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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 811-4537
---------------------------------------------
Liberty All Star Growth Fund, Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
One Financial Center, Boston, Massachusetts 02111
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(Address of principal executive offices) (Zip code)
Heidi Hoefler, Esq.
Columbia Management Group, Inc.
One Financial Center
Boston, MA 02111
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(Name and address of agent for service)
Registrant's telephone number, including area code: 1-617-772-3743
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Date of fiscal year end: December 31, 2003
--------------------------
Date of reporting period: December 31, 2003
-------------------------
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its
regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street,
NW, Washington, DC 20549-0609. The OMB has reviewed this collection of
information under the clearance requirements of 44 U.S.C. Section 3507.
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Item 1. Report to Stockholders
[GRAPHIC]
[ALL STAR(R) GROWTH FUND LOGO]
ANNUAL REPORT 2003
MULTI-MANAGEMENT
[GRAPHIC]
CLOSED-END STRUCTURE
[GRAPHIC]
PROFESSIONAL MANAGEMENT
[GRAPHIC]
ACCESS TO LEADING INVESTMENT MANAGERS
[GRAPHIC]
ONGOING MONITORING AND REBALANCING
[GRAPHIC]
DISTRIBUTION POLICY
[GRAPHIC]
LIBERTY ALL-STAR GROWTH FUND
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[GRAPHIC]
map to 330
in ARTPRO
A SINGLE INVESTMENT...
A DIVERSIFIED GROWTH PORTFOLIO
Only one fund offers:
- - A diversified, multi-managed portfolio of small, mid- and large cap growth
stocks
- - Exposure to the industry sectors that make the U.S. economy the world's most
dynamic
- - Access to institutional-quality investment managers
- - Objective and ongoing manager evaluation
- - Active portfolio rebalancing
- - A quarterly fixed distribution policy
- - Listing on the New York Stock Exchange
(ticker symbol: ASG)
LIBERTY ALL-STAR GROWTH FUND, INC.
CONTENTS
<Table>
1 President's Letter
4 Editorial Feature: Unique Fund Attributes
10 Investment Managers/Portfolio Characteristics
11 Manager/LAMCO Roundtable
18 Investment Growth
19 Table of Distributions and Rights Offerings
20 Top 50 Holdings
21 Major Stock Changes in the Fourth Quarter
22 Schedule of Investments
28 Financial Statements
31 Financial Highlights
33 Notes to Financial Statements
36 Report of Independent Auditors
37 Automatic Dividend Reinvestment and Cash Purchase Plan
38 Tax Information
39 Directors and Officers
INSIDE BACK
COVER Fund Information
</Table>
<Page>
PRESIDENT'S LETTER
FELLOW SHAREHOLDERS: FEBRUARY 2004
Two thousand three was a strong year for equity investors and a good year for
Liberty All-Star Growth Fund shareholders. The Fund generally performed in line
with key benchmarks during 2003. What is more gratifying, the Fund has
outperformed for the past three years - a period that includes a strong 2003 and
the difficult market years of 2001 and 2002, thus demonstrating its ability to
perform well through widely varying market conditions.
Certainly, the stock market's rebound from three straight negative years - a
phenomenon not seen since 1939-1941 - was universally welcomed. We will look
more closely at 2003 momentarily, but first pause to review the Fund's
performance for the fourth quarter and full year.
<Table>
<Caption>
FUND STATISTICS
PERIODS ENDING DECEMBER 31, 2003 4TH QUARTER 2003 3 YEARS
LIBERTY ALL-STAR GROWTH FUND, INC.
Year End Net Asset Value (NAV) $6.51
Year End Market Price $6.83
Year End Premium 4.9%
Distributions $0.16 $0.58 $2.17
Market Price Trading Range $6.23 to $7.00 $4.61 to $7.00 $4.38 to $10.91
Premium/(Discount) Range 8.2% to 0.8% 8.5% to (7.8)% 11.4% to (10.2)%
</Table>
<Table>
<Caption>
PERFORMANCE SUMMARY
PERIODS ENDING DECEMBER 31, 2003 4TH QUARTER 2003 3 YEARS*
LIBERTY ALL-STAR GROWTH FUND, INC.
Shares Valued at NAV 10.9% 33.5% (6.1)%
Shares Valued at NAV with Dividends Reinvested 10.9% 33.7% (5.7)%
Shares Valued at Market Price with Dividends Reinvested 12.9% 51.1% 0.5%
Lipper Multi-Cap Growth Mutual Fund Average 10.8% 35.3% (10.4)%
Category Percentile Rank (1=best; 100=worst) 53rd 50th 25th
Russell Growth Indices
Largecap 10.4% 29.8% (9.4)%
Midcap 12.2% 42.7% (6.1)%
Smallcap 12.7% 48.5% (2.0)%
Nasdaq Composite Index 12.2% 50.7% (6.4)%
</Table>
Figures shown for the Fund and the Lipper Multi-Cap Growth Mutual Fund Average
are total returns, which include dividends, after deducting fund expenses. The
Fund's reinvested returns assume that all of the Fund's rights offerings were
fully subscribed under the terms of each offering. Figures shown for the
unmanaged Russell Indices and the Nasdaq Composite Index are total returns,
including income. Past performance cannot predict future results.
*Average annual returns.
1
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PRESIDENT'S LETTER
Looking at the tables on the previous page, the Fund closed 2003 with a
solid quarter. In terms of net asset value (NAV), the Fund advanced 10.9
percent. Measured in terms of market price, the Fund returned 12.9 percent.
These results compare favorably to the 10.8 percent quarterly return of its
primary benchmark, the Lipper Multi-Cap Growth Mutual Fund Average. For the full
year, the Fund's returns were 33.5 percent and 51.1 percent, respectively, based
on NAV and market price. These results were competitive with the 35.3 percent
return for the Lipper Multi-Cap Growth Mutual Fund Average.
The past year was a good one for the Fund, but as mentioned, the three-year
period demonstrates the benefits of the Fund's multi-managed structure, as this
time frame encompasses both sharply rising and falling markets. During this
period of widely varying market conditions, the Fund performed favorably
compared to its primary benchmark. As the second table on the previous page
indicates, the Fund is a top quartile performer over the past three years when
ranked against peer funds in the Lipper Multi-Cap Growth Mutual Fund Average,
meaning that it outperformed 75 percent of the funds in that universe.
PERFORMANCE VALIDATES UNDERLYING STRENGTHS
Investment performance - both short term and long term - demonstrates the Fund's
underlying strengths. The Fund's closed-end, multi-management structure provides
shareholders with access to institutional quality investment managers and
exposure to the full spectrum of growth stocks: small-cap, mid-cap and
large-cap. Management and ongoing monitoring by the Fund manager, Liberty Asset
Management Company (LAMCO), ensure alignment with shareholder interests and that
the investment managers are meeting expectations. A fuller description of the
Fund's unique attributes may be found in this Annual Report's feature section,
which immediately follows this letter. I encourage you to review it.
Turning to 2003, most investors feel that the market's recovery actually
began with the lows reached on October 9, 2002. Using the S&P 500 Index as a
proxy for the broad market, the index gained 8.4 percent in the final quarter of
2002 and then declined 3.2 percent in the first quarter of 2003, with investors
moving to the sidelines as war with Iraq moved ever closer. Once hostilities
actually broke out and the uncertainty was removed, investors gained confidence
and returned to the stock market, leading the S&P 500 to a 15.4 percent second
quarter gain. Of course, monetary and fiscal policy helped greatly. The Federal
Reserve lowered the Fed funds rate to 1.0 percent - a level not seen since the
Eisenhower administration - and President Bush shepherded his $350 billion
economic package - including a lower tax on dividends - to Congressional passage
in May. In addition, inflation remained quiescent, corporate profits were strong
(one of the best trough to peak earnings recoveries in the postwar era) and GDP
gained momentum, leading up to an annualized 8-plus percent surge in the third
quarter.
GROWTH LED BY LOWER QUALITY STOCKS
Commenting specifically on the growth style of investing during 2003, small-cap
outperformed large-cap as the Russell indices indicate. Lower quality, lower
priced and more speculative issues outperformed higher quality stocks for most
of the year. That is not unusual in a rebounding economy - especially when ample
monetary stimulus is present - because companies that once looked as though they
might fail suddenly look as though they'll survive. The Fund's managers
2
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[PHOTO]
OFFICERS OF LIBERTY ALL-STAR GROWTH FUND, FROM LEFT: MARK T. HALEY, CFA, VICE
PRESIDENT - INVESTMENTS; WILLIAM R. PARMENTIER, JR., PRESIDENT AND CHIEF
EXECUTIVE OFFICER; AND FRED H. WOFFORD, VICE PRESIDENT - OPERATIONS.
have a high quality bias, meaning they do not focus on these more speculative,
lower quality stocks. Over time, quality - defined by growth and stability of
earnings and dividends - almost always wins out. Certainly, the Fund's
investment managers maintained their disciplines and focused on better quality
companies during 2003.
For further analysis of 2003 and a look ahead, I would recommend to you our
annual Manager Roundtable, which begins on page 11. This year's Roundtable is
especially insightful, as the managers summarize their varying growth
strategies, allowing shareholders to see and compare how each manager's
capitalization and growth philosophy influence their respective outlook and
investment decision making. In addition, in a departure from past Roundtables,
we at LAMCO offer our own comments at the end of each discussion point, allowing
shareholders to gain better insights into the perspective we bring to Fund
management.
In summary, we are pleased with the Fund's performance in 2003, given its
high quality focus. We feel the same way about its longer-term results, as they
encompass one of the most difficult stock market environments in decades. We are
gratified, as well, that shareholders expressed their confidence in the Fund by
oversubscribing the offering of rights to purchase additional shares of the
Fund, which was conducted during late summer. We are optimistic over prospects
for 2004, but realistically believe that it will be extremely difficult to top
2003. That may be for the better. A sound if unspectacular year may be in
investors' best long-term interests.
Be assured that as we move forward your team here at LAMCO remains dedicated
to the Fund's founding principles, to integrity in all that we do, and to
managing with our shareholders' best interests first and foremost. We thank you
for your ongoing support of the Fund.
Sincerely,
/s/ William R. Parmentier
William R. Parmentier, Jr.
President and Chief Executive Officer
Liberty All-Star Growth Fund, Inc.
3
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UNIQUE FUND ATTRIBUTES
MULTI-MANAGEMENT
[GRAPHIC]
Multi-management is the process of allocating Fund assets among several
carefully selected investment managers with complementary investment approaches.
It's an important factor distinguishing Liberty All-Star Growth Fund from other
funds. The Fund doesn't have one investment manager, but three. Why?
Multi-management is intended to diversify the Fund and lower risk. While all of
the Fund's managers practice the growth style of investing, each is selected for
its particular investment strategy and capitalization focus - one small-cap
manager, one mid-cap and one large-cap. This mix of capitalization ranges
recognizes that growth investor preference shifts over time as changing business
and economic conditions favor small-, mid- or large-cap companies. Having three
managers also reduces the volatility that a single growth manager inevitably
encounters, and it has the potential for producing more consistent returns over
time. Thus, in a single investment the Fund provides investors with access to a
diversified portfolio and exposure to the entire capitalization spectrum of
growth companies. Multi-management is widely practiced by large institutional
investors, such as endowments, foundations and pension plans. It is found far
less frequently in funds in which individuals can invest. Liberty Asset
Management Company (LAMCO), the Fund manager, was among the first investment
firms to bring multi-management to individual investors.
AS ADVISOR TO THE ALL-STAR GROWTH FUND, LIBERTY ASSET MANAGEMENT
4
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CLOSED-END STRUCTURE
[GRAPHIC]
Liberty All-Star Growth Fund is a closed-end fund, a characteristic that
distinguishes it from most investment funds, which are open-end mutual funds. An
open-end mutual fund creates or redeems shares continuously as money flows into
or out of the fund. Closed-end funds, by contrast, have a fixed number of shares
that are traded between investors on a stock exchange (the Fund is listed on the
New York Stock Exchange but trades on other exchanges, as well). Why does
closed-end versus open-end matter to investors? An exchange-traded, closed-end
fund is bought and sold just like the shares of other publicly traded
securities. Pricing is intra-day - not just end-of-day, as is the case with
open-end mutual funds. A transaction price is continuously available and there
are no annual sales fees. From the perspective of the three investment managers,
the Fund's closed-end structure gives them the confidence of knowing that they
will not experience sharp inflows or outflows of assets. Thus, they are able to
focus on stock selection and investing for the long term instead of being
influenced by cash flows that can occur at inappropriate times. Finally,
closed-end funds do not have minimum transaction or balance requirements and do
not incur ongoing costs associated with distributing their shares, often
resulting in lower expense ratios.
COMPANY (LAMCO) ADDS VALUE FOR INVESTORS BY PRACTICING A WELL-
5
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PROFESSIONAL MANAGEMENT
[GRAPHIC]
Investors in Liberty All-Star Growth Fund benefit from having multiple levels of
investment professionals acting on their behalf. At the first level, the
professionals at LAMCO research and evaluate a broad universe of growth
investment management firms, selecting those few that meet a rigorous set of
criteria. Once chosen, the investment managers are closely monitored by LAMCO,
which considers a range of factors, including their investment performance. The
investment managers themselves represent the second level. The investment
managers chosen for Liberty All-Star Growth Fund are institutional-quality
managers - "all-stars" in their field - and operate independently of LAMCO. That
means there are no affiliations or alliances with the investment managers, and
that they have just one mandate: consistent implementation of their style and
strategy in pursuit of good performance. At the third level is the Fund's
independent Board of Directors. This Board, elected by the shareholders, has
oversight responsibility for Fund operations to ensure that decisions made by
LAMCO and the investment managers reflect the shareholders' best interests.
DEFINED AND DISCIPLINED INVESTMENT MANAGEMENT PROCESS.
