[LOGO] LIBERTY
ALL*STAR
-----------
EQUITY FUND
[COVER GRAPHIC]
GROWTH CONSISTENCY
OBJECTIVITY VALUE
THIRD QUARTER REPORT 2000
<PAGE>
[BACKGROUND GRAPHIC]
LIBERTY ALL-STAR EQUITY FUND
2nd Quarter 3rd Quarter
Fund Facts 2000 2000
---------- ----------- -----------
Net Asset Value (NAV) $14.09 $14.25
Market Price $12.313 $13.125
Quarter End Discount 12.6% 7.9%
Dividends Declared $0.36 $0.37
Market Price Trading Range $10.313 to $12.750 $12.313 to $13.250
Discount Range 24.3% to 10.0% 13.1% to 6.9%
Annualized Rates of Return
--------------------------
Performance Summary 9 1 3 5 10
Periods Ending Sept. 30, 2000 Quarter Months Year Year Year Year
----------------------------- ------- ------ ---- ---- ---- ----
Shares Valued at NAV 3.7% 9.3% 21.5% 12.8% 17.7% 17.8%
Shares Valued at NAV
with Dividends Reinvested 4.0 10.7 23.3 13.5 18.2 18.2
Shares Valued at Market Price
with Dividends Reinvested 9.7 29.2 25.5 10.2 17.7 19.1
Lipper Growth and Income
Mutual Fund Average 3.0 2.6 13.9 10.4 16.5 16.2
S&P 500 Index (1.0) (1.4) 13.3 16.4 21.7 19.4
Figures shown for the Fund and the Lipper Growth and Income Mutual Fund Average
are total returns, which include dividends, after deducting fund expenses. The
Fund's reinvested returns assume all primary subscription rights in all the
Fund's rights offerings were exercised. Figures shown for the unmanaged S&P 500
Index are total returns, including income.
<PAGE>
PRESIDENT'S LETTER
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Fellow Shareholders: October 2000
The third quarter was one in which the Fund's structural blend of value
and growth styles of investing truly proved itself. In terms of performance, the
Fund valued at net asset value (NAV) with dividends reinvested returned 4.0
percent. By comparison, the Lipper Growth and Income Mutual Fund Average
returned 3.0 percent and the S&P 500 Index declined 1.0 percent. Year-to-date
results are even stronger, as the table on the facing page shows. In particular,
the Fund's year-to-date market price return of 29.2 percent with dividends
reinvested reflects both solid NAV performance and a narrowing of the discount
to a level more in line with its historic norm. As we have said before,
discounts can be cyclical, and we have always believed that the discount would
narrow.
The story behind the Fund's performance figures, both for the quarter and
the past nine months, is where the real news may be found. Despite the rotation
in investor sentiment between growth and value stocks, the Fund has outperformed
both the Lipper Growth and Income Mutual Fund Average and the S&P 500 Index in
each quarter this year.
[The following table was depicted as a bar chart in the printed material.]
Russell Large Cap Value Versus Growth
Relative Quarterly Performance
Value Outperformed 13.2% 4.7%
Growth Outperformed -6.7% -2.0%
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
The third quarter is worth added focus, as it saw an extraordinary
rotation in the leadership between growth and value styles of investing. The
above bar chart highlights those differences by comparing the relative returns
of the Russell 1000 Value Index (a measure of large cap value stock performance)
to the Russell 1000 Growth Index (a measure of large cap growth stock
performance) for the past three quarters. Note that in the first quarter, value
trailed growth by 6.7 percent. In the second quarter, value again lagged but by
just 2.0 percent. In the third quarter, however, value sprinted ahead of growth
and outperformed by 13.2 percent, leaving it 4.7 percent ahead year-to-date.
Since Frank Russell Company began compiling their style benchmarks in 1979,
there has never been a quarter where the margin by which value outperformed
growth was greater than this year's third quarter.
This is precisely the kind of volatility that the All-Star Equity Fund is
designed to mitigate. Two thoughts on this point: One, it is impossible for an
investor to consistently market time
LIBERTY ALL-STAR EQUITY FUND 1
<PAGE>
PRESIDENT'S LETTER -- CONTINUED
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these swings between growth and value; two, the rotation between growth and
value and the monthly differences, with one outperforming the other and vice
versa, has increased considerably lately. From 1979 through 1999, the monthly
differences between these two style benchmarks never exceeded 10 percent. But in
2000 alone, the performance difference between the two styles has exceeded 10
percent in three out of nine months thus far. Because the Fund blends both value
and growth styles of investing, it is positioned for greater long-term
consistency and fewer concerns over style volatility.
Another factor supporting the Fund's ability to offer greater consistency
is its diversification. This year, the breadth of the stock market has improved.
To illustrate, while the cap-weighted S&P 500 Index is down 1.4 percent this
year, the average stock in the S&P 500 actually rose 6.7 percent. The Fund's
diversified portfolio is ideally structured for this environment.
Turning to Fund news, in October Liberty Asset Management Company
recommended, and the Board of Trustees approved, the hiring of a new Portfolio
Manager, Mastrapasqua & Associates. The new manager replaces J.P. Morgan
Investment Management Inc. effective November 1, 2000. Frank Mastrapasqua,
Ph.D., Chairman and CEO, and Thomas (Tad) Trantum, CFA, President, will serve as
the portfolio managers to the Fund. Together, they have over 60 years of
investment experience and have managed portfolios together for the last 13
years. The firm practices a growth investment style which they will use to
manage their portion of the Fund's assets. The Fund's portfolio management
agreement with Mastrapasqua & Associates, which will be submitted to
shareholders for ratification at the 2001 annual meeting, is at the same
management fee rate and on substantially the same other terms and conditions as
the Fund's agreement with its other four Portfolio Managers.
Meanwhile, for this quarter's manager interview, we have turned to John
Lindenthal of Oppenheimer Capital, who has been an All-Star manager since 1990.
Oppenheimer is a value style manager that uses an intrinsic value approach to
manage their portion of the Fund's assets. I think you will enjoy reading John's
comments.
We are pleased with the Fund's performance both short and long term as
depicted on the inside front cover. We pledge our best efforts to maintain and
enhance the Fund's record going forward. As always, thank you for your
continuing support of the Fund.
Sincerely,
/s/ William R. Parmentier, Jr.
William R. Parmentier, Jr.
President and Chief Executive Officer
Liberty All-Star Equity Fund and
Liberty Asset Management Company
2 LIBERTY ALL-STAR EQUITY FUND
<PAGE>
INVESTMENT GROWTH AS OF SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
[The following table was represented as a mountain chart in the printed
material.]
