plus a per share fee (which includes any brokerage commissions the Plan Agent is required to pay). Sales of shares held in the Plan will also be subject to a service fee of $2.50 and a per share fee currently $0.10. All fees described in this summary are subject to change. Please contact the Plan Agent for the current fees.

Shareholders may terminate their participation in the Plan by notifying the Plan Agent by telephone, through the Internet or in writing. Such termination will be effective immediately if notice is received by The Plan Agent prior to any dividend record date and all subsequent dividends and distributions will be paid in cash instead of shares.

The Fund reserves the right to amend or terminate the Plan.

The full text of the Plan may be found on the Fund’s website at www.all-starfunds.com.


Annual Report | December 31, 2015
45


Liberty All-Star® Equity Fund
Tax Information

(Unaudited)
 
All 2015 distributions, whether received in cash or shares of the Fund, consist of the following:

(1) ordinary dividends
(2) long-term capital gains

The table below details the breakdown of each 2015 distribution for federal income tax purposes.

     
Total Ordinary Dividends
 
Record Date
Payable Date
Amount per Share
Qualified
Non-Qualified