6
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ACCESS TO LEADING INVESTMENT MANAGERS
[GRAPHIC]
Manager selection is perhaps the critical decision for any investor. There are
thousands of investment management firms from which to choose, and their
long-term investment performance varies widely. Many of the most sought-after
investment managers are closed to new investors and many of the best performing
managers invest only for institutions, not individuals. LAMCO provides Fund
shareholders with access to these leading investment managers. In the search for
managers, LAMCO calls on the expertise of its professional staff,
state-of-the-art analytical tools and years of experience in the investment
industry. In selecting investment managers for the Fund, LAMCO conducts in-depth
research and rigorous due diligence, focusing on the "four Ps" ... that is, each
manager's philosophy, process, people and performance. We seek investment
management firms that have demonstrated a consistent application of their growth
strategy and a clearly articulated, disciplined investment process. We also want
to see a well-managed organization and continuity among a firm's investment
professionals.
LAMCO BRINGS OBJECTIVITY, EXPERIENCE AND EXPERTISE TO
7
<Page>
ONGOING MONITORING AND REBALANCING
[GRAPHIC]
It's not enough to simply select all-star investment managers. Constant
vigilance is required to ensure that each is performing up to expectations and
contributing to Fund performance. Like all businesses, investment management
firms can change over time. Ownership and key personnel can change. Market
pressures may lead a firm to deviate from its espoused growth strategy.
Individual investors often have difficulty knowing that the fund in which they
originally invested has changed. LAMCO's active monitoring guards against that.
We analyze the Fund's investment managers' trading activity and the
characteristics of their holdings to confirm that they are adhering to their
strategy and performing well relative to their peers. We also evaluate changes
in key decision makers, should they occur. When warranted, LAMCO replaces
managers. LAMCO also proactively rebalances the Fund when necessary. Portfolio
rebalancing maintains the Fund's structural integrity and is a well-recognized
risk management tool. Disciplined, periodic rebalancing keeps the Fund's assets
equally divided among its three investment managers. Owing to shifting market
sentiment and economic conditions, small-cap, mid-cap and large-cap growth
stocks will perform differently over time. This can unbalance the portfolio.
When this happens, LAMCO "locks in" profits by taking assets from the managers
whose capitalization focus has been in favor and gives it to those whose
capitalization focus has been out of favor. While this seems counterintuitive,
it is really a case of taking money from today's winners and redeploying it
among tomorrow's.
CONSTRUCTING AND MONITORING A MULTI-MANAGED PORTFOLIO, AND
8
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DISTRIBUTION POLICY
[GRAPHIC]
Since 1997, the Fund has followed a policy of paying annual distributions on its
common stock at a rate of 10 percent of net asset value (paid quarterly at 2.5
percent per quarter), providing a systematic mechanism for distributing funds to
shareholders. Because a portion of the portfolio is turned over when an
investment manager is replaced (often generating realized capital gains), the
Fund's multi-management investment approach and the payout policy complement one
another. Recognizing the diverse needs of the Fund's shareholders, LAMCO also
offers an Automatic Dividend Reinvestment and Cash Purchase Plan. Some investors
prefer their dividends in the form of cash. Others reinvest their dividends in
additional Fund shares, thus letting their dividends compound over time. The
Cash Purchase feature allows shareholders to make additional investments in the
Fund on a monthly basis. LAMCO rounds out its services for shareholders by
providing a range of tools, such as a Web site at www.all-starfunds.com;
communications, such as monthly updates and quarterly reports; and shareholder
assistance via toll-free telephone at 1-800-LIB-FUND.
IS DEDICATED TO THE LONG-TERM SUCCESS OF FUND SHAREHOLDERS.
9
<Page>
INVESTMENT MANAGERS/PORTFOLIO CHARACTERISTICS
THE FUND'S THREE GROWTH INVESTMENT MANAGERS AND THE MARKET CAPITALIZATION ON
WHICH EACH FOCUSES:
[CHART]
<Table>
<Caption>
SMALL-CAP MID-CAP LARGE-CAP
GROWTH GROWTH GROWTH
M.A. WEATHERBIE & CO., INC. TCW INVESTMENT WILLIAM BLAIR & COMPANY, L.L.C.
Companies with enduring competitive MANAGEMENT COMPANY Companies that have demonstrated
advantages and high, sustainable Companies with competitive consistently high rates of growth
earnings growth. advantages and superior business and profitability.
models that should result in
rapidly growing sales and earnings.
</Table>
MANAGERS' DIFFERING INVESTMENT STRATEGIES ARE REFLECTED IN PORTFOLIO
CHARACTERISTICS
The portfolio characteristics table below is a regular feature of the Fund's
shareholder reports. It serves as a useful tool for understanding the value of
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 S&P/BARRA
SmallCap, MidCap and LargeCap Growth indices.
MARKET CAPITALIZATION SPECTRUM
SMALL LARGE
[GRAPHIC]
PORTFOLIO CHARACTERISTICS
AS OF DECEMBER 31, 2003
(UNAUDITED)
<Table>
<Caption>
S&P/BARRA GROWTH:
SMALLCAP MIDCAP LARGECAP M.A. WILLIAM TOTAL
600 INDEX 400 INDEX 500 INDEX WEATHERBIE TCW BLAIR FUND
Number of Holdings 231 169 162 56 44 33 124*
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Weighted Average Market
Capitalization
(billions) $ 1.3 $ 3.7 $ 117.3 $ 2.4 $ 15.4 $ 66.4 $ 28.0
- -------------------------------------------------------------------------------------------------------------------------------
Average Five-Year
Earnings Per Share
Growth 13% 17% 19% 19% 31% 18% 22%
- -------------------------------------------------------------------------------------------------------------------------------
Dividend Yield 0.5% 0.7% 1.5% 0.3% 0.2% 0.6% 0.4%
- -------------------------------------------------------------------------------------------------------------------------------
Price/Earnings Ratio 23x 24x 27x 29x 44x 27x 30x
- -------------------------------------------------------------------------------------------------------------------------------
Price/Book Value Ratio 3.8x 4.2x 5.8x 4.5x 5.9x 6.0x 5.4x
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
*Certain holdings are held by more than one manager.
10
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MANAGER/LAMCO ROUNDTABLE
THE VIEWS EXPRESSED BY THE FUND'S INVESTMENT MANAGERS REFLECT THEIR GROWTH
ORIENTATION AS WELL AS THEIR CAPITALIZATION FOCUS
HAVING REMAINED TRUE TO THEIR INVESTMENT DISCIPLINES THROUGH A DIFFICULT MARKET,
THE FUND'S INVESTMENT MANAGERS PRODUCED SOLID RETURNS IN 2003. HERE, THEY
DISCUSS THEIR APPROACHES AND TAKE ON ISSUES RANGING FROM GLOBALIZATION TO
PROSPECTS FOR THE STOCK MARKET.
Continuing a tradition, the Fund's manager, Liberty Asset Management Company
(LAMCO), recently had the opportunity to moderate another annual roundtable with
the Fund's three investment managers. In a departure from past practice, in this
roundtable LAMCO offers its perspective - as a further insight for investors -
at the conclusion of the discussion on each point.
As would be expected, there is commonality to the managers' comments because
they are all growth style investors. However, in reading this roundtable, Fund
shareholders should make note of differences, as well - reflecting the managers'
varying capitalization focus - small, medium or large cap - and their investment
philosophy, strategy and process. The participating investment managers and
their investment styles are:
THE VIEWS EXPRESSED IN THIS INTERVIEW REPRESENT THE PORTFOLIO MANAGERS' VIEWS
AND LAMCO'S PERSPECTIVE AT THE TIME OF THE DISCUSSION (JANUARY 2004) AND ARE
SUBJECT TO CHANGE.
M. A. WEATHERBIE & CO., INC.
PORTFOLIO MANAGER/Matthew A. Weatherbie, CFA,
President and Founder
INVESTMENT STYLE/Small-Cap Growth - M.A. Weatherbie practices a small
capitalization growth investment style focusing 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.
TCW INVESTMENT MANAGEMENT COMPANY
PORTFOLIO MANAGER/Douglas S. Foreman, CFA,
Chief Investment Officer U.S. Equities
INVESTMENT STYLE/Mid-Cap Growth - TCW seeks capital appreciation through
investment in the securities of rapidly growing companies whose business
prospects, in TCW's view, are not properly perceived by consensus research.
WILLIAM BLAIR & COMPANY, L.L.C.
PORTFOLIO MANAGER/John F. Jostrand, CFA, Principal
INVESTMENT STYLE/Large-Cap Growth - William Blair emphasizes disciplined,
fundamental research to identify quality growth companies with the ability to
sustain their growth over long time periods. At the core of the firm is a group
of analysts, who perform research aimed at identifying companies that have the
opportunity to grow in a sustainable fashion for extended periods of time.
LAMCO: Having all the managers in a roundtable is an excellent opportunity for
Fund shareholders to compare the varying growth investment approaches that are
present in the Fund. Thus, we'd like to open by asking each of you to summarize
your investment philosophy and approach. Let's go by capitalization size, from
small to large. That means starting off with you, Matt Weatherbie.
WEATHERBIE (M.A. WEATHERBIE - SMALL-CAP GROWTH): We are growth stock investors:
We seek to invest in the best smaller capitalization growth companies in
America. This means companies with some seasoning, a significant competitive
advantage, high inherent profitability, financial strength and proven
entrepreneurial management. Our process is bottom-up and emphasizes both
detailed financial analysis and field
11
<Page>
research to assess the quality of a company's business model and management. We
use a disciplined, proven set of stock valuation techniques to determine good
investment value.
LAMCO: Doug Foreman, summarize your approach, will you please?
FOREMAN (TCW - MID-CAP GROWTH): We're aggressive growth investors. We're looking
for companies with the potential for positive earnings surprise and that have
outstanding business models. Those are our two key criteria. We believe that a
stock is only truly mispriced in the marketplace if the Wall Street consensus
has expectations in terms of growth rate and earnings per share (EPS) that are
below our own. That gap between what our estimates are based on our fundamental
work and what Wall Street expects and will pay for is our alpha, or our ability
to outperform. Overall, our batting average for finding companies that have
sound business models is pretty high, which means the growth these companies are
generating is sustainable and capable of beating expectations.
LAMCO: John Jostrand, tell us about the William Blair large-cap growth approach.
JOSTRAND (WILLIAM BLAIR - LARGE-CAP GROWTH): William Blair employs a quality
growth approach and a fundamental company research process. We define a quality
growth company as one exhibiting superior, long-term earnings growth combined
with a proven and sustainable competitive advantage from a market/brand
position, proprietary product or technology position, or a unique asset base.
These companies generally exhibit superior profitability, high reinvestment
rate, low financial leverage, consistency of returns and strong management. We
have a team of experienced analysts, who are organized into sector teams and led
by a portfolio manager.
LAMCO PERSPECTIVE: THE INVESTMENT MANAGERS' RESPONSES CLEARLY HIGHLIGHT THE
DIVERSIFICATION THAT THE FUND OFFERS TO SHAREHOLDERS. ALL THE MANAGERS FOCUS ON
THE GROWTH STYLE OF INVESTING, BUT THEY FOLLOW VERY DIFFERENT INVESTMENT
DISCIPLINES. IN ADDITION, WITH ALL THREE CAPITALIZATION RANGES BEING REPRESENTED
IN THE FUND, SHAREHOLDERS COULD BENEFIT FROM THE ECONOMIC RECOVERY, AS INVESTOR
SENTIMENT FREQUENTLY ROTATES AMONG SMALL, MID- AND LARGE CAPITALIZATION STOCKS
DURING SUCH PERIODS.
LAMCO: In a vein similar to our first discussion point, this roundtable also
gives us an opportunity to compare top-down and bottom-up investment approaches.
To what extent are you more a bottom-up manager or a top-down manager? Or do you
factor both perspectives into your thinking? Let's take the responses in reverse
order, from large to small.
JOSTRAND (WILLIAM BLAIR - LARGE-CAP GROWTH): William Blair is 90 percent
bottom-up. The vast majority of our time, resources, and philosophical and
research criteria are devoted to investigating specific investment
opportunities, the industry in which they compete and the managements of those
investment opportunities. We spend some time evaluating the overall environment.
This consists of primarily setting an investment framework in which to establish
proper valuation analysis and examine broad trends in the global economy.
FOREMAN (TCW - MID-CAP GROWTH): We are almost exclusively a bottom-up manager.
We build a portfolio stock-by-stock, company-by-company. What we find,
[SIDENOTE]
"WE SEEK TO INVEST IN THE BEST SMALLER CAPITALIZATION GROWTH COMPANIES IN
AMERICA. THIS MEANS COMPANIES WITH SOME SEASONING, A SIGNIFICANT COMPETITIVE
ADVANTAGE, HIGH INHERENT PROFITABILITY, FINANCIAL STRENGTH AND PROVEN
ENTREPRENEURIAL MANAGEMENT."
MATT WEATHERBIE,
M.A. WEATHERBIE
12
<Page>
though, is that our investment criteria of finding companies that are growing
rapidly, beating expectations and operating with good business models tends to
lead us to areas such as technology, health care, specialty retail, media, and
consumer and business services. The reason we tend to focus on those industries
is that over time they tend to grow faster than the overall economy. Secondly,
there's a lot of change in these industries. If there isn't much change in an
industry or if change occurs glacially, then it's very difficult for a
medium-sized business to add value and take on bigger firms, which possess
inherent advantages, including scale, product breadth, management depth and
geographic coverage. Generally, however, the one key attribute they don't have
is an ability to react quickly to change. That can provide the opportunity for
small and medium-sized companies to create new businesses within those
industries or to find a better, cheaper, faster way to do what's already being
done.
WEATHERBIE (M.A. WEATHERBIE - SMALL-CAP GROWTH): We are primarily a bottom-up
manager evaluating stocks one at a time. Once or twice a year, however, we
devote an internal research meeting to looking at macro issues to try and make
sure that we are cognizant of important trends that could affect our
investments.
LAMCO PERSPECTIVE: THE INVESTMENT MANAGERS WE SELECTED PLACE THEIR EMPHASIS ON
BEING GOOD STOCK PICKERS. THEY DON'T IGNORE THE MACRO ENVIRONMENT, BUT THEIR
FOCUS IS ON FINDING SOLID COMPANIES WITH EXCELLENT GROWTH PROSPECTS.