Includes Additional Investments Made Through Rights Offerings $83.80(2)
Net Asset Value of Shares Acquired Through Distribution Reinvestment $65.25(2)
Net Asset Value Per Share Plus Distributions Paid $30.15(1)
1. Net asset value (NAV) of one share of All-Star as of 9/30/00 plus
distributions paid since inception.
2. To evaluate your investment in the Fund, these values should be used. Each
shows how your investment has fared by reinvesting the Fund's
distributions. The upper value includes additional investments made
through the rights offerings in 1992, 1993, 1994 and 1998.
The above chart illustrates the net asset value (NAV) growth of an
original share of the Fund since the Fund's inception date through September 30,
2000.
The bottom region of the chart reflects NAV growth assuming all
distributions were received in cash and not reinvested back into the Fund. As of
September 30, 2000, the NAV grew to $30.15 (current NAV of $14.25 plus
distributions paid since inception totaling $15.90, which includes tax credits
of $0.67 on retained capital gains).
Moving up the chart, the middle region depicts additional value added
through the reinvestment and compounding of distributions. An original share
with distributions reinvested grew to $65.25 (4.579 shares times the current NAV
of $14.25).
On four occasions, the Fund has allowed the purchase of additional shares
of the Fund at a discount through rights offerings. The top region illustrates
the additional value added assuming participation in all the rights offerings
and the reinvestment of all distributions. An original share grew to $83.80
(5.881 shares times the current NAV of $14.25).
LIBERTY ALL-STAR EQUITY FUND 3
<PAGE>
A TABLE OF PER-SHARE VALUES, DISTRIBUTIONS AND REINVESTMENT
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
Shares Shares
Shares Purchased Acquired Shares NAV(1) Market Price Total Market
Owned At Through Through Owned Per Share Total NAV Per Share Price Of
Beginning Per Share Reinvestment Rights At End At End Of Shares At End Shares
Year Of Period Distributions Program Offering Of Period Of Period Owned Of Period Owned
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987 1.000 $1.18 0.140 -- 1.140 $7.90 $9.01 $6.00 $6.84
----------------------------------------------------------------------------------------------------------------------------------
1988 1.140 0.64 0.107 -- 1.247 8.29 10.34 7.25 9.04
----------------------------------------------------------------------------------------------------------------------------------
1989 1.247 0.95 0.156 -- 1.403 9.58 13.44 8.25 11.57
----------------------------------------------------------------------------------------------------------------------------------
1990 1.403 0.90 0.167 -- 1.570 8.92 14.00 7.75 12.17
----------------------------------------------------------------------------------------------------------------------------------
1991 1.570 1.02 0.171 -- 1.741 11.20 19.50 10.75 18.72
----------------------------------------------------------------------------------------------------------------------------------
1992 1.741 1.07 0.199 0.179(2) 2.119 10.78 22.84 11.125 23.57
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1993 2.119 1.25(3) 0.266 0.138(2) 2.523 10.40 26.24 11.125 28.07
----------------------------------------------------------------------------------------------------------------------------------
1994 2.523 1.00 0.277 0.155(2) 2.955 9.26 27.36 8.50 25.12
----------------------------------------------------------------------------------------------------------------------------------
1995 2.955 1.04 0.310 -- 3.265 11.03 36.01 10.875 35.51
----------------------------------------------------------------------------------------------------------------------------------
1996 3.265 1.31(3) 0.403 -- 3.668 11.95 43.83 11.25 41.27
----------------------------------------------------------------------------------------------------------------------------------
1997 3.668 1.69(3) 0.501 -- 4.169 13.32 55.53 13.313 55.50
----------------------------------------------------------------------------------------------------------------------------------
1998 4.169 1.40 0.487 0.173(2) 4.829 14.22 68.67 12.938 62.48
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1999 4.829 1.39 0.569 -- 5.398 14.02 75.68 11.063 59.72
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2000
1st Quarter 5.398 0.33 0.159 -- 5.557 14.48 80.47 11.188 62.17
2nd Quarter 5.557 0.36 0.159 -- 5.716 14.09 80.54 12.313 70.38
3rd Quarter 5.716 0.37 0.165 -- 5.881 14.25 83.80 13.125 77.19
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Net Asset Value.
2. 1992: Rights offering completed in April 1992. One share offered at $10.05
for every 10 shares owned.
1993: Rights offering completed in October 1993. One share offered at $10.41
for every 15 shares owned.
1994: Rights offering completed in September 1994. One share offered at $9.14
for every 15 shares owned.
1998: Rights offering completed in April 1998. One share offered at $12.83
for every 20 shares owned.
3. 1993: Includes the $0.18 per share tax credit passed through to shareholders,
which was assumed to be reinvested at the year-end market price of
$11.125.
1996: Includes the $0.13 per share tax credit passed through to shareholders,
which was assumed to be reinvested at the year-end market price of
$11.25.
1997: Includes the $0.36 per share tax credit passed through to shareholders,
which was assumed to be reinvested at the year-end market price of
$13.313.
4 LIBERTY ALL-STAR EQUITY FUND
<PAGE>
PORTFOLIO MANAGERS/PORTFOLIO CHARACTERISTICS
--------------------------------------------------------------------------------
THE FUND'S FIVE PORTFOLIO MANAGERS AND THE INVESTMENT STYLES THEY PRACTICE ARE:
BOSTON PARTNERS ASSET MANAGEMENT, L.P.
Companies with low price-to-earnings and price-to-book ratios where a catalyst
for positive change has been identified.
OPPENHEIMER CAPITAL
Companies that exhibit the ability to generate excess cash flow while earning
high returns on invested capital.
J.P. MORGAN INVESTMENT MANAGEMENT INC.*
Companies diversified across all sectors that are undervalued relative to the
firm's projected growth rates.
WESTWOOD MANAGEMENT CORPORATION
Companies selling at reasonable valuations based on the firm's earnings
projections, which are not yet reflected in consensus estimates.
TCW INVESTMENT MANAGEMENT COMPANY
Growth companies that have superior sales growth, leading and/or rising market
shares, and high and/or rising profit margins.
MANAGERS' DIFFERING INVESTMENT STYLES ARE REFLECTED IN PORTFOLIO
CHARACTERISTICS: The portfolio characteristics table below is a regular feature
of the Fund's shareholder reports. It serves as a useful tool for understanding
the value of the Fund's multi-managed portfolio. The characteristics are
different for each of the Fund's five portfolio managers. These differences are
a reflection of the fact that each pursues a different investment style. The
shaded column highlights the characteristics of the Fund as a whole, while the
final column shows portfolio characteristics for the S&P 500 Index.
