Liberty All-Star Equity Fund (USA) N-CSRSCertified semi-annual shareholder report (management investment company)

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 No.: 811-04809

Liberty All-Star Equity Fund

(Exact name of registrant as specified in charter)

1290 Broadway, Suite 1000, Denver, Colorado 80203

(Address of principal executive offices) (Zip code)

Sareena Khwaja-Dixon, Esq.

ALPS Fund Services, Inc.

1290 Broadway, Suite 1000

Denver, Colorado 80203

(Name and address of agent for service)

Registrant’s telephone number, including area code: 303-623-2577

Date of fiscal year end: December 31

Date of reporting period: January 1, 2024 – June 30, 2024

Item 1. Report of Shareholders.

(a)     

Contents

A SINGLE INVESTMENT...

A DIVERSIFIED CORE PORTFOLIO

A single fund that offers:

LIBERTY ALL-STAR^® EQUITY FUND

(Unaudited)

Mega-cap technology stocks rallied around the Artificial Intelligence (AI) themed names that posted exceptional returns in the second quarter and first half of 2024. In their wake they carried the rest of the market higher, but it was the same tale of two markets that over the past 18 months has seen outsized gains concentrated in a handful of names while the rest of the market delivered middling or even negative returns. For the second quarter the group of stocks known as the “Magnificent Seven¹” shored up the return of the S&P 500^®; NVIDIA led returns with a gain of 36.74 percent for the quarter and 149.50 percent for the first half after rising 239.02 percent in 2023.

Through the first half of 2024 this extreme concentration grew even more pronounced. Information technology and communication services were the only two sectors out of the 11 S&P 500^® sectors to outperform the overall index. By itself, information technology accounted for over 50 percent of the first half return for the S&P 500^® Index.

The contrast can be illustrated by returns for the Dow Jones Industrial Average (DJIA) and the NASDAQ Composite Index, both of which are widely followed and customarily cited in our shareholder letters. As it is composed of just 30 large-cap stocks, the DJIA is not as fully diversified as other indices but to the point here the Dow represents a cross-section of the economy and is considered more value oriented than the NASDAQ Composite, which has a heavier weighting in technology stocks. Second quarter and first half returns for the Dow: -1.27 percent and 4.79 percent, respectively. Similar period returns for the NASDAQ Composite: 8.47 percent and 18.57 percent. Returns for the S&P 500^® Index, which is representative of a broad cross-section of large-cap stocks, fell between those two with a second quarter return of 4.28 percent and a first half return of 15.29 percent.

One metric that demonstrates how concentrated even a diversified index like the S&P 500^® has become: 74 percent of stocks in the index underperformed the index as a whole in the second quarter. Further, the S&P 500^® Equal Weight Index actually lost -2.63 percent in the second quarter. (S&P 500^® Index returns are usually reported on a capitalization-weighted basis in which larger stocks are given proportionally more weight; when returns are reported on an equal-weighted basis every company in the index is treated equally regardless of market capitalization.) Finally, of the 11 S&P sectors, six actually posted negative returns for the quarter.

While overall stock market performance was skewed by robust returns from just a few stocks, the overall economic and business backdrop in the second quarter (and first half) was relatively sound. Perhaps of greatest significance, the ongoing battle against inflation showed progress. The Federal Reserve’s preferred inflation measure—the core Personal Consumption Expenditure Price Index (PCE), which strips out volatile food and energy items—declined in May, falling to a yearly increase of 2.6 percent from 2.9 percent in December and 4.6 percent in May 2023. A strong employment market showed some cooling in May as well, with recurring applications for U.S. jobless benefits rising to the highest level since the end of 2021, indicating it is beginning to take longer for the unemployed to find work. Hiring in general has slowed significantly from the pandemic era of labor shortages and the unemployment rate rose in May to 4 percent for the first time in over two years. Another indicator of a lessening in inflationary pressure was a meager 0.1 percent increase in retail sales in May, while April sales were revised downward.

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These indicators pointed to a slowing economy and thus heightened the possibility of lower interest rates. Economic data also indicated the economy was on an even keel and therefore likely to avoid a “hard landing” that could mean recession. The S&P 500^® was lower in April, but a key driver was concerns over geopolitical tensions in the Middle East. Spurred by a 629 percent jump in year-over-year profits for NVIDIA, corporate earnings increased in the first quarter (reported in 2Q), led by renewed sentiment favoring technology stocks. This sent the S&P 500^® and NASDAQ Composite to multiple record highs leading into the close of the first half.