LAMCO: There's a collective sigh of relief now that 2003 has gone down in the
history books as a positive year for equity investors. Looking back, how would
you summarize the stock market during 2003? Doug Foreman, start us off on this
one, please.
FOREMAN (TCW - MID-CAP GROWTH): I think 2003 was the flip side of 2002 - almost
a mirror image. Just to retrace: 2002 was the last year of the bear market,
which ended in early October of that year. Until that point in 2002, it didn't
matter what area of the market you were in - small, medium or large, growth or
value - you got tattooed pretty good. But, this is typical of the final stages
of a bear market - everybody gives up on everything. You saw that in 2002. In
2003, we saw the flip side. It was a year in which a rising tide lifted all the
boats, even though small-cap did better than large, which is typical of the
early stages of a recovery.
The fundamentals in the industries that we follow really bottomed in the
summer of '02. The market didn't take off for a while because it was suffering
through the fallout from various corporate scandals. But beneath the surface,
fundamentals were improving. By the time we got to the third quarter of 2003, we
had an 8 percent plus annualized gain in GDP. By then, investors across the
board were beginning to understand that business had gotten a whole lot better
and stocks hadn't gone up just because they were oversold. They went up because
business conditions improved dramatically.
LAMCO: John Jostrand, how does William Blair see 2003?
JOSTRAND (WILLIAM BLAIR - LARGE-CAP GROWTH): We summarize 2003 as a dramatic
step back from the brink. Many companies experienced their first positive
financial trends in three years, and the global political/terror picture
improved markedly. Small and cyclical were the two defining characteristics of
winning
[SIDENOTE]
"WE'RE LOOKING FOR COMPANIES WITH THE POTENTIAL FOR POSITIVE EARNINGS SURPRISE
AND THAT HAVE OUTSTANDING BUSINESS MODELS...THAT GAP BETWEEN WHAT OUR ESTIMATES
ARE... AND WHAT WALL STREET EXPECTS AND WILL PAY FOR IS OUR ALPHA, OR OUR
ABILITY TO OUTPERFORM."
DOUG FOREMAN,
TCW
13
<Page>
stocks, many of which were up 100 percent or more. Proven growth companies were
up, but significantly less. Still, they turned in a respectable and welcome 20
percent gain.
LAMCO: Recap your views on 2003, please, Matt Weatherbie.
WEATHERBIE (M.A. WEATHERBIE - SMALL-CAP GROWTH): The year 2003 was one of strong
absolute returns in both large and small company stocks. Within the small cap
universe, it was somewhat frustrating and unexpected that lower quality, low
priced small cap stocks outperformed the high quality stocks we emphasize.
Essentially, in 2003, Federal Reserve monetary policy was extremely
accommodative. This led to an 800-basis point decline in junk bond yields,
bringing over-leveraged companies back from the brink and creating a speculative
stock market, causing low quality to outperform high quality.
LAMCO PERSPECTIVE: THE MANAGERS WERE WELL POSITIONED TO PARTICIPATE IN A
RECOVERING ECONOMY AND A REBOUNDING STOCK MARKET, AS EVIDENCED BY THE FUND'S 33
PERCENT-PLUS RETURN BASED ON NET ASSET VALUE IN 2003. EQUALLY GRATIFYING, THE
FUND RANKED IN THE TOP QUARTILE AMONG ITS LIPPER MULTI-CAP GROWTH FUND PEERS FOR
THE PAST THREE YEARS, A PERIOD THAT INCLUDED THE NEGATIVE STOCK MARKET YEARS OF
2001 AND 2002 AND THE STRONG 2003.
LAMCO: Liberty All-Star Growth Fund may be a domestic equity fund - but it is
subject to perhaps the most pervasive force of our era: globalization. The
pluses and minuses of globalization are frequently debated - sometimes heatedly.
As an investor, how do you seek to benefit from the upside of globalization, and
how do you seek to protect yourself from its downside? Matt Weatherbie, we'll
stay with you.
WEATHERBIE (M.A. WEATHERBIE - SMALL-CAP GROWTH): One of the tenets we look for
in a company is a significant competitive advantage. It is important that
globalization be at worst a neutral and, better still, a positive for our
companies. For example, Dollar Tree Stores is a domestic specialty retailer. One
of its significant competitive advantages is its ability, developed over a
number of years, to source unique, high quality merchandise from China. China
has become "the manufacturing floor for the world" and the diverse sources of
product in China that Dollar Tree has established has created a compelling
advantage for it. For our companies that sell overseas as well as in the U.S.,
it is important that they have world-class franchises that enable them to
penetrate growing overseas markets. An example is Microchip Technology, a
manufacturer of microcontrollers that derives 70 percent of its revenues from
non-U.S. markets. Microchip's highly productive R&D, reputation for
cost-effective, technically advanced products and aggressive worldwide
engineering sales network provide this advantage.
LAMCO: Let's hear from Doug Foreman and then from John Jostrand.
FOREMAN (TCW - MID-CAP GROWTH): We're domestic-only investors. We make few
direct investments in overseas-based companies. The areas in which we invest -
the ones I mentioned earlier - are the very areas where the U.S. tends to be in
a global competitive lead. There are a few exceptions to that, but, generally,
in areas such as specialty retail, technology and health care the U.S. is the
world-class leader. So, looking globally, Europe, Asia and China are all fertile
ground in which our companies
[SIDENOTE]
"WE DEFINE A QUALITY GROWTH COMPANY AS ONE EXHIBITING SUPERIOR, LONG-TERM
EARNINGS GROWTH COMBINED WITH A PROVEN AND SUSTAINABLE COMPETITIVE ADVANTAGE
FROM A MARKET/BRAND POSITION, PROPRIETARY PRODUCT OR TECHNOLOGY POSITION, OR A
UNIQUE ASSET BASE."
JOHN JOSTRAND,
WILLIAM BLAIR
14
<Page>
can grow. A good example of this is eBay in Germany over the last three years.
eBay has created an absolutely huge business, despite a sluggish German economy.
In most cases, our portfolio companies are either in the process of
establishing operations overseas and starting to grow very rapidly, or they've
been so successful domestically they just haven't had the time to expand
offshore. So, for us, globalization offers more upside than downside. Our
portfolio companies tend not to be big and mature enough for foreign competition
to represent a threat to their growth. And, typically, their market share in
foreign countries is still low, as they are just getting established.
JOSTRAND (WILLIAM BLAIR - LARGE-CAP GROWTH): The upside of globalization is the
marked expansion of revenue opportunities for our companies in the All-Star
Growth Fund. In the portion of the Fund that we manage, the share of portfolio
companies' revenue generated by customers outside North America ranges up to 65
percent. In a broader sense, growth rates are higher in countries where the
standard of living is rising. Increased per capita income and GDP are the chief
benefits of globalization and we believe corporate activity is an important
contributor to improved living standards.
The downside to globalization is the clash of cultures. In spite of a
so-called shrinking world - due to the ease of communication and travel -
distance may contribute to misunderstanding and, therefore, failed investments.
New competitors are another downside, but one that is more easily analyzed than
culture clash or misunderstood government policies in distant lands. We believe
that the best protection to the downside of globalization is in the adage
"travel broadens the mind." Fortunately, this is very near to our basic research
philosophy, which can be expressed as, "Get out there and find out what's going
on and speak directly to people who are in the middle of the issues." Our firm
is fortunate to have several people doing excellent work globally.
LAMCO PERSPECTIVE: THE MANAGERS' CONSENSUS IS THAT THE FUND IS POSITIONED TO
BENEFIT MORE FROM GLOBALIZATION THAN IT IS TO BE HARMED BY IT. WE WOULD AGREE.
LAMCO: What issue or potential problem most concerns you going forward? And the
reverse: what are you most sanguine about? Let's stay with you, John Jostrand,
and then ask Doug Foreman and Matt Weatherbie to comment.
JOSTRAND (WILLIAM BLAIR - LARGE-CAP GROWTH): The most concerning economic
development is the decline of more than 28 percent over the past two years in
the trade-weighted value of the U.S. dollar. The current exchange level is about
in the middle of the range before the bubble in U.S. technology stocks (i.e.,
the 10 years ended 1996), so our concern is mild for the moment. The decline in
the currency, paired with the revival in gold prices, has us watchful about
valuations for U.S. equities.
On a positive note, with the consensus view that the economic cycle has
entered mid-stream, there is less controversy about the earnings outlook. The
indicators that we, as stock pickers, watch are positive for continued earnings
growth. The yield curve is positive and commodity prices are up, signaling the
return of corporate pricing power. Our portfolio characteristics remain in clear
harmony with our philosophy of owning quality growth companies. The moderate
beta and volatility characteristics of quality investments had their predictable
[SIDENOTE]
"FOR US, GLOBALIZATION OFFERS MORE UPSIDE THAN DOWNSIDE. THE AREAS IN WHICH WE
INVEST - INCLUDING TECHNOLOGY, HEALTH CARE, SPECIALTY RETAIL AND MEDIA - ARE THE
VERY AREAS WHERE THE U.S. TENDS TO BE IN A GLOBAL COMPETITIVE LEAD."
DOUG FOREMAN,
TCW
15
<Page>
effects in a recovery year such as 2003, but the moderate portfolio turnover
William Blair typically exhibits was highlighted in some academic research as a
proven long-term element in good investor returns. A mid-stream year, cyclically
speaking, should give William Blair portfolios - and quality in general - an
advantage as lower quality companies dominated in the early stages of the market
recovery in 2003.
FOREMAN (TCW - MID-CAP GROWTH): The one thing I'm a little bit concerned about
is that the consensus of opinion regarding the economic outlook is one of the
tightest that I've seen in my investing career. By that, I mean the evidence of
recovery has been so overwhelming that even bearish investors have had to cave
in. At year-end 2003, there was a tight consensus that it had been a very good
year of recovery and that '04 is highly likely to be more of the same. I agree
with that - and that's what makes me a little nervous. Slightly more divergence
would be better, because divergence usually represents a better opportunity to
make money. You'll get somewhat different views as to what the tight consensus
outlook for the economy means for the stock market. My gut instincts tell me
there will be some surprises - there always are.
The same thing that makes me nervous also makes me feel good - namely the
ongoing recovery and projected strength in the economy. I feel that we are still
in the fairly early innings of the recovery, to use a baseball analogy. We're
not in the first inning any more, but we're still in the second, third or fourth
- - somewhere in that area. So, it feels to me like we're still in the early
stages of the recovery and it would be highly unusual with the elections coming
up for us to lose this head of steam that we've built up. Anything can happen,
as we've learned the hard way. But, barring some unusual event, things should
continue to get better and the stock market should continue to rise. At the same
rate as '03? Probably not, but I think we have a good year ahead of us. The
other thing I feel good about is that, unlike investors who lagged the market,
better quality companies should do better this year. Lower quality companies
always outperform at the beginning of a bull market. And, I don't think there
are excesses in the market, despite the positive year that we had.
WEATHERBIE (M.A. WEATHERBIE - SMALL-CAP GROWTH): The issue that most concerns me
at present is the size of the federal budget deficit. Fiscal restraint needs to
be reestablished in Washington. Even if it is, it is unclear to me whether the
Bush tax cuts - which are very good for stock market investors - can be made
permanent, or whether future significant tax increases are likely, which would
depress economic growth and the market's potential.
I am most sanguine about the prospect for accelerating economic growth
worldwide in 2004. This, combined with the impressive productivity improvements
that U.S. businesses have been demonstrating, will lead to strong corporate
profit growth, rising employment and, in my opinion, another year of positive
equity returns in 2004. It should be noted that the fourth year of a
presidential term has traditionally been a good one for the stock market.
LAMCO PERSPECTIVE: CONSENSUS ISN'T PERFECT. AS DOUG FOREMAN SAYS, "ANYTHING CAN
HAPPEN, AS WE'VE LEARNED THE HARD WAY." THE MANAGERS WILL NOT STRAY FROM THEIR
STRATEGY AND CAPITALIZATION FOCUS, BUT THEY CLEARLY HAVE THE EXPERIENCE TO
FINE-TUNE THE PORTFOLIO, DEPENDING ON DEVELOPMENTS, AND MONITOR THE LARGER
TRENDS THAT COULD IMPACT THE STOCK MARKET.
[SIDENOTE]
"I AM MOST SANGUINE ABOUT THE PROSPECT FOR ACCELERATING ECONOMIC GROWTH
WORLDWIDE IN 2004...AND, IT SHOULD BE NOTED THAT THE FOURTH YEAR OF A
PRESIDENTIAL TERM HAS TRADITIONALLY BEEN A GOOD ONE FOR THE STOCK MARKET."
MATT WEATHERBIE,
M.A. WEATHERBIE
16
<Page>
LAMCO: Name one stock that you have added recently to the portion of the
All-Star Growth Fund portfolio that you manage and why you added it. Doug
Foreman, what does TCW like?
FOREMAN (TCW - MID-CAP GROWTH): Eon Labs is a smaller generic drug company that
we believe is well positioned for growth. The number of prescription drugs
coming off patent in the next five years represents billions of dollars in
revenue and this company has done a good job of being the first to file for a
number of generic products over the past four years. Eon Labs also enjoys good
revenue diversity by going to market with more than 100 drugs, which is
important because generic drugs can come and go. The company has a tremendous
growth record - 30 percent plus on the top and bottom lines over the past few
years. It's a well managed company and it has numerous products in the pipeline
for approval over the next 12 to 18 months.
LAMCO: John Jostrand, what has William Blair added to the portfolio?
JOSTRAND (WILLIAM BLAIR - LARGE-CAP GROWTH): Our most recent purchase is
actually an addition to an existing position - EMC. This is a data storage
company in which the original thesis of growing demand for storage capacity,
modular additions to capacity and the increasing complexity of storage
management continues to strengthen. Management has shown an ability to adapt to
customers' shifting priorities through recent product developments, additional
distribution channels and strategic partnering - all of which has improved its
competitive position. Lastly, the company made three important acquisitions that
bring greater value to its customer base and greater distribution clout for the
acquired companies.