PORTFOLIO CHARACTERISTICS
AS OF SEPTEMBER 30, 2000
(UNAUDITED)
INVESTMENT STYLE SPECTRUM
VALUE GROWTH
------------------------------------
------------------------------------
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Boston Oppen- J.P. West- Total S&P
Partners heimer Morgan* wood TCW Fund 500 Index
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Number of Holdings 36 28 86 41 25 180 500
---------------------------------------------------------------------------------------------------------
Percent of Holdings
in Top 10 45% 60% 30% 33% 59% 18% 24%
---------------------------------------------------------------------------------------------------------
Weighted Average
Market Capitalization
(billions) $25 $78 $130 $57 $86 $74 $134
---------------------------------------------------------------------------------------------------------
One-Year Forecast I/B/E/S
Earnings Per Share 19% 23% 28% 27% 34% 26% 25%
---------------------------------------------------------------------------------------------------------
Dividend Yield 1.6% 1.4% 1.1% 1.6% 0.2% 1.2% 1.1%
---------------------------------------------------------------------------------------------------------
One-Year Forecast I/B/E/S
Price/Earnings Ratio 16x 19x 23x 18x 43x 22x 25x
---------------------------------------------------------------------------------------------------------
Average Price/
Book Value Ratio 3.0x 3.5x 4.1x 3.6x 9.2x 4.7x 5.2x
---------------------------------------------------------------------------------------------------------
</TABLE>
*Mastrapasqua & Associates replaced J.P. Morgan Investment Management Inc.
effective November 1, 2000.
LIBERTY ALL-STAR EQUITY FUND 5
<PAGE>
TOP 50 HOLDINGS
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RANK RANK MARKET
AS OF AS OF VALUE PERCENT OF
9/30/00 6/30/00 SECURITY NAME ($000) NET ASSETS
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1 1 Citigroup, Inc. $44,634 3.1%
2 6 Siebel Systems, Inc. 29,565 2.1
3 4 Pharmacia Corp. 26,678 1.9
4 7 SBC Communications, Inc. 26,075 1.8
5 2 Intel Corp. 23,493 1.7
6 11 The Progressive Corp. 21,361 1.5
7 25 AFLAC, Inc. 20,500 1.4
8 5 Cisco Systems, Inc. 20,371 1.4
9 17 El Paso Energy Corp. 19,782 1.4
10 14 Exxon Mobil Corp. 19,530 1.4
11 10 Avon Products, Inc. 18,937 1.3
12 20 Countrywide Credit
Industries, Inc. 18,917 1.3
13 45 Fannie Mae 18,233 1.3
14 19 Maxim Integrated Products, Inc. 18,227 1.3
15 28 Providian Financial Corp. 17,932 1.3
16 26 XL Capital Ltd. 17,567 1.2
17 9 Nokia Corp. ADR 16,721 1.2
18 New Verizon Communications* 16,605 1.2
19 18 Baxter International, Inc. 16,409 1.2
20 12 Deere & Co. 16,329 1.2
21 39 Freddie Mac 16,219 1.1
22 16 Pfizer, Inc. 15,990 1.1
23 24 ACE Ltd. 15,712 1.1
24 29 Paychex, Inc. 15,693 1.1
25 21 Minnesota Mining &
Manufacturing Co. 15,382 1.1
26 51 The Boeing Co. 14,490 1.0
27 8 Dell Computer Corp. 14,411 1.0
28 42 CIGNA Corp. 13,614 1.0
29 New Stilwell Financial, Inc.** 13,598 1.0
30 27 The Charles Schwab Corp. 13,446 0.9
31 13 Microsoft Corp. 13,406 0.9
32 30 Alcoa, Inc. 12,161 0.9
33 33 Amgen, Inc. 12,094 0.9
34 63 Peco Energy Co. 12,082 0.9
35 38 The Home Depot, Inc. 11,698 0.8
36 22 Burlington Resources, Inc. 11,500 0.8
37 31 Harcourt General, Inc. 11,310 0.8
38 53 Allmerica Financial Corp. 11,163 0.8
39 37 Time Warner, Inc. 11,088 0.8
40 36 Wal-Mart Stores, Inc. 11,050 0.8
41 131 UST, Inc. 10,934 0.8
42 81 AXA Financial, Inc. 10,845 0.8
43 55 Reliant Energy, Inc. 10,616 0.7
44 84 Genentech, Inc. 10,399 0.7
45 46 Bristol-Myers Squibb Co. 10,094 0.7
46 41 Morgan Stanley Dean Witter & Co. 10,058 0.7
47 73 Southwest Airlines Co. 10,056 0.7
48 68 Wellpoint Health Networks, Inc. 10,003 0.7
49 48 Compaq Computer Corp. 9,973 0.7
50 15 Sprint Corp. (FON Group) 9,966 0.7
* Merger between Bell Atlantic Corp. and GTE Corp.
** Spun-off by Kansas City Southern Industries, Inc.
6 LIBERTY ALL-STAR EQUITY FUND
<PAGE>
MAJOR STOCK CHANGES IN THE THIRD QUARTER / DISTRIBUTION POLICY
--------------------------------------------------------------------------------
The following are the major ($5.0 million or more) stock changes -- both
purchases and sales -- that were made in the Fund's portfolio during the third
quarter of 2000.
--------------------------------------------------------------------------------
SHARES
----------------------------------------
SECURITY NAME PURCHASED SOLD AS OF 9/30/2000
--------------------------------------------------------------------------------
Anadarko Petroleum Corp. 93,400 93,400
Boston Scientific Corp. 255,000 255,000
Duke Energy Corp. 68,100 68,100
The Hartford Financial Services
Group, Inc. 84,700 84,700
The Reader's Digest Association, Inc. 154,000 154,000
Bank One Corp. (217,300) 0
Computer Associates International, Inc. (512,948) 0
Diageo PLC (160,000) 0
Du Pont (E.I.) de Nemours & Co. (142,300) 0
Federated Department Stores, Inc. (210,700) 43,600
Sara Lee Corp. (333,000) 0
Textron, Inc. (110,000) 0
DISTRIBUTION POLICY
Liberty All-Star Equity Fund's current policy, in effect since 1988, is to pay
distributions on its common shares totaling approximately 10 percent of its net
asset value per year, payable in four quarterly installments of 2.5 percent of
the Fund's net asset value at the close of the New York Stock Exchange on the
Friday prior to each quarterly declaration date. The fixed distributions are not
related to the amount of the Fund's net investment income or net realized
capital gains or losses. If, for any calendar year, the total distributions
required by the 10 percent pay-out policy exceed the Fund's net investment
income and net realized capital gains, the excess will generally be treated as a
tax-free 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 required to be distributed under the 10 percent
pay-out policy, the Fund may, at its discretion, retain and not distribute net
realized capital gains and pay income tax thereon to the extent of such excess.
The Fund retained such excess gains in 1993, 1996 and 1997.
