N-30D 1 b38595asn-30d.txt LIBERTY ALL-STAR GROWTH AND INCOME FUND 1 PRESIDENT'S MESSAGE Dear Shareholder: Two factors have contributed to the recent weakness in the stock market: a stronger-than-expected economic slowdown, reinforced by the higher costs of energy and a slump in the technology sector, and a sharp reduction in earnings growth expectations. At the end of 2000, expected fourth-quarter S&P earnings growth had been revised downward from a gain of 15%-16% to a gain of approximately 7%. As for 2001, some are concerned about a possible recession. Nevertheless, we believe that a slowdown in the first quarter is most likely. If the economy does slip into a recession in the first half of 2001, it ultimately could have positive ramifications for the stock market. If a recession occurs, it is likely that the Federal Reserve would cut rates aggressively. And, historically speaking, the market has generally gained ground after the Fed has cut rates during a recession. Slowdown or recession, we soon will be looking toward the next year, and 2002 could be a year of improved economic growth. The economy may benefit from the delayed impact of additional interest rate cuts expected in 2001. Furthermore, there may be some type of tax cut plan in 2001, with the impact hitting in 2002. Energy prices could also start to come down by the summer, as more supplies hit the market and demand lessens. If energy costs remain low next winter, consumer disposable income could get a nice boost. The bottom line is we believe that the worst may be nearly over. And, in turn, we may be approaching the point at which market participants start to anticipate a brighter 2002. Sincerely, Stephen E. Gibson President February 12, 2001 2 PORTFOLIO MANAGERS' REPORT INVESTORS TURN TO VALUE IN A VOLATILE MARKET In 2000 the U.S. equity markets experienced a decisive shift in investor sentiment from the growth style of investment management to the value style. As such, value managers, generally outperformed their growth-oriented counterparts for the year. The technology stocks, that propelled the growth style of investment management during 1999 and early in 2000, were hit hard by valuation and profitability concerns. This triggered a broad correction among internet and dot-com related stocks during second half of the year. The NASDAQ Composite Index, heavily weighted in the technology sector, fell 39% for the year. Liberty All-Star Growth & Income Fund's Class A shares Net Asset Value (NAV) increased from $11.15 on December 31, 1999, to $11.92 on December 31, 2000, and posted a total return of 6.91% for the year (without a sales charge). This return compares favorably to the one-year total return of negative 9.10% for the Standard & Poor's 500 (S&P 500) Index. In particular, the Fund's value managers offered strong returns in 2000, significantly outperforming the S&P 500 and other growth-related indexes. As we approach the Fund's two-year anniversary, we are pleased by the long-term performance of the Fund. The Fund's Class A shares Net Asset Value (NAV) increased from $10.00 at the inception date of 3-1-99 to $11.92 on December 31, 2000, for a 10.04% annualized total return (without a sales charge). This compares favorably to an annualized total return of 4.81%* for the S&P 500 Index over the same time period. The equity markets have experienced large swings in performance between the growth and value styles of investment management over the past two years. We believe that trying to time the out-performance of either style is extremely