<PAGE> 1
Liberty All-Star Growth & Income Fund Semiannual Report
- --------------------------------------------------------------------------------
JUNE 30, 1999
YOU MAY NOT HAVE THE
FINANCIAL STRENGTH OF BILLION DOLLAR
INSTITUTIONS. BUT THAT DOESN'T MEAN YOU
CAN'T HAVE THEIR INVESTMENT APPROACH.
<PAGE> 2
President's Message
Dear Shareholders:
I am pleased to present the first semiannual report for Liberty All-Star Growth
& Income Fund.
The four months since the Fund commenced investment operations on March 1, 1999
were marked by a series of events that created dramatic shifts in investor
sentiment. In the early months of 1999, the U.S. economy continued its upward
trend, though the market was still led by a few growth leaders. The technology
sector, especially Internet stocks, saw spectacular gains. In March and April,
oil prices rebounded sharply, improving the outlook for energy companies. An
improvement in the performance of value stocks and companies in cyclical sectors
followed.
Liberty All-Star Growth & Income Fund's Class A share total return of 11.70%
(without sales charge), for the four-month period ended June 30, 1999
outperformed the Standard & Poor's (S&P) 500 Index return of 11.33% during the
period.
The following report provides a discussion of your Fund, describes its
multi-managed approach and its performance in its first four months of
investment operations. Thank you for selecting Liberty All-Star Growth & Income
Fund and for giving us the opportunity to serve your investment needs.
Sincerely,
William R. Parmentier, Jr.
President
August 11, 1999
- ---------------------------- The Standard & Poor's 500 Index is an unmanaged
Not FDIC May Lose Value index that tracks the performance of 500 widely
Insured No Bank Guarantee held, large-capitalization U.S. stocks. Unlike
- ---------------------------- mutual funds, an index does not incur fees or
charges. It is not possible to invest in an index.
Past performance cannot predict future investment
results. Because market and economic conditions
change frequently, there can be no assurance that
the trends described above or on the following
pages will continue.
<PAGE> 3
Highlights
- --------------------------------------------------------------------------------
- -- LARGE-CAP STOCKS LED IN THE FIRST QUARTER OF 1999.
A narrow group of large-cap growth stocks continued to lead the U.S. stock
market as we entered 1999. The market was so narrow that 18 stocks
accounted for 100% of the return of the Standard & Poor's 500 Index in the
first quarter of 1999.
- -- TECHNOLOGY SECTOR SOARED IN EARLY 1999.
In this narrow market, investors also showed renewed interest in technology
stocks. Internet related stocks, especially the more speculative "dot com"
issues soared to levels well above their fundamental values.
- -- VALUE STOCKS IMPROVED IN THE SECOND QUARTER.
Strong domestic growth and signs of improvement in overseas economies
triggered a broadening of the market, as investors focused on fundamentals.
Long overlooked traditional value sectors like energy, basic materials,
capital goods and consumer cyclicals performed well.
- -- PERFORMANCE OF GROWTH AND VALUE STYLES.
The chart below illustrates the dramatic style shift from growth to value
since the beginning of 1999. It also highlights the benefits of owning
Liberty All-Star Growth & Income Fund with its blend of growth and value
investment styles. The Fund's multi-managed approach seeks to provide more
consistent returns by combining both value and growth styles.
NET ASSET VALUE AS OF 6/30/99
Class A $11.17
- ----------------------------
Class B $11.15
- ----------------------------
Class C $11.15
- ----------------------------
Class Z $11.18
- ----------------------------
GROWTH VS. VALUE
1st and 2nd Quarter 1999
6.4% 3.9%
1.4% 11.3%
1st QTR 1999 2nd QTR 1999
- -- RUSSELL 1000 GROWTH -- RUSSELL 1000 VALUE
The Russell 1000 Growth Index contains those securities in the Russell 1000
Index with a greater than average growth orientation. Companies in this index
tend to exhibit higher price to book and price-earnings ratios, lower dividend
yields and higher forecasted growth rates. The Russell 1000 Value Index contains
those securities in the Russell 1000 Index with a less than average growth
orientation. Companies in this index generally have low price to book and
price-earnings ratios, higher dividend yields and lower forecasted growth
values.
Unlike mutual funds, indexes are not investments and do not incur fees or
expenses. It is not possible to invest directly in an index.
1
<PAGE> 4
A Distinctive Investment Approach
- --------------------------------------------------------------------------------
MOST MUTUAL FUNDS ARE RUN BY A MANAGER OR A TEAM OF MANAGERS THAT PURSUE A
PARTICULAR INVESTMENT STYLE, WHETHER IT IS GROWTH OR VALUE. THIS APPROACH WORKS
WELL WHEN THE MANAGER'S STYLE IS IN FAVOR, BUT STYLES GO IN AND OUT OF FAVOR.
WHAT PRODUCES STRONG RETURNS ONE YEAR MAY PRODUCE DISAPPOINTING RESULTS THE
NEXT.
Large institutions, on the other hand, traditionally rely on a multi-management
approach to manage the more than $7 trillion they hold in their pension and
endowment plans. By employing independent investment managers who practice
different investment styles, these institutions seek to reduce volatility while
producing attractive returns. Liberty Asset Management Company (LAMCO) uses this
same multi-manager approach for Liberty All-Star Growth & Income Fund
(All-Star).
CONSTRUCTING THE MANAGEMENT TEAM
LAMCO has chosen five independent investment managers that, they believe,
provide an optimal style combination to achieve All-Star's investment
objectives.
Three of the investment managers, representing approximately 60% of All-Star's
assets, employ value-oriented styles, which focus on the selection of companies
that trade at comparatively low multiples of company earnings and book value.
