UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM N-CSR

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number

811-04537

 

Liberty All-Star Growth Fund, Inc.

(Exact name of registrant as specified in charter)

 

1625 Broadway, Suite 2200, Denver, Colorado

 

80202

(Address of principal executive offices)

 

(Zip code)

 

Tane T. Tyler, Secretary
Liberty All-Star Growth Fund, Inc.
1290 Broadway, Suite 1100
Denver, Colorado 80203

(Name and address of agent for service)

 

Registrant’s telephone number, including area code:

303-623-2577

 

 

Date of fiscal year end:

December 31

 

 

Date of reporting period:

June 30, 2008

 

 


 

Item 1.  Reports to Stockholders.

 


 

 


 

LIBERTY ALL-STAR® GROWTH FUND, INC.

Period Ending June 30, 2008

 

Fund Statistics

 

 

 

Net Asset Value (NAV)

 

$

5.11

 

Market Price

 

$

4.67

 

Discount

 

8.6

%

 

 

 

Quarter

 

Year-to-Date

 

Distributions

 

$0.14

 

$0.27

 

Market Price Trading Range

 

$4.60 to $5.16

 

$4.27 to $6.01

 

Premium/(Discount) Range

 

(6.7)% to (10.1

)%

0.9% to (10.1

)%

 

Performance

 

 

 

 

 

Shares Valued at NAV

 

3.0

%

(10.8

)%

Shares Valued at NAV with Dividends Reinvested

 

3.0

%

(10.6

)%

Shares Valued at Market Price with Dividends Reinvested

 

1.7

%

(17.3

)%

NASDAQ Composite Index

 

0.8

%

(13.2

)%

Russell 3000® Growth Index

 

1.5

%

(9.0

)%

S&P 500 Index

 

(2.7

)%

(11.9

)%

Lipper Multi-Cap Growth Mutual Fund Average*

 

1.7

%

(10.8

)%

NAV Reinvested Percentile Rank (1 = best; 100 = worst)

 

34th

 

44th

 

Number of Funds in Category

 

542

 

528

 

 

*

Percentile rank calculated using the Fund’s NAV Reinvested return within the Lipper Multi-Cap Growth Open-end Mutual Fund Universe.

 

Figures shown for the Fund and the Lipper Multi-Cap Growth Mutual Fund Average are total returns, which include dividends, after deducting fund expenses. Figures shown for the unmanaged NASDAQ Composite Index, the Russell 3000 Growth Index and the S&P 500 Index are total returns, including income. A description of the Lipper benchmark and the market indices can be found on page 28.

 

Past performance cannot predict future results. Performance will fluctuate with market conditions. Current performance may be lower or higher than the performance data shown. Performance information does not reflect the deduction of taxes that shareholders would pay on Fund distributions or the sale of Fund shares. An investment in the Fund involves risk, including loss of principal.

 

Shares of closed-end funds frequently trade at a discount to net asset value. The price of the Fund’s shares is determined by a number of factors, several of which are beyond the control of the Fund. Therefore, the Fund cannot predict whether its shares will trade at, below or above net asset value.

 


 

 

 

LIBERTY ALL-STAR® GROWTH FUND

 

 

PRESIDENT’S LETTER

 

 

July 2008

 

Fellow Shareholders:

 

The second quarter got off to a promising start, as broad market indices posted gains in April and May after declining for five straight months from November through March. June, however, proved to be a different story, as it dashed investors’ hopes and led most equity indices to post double-digit declines for the first half of 2008. As shareholders may have read already, it was the worst June for the Dow Jones Industrial Average since the Great Depression. Looking at more recent history, it was the third straight quarterly decline for the S&P 500 Index, and the worst second quarter since 2002.

 

Growth stocks outperformed value, which helped Liberty All-Star Growth Fund turn in a positive quarter. We will comment on Fund performance shortly.

 

In the second quarter, the woes that have plagued stock markets since the latter half of 2007 continued – with a vengeance. Oil and other commodity prices soared to record levels. The housing market remained in the doldrums. Unemployment ticked upward and consumer sentiment fell to its lowest level since 1980. And the credit crisis, with all its far-reaching implications, seemed to raise new doubts about the stability of financial institutions large and small. In fact, financials were the poorest performing sector, as banks and financial institutions took write-downs and reported disappointing earnings. With vehicle sales falling dramatically, General Motors Corp. lost 40 percent of its value during the quarter. Twenty-two of 30 Dow Industrial stocks closed the quarter in the red.

 

Volatility moderated somewhat over the quarter, but it would be hard to convince many investors of that. As measured by the Volatility Index (VIX), volatility was 108 percent higher in the first quarter of 2008 than in the year-earlier period. The VIX declined in the second quarter – but was still 51 percent higher on average than it was in the second quarter of 2007.

 

At June 30, the S&P 500 Index had fallen 2.7 percent for the quarter and 11.9 percent for the first half. The Nasdaq Composite Index actually rose 0.8 percent, but was off 13.2 percent for the half. An active growth style benchmark, the Lipper Multi-Cap Growth Mutual Fund Average gained 1.7 percent for the quarter but was 10.8 percent lower for the half. The Russell 3000 Growth Index returned 1.5 percent for the quarter, but was down 9.0 percent for the half.

 

Turning to Liberty All-Star Growth Fund, the Fund’s net asset value (NAV) and NAV with dividends reinvested both rose 3.0 percent in the second quarter. Shares valued at market price with dividends reinvested did not quite keep pace, rising 1.7 percent as the discount to NAV at which shares trade widened. For the first half, the Fund’s NAV declined 10.8 percent and NAV with dividends reinvested fell 10.6 percent. Shares valued at market price with dividends

 

www.all-starfunds.com

 

ASG

 

1


 

reinvested declined 17.3 percent, once again reflecting a widening of the discount, which grew to as much as 10.1 percent during the quarter, a trend that has impacted many closed-end funds during this period of heightened market volatility.

 

This quarter’s investment manager interview is with Matt Weatherbie, CFA, President and Founder of M. A. Weatherbie & Co., Inc., the Fund’s small cap growth manager. In a market that is clearly in the grip of emotion, Matt Weatherbie continues to pick quality small cap stocks on a bottom-up basis – that is, investing in companies with sound fundamentals and solid long-term prospects.

 

We are pleased that despite the current upheaval – or, more likely, because of it – investors are focused on the type of high quality growth stocks that have always been the hallmark of the Fund. Obviously, we are disappointed in a widening of the discount and its impact on the price of Fund shares. Still, through June this year, the Fund comfortably ranks in the top half of the Lipper Multi-Cap Growth universe. We will continue to monitor the Fund and the broader markets and act in accord with our objective of consistent long-term returns for shareholders.

 

Sincerely,

 

 

 

 

William R. Parmentier, Jr.

 

President

 

Liberty All-Star Growth Fund, Inc.

 

 

The views expressed in the President’s letter and the Manager Interview reflect the views of the President and Manager, respectively, as of July 2008 and may not reflect their views on the date this report is first published or anytime thereafter. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for the Fund are based on numerous factors, may not be relied on as an indication of trading intent. References to specific company securities should not be construed as a recommendation or investment advice.

 

SECOND QUARTER REPORT

JUNE 30, 2008

 

2


 

 

 

LIBERTY ALL-STAR® GROWTH FUND

 

 

TABLE OF DISTRIBUTIONS & RIGHTS OFFERINGS

 

 

 

 

 

RIGHTS OFFERINGS

 

 

 

 

 

 

 

SHARES NEEDED

 

 

 

 

 

PER SHARE

 

MONTH

 

TO PURCHASE

 

SUBSCRIPTION

 

YEAR

 

DISTRIBUTIONS

 

COMPLETED

 

ONE ADDITIONAL SHARE

 

PRICE

 

1997

 

$

1.24

 

 

 

 

 

 

 

1998

 

1.35

 

July

 

10

 

$

12.41

 

1999

 

1.23

 

 

 

 

 

 

 

2000

 

1.34

 

 

 

 

 

 

 

2001

 

0.92

 

September

 

8

 

6.64

 

2002

 

0.67

 

 

 

 

 

 

 

2003

 

0.58

 

September

 

8

*

5.72

 

2004

 

0.63

 

 

 

 

 

 

 

2005

 

0.58

 

 

 

 

 

 

 

2006

 

0.59

 

 

 

 

 

 

 

2007

 

0.61

 

 

 

 

 

 

 

2008

 

 

 

 

 

 

 

 

 

1st Quarter

 

0.13

 

 

 

 

 

 

 

2nd Quarter

 

0.14

 

 

 

 

 

 

 

 

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

 

DISTRIBUTION POLICY

 

Liberty All-Star Growth Fund, Inc.’s current policy, in effect since 1997, is to pay distributions on its 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 and may be taxed as ordinary income up to the amount of the Fund’s current and accumulated earnings and profits. If, for any calendar year, the total distributions made under the 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 non-taxable return of capital, reducing the shareholder’s adjusted basis in his or her shares. If the Fund’s net investment income and net realized capital gains for any year exceed the amount distributed under the 10 percent pay-out policy, the Fund may, in its discretion, retain and not distribute net realized capital gains and pay income tax thereon to the extent of such excess.