difficult. That is why we attempt to generate attractive long-term, risk-adjusted performance by selecting both growth and value investment managers to manage the Fund. In addition to providing a significant performance advantage relative to the S&P 500 during 2000, this approach helped the Fund avoid the severe downside volatility that characterized 2000. On behalf of the entire LAMCO team, I would like to take this opportunity to thank you for supporting the fund and LAMCO's investment approach. * As of 2/28/99 3 BILL PARMENTIER AND CHRIS CARABELL SIGNATURES -- ALSO NOTE JP MORGAN HAS BEEN REPLACED BY MASTRAPASQUA & ASSOCIATES (A GROWTH MANAGER) AND WESTWOOD HAS BEEN RECLASSIFIED AS A VALUE MANAGER. An investment in the Fund offers significant long-term growth potential, but also involves certain risks. The Fund may be affected by stock market fluctuations that occur in response to economic and business developments. PERFORMANCE INFORMATION
------------------------------------------------------------------------------- PERFORMANCE OF A $10,000 INVESTMENT IN ALL SHARE CLASSES 3/1/99-12/31/00 ------------------------------------------------------------------------------- WITHOUT WITH SALES CHARGE($) SALES CHARGE($) ------------------------------------------------------------------------------- CLASS A $11,920 $11,235 CLASS B $11,760 $11,360 CLASS C $11,750 $11,750 CLASS Z $11,970 $11,970
Performance of a $10,000 investment in Class A Shares 3/1/99-12/31/00
LIBERTY ALL STAR GROWTH & INCOME FUND LIBERTY ALL STAR GROWTH & INCOME FUND S&P500 INDEX without sales charge with sales charge 03/01/99 $10,000.00 03/01/99 $ 9,425.00 02/28/99 $10,000.00 03/31/99 3.50% $10,350.00 03/31/99 3.50% $ 9,754.88 03/31/99 4.00% $10,400.00 04/30/99 5.70% $10,939.95 04/30/99 5.70% $10,310.90 04/30/99 3.87% $10,602.48 05/31/99 -1.46% $10,780.23 05/31/99 -1.46% $10,160.36 05/31/99 -2.38% $10,547.54 06/30/99 3.62% $11,170.47 06/30/99 3.62% $10,528.17 06/30/99 5.53% $11,130.82 07/31/99 -4.03% $10,720.30 07/31/99 -4.03% $10,103.88 07/31/99 -3.11% $10,784.65 08/31/99 -3.26% $10,370.82 08/31/99 -3.26% $ 9,774.50 08/31/99 -0.50% $10,730.73 09/30/99 -2.31% $10,131.25 09/30/99 -2.31% $ 9,548.71 09/30/99 -2.74% $10,436.71 10/31/99 4.34% $10,570.95 10/31/99 4.34% $ 9,963.12 10/31/99 6.33% $11,097.35 11/30/99 0.65% $10,640.72 11/30/99 0.66% $10,028.88 11/30/99 2.03% $11,322.63 12/31/99 4.79% $11,150.41 12/31/99 4.79% $10,509.26 12/31/99 5.88% $11,988.40 01/31/00 -3.50% $10,780.14 01/31/00 -3.50% $10,141.44 01/31/00 -5.02% $11,386.58 02/29/00 -0.93% $10,660.07 02/29/00 -0.93% $10,047.12 02/29/00 -1.89% $11,171.37 03/31/00 10.04% $11,730.35 03/31/00 10.04% $11,055.85 03/31/00 9.78% $12,263.93 04/30/00 -1.35% $11,570.81 04/30/00 -1.36% $10,905.49 04/30/00 -3.01% $11,894.79 05/31/00 0.52% $11,630.98 05/31/00 0.52% $10,962.20 05/31/00 -2.05% $11,650.95 06/30/00 0.26% $11,661.22 06/30/00 0.26% $10,990.70 06/30/00 2.46% $11,937.56 07/31/00 -0.94% $11,551.61 07/31/00 -0.94% $10,887.39 07/31/00 -1.56% $11,751.33 08/31/00 6.93% $12,352.13 08/31/00 6.93% $11,641.89 08/31/00 6.21% $12,481.09 09/30/00 -2.19% $12,081.62 09/30/00 -2.19% $11,386.93 09/30/00 -5.28% $11,822.09 10/31/00 1.57% $12,271.30 10/31/00 1.57% $11,565.70 10/31/00 -0.42% $11,772.44 11/30/00 -7.42% $11,360.77 11/30/00 -7.42% $10,707.53 11/30/00 -7.88% $10,844.77 12/31/00 4.93% $11,920.00 12/31/00 4.93% $11,234.60 12/31/00 0.49% $10,897.91