The other two styles, representing 40% of the portfolio, are growth-oriented
styles, which focus on the selection of companies whose growth prospects are
better than the average company. Within these broad categories of value and
growth are the specific styles shown in the pie chart on the left.
LAMCO searches for successful, independent investment management organizations
to hire as Portfolio Managers for All-Star. LAMCO employs qualitative and
quantitative analysis, face-to-face meetings and other techniques to select
managers they believe can bring to All-Star both a value-added approach and the
ability to complement the investment styles of the other managers.
LAMCO looks for the following characteristics in potential investment
managers:
* A constant focus on a particular style of investing.
* A disciplined investment decision-making process.
* A record of success relative to other managers who practice the same
investment style.
* Continuity among investment professionals, so that those who have built the
record remain the managers.
* A well-managed, highly responsive organization.
CURRENT MANAGEMENT TEAM AND THEIR INVESTMENT STYLES
WESTWOOD MANAGEMENT CORPORATION 20%
GROWTH Invest in companies selling at reasonable valuations based on the firm's
earnings projections, which are not yet reflected in consensus estimates.
- --------------------------------------------------------------------------------
WILKE/THOMPSON CAPITAL MANAGEMENT, INC. 20%
GROWTH Invest in companies that demonstrate the ability to sustain strong
secular growth across a broad range of market capitalizations.
- --------------------------------------------------------------------------------
BOSTON PARTNERS ASSET MANAGEMENT, L.P. 20%
VALUE Invest in companies with low price-to-earnings and price-to-book ratios
where a catalyst for positive change has been identified.
- --------------------------------------------------------------------------------
J.P. MORGAN INVESTMENT INC. 20%
VALUE Invest in companies diversified across all sectors that are undervalued
relative to their projected growth rates.
- --------------------------------------------------------------------------------
OPCAP ADVISORS 20%
VALUE Invest in companies that exhibit the ability to generate excess cash flow
while earning high returns on invested capital.
- --------------------------------------------------------------------------------
[PIE CHART]
2
<PAGE> 5
Manager Evaluation and, Occasionally, Replacement
- --------------------------------------------------------------------------------
LAMCO CONDUCTS CONTINUING EVALUATION OF THE PORTFOLIO MANAGERS, TO BE SURE THAT
EACH IS STILL SUITED TO MANAGE A PORTION OF ALL-STAR'S PORTFOLIO. THROUGH
FREQUENT MEETINGS WITH EACH INVESTMENT MANAGER, AND THROUGH QUALITATIVE AND
QUANTITATIVE ANALYSIS, LAMCO CONTINUALLY EVALUATES EACH MANAGER TO DETERMINE
WHETHER:
* It is consistently practicing its investment style.
* Its transactions and holdings reflect the style.
* Its organization and investment process continue to support the style.
* Its investment performance is competitive when compared with other managers
using a similar style.
LAMCO also continuously reviews the collective performance of the Portfolio
Management team so that All-Star receives the full benefits of multi-management.
LAMCO's procedures include:
* Seeing that All-Star's total portfolio has the proper investment
characteristics.
* Researching new investment managers as possible future Portfolio Managers.
* Making Portfolio Manager changes when necessary.
LAMCO also shifts assets among the Portfolio Managers at selected times. As the
previous pie chart indicates, All-Star's assets are allocated among the five
Portfolio Managers to provide the desired style diversification. However, each
day stock market action changes the actual assets under management of the
various managers. Accordingly, from time to time, LAMCO reallocates assets in
order to preserve the benefits of All-Star's multi-management methodology. This
procedure is called rebalancing.
3
<PAGE> 6
Portfolio Managers' Report
- --------------------------------------------------------------------------------
THE NET ASSET VALUE OF LIBERTY ALL-STAR GROWTH & INCOME FUND'S CLASS A SHARES
INCREASED FROM $10.00 ON MARCH 1, 1999, TO $11.17 ON JUNE 30, 1999. ALL-STAR'S
TOTAL RETURN WITHOUT SALES CHARGE WAS 11.70% FROM THE FUND'S INCEPTION ON MARCH
1, 1999, OUTPERFORMING THE 11.33% RETURN OF THE S&P 500 INDEX.
This four-month time period was characterized by a rotation in market leadership
from the large-capitalization growth stocks to more cyclically oriented stocks
across a broader capitalization spectrum. The catalyst for this shift in
preference was the increasing perception of strong domestic growth, and evidence
that economic conditions were improving abroad. In addition, many of the
cyclical sectors of the market had considerably lower valuations compared to
growth stocks where premiums for their earnings visibility had risen
significantly.
As a result, the environment during most of the second quarter favored value
oriented investment strategies that emphasized cyclical sectors like basic
materials, capital goods and energy stocks. All-Star's three value managers
(J.P. Morgan Investment Management, Boston Partners Asset Management and OpCap
Advisors) benefited from this rotation to value stocks. Liberty Asset Management
Company's multi-managed approach seeks to provide more consistent returns by
combining both value and growth styles of investment management.
William R. Parmentier Christopher S. Carabell
William R. Parmentier and Christopher S. Carabell are responsible for the
management of the Portfolio.
Mr. Parmentier is the president and chief investment officer of LAMCO. Mr.
Carabell is a senior vice president of LAMCO.