LIBERTY ALL-STAR EQUITY FUND 7
<PAGE>
MANAGER INTERVIEW
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[PHOTO]
JOHN G. LINDENTHAL
Oppenheimer Capital
Manager Interview
Oppenheimer Capital Believes Long-Term Returns Are Built on Buying Quality
Companies at a Discount to their Intrinsic Value
Oppenheimer Capital is one of All-Star's five portfolio managers. Oppenheimer
is a value style manager investing in the stocks of quality companies with sound
business prospects that are considered undervalued. Research focuses on cash
flow analysis. Purchase candidates exhibit a high return on equity, large
undedicated cash flow and reasonable prices in relation to intrinsic value. We
recently had the opportunity to talk with Managing Director John G. Lindenthal.
The Fund Manager, Liberty Asset Management Company (LAMCO), serves as moderator
for the discussion.
--------------------------------------------------------------------------------
The views expressed in this interview represent the portfolio manager's views at
the time of the discussion (October 2000) and are subject to change.
--------------------------------------------------------------------------------
LAMCO: As it has been nearly 18 months since your last interview, let's begin by
revisiting some fundamentals about Oppenheimer's style, philosophy and strategy.
LINDENTHAL: Oppenheimer Capital is a value investor, and what we mean by that is
we want to buy companies that are selling at a discount to the intrinsic value
of the business. We analyze the business and come up with a price that we
believe the business is worth. We buy when we find opportunities to invest at a
discount. So, it's a little different than the traditional value approach, which
is typically more statistically-driven in terms of buying stocks that are
inexpensive based on price-to-earnings or price-to-book ratios.
LAMCO: What usually causes that discount to occur?
LINDENTHAL: It can result from several factors: simply an opportunity in the
marketplace, a stock being out of favor, investors not fully appreciating
certain insights that we have or a combination of those factors.
LAMCO: What kinds of stocks do you usually evaluate?
LINDENTHAL: Our universe is pretty broad. We're looking for companies with
capitalizations of $7 billion or greater, but aside from that we'll look at just
about any company. We don't break the market down into growth or value like some
investors do. To us, any stock is fair game as long as we can satisfy to
ourselves that the stock is selling at a discount to what it's worth. That can
include businesses with annual growth rates of 15 to 20 percent, which is sort
of at the high end for us, or businesses at the lower end that are growing at 5
to 8 percent. But, what all these companies have in common is that they are
selling at a discount to what they're worth.
The quality of the businesses can differ somewhat. Obviously, we're
willing to pay somewhat more in terms of a price-to-earnings ratio for a higher
quality business than we are for one of lower
8 LIBERTY ALL-STAR EQUITY FUND
<PAGE>
MANAGER INTERVIEW -- CONTINUED
--------------------------------------------------------------------------------
quality. But no matter what price we pay, we want to make sure it's selling at a
discount to what we think it's worth.
LAMCO: You mention the word quality. You have a number of metrics by which you
judge the quality of a company.
LINDENTHAL: Yes, that's a good point because that's what creates value over long
periods of time. It's good to buy stocks opportunistically, which we try to do,
but it's really the quality of the business that creates value over long periods
of time. And, we're pretty long term in our thinking. So, we want to make sure
the determinants of quality -- such as earnings and earnings growth, free cash
flow, a strong balance sheet, solid competitive position, and management skill
and experience -- are all present and accounted for.
--------------------------------------------------------------------------------
"Oppenheimer Capital is a value investor, and what we mean by that is we want to
buy companies that are selling at a discount to the intrinsic value of the
business."
--------------------------------------------------------------------------------
LAMCO: How about your investment process-- how do you go about identifying the
portfolio companies that you ultimately invest in?
LINDENTHAL: We have approximately 30 people involved in the overall research
process. We break the stock market down into nine different sectors. As I
mentioned, any stock at or above that $7 billion market cap level is fair game.
So, we review companies in those sectors all the time, including stocks we own
and stocks we don't own. We want to stay current with all these companies, what
they are doing and what their current prospects are.
So, out of that process we surface a lot of attractive ideas. The analysts
will focus on ideas that they want to research further, or a couple of analysts
will work together to do a research report and present it to the group. If the
stock passes all our criteria it goes on the buy list.
In sum, we don't really use a screening mechanism. Instead, it's looking
closely at companies, listening to management, analyzing the business and
understanding what drives it. As I said earlier, we don't differentiate between
value and growth. We're just looking for those companies that fit our
qualitative criteria and those companies that our valuation work confirms are
selling at a discount.
--------------------------------------------------------------------------------
"It's good to buy stocks opportunistically ... but it's really the quality of
the business that creates value over long periods of time."
--------------------------------------------------------------------------------
LAMCO: In light of the volatile market environment that we had in the third
quarter and early in the fourth quarter, are some stocks that might not
ordinarily have been thought of as fitting your portfolio coming into range?
LINDENTHAL: Recently, we have reviewed names like Dell, Microsoft and
Hewlett-Packard. We haven't bought any of those names, but they're in the
research pipeline because they're down 50 to 70 percent from their highs. The
names that I just mentioned are all technology related, but, more importantly,
they're superior companies with great attributes. The problem in the last couple
of years is that we haven't been able to buy these types of stocks because their
valuations were so extended.
LIBERTY ALL-STAR EQUITY FUND 9
<PAGE>
MANAGER INTERVIEW -- CONTINUED
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
" ... we don't differentiate between value and growth. We're just looking for
those companies that fit our qualitative criteria and ... are selling at a
discount."
--------------------------------------------------------------------------------
That's the easy part, if you will. The hard part is trying to get a handle
on how much the businesses are going to slow and what that could do to
profitability. That's the work we're doing right now. We think the best way to
make money over the long term is to buy a high quality business below their
intrinsic value.
LAMCO: So, the challenge is figuring out whether that growth rate is going to
return to historic norms after a slowdown of just a quarter or two, or whether
there has been a change to slower long-term growth.
LINDENTHAL: Yes, the easy part is knowing that the stocks of good companies have
been marked down; the hard part is knowing whether it's a knee-jerk reaction or
a sea change. But, we generally find that when we buy high quality businesses at
reasonable prices and have a fairly lengthy time frame, it takes a lot of the
risk out of investing.
LAMCO: But, eventually, you are confronted with choices about selling, so let's
ask about your sell discipline.
LINDENTHAL: The sell discipline is pretty simple and straightforward. When we
buy a stock, we set a price that we think the business is worth. That's our
target price. As we approach that target price, we review the company again to
see if anything has changed -- in other words, whether the intrinsic value of
the company has gone up. If it has, we will reset the target price at a higher
level. If it hasn't, the stock is fully valued and we will sell. We will sell a
stock earlier if we determine there is a deterioration in some of those
qualitative aspects that I discussed earlier.