The Standard & Poor's 500 Index is an unmanaged index that tracks the performance of 500 widely 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. AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/00 -------------------------------------------------------------------------------------------------------------------------- SHARE CLASS A B C Z -------------------------------------------------------------------------------------------------------------------------- INCEPTION 3/1/99 3/1/99 3/1/99 3/1/99 -------------------------------------------------------------------------------------------------------------------------- WITHOUT WITH WITHOUT WITH WITHOUT WITH WITHOUT SALES SALES SALES SALES SALES SALES SALES CHARGE(%) CHARGE(%) CHARGE(%) CHARGE(%) CHARGE(%) CHARGE(%) CHARGE(%) -------------------------------------------------------------------------------------------------------------------------- 1 YEAR 6.91 0.76 6.04 1.04 6.05 5.05 7.16 LIFE 10.04 6.55 9.23 7.19 9.18 9.18 10.29
Past performance cannot predict future 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) charge of 5% for one year, 4% since inception for Class B shares and 1% for one year for Class C shares. Performance results reflect any voluntary waivers or reimbursement of Fund expenses by the Advisor or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. Performance for different share classes will vary based on differences in sales charges and fees associated with each class. 4 LIBERTY ALL-STAR GROWTH AND INCOME SCHEDULE OF INVESTMENTS December 31, 2000
SHARES MARKET VALUE ---------------------------------------------------------------------------------- AEROSPACE & DEFENSE (1.4%) The Boeing Co. 3,400 $ 224,400 United Technologies Corp. 2,200 172,975 ------------ 397,375 ------------ BANKS (6.5%) Bank of America Corp. 9,100 417,462 The Bank of New York Co., Inc. 2,300 126,931 Chase Manhattan Corp. 3,350 152,215 Comerica, Inc. 1,800 106,875 First Union Corp. 6,300 175,219 FleetBoston Financial Corp. 5,800 217,863 KeyCorp. 5,600 156,800 PNC Financial Services Corp. 2,150 157,084 Suntrust Banks, Inc. 2,700 170,100 Wells Fargo & Co. 3,793 211,223 ------------ 1,891,772 ------------ BROADCASTING & CABLE (1.9%) Cablevision Systems Corp. Class A(a) 3,400 288,788 Clear Channel Communications, Inc.(a) 5,540 268,344 ------------ 557,132 ------------ BUSINESS & CONSUMER SERVICES (0.9%) Paychex, Inc. 5,400 262,575 ------------ CHEMICALS (0.5%) Praxair, Inc. 3,400 150,875 ------------ COMMUNICATIONS EQUIPMENT (2.3%) Avaya, Inc.(a) 3,500 36,093 Cisco Systems, Inc.(a) 7,700 294,525 Nokia Corp.(b) 5,000 217,500 Nortel Networks Corp. 3,500 112,219 ------------ 660,337 ------------ COMPUTER & BUSINESS EQUIPMENT (4.9%) Compaq Computer Corp. 9,400 141,470 Dell Computer Corp.(a) 14,900 259,819 EMC Corp.(a) 1,490 99,085 International Business Machines Corp. 2,120 180,200 Lexmark International Group, Inc.(a) 4,500 199,406 NCR Corp.(a) 2,100 103,163 Network Appliance, Inc.(a) 1,700 109,198 Sun Microsystems, Inc.(a) 2,800 78,050 3Com Corp.(a) 19,400 164,900 VERITAS Software Corp.(a) 1,000 87,500 ------------ 1,422,791 ------------ COMPUTER SERVICES & SOFTWARE (3.3%) Electronic Data Systems Corp. 2,400 138,600 Microsoft Corp.(a) 5,100 221,850 Oracle Corp.(a) 4,400 127,875 Parametric Technology Co.(a) 10,800 145,125 Siebel Systems, Inc.(a) 3,750 254,063 Yahoo!, Inc.(a) 2,450 73,921 ------------ 961,434 ------------ CONSUMER PRODUCTS (4.0%) Avon Products, Inc. 8,984 430,109 Kimberly-Clark Corp. 3,300 233,277 Procter & Gamble Co. 2,200 172,563 UST, Inc. 11,400 319,913 ------------ 1,155,862 ------------ DIVERSIFIED (2.6%) General Electric Co. 5,300 254,069 Honeywell International, Inc. 500 23,656 Minnesota Mining & Manufacturing Co. 3,942 475,011 ------------ 752,736 ------------ DRUGS & HEALTH CARE (13.7%) Amgen, Inc. 5,850 374,034 Applera Corp. - Applied Biosystems Group 1,000 94,062 Baxter International, Inc. 3,100 273,769 Biogen, Inc.