PERFORMANCE INFORMATION -- CUMULATIVE TOTAL RETURNS AS OF 6/30/99
<TABLE>
<S> <C> <C> <C> <C>
Share Class A B C Z
Inception 3/1/99 3/1/99 3/1/99 3/1/99
w/o sales with sales w/o sales with sales w/o sales with sales
charge charge charge charge charge charge
Life 11.70% 5.28% 11.50% 6.50% 11.50% 10.50% 11.80%
</TABLE>
TOP HOLDINGS AS OF 6/30/99
(as a percentage of net assets)
Computer Associates International, Inc. 1.7%
- -----------------------------------------------------
Citigroup, Inc. 1.6%
- -----------------------------------------------------
Waste Management, Inc. 1.6%
- -----------------------------------------------------
Monsanto Co. 1.6%
- -----------------------------------------------------
Freddie Mac 1.4%
- -----------------------------------------------------
CIGNA Corp. 1.4%
- -----------------------------------------------------
Microsoft Corp. 1.3%
- -----------------------------------------------------
GTE Corp. 1.2%
- -----------------------------------------------------
Cisco Systems, Inc. 1.2%
- -----------------------------------------------------
AT&T Corp. 1.1%
- -----------------------------------------------------
TOP FIVE SECTORS AS OF 6/30/99
(as a percentage of net assets)
Technology 18.1%
- -----------------------------------------------------
Financials 17.8%
- -----------------------------------------------------
Consumer Staples 14.8%
- -----------------------------------------------------
Consumer Cyclicals 12.4%
- -----------------------------------------------------
Capital Goods 10.0%
- -----------------------------------------------------
Portfolio holdings and sector breakdowns are calculated as a percentage of total
net assets. Because the Fund is actively managed, there can be no guarantee the
Fund will continue to maintain the same portfolio holdings and sector breakdowns
in the future.
Industry sectors in the following financial statements are based upon the
standard industrial classifications (SIC) as published by the U.S. Office of
Management and Budget. The sector classifications used on this page are based
upon the Advisor's defined criteria as used in the investment process.
Past performance cannot predict future investment results. Returns and value of
an investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. The "with sales charge" returns include
the maximum 5.75% charge for Class A shares and the maximum contingent deferred
sales charge (CDSC) of 5% since inception for Class B shares, and 1% since
inception for Class C shares.
Performance results reflect any voluntary waivers or reimbursements by the
Advisor or its affiliates. Absent these waivers or reimbursement arrangements,
performance results would have been lower.
4
<PAGE> 7
Schedule of Investments
- --------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
COMMON STOCKS (94.7%) SHARES MARKET VALUE
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE (1.9%)
Boeing Co. 2,417 $ 106,801
Lockheed Martin Corp. 3,384 126,054
-----------
232,855
-----------
AUTOS, TIRES & ACCESSORIES (1.9%)
DaimlerChrysler AG 800 71,100
Ford Motor Co. 1,950 110,053
Lear Corp. (a) 1,200 59,700
-----------
240,853
-----------
BANKS (4.6%)
ABN AMRO Holding NV ADR 1,550 34,197
Astoria Financial Corp. 800 35,150
Bank of America Corp. 1,675 122,798
First Union Corp. 1,100 51,700
Fleet Financial Group, Inc. 2,575 114,266
PNC Bank Corp. 1,150 66,269
U.S. Bancorp 600 20,400
Washington Mutual, Inc. 1,500 53,063
Wells Fargo & Co. 2,017 86,227
-----------
584,070
-----------
BROADCASTING & CABLE (1.3%)
Chancellor Media Corp. (a) 2,434 134,174
The News Corp., Ltd. ADR 700 24,719
-----------
158,893
-----------
BUSINESS & CONSUMER SERVICES (1.9%)
America Online, Inc. (a) 300 33,150
Cendant Corp. (a) 2,200 45,100
Cintas Corp. 1,500 100,781
IMS Health, Inc. 1,250 39,063
Service Corp. International 1,000 19,250
-----------
237,344
-----------
CHEMICALS (2.0%)
Monsanto Co. 5,057 199,435
Rohm & Haas Co. 1,300 55,738
-----------
255,173
-----------
COMMUNICATIONS EQUIPMENT (2.7%)
Cisco Systems, Inc. (a) 2,300 148,350
CommScope, Inc. (a) 200 6,150
Lucent Technologies, Inc. 1,100 74,181
Nokia Corp. ADR 1,214 111,157
-----------
339,838
-----------
COMPUTER & BUSINESS EQUIPMENT (3.8%)
Apple Computer, Inc. (a) 200 9,263
Compaq Computer Corp. 3,227 76,440
EMC Corp. (a) 900 49,500
Hewlett-Packard Co. 1,000 100,500
International Business Machines Corp. 1,070 138,298
Solectron Corp. (a) 700 46,681
Sun Microsystems, Inc. (a) 800 55,100
3Com Corp. (a) 125 3,336
-----------
479,118
-----------
COMPUTER SERVICES & SOFTWARE (8.3%)
Acxiom Corp. (a) 1,800 44,888
Automatic Data Processing, Inc. 1,600 70,400
Best Software, Inc. (a) 1,200 19,350
BMC Software, Inc. (a) 800 43,200
Computer Associates International, Inc. 3,902 214,610
Computer Sciences Corp. 700 48,431
Fiserv, Inc. (a) 2,300 72,019
Intuit, Inc. (a) 400 36,050
Keane, Inc. (a) 1,200 27,150
Legato Systems, Inc. (a) 600 34,650
Microsoft Corp. (a) 1,750 157,828
Oracle Corp. (a) 2,650 98,381
Sterling Commerce, Inc. (a) 900 32,850
Sterling Software, Inc. (a) 4,400 117,425
SunGard Data Systems, Inc. (a) 1,000 34,500
-----------
1,051,732
-----------
CONSUMER PRODUCTS (2.0%)
Avon Products, Inc. 1,824 101,232
Gillette Co. 300 12,300
Kimberly-Clark Corp. 400 22,800
Philip Morris Companies, Inc. 1,600 64,300
Procter & Gamble Co. 400 35,700
Ralston Purina Co. 700 21,306
-----------
257,638
-----------
DIVERSIFIED (3.5%)
AlliedSignal, Inc. 1,825 114,975
Cooper Industries, Inc. 200 10,400
Loews Corp. 1,025 81,103
Minnesota Mining & Manufacturing Co. 1,016 88,329
Parker-Hannifin Corp. 925 42,319
The Seagram Co., Ltd. 500 25,188
Tyco International Ltd. 750 71,063
-----------
433,377
-----------
DRUGS & HEALTH CARE (5.6%)
ALZA Corp. (a) 400 20,350
American Home Products Corp. 1,000 57,500
Becton, Dickinson & Co. 300 9,000
Bristol-Myers Squibb Co. 600 42,263
Cardinal Health, Inc. 600 38,475
Elan Corp. ADR (a) 900 24,975
Eli Lilly & Co. 300 21,488
5
See notes to investment portfolio.