LAMCO: Let's talk about the value style generally. Whatever gains were made in
the market during the third quarter this year were made in value style stocks,
but that was only after a long period when they were generally out of favor. Do
you feel that value is poised to make further headway?
LINDENTHAL: The simple answer would be yes, but we're trying to give the right
answer. This last quarter value did outperform growth but recently this has been
more the exception than the rule. We've seen value outperform for shorter
periods of time over the past few years, say, a month or two, but then the
market would go right back to growth. Now, we've seen technology stocks,
especially those tied to the Internet, come under pressure and money has flowed
into other areas. This creates a broader market, which we think is a healthier
market. At the same time, we're early in the cycle. Value style investing still
needs to gain some momentum. So, I think the answer is yes -- value style
investing may outperform, but we need to see sustained cash flows in the
direction of value investing.
--------------------------------------------------------------------------------
" ... we generally find that when we buy high quality businesses at reasonable
prices and have a fairly lengthy time frame, it takes a lot of the risk out of
investing."
--------------------------------------------------------------------------------
LAMCO: In an effort to enhance performance, some value managers are known to
have given their portfolios a growth tilt.
10 LIBERTY ALL-STAR EQUITY FUND
<PAGE>
MANAGER INTERVIEW -- CONTINUED
--------------------------------------------------------------------------------
Have you found it hard to stick to your discipline over this extended period
when growth has been so dominant?
LINDENTHAL: Those pressures are always present, but we've stuck to our
philosophy and that has served us well. I know some value managers got up to 30
percent technology. We have been at about 10 percent technology with just two
names, Intel and Nokia, and we reduced those pretty dramatically last year
because of price. So, despite the temptations, we have pretty much stuck to our
knitting, knowing that the pendulum eventually swings back. We just want to be
the best value investors we can be, based on our philosophy. Besides, for the
Liberty All-Star Equity Fund, LAMCO wants us to adhere to our style. LAMCO
understands that your style may be out of favor, but that's the whole philosophy
of the All-Star Fund -- having five managers and getting the most from one style
when the other is out of favor, knowing that the pendulum swings back and being
sure you're well positioned when it does.
LAMCO: The last time we talked for an All-Star quarterly report, financials were
a major part of your portfolio. Is that still the case?
LINDENTHAL: We still have a little over 40 percent of the portfolio in financial
stocks and we have had that since the early 1990s when we first became a manager
for All-Star. This is not an interest rate call because we've had all kinds of
interest rate environments over the last nine years. It's a matter of finding a
lot of companies that we thought represented attractive valuations, good returns
on capital, ample cash flow and managements that are shareholder friendly. We do
cut back on financial stocks from time to time. For example, Citigroup is still
our largest position, but we have trimmed it back.
LAMCO: When you do that with a Citigroup, is it purely on fundamentals or are
you also taking into consideration the changing interest rate environment?
LINDENTHAL: With us, it's not so much the interest rate environment. We think
the liquidity in the financial system is what effects interest rates. Mr.
Greenspan and the Fed, rightfully so, get all the attention. The key issue is
supply of funds, or money available in the system relative to demand for it. We
have had periods like 1993 and '94 when the Fed drained money out of the system
and interest rates went up. But with that exception, generally we have had
fairly positive liquidity. Financial stocks do well in that environment.
--------------------------------------------------------------------------------
" ...liquidity in the market now is adequate, but not excessive. We've got money
growing at about 5 or 6 percent a year and we've got the demand for money
growing at about the same pace..."
--------------------------------------------------------------------------------
LAMCO: Do you see adequate liquidity in the market now?
LINDENTHAL: It's adequate, but not excessive. We've got money growing at about 5
or 6 percent a year and we've got the demand for money growing at about the same
pace, so it's neutral.
LAMCO: Are there any other sectors that you are over- or underweighting at this
time?
LINDENTHAL: Given our large weighting to financial stocks, that's really the
standout. We have been underweighted in a couple of good performing areas,
energy and utilities, and that has hurt us a bit. On the other hand, a moderate
LIBERTY ALL-STAR EQUITY FUND 11
<PAGE>
MANAGER INTERVIEW -- CONTINUED
--------------------------------------------------------------------------------
overweight to capital goods has helped, especially Boeing, which went from the
low $30s to the $60 range today.
LAMCO: On the subject of specific stocks, what are some that you've added
to the portfolio lately?
LINDENTHAL: We have fairly low turnover, but one of the names we've added is
Alcoa. We view Alcoa as the global leader in the aluminum industry, but we
really think of it as sort of a reindustrialization story. The way aluminum is
produced has changed a good deal -- today it's much more efficient and much less
costly. In addition, for an industrial process that uses tremendous amounts of
energy, Alcoa is extremely well positioned from an energy standpoint. Therefore,
despite the ups and downs that the aluminum industry experiences, we feel
aluminum is less of a commodity today and Alcoa's management is better able to
manage the impact of demand cycles.
In the cable area, we added Cablevision, which is predominately in the New
York area. The company has done a good job of rolling out new technology with
cable modems and Internet access, so we believe the company is in the sweet
spot. In addition, it may be attractive to other companies as an acquisition. We
don't know that, but we think that generally it's a very attractive company in a
consolidating industry.
A financial stock we added was FleetBoston Financial. We got interested in
the company because we owned BankBoston and with the merger of Fleet and
Bank-Boston we really got to know the management of Fleet very well. There are
risks in acquisitions, but we feel Fleet has a good acquisition strategy.
Recently, Fleet acquired Summit of New Jersey, so it has an even stronger
position in the Northeast. Fleet also owns discount broker Quick & Reilly and
Robertson Stephens, an investment bank oriented toward technology companies.
We also added Carnival Cruise Lines after a decline in the stock's price
owing to concerns about weak pricing and excess capacity. Fundamentally, it's a
strong business with good cash flow and we thought it was a good buying
opportunity.
LAMCO: How about any dispositions?
LINDENTHAL: We sold R.R. Donnelley, the Chicago printing company that's
especially well known for yellow pages directories. We felt the company's
competitive position was eroding because of the Internet. Yellow pages haven't
gone away, but there's more and more going on the Internet and people are
increasingly using it for directory services.
We also trimmed some positions, such as Intel, Nokia and Citigroup, which
I have already mentioned. In addition, we cut back on Morgan Stanley Dean Witter
and Pharmacia, the drug company. Both were done on a valuation basis. AFLAC, the
insurance company, has been spectacular, but after it hit a new high we trimmed
our position for the same reason.
LAMCO: Many thanks for an interesting interview, as always.