(a) 4,350 261,271 Biovail Corp.(a) 3,000 116,520 Boston Scientific Corp.(a) 7,800 106,763 Bristol-Myers Squibb Co. 3,300 243,994 Cardinal Health, Inc. 1,400 139,475 Elan Corp. PLC(b) 2,400 112,350 Forest Laboratories, Inc.(a) 1,000 132,875 Genentech, Inc.(a) 4,250 346,375 IDEC Pharmaceuticals Corp.(a) 700 132,694 Invitrogen Corp.(a) 1,400 120,925 Johnson & Johnson 1,400 147,087 MedImmune, Inc.(a) 1,800 85,838 Merck & Co., Inc. 1,200 112,350 Millipore Corp.(a) 1,400 88,200 Pfizer, Inc. 8,425 387,550 Pharmacia Corp. 7,813 476,593 Protein Design Labs, Inc.(a) 900 78,188 Wellpoint Health Networks, Inc.(a) 1,500 172,875 ------------ 4,003,788 ------------ ELECTRIC & GAS UTILITIES (2.3%) Duke Energy Corp. 1,700 144,925 Exelon Corp. 2,600 182,546 NiSource, Inc. 828 25,461 Progress Energy, Inc. 3,372 165,845 Progress Energy, Inc., Contingent Value Obligations(a) 3,000 1,350 Reliant Energy, Inc. 3,500 151,594 ------------ 671,721 ------------
See Notes to Schedule of Investments. 5
SHARES MARKET VALUE ---------------------------------------------------------------------------------- ELECTRONICS & ELECTRICAL EQUIPMENT (7.6%) Analog Devices, Inc.(a) 1,500 $ 76,781 Applied Materials, Inc.(a) 5,400 206,212 Broadcom Corp. Class A 700 59,150 Emerson Electric Co. 7,206 567,923 Intel Corp. 8,450 255,613 JDS Uniphase Corp.(a) 4,700 195,931 Maxim Integrated Products, Inc.(a) 4,950 236,672 PMC-Sierra, Inc.(a) 1,000 78,625 Synopsys, Inc.(a) 3,000 142,313 Texas Instruments, Inc.(a) 2,900 137,388 Waters Corp.(a) 1,500 125,250 Xilinx, Inc.(a) 3,150 145,294 ------------ 2,227,152 ------------ FINANCIAL SERVICES (11.1%) American Express Co. 2,200 120,862 AXA Financial, Inc.(b) 679 48,724 The Charles Schwab Corp. 8,250 234,094 Citigroup, Inc. 12,053 615,456 Countrywide Credit Industries, Inc. 10,200 512,550 Freddie Mac 7,796 536,950 Lehman Brothers Holdings, Inc. 500 33,813 Merrill Lynch & Co., Inc. 2,300 156,831 MetLife, Inc. 4,300 150,500 Morgan Stanley Dean Witter & Co. 4,100 324,925 Providian Financial Corp. 3,900 224,250 Stilwell Financial, Inc. 6,800 268,175 ------------ 3,227,130 ------------ FOOD, BEVERAGE & RESTAURANTS (1.1%) Anheuser-Busch Companies, Inc. 3,300 150,150 Heinz (H.J.) Co. 3,500 166,031 ------------ 316,181 ------------ FORESTRY & PAPER (1.1%) Georgia Pacific Corp. 5,700 177,412 Weyerhaeuser Co. 2,700 137,025 ------------ 314,437 ------------ HOTELS & ENTERTAINMENT/LEISURE (2.9%) Carnival Corp. 6,200 191,038 Pixar, Inc.(a) 2,600 78,000 Readers Digest Association, Inc. 5,400 211,275 Starwood Hotels & Resorts Worldwide, Inc. 2,600 91,650 Time Warner, Inc. 2,800 146,272 Walt Disney Co. 4,400 127,325 ------------ 845,560 ------------ INDUSTRIAL EQUIPMENT (1.0%) Deere & Co. 3,500 160,344 Dover Corp. 3,393 137,629 ------------ 297,973 ------------ INSURANCE (8.6%) ACE Ltd. 5,050 214,309 Aetna, Inc.(a) 3,800 156,038 AFLAC, Inc. 4,271 308,312 Allmerica Financial Corp. 3,975 288,187 American International Group, Inc. 2,250 221,765 CIGNA Corp. 2,075 274,523 The Hartford Financial Services Group, Inc. 2,100 148,312 The Progressive Corp.