<PAGE> 8
Schedule of Investments Continued
- --------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
COMMON STOCKS (CONTINUED) SHARES MARKET VALUE
- --------------------------------------------------------------------------------
DRUGS & HEALTH CARE (CONTINUED)
Forest Laboratories, Inc. (a) 650 $ 30,063
Genzyme Corp. (a) 500 24,250
Genzyme Surgical Products (a) 90 394
HEALTHSOUTH Corp. (a) 500 7,469
Humana, Inc. 800 10,350
Medtronic, Inc. 600 46,725
Merck & Co., Inc. 250 18,500
Patterson Dental Co. (a) 1,200 41,700
PE Corp-Celera Genomics Group (a) 75 1,214
PE Corp-PE Biosystems Group 150 17,212
Pediatrix Medical Group, Inc. (a) 2,100 44,625
Pfizer, Inc. 300 32,925
Pharmacia & Upjohn, Inc. 1,250 71,016
SmithKline Beecham PLC ADR 1,100 72,669
Steris Corp. (a) 1,800 34,875
Warner-Lambert Co. 500 34,688
-----------
702,726
-----------
ELECTRIC & GAS UTILITIES (4.1%)
Central & South West Corp. 800 18,700
Columbia Energy Group 800 50,150
Consolidated Edison, Inc. 2,150 97,287
Florida Progress Corp. 1,700 70,231
Northern States Power Co. 700 16,931
Peco Energy Co. 2,400 100,500
P G & E Corp. 2,050 66,625
PP&L Resources, Inc. 900 27,675
Reliant Energy, Inc. 2,500 69,062
-----------
517,161
-----------
ELECTRONICS & ELECTRICAL EQUIPMENT (2.7%)
Emerson Electric Co. 820 51,558
Intel Corp. 1,914 113,883
Linear Technology Corp. 1,550 104,237
Molex, Inc. 900 33,300
Motorola, Inc. 220 20,845
Texas Instruments, Inc. 100 14,500
-----------
338,323
-----------
FINANCIAL SERVICES (5.5%)
The Charles Schwab Corp. 400 43,950
The CIT Group, Inc. 800 23,100
Citigroup, Inc. 4,260 202,350
Countrywide Credit Industries, Inc. 2,017 86,227
Freddie Mac 3,065 177,770
The Goldman Sachs Group, Inc. (a) 400 28,900
KeyCorp 400 12,850
Morgan Stanley Dean Witter & Co. 504 51,660
Newcourt Credit Group, Inc. 500 6,469
Paychex, Inc. 1,950 62,156
-----------
695,432
-----------
FOOD, BEVERAGE & RESTAURANTS (5.1%)
Anheuser-Busch Companies, Inc. 950 67,391
Bestfoods 200 9,900
Diageo PLC ADR 1,617 69,531
Dole Food Co., Inc. 454 13,336
General Mills, Inc. 775 62,291
International Home Foods, Inc. (a) 1,950 35,953
McDonald's Corp. 1,500 61,969
Nabisco Holdings Corp. 1,825 78,931
The Pepsi Bottling Group, Inc. 3,175 73,223
PepsiCo, Inc. 800 30,950
Starbucks Corp. (a) 2,800 105,175
U.S. Foodservice (a) 900 38,362
-----------
647,012
-----------
HOTELS & ENTERTAINMENT/LEISURE (1.7%)
Marriott International, Inc., Class A 800 29,900
Mirage Resorts, Inc. (a) 1,100 18,425
Starwood Hotels & Resorts Worldwide, Inc. 2,350 71,822
Time Warner, Inc. 1,300 95,550
-----------
215,697
-----------
INDUSTRIAL EQUIPMENT (2.4%)
Caterpillar, Inc. 1,438 86,280
Deere & Co. 900 35,662
Dover Corp. 2,017 70,595
Fastenal Co. 500 26,219
Ingersoll-Rand Co. 1,075 69,472
MSC Industrial Direct Co., Inc. (a) 1,900 19,475
-----------
307,703
-----------
INSURANCE (6.0%)
ACE Ltd. 2,925 82,631
Aetna, Inc. 600 53,662
AFLAC, Inc. 1,617 77,414
Allmerica Financial Corp. 775 47,130
Allstate Corp. 1,175 42,153
Ambac Financial Group, Inc. 300 17,137
CIGNA Corp. 1,925 171,325
Conseco, Inc. 4,623 140,713
Marsh & McLennan Companies, Inc. 350 26,425
Provident Companies, Inc. 700 28,000
XL Capital Ltd. 1,216 68,704
-----------
755,294
-----------
METALS & MINING (1.4%)