LAMCO: Matt Weatherbie, what have you focused on recently?
WEATHERBIE (M.A. WEATHERBIE - SMALL-CAP GROWTH): A company that we recently
added is Universal Technical Institute (UTI), the leading provider of
post-secondary education for students seeking careers as professional automotive
technicians. The company works closely with leading original equipment
manufacturers to continuously refine and expand its program. As a result, it is
often the sole provider of manufacturer-based training programs. There is a
shortage of 60,000 auto techs in the U.S., primarily because of rapid
technological advancement and an aging workforce. For example, an auto these
days can have up to 42 microprocessors in it. UTI fits our criteria: it has high
growth, an excellent return on invested capital, strong cash flow generation, a
market leadership position, long-tenured and stable management team, a strong
balance sheet and significant growth potential.
LAMCO PERSPECTIVE: THE MANAGERS' RECENT PURCHASES OR ENHANCEMENTS TO EXISTING
POSITIONS CLEARLY REFLECT THEIR CAPITALIZATION FOCUS. SINCE THE RESTRUCTURING OF
THE FUND OVER THREE YEARS AGO AND THE ESTABLISHMENT OF THE CURRENT INVESTMENT
MANAGER LINE-UP, EACH MANAGER HAS CONSISTENTLY MAINTAINED ITS RESPECTIVE
STRATEGY AND CAPITALIZATION FOCUS, AS LAMCO INTENDED.
[SIDENOTE]
"WE SUMMARIZE 2003 AS A DRAMATIC STEP BACK FROM THE BRINK. MANY COMPANIES
EXPERIENCED THEIR FIRST POSITIVE FINANCIAL TRENDS IN THREE YEARS, AND THE GLOBAL
POLITICAL/TERROR PICTURE IMPROVED MARKEDLY."
JOHN JOSTRAND,
WILLIAM BLAIR
17
<Page>
INVESTMENT GROWTH as of December 31, 2003
GROWTH OF A $10,000 INVESTMENT
The graph below illustrates the growth of a $10,000 investment assuming purchase
of common stock at the closing market price (NYSE: ASG) of $9.25 on December 31,
1996, and tracking its progress through December 31, 2003. This 7-year period
covers the calendar years since the Fund commenced its 10 percent distribution
policy in 1997.
[CHART]
The dark green region of the graph above reflects the growth of the investment
assuming all distributions were received in cash and not reinvested back in the
Fund. The value of the investment under this scenario grew to $15,308 (this
value includes distributions per share totaling $7.33 during the period).
The light green region of the graph depicts additional value realized
through reinvestment of all distributions and participation in all the rights
offerings under the terms of each offering. On three occasions, the Fund has
conducted rights offerings that allow shareholders to purchase additional shares
at a discount. The value of the investment under this scenario grew to
$16,594.
18
<Page>
TABLE OF DISTRIBUTIONS AND RIGHTS OFFERINGS
<Table>
<Caption>
RIGHTS OFFERINGS
------------------------------------------------------
PER SHARE SHARES NEEDED TO PURCHASE SUBSCRIPTION
YEAR DISTRIBUTIONS ONE ADDITIONAL SHARE PRICE
1997 $ 1.24
- ---------------------------------------------------------------------------------------------------------------
1998 1.35 10 $ 12.41
- ---------------------------------------------------------------------------------------------------------------
1999 1.23
- ---------------------------------------------------------------------------------------------------------------
2000 1.34
- ---------------------------------------------------------------------------------------------------------------
2001 0.92 8 6.64
- ---------------------------------------------------------------------------------------------------------------
2002 0.67
- ---------------------------------------------------------------------------------------------------------------
2003 0.58 8* 5.72
- ---------------------------------------------------------------------------------------------------------------
</Table>
*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.
19
<Page>
TOP 50 HOLDINGS
<Table>
<Caption>
RANK AS RANK AS MARKET PERCENT OF
OF 12/31/03 OF 9/30/03 SECURITY NAME VALUE ($000) NET ASSETS
1 1 eBay, Inc. $ 5,451 3.3%
2 2 Bed Bath & Beyond, Inc. 4,695 2.9
3 7 Xilinx, Inc. 3,909 2.4
4 5 Maxim Integrated Products, Inc. 3,790 2.3
5 3 Westwood One, Inc. 3,561 2.2
6 12 Univision Communications, Inc., Class A 3,002 1.8
7 10 Pfizer, Inc. 2,933 1.8
8 13 Yahoo! Inc. 2,895 1.8
9 6 Microsoft Corp. 2,859 1.8
10 11 Paychex, Inc. 2,786 1.7
11 23 Getty Images, Inc. 2,750 1.7
12 4 EchoStar Communications Corp., Class A 2,744 1.7
13 15 Clear Channel Communications, Inc. 2,599 1.6
14 24 First Data Corp. 2,317 1.4
15 25 Cisco Systems, Inc. 2,310 1.4
16 17 National Instruments Corp. 2,297 1.4
17 22 Genentech, Inc. 2,283 1.4
18 30 Fastenal Co. 2,245 1.4
19 18 Amazon.com, Inc. 2,211 1.4
20 16 Medtronic, Inc. 2,122 1.3
21 21 Cox Communications, Inc., Class A 2,119 1.3
22 14 SLM Corp. 2,087 1.3
23 41 SAP AG 1,966 1.2
24 27 Patterson Dental Co. 1,950 1.2
25 33 Walgreen Co. 1,930 1.2
26 32 Linear Technology Corp. 1,925 1.2
27 31 UnitedHealth Group, Inc. 1,922 1.2
28 35 State Street Corp. 1,854 1.1
29 26 InterActiveCorp 1,825 1.1
30 19 Dollar Tree Stores, Inc. 1,793 1.1
31 28 Martek Biosciences Corp. 1,771 1.1
32 48 BEA Systems, Inc. 1,684 1.0
33 37 Cognex Corp. 1,648 1.0
34 34 ResMed, Inc. 1,631 1.0
35 29 Education Management Corp. 1,630 1.0
36 44 Eli Lilly and Co. 1,609 1.0
37 49 Juniper Networks, Inc. 1,601 1.0
38 51 Zebra Technologies Corp., Class A 1,598 1.0
39 38 Dell, Inc. 1,532 0.9
40 42 Fannie Mae 1,531 0.9
41 63 The Cheesecake Factory, Inc. 1,521 0.9
42 57 UTI Worldwide, Inc. 1,519 0.9
43 54 Danaher Corp. 1,459 0.9
44 53 Taiwan Semiconductor Manufacturing Co., Ltd. 1,447 0.9
45 64 Siebel Systems, Inc. 1,395 0.9
46 45 PepsiCo, Inc. 1,371 0.8
47 36 Lincare Holdings, Inc. 1,367 0.8
48 43 The Corporate Executive Board Co. 1,354 0.8
49 20 Avon Products, Inc. 1,350 0.8
50 50 Alcon, Inc. 1,338 0.8
</Table>
20
<Page>
MAJOR STOCK CHANGES IN THE FOURTH QUARTER
The following are the major ($500,000 or more) stock changes--both purchases and
sales--that were made in the Fund's portfolio during the fourth quarter of 2003.
<Table>
<Caption>
SECURITY NAME PURCHASES (SALES) SHARES AS OF 12/31/03
PURCHASES
CheckFree Corp. 19,200 19,200
EMC Corp. 49,900 83,100
Medicis Pharmaceutical Corp., Class A 8,082 12,382
MGI Pharma, Inc. 15,200 15,200
SALES
Avon Products, Inc. (10,800) 20,000
Charles River Laboratories International, Inc. (21,972) 0
Family Dollar Stores, Inc. (32,582) 31,723
Gilead Sciences, Inc. (48,800) 0
Intel Corp. (53,700) 0
The Yankee Candle Co., Inc. (21,661) 0
</Table>
21
<Page>
SCHEDULE OF INVESTMENTS as of December 31, 2003
<Table>
<Caption>
COMMON STOCKS (98.9%) SHARES MARKET VALUE
CONSUMER DISCRETIONARY (27.6%)
AUTOMOBILES (0.6%)
Harley-Davidson, Inc. 21,300 $ 1,012,389
---------------
HOTELS, RESTAURANTS & LEISURE (2.7%)
The Cheesecake Factory, Inc. (a) 34,537 1,520,664
International Speedway Corp., Class A 29,810 1,331,315
Outback Steakhouse, Inc. 21,086 932,212
P.F. Chang's China Bistro, Inc. (a) 11,498 585,018
---------------
4,369,209
---------------
INTERNET & CATALOG RETAIL (6.4%)
Amazon.com, Inc. (a) 42,000 2,210,880
eBay, Inc. (a) 84,400 5,451,396
InterActiveCorp. 53,781 1,824,789
Netflix, Inc. (a) 17,114 935,965
---------------
10,423,030
---------------
MEDIA (11.8%)
Cablevision Systems Corp., Class A (a) 34,751 812,826
Citadel Broadcasting Co. (a) 33,096 740,358
Clear Channel Communications, Inc. 55,500 2,599,065
Cox Communications, Inc., Class A (a) 61,500 2,118,675
Cox Radio, Inc., Class A (a) 36,700 925,941
EchoStar Communications Corp., Class A (a) 80,700 2,743,800
Getty Images, Inc. (a) 54,860 2,750,132
Univision Communications, Inc., Class A (a) 75,640 3,002,152
Westwood One, Inc. (a) 104,094 3,561,056
---------------
19,254,005
---------------
MULTI-LINE RETAIL (2.7%)
Dollar Tree Stores, Inc. (a) 59,635 1,792,628
Family Dollar Stores, Inc. 31,723 1,138,221
Kohl's Corp. (a) 27,400 1,231,356
99 Cents Only Stores (a) 10,389 282,892
---------------
4,445,097
---------------
SPECIALTY RETAIL (3.4%)
Bed Bath & Beyond, Inc. (a) 108,300 4,694,805
The Children's Place Retail Stores, Inc. (a) 32,106 858,193
---------------
5,552,998
---------------
</Table>
See Notes to Schedule of Investments.
22
<Page>
SCHEDULE OF INVESTMENTS
<Table>
<Caption>
COMMON STOCKS (CONTINUED) SHARES MARKET VALUE
CONSUMER STAPLES (3.2%)
BEVERAGES (0.9%)
PepsiCo, Inc. 29,400 $ 1,370,628
---------------
FOOD & STAPLES RETAILING (1.5%)
Rite Aid Corp. (a) 90,662 547,598
Walgreen Co. 53,050 1,929,959
---------------
2,477,557
---------------
PERSONAL PRODUCTS (0.8%)
Avon Products, Inc. 20,000 1,349,800
---------------
ENERGY (1.8%)
ENERGY EQUIPMENT & SERVICES (1.4%)
Patterson-UTI Energy, Inc. (a) 25,315 833,370
Pride International, Inc. (a) 44,705 833,301
Tidewater, Inc. 18,338 547,939
---------------
2,214,610
---------------
OIL & GAS (0.4%)
Suncor Energy, Inc. 27,200 681,632
---------------
FINANCIALS (7.3%)
CAPITAL MARKETS (3.0%)
Affiliated Managers Group, Inc. (a) 8,820 613,784
Investment Technology Group, Inc. (a) 33,590 542,479
SEI Investment Co. 21,000 639,870
State Street Corp. 35,600 1,854,048
T. Rowe Price Group, Inc. 25,500 1,208,955
---------------
4,859,136
---------------
CONSUMER FINANCE (1.3%)
SLM Corp. 55,400 2,087,472
---------------
DIVERSIFIED FINANCIAL SERVICES (0.6%)
CapitalSource, Inc. (a) 4,600 99,728
Financial Federal Corp. (a) 27,842 850,573
---------------
950,301
---------------
INSURANCE (1.5%)
Brown & Brown, Inc. 17,610 574,262
Montpelier Re Holdings Ltd. 16,663 611,532
Platinum Underwriters Holdings Ltd. 18,064 541,920
XL Capital Ltd., Class A 8,800 682,440
---------------
2,410,154
---------------
</Table>
See Notes to Schedule of Investments.
23
<Page>
<Table>
<Caption>
COMMON STOCKS (CONTINUED) SHARES MARKET VALUE
THRIFTS & MORTGAGE FINANCE (0.9%)
Fannie Mae 20,400 $ 1,531,224
---------------
HEALTH CARE (17.0%)
BIOTECHNOLOGY (5.2%)
Affymetrix, Inc. (a) 44,800 1,102,528
Amgen, Inc. (a) 19,200 1,186,560
Enzon Pharmaceuticals, Inc. (a) 35,712 428,544
Genentech, Inc. (a) 24,400 2,283,108
Martek Biosciences Corp. (a) 27,258 1,770,952
MedImmune, Inc. (a) 26,200 665,480
QLT, Inc. (a) 49,737 937,542
---------------
8,374,714
---------------
HEALTH CARE EQUIPMENT & SUPPLIES (3.9%)
Alcon, Inc. 22,100 1,337,934
Medtronic, Inc. 43,650 2,121,827
PolyMedica Corp. 49,938 1,313,869
ResMed, Inc. (a) 39,275 1,631,484
---------------
6,405,114
---------------
HEALTH CARE PROVIDERS & SERVICES (4.0%)
Express Scripts, Inc., Class A (a) 14,000 930,020
Inveresk Research Group, Inc. (a) 14,280 353,144
Lincare Holdings, Inc. (a) 45,530 1,367,266
Patterson Dental Co. (a) 30,390 1,949,822
UnitedHealth Group, Inc. 33,040 1,922,267
---------------
6,522,519
---------------
PHARMACEUTICALS (3.9%)
Eli Lilly and Co. 22,875 1,608,799
Eon Labs, Inc. (a) 5,500 280,225
Medicis Pharmaceutical Corp., Class A 12,382 882,837
MGI Pharma, Inc. (a) 15,200 625,480
Pfizer, Inc. 83,030 2,933,450
Pharmion Corp. (a) 4,700 71,675
---------------
6,402,466
---------------
INDUSTRIALS (6.7%)
AIR FREIGHT & LOGISTICS (0.9%)
UTI Worldwide, Inc. 40,035 1,518,528
---------------
</Table>
See Notes to Schedule of Investments.