-Ohio 5,250 544,031 UnumProvident Corp. 3,500 94,063 XL Capital Ltd. 2,900 253,388 ------------ 2,502,928 ------------ METALS & MINING (1.3%) Alcoa, Inc. 11,000 $ 368,500 ------------ OIL & GAS (7.0%) Anadarko Petroleum Corp. 2,100 149,268 Apache Corp. 2,100 147,131 Burlington Resources, Inc. 4,700 237,350 Chevron Corp. 1,700 143,543 Conoco, Inc. Class A 3,850 110,206 Conoco, Inc. Class B 5,500 159,156 Devon Energy Corp. 2,508 152,913 El Paso Energy Corp. 5,000 358,125 Exxon Mobil Corp. 1,700 147,794 Halliburton Co. 3,075 111,469 USX-Marathon Group 6,900 191,475 The Williams Companies, Inc. 3,500 139,781 ------------ 2,048,211 ------------ REAL ESTATE INVESTMENT TRUSTS (0.5%) Kimco Realty Corp. 1,800 79,538 Vornado Realty Trust 1,800 68,963 ------------ 148,501 ------------ RETAIL TRADE (5.6%) Costco Wholesale Corp.(a) 2,700 107,831 Harcourt General, Inc. 4,425 253,110 The Home Depot, Inc. 6,000 274,125 Kroger Corp.(a) 6,300 170,494 The Limited, Inc. 5,500 93,844 May Department Stores Co. 5,214 170,759 RadioShack Corp. 2,000 85,625 Target Corp. 4,900 158,025 Tiffany & Co. 1,700 53,763 Wal-Mart Stores, Inc. 4,900 260,312 ------------ 1,627,888 ------------ TELECOMMUNICATIONS (3.5%) Qualcomm, Inc.(a) 900 73,969 SBC Communications, Inc. 6,859 327,517 Sprint Corp. (FON Group) 13,353 271,233 Verizon Communications 6,818 341,752 ------------ 1,014,471 ------------
See Notes to Schedule of Investments. 6
SHARES MARKET VALUE ---------------------------------------------------------------------------------- TRANSPORTATION (2.7%) AMR Corp.(a) 5,000 $ 195,937 Canadian Pacific Ltd. 6,300 179,943 Delta Air Lines, Inc. 3,300 165,619 Southwest Airlines Co. 4,000 134,120 United Parcel Service, Inc. Class B 2,300 135,268 ------------ 810,887 ------------ TOTAL COMMON STOCKS 28,638,217 (Cost $25,575,467) ------------ PREFERRED STOCK (0.5%) BROADCASTING & CABLE The News Corp. Ltd.(b) 4,548 132,176 (Cost $137,354) ------------ TOTAL INVESTMENTS (98.8%) 28,770,393 (Cost of $25,712,821)(c) ------------
SHORT-TERM INVESTMENT (2.6%) PAR ---------------------------------------------------------------------------------- REPURCHASE AGREEMENT (2.6%) SBC Warburg Ltd., Repurchase Agreement dated 12/29/00, 6.00% to be repurchased at $746,497 on 01/02/01, collateralized by U.S. Treasury bonds and/or notes with various maturities to 2028, with a current market value of $760,295 $746,000 746,000 ------------ OTHER ASSETS & LIABILITIES, NET (-1.4%) (394,652) ------------ NET ASSETS (100.0%) $ 29,121,741 ------------ Notes to Schedule of Investments: (a) Non-income producing security. (b) Represents an American Depositary Receipt. (c) Cost for federal income tax purposes is $25,867,921. Gross unrealized appreciation and depreciation of investments at December 31, 2000 is as follows: Gross unrealized appreciation $ 5,160,203 Gross unrealized depreciation (2,257,731) ------------ Net unrealized appreciation $ 2,902,472 ============
See notes to financial statements 7 STATEMENT OF ASSETS & LIABILITIES December 31, 2000 ASSETS Investments at value (cost $25,712,821) $28,770,393 Short-term obligations 746,000 ----------- 29,516,393 ----------- Receivable for: Investments sold $257,047 Dividends 18,305 Fund shares sold 4,864 Interest 373 Other 4,900 Expense reimbursement due from Advisor 80,692 366,181 -------- ----------- Total Assets 29,882,574 LIABILITIES Payable to custodian bank 122,690 Payable for: Investments purchased 341,077 Fund shares repurchased 176,907 Accrued: Management fee 14,511 Administration fee 1,665 Service fee 398 Distribution fee - Class B 2,472 Distribution fee - Class C 718 Bookkeeping fee 5,630 Transfer agent fee 9,819 Other 84,946 -------- Total Liabilities 760,833 ----------- NET ASSETS $29,121,741 ----------- Net asset value & redemption price per share - Class A ($4,301,931/360,986) $ 11.92(a) ----------- Maximum offering price per share - Class A ($11.92/0.9425) $ 12.65(b) ----------- Net asset value & offering price per share - Class B ($17,926,326/1,524,771) $ 11.76(a) ----------- Net asset value & offering price per share - Class C ($4,500,809/382,917) $ 11.75(a) ----------- Net asset value, offering and redemption price per share - Class Z ($2,392,675/199,907) $ 11.97 ----------- COMPOSITION OF NET ASSETS Capital paid in $26,221,176 Accumulated realized loss (157,007) Net unrealized appreciation 3,057,572 ----------- $29,121,741 -----------
(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. See notes to financial statements. 8 STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000 INVESTMENT INCOME Dividends $ 312,071 Interest 55,095 ---------- Total investment income (net of nonreclaimable foreign taxes withheld at source which amounted to $1,619) 367,166 EXPENSES Management fee $ 163,057 Administrative fee 54,352 Service fee - Class A 10,494 Service fee - Class B 40,445 Service fee - Class C 11,192 Distribution fee - Class B 121,333 Distribution fee - Class C 33,576 Transfer agent fee 67,381 Bookkeeping fee 36,099 Trustees fee 14,042 Custodian fee 10,769 Audit fee 3,497 Legal fee 29,563 Reports to shareholders 28,924 Registration fee 53,467 Other 22,128 --------- 700,319 Fees and expenses waived or borne by the Advisor (143,400) 556,919 --------- ---------- Net Investment Loss (189,753) ---------- NET REALIZED & UNREALIZED GAIN ON PORTFOLIO POSITIONS Net realized gain 188,417 Net Change in Unrealized Appreciation/Depreciation 1,583,656 ---------- Net Gain 1,772,073 ---------- Increase in Net Assets from Operations $1,582,320 ==========
See notes to financial statements. 9 STATEMENT OF CHANGES IN NET ASSETS
Year ended Year ended December 31 December 31 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS 2000 1999(a) Operations: Net investment loss $ (189,753) $ (62,030) Net realized gain (loss) 188,417 (320,811) Net change in unrealized appreciation/depreciation 1,583,656 1,473,916 ------------ ------------ Net Increase from Operations 1,582,320 1,091,075 ------------ ------------ Fund Share Transactions: Receipts for shares sold - Class A 1,186,021 3,835,797 Cost of shares repurchased - Class A (865,982) (270,986) ------------ ------------ 320,039 3,564,811 ------------ ------------ Receipts for shares sold - Class B 6,101,513 14,588,835 Cost of shares repurchased - Class B (2,774,654) (1,375,484) ============ ============ 3,326,859 13,213,351 ------------ ------------ Receipts for shares sold - Class C 793,919 4,155,190 Cost of shares repurchased - Class C (636,705) (239,118) ------------ ------------ 157,214 3,916,072 ------------ ------------ 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 3,804,112 22,644,234 ------------ ------------ Total Increase 5,386,432 23,735,309 NET ASSETS Beginning of period 23,735,309 -- ------------ ------------ End of period (net of accumulated $ 29,121,741 $ 23,735,309 net investment income of none and ============ ============ none, respectively) NUMBER OF FUND SHARES Sold - Class A 103,238 358,222 Repurchased - Class A (74,795) (25,679) ------------ ------------ 28,443 332,543 ------------ ------------ Sold - Class B 532,680 1,366,155 Repurchased - Class B (244,238) (129,826) ------------ ------------ 288,442 1,236,329 ------------ ------------ Sold - Class C 69,136 390,902 Repurchased - Class C (54,968) (22,153) ------------ ------------ 14,168 368,749 ------------ ------------ Sold - Class Z -- 270,000 Repurchased - Class Z -- (70,093) ------------ ------------ -- 199,907 ------------ ------------