Alcoa, Inc. 2,225 137,672
Allegheny Teledyne, Inc. 1,400 31,675
-----------
169,347
-----------
6 See notes to financial statements.
<PAGE> 9
Schedule of Investments Continued
- --------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
COMMON STOCKS (CONTINUED) SHARES MARKET VALUE
- --------------------------------------------------------------------------------
OIL & GAS (5.5%)
Apache Corp. 1,850 72,150
Burlington Resources, Inc. 800 34,600
Conoco, Inc. 3,925 109,409
Cooper Cameron Corp. (a) 600 22,237
Elf Aquitaine ADR 1,125 82,758
El Paso Energy Corp. 975 34,308
Enron Corp. 500 40,875
Halliburton Co. 1,675 75,794
Mobil Corp. 200 19,800
PennzEnergy Co. 2,050 34,209
Phillips Petroleum Co. 400 20,125
Royal Dutch Petroleum Co. 600 36,150
Texaco, Inc. 1,150 71,875
Tosco Corp. 1,700 44,094
-----------
698,384
-----------
PAPER (0.6%)
Temple-Inland, Inc. 1,125 76,781
-----------
POLLUTION CONTROL (1.8%)
Azurix Corp. (a) 1,300 26,000
Waste Management, Inc. 3,764 202,315
-----------
228,315
-----------
PUBLISHING (0.8%)
The New York Times Co. 600 22,087
R. R. Donnelley & Sons Co. 2,221 82,316
-----------
104,403
-----------
REAL ESTATE INVESTMENT TRUSTS (0.6%)
Kimco Realty Corp. 900 35,212
Vornado Realty Trust 1,000 35,312
-----------
70,524
-----------
RETAIL TRADE (9.9%)
AnnTaylor Stores Corp. (a) 800 36,000
CDW Computer Centers, Inc. (a) 900 39,600
Circuit City Stores, Inc. 350 32,550
CVS Corp. 2,700 138,037
Family Dollar Stores, Inc. 2,100 50,400
Federated Department Stores, Inc. (a) 2,250 119,109
Harcourt General, Inc. 925 47,695
Home Depot, Inc. 1,500 96,656
Kohl's Corp. (a) 1,100 84,906
The Kroger Co. (a) 1,600 44,700
The Limited, Inc. 1,550 70,331
Linens 'n Things, Inc. (a) 1,300 56,875
May Department Stores Co. 1,824 74,556
Safeway, Inc. (a) 1,350 66,825
Staples, Inc. (a) 3,300 102,094
Tiffany & Co. 750 72,375
Toys R Us, Inc. (a) 600 12,412
Walgreen Co. 2,400 70,500
Wal-Mart Stores, Inc. 800 38,600
-----------
1,254,221
-----------
TELECOMMUNICATIONS (5.5%)
AT&T Corp. 2,562 142,992
Bell Atlantic Corp. 600 39,225
GTE Corp. 2,050 155,287
Level 3 Communications, Inc. (a) 50 3,003
MCI WorldCom, Inc. (a) 1,300 112,125
SBC Communications, Inc. 1,850 107,300
Sprint Corp. (FON Group) 1,601 84,553
Uniphase Corp. (a) 300 49,800
-----------
694,285
-----------
TRANSPORTATION (1.6%)
AMR Corp. (a) 1,214 82,856
Burlington Northern Santa Fe Corp. 1,000 31,000
CNF Transportation, Inc. 850 32,619
CSX Corp. 400 18,125
Union Pacific Corp. 700 40,819
205,419
-----------
TOTAL COMMON STOCKS
(Cost $11,364,805) 11,951,918
-----------
PREFERRED STOCK (0.6%)
- --------------------------------------------------------------------------------
BROADCASTING & CABLE (0.6%)
The News Corp., Ltd. ADR
(cost $80,831) 2,500 78,906
-----------
SHORT-TERM INVESTMENT (6.2%) PAR
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (6.2%)
SBC Warburg Ltd., Repurchase
Agreement dated 6/30/99, 4.80% to be
repurchased at $777,104 on 7/1/99,
collateralized by U.S. Treasury bonds
and notes with various maturities to 2027,
with a current market value of $804,455.
$777,000 777,000
-----------
TOTAL INVESTMENTS (101.5%)
(Cost $12,222,636)(b) 12,807,824
OTHER ASSETS AND LIABILITIES, NET (-1.5%) (189,726)
-----------
NET ASSETS (100.0%) $12,618,098
===========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) The cost of investments for federal income tax purposes is $12,237,464.
Gross unrealized appreciation and depreciation of investments at June 30, 1999
is as follows:
Gross unrealized appreciation $ 882,233
Gross unrealized depreciation (311,873)
---------
Net unrealized appreciation $ 570,360
=========
Acronym Name
------- ---------------------------
ADR American Depositary Receipt
See notes to investment portfolio. 7
<PAGE> 10
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
ASSETS
Investments at value (cost $12,222,636) $12,807,824
Receivable for:
Fund shares sold $172,190
Investments sold 26,307
Dividends 9,742
Interest 104
Receivable due from Advisor 25,354
Other 4,019 237,716
-------- -----------
Total Assets 13,045,540
LIABILITIES
Payable for:
Investments purchased 395,493
Other 31,949
--------
Total Liabilities 427,442
-----------
NET ASSETS $12,618,098
===========
Net asset value & redemption price per share
-- Class A ($1,565,448/140,154) $ 11.17(a)
===========
Maximum offering price per share
-- Class A ($11.17/0.9425) $ 11.85(b)
===========
Net asset value & offering price per share
-- Class B ($6,361,437/570,666) $ 11.15(a)
===========
Net asset value & offering price per share
-- Class C ($2,456,295/220,387) $ 11.15(a)
===========
Net asset value, offering and redemption price
per share
-- Class Z ($2,234,918/199,907) $ 11.18
===========
COMPOSITION OF NET ASSETS
Capital paid in $11,979,292
Accumulated net investment loss (5,579)
Net realized gain 59,197
Net unrealized appreciation 585,188
-----------
$12,618,098
===========
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
(b) On sales of $50,000 or more the offering price is reduced.