 

DIVIDEND REINVESTMENT PLAN

 

Each registered shareholder of the Fund will automatically be a participant in the Fund’s Automatic Dividend Reinvestment and Cash Purchase Plan unless the shareholder specifically elects otherwise by writing to the Plan Agent, Computershare Trust Company, N.A., P.O. Box 43078, Providence, RI 02940-3078 or by calling 1-800-LIB-FUND (1-800-542-3863). If your shares are held for you by a broker, bank or other nominee, you should contact the institution holding your shares as to whether or not you wish to participate in the Plan. Participants in the Plan have their dividends automatically reinvested in additional shares of the Fund, and are kept apprised of the status of their account through quarterly statements.

 

3


 

LIBERTY ALL-STAR® GROWTH FUND

TOP 20 HOLDINGS & ECONOMIC SECTORS

as of June 30, 2008 (Unaudited)

 

TOP 20 HOLDINGS*

 

PERCENT OF NET ASSETS

 

ANSYS, Inc.

 

1.92

%

Smith International, Inc.

 

1.64

 

Core Laboratories N.V.

 

1.57

 

McDonald’s Corp.

 

1.53

 

Wal-Mart Stores, Inc.

 

1.50

 

FMC Technologies, Inc.

 

1.47

 

International Business Machines Corp.

 

1.43

 

Affiliated Managers Group, Inc.

 

1.37

 

Potash Corp. of Saskatchewan, Inc.

 

1.35

 

Praxair, Inc.

 

1.35

 

LKQ Corp.

 

1.34

 

Resources Connection, Inc.

 

1.34

 

QUALCOMM, Inc.

 

1.26

 

Baxter International, Inc.

 

1.25

 

General Dynamics Corp.

 

1.24

 

Flowserve Corp.

 

1.24

 

Oracle Corp.

 

1.24

 

Aflac, Inc.

 

1.17

 

Strayer Education, Inc.

 

1.17

 

Corning, Inc.

 

1.15

 

 

 

27.53

%

 

ECONOMIC SECTORS*

 

PERCENT OF NET ASSETS

 

Information Technology

 

23.12

%

Health Care

 

15.92

 

Industrials

 

15.89

 

Energy

 

14.20

 

Consumer Discretionary

 

10.46

 

Financials

 

7.24

 

Consumer Staples

 

4.79

 

Materials

 

3.99

 

Telecommunication Services

 

2.24

 

Other Net Assets

 

2.15

 

 

 

100.00

%

 

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

 

4


 

LIBERTY ALL-STAR® GROWTH FUND

MAJOR STOCK CHANGES IN THE SECOND QUARTER

(Unaudited)

 

The following are the major ($1.0 million or more) stock changes – both purchases and sales – that were made in the Fund’s portfolio during the second quarter of 2008.

 

SECURITY NAME

 

PURCHASES (SALES)

 

SHARES AS OF 6/30/08

 

PURCHASES

 

 

 

 

 

Accenture Ltd., Class A

 

31,000

 

31,000

 

Adobe Systems, Inc.

 

40,400

 

40,400

 

Corning, Inc.

 

74,300

 

74,300

 

Costco Wholesale Corp.

 

14,800

 

14,800

 

EnCana Corp.

 

13,800

 

13,800

 

NIKE, Inc., Class B

 

15,100

 

22,300

 

Oracle Corp.

 

87,600

 

87,600

 

QUALCOMM, Inc.

 

42,400

 

42,400

 

Symantec Corp.

 

60,900

 

60,900

 

 

 

 

 

 

 

SALES

 

 

 

 

 

CSX Corp.

 

(27,600

)

—

 

Deere & Co.

 

(27,200

)

—

 

Genentech, Inc.

 

(20,800

)

—

 

Genzyme Corp.

 

(17,100

)

13,000

 

Honeywell International, Inc.

 

(22,600

)

—

 

Mobile TeleSystems OJSC

 

(13,000

)

—

 

Potash Corp. of Saskatchewan, Inc.

 

(5,300

)

8,800

 

United Technologies Corp.

 

(14,900

)

—

 

 

5


 

LIBERTY ALL-STAR® GROWTH FUND

INVESTMENT MANAGERS / PORTFOLIO CHARACTERISTICS

 

THE FUND’S THREE GROWTH INVESTMENT MANAGERS AND

THE MARKET CAPITALIZATION ON WHICH EACH FOCUSES:

 

 

MANAGERS’ DIFFERING INVESTMENT STRATEGIES ARE REFLECTED IN PORTFOLIO CHARACTERISTICS

 

The portfolio characteristics table below is a regular feature of the Fund’s shareholder re-ports. It serves as a useful tool for understanding the value of the Fund’s multi-managed portfolio. The characteristics are different for each of the Fund’s three investment managers. These differences are a reflection of the fact that each has a different capitalization focus and investment strategy. The shaded column highlights the characteristics of the Fund as a whole, while the first three columns show portfolio characteristics for the Russell Smallcap, Midcap and Largecap Growth indices. See page 28 for a description of these indices.

 

PORTFOLIO CHARACTERISTICS

 

MARKET CAPITALIZATION SPECTRUM

AS OF JUNE 30, 2008
(UNAUDITED)

 

 

 

 

RUSSELL GROWTH:

 

 

 

 

 

 

 

 

 

 

 

SMALLCAP

 

MIDCAP

 

LARGECAP

 

M.A.

 

 

 

 

 

TOTAL

 

 

 

INDEX

 

INDEX

 

INDEX

 

WEATHERBIE

 

TCW

 

CHASE

 

FUND

 

Number of Holdings

 

1220

 

505

 

61

 

647

 

58

 

34

 

145

*

Weighted Average Market Capitalization (billions)

 

$

1.2

 

$

8.4

 

$

65.3

 

$

2.1

 

$

7.8

 

$

61.7

 

$

23.4

 

Average Five-Year

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings Per Share Growth

 

26

%

33

%

31

%

30

%

45

%

30

%

35

%

Dividend Yield

 

0.5

%

0.8

%

1.3

%

0.4

%

0.2

%

1.2

%

0.6

%

Price/Earnings Ratio

 

18

x

18

x

18

x

20

x

25

x

19

x

21

x

Price/Book Value Ratio

 

4.5

x

5.5

x

5.3

x

4.7

x

7.5

x

5.2

x

5.9

x

 

*  Certain holdings are held by more than one manager.

 

6


 

 

 

LIBERTY ALL-STAR® GROWTH FUND

 

 

MANAGER INTERVIEW

 

 

Matthew A. Weatherbie,

CFA

M.A. Weatherbie & Co., Inc

 

Bottom-up, quality orientation helps M.A. Weatherbie navigate through difficult stock market

 

M.A. Weatherbie & Co. manages the portion of the Liberty All-Star Growth Fund that is allocated to small cap growth stocks. M.A. Weatherbie focuses on high quality companies that demonstrate superior earnings growth prospects, yet are reasonably priced relative to their intrinsic value. The firm seeks to provide superior returns relative to small capitalization growth indices over a full market cycle. Recently, we spoke with the firm’s President and founder, Matthew A. Weatherbie, CFA. The Fund’s Investment Adviser, ALPS Advisers, Inc., moderated the interview.

 

How, in general, are companies in the portion of the Liberty All-Star Growth Fund that you manage performing in this difficult economic environment?

 

Our companies are generally performing quite well. Their business models are recession-resilient and, over-all, our companies’ managements are doing a good job of controlling costs in the short term, while continuing to invest in growth initiatives for the long term. We continue to expect double-digit earnings growth for companies in our portfolio in 2008. This expectation is unchanged from four months ago, despite an uneven and generally weak economy.

 

When we get into these difficult markets, do you do anything differently? Obviously, you are going to adhere to your style and strategy. We mean, for instance, trading, or doubling up on due diligence, monitoring portfolio companies more closely.

 

In these difficult times, the weak economy and scary headlines make it that much more important to closely monitor portfolio companies – which we are doing.  In addition, the stock market has recently been marked by declining liquidity among smaller cap stocks and volatile stock price movements up and down.  We are attempting to capitalize on this by trading a little more actively around position sizes – trimming back stocks that have shot up in price while adding to those that have recently been under pressure.

 

“[There has been] declining liquidity among smaller cap stocks and volatile stock price movements up and down.  We are attempting to capitalize on this…”

 

What is a stock in the portion of the Liberty All-Star Growth Fund that you manage that has been a good performer year to date through June 30?

 

IHS has been a good performer in a difficult 2008, continuing its significant out performance since being purchased two years ago. The company provides databases and

 

7


 

related services to help engineering and energy clients improve efficiency and profitability. IHS has a great subscription-based business model, a global customer base – 50 percent of revenues come from outside the U.S. – and essential products that are needed for energy exploration and development, security and environmental impact, and engineering standards. As the company essentially sells the same information over and over to a growing contingent of global customers, margins are expanding. Free cash flow is 150 percent of net income.

 

“We continue to expect double-digit earnings growth for companies in our portfolio in 2008.”