24
<Page>
<Table>
<Caption>
COMMON STOCKS (CONTINUED) SHARES MARKET VALUE
COMMERCIAL SERVICES & SUPPLIES (3.5%)
Bright Horizons Family Solutions, Inc. (a) 6,851 $ 287,742
Cintas Corp. 12,572 630,234
The Corporate Executive Board Co. (a) 29,019 1,354,317
Education Management Corp. (a) 52,528 1,630,469
Robert Half International, Inc. (a) 26,200 611,508
Universal Technical Institute, Inc. (a) 10,906 327,180
West Corp. (a) 36,366 844,782
---------------
5,686,232
---------------
MACHINERY (0.9%)
Danaher Corp. 15,900 1,458,825
---------------
TRADING COMPANIES & DISTRIBUTORS (1.4%)
Fastenal Co. 44,950 2,244,803
---------------
INFORMATION TECHNOLOGY (33.7%)
COMMUNICATIONS EQUIPMENT (3.7%)
CIENA Corp. (a) 62,100 412,344
Cisco Systems, Inc. (a) 95,100 2,309,979
Juniper Networks, Inc. (a) 85,700 1,600,876
Packeteer, Inc. (a) 30,500 517,890
Polycom, Inc. (a) 62,793 1,225,719
---------------
6,066,808
---------------
COMPUTERS & PERIPHERALS (2.4%)
Avid Technology, Inc. (a) 5,556 266,688
Dell, Inc. (a) 45,100 1,531,596
EMC Corp. (a) 83,100 1,073,652
Network Appliance, Inc. (a) 49,100 1,008,023
---------------
3,879,959
---------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (2.4%)
Cognex Corp. 58,365 1,648,228
National Instruments Corp. 50,510 2,296,690
---------------
3,944,918
---------------
INTERNET SOFTWARE & SERVICES (2.9%)
Orbitz, Inc., Class A (a) 10,756 249,539
Retek, Inc. (a) 36,172 335,676
WebEx Communications, Inc. (a) 37,945 762,694
webMethods, Inc. (a) 41,600 380,640
Yahoo! Inc. (a) 64,100 2,895,397
---------------
4,623,946
---------------
</Table>
See Notes to Schedule of Investments.
25
<Page>
<Table>
<Caption>
COMMON STOCKS (CONTINUED) SHARES MARKET VALUE
IT SERVICES (4.7%)
CheckFree Corp. (a) 19,200 $ 530,880
First Data Corp. 56,400 2,317,476
Paychex, Inc. 74,900 2,786,280
SRA International, Inc. (a) 19,721 849,975
SunGard Data Systems, Inc. (a) 44,000 1,219,240
---------------
7,703,851
---------------
OFFICE ELECTRONICS (1.0%)
Zebra Technologies Corp., Class A (a) 24,082 1,598,322
---------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (10.0%)
Altera Corp. (a) 32,500 737,750
Applied Micro Circuits Corp. (a) 72,300 432,354
GlobespanVirata, Inc. (a) 45,800 269,304
Intersil Corp., Class A 20,956 520,757
Linear Technology Corp. 45,750 1,924,703
Maxim Integrated Products, Inc. 76,100 3,789,780
Microchip Technology, Inc. 33,221 1,108,253
Novellus Systems, Inc. (a) 17,500 735,875
Power Integrations, Inc. (a) 16,450 550,417
Semtech Corp. (a) 37,103 843,351
Taiwan Semiconductor Manufacturing Co., Ltd. (a)(b) 141,300 1,446,912
Xilinx, Inc. (a) 100,900 3,908,866
---------------
16,268,322
---------------
SOFTWARE (6.6%)
Agile Software Corp. (a) 84,820 839,718
BEA Systems, Inc. (a) 136,900 1,683,870
E.piphany, Inc. (a) 76,548 551,911
Interwoven, Inc. (a) 21,152 267,361
Intuit, Inc. (a) 23,700 1,253,967
Microsoft Corp. 103,800 2,858,652
SAP AG (b) 47,300 1,965,788
Siebel Systems, Inc. (a) 100,600 1,395,322
---------------
10,816,589
---------------
TELECOMMUNICATION SERVICES (1.6%)
DIVERSIFIED TELECOMMUNICATION SERVICES (0.6%)
Time Warner Telecom, Inc. (a) 93,800 950,194
---------------
</Table>
See Notes to Schedule of Investments.
26
<Page>
<Table>
<Caption>
COMMON STOCKS (CONTINUED) SHARES MARKET VALUE
WIRELESS TELECOMMUNICATION SERVICES (1.0%)
At Road, Inc. (a) 22,678 $ 301,617
Sprint Corp. (PCS Group) (a) 141,000 792,420
Telephone and Data Systems, Inc. 8,800 550,440
---------------
1,644,477
---------------
TOTAL COMMON STOCKS (COST OF $137,684,267) 161,099,829
---------------
<Caption>
WARRANTS (0.1%) UNITS
CONSUMER DISCRETIONARY (0.1%)
INTERNET & CATALOG RETAIL (0.1%)
InterActiveCorp, Expires 02/04/09 (a) (Cost of $20,691) 2,918 107,966
---------------
<Caption>
SHORT-TERM INVESTMENT (2.4%) PAR VALUE
REPURCHASE AGREEMENT (2.4%)
Repurchase agreement with State Street Bank & Trust Co., dated
12/31/03, due 01/02/04 at 0.78%, collateralized by U.S. Treasury
Bonds with various maturities to 08/15/28, market value
$4,135,222
(repurchase proceeds $4,044,175) (Cost of $4,044,000) $ 4,044,000 4,044,000
---------------
TOTAL INVESTMENTS (101.4%) (COST OF $141,748,958) (c) 165,251,795
OTHER ASSETS AND LIABILITIES, NET (-1.4%) (2,346,815)
---------------
NET ASSETS (100.0%) $ 162,904,980
===============
NET ASSET VALUE PER SHARE (25,007,325 SHARES OUTSTANDING) $ 6.51
===============
</Table>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Represents an American Depositary Receipt.
(c) Cost of investments for federal income tax purposes is $142,386,727.
Gross unrealized appreciation and depreciation of investments at
December 31, 2003 is as follows:
<Table>
Gross unrealized appreciation $ 39,076,858
Gross unrealized depreciation (16,211,790)
-------------
Net unrealized appreciation $ 22,865,068
=============
</Table>
See Notes to Financial Statements.
27
<Page>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2003
<Table>
ASSETS:
Investments at market value (identified cost $141,748,958) $ 165,251,795
Cash 1,349
Receivable for investments sold 498,492
Dividends and interest receivable 35,102
---------------
TOTAL ASSETS 165,786,738
---------------
LIABILITIES:
Payable for investments purchased 358,505
Distributions payable to shareholders 2,028,583
Investment advisory, administrative and bookkeeping/pricing fees payable 402,157
Accrued expenses 92,513
---------------
TOTAL LIABILITIES 2,881,758
---------------
NET ASSETS $ 162,904,980
===============
NET ASSETS REPRESENTED BY:
Paid-in capital (authorized 60,000,000 shares at $0.10 Par;
25,007,325 shares outstanding) $ 157,064,294
Accumulated net realized loss on investments (17,662,151)
Net unrealized appreciation on investments 23,502,837
---------------
TOTAL NET ASSETS APPLICABLE TO OUTSTANDING SHARES
OF COMMON STOCK ($6.51 PER SHARE) $ 162,904,980
===============
</Table>
See Notes to Financial Statements.
28
<Page>
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2003
<Table>
INVESTMENT INCOME:
Dividends $ 486,887
Interest 30,840
---------------
TOTAL INVESTMENT INCOME (NET OF FOREIGN TAXES
WITHHELD AT SOURCE WHICH AMOUNTED TO $2,228) 517,727
EXPENSES:
Investment advisory fee $ 1,039,457
Administrative fee 261,112
Bookkeeping and pricing fees 39,937
Custodian fees 21,199
Transfer agent fees 113,447
Shareholder communication expenses 117,046
Directors' fees and expenses 32,806
NYSE fee 39,350
Miscellaneous expense 83,130
---------------
TOTAL EXPENSES 1,747,484
---------------
CUSTODY EARNINGS CREDIT (257)
---------------
NET EXPENSES 1,747,227
---------------
NET INVESTMENT LOSS (1,229,500)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions:
Proceeds from sales 48,328,625
Cost of investments sold 40,753,378
---------------
Net realized gain on investment transactions 7,575,247
Net unrealized appreciation (depreciation) on investments:
Beginning of year (8,401,413)
End of year 23,502,837
---------------
Change in unrealized depreciation-net 31,904,250
---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 38,249,997
===============
</Table>
See Notes to Financial Statements.
29
<Page>
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
---------------------------------
STATEMENT OF CHANGES IN NET ASSETS 2003 2002
OPERATIONS:
Net investment loss $ (1,229,500) $ (1,404,182)
Net realized gain (loss) on investment transactions 7,575,247 (8,922,068)
Change in unrealized appreciation (depreciation)-net 31,904,250 (33,534,693)
--------------- ---------------
Net increase (decrease) in net assets resulting from operations 38,249,997 (43,860,943)
--------------- ---------------
DISTRIBUTIONS DECLARED FROM:
Net realized gain on investments (7,098,747) --
Paid-in capital (5,634,283) (13,398,589)
--------------- ---------------
Total distributions (12,733,030) (13,398,589)
--------------- ---------------
CAPITAL TRANSACTIONS:
Proceeds from rights offering 18,754,401 --
Dividend reinvestments 6,412,884 6,185,822
--------------- ---------------
Increase in net assets from capital share transactions 25,167,285 6,185,822
--------------- ---------------
Total increase (decrease) in net assets 50,684,252 (51,073,710)
NET ASSETS:
Beginning of year 112,220,728 163,294,438
--------------- ---------------
End of year $ 162,904,980 $ 112,220,728
=============== ===============
</Table>
See Notes to Financial Statements.
30
<Page>
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
2003 2002 2001 2000 1999
PER SHARE OPERATING PERFORMANCE:
Net asset value at beginning of year $ 5.44 $ 8.31 $ 10.86 $ 13.44 $ 13.03
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment loss (0.06) (0.07) (0.09) (0.09) (0.05)
Net realized and unrealized gain
(loss) on investments 1.79 (2.13) (1.50) (1.15) 1.83
-------- -------- -------- -------- --------
Total from Investment Operations 1.73 (2.20) (1.59) (1.24) 1.78
-------- -------- -------- -------- --------
Less Distributions from:
Paid-in capital (0.26) (0.67) (0.92) (0.05) --
Realized capital gain (0.32) -- -- (1.22) (1.23)
In excess of realized capital gain -- -- -- (0.07) --
-------- -------- -------- -------- --------
Total Distributions (0.58) (0.67) (0.92) (1.34) (1.23)
-------- -------- -------- -------- --------
Change due to rights offering (a) (0.08) -- (0.04) -- --
Impact of shares issued
in dividend reinvestment (b) -- -- -- -- (0.14)
-------- -------- -------- -------- --------
Total Distributions, Reinvestments
and Rights Offering (0.66) (0.67) (0.96) (1.34) (1.37)
-------- -------- -------- -------- --------
Net asset value at end of year $ 6.51 $ 5.44 $ 8.31 $ 10.86 $ 13.44
======== ======== ======== ======== ========
Market price at end of year $ 6.83 $ 5.05 $ 8.33 $ 9.438 $ 10.813
======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN FOR SHAREHOLDERS: (c)
Based on net asset value 33.7% (27.2)% (13.7)% (9.1)% 15.9%
Based on market price 51.1% (32.6)% (0.5)% (1.8)% 6.2%
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of year (millions) $ 163 $ 112 $ 163 $ 180 $ 219
Ratio of expenses to average net assets (d) 1.34% 1.38% 1.41% 1.21% 1.20%
Ratio of net investment loss
to average net assets (d) (0.94)% (1.07)% (1.12)% (0.71)% (0.37)%
Portfolio turnover rate 37% 25% 41% 62% 71%
</Table>
(a) Effect of Fund's rights offerings for shares at a price below net asset
value.
(b) Effect of payment of a portion of distributions in newly issued shares at a
discount from net asset value.
(c) Calculated assuming all distributions reinvested at actual reinvestment
price and all rights offerings were fully subscribed under the terms of each
offering.
(d) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
See Notes to Financial Statements.
31
<Page>
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1998 1997 1996 1995(e) 1994
PER SHARE OPERATING PERFORMANCE:
Net asset value at beginning of year $ 12.89 $ 11.27 $ 10.55 $ 9.95 $ 10.54
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income (loss) (0.03) (0.02) 0.01 0.31 0.23
Net realized and unrealized gain
(loss) on investments 1.73 2.88 1.86 1.05 (0.24)
-------- -------- -------- -------- --------
Total from Investment Operations 1.70 2.86 1.87 1.36 (0.01)
-------- -------- -------- -------- --------
Less Distributions from:
Net investment income -- -- (0.01) (0.31) (0.23)
Paid-in capital (0.83) -- -- -- --
Realized capital gain (0.52) (1.24) (1.01) (0.45) (0.35)
-------- -------- -------- -------- --------
Total Distributions (1.35) (1.24) (1.02) (0.76) (0.58)
-------- -------- -------- -------- --------
Change due to rights offering (a) (0.21) -- -- -- --
Impact of shares issued
in dividend reinvestment (b) -- -- (0.13) -- --
-------- -------- -------- -------- --------
Total Distributions, Reinvestments
and Rights Offering (1.56) (1.24) (1.15) (0.76) (0.58)
-------- -------- -------- -------- --------
Net asset value at end of year $ 13.03 $ 12.89 $ 11.27 $ 10.55 $ 9.95
======== ======== ======== ======== ========
Market price at end of year $ 11.438 $ 11.938 $ 9.250 $ 9.375 $ 8.500
======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN FOR SHAREHOLDERS: (c)
Based on net asset value 15.3% 27.3% 18.3% 14.6% 0.5%
Based on market price 9.3% 43.6% 9.3% 19.3% (11.7)%
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of year (millions) $ 199 $ 167 $ 137 $ 120 $ 113
Ratio of expenses to average net assets (d) 1.22% 1.20% 1.35% 1.42% 1.51%
Ratio of net investment income (loss)
to average net assets (d) (0.22)% (0.18)% 0.06% 2.87% 2.12%
Portfolio turnover rate 33% 57% 51% 82% 50%
</Table>
(a) Effect of Fund's rights offerings for shares at a price below net asset
value.