Statement of Operations
- --------------------------------------------------------------------------------
For the Period Ended June 30, 1999(a) (Unaudited)
INVESTMENT INCOME
Dividends $ 29,397
Interest 8,061
--------
Total investment income (net of
nonreclaimable foreign taxes
withheld at source which
amounted to $490) 37,458
EXPENSES
Management fee $ 18,506
Service fee --Class A, Class B, Class C 3,575
Distribution fee -- Class B 6,150
Distribution fee -- Class C 3,065
Transfer agent 7,777
Bookkeeping fee 11,934
Trustees fee 5,002
Custodian fee 3,050
Audit fee 7,930
Legal fee 976
Registration fee 17,812
Reports to shareholders 2,928
Other 1,594
--------
90,299
Fees and expenses waived or borne
by the Advisor (47,262) 43,037
-------- --------
Net Investment Loss (5,579)
--------
NET REALIZED & UNREALIZED GAIN ON
PORTFOLIO POSITIONS
Net realized gain 59,197
Net change in unrealized appreciation/depreciation
on investments 585,188
--------
Net Gain 644,385
--------
Increase in Net Assets from Operations $638,806
========
(a) The Fund commenced investment operations on March 1, 1999.
8 See notes to financial statements.
<PAGE> 11
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
PERIOD ENDED
JUNE 30,
INCREASE (DECREASE) IN NET ASSETS 1999(a)
- --------------------------------------------------------------------------------
Operations:
Net investment loss $ (5,579)
Net realized gain 59,197
Net unrealized appreciation 585,188
-----------
Net Increase from Operations 638,806
Fund Share Transactions:
Receipts for shares sold -- Class A 1,522,273
Cost of shares repurchased -- Class A (12,298)
-----------
1,509,975
-----------
Receipts for shares sold -- Class B 6,212,179
Cost of shares repurchased -- Class B (47,312)
-----------
6,164,867
-----------
Receipts for shares sold -- Class C 2,355,574
Cost of shares repurchased -- Class C (1,124)
-----------
2,354,450
-----------
Receipts for shares sold -- Class Z 2,700,000
Cost of shares repurchased -- Class Z (750,000)
-----------
1,950,000
-----------
Net Increase from Fund
Share Transactions 11,979,292
-----------
Total Increase 12,618,098
NET ASSETS
Beginning of period --
-----------
End of period (net of accumulated
net investment loss of $5,579) $12,618,098
===========
NUMBER OF FUND SHARES
Sold -- Class A 141,284
Repurchased -- Class A (1,130)
-----------
140,154
-----------
Sold -- Class B 575,044
Repurchased -- Class B (4,378)
-----------
570,666
-----------
Sold -- Class C 220,488
Repurchased -- Class C (101)
-----------
220,387
-----------
Sold -- Class Z 270,000
Repurchased -- Class Z (70,093)
-----------
199,907
-----------
(a) The Fund commenced investment operations on March 1, 1999
See notes to financial statements. 9
<PAGE> 12
Notes To Financial Statements
- --------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
Liberty All-Star Growth and Income Fund (the Fund) organized as a Massachusetts
business trust on November 3, 1998, is an open-end, diversified management
investment company. The Fund commenced investment operations on March 1, 1999.
The Fund's investment objective is to seek total investment return, comprised of
long term capital appreciation and current income, through investment primarily
in a diversified portfolio of equity securities. The Fund is managed by Liberty
Asset Management Company (the Advisor). The Advisor is a subsidiary of Liberty
Financial Companies, Inc., a publicly traded company of which Liberty Mutual
Insurance Company is the majority shareholder. The Fund may issue an unlimited
number of shares. The Fund offers four classes of shares: Class A, Class B,
Class C and Class Z. Class A shares are sold with a front-end sales charge. A
1.00% contingent deferred sales charge is assessed on redemptions made within
eighteen months on an original purchase of $1 million to $5 million. Class B
shares are subject to an annual distribution fee and a contingent deferred sales
charge. Class B shares will convert to Class A shares when they have been
outstanding approximately eight years. Class C shares are subject to a
contingent deferred sales charge on redemptions made within one year after
purchase and an annual distribution fee. Class Z shares are offered continuously
at net asset value. There are certain restrictions on the purchase of Class Z
shares, as described in the Fund's prospectus.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results, if different,
are expected to be immaterial to the net assets of the Fund.
VALUATION OF INVESTMENTS:
Portfolio securities listed on an exchange and over-the-counter securities
quoted on the NASDAQ system are valued on the basis of the last sale on the date
as of which the valuation is made, or, lacking any sales, at the current bid
prices. Over-the-counter securities not quoted on the NASDAQ system are valued
on the basis of the mean between the current bid and asked prices on that date.
Securities for which reliable quotations are not readily available are valued at
fair value, as determined in good faith and pursuant to procedures established
by the Trustees. Short-term instruments maturing in more than 60 days for which
market quotations are readily available are valued at current market value.
Short-term instruments with remaining maturities of 60 days or less are valued
at amortized cost, unless the Board of Trustees determines that this does not
represent fair value.
PROVISION FOR FEDERAL INCOME TAX:
The Fund qualifies as a "regulated investment company." As a result, a federal
income tax provision is not required for amounts distributed to shareholders.