 

The energy situation is creating new opportunities for alternative sources – everything from solar to wind to fuel cells and much more. Typically, alternative energy – including green energy – is an area that might be pioneered by smaller companies. Do you see opportunities for small cap growth in this space, even if it’s a few years off?

 

The challenge in terms of new opportunities for alternative energy sources is finding smaller cap growth companies that meet our stringent quality criteria. Solar panels tend to be commodities, for example. One company we do own is Kaydon Corporation, a quality manufacturer of large diameter bearings and other highly engineered products. These bearings are used in wind turbines and Kaydon is the supplier to General Electric, which sees substantial growth in the wind turbine market. Some of our other holdings would also be beneficiaries. These include previously mentioned IHS (engineering standards for new industrial products), Fastenal (a national distributor of industrial fasteners and related products) and Stantec (a broad-based supplier of engineering and construction services in North America), as well as ANSYS (the leader in simulation soft- ware used in new product development).

 

Are there other areas – sectors or industries – that you are keeping your eye on for their future potential as launching pads for successful small cap companies?

 

The economy is likely in the early stages of significant change as sky-high commodity prices will lead to reduced demand and increased supplies over a multi-year period. While we are bottom-up and not top-down investors, we will be mindful of these trends, so as to invest in the beneficiaries of this coming change, not its victims.

 

Many thanks for a good interview.

 

8

 


 

LIBERTY ALL-STAR® GROWTH FUND

SCHEDULE OF INVESTMENTS

as of June 30, 2008 (Unaudited)

 

 

 

SHARES

 

MARKET VALUE

 

COMMON STOCKS (97.85%)

 

 

 

 

 

 

 

 

 

 

 

„CONSUMER DISCRETIONARY (10.46%)

 

 

 

 

 

Automobiles (0.45%)

 

 

 

 

 

Thor Industries, Inc.

 

31,552

 

$

670,796

 

 

 

 

 

 

 

Distributors (1.34%)

 

 

 

 

 

LKQ Corp.(a)

 

110,628

 

1,999,048

 

 

 

 

 

 

 

Diversified Consumer Services (1.36%)

 

 

 

 

 

K12, Inc.(a)

 

13,500

 

289,305

 

Strayer Education, Inc.

 

8,300

 

1,735,281

 

 

 

 

 

2,024,586

 

 

 

 

 

 

 

Hotels, Restaurants & Leisure (3.89%)

 

 

 

 

 

BJ’s Restaurants, Inc.(a)

 

26,504

 

257,884

 

Chipotle Mexican Grill, Inc., Class B(a)

 

6,900

 

519,984

 

Ctrip.com International Ltd.(b)

 

24,520

 

1,122,526

 

Home Inns & Hotels Management, Inc.(a)(b)

 

26,805

 

509,563

 

Life Time Fitness, Inc.(a)

 

26,993

 

797,643

 

McDonald’s Corp.

 

40,400

 

2,271,288

 

Texas Roadhouse, Inc., Class A(a)

 

34,124

 

306,092

 

 

 

 

 

5,784,980

 

 

 

 

 

 

 

Multi-line Retail (0.67%)

 

 

 

 

 

Dollar Tree, Inc.(a)

 

30,533

 

998,124

 

 

 

 

 

 

 

Specialty Retail (1.37%)

 

 

 

 

 

Hibbett Sports, Inc.(a)

 

41,459

 

874,785

 

PetSmart, Inc.

 

22,900

 

456,855

 

Staples, Inc.

 

29,600

 

703,000

 

 

 

 

 

2,034,640

 

 

 

 

 

 

 

Textiles, Apparel & Luxury Goods (1.38%)

 

 

 

 

 

NIKE, Inc., Class B

 

22,300

 

1,329,303

 

Phillips-Van Heusen Corp.

 

19,933

 

729,946

 

 

 

 

 

2,059,249

 

 

 

 

 

 

 

„CONSUMER STAPLES (4.79%)

 

 

 

 

 

Beverages (0.61%)

 

 

 

 

 

The Coca-Cola Co.

 

17,500

 

909,650

 

 

 

 

 

 

 

Food & Staples Retailing (2.81%)

 

 

 

 

 

Costco Wholesale Corp.

 

14,800

 

1,038,072

 

CVS Caremark Corp.

 

23,200

 

918,024

 

Wal-Mart Stores, Inc.

 

39,700

 

2,231,140

 

 

 

 

 

4,187,236

 

 

 

 

 

 

 

Household Products (1.13%)

 

 

 

 

 

Colgate-Palmolive Co.

 

24,200

 

1,672,220

 

 

See Notes to Schedule of Investments and Financial Statements

 

9


 

 

 

SHARES

 

MARKET VALUE

 

COMMON STOCKS (continued)

 

 

 

 

 

 

 

 

 

 

 

Personal Products (0.24%)

 

 

 

 

 

Bare Escentuals, Inc.(a)

 

18,779

 

$

351,731

 

 

 

 

 

 

 

„ENERGY (14.20%)

 

 

 

 

 

Energy Equipment & Services (10.67%)

 

 

 

 

 

CARBO Ceramics, Inc.

 

6,285

 

366,730

 

CGGVeritas(a)(b)

 

23,259

 

1,098,057

 

Core Laboratories N.V.(a)

 

16,412

 

2,336,248

 

FMC Technologies, Inc.(a)

 

28,500

 

2,192,505

 

IHS, Inc.(a)

 

22,357

 

1,556,047

 

NATCO Group, Inc.(a)

 

13,289

 

724,649

 

National-Oilwell Varco, Inc.(a)

 

13,400

 

1,188,848

 

Oceaneering International, Inc.(a)

 

20,000

 

1,541,000

 

Patterson-UTI Energy, Inc.

 

10,382

 

374,167

 

Smith International, Inc.

 

29,400

 

2,444,317

 

Transocean, Inc.(a)

 

9,600

 

1,462,944

 

Weatherford International Ltd.(a)

 

12,000

 

595,080

 

 

 

 

 

15,880,592

 

 

 

 

 

 

 

Oil, Gas & Consumable Fuels (3.53%)

 

 

 

 

 

Apache Corp.

 

11,500

 

1,598,500

 

Devon Energy Corp.

 

12,600

 

1,514,016

 

EnCana Corp.

 

13,800

 

1,254,834

 

Golar LNG Ltd.

 

5,999

 

92,925

 

Quicksilver Resources, Inc.(a)

 

10,700

 

413,448

 

XTO Energy, Inc.

 

5,500

 

376,805

 

 

 

 

 

5,250,528

 

 

 

 

 

 

 

„FINANCIALS (7.24%)

 

 

 

 

 

Capital Markets (3.06%)

 

 

 

 

 

Affiliated Managers Group, Inc.(a)

 

22,562

 

2,031,934

 

GFI Group, Inc.

 

90,297

 

813,576

 

optionsXpress Holdings, Inc.

 

37,985

 

848,585

 

SEI Investments Co.

 

36,900

 

867,888

 

 

 

 

 

4,561,983

 

 

 

 

 

 

 

Diversified Financial Services (1.65%)

 

 

 

 

 

Financial Federal Corp.

 

38,133

 

837,401

 

IntercontinentalExchange, Inc.(a)

 

9,300

 

1,060,199

 

MSCI, Inc.(a)

 

15,289

 

554,838

 

 

 

 

 

2,452,438

 

 

 

 

 

 

 

Insurance (2.53%)

 

 

 

 

 

Aflac, Inc.

 

27,800

 

1,745,840

 

Assurant, Inc.

 

10,100

 

666,196

 

Brown & Brown, Inc.

 

41,283

 

717,911

 

eHealth, Inc.(a)

 

35,800

 

632,228

 

 

 

 

 

3,762,175

 

 

See Notes to Schedule of Investments and Financial Statements

 

10


 

 

 

SHARES

 

MARKET VALUE

 

COMMON STOCKS (continued)

 

 

 

 

 

 

 

 

 

 

 

„HEALTH CARE (15.92%)

 

 

 

 

 

Biotechnology (2.82%)

 

 

 

 

 

BioMarin Pharmaceutical, Inc.(a)

 

24,943

 

$

722,848

 

CV Therapeutics, Inc.(a)

 

23,700

 

195,051

 

Genzyme Corp.(a)

 

13,000

 

936,261

 

Isis Pharmaceuticals, Inc.(a)

 

32,100

 

437,523

 

Martek Biosciences Corp.(a)

 

11,457

 

386,215

 

United Therapeutics Corp.(a)

 

9,499

 

928,527

 

Vertex Pharmaceuticals, Inc.(a)

 

17,800

 

595,766

 

 

 

 

 

4,202,191

 

 

 

 

 

 

 

Health Care Equipment & Supplies (5.52%)

 

 

 

 

 

Accuray, Inc.(a)

 

42,845

 

312,340

 

ArthroCare Corp.(a)

 

8,784

 

358,475

 

Baxter International, Inc.

 

29,000

 

1,854,261

 

Becton Dickinson & Co.