(b) Effect of payment of a portion of distributions in newly issued shares at a
discount from net asset value.
(c) Calculated assuming all distributions reinvested at actual reinvestment
price and all rights offerings were fully subscribed under the terms of each
offering.
(d) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(e) Liberty Asset Management Company assumed complete management
responsibilities of the Fund in November 1995.
See Notes to Financial Statements.
32
<Page>
NOTES TO FINANCIAL STATEMENTS December 31, 2003
I. 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.
II. 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. 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.
Debt securities generally are valued by a pricing service approved by the
Fund's Board of Directors, based upon market transactions for normal,
institutional-sized trading units of similar securities. The services may use
various pricing techniques, which will take into account appropriate factors
such as yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other data, as well as broker quotes. Debt securities for
which quotes are readily available are valued at an over-the-counter or exchange
bid quotation.
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.
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 advisor has determined are creditworthy. The Fund, through
its custodian, receives delivery of underlying securities collateralizing a
repurchase agreement. Collateral is at least equal, at all times, to the value
of the repurchase obligation including interest. A repurchase agreement
transaction involves certain risks in the event of default or insolvency of the
counterparty. These risks include possible delays or restrictions upon the
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. Premium and discount are
amortized and accreted, respectively, on all debt securities. Corporate actions
and dividend income are recorded on the ex-date.
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.
33
<Page>
NOTES TO FINANCIAL STATEMENTS
III. FEDERAL TAX INFORMATION
The timing and character of income and capital gain distributions are determined
in accordance with income tax regulations, which may differ from GAAP.
Reclassifications are made to the Fund's capital accounts for permanent tax
differences to reflect income and gains available for distribution (or available
capital loss carryforwards) under income tax regulations.
For the year ended December 31, 2003, permanent differences resulting
primarily from differing treatments for net operating losses, return of capital
and excess distributions were identified and reclassified among the components
of the Fund's net assets as follows:
<Table>
<Caption>
ACCUMULATED NET ACCUMULATED
INVESTMENT LOSS NET REALIZED LOSS PAID-IN CAPITAL
--------------- ----------------- ---------------
$ 1,229,500 $ 7,098,748 $ (8,328,248)
</Table>
Net investment income and net realized gains (losses), as disclosed on the
Statement of Operations, and net assets were not affected by this
reclassification.
The tax character of distributions paid during the years ended December 31,
2003 and December 31, 2002 was as follows:
<Table>
<Caption>
12/31/03 12/31/02
-------- --------
Distributions paid from:
Ordinary income* $ 7,098,737 $ --
Long-term capital gain -- --
------------ -------------
7,098,737 --
Return of capital 4,528,603 14,239,710
------------ -------------
$ 11,627,340 $ 14,239,710
</Table>
*For tax purposes short-term capital gains distributions, if any, are considered
ordinary income distributions.
As of December 31, 2003, the components of distributable earnings on a tax
basis were as follows:
<Table>
<Caption>
UNDISTRIBUTED UNDISTRIBUTED NET
ORDINARY LONG-TERM UNREALIZED
INCOME CAPITAL GAINS APPRECIATION*
------------- ------------- -------------
$ -- $ -- $ 22,865,068
</Table>
*The differences between book-basis and tax-basis net unrealized appreciation
are primarily due to deferral of losses from wash sales.
The following capital loss carryforwards are available to reduce taxable
income arising from future net realized gains on investments, if any, to the
extent permitted by the Internal Revenue Code:
<Table>
<Caption>
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
---------- ------------
2009 $ 5,781,653
2010 11,242,729
------------
$ 17,024,382
</Table>
Future realized gains offset by the loss carryforwards are not required to be
distributed to shareholders. However, under the Fund's distribution policy, as
described above, such gains may be distributed to shareholders in the year gains
are realized. Any such gains distributed may be taxable to shareholders as
ordinary income. Capital loss carryforwards of $7,098,726 were utilized during
the year ended December 31, 2003.
IV. FEES AND COMPENSATION PAID TO AFFILIATES
INVESTMENT ADVISORY FEE
Liberty Asset Management Company ("LAMCO"), a wholly owned subsidiary of
Columbia Management Group, Inc. ("Columbia"), which is a wholly owned subsidiary
of FleetBoston Financial Corporation, is the investment advisor of the Fund.
LAMCO receives a monthly fee based on the Fund's average weekly net assets at
the following annual rates:
<Table>
<Caption>
AVERAGE WEEKLY NET ASSETS FEE RATE
------------------------- --------
First $300 million 0.80%
Over $300 million 0.72%
</Table>
Under Portfolio Manager Agreements, LAMCO 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 LAMCO and is based on the Fund's average weekly net assets at
the following annual rates:
<Table>
<Caption>
AVERAGE WEEKLY NET ASSETS FEE RATE
------------------------- --------
First $300 million 0.40%
Over $300 million 0.36%
</Table>
34
<Page>
ADMINISTRATION FEE
LAMCO provides administrative and other services for a monthly fee based on the
Fund's average weekly net assets at the following annual rates:
<Table>
<Caption>
AVERAGE WEEKLY NET ASSETS FEE RATE
------------------------- --------
First $300 million 0.20%
Over $300 million 0.18%
</Table>
PRICING AND BOOKKEEPING FEES
LAMCO is responsible for providing pricing and bookkeeping services to the Fund
under a pricing and bookkeeping agreement. Under a separate agreement (the
"Outsourcing Agreement"), LAMCO has delegated those functions to State Street
Corporation ("State Street"). LAMCO pays the total fees collected from the Fund
for these services to State Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Fund, LAMCO receives
from the Fund an annual flat fee of $10,000 paid monthly, and in any month that
the Fund's average weekly net assets exceed $50 million, an additional monthly
fee. The additional fee rate is calculated by taking into account the fees
payable to State Street under the Outsourcing Agreement. This rate is applied to
the average daily net assets of the Fund for that month. The Fund also pays
additional fees for pricing services. For the year ended December 31, 2003, the
effective pricing and bookkeeping fee rate was 0.031%.
CUSTODY CREDITS
The Fund has an agreement with its custodian bank under which custody fees may
be reduced by balance credits. 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
The Fund pays no compensation to its officers, all of whom are employees of
Columbia or its affiliates.
V. PORTFOLIO INFORMATION
PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 2003, the cost of purchases and proceeds from
sales of securities, excluding short-term obligations, were $59,173,014 and
$48,328,625, respectively.
VI. CAPITAL TRANSACTIONS
In a rights offering commencing September 12, 2003, shareholders exercised
rights to purchase 3,305,213 shares at $5.72 per share for proceeds, net of
expenses, of $18,754,401. During the years ended December 31, 2003 and December
31, 2002, distributions in the amount of $6,412,884 and $6,185,822,
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 1,083,624 and 964,320 shares, respectively.
35
<Page>
REPORT OF INDEPENDENT AUDITORS
TO THE SHAREHOLDERS AND THE BOARD OF DIRECTORS OF LIBERTY ALL-STAR GROWTH FUND,
INC.
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 Fund, Inc. (the
"Fund") at December 31, 2003, and 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 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 securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion. The financial highlights of the Fund for periods prior to January
1, 1999 were audited by other independent accountants whose report dated
February 12, 1999 expressed an unqualified opinion on those statements.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 10, 2004
36
<Page>
AUTOMATIC DIVIDEND REINVESTMENT & CASH PURCHASE PLAN (UNAUDITED)
Each shareholder of the Fund will automatically be a participant in the Fund's
Automatic Dividend Reinvestment and Cash Purchase Plan as amended June 30, 1996
(the "Plan"), unless the shareholder specifically elects otherwise by writing to
the agent for participants in the Plan, EquiServe Trust Company, N.A. (the "Plan
Agent"), P.O. Box 43010, Providence, RI 02940-3010 or by calling 1-800-LIB-FUND
(1-800-542-3863). Shareholders whose shares are held in the name of a brokerage
firm, bank or other nominee must notify their brokerage firm, bank or nominee if
they do not wish to participate in the Plan.
Under the Plan, all dividends and other distributions on shares of the Fund
are automatically reinvested by the Plan Agent in additional shares of the Fund.
Distributions declared payable in shares or cash at the option of shareholders
are paid to participants in the Plan entirely in newly issued full and
fractional shares valued at the lower of market value or net asset value per
share on the valuation date for the distribution (but not a discount of more
than 5 percent from market price). Distributions declared payable only in cash
will be reinvested for the accounts of participants in the Plan in additional
shares purchased by the Plan Agent on the open market at prevailing market
prices. If, prior to the Plan Agent's completion of such open market purchases,
the market price of a share equals or exceeds its net asset value, the remainder
of the distribution will be paid in newly issued shares valued at net asset
value (but not at a discount of more than 5 percent from market price).
Dividends and distributions are subject to taxation, whether received in cash or
in shares.
Participants in the Plan have the option of making additional cash payments
in any amount from $100 to $3,000 on a monthly basis for investment in shares of
the Fund purchased on the open market. These voluntary cash payments will be
invested on or about the 15th day of each calendar month, and voluntary payments
should be sent so as to be received by the Plan Agent no later than 10 days
before the next investment date. Barring suspension of trading, voluntary cash
payments will be invested within 45 days of receipt. A participant may withdraw
a voluntary cash payment by written notice received by the Plan Agent at least
48 hours before such payment is to be invested.
The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in the account, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Plan Agent in non-certificated form in the name
of the participant, and each shareholder's proxy will include those shares
purchased or received pursuant to the Plan.
There is no charge to participants for reinvesting distributions pursuant to
the Plan. The Plan Agent's fees are paid by the Fund. There are no brokerage
charges with respect to shares issued directly by the Fund as a result of
dividends or distributions declared payable in shares or in cash. However, each
participant bears a pro rata share of brokerage commissions incurred with
respect to the Plan Agent's open market purchases in connection with the
reinvestment of distributions declared payable only in cash.
With respect to purchases from voluntary cash payments, the Plan Agent will
charge $1.25 for each such purchase for a participant, plus a pro rata share of
the brokerage commissions. Brokerage charges for purchasing small amounts of
shares for individual accounts through the Plan are expected to be less than the
usual brokerage charges for such transactions, as the Plan Agent will be
purchasing shares for all participants in blocks and prorating the lower
commission thus attainable.
Shareholders whose shares are held in the name of a brokerage firm, bank or
other nominee will be able to participate in the Plan only if their brokerage
firm, bank or nominee is able to do so on their behalf. Shareholders
participating in the Plan through a brokerage firm may not be able to transfer
their shares to another brokerage firm and continue to participate in the Plan.
Shareholders may terminate their participation in the Plan by written notice
to the Plan Agent, EquiServe Trust Company, N.A., P.O. Box 43010, Providence, RI
02940-3010. Such termination will be effective immediately if received not less
than 10 days prior to the record date for a dividend or distribution; otherwise
it will be effective on the first business day after the payment date of such
dividend or distribution. On termination, participants may either have
certificates for the Fund shares in their Plan accounts delivered to them or
have the Plan Agent sell such shares in the open market and deliver the
proceeds, less a $2.50 fee plus brokerage commissions, to the participant.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan.
37
<Page>
TAX INFORMATION (UNAUDITED)
All 2003 distributions whether received in cash or shares of the Fund consist of
the following:
(1) ordinary dividends and
(2) return of capital
Below is a table that details the breakdown of each 2003 distribution for
federal income tax purposes.
TAX STATUS OF 2003 DISTRIBUTIONS
<Table>
<Caption>
ORDINARY DIVIDENDS LONG-TERM
AMOUNT --------------------------- CAPITAL RETURN OF
DATE PAID PER SHARE QUALIFIED NON-QUALIFIED GAINS CAPITAL
*01/02/03 $ 0.14 3.68% 55.96% -- 40.36%
- -------------------------------------------------------------------------------
03/17/03 $ 0.13 3.68% 55.96% -- 40.36%
- -------------------------------------------------------------------------------
06/30/03 $ 0.14 3.68% 55.96% -- 40.36%
- -------------------------------------------------------------------------------
10/06/03 $ 0.15 3.68% 55.96% -- 40.36%
- -------------------------------------------------------------------------------
**01/02/04 $ 0.16 -- -- -- --
- -------------------------------------------------------------------------------
</Table>
* Pursuant to section 852 of the Internal Revenue Code, the taxability of this
distribution will be reported on the Form 1099-DIV for 2003.
** Pursuant to section 852 of the Internal Revenue Code, the taxability of this
distribution will be reported on the Form 1099-DIV for 2004.
38
<Page>
DIRECTORS AND OFFICERS
The names of the Directors and officers of the Liberty All-Star Growth Fund,
Inc., the date each was first elected or appointed to office, their term of
office, their principal business occupations and other directorships they have
held during at least the last five years, are shown below.
<Table>
<Caption>
NUMBER OF
POSITION TERM OF PRINCIPAL PORTFOLIOS IN
WITH LIBERTY OFFICE AND OCCUPATION(S) FUND COMPLEX OTHER
NAME (AGE) ALL-STAR LENGTH OF DURING PAST OVERSEEN DIRECTORSHIPS
AND ADDRESS GROWTH FUND SERVICE FIVE YEARS BY DIRECTOR HELD
DISINTERESTED DIRECTORS
John A. Benning (69) Director Director Since Retired since December, 2 TT International USA
c/o Liberty Asset 2002; Term 1999; Senior Vice (investment company)
Management Company expires 2005 President, General
One Financial Center Counsel and Secretary,
Boston, MA 02111 Liberty Financial
Companies Inc. (July,
1985 to December, 1999);
Vice President, Secretary
and Director, Liberty
Asset Management Company
(August, 1985 to
December, 1999).