12 LIBERTY ALL-STAR EQUITY FUND
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMMON STOCKS (97.1%) SHARES MARKET VALUE
--------------------------------------------------------------------------------
AEROSPACE & DEFENSE (1.0%)
The Boeing Co. 230,000 $ 14,490,000
--------------
AUTOS, TIRES & ACCESSORIES (0.4%)
Ford Motor Co. 49,997 1,265,549
Lear Corp. (a) 194,900 4,007,631
--------------
5,273,180
--------------
BANKS (3.3%)
ABN AMRO Holdings NV (b) 165,936 3,837,270
Astoria Financial Corp. 25,600 988,800
Chase Manhattan Bank Corp. 153,250 7,078,234
First Union Corp. 275,000 8,851,562
FleetBoston Financial Corp. 140,000 5,460,000
PNC Bank Corp. 143,100 9,301,500
Washington Mutual, Inc. 69,000 2,747,062
Wells Fargo & Co. 200,000 9,187,500
--------------
47,451,928
--------------
BROADCASTING & CABLE (2.0%)
AT&T Corp.-Liberty Media Group Class A (a) 202,900 3,652,200
Cablevision Systems Corp. Class A (a) 100,000 6,631,250
Clear Channel Communications, Inc. (a) 172,908 9,769,302
Comcast Corp. Special Class A 80,400 3,291,375
The News Corp., Ltd. (b) 77,500 4,412,119
--------------
27,756,246
--------------
BUSINESS & CONSUMER SERVICES (1.7%)
America Online, Inc. 61,900 3,327,125
Cendant Corp. (a) 114,500 1,245,187
Paychex, Inc. 298,912 15,692,880
Sabre Holdings Corp. 115,624 3,345,869
--------------
23,611,061
--------------
CHEMICALS (0.2%)
Rohm & Haas Co. 112,600 3,272,437
--------------
COMMUNICATIONS EQUIPMENT (3.2%)
Cisco Systems, Inc. (a) 368,700 20,370,675
Lucent Technologies, Inc. 50,600 1,546,462
Nokia Corp. (b) 420,000 16,721,250
Nortel Networks Corp. 77,900 4,639,919
Tellabs, Inc. (a) 22,200 1,060,050
TyCom Ltd. (a) 38,400 1,473,600
--------------
45,811,956
--------------
See Notes to Schedule of Investments. LIBERTY ALL-STAR EQUITY FUND 13
<PAGE>
SCHEDULE OF INVESTMENTS (UNAUDITED) -- CONTINUED
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED SHARES MARKET VALUE
--------------------------------------------------------------------------------
COMPUTER & BUSINESS EQUIPMENT (4.6%)
Compaq Computer Corp. 361,600 $ 9,972,928
Dell Computer Corp. (a) 467,700 14,411,006
EMC Corp. (a) 56,900 5,640,212
Hewlett-Packard Co. 52,400 5,082,800
International Business Machines Corp. 85,350 9,601,875
NCR Corp. (a) 17,200 650,375
Palm, Inc. (a) 72,324 3,828,652
Seagate Technology, Inc. (a) 32,900 2,270,100
Sun Microsystems, Inc. (a) 75,300 8,791,275
3Com Corp. (a) 236,200 4,532,087
--------------
64,781,310
--------------
COMPUTER SERVICES & SOFTWARE (4.2%)
Citrix Systems, Inc. (a) 24,900 499,556
Electronic Data Systems Corp. 115,600 4,797,400
Intuit, Inc. (a) 88,300 5,033,100
Microsoft Corp. (a) 222,500 13,405,625
Oracle Corp. (a) 29,600 2,331,000
Parametric Technology Corp. (a) 359,200 3,928,750
Siebel Systems, Inc. (a) 265,600 29,564,600
--------------
59,560,031
--------------
CONSUMER PRODUCTS (3.7%)
Avon Products, Inc. 463,300 18,937,387
Clorox Co. 36,100 1,428,206
Gillette Co. 231,200 7,138,300
Kimberly-Clark Corp. 127,500 7,116,094
Philip Morris Companies, Inc. 152,000 4,474,500
Procter & Gamble Co. 35,200 2,358,400
UST, Inc. 478,000 10,934,250
--------------
52,387,137
--------------
DIVERSIFIED (2.7%)
Cooper Industries, Inc. 40,000 1,410,000
General Electric Co. 150,700 8,693,506
Honeywell International, Inc. 33,600 1,197,000
Minnesota Mining & Manufacturing Co. 168,800 15,381,900
The Seagram Co., Ltd. 47,100 2,705,306
Tyco International Ltd. 176,468 9,154,277
--------------
38,541,989
--------------
DRUGS & HEALTH CARE (9.9%)
ALZA Corp. (a) 56,400 4,878,600
American Home Products Corp. 49,700 2,811,156
Amgen, Inc. 173,200 12,094,231
14 LIBERTY ALL-STAR EQUITY FUND See Notes to Schedule of Investments.
<PAGE>
SCHEDULE OF INVESTMENTS (UNAUDITED) -- CONTINUED
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED SHARES MARKET VALUE
--------------------------------------------------------------------------------
DRUGS & HEALTH CARE -- CONTINUED
Aventis S.A. (b) 39,600 $ 2,982,375
Baxter International, Inc. 205,600 16,409,450
Biogen, Inc. (a) 153,400 9,357,400
Boston Scientific Corp. (a) 255,000 4,191,562
Bristol-Myers Squibb Co. 176,700 10,093,987
Eli Lilly & Co. 50,200 4,072,475
Genentech, Inc. (a) 56,000 10,398,500
Medtronic, Inc. 129,900 6,730,444
PE Corp-PE Biosystems Group 16,400 1,910,600
Pfizer, Inc. 355,825 15,989,886
Pharmacia Corp. 443,240 26,677,508
Schering-Plough Corp. 68,200 3,171,300
Wellpoint Health Networks, Inc. (a) 104,200 10,003,200
--------------
141,772,674
--------------
ELECTRIC & GAS UTILITIES (3.1%)
Columbia Energy Group 43,300 3,074,300
DTE Energy Co. 45,400 1,736,550
Duke Energy Corp. 68,100 5,839,575
Entergy Corp. 37,100 1,381,975
Florida Progress Corp. 174,900 9,258,769
NiSource, Inc. 28,600 697,125
Peco Energy Co. 199,500 12,082,219
Reliant Energy, Inc. 228,300 10,615,950
--------------
44,686,463
--------------
ELECTRONICS & ELECTRICAL EQUIPMENT (5.9%)
Altera Corp. (a) 26,600 1,270,150
Applied Materials, Inc. (a) 126,400 7,497,100
Cypress Semiconductor Corp. (a) 104,500 4,343,281
Emerson Electric Co. 120,000 8,040,000
Intel Corp. 564,400 23,493,150
JDS Uniphase Corp. (a) 73,200 6,931,125
LSI Logic Corp. (a) 123,000 3,597,750
Maxim Integrated Products, Inc. (a) 226,600 18,227,138
Motorola, Inc. 88,300 2,494,475
Sensormatic Electronics Corp. (a) 91,500 1,372,500
Synopsys, Inc. (a) 112,700 4,268,513