 

14,700

 

1,195,110

 

I-Flow Corp.(a)

 

32,443

 

329,296

 

Intuitive Surgical, Inc.(a)

 

3,600

 

969,840

 

Masimo Corp.(a)

 

7,961

 

273,460

 

Orthofix International N.V.(a)

 

7,717

 

223,407

 

ResMed, Inc.(a)

 

22,510

 

804,507

 

SurModics, Inc.(a)

 

20,109

 

901,688

 

Thoratec Corp.(a)

 

35,300

 

613,867

 

Wright Medical Group, Inc.(a)

 

13,221

 

375,609

 

 

 

 

 

8,211,860

 

 

 

 

 

 

 

Health Care Providers & Services (3.41%)

 

 

 

 

 

athenahealth, Inc.(a)

 

1,200

 

36,912

 

Express Scripts, Inc.(a)

 

12,200

 

765,184

 

HealthExtras, Inc.(a)

 

29,400

 

886,116

 

Lincare Holdings, Inc.(a)

 

30,645

 

870,318

 

PSS World Medical, Inc.(a)

 

44,236

 

721,047

 

Psychiatric Solutions, Inc.(a)

 

16,600

 

628,144

 

VCA Antech, Inc.(a)

 

41,877

 

1,163,343

 

 

 

 

 

5,071,064

 

 

 

 

 

 

 

Health Care Technology (0.63%)

 

 

 

 

 

Cerner Corp.(a)

 

12,600

 

569,268

 

Phase Forward, Inc.(a)

 

20,858

 

374,818

 

 

 

 

 

944,086

 

 

 

 

 

 

 

Life Sciences Tools & Services (1.22%)

 

 

 

 

 

PharmaNet Development Group, Inc.(a)

 

23,837

 

375,909

 

WuXi PharmaTech Cayman, Inc.(a)(b)

 

70,559

 

1,432,348

 

 

 

 

 

1,808,257

 

 

See Notes to Schedule of Investments and Financial Statements

 

11


 

 

 

SHARES

 

MARKET VALUE

 

COMMON STOCKS (continued)

 

 

 

 

 

 

 

 

 

 

 

Pharmaceuticals (2.32%)

 

 

 

 

 

Auxilium Pharmaceuticals, Inc.(a)

 

22,857

 

$

768,452

 

Johnson & Johnson

 

13,000

 

836,420

 

Mylan, Inc.

 

67,200

 

811,104

 

Teva Pharmaceutical Industries Ltd.(b)

 

22,700

 

1,039,660

 

 

 

 

 

3,455,636

 

 

 

 

 

 

 

„INDUSTRIALS (15.89%)

 

 

 

 

 

Aerospace & Defense (3.45%)

 

 

 

 

 

General Dynamics Corp.

 

22,000

 

1,852,400

 

Lockheed Martin Corp.

 

11,500

 

1,134,590

 

Spirit AeroSystems Holdings, Inc.(a)

 

50,700

 

972,426

 

TransDigm Group, Inc.(a)

 

34,736

 

1,166,782

 

 

 

 

 

5,126,198

 

 

 

 

 

 

 

Air Freight & Logistics (0.29%)

 

 

 

 

 

UTI Worldwide, Inc.

 

21,956

 

438,022

 

 

 

 

 

 

 

Commercial Services & Supplies (7.67%)

 

 

 

 

 

The Advisory Board Co.(a)

 

15,900

 

625,347

 

American Reprographics Co.(a)

 

52,403

 

872,510

 

Clean Harbors, Inc.(a)

 

21,000

 

1,492,260

 

The Corporate Executive Board Co.

 

39,292

 

1,652,229

 

Quanta Services, Inc.(a)

 

40,600

 

1,350,762

 

Resources Connection, Inc.

 

98,137

 

1,997,089

 

Stantec, Inc.(a)

 

28,338

 

730,837

 

Stericycle, Inc.(a)

 

25,172

 

1,301,392

 

Waste Connections, Inc.(a)

 

43,604

 

1,392,276

 

 

 

 

 

11,414,702

 

 

 

 

 

 

 

Construction & Engineering (0.84%)

 

 

 

 

 

Foster Wheeler Ltd.(a)

 

17,016

 

1,244,720

 

 

 

 

 

 

 

Electrical Equipment (0.39%)

 

 

 

 

 

ABB Ltd.(a)(b)

 

20,300

 

574,896

 

 

 

 

 

 

 

Machinery (1.80%)

 

 

 

 

 

Flowserve Corp.

 

13,500

 

1,845,450

 

Kaydon Corp.

 

16,267

 

836,286

 

 

 

 

 

2,681,736

 

 

 

 

 

 

 

Road & Rail (0.92%)

 

 

 

 

 

Burlington Northern Santa Fe Corp.

 

13,700

 

1,368,493

 

 

 

 

 

 

 

Trading Companies & Distributors (0.53%)

 

 

 

 

 

Fastenal Co.

 

18,365

 

792,633

 

 

See Notes to Schedule of Investments and Financial Statements

 

12


 

 

 

SHARES

 

MARKET VALUE

 

COMMON STOCKS (continued)

 

 

 

 

 

 

 

 

 

 

 

„INFORMATION TECHNOLOGY (23.12%)

 

 

 

 

 

Communications Equipment (4.71%)

 

 

 

 

 

Corning, Inc.

 

74,300

 

$

1,712,615

 

Infinera Corp.(a)

 

60,694

 

535,321

 

Polycom, Inc.(a)

 

57,969

 

1,412,125

 

QUALCOMM, Inc.

 

42,400

 

1,881,288

 

Research In Motion Ltd.(a)

 

12,600

 

1,472,940

 

 

 

 

 

7,014,289

 

 

 

 

 

 

 

Computers & Peripherals (1.43%)

 

 

 

 

 

International Business Machines Corp.

 

18,000

 

2,133,540

 

 

 

 

 

 

 

Electronic Equipment & Instruments (1.81%)

 

 

 

 

 

FLIR Systems, Inc.(a)

 

34,341

 

1,393,214

 

National Instruments Corp.

 

45,508

 

1,291,062

 

 

 

 

 

2,684,276

 

 

 

 

 

 

 

Internet Software & Services (3.48%)

 

 

 

 

 

Akamai Technologies, Inc.(a)

 

37,400

 

1,301,146

 

Baidu.com(a)(b)

 

2,900

 

907,584

 

Bankrate, Inc.(a)

 

21,900

 

855,633

 

comScore, Inc.(a)

 

14,858

 

324,202

 

Mercadolibre, Inc.(a)

 

21,039

 

725,635

 

TechTarget, Inc.(a)

 

34,571

 

365,070

 

VistaPrint Ltd.(a)

 

26,044

 

696,937

 

 

 

 

 

5,176,207

 

 

 

 

 

 

 

IT Services (2.81%)

 

 

 

 

 

Accenture Ltd., Class A

 

31,000

 

1,262,320

 

Alliance Data Systems Corp.(a)

 

10,900

 

616,395

 

Cognizant Technology Solutions Corp., Class A(a)

 

44,800

 

1,456,448

 

SRA International, Inc.(a)

 

37,551

 

843,395

 

 

 

 

 

4,178,558

 

 

 

 

 

 

 

Semiconductors & Semiconductor Equipment (1.43%)

 

 

 

 

 

Cavium Networks, Inc.(a)

 

14,837

 

311,577

 

FormFactor, Inc.(a)

 

23,601

 

434,966

 

Hittite Microwave Corp.(a)

 

38,690

 

1,378,138

 

 

 

 

 

2,124,681

 

 

 

 

 

 

 

Software (7.45%)

 

 

 

 

 

Adobe Systems, Inc.(a)

 

40,400

 

1,591,356

 

ANSYS, Inc.(a)

 

60,695

 

2,859,948

 

CA, Inc.

 

20,400

 

471,036

 

Monotype Imaging Holdings, Inc.(a)

 

28,938

 

352,465

 

Oracle Corp.(a)

 

87,600

 

1,839,600

 

Salesforce.com, Inc.(a)

 

21,600

 

1,473,768

 

 

See Notes to Schedule of Investments and Financial Statements

 

13


 

 

 

SHARES

 

MARKET VALUE

 

COMMON STOCKS (continued)

 

 

 

 

 

 

 

 

 

 

 

Software (Continued)

 

 

 

 

 

Solera Holdings, Inc.(a)

 

16,053

 

$

444,026

 

Symantec Corp.(a)

 

60,900

 

1,178,415

 

VMware, Inc.(a)

 

16,360

 

881,150

 

 

 

 

 

11,091,764

 

 

 

 

 

 

 

„MATERIALS (3.99%)

 

 

 

 

 

Chemicals (3.60%)

 

 

 

 

 

Innophos Holdings, Inc.

 

19,600

 

626,220

 

Intrepid Potash, Inc.(a)

 

11,000

 

723,580

 

Potash Corp. of Saskatchewan, Inc.

 

8,800

 

2,011,416

 

Praxair, Inc.

 

21,295

 

2,006,841

 

 

 

 

 

5,368,057

 

 

 

 

 

 

 

Metals & Mining (0.39%)

 

 

 

 

 

Allegheny Technologies, Inc.