James E. Grinnell (74) Director Director Since Private investor since 2 None
c/o Liberty Asset 1994; Term November 1988; President
Management Company Expires 2006 and Chief Executive
One Financial Center Officer, Distribution
Boston, MA 02111 Management Systems, Inc.
(1983 to May 1986);
Senior Vice President,
Operations, The Rockport
Company (importer and
distributor of shoes)
(May 1986 to November
1988).
Richard W. Lowry (67) Director Director Since Private Investor since 121 None
c/o Liberty Asset 1994; Term 1987 (formerly Chairman
Management Company Expires 2004 and Chief Executive
One Financial Center Officer, U.S. Plywood
Boston, MA 02111 Corporation (building
products manufacturer).
John J. Neuhauser (60) Director Director Since Academic Vice President 122 Saucony, Inc. (athletic
c/o Liberty Asset 1998; Term and Dean of Faculties footwear) and SkillSoft
Management Company Expires 2006 since August 1999, Boston Corp. (e-learning)
One Financial Center College (formerly Dean,
Boston, MA 02111 Boston College School of
Management from September
1977 to September 1999).
INTERESTED DIRECTOR
William E. Mayer* (63) Director Director Since Managing Partner, Park 121 Lee Enterprises (print
c/o Liberty Asset 1998; Term Avenue Equity Partners media); WR Hambrecht + Co
Management Company Expires 2005 (private equity) since (financial service
One Financial Center February 1999 (formerly provider); First Health
Boston, MA 02111 Founding Partner, (healthcare).
Development Capital, LLC
from November 1996 to
February 1999).
</Table>
* A DIRECTOR WHO IS AN "INTERESTED PERSON" (AS DEFINED IN THE INVESTMENT COMPANY
ACT OF 1940 ("1940 ACT")) OF LIBERTY ALL-STAR GROWTH FUND, INC. OR LAMCO. MR.
MAYER IS AN INTERESTED PERSON BY REASON OF HIS AFFILIATION WITH WR HAMBRECHT +
CO.
39
<Page>
<Table>
<Caption>
POSITION YEAR FIRST
WITH LIBERTY ELECTED OR
ALL-STAR APPOINTED PRINCIPAL OCCUPATION(S) DURING
NAME (AGE) AND ADDRESS GROWTH FUND TO OFFICE PAST FIVE YEARS
OFFICERS
William R. Parmentier, Jr. (51) President 1998 President (since June 1998) and Chief Investment
Liberty Asset Management Company and Chief Officer (since April 1995), Senior Vice President
One Financial Center Executive (May 1995 to June 1998), Liberty Asset Management.
Boston, MA 02111 Officer
Mark T. Haley, CFA (39) Vice President 1999 Vice President-Investments (since January 1999),
Liberty Asset Management Company Director of Investment Analysis (December 1996 to
One Financial Center December 1998), Investment Analyst (January 1994
Boston, MA 02111 to November 1996), Liberty Asset Management.
Fred H. Wofford (48) Vice President 2003 Director of Funds Operations (since March 2003),
Liberty Asset Management Company Liberty Asset Management (formerly Director of
One Financial Center Investment Compliance, Deutsche Asset Management
Boston, MA 02111 from February 1999 to March 2003; Manager of Fund
Administration, BankBoston 1784 Funds from
November 1995 to February 1999).
J. Kevin Connaughton (39) Treasurer 2000 Treasurer of the Columbia Funds and of the Liberty
One Financial Center All-Star Funds since December 2000 (formerly
Boston, MA 02111 Controller of the Columbia Funds and of the
Liberty All-Star Funds from February 1998 to
October 2000); Vice President of Columbia
Management Advisors, Inc. since April 2003;
Treasurer of the Galaxy Funds since September
2002; Treasurer of the Columbia Management
Multi-Strategy Hedge Fund, LLC since December 2002
(formerly Vice President of Colonial Management
Associates, Inc. from February 1998 to October
2000; Senior Tax Manager, Coopers & Lybrand, LLP
from April 1996 to January 1998).
Vicki Benjamin (42) Chief 2001 Controller of the Columbia Funds and Liberty
One Financial Center Accounting All-Star Funds since June 2002; Chief Accounting
Boston, MA 02111 Officer and Officer of the Columbia Funds and Liberty All-Star
Controller Funds since June 2001; Controller and Chief
Accounting Officer of the Galaxy Funds since
September 2002 (formerly Vice President, Corporate
Audit, State Street Bank and Trust Company from
May 1998 to April 2001; Audit Manager from July
1994 to June 1997, Senior Audit Manager from July
1997 to May 1998, Coopers & Lybrand LLP).
David A. Rozenson (49) Secretary 2003 Secretary of the Columbia Funds and of the Liberty
One Financial Center All-Star Funds since December 2003; Senior Counsel
Boston, MA 02111 of FleetBoston Financial Corporation since January
1996; Associate General Counsel of Columbia
Management Group since November 2002.
</Table>
40
<Page>
[ALL-STAR(R) GROWTH FUND LOGO]
FUND MANAGER
Liberty Asset Management Company
One Financial Center
Boston, Massachusetts 02111
617-772-3626
www.all-starfunds.com
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
125 High Street
Boston, Massachusetts 02110
CUSTODIAN
State Street Bank & Trust Company
225 Franklin Street
Boston, Massachusetts 02110
INVESTOR ASSISTANCE,
TRANSFER & DIVIDEND
DISBURSING AGENT & REGISTRAR
EquiServe Trust Company, N.A.
P.O. Box 43010, Providence, Rhode Island 02940-3010
1-800-LIB-FUND (1-800-542-3863)
www.equiserve.com
LEGAL COUNSEL
Kirkpatrick and Lockhart LLP
1800 Massachusetts Avenue, NW
Washington, DC 20036-1800
DIRECTORS
John A. Benning*
James E. Grinnell*
Richard W. Lowry*
William E. Mayer
Dr. John J. Neuhauser*
OFFICERS
William R. Parmentier, Jr., President and Chief Executive Officer
Mark T. Haley, CFA, Vice President
Fred H. Wofford, Vice President
J. Kevin Connaughton, Treasurer
Vicki L. Benjamin, Chief Accounting Officer and Controller
David A. Rozenson, Secretary
*Member of the audit committee.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to its portfolio securities is available (1) without
charge, upon request, by calling 1-800-542-3863 or (2) on the Securities and
Exchange Commission's web site at www.sec.gov.
[ASG LISTED NYSE LOGO]
<Page>
[GRAPHIC]
[ALL STAR(R) GROWTH FUND LOGO]
LIBERTY ASSET MANAGEMENT COMPANY,
FUND MANAGER
ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02111
617-772-3626
www.all-starfunds.com
[ASG LISTED NYSE LOGO]
A MEMBER OF THE
[CLOSED-END FUND ASSOCIATION, INC LOGO]
WWW.CLOSED-END FUND.COM
IMAGE OF THE NEW YORK STOCK EXCHANGE
TRADING FLOOR WITH PERMISSION OF NYSE.
MULTI-MANAGEMENT
[GRAPHIC]
CLOSED-END STRUCTURE
[GRAPHIC]
PROFESSIONAL MANAGEMENT
[GRAPHIC]
ACCESS TO LEADING
INVESTMENT MANAGERS
[GRAPHIC]
ONGOING MONITORING
AND REBALANCING
[GRAPHIC]
DISTRIBUTION POLICY
[GRAPHIC]
LIBERTY ALL-STAR GROWTH FUND
<Page>
ITEM 2. CODE OF ETHICS.
(a) The registrant has, as of the end of the period covered by this
report, adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed
by the registrant or a third party.
(b) During the period covered by this report, there were not any
amendments to a provision of the code of ethics adopted in 2(a)
above.
(c) During the period covered by this report, there were not any
waivers or implicit waivers to a provision of the code of ethics
adopted in 2(a) above.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Audit Committee is composed of three of the registrant's
independent directors who are not affiliated with the registrant's investment
adviser. The Board has determined that each of the audit committee members
is "financially literate" and that at least one member has "accounting or
related financial management expertise" as used in the New York Stock
Exchange definitions of the terms.
Under the recently enacted Sarbanes-Oxley Act, if the Board of
Directors has not determined that a "financial expert," a new term based on
criteria contained in the Sarbanes-Oxley Act, is serving on the audit
committee, it must disclose this fact and explain why the committee does not
have such an expert. The Board of Directors has determined that none of the
members of its audit committee meets the technical requirements of the
definition. Moreover, it believes that for the following reasons it is not
necessary for a registered investment company such as the registrant, with an
audit committee that meets the New York Stock Exchange requirements of
financial literacy, to have a "financial expert" as a member of the committee.
1. The financial statements of and accounting principles applying to
registered investment companies such as the registrant are relatively
straightforward and transparent compared to those of operating
companies. The significant accounting issues are valuation of
securities and other assets (regulated under the Investment Company Act
of 1940 (the "1940 Act") and computed daily), accrual of expenses,
allocation of joint expenses shared with other entities, such as
insurance premiums, and disclosures of all related party transactions.
Equally important is a knowledge of the tax laws applying to registered
investment companies. None of the accounting issues involving
corporate America that have received recent publicity, such as
sophisticated derivative transactions and special purpose entities,
are present in financial reporting for registered investment companies.
<Page>
2. During the years that the registrant has been filing financial reports
under the 1940 Act since its inception in 1986 there has never been a
requirement for a financial report or statement to be restated.
3. The current members of the audit committee have many years of aggregate
experience serving on this audit committee and in the Board's judgment,
through this experience and experience with other public corporation's
financial affairs, they have an understanding of the relevant generally
accepted accounting principles governing the registrant's financial
statements, tax laws applying to the registrant, the registrant's
internal accounting controls and audit committee functions necessary to
satisfy the objectives of the Sarbanes-Oxley Act with respect to the
financial statements, auditing process and internal controls of the
registrant.
4. The audit committee has the capability of employing a consultant who
satisfies the technical definition of a "financial expert" and will
do so from time to time if circumstances warrant.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
4(a) Aggregate Audit Fees billed to the registrant by the principal
accountant for professional services rendered during the fiscal years ended
December 31, 2003 and December 31, 2002 are as follows:
<Table>
<Caption>
2003 2002
$27,500 $23,100
</Table>
Audit Fees include amounts related to the audit of the registrant's annual
financial statements or services that are normally provided by the accountant
in connection with statutory and regulatory filings or engagements for those
fiscal years.
<Page>
(b) Aggregate Audit-Related Fees billed to the registrant by the principal
accountant for professional services rendered during the fiscal years ended
December 31, 2003 and December 31, 2002 are as follows:
<Table>
<Caption>
2003 2002
$4,000 $2,000
</Table>
Audit-Related Fees include amounts for assurance and related services by the
principal accountant that are reasonably related to the performance of the
audit of the registrant's financial statements and are not reported in Audit
Fees above. In fiscal year 2003, Audit-Related Fees relate to certain
agreed-upon procedures performed for semi-annual shareholder reports.
Audit-Related Fees in fiscal year 2002 relate to certain agreed-upon
procedures conducted during the conversion of the registrant's accounting
system.
The "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X became effective on May 6, 2003. The percentage of
Audit-Related services to the registrant that were approved under the "de
minimis" exception during the fiscal years ended December 31, 2003 and
December 31, 2002 are as follows:
<Table>
<Caption>
2003 2002
0% N/A
</Table>
The pre-approval requirements for services to the investment adviser (not
including any sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser) and any entity
controlling, controlled by, or under common control with the adviser that
provides ongoing services to the registrant under paragraph (c)(7)(ii) of
Rule 2-01 of Regulation S-X became effective on May 6, 2003. During the
fiscal year ended December 31, 2003, there were no Audit-Related Fees that
were approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation
S-X.
The percentage of Audit-Related fees required to be approved under paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X that were approved under the "de
minimis" exception during the fiscal years ended December 31, 2003 and
December 31, 2002 are as follows:
<Table>
<Caption>
2003 2002
0% N/A
</Table>
(c) Aggregate Tax Fees billed to the registrant by the principal accountant
for professional services rendered during the fiscal years ended December 31,
2003 and December 31, 2002 are as follows:
<Table>
<Caption>
2003 2002
$2,600 $2,500
</Table>
<Page>
Tax Fees include amounts for professional services by the principal
accountant for tax compliance, tax advice and tax planning. Tax Fees in both
fiscal years 2003 and 2002 relate to the review of annual tax returns.
The "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X became effective on May 6, 2003. The percentage of Tax Fees
billed to the registrant that were approved under the "de minimis" exception
during the fiscal years ended December 31, 2003 and December 31, 2002 are as
follows:
<Table>
<Caption>
2003 2002
0% N/A
</Table>
The pre-approval requirements for services to the investment adviser (not
including any sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser) and any entity
controlling, controlled by, or under common control with the adviser that
provides ongoing services to the registrant under paragraph (c)(7)(ii) of
Rule 2-01 of Regulation S-X became effective on May 6, 2003. During the
fiscal year ended December 31, 2003, there were no Tax Fees that were
approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X.
The percentage of Tax Fees required to be approved under paragraph (c)(7)(ii)
of Rule 2-01 of Regulation S-X that were approved under the "de minimis"
exception during the fiscal years ended December 31, 2003 and December 31,
2002 are as follows:
<Table>
<Caption>
2003 2002
0% N/A
</Table>
(d) Aggregate All Other Fees billed to the registrant by the principal
accountant for professional services rendered during the fiscal years ended
December 31, 2003 and December 31, 2002 are as follows:
<Table>
<Caption>
2003 2002
$0 $0
</Table>
All Other Fees include amounts for products and services provided by the
principal accountant, other than the services reported in (a)-(c) above.