OTHER:
Security transactions are accounted for on the trade date. Interest income and
expenses are recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS:
All income, expenses (other than the Class A, Class B and Class C service fees
and Class B and Class C distribution fees), and realized and unrealized gains
(losses), are allocated to each class proportionately on a daily basis for
purposes of determining the net asset value of each class.
Per share data is calculated using the average shares outstanding during the
period. In addition, Class A, Class B and Class C net investment income per
share data reflects the service fee per share applicable to Class A, Class B and
Class C shares and the distribution fee applicable to Class B and Class C shares
only.
Class A, Class B and Class C ratios are calculated by adjusting the expense and
net investment income ratios for the Fund for the entire period by the service
fee applicable to Class A, Class B and Class C shares and the distribution fee
applicable to Class B and Class C shares only.
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT FEE:
Under the Fund's Management and Portfolio Management Agreements, the Fund pays
the Advisor a management fee for its investment management services at an annual
rate of 0.60% of the Fund's average net assets. The Advisor pays each Portfolio
Manager other than OpCap Advisors a portfolio management fee at an annual rate
of 0.30% of the average net assets of the portion of the investment portfolio
managed by it. The agreement with OpCap Advisors provides for a fee of 0.40% per
year of the average net assets of the portion of the investment portfolio
managed by it. OpCap Advisors has voluntarily agreed, however, to waive any fee
in excess of 0.30% until the earlier of March 1, 2002 or the date the total of
the Fund's net assets reaches $100 million. Any increase in the fee payable to
OpCap Advisors following the expiration of its fee waiver agreement will be
borne by the Advisor.
10
<PAGE> 13
Notes To Financial Statements Continued
- --------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
ADMINISTRATION FEE:
The Fund pays Colonial Management Associates, Inc. (the Administrator) an
affiliate of the Advisor, an administrative fee for its administrative services
at an annual rate of 0.20% of the Fund's average net assets.
BOOKKEEPING FEE:
Colonial Management Associates, Inc., an affiliate of the Advisor, provides
bookkeeping and pricing services for a monthly fee equal to $36,000 annually
plus 0.035% of the Fund's average net assets over $50 million.
TRANSFER AGENT FEE:
Liberty Funds Services, Inc., an affiliate of the Advisor, provides shareholder
services for a monthly fee equal to 0.236% annually of the Fund's average net
assets and receives reimbursement for certain out-of-pocket expenses.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES:
Liberty Funds Distributor, Inc. (the Distributor), a subsidiary of the Advisor,
is the Fund's principal underwriter. For the period ended June 30, 1999, the
Fund has been advised that the Distributor retained net underwriting discounts
of $7,400 on sales of the Fund's Class A shares and received contingent deferred
sales charges (CDSC) of none, $81 and $8,586 on Class A, Class B and Class C
share redemptions, respectively. The Fund has adopted a 12b-1 plan which
requires the payment of a service fee to the Distributor on Class A, Class B and
Class C shares equal to 0.25% annually of the Fund's net assets as of the 20th
of each month. The plan also requires the payment of a distribution fee to the
Distributor equal to 0.75% annually of the average net assets attributable to
Class B and Class C shares only. The CDSC fees received from the 12b-1 plan are
used principally as repayment to the Distributor for amounts paid by the
Distributor to dealers who sold such shares.
EXPENSE LIMITS:
The Advisor has agreed, until further notice, to waive fees and bear certain
Fund expenses to the extent that total expenses (exclusive of service and
distribution fees, brokerage commissions, interest, taxes and extraordinary
expenses, if any) exceed 1.25% annually of the Fund's average net assets.
NOTE 3. SECURITIES TRANSACTIONS
Realized gains and losses are recorded on the identified cost basis for both
financial reporting and federal income tax purposes. The cost of investments
purchased and the proceeds from investments sold excluding short-term debt
obligations for the period ended June 30, 1999 were $12,552,760 and $1,166,321,
respectively.
The Fund may enter into repurchase agreements and require the seller of the
instruments to maintain on deposit with the Fund's custodian bank or in the
Federal Reserve Book-Entry System securities in the amount at all times equal to
or in excess of the value of the repurchase agreement plus accrued interest. The
Fund may experience costs and delays in liquidating the collateral if the issuer
defaults or enters bankruptcy.
NOTE 4. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income tax
regulations, which may differ from generally accepted accounting principles.
Reclassifications are made to the Fund's capital accounts to reflect income and
gains available for distribution (or available capital loss carryovers) under
income tax regulations.
NOTE 5. LINE OF CREDIT
The Fund may borrow up to 10% of its net assets under a line of credit for
temporary or emergency purposes. Any borrowings bear interest at one of the
following options determined at the inception of the loan: (1) federal funds
rate plus 1/2 of 1%, (2) the lending bank's base rate or (3) IBOR offshore loan
rate plus 1/2 of 1%. There were no borrowings under the line of credit during
the period ended June 30, 1999.