 

9,700

 

575,016

 

 

 

 

 

 

 

„TELECOMMUNICATION SERVICES (2.24%)

 

 

 

 

 

Diversified Telecommunication (0.51%)

 

 

 

 

 

Cbeyond, Inc.(a)

 

47,968

 

768,447

 

 

 

 

 

 

 

IT Services (0.85%)

 

 

 

 

 

NeuStar, Inc., Class A(a)

 

58,794

 

1,267,599

 

 

 

 

 

 

 

Wireless Telecommunication Services (0.88%)

 

 

 

 

 

Clearwire Corp.(a)

 

100,600

 

1,303,776

 

 

 

 

 

 

 

TOTAL COMMON STOCKS (COST Of $137,264,871)

 

 

 

145,620,680

 

 

 

 

PAR VALUE

 

MARKET VALUE

 

 

 

 

 

 

 

SHORT TERM INVESTMENT (2.07%)

 

 

 

 

 

„REPURCHASE AGREEMENT (2.07%)

 

 

 

 

 

Repurchase agreement with State Street Bank & Trust Co., dated 06/30/08, due 07/01/08 at 1.150%, collateralized by several U.S. Treasury Bonds with various maturity dates, market value of $3,151,993 (Repurchase proceeds of $3,086,099) (COST of $3,086,000)

 

$

3,086,000

 

3,086,000

 

 

 

 

 

 

 

TOTAL INVESTMENTS (99.92%) (COST Of 140,350,871)(c)

 

 

 

148,706,680

 

OTHER ASSETS IN EXCESS Of LIABILITIES (0.08%)

 

 

 

123,485

 

NET ASSETS (100.00%)

 

 

 

$

148,830,165

 

NET ASSET VALUE PER SHARE (29,122,732 SHARES OUTSTANDING)

 

 

 

$

5.11

 

 

Notes to Schedule of Investments:

 

(a)               Non-income producing security.

 

(b)              American Depositary Receipt.

 

(c)               Cost of investments for federal income tax purposes is $140,451,023

 

 

 

Gross unrealized appreciation and depreciation at June 30, 2008 based on cost of investments for federal income tax purposes is as follows:

 

 

 

 

Gross unrealized appreciation

 

 

 

$

23,604,489

 

 

Gross unrealized depreciation

 

 

 

(15,348,832

)

 

Net unrealized appreciation

 

 

 

$

8,255,657

 

 

See Notes to financial Statements

 

14


 

LIBERTY ALL-STAR® GROWTH FUND

STATEMENT OF ASSETS AND LIABILITIES

June 30, 2008 (Unaudited)

 

ASSETS:

 

 

 

Investments at market value (cost $140,350,871)

 

$

148,706,680

 

Cash

 

1,218

 

Receivable for investment securities sold

 

837,653

 

Dividends and interest receivable

 

43,449

 

Foreign tax reclaim

 

4,348

 

Prepaid and other assets

 

34,050

 

 

 

 

 

TOTAL ASSETS

 

149,627,398

 

 

 

 

 

LIABILITIES:

 

 

 

Payable for investment securities purchased

 

554,015

 

Investment advisory fees payable

 

100,956

 

Payable for administration, pricing and bookkeeping fees

 

25,990

 

Accrued expenses

 

116,272

 

 

 

 

 

TOTAL LIABILITIES

 

797,233

 

 

 

 

 

NET ASSETS

 

$

148,830,165

 

 

 

 

 

NET ASSETS REPRESENTED BY:

 

 

 

Paid-in capital (authorized 60,000,000 shares at $0.10 Par; 29,122,732 shares outstanding)

 

$

141,059,402

 

Overdistributed net investment income

 

(8,271,505

)

Accumulated net realized gain on investments

 

7,686,459

 

Net unrealized appreciation on investments

 

8,355,809

 

 

 

 

 

TOTAL NET ASSETS APPLICABLE TO OUTSTANDING SHARES OF COMMON STOCK ($5.11 PER SHARE)

 

$

148,830,165

 

 

See Notes to Financial Statements

 

15


 

LIBERTY ALL-STAR® GROWTH FUND

STATEMENT OF OPERATIONS

Six Months Ended June 30, 2008 (Unaudited)

 

INVESTMENT INCOME:

 

 

 

 

 

Dividends

 

 

 

$

459,788

 

Interest

 

 

 

36,355

 

 

 

 

 

 

 

TOTAL INVESTMENT INCOME (NET OF FOREIGN TAXES WITHHELD AT SOURCE WHICH AMOUNTED TO $2,187)

 

 

 

496,143

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

Investment advisory fee

 

$

606,609

 

 

 

Administrative fee

 

151,652

 

 

 

Pricing and bookkeeping fees

 

30,427

 

 

 

Audit fees

 

13,377

 

 

 

Custodian fee

 

15,631

 

 

 

Directors’ fees and expenses

 

31,750

 

 

 

Insurance expense

 

4,300

 

 

 

Legal fees

 

70,436

 

 

 

Shareholder communication expenses

 

61,091

 

 

 

Transfer agent fees

 

42,960

 

 

 

Miscellaneous expenses

 

6,567

 

 

 

 

 

 

 

 

 

TOTAL EXPENSES

 

 

 

1,034,800

 

 

 

 

 

 

 

NET INVESTMENT LOSS

 

 

 

(538,657

)

 

 

 

 

 

 

REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:

 

 

 

 

 

Net realized gain on investment transactions

 

 

 

7,760,160

 

 

 

 

 

 

 

Net unrealized appreciation on investments:

 

 

 

 

 

Beginning of year

 

33,885,193

 

 

 

End of period

 

8,355,809

 

 

 

 

 

 

 

 

 

Net change in unrealized appreciation

 

 

 

(25,529,384

)

 

 

 

 

 

 

NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS

 

 

 

$

(18,307,881

)

 

See Notes to Financial Statements

 

16


 

LIBERTY ALL-STAR® GROWTH FUND

STATEMENT OF CHANGES IN NET ASSETS

 

 

 

SIX MONTHS ENDED

 

YEAR ENDED

 

 

 

JUNE 30, 2008
(UNAUDITED)

 

DECEMBER 31,
2007

 

OPERATIONS

 

 

 

 

 

Net investment loss

 

$

(538,657

)

$

(839,305

)

Net realized gain on investment transactions

 

7,760,160

 

21,600,251

 

Net change in unrealized appreciation

 

(25,529,384

)

5,748,516

 

Net increase/(decrease) in net assets resulting from operations

 

(18,307,881

)

26,509,462

 

 

 

 

 

 

 

DISTRIBUTIONS DECLARED FROM:

 

 

 

 

 

Net investment income

 

(7,732,848

)

—

 

Net realized gain on investments

 

—

 

(16,945,766

)

Total distributions

 

(7,732,848

)

(16,945,766

)

 

 

 

 

 

 

CAPITAL TRANSACTIONS:

 

 

 

 

 

Dividend reinvestments

 

3,161,547

 

5,405,373

 

Total increase/(decrease) in net assets

 

(22,879,182

)

14,969,069

 

 

 

 

 

 

 

NET ASSETS:

 

 

 

 

 

Beginning of year

 

171,709,347

 

156,740,278

 

End of period (including overdistributed net investment income of $(8,271,505) and $0 respectively)

 

$

148,830,165

 

$

171,709,347

 

 

See Notes to Financial Statements

 

17


 

LIBERTY ALL-STAR® GROWTH FUND

FINANCIAL HIGHLIGHTS

 

 

 

SIX MONTHS ENDED

 

 

 

JUNE 30, 2008
(UNAUDITED)

 

PER SHARE OPERATING PERFORMANCE:

 

 

 

Net asset value at beginning of year

 

$

6.03

 

 

 

 

 

INCOME FROM INVESTMENT OPERATIONS:

 

 

 

Net investment loss

 

(0.01

)

Net realized and unrealized gain/(loss) on investments

 

(0.64

)

Total from Investment Operations

 

(0.65

)

 

 

 

 

LESS DISTRIBUTIONS FROM:

 

 

 

Net investment income

 

(0.27

)

Realized capital gain

 

—

 

Return of capital

 

—

 

Total Distributions

 

(0.27

)

Change due to rights offering (a)

 

—

 

Total Distributions and Rights Offering

 

(0.27

)

Net asset value at end of period

 

$

5.11

 

Market price at end of period

 

$

4.67

 

 

 

 

 

TOTAL INVESTMENT RETURN FOR SHAREHOLDERS: (b)

 

 

 

Based on net asset value

 

(10.6

)% (d)

Based on market price

 

(17.3

)% (d)

 

 

 

 

RATIO AND SUPPLEMENTAL DATA:

 

 

 

Net assets at end of period (millions)

 

$

149

 

Ratio of expenses to average net assets (c)

 

1.36

% (e)

Ratio of net investment loss to average net assets (c)

 

(0.71

)% (e)

Portfolio turnover rate

 

48

% (d)

 

(a)               Effect of Fund’s rights offerings for shares at a price below net asset value.

(b)              Calculated assuming all distributions reinvested at actual reinvestment price and all primary rights in the Fund’s rights offering were exercised.

(c)               The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%.

(d)              Not annualized.

(e)               Annualized.