The "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X became effective on May 6, 2003. The percentage of All Other
Fees billed to the registrant that were approved under the "de minimis"
exception during the fiscal years ended December 31, 2003 and December 31,
2002 are as follows:
<Table>
<Caption>
2003 2002
0% N/A
</Table>
<Page>
The pre-approval requirements for services to the investment adviser (not
including any sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser) and any entity
controlling, controlled by, or under common control with the adviser that
provides ongoing services to the registrant under paragraph (c)(7)(ii) of
Rule 2-01 of Regulation S-X became effective on May 6, 2003. During the
fiscal year ended December 31, 2003, there were no All Other Fees that were
approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X.
The percentage of All Other Fees required to be approved under paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X that were approved under the "de
minimis" exception during the fiscal years ended December 31, 2003 and
December 31, 2002 are as follows:
<Table>
<Caption>
2003 2002
0% N/A
</Table>
(e)(1) Audit Committee Pre-Approval Policies and Procedures
I. GENERAL OVERVIEW
The Audit Committee of the registrant has adopted a formal policy (the
"Policy") which sets forth the procedures and the conditions pursuant to
which the Audit Committee will pre-approve (i) all audit and non-audit
(including audit related, tax and all other) services provided by the
registrant's independent auditor to the registrant and individual funds
(collectively "Fund Services"), and (ii) all non-audit services provided by
the registrant's independent auditor to the funds' adviser or a control
affiliate of the adviser, that relate directly to the funds' operations and
financial reporting (collectively "Fund-related Adviser Services"). A
"control affiliate" is an entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the funds, and the
term "adviser" is deemed to exclude any unaffiliated sub-adviser whose role
is primarily portfolio management and is sub-contracted or overseen by
another investment adviser.
The Audit Committee uses a combination of specific (on a case-by-case basis
as potential services are contemplated) and general (pre-determined list of
permitted services) pre-approvals. Unless a type of service has received
general pre-approval, it will require specific pre-approval by the Audit
Committee if it is to be provided by the independent auditor.
The Policy does not delegate the Audit Committee's responsibilities to
pre-approve services performed by the independent auditor to management.
II. GENERAL PROCEDURES
On an annual basis, the Fund Treasurer and/or Director of Trustee
Administration shall submit to the Audit Committee a schedule of the types of
Fund Services and Fund-related Adviser Services that are subject to general
pre-approval.
<Page>
These services will provide a description of each type of service that is
subject to general pre-approval and, where possible, will provide projected
fees for each instance of providing each service. This general pre-approval
and related fees (where provided) will generally cover the period from July 1
through June 30 of the following year. The Audit Committee will review and
approve the types of services and review the projected fees for the next
fiscal year and may add to, or subtract from, the list of general
pre-approved services from time to time, based on subsequent determinations.
This approval acknowledges that the Audit Committee is in agreement with the
specific types of services that the independent auditor will be permitted to
perform. The fee amounts will be updated to the extent necessary at other
regularly scheduled meetings of the Audit Committee.
In addition to the fees for each individual service, the Audit Committee has
the authority to implement a fee cap on the aggregate amount of non-audit
services provided to an individual fund.
If, subsequent to general pre-approval, a fund, adviser or control affiliate
determines that it would like to engage the independent auditor to perform a
service not included in the general pre-approval list, the specific
pre-approval procedure shall be as follows:
- A brief written request shall be prepared by management detailing the
proposed engagement with explanation as to why the work is proposed
to be performed by the independent auditor;
- The request should be addressed to the Audit Committee with copies to
the Fund Treasurer and/or Director of Trustee Administration;
- The Fund Treasurer and/or Director of Trustee Administration will
arrange for a discussion of the service to be included on the agenda
for the next regularly scheduled Audit Committee meeting, when the
Committee will discuss the proposed engagement and approve or deny
the request.
- If the timing of the project is critical and the project needs to
commence before the next regularly scheduled meeting, the Chairperson
of the Audit Committee may approve or deny the request on behalf of
the Audit Committee, or, in the Chairperson's discretion, determine
to call a special meeting of the Audit Committee for the purpose of
considering the proposal. Should the Chairperson of the Audit
Committee be unavailable, any other member of the Audit Committee
may serve as an alternate for the purpose of approving or denying
the request. Discussion with the Chairperson (or alternate, if
necessary) will be arranged by the Fund Treasurer and/or Director
of Trustee Administration. The independent auditor will not
commence any such project unless and until specific approval has
been given.
III. ADDITIONAL PRE-APPROVAL INFORMATION
The engagement of the independent auditor to provide Fund Services and
Fund-related Adviser Services shall be approved by the Audit Committee prior
to the commencement of any such engagement.
<Page>
A. AUDIT SERVICES TO THE FUNDS
The Audit Committee will monitor the Audit services engagement throughout the
year and will also approve, if necessary, any changes in terms and conditions
resulting from changes in audit scope, fund structure or other items.
B. AUDIT-RELATED SERVICES TO THE FUNDS
The Audit Committee believes that the provision of Audit-related Services is
consistent with the SEC's rules on auditor independence, and will grant
general pre-approval to specific Audit-related Services.
C. TAX SERVICES TO THE FUNDS
The Audit Committee will grant general pre-approval to those specific Tax
services that have historically been provided by the auditor, that the Audit
Committee has reviewed and believes would not impair the independence of the
auditor, and that are consistent with the SEC's rules on auditor
independence.
D. ALL OTHER SERVICES TO THE FUNDS
The Audit Committee will grant general pre-approval to those specific
permissible non-audit services classified as All Other Services that it
believes are routine and recurring services, would not impair the
independence of the auditor and are consistent with the SEC's rules on
auditor independence.
E. FUND-RELATED ADVISER SERVICES
The Audit Committee will grant general pre-approval to provide specific
non-audit services to the funds' investment adviser, or any control
affiliates, that relate directly to the funds' operations and financial
statements. This includes services customarily required by one or more
adviser entities or control affiliates in the ordinary course of their
operations.
F. CERTAIN OTHER SERVICES PROVIDED TO ADVISER ENTITIES
The Audit Committee recognizes that there are cases where services proposed
to be provided by the independent auditor to the adviser or control
affiliates are not Fund-related Adviser Services within the meaning of the
Policy, but nonetheless may be relevant to the Audit Committee's ongoing
evaluation of the auditor's independence and objectivity with respect to its
audit services to the funds. As a result, in all cases where an adviser or
control affiliate engages the independent auditor to provide audit or
non-audit services that are not Fund Services or Fund-related Adviser
Services, were not subject to pre-approval by the Audit Committee, and the
projected fees for any such engagement (or the aggregate of all such
engagements) exceeds a pre-determined
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threshold established by the Audit Committee, the independent auditor, Fund
Treasurer and/or Director of Trustee Administration will notify the Audit
Committee not later than its next meeting. Such notification shall include a
general description of the services provided, the entity that is to be the
recipient of such services, the timing of the engagement, the entity's
reasons for selecting the independent auditor, and the projected fees. Such
information will allow the Audit Committee to consider whether non-audit
services provided to the adviser and Adviser Entities, which were not subject
to Audit Committee pre-approval, are compatible with maintaining the
auditor's independence.
IV. REPORTING TO THE AUDIT COMMITTEE
The Fund Treasurer or Director of Trustee Administration shall report to the
Audit Committee at each of its regular meetings regarding all Fund Services
or Fund-related Adviser Services initiated since the last such report was
rendered, including:
- A general description of the services, and
- Actual billed and projected fees, and
- The means by which such Fund Services or Fund-related Adviser
Services were approved by the Audit Committee.
In addition, in accordance with Section 208-5 of the Sarbanes-Oxley Act of
2002, the independent auditor shall report to the Audit Committee annually,
and no more than 90 days prior to the filing of audit reports with the SEC,
all non-audit services provided to entities in the funds' "investment company
complex," as defined by SEC rules. In addition, the independent auditor must
annually disclose to the Audit Committee all relationships with the funds of
which the independent auditor is aware that may be reasonably thought to bear
on the auditor's independence. The independent auditor shall tabulate,
calculate and disclose its fees annually for such relationships.
V. AMENDMENTS; ANNUAL APPROVAL BY AUDIT COMMITTEE
The Policy may be amended from time to time by the Audit Committee. Prompt
notice of any amendments will be provided to the independent auditor, Fund
Treasurer and Director of Trustee Administration. The Policy shall be
reviewed and approved at least annually by the Audit Committee.
(f) Not applicable.
(g) All non-audit fees billed by the registrant's accountant for services
rendered to the registrant for the fiscal years ended December 31, 2003 and
December 31, 2002 are disclosed in 4(b)-(d) above.
All non-audit fees billed by the registrant's accountant for services
rendered to the registrant's investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser) and any entity controlling,
controlled by, or under common control with the
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adviser that provides ongoing services to the registrant for the fiscal years
ended December 31, 2003 and December 31, 2002 are also disclosed in 4(b)-(d)
above. There were no such fees during the last two fiscal years.
(h) The registrant's Audit Committee of the Board of Directors has considered
whether the provision of non-audit services that were rendered to the
registrant's adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under
common control with the investment adviser that provides ongoing services to
the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of
Rule 2-01 of Regulation S-X, is compatible with maintaining the principal
accountant's independence. The Audit Committee determined that the provision
of such services is compatible with maintaining the principal accountant's
independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable at this time.
ITEM 6. RESERVED.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The Fund has delegated to Liberty Asset Management Company (the "Advisor")
the responsibility to vote proxies relating to portfolio securities held by
the Fund. In deciding to delegate this responsibility to the Advisor, the
Board of Trustees of the Trust reviewed and approved the policies and
procedures adopted by the Advisor. These included the procedures that the
Advisor follows when a vote presents a conflict between the interests of the
Fund and its shareholders and the Advisor, its affiliates, its other clients
or other persons.
The Advisor's policy is to vote all proxies for Fund securities in a manner
considered by the Advisor 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 Advisor 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 Advisor 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 Advisor determines the best interest of the Fund in light of the
potential economic return on the Fund's investment.
The Advisor 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, the Advisor's Proxy Committee determines
the vote in the best interest of the Fund, without consideration of any
benefit to the Advisor, its affiliates, its other clients or other persons. 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
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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 Advisor has three classes of proxy proposals. The first two classes are
predetermined guidelines to vote for or against specific proposals, unless
otherwise directed by the Proxy Committee. The third class is for proposals
given special consideration by the Proxy Committee. In addition, the Proxy
Committee considers requests to vote on proposals in the first two classes
other than according to the predetermined guidelines.
The Advisor generally votes in favor of proposals related to the following
matters: selection of auditors (unless the auditor receives more than 50% of
its revenues from non-audit activities from the company and its affiliates),
election of directors (unless the proposal gives management the ability to
alter the size of the board without shareholder approval), different persons
for chairman of the board /chief executive officer (unless, in light of the
size of the company and the nature of its shareholder base, the role of
chairman and CEO are not held by different persons), compensation (if
provisions are consistent with standard business practices), debt limits
(unless proposed specifically as an anti-takeover action), indemnifications
(unless for negligence and or breaches of fiduciary duty), meetings, name of
company, principal office (unless the purpose is to reduce regulatory or
financial supervision), reports and accounts (if the certifications required
by Sarbanes-Oxley Act of 2002 have been provided), par value, shares (unless
proposed as an anti-takeover action), share repurchase programs, independent
committees, and equal opportunity employment.
The Advisor generally votes against proposals related to the following
matters: super majority voting, cumulative voting, preferred stock, warrants,
rights, poison pills, reclassification of common stock and meetings held by
written consent.
The Advisor gives the following matters special consideration: new proposals,
proxies of investment company shares (other than those covered by the
predetermined guidelines), mergers/acquisitions (proposals where a hostile
merger/acquisition is apparent or where the Advisor represents ownership in
more than one of the companies involved), shareholder proposals (other than
those covered by the predetermined guidelines), executive/director
compensation (other than those covered by the predetermined guidelines),
pre-emptive rights and proxies of international issuers which block
securities sales between submission of a proxy and the meeting (proposals
for these securities are voted only on the specific instruction of the Proxy
Committee and to the extent practicable in accordance with predetermined
guidelines).
In addition, if a portfolio manager or other party involved with a client of
the Advisor or Fund account concludes that the interest of the client or Fund
requires that a proxy be voted on a proposal other than according to the
predetermined guidelines, he or she may request that the Proxy Committee
consider voting the proxy differently. If any person (or entity) requests the
Proxy Committee (or any of its members) to vote a proxy other than according
to a predetermined guideline, that person must furnish to the Proxy Committee
a written explanation of the reasons for the request and a description of the
person's (or entity's) relationship with the party proposing the matter to
shareholders or any other matter known to the person (or entity) that would
create a potential conflict of interest.
The Proxy Committee may vary from the 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
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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.
The Advisor's Proxy Committee is composed of operational and investment
representatives of its regional offices as well as senior representatives of
the Advisor's equity investments, equity research, compliance and legal
functions. During the first quarter of each year, the Proxy Committee
reviews all guidelines and establishes guidelines for expected new proposals.
In addition to these reviews and its other responsibilities described above,
its functions include annual review of its Proxy Voting Policy and Procedures
to ensure consistency with internal policies and regulatory agency policies,
and development and modification of voting guidelines and procedures as it
deems appropriate or necessary.
The Advisor uses 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. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable at this time.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable at this time.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal
financial officer, 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 last
fiscal half-year (the registrant's second fiscal half-year in the
case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
ITEM 11. EXHIBITS.
(a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR
attached hereto as Exhibit 99.CODE ETH
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(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 at this time.
(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.
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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.
(registrant) Liberty All-Star Growth Fund, Inc.
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By (Signature and Title) /s/ William R. Parmentier, Jr.
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William R. Parmentier, Jr., President
Date March 5, 2004
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By (Signature and Title) /s/ William R. Parmentier, Jr.
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William R. Parmentier, Jr., President
Date March 5, 2004
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By (Signature and Title) /s/ J. Kevin Connaughton
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J. Kevin Connaughton, Treasurer
Date March 5, 2004
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