(a) The Fund commenced operations on March 1, 1999. See notes to financial statements. 10 FINANCIAL HIGHLIGHTS Selected data for a share of each class outstanding throughout each period are as follows:
Year ended December 31, 2000 --------------------------------------------------- Class A Class B Class C Class Z --------- --------- --------- --------- Net asset value - Beginning of period $ 11.150 $ 11.090 $ 11.080 $ 11.170 --------- --------- --------- --------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(a)(b) (0.017) (0.103) (0.103) 0.012 Net realized and unrealized gain 0.787 0.773 0.773 0.788 --------- --------- --------- --------- Total from Investment Operations 0.770 0.670 0.670 0.800 --------- --------- --------- --------- Net asset value - End of period $ 11.920 $ 11.760 $ 11.750 $ 11.970 --------- --------- --------- --------- Total return(c)(d) 6.91% 6.04% 6.05% 7.16% --------- --------- --------- --------- RATIOS TO AVERAGE NET ASSETS Expenses(e) 1.50% 2.25% 2.25% 1.25% Fees and expenses waived or borne by the Advisor(e) 0.53% 0.53% 0.53% 0.53% Net investment income (loss)(e) (0.15)% (0.90)% (0.90)% 0.10% Portfolio turnover 82% 82% 82% 82% Net assets at end of period (000) $ 4,302 $ 17,926 $ 4,501 $ 2,393 (a) Net of fees and expenses waived or borne by the Advisor which amounted to: $ 0.061 $ 0.061 $ 0.061 $ 0.061
(b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Had the Advisor not waived or reimbursed a portion of expenses, total return would have been reduced. (e) The benefits derived from custody credits and directed brokerage arrangements had no impact. 11 FINANCIAL HIGHLIGHTS Selected data for a share of each class outstanding throughout each period are as follows:
Period ended December 31 ---------------------------------------------------- 1999(b) Class A Class B Class C Class Z --------- --------- --------- --------- Net asset value - Beginning of period $ 10.000 $ 10.000 $ 10.000 $ 10.000 --------- --------- --------- --------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (a)(c) (0.003) (0.071) (0.071) 0.019 Net realized and unrealized gain 1.153 1.161 1.151 1.151 --------- --------- --------- --------- Total from Investment Operations 1.150 1.090 1.080 1.170 --------- --------- --------- --------- Net asset value - End of period $ 11.150 $ 11.090 $ 11.080 $ 11.170 ========= ========= ========= ========= Total return (d)(e)(f) 11.50% 10.90% 10.80% 11.70% ========= ========= ========= ========= 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) 1.69% 1.69% 1.69% 1.69% Net investment income (loss) (g)(h) (0.03)% (0.78)% (0.78)% 0.22% Portfolio turnover (f) 68% 68% 68% 68% Net assets at end of period (000) $ 3,708 $ 13,706 $ 4,087 $ 2,234 (a) Net of fees and expenses waived or borne by the Advisor which amounted to: $ 0.150 $ 0.150 $ 0.150 $ 0.150
(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 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES Liberty All-Star Growth and Income Fund (All-Star or the Fund), organized as a Massachusetts business trust in 1998, is an open-end, diversified management investment company. All-Star'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. All-Star is managed by Liberty Asset Management Company (the "Manager"). The Manager 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 contingent deferred sales charge is assessed on redemptions made within eighteen months on an original purchase of $1 million to $25 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 in three, four or eight years after purchase, depending on the program under which shares were purchased. 