 

See Notes to Financial Statements

 

18


 

YEAR ENDED DECEMBER 31,

 

2007

 

2006

 

2005

 

2004

 

2003

 

 

 

 

 

 

 

 

 

 

 

$

5.69

 

$

5.97

 

$

6.29

 

$

6.51

 

$

5.44

 

 

 

 

 

 

 

 

 

 

 

(0.50

)

(0.04

)

(0.04

)

(0.05

)

(0.06

)

1.45

 

0.35

 

0.30

 

0.46

 

1.79

 

0.95

 

0.31

 

0.26

 

0.41

 

1.73

 

 

 

 

 

 

 

 

 

 

 

—

 

—

 

—

 

—

 

—

 

(0.61

)

(0.47

)

(0.11

)

(0.34

)

(0.32

)

—

 

(0.12

)

(0.47

)

(0.29

)

(0.26

)

(0.61

)

(0.59

)

(0.58

)

(0.63

)

(0.58

)

—

 

—

 

—

 

—

 

(0.08

)

(0.61

)

(0.59

)

(0.58

)

(0.63

)

(0.66

)

$

6.03

 

$

5.69

 

$

5.97

 

$

6.29

 

$

6.51

 

$

5.96

 

$

5.37

 

$

5.44

 

$

6.61

 

$

6.83

 

 

 

 

 

 

 

 

 

 

 

17.9

%

6.4

%

4.6

%

6.7

%

33.7

%

23.5

%

10.2

%

(9.3

)%

6.9

%

51.1

%

 

 

 

 

 

 

 

 

 

 

$

172

 

$

157

 

$

163

 

$

165

 

$

163

 

1.28

%

1.40

%

1.35

%

1.31

%

1.34

%

(0.51

)%

(0.73

)%

(0.78

)%

(0.82

)%

(0.94

)%

60

%

52

%

46

%

28

%

37

%

 

See Notes to Financial Statements

 

19


 

LIBERTY ALL-STAR® GROWTH FUND

 

 

NOTES TO FINANCIAL STATEMENTS

 

 

June 30, 2008 (Unaudited)

 

 

 

NOTE  1.  ORGANIZATION

 

Liberty All-Star Growth Fund, Inc. (the “Fund”) is a Maryland corporation registered under the Investment Company Act of 1940 (the “Act”), as amended, as a diversified, closed-end management investment company.

 

Investment Goal

 

The Fund seeks long-term capital appreciation.

 

Fund Shares

 

The Fund may issue 60,000,000 shares of common stock at $0.10 par.

 

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements.

 

Security Valuation

 

Equity securities are valued at the last sale price at the close of the principal exchange on which they trade, except for securities listed on the NASDAQ which are valued at the NASDAQ official closing price. Unlisted securities or listed securities for which there were no sales during the day are valued at the closing bid price on such exchanges or over-the-counter markets.

 

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

 

Investments for which market quotations are not readily available are valued at fair value as determined in good faith under consistently applied procedures approved by and under the general supervision of the Board of Directors.

 

Foreign Securities

 

The Fund invests in foreign securities which mayinvolveanumberofriskfactorsandspecial considerations not present with investments in securities of U.S. corporations.

 

Security Transactions

 

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

 

Repurchase Agreements

 

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

 

Income Recognition

 

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

 

20


 

LIBERTY ALL-STAR® GROWTH FUND

NOTES TO FINANCIAL STATEMENTS

June 30, 2008 (Unaudited)

 

Fair Value Measurements

 

The Fund adopted the provisions of Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157 (“FAS 157”), “Fair Value Measurements,” on January 1, 2008. FAS 157 established a three-tier hierarchy to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.

 

Various inputs are used in determining the value of the Fund’s investments as of the end of the reporting period. These inputs are categorized in the following hierarchy under applicable financial accounting standards:

 

Level 1 – Quoted prices in active markets for identical investments

 

Level 2 – Other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

 

Level 3 – Significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

 

The following is a summary of the inputs used to value the Fund’s investments as of June 30, 2008.

 

 

 

Investments in

 

Other Financial

 

Valuation Inputs

 

Securities

 

Instruments*

 

 

 

 

 

 

 

Level 1- Quoted Prices

 

$

145,620,680

 

—

 

 

 

 

 

 

 

Level 2- Other Significant Observable Inputs

 

$

3,086,000

 

—

 

 

 

 

 

 

 

Level 3- Significant Unobservable Inputs

 

$

0

 

—

 

 

 

 

 

 

 

Total

 

$

148,706,680

 

—

 

 

*                 Other financial instruments are derivative investments not reflected in the Schedule of Investments such as futures, forwards and swap contracts, which are valued at the unrealized appreciation/depreciation on the investment.

 

For the six months ended June 30, 2008, the Fund did not have significant unobservable inputs (Level 3) used in determining fair value. Therefore, a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value is not applicable.

 

Federal Income Tax Status

 

Consistent with the Fund’s policy to qualify as a regulated investment company and to distribute all of its taxable income to shareholders, no federal income tax has been accrued.

 

Distributions to Shareholders

 

The Fund currently has a policy of paying distributions on its common shares totaling approximately 10% of its net asset value per year. The distributions are payable in four quarterly distributions of 2.5% 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. Distributions to shareholders are recorded on ex-date.

 

21


 

LIBERTY ALL-STAR® GROWTH FUND

 

 

NOTES TO FINANCIAL STATEMENTS

 

 

June 30, 2008 (Unaudited)

 

 

 

Indemnification

 

In the normal course of business, the Fund enters into contracts that contain a variety of representations and warranties and which provide general indemnities. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims against the Fund. Also, under the Fund’s organizational documents and by contract, the Directors and Officers of the Fund are indemnified against certain liabilities that may arise out of their duties to the Fund. However, based on experience, the Fund expects the risk of loss due to these warranties and indemnities to be minimal.

 

Recent Accounting Pronouncements

 

Effective January 1, 2007, the Fund adopted FASB Interpretation No. 48 (“FIN 48”) “AccountingforUncertaintyinIncomeTaxes,” which requires that the financial statement effects of a tax position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. Management has concluded that the Fund has taken no uncertain tax positions that require adjustment to the financial statements to comply with the provisions of FIN 48. The Fund files income tax returns in the U.S. federal jurisdiction and the State of Colorado. The statute of limitations on the Fund’s federal tax return filings remains open for the years ended December 31, 2004 through December 31, 2007. The Fund’s Colorado tax return filings remain open for the years ended December 31, 2006 through December 31, 2007. To our knowledge there are no federal or Colorado income tax returns currently under examination.

 

In March 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 161 (“FAS 161”), “Disclosures about Derivative Instruments and Hedging Activities”. FAS 161 is intended to improve financial reporting about derivative instruments and hedging activities. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Management has begun to evaluate the impact the adoption of FAS 161 will have on the Fund’s financial statement disclosures.

 

NOTE  3.  FEDERAL  TAX  INFORMATION

 

The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, whichmaydifferfromGAAP.Reclassifications are made to the Fund’s capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations.

 

For the year ended December 31, 2007, permanent book and tax basis differences resulting primarily from differing treatments for net operating losses and prior year excess distributions were identified and reclassified among the components of the Fund’s net assets as follows:

 

Accumulated

 

Accumulated

 

 

 

Net Investment

 

Net Realized

 

Paid-In

 

Loss

 

Gain

 

Capital

 

$

839,305

 

$

(4,654,351

)

$

3,815,046

 

 

Net investment income and net realized gains (losses), as disclosed on the State- ment of Operations, and net assets were not affected by this reclassification.

 

Classification of Distributions to Shareholders

 

The tax character of distributions paid during the year ended December 31, 2007 was as follows:

 

 

 

12/31/07

 

Distributions paid from:

 

 

 

Ordinary income

 

$

4,189,031

 

Long-term capital gain

 

16,571,781

 

 

 

20,760,812

 

Return of capital

 

—

 

 

 

$

20,760,812

 

 

22


 

LIBERTY ALL-STAR® GROWTH FUND

NOTES TO FINANCIAL STATEMENTS

June 30, 2008 (Unaudited)

 

As of December 31, 2007, the components of distributable earnings on a tax basis were as follows:

 

Undistributed

 

Undistributed

 

 

 

Ordinary

 

Long Term

 

Net Unrealized

 

Income

 

Capital Gains

 

Appreciation*

 

$

1,705

 

$

28,271

 

$

33,781,516

 

 

*                 Thedifferencesbetweenbook-basisandtax-basis net unrealized appreciation are primarily due to deferral of losses from wash sales.

 

NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES

 

Investment Advisory Fee

 

ALPS Advisers, Inc. (“AAI”), serves as the investment adviser to the Fund. AAI receives a monthly investment advisory fee based on the Fund’s average daily net assets at the following annual rates:

 

Average Daily Net Assets

 

Annual Fee Rate

 

First $300 million

 

0.80

%

Over $300 million

 

0.72

%

 

Under Portfolio Management Agreements, AAI pays each Portfolio Manager a portfolio management fee based on the assets of the investment portfolio that they manage. The portfolio management fee is paid from the investment advisory fees collected by AAI and is based on the Fund’s average daily net assets at the following annual rates:

 

Average Daily Net Assets

 

Annual Fee Rate

 

First $300 million

 

0.40

%

Over $300 million

 

0.36

%

 

Administration, Pricing and Bookkeeping Fees

 

ALPS Fund Services, Inc. (“ALPS”) provides administrative and other services to the Fund for a monthly administration fee based on the Fund’s average daily net assets at the following annual rates:

 

Average Daily Net Assets

 

Annual Fee Rate

 

First $300 million

 

0.20

%

Over $300 million

 

0.18

%

 

In addition, ALPS provides pricing and bookkeeping services to the Fund for an annual fee consisting of: (i) $38,000 paid monthly plus an additional monthly fee based on the level of average daily net assets for the month; and (ii) a multi- manager fee based on the number of portfolio managers; provided that during any 12-month period, the aggregate amount of (i) shall not exceed $140,000 (exclusive of out-of-pocket expenses and charges).