11
<PAGE> 14
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of each class outstanding throughout the period is as
follows:
<TABLE>
<CAPTION>
(UNAUDITED)
PERIOD ENDED JUNE 30, 1999(b)
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS Z
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.000 $10.000 $10.000 $10.000
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (a)(c) 0.001 (0.026) (0.026) 0.010
Net realized and unrealized gain 1.169 1.176 1.176 1.170
------- ------- ------- -------
Total from Investment Operations 1.170 1.150 1.150 1.180
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.170 $11.150 $11.150 $11.180
======= ======= ======= =======
Total return (d)(e)(f) 11.70% 11.50% 11.50% 11.80%
======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses (g)(h) 1.50% 2.25% 2.25% 1.25%
Fees and expenses waived or borne by the Advisor (g)(h) 2.04% 2.04% 2.04% 2.04%
Net investment income (loss) (g)(h) 0.09% (0.66)% (0.66)% 0.34%
Portfolio turnover (f) 17% 17% 17% 17%
Net assets at end of period (000) $ 1,566 $ 6,361 $ 2,456 $ 2,235
(a) Net of fees and expenses waived or borne by the Advisor
which amounted to: $ 0.072 $ 0.072 $ 0.072 $ 0.072
</TABLE>
(b) The Fund commenced investment operations on March 1, 1999. Per share
amounts reflect activity from that date.
(c) Per share data was calculated using average shares outstanding during the
period.
(d) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(e) Had the Advisor not waived or reimbursed a portion of expenses, total
return would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(h) Annualized.
12
<PAGE> 15
TRUSTEES & TRANSFER AGENT
- --------------------------------------------------------------------------------
ROBERT J. BIRNBAUM
Consultant (formerly Special Counsel, Dechert, Price & Rhoads; President and
Chief Operating Officer, New York Stock Exchange, Inc.; President, American
Stock Exchange Inc.)
TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore
Bank & Trust Company)
JOHN V. CARBERRY
Senior Vice President of Liberty Financial Companies, Inc. (formerly Managing
Director, Salomon Brothers)
LORA S. COLLINS
Attorney (formerly Attorney, Kramer, Levin, Naftalis & Frankel)
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
SALVATORE MACERA
Private Investor (formerly Executive Vice President of Itek Corp. and
President of Itek Optical & Electronic Industries, Inc.)
WILLIAM E. MAYER
Partner, Development Capital, LLC (formerly Dean, College of Business and
Management, University of Maryland; Dean, Simon Graduate School of Business,
University of Rochester; Chairman and Chief Executive Officer, CS First Boston
Merchant Bank; and President and Chief Executive Officer, The First Boston
Corporation)
JAMES L. MOODY, JR.
Retired (formerly Chairman of the Board, Chief Executive Officer and Director
Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
THOMAS E. STITZEL
Professor of Finance, College of Business, Boise State University; Business
Consultant and Author
ROBERT L. SULLIVAN
Retired Partner, KPMG LLP (formerly Management Consultant, Saatchi and
Saatchi Consulting Ltd. and Principal and International Practice Director,
Management Consulting, Peat Marwick Main & Co.)
ANNE-LEE VERVILLE
Consultant (formerly General Manager, Global Education Industry, and
President, Applications Solutions Division, IBM Corporation)
- --------------------------------------------------------------------------------
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Liberty All-Star Growth &Income Fund is:
Liberty Funds Services, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
The Fund mails one shareholder report to each shareholder address. If you would
like more than one report, please call 1-800-426-3750 and additional reports
will be sent to you.
This report has been prepared for shareholders of Liberty All-Star Growth
&Income Fund. This report may also be used as sales literature when preceded or
accompanied by the current prospectus which provides details of sales charges,
investment objectives and operating policies of the Fund and with the most
recent copy of the Liberty Funds Distributor, Inc. Performance Update.
<PAGE> 16
Choose Liberty
- --------------------------------------------------------------------------------
Because no single investment manager can be all things to all investors.(SM)
LIBERTY
[LOGO] Colonial has long been a recognized leader in fixed-income
COLONIAL investing. In addition, Colonial has distinguished itself
MANAGEMENT with both a traditional value and a more contemporary
ASSOCIATES, INC. approach to equity investing.
[LOGO] Crabbe Huson's contrarian investment style seeks long-term
CRABBE HUSON performance by investing in stocks from high-quality,
out-of-favor companies. This risk-averse strategy
capitalizes on the potential of these companies to regain
market popularity.
[LOGO] LAMCO brings institutional money management to individual
LIBERTY investors through a disciplined multi-manager investment
ASSET MANAGEMENT process that seeks to deliver consistent long-term returns.
COMPANY
LOGO] A leader in Asian investing(TM), Newport has an
NEWPORT unparalleled knowledge of Asian economies, business and
FUND culture.
MANAGEMENT
[LOGO] Stein Roe's growth management style emphasizes companies
STEIN with the ability to create, maintain and grow earnings in
ROE & different market environments.
FARNHAM
BOSTON * CHICAGO * NEW YORK * PORTLAND * SAN FRANCISCO
That's why each of these affiliated managers has excelled in a particular
investment style. These managers not only specialize in a distinct investment
style, they hold a passion for their style along with a demonstrated track
record.
Each of these managers is a member of the Liberty Financial Companies (NYSE: L),
a diversified asset accumulation and management organization with approximately
$62.7 billion in assets under management for more than 1.7 million investors.
Many of the affiliated managers' products are offered by prospectus through
Liberty Funds Distributor, Inc.
Ask your financial advisor to help you develop an investment strategy that
blends the complementary disciplines of different managers into a well-balanced
program tailored to your goals.
LIBERTY ALL-STAR GROWTH & INCOME FUND Semiannual Report, June 30, 1999
- --------------------------------------------------------------------------------
[LOGO] LIBERTY -------------
ALL-STAR * COLONIAL * CRABBE HUSON * NEWPORT * STEIN ROE ADVISOR BULK RATE
U.S. POSTAGE
Liberty Funds Distributors, Inc.(C) 1999 PAID
One Financial Center, Boston, MA 02111-02621, 1-800-426-3750 HOLLISTON, MA
Visit us at www.libertyfunds.com PERMIT NO. 20
-------------
AL-03/581H-0699 (8/99) 99/980