Texas Instruments, Inc. 46,200 2,180,063
--------------
83,715,245
--------------
FINANCIAL SERVICES (13.0%)
Associates First Capital Corp. 20,800 790,400
AXA Financial, Inc. (b) 212,900 10,844,594
Capital One Financial Corp. 36,700 2,571,294
The Charles Schwab Corp. 378,750 13,445,625
See Notes to Schedule of Investments. LIBERTY ALL-STAR EQUITY FUND 15
<PAGE>
SCHEDULE OF INVESTMENTS (UNAUDITED) -- CONTINUED
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED SHARES MARKET VALUE
--------------------------------------------------------------------------------
FINANCIAL SERVICES -- CONTINUED
The CIT Group, Inc. 102,900 $ 1,800,750
Citigroup, Inc. 825,599 44,633,946
Countrywide Credit Industries, Inc. 501,100 18,916,525
Fannie Mae 255,000 18,232,500
Freddie Mac 300,000 16,218,750
The Goldman Sachs Group, Inc. 35,600 4,056,175
MetLife, Inc. (a) 291,200 7,625,800
Morgan Stanley Dean Witter & Co. 110,000 10,058,125
Providian Financial Corp. 141,200 17,932,400
Stilwell Financial, Inc. 312,600 13,598,100
U.S. Bancorp 168,300 3,828,825
--------------
184,553,809
--------------
FOOD, BEVERAGE & RESTAURANTS (1.3%)
Anheuser-Busch Companies, Inc. 212,400 8,987,175
The Coca-Cola Co. 35,800 1,973,475
Heinz (H.J.) Co. 197,700 7,327,256
--------------
18,287,906
--------------
HOTELS & ENTERTAINMENT/LEISURE (2.5%)
Carnival Corp. 100,000 2,462,500
Gemstar International Group Ltd. (a) 13,700 1,194,469
Pixar, Inc. (a) 122,100 3,922,463
The Reader's Digest Association, Inc. 154,000 5,438,125
Starwood Hotels & Resorts Worldwide, Inc. 192,000 3,896,875
Time Warner, Inc. 141,700 11,088,025
The Walt Disney Co. 203,300 7,344,000
--------------
35,346,457
--------------
INDUSTRIAL EQUIPMENT (2.4%)
Caterpillar, Inc. 130,000 4,387,500
Deere & Co. 491,100 16,329,075
Dover Corp. 110,000 5,163,125
Illinois Tool Works, Inc. 154,500 8,632,688
--------------
34,512,388
--------------
INSURANCE (8.5%)
ACE Ltd. 400,300 15,711,775
AFLAC, Inc. 320,000 20,500,000
Allmerica Financial Corp. 174,600 11,163,488
Ambac Financial Group, Inc. 70,300 5,149,475
American International Group, Inc. 101,850 9,745,772
CIGNA Corp. 130,400 13,613,760
The Hartford Financial Services Group, Inc. 84,700 6,177,806
The Progressive Corp. 260,900 21,361,188
XL Capital Ltd. 239,000 17,566,500
--------------
120,989,764
--------------
16 LIBERTY ALL-STAR EQUITY FUND See Notes to Schedule of Investments.
<PAGE>
SCHEDULE OF INVESTMENTS (UNAUDITED) -- CONTINUED
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED SHARES MARKET VALUE
--------------------------------------------------------------------------------
METALS & MINING (1.4%)
Alcan Aluminum Ltd. 254,100 $ 7,353,019
Alcoa, Inc. 480,416 12,160,530
--------------
19,513,549
--------------
OIL & GAS (9.1%)
Anadarko Petroleum Corp. 93,400 6,207,364
Apache Corp. 143,600 8,490,350
Baker Hughes, Inc. 44,900 1,666,913
Burlington Resources, Inc. 312,400 11,500,225
Conoco, Inc. Class A 336,500 8,791,063
Conoco, Inc. Class B 281,500 7,582,906
Devon Energy Corp. 143,079 8,606,202
Dynegy, Inc. 32,800 1,869,600
El Paso Energy Corp. 321,000 19,781,625
Exxon Mobil Corp. 219,127 19,529,694
Global Marine, Inc. (a) 59,200 1,827,800
Halliburton Co. 120,800 5,911,650
Occidental Petroleum Corp. 400,100 8,727,181
Royal Dutch Petroleum Co. 54,862 3,288,291
USX-Marathon Group 234,000 6,639,750
The Williams Companies, Inc. 190,400 8,044,400
--------------
128,465,014
--------------
PAPER (0.1%)
Temple-Inland, Inc. 53,000 2,007,375
--------------
REAL ESTATE (0.9%)
Kimco Realty Corp. 67,400 2,847,650
TrizecHahn Corp. 418,900 7,042,756
Vornado Realty Trust 71,700 2,661,863
--------------
12,552,269
--------------
RETAIL TRADE (4.3%)
Costco Wholesale Corp. (a) 128,000 4,472,000
Federated Department Stores, Inc. (a) 43,600 1,139,050
The Gap, Inc. 25,700 517,213
Harcourt General, Inc. 191,700 11,310,300
The Home Depot, Inc. 220,450 11,697,628
The Limited, Inc. 350,500 7,732,906
May Department Stores Co. 225,000 4,612,500
Target Corp. 69,400 1,778,375
Tiffany & Co. 111,400 4,295,863
The TJX Companies, Inc. 94,900 2,135,250
Wal-Mart Stores, Inc. 229,600 11,049,500
--------------
60,740,585
--------------
See Notes to Schedule of Investments. LIBERTY ALL-STAR EQUITY FUND 17
<PAGE>
SCHEDULE OF INVESTMENTS (UNAUDITED) -- CONTINUED
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED SHARES MARKET VALUE
--------------------------------------------------------------------------------
TELECOMMUNICATIONS (4.8%)
AT&T Corp. 74,900 $ 2,200,188
Global Crossing Ltd. (a) 54,300 1,683,300
Level 3 Communications, Inc. (a) 17,200 1,326,550
Qwest Communications International, Inc. (a) 26,400 1,268,850
SBC Communications, Inc. 521,500 26,075,000
Sprint Corp. (FON Group) 340,000 9,966,250
Verizon Communications 342,810 16,604,859
WorldCom, Inc. (a) 299,100 9,085,163
--------------
68,210,160
--------------
TRANSPORTATION (2.9%)
AMR Corp. (a) 180,000 5,883,750
Burlington Northern Santa Fe Corp. 200,000 4,312,500
CSX Corp. 124,100 2,706,931
Delta Air Lines, Inc. 150,200 6,665,125
Southwest Airlines Co. 414,700 10,056,475
Union Pacific Corp. 81,000 3,148,875
United Parcel Service, Inc. Class B 138,900 7,830,488
--------------
40,604,144
--------------
TOTAL COMMON STOCKS
(Cost $973,161,105) 1,378,895,077
--------------
PREFERRED STOCK (0.5%)
BROADCASTING & CABLE (0.5%)
The News Corp. Ltd. (b)