 

The Fund also reimburses ALPS for out-of- pocket expenses and charges, including fees payable to third parties for pricing the Fund’s portfolio securities and direct internal costs incurred by ALPS in connection with providing fund accounting oversight and monitoring and certain other services.

 

Custody Credits

 

The Fund has an agreement with its custodian bank under which custody fees may be reduced by balance credits. These credits are recorded as a reduction of total expenses on the Statement of Operations. The Fund could have invested a portion of the assets utilized in connection with the expense offset arrangement in an income- producing asset if it had not entered into such an agreement.

 

Fees Paid to Officers

 

All officers of the Fund are employees of AAI or its affiliates, and receive no compensation from the Fund. The Board of Directors has appointed a Chief Compliance Officer to the Fund in accordance with federal securities regulations.

 

23


 

LIBERTY ALL-STAR® GROWTH FUND

NOTES TO FINANCIAL STATEMENTS

June 30, 2008 (Unaudited)

 

NOTE  5. PORTFOLIO INFORMATION

 

For the six months ended June 30, 2008, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $72,156,511 and $75,854,367, respectively.

 

NOTE  6. CAPITAL TRANSACTIONS

 

During the six months ended June 30, 2008, and the year ended December 31, 2007 distributions in the amount of $3,161,547 and $5,405,373, respectively, were paid in newly issued shares valued at market value or net asset value, but not less than 95% of market value. Such distributions resulted in the issuance of 636,125 and 952,292 shares, respectively.

 

NOTE 7. RESULTS OF ANNUAL MEETING OF SHAREHOLDERS

 

On April 23, 2008, the Annual Meeting of Shareholders of the Fund was held to elect two Directors and to approve the Fund’s Portfolio Management Agreement with Chase Investment Counsel Corporation. On February 15, 2008, the record date for the Meeting, the Fund had outstanding 28,486,606 shares of common stock. The votes cast at the meeting were as follows:

 

Proposal to elect two Directors:

 

 

 

For

 

Withheld

 

John A. Benning

 

16,050,870

 

781,606

 

Richard C. Rantzow

 

16,046,787

 

785,689

 

 

The meeting was adjourned with respect to the proposal to approve the Fund’s Portfolio Management Agreement and reconvened on May 22, 2008. The votes cast at that meeting were as follows:

 

Proposal to approve Portfolio Management Agreement:

 

For

 

Against

 

Abstain

 

Non-Votes

 

12,405,156

 

471,884

 

465,387

 

4,199,396

 

 

24


 

 

LIBERTY ALL-STAR® GROWTH FUND

 

 

RE-APPROVAL OF THE INVESTMENT ADVISORY CONTRACTS

 

 

June 30, 2008 (Unaudited)

 

BOARD CONSIDERATION AND RE-APPROVAL OF THE INVESTMENT ADVISORY CONTRACTS

 

The Investment Company Act of 1940 requires that the Board of Directors of the Fund (the “Board”), including all of the Directors who are not “interested persons” of the Fund (“Independent Directors”), annually review the Fund’s investment advisory agreements and consider whether or not to re-approve them for an additional year. At its meeting on June 11, 2008, the Board, including the Independent Directors, with the exception of Mr. John Benning who was unavoidably absent, conducted such a review and approved the continuation of the Fund Management Agreement between the Fund and ALPS Advisers, Inc. (“AAI”) and the three separate Portfolio Management Agreements, each among the Fund, AAI and a Portfolio Manager (each, an “Agreement”) (Chase Investment Counsel Corporation; M.A. Weatherbie & CO., Inc.; and TCW Investment Management Company, each a “Portfolio Manager” and collectively the “Portfolio Managers”). Prior to the Board action, the Independent Directors met to consider management’s recommendations as to the renewal of each Agreement. As part of the process to consider these matters, legal counsel to the Independent Directors requested certain information from AAI and each Portfolio Manager. In response to these requests, the Independent Directors received extensive reports from AAI and each Portfolio Manager that addressed specific factors designed to inform the Board’s consideration of the Agreements. Counsel also provided the Independent Directors and the Board with a memorandum detailing their responsibilities pertaining to the renewal of each Agreement. Based on its evaluation of all material factors, the Board unanimously concluded that the terms of each Agreement were reasonable and fair and that the renewal of each Agreement was in the best interests of the Fund and its shareholders.

 

In voting to approve the continuation of each Agreement, the Board did not identify any single factor as all-important or controlling. The following summary does not detail all the matters considered by the Board, but provides a summary of the material matters it considered. The Board considered whether each Agreement would be in the best interests of the Fund and its shareholders, an evaluation based on: (1) the nature, extent and quality of the services to be provided under each Agreement; (2) the investment performance of the Fund; (3) the cost to the Fund (including management fees and expense ratios) of the services provided and profits realized by AAI and its affiliates from their relationships with the Fund and with respect to other funds and accounts managed by AAI; (4) the extent to which economies of scale would be realized as the Fund grows and whether fee levels will reflect economies of scale for the benefit of shareholders; (5) potential fall-out benefits to AAI and each Portfolio Manager from their relationships with the Fund; and (6) other general information about AAI and each Portfolio Manager. The following is a summary of the Board’s discussion and conclusions regarding these matters.

 

NATURE, EXTENT AND QUALITY OF THE SERVICES PROVIDED

 

The Directors considered the nature, extent and quality of the portfolio manager selection, evaluation and monitoring services provided by AAI, and the portfolio management services provided by each Portfolio Manager, in light of the investment objective of the Fund. In connection with its review, the Board considered AAI’s long-term history of care and conscientiousness in the management of the Fund and the administrative services provided to the Fund by AAI and its affiliates. The Board also considered each Portfolio Manager’s demonstrated consistency in investment approach. It reviewed the background and experience of the personnel at AAI

 

25


 

responsible for portfolio manager selection, evaluation and monitoring for the Fund and the Portfolio Managers personnel responsible for managing the Fund’s portfolio. The Board also considered the compliance records of AAI and each Portfolio Manager. The Board concluded that the nature, extent and quality of the services provided by AAI and the respective Portfolio Managers to the Fund were appropriate and consistent with the terms of the respective Agreements and that the Fund was likely to continue to benefit from services provided under the Agreements. The Board also concluded that the quality of those services had been consistent with or superior to quality norms in the industry and that AAI and the respective Portfolio Managers had sufficient personnel, with the appropriate education and experience, to serve the Fund effectively and had demonstrated their continuing ability to attract and retain well-qualified personnel. Finally, the Board concluded that the financial condition of each of AAI and the respective Portfolio Managers was sound.

 

INVESTMENT PERFORMANCE

 

The Board reviewed the long-term and short-term investment performance of the Fund and other investment companies and other accounts managed by the Portfolio Managers. The performance information provided demonstrated to the Directors a generally consistent pattern of favorable long-term performance for shareholders of the Fund.

 

COSTS OF THE SERVICES PROVIDED TO THE FUND AND THE PROFITS REALIZED BY AAI FROM ITS RELATIONSHIP WITH THE FUND

 

The Board reviewed the fees paid by the Fund to AAI and the fees paid by AAI to the Portfolio Managers as well as information provided by AAI about the rates of compensation paid to investment advisers, and overall expense ratios, for funds comparable in size, character and investment strategy to the Fund. The Board also compared the Fund’s management fees to the fees charged by AAI and the Portfolio Managers to their other accounts, including fees for institutional accounts. The Board considered that the Portfolio Managers were paid by AAI, not the Fund. The Board also considered the differences in the level of services provided and the differences in responsibility of AAI and the Portfolio Managers to the Fund and to other accounts. The Board also reviewed the fee breakpoint schedule that lowers the advisory fee rate as the Fund’s assets increase. The Board concluded that the management fees payable by the Fund to AAI and the fees payable by AAI to the Portfolio Managers were reasonable in relation to the nature and quality of the services provided, taking into account the fees charged by other advisors for managing comparable funds with similar strategies and the fees AAI and the Portfolio Managers charge to other clients.

 

PROFITABILITY AND COSTS OF SERVICES TO AAI

 

The Board reviewed reports of the financial position of each of AAI and the Portfolio Managers. The Board determined that the profitability of AAI was reasonable in relation to the services provided and to the costs of providing fund management services to the Fund. The Directors also considered the potential “fall-out” benefits (including the receipt of research products and services from unaffiliated brokers) that AAI or the Portfolio Managers might receive in connection with their association with the Fund, and acknowledged AAI’s and each Portfolio Manager’s well-established stand-alone management relationships independent of the Fund and the regulatory risks each assumed in connection with the management of the Fund.