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 All-Star 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. 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 operating expenses are recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. 13 DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS - All income, expenses (other than 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 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 All-Star's Management and Portfolio Management Agreements, All-Star pays the Manager a management fee for its investment management services at an annual rate of 0.60% of All-Star's average net assets. The Manager 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 Manager. ADMINISTRATION FEE - All-Star pays the Manager an administrative fee for its administrative services at an annual rate of 0.20% of All-Star's average net assets. BOOKKEEPING FEE - Colonial Management Associates, Inc., an affiliate of the Manager, provides bookkeeping and pricing services for $36,000 annually plus 0.035% annually of All-Star's average net assets over $50 million. TRANSFER AGENT FEE - Liberty Funds Services, Inc., an affiliate of the Manager, provides shareholder services for a fee comprised of 0.07% annually of average net assets plus charges based on the number of shareholder accounts and transactions and receives reimbursement for certain out-of-pocket expenses. UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES - Liberty Funds Distributor, Inc., a subsidiary of the Manager, is the Fund's principal underwriter. For the year ended December 31, 2000, the Fund has been advised that the Distributor retained net underwriting discounts of $3,596 on sales of the Fund's Class A shares and received contingent deferred sales charges (CDSC) of $50, $50,532 and $1,736 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 equal to 0.25% annually on Class A, Class B and Class C net assets as of the 20th of each month. The plan also requires the payment of a 14 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 Manager 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 year ended December 31, 2000 were $25,633,402 and $21,476,390, 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 33 1/3% 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 year ended December 31, 2000. NOTE 7. OTHER RELATED PARTY TRANSACTIONS At December 31, 2000, LAMCO owned 3%, 3%, and 100% of the Fund's outstanding Class A, Class C and Class Z shares, respectively. NOTE 8. PLAN OF REORGANIZATION The Board of Trustees of the Fund has approved a proposal to reorganize the Fund into the Liberty Growth & Income Fund. Shareholders of the Fund approved the reorganization on January 25, 2001. The reorganization took 15 REPORT OF INDEPENDENT ACCOUNTANTS TO THE SHAREHOLDERS AND THE TRUSTEES OF LIBERTY ALL-STAR GROWTH & INCOME FUND In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Liberty All-Star Growth & Income Fund (the "Fund") at December 31, 2000, the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and the financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of portfolio positions at December 31, 2000 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. Effective February 9, 2001, as discussed in Note 8, the Fund merged into Liberty Growth & Income Fund. PricewaterhouseCoopers LLP Boston, Massachusetts February 12, 2001