(Cost $4,611,740) 150,000 7,031,250
--------------
18 LIBERTY ALL-STAR EQUITY FUND See Notes to Schedule of Investments.
<PAGE>
SCHEDULE OF INVESTMENTS (UNAUDITED) -- CONTINUED
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SHORT-TERM INTEREST MATURITY PAR MARKET
INVESTMENTS (2.2%) RATE DATE VALUE VALUE
--------------------------------------------------------------------------------
COMMERCIAL PAPER (1.2%)
Household Finance 6.400% 10/03/00 $ 8,000,000 $ 7,997,155
Household Finance 6.500 10/05/00 5,000,000 4,996,389
Household Finance 6.520 10/10/00 3,500,000 3,494,295
--------------
TOTAL COMMERCIAL PAPER (COST $16,487,839) 16,487,839
--------------
REPURCHASE AGREEMENT (1.0%)
SBC Warburg Ltd., Repurchase Agreement dated
09/29/00, 6.50% to be repurchased at $14,408,801
on 10/02/00, collateralized by U.S. Treasury notes
with various maturities to 2027, with a current
market value of $14,718,387. 14,401,000 14,401,000
--------------
TOTAL SHORT-TERM INVESTMENTS (COST $30,888,839) 30,888,839
--------------
TOTAL INVESTMENTS (99.8%) (COST $1,008,661,684) 1,416,815,166
OTHER ASSETS AND LIABILITIES, NET (0.2%) 2,466,430
--------------
NET ASSETS (100.0%) 1,419,281,596
==============
NET ASSET VALUE PER SHARE (99,577,653 SHARES OUTSTANDING) $14.25
==============
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Represents an American Depositary Receipt.
Gross unrealized appreciation and depreciation of investments
at September 30, 2000 is as follows:
Gross unrealized appreciation $460,090,758
Gross unrealized depreciation (51,937,276)
------------
Net unrealized appreciation $408,153,482
------------
LIBERTY ALL-STAR EQUITY FUND 19
<PAGE>
PER SHARE CHANGES IN NET ASSETS / DIVIDEND REINVESTMENT PLAN
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, 2000 ----------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE CHANGES IN NET ASSETS:
Net asset value at beginning of period $14.02 $14.22 $13.32 $11.95 $11.03 $ 9.26
====== ====== ====== ====== ====== ======
Net investment income 0.04 0.05 0.05 0.05 0.08 0.10
Distributions declared (1.06) (1.39) (1.40) (1.33) (1.18) (1.04)
Change due to rights offering (a) -- -- (0.10) -- -- --
Impact of shares issued in dividend
reinvestment (b) -- (0.08) -- -- -- --
Net realized and unrealized
gains on investments 1.25 1.22 2.35 3.01(c) 2.15(c) 2.71
Provision for federal income tax -- -- -- (0.36) (0.13) --
====== ====== ====== ====== ====== ======
Net asset value at end of period $14.25 $14.02 $14.22 $13.32 $11.95 $11.03
====== ====== ====== ====== ====== ======
</TABLE>
(a) Effect of All-Star's rights offering for shares at a price below net asset
value.
(b) Effect of payment of a portion of distributions in newly issued shares
valued at a discount from net asset value.
(c) Before provision for federal income tax.
DIVIDEND REINVESTMENT PLAN
Through the Fund's Automatic Dividend Reinvestment and Cash Purchase Plan, the
Fund's shareholders have the opportunity to have their dividends and
distributions automatically reinvested in additional shares of the Fund.
Participating shareholders have been rewarded as a result of the consistent
reinvestment of distributions. Each share of the Fund owned by shareholders who
have participated in the Dividend Reinvestment Program since the Fund began
operations in 1986 would have grown to 4.579 shares as of September 30, 2000,
with a total net asset value of $65.25. Participants are kept apprised of the
status of their account through quarterly statements.
For complete information and enrollment forms, please call Investor Assistance
toll-free at 1-800-LIB-FUND (1-800-542-3863) weekdays between 9 AM and 5 PM
Eastern time. If your shares are held for you by a broker, bank or other
nominee, you should contact the institution holding your shares if you wish to
participate in the Plan.
20 LIBERTY ALL-STAR EQUITY FUND
<PAGE>
[LOGO] LIBERTY USA
ALL*STAR --------
----------- LISTED
EQUITY FUND --------
NYSE
FUND MANAGER
Liberty Asset Management Company
Federal Reserve Plaza
600 Atlantic Avenue
Boston, Massachusetts 02210-2214
1-617-722-6036
Internet: www.libertyallstar.com
INDEPENDENT AUDITORS
PricewaterhouseCoopers, LLP
160 Federal Street
Boston, Massachusetts 02110
CUSTODIAN
The Chase Manhattan Bank
270 Park Avenue
New York, NY 10017-2070
INVESTOR ASSISTANCE,
TRANSFER & DIVIDEND
DISBURSING AGENT & REGISTRAR
State Street Bank and Trust Company c/o EquiServe
P.O. Box 8200, Boston, Massachusetts 02266-8200
1-800-LIB-FUND (1-800-542-3863)
Internet: www.equiserve.com
LEGAL COUNSEL
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
TRUSTEES
Robert J. Birnbaum*
James E. Grinnell*
Richard W. Lowry*
William E. Mayer
Dr. John J. Neuhauser*
Joseph J. Palombo
OFFICERS
Joseph J. Palombo, Chairman of the Board of Trustees
William R. Parmentier, Jr., President and Chief Executive Officer
Kevin M. Carome, Executive Vice President
Christopher S. Carabell, Vice President
Mark T. Haley, Vice President
Pamela A. McGrath, Treasurer
William J. Ballou, Secretary
* Member of the audit committee.
--------------------------------------------------------------------------------
Liberty Asset Management Company, the Fund's manager,
is one of the Liberty Financial Companies (NYSE: L).
[LOGO] LIBERTY
FINANCIAL
<PAGE>
[LOGO] LIBERTY
ALL*STAR
-----------
EQUITY FUND
Liberty Asset Management Company
Federal Reserve Plaza
600 Atlantic Avenue
Boston, Massachusetts 02210-2214
USA A MEMBER OF THE
-------- CLOSED-END
LISTED FUND
-------- ASSOCIATION, INC.
NYSE WWW.CLOSED-ENDFUNDS.COM