 

26


 

EXTENT OF ECONOMIES OF SCALE AS THE FUND GROWS AND WHETHER FEE LEVELS REFLECT ECONOMIES OF SCALE

 

The Board reviewed the fee breakpoint schedule and concluded that it reflects certain economies of scale with respect to the selection, evaluation and monitoring of Portfolio Managers and other services by AAI and the management of Fund assets by each Portfolio Manager.

 

The Board also considered its long association with AAI and AAI’s relationships with the Portfolio Managers and their personnel, and the Board’s familiarity with their culture to evaluate the services to be provided. The Board will meet at least four times per year in order to oversee the operations of the Fund. At such meetings, AAI and the Portfolio Managers will submit and/or make presentations and discuss performance, compliance and other relevant issues.

 

27


 

LIBERTY ALL-STAR® GROWTH FUND

 

 

DESCRIPTION OF LIPPER BENCHMARK AND MARKET INDICES

 

 

 

Lipper Multi-Cap Growth Mutual Fund Average

 

The average of funds that, by portfolio practice, invest in a variety of market capitalization ranges without concentrating 75% of their equity assets in any one market capitalization range over an extended period of time. Multi-Cap funds typically have between 25% to 75% of their assets invested in companies with market capitalizations (on a three-year weighted basis) above 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Multi-Cap growth funds typically have an above-average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P SuperComposite 1500 Index.

 

NASDAQ Composite Index

 

Measures all NASDAQ domestic and international based common type stocks listed on the NASDAQ Stock Market.

 

Russell 3000® Growth Index

 

Measures the performance of those Russell 3000 companies with higher price-to-book-ratios and higher forecasted growth values. The Russell 3000 Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market.

 

Russell 1000® Growth Index (Largecap)

 

Measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index.

 

Russell Midcap® Growth Index

 

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

 

Russell 2000® Growth Index (Smallcap)

 

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

 

S&P 500 Index

 

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

 

28


 

 

INVESTMENT ADVISER

ALPS Advisers, Inc.

1290 Broadway, Suite 1100

Denver, Colorado 80203

303-623-2577

www.all-starfunds.com

 

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Deloitte & Touche LLP

555 Seventeenth Street, Suite 3600

Denver, Colorado 80202

 

CUSTODIAN

State Street Bank & Trust Company

One Lincoln Street

Boston, Massachusetts 02111

 

INVESTOR ASSISTANCE, TRANSFER & DIVIDEND DISBURSING AGENT & REGISTRAR

Computershare Trust Company, N.A.

P.O. Box 43078

Providence, Rhode Island 02940-3078

1-800-LIB-FUND (1-800-542-3863)

www.computershare.com

 

LEGAL COUNSEL

Kirkpatrick & Lockhart

  Preston Gates Ellis LLP

1601 K Street, NW

Washington, DC 20006

 

DIRECTORS

John A. Benning*

Thomas W. Brock*

Edmund J. Burke

George R. Gaspari*

Richard W. Lowry*, Chairman

Dr. John J. Neuhauser*

Richard C. Rantzow*

 

OFFICERS

William R. Parmentier, Jr., President

Mark T. Haley, CFA, Senior Vice President

Edmund J. Burke, Vice President

Jeremy O. May, Treasurer

Kimberly R. Storms, Assistant Treasurer

Tané T. Tyler, Secretary

Phillip Perrone, Chief Compliance Officer

 

* Member of the Audit Committee

 

A description of the Fund’s proxy voting policies and procedures is available (i) on the Securities and Exchange Commission’s website at www.sec.gov, and (ii) without charge, upon request, by calling 1-800-542-3863. Information regarding how the Fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2008 is available from the SEC’s website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is also available at www.all-starfunds.com.

 

The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Q’s are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

 

Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that the Fund may purchase at market prices from time to time shares of its own common stock in the open market.

 

This report is transmitted to shareholders of Liberty All-Star Growth Fund, Inc. for their information. It is not a prospectus or other document intended for use in the purchase of Fund shares.

 


 

 

 


 

Item 2. Code of Ethics.

 

Not Applicable to this Report.

 

Item 3. Audit Committee Financial Expert.

 

Not Applicable to this Report.

 

Item 4. Principal Accountant Fees and Services.

 

Not Applicable to this Report.

 

Item 5. Audit Committee of Listed Registrants.

 

Not Applicable to this Report.

 

Item 6. Schedule of Investments

 

The registrant’s “Schedule I – Investments in securities of unaffiliated issuers” (as set forth in 17 CFR 210.12-12) is included in Item 1 of this Form N-CSR.

 

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

 

The Fund has delegated to ALPS Advisers, Inc. (the “Adviser”) the responsibility to vote proxies relating to portfolio securities held by the Fund.  In deciding to delegate this responsibility to the Adviser, the Fund’s Board reviewed and approved the policies and procedures adopted by the Adviser.  These included the procedures that the Adviser follows when a vote presents a conflict between the interests of the Fund and its shareholders and the Adviser, its affiliates, its other clients or other persons.

 

The Adviser’s policy is to vote all proxies for Fund securities in a manner considered by the Adviser to be in the best interest of the Fund and its shareholders without regard to any benefit to the Advisor, its affiliates, its other clients or other persons. The Adviser or an affiliate examines each proposal and votes against the proposal, if, in its judgment, approval or adoption of the proposal would be expected to impact adversely the current or potential market value of the issuer’s securities. The Adviser or an affiliate also examines each proposal and votes the proxies against the proposal, if, in its judgment, the proposal would be expected to affect adversely the best interest of the Fund. The Adviser or an affiliate determines the best interest of the Fund in light of the potential economic return on the Fund’s investment.

 

The Adviser addresses potential material conflicts of interest by having predetermined voting guidelines. For those proposals that require special consideration or in instances where special circumstances may require varying from the predetermined guideline, a Proxy Committee determines the vote in the best interest of the Fund, without consideration of any benefit to the Adviser, its affiliates, its other clients or other persons. The Proxy Committee is composed of representatives of equity investments, equity research, compliance, legal and fund administration functions. In addition to the responsibilities described above, the Proxy Committee has the responsibility to review, on a semi-annual basis, the Adviser’s proxy voting policies to ensure consistency with internal and regulatory agency policies and to develop additional predetermined voting guidelines to assist in the review of proxy proposals.

 

The Proxy Committee may vary from a predetermined guideline if it determines that voting on the proposal according to the predetermined guideline would be expected to impact adversely the current or potential market value of the issuer’s

 


 

securities or to affect adversely the best interest of the client. References to the best interest of a client refer to the interest of the client in terms of the potential economic return on the client’s investment. In determining the vote on any proposal, the Proxy Committee does not consider any benefit other than benefits to the owner of the securities to be voted. A member of the Proxy Committee is prohibited from voting on any proposal for which he or she has a conflict of interest by reason of a direct relationship with the issuer or other party affected by a given proposal. Persons making recommendations to the Proxy Committee or its members are required to disclose to the Committee any relationship with a party making a proposal or other matter known to the person that would create a potential conflict of interest.

 

The Adviser has retained Institutional Shareholder Services (“ISS”), a third party vendor, to implement its proxy voting process. ISS provides proxy analysis, record keeping services and vote disclosure services.

 

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

 

Not Applicable to this Report.

 

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

 

During the six months ended June 30, 2008, there were no purchases made by or on behalf of the registrant or any “affiliated purchaser”, as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934 (“Exchange Act”), of shares or other units of any class of the registrant’s equity securities that are registered by the registrant pursuant to Section 12 of the Exchange Act.

 

Item 10. Submission of Matters to a Vote of Security Holders.

 

There have not been any material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of directors, since those procedures were last disclosed in response to the requirements of this Item.

 

Item 11. Controls and Procedures.

 

(a)   The registrant’s principal executive officer and principal financial officers, based on their evaluation of the registrant’s disclosure controls and procedures as of a date within 90 days of the filing of this report, have concluded that such controls and procedures are adequately designed to ensure that information required to be disclosed by the registrant in Form N-CSR is accumulated and communicated to the registrant’s management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

(b)   There were no changes in the registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

Item 12. Exhibits.

 

(a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR is Not Applicable to this Report.

 

(a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT.

 

(a)(3) Not applicable.

 

(b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT.

 


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

LIBERTY ALL-STAR GROWTH FUND, INC.

 

By:

/s/ William R. Parmentier, Jr.

 

 

William R. Parmentier, Jr. (Principal Executive Officer)

 

 

President

 

 

 

 

Date:

September 8, 2008

 

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

LIBERTY ALL-STAR GROWTH FUND, INC.

 

By:

/s/William R. Parmentier, Jr.

 

 

William R. Parmentier, Jr. (Principal Executive Officer)

 

 

President

 

 

 

 

Date:

September 8, 2008

 

 

 

 

 

 

 

By:

/s/ Jeremy O. May

 

 

Jeremy O. May (Principal Financial Officer)

 

 

Treasurer

 

 

 

 

Date:

September 8, 2008