The performance gap between growth and value stocks widened substantially in the second quarter as the broad market Russell 3000^® Growth Index returned 7.80 percent versus -2.25 percent for the corresponding value index. For the first half, the growth index returned 19.90 percent, more than triple the 6.18 percent return for the value index.

Liberty All-Star^® Equity Fund 

After a strong first quarter, Liberty All-Star^® Equity Fund lagged in the second quarter. For the period, the Fund was all but unchanged, returning -0.06 percent when shares are valued at net asset value (NAV) with dividends reinvested; returns declined 2.38 percent when shares are valued at market price with dividends reinvested. (Fund returns are net of expenses.) Both returns were lower when compared with that of the Fund’s primary benchmark, the Lipper Large-Cap Core Mutual Fund Average, which returned 3.27 percent. Similarly, Fund returns were lower than the S&P 500^® and the NASDAQ Composite but mixed against the DJIA (the NAV return ahead, the market price return modestly behind).

Fund returns lagged the Lipper benchmark for the first half; valued by NAV, the Fund returned 9.50 percent and valued by market price it returned 12.22 percent (both with dividends reinvested). The Lipper benchmark returned 14.38 percent. Fund returns were well ahead of the DJIA but trailed the S&P 500^® and the NASDAQ Composite. Fund returns topped the S&P 500^® Equal Weight Index for both the quarter and first half.

Two factors were behind lagging Fund returns for the quarter and half: First, value stocks which nominally account for 60 percent of Fund assets, strongly underperformed growth stocks. Second, the Fund’s greater diversity meant it could not keep pace with exceptional returns on the part of information technology stocks, especially the semiconductor stocks in that sector.

Relative to their underling NAV, Fund shares traded during the second quarter in a range from a 0.4 percent premium to a 4.3 percent discount. Shares traded at a 3.1 percent discount at quarter’s end. For the first half, the trading range extended from a 0.4 percent premium to a 5.8 percent discount.

In accordance with the Fund’s distribution policy, the Fund paid a distribution of $0.18 per share in the second quarter. The Fund’s distribution policy has been in place since 1988 and is a major component of the Fund’s total return. The Fund has paid distributions of $30.64 per share for a total of more than $3.7 billion since 1987 (the Fund’s first full calendar year of operations). We continue to emphasize that shareholders should include these distributions when determining the total return on their investment in the Fund.

(Unaudited)

Although Fund returns lagged for the second quarter and first half, we believe performance should not be assessed in isolation but in the larger context of long-term market conditions. Currently, we are in an environment of two extremes: the valuation spread between growth and value styles of investing and the performance gap between a small group of mega-cap growth stocks and those representing the entire rest of the economy. This is magnified by investor expectations for AI; while holding immense promise for investors, AI will mature and competitive advantages will even out across the industry. Certainly, individual stocks do outperform—sometimes by a significant margin for a long period of time. It is not often, however, that they completely separate and become a market unto themselves. We believe this will change and that deviating from proven investment management and portfolio construction principles to mirror the present market invites an unacceptable level of risk. We will stay patient and manage in keeping with fundamentals that have proven effective not in the moment, but over the years. Thank you for your support of the Fund.

Sincerely,

Mark T. Haley, CFA 

President 

Liberty All-Star^® Equity Fund

The views expressed in the President’s letter and the Manager Interview reflect the views of the President and Manager as of July 2024 and may not reflect their views on the date this report is first published or anytime thereafter. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the Fund disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for the Fund are based on numerous factors, may not be relied on as an indication of trading intent.

 (Unaudited)

Performance returns for the Fund are total returns, which include dividends. Returns are net of management fees and other Fund expenses.

The returns shown for the Lipper Large-Cap Core Mutual Fund Average are based on open-end mutual funds’ total returns, which include dividends, and are net of fund expenses. Returns for the unmanaged Dow Jones Industrial Average, NASDAQ Composite Index and the S&P 500^® Indices are total returns, including dividends. A description of the Lipper benchmark and the market indices can be found on page 33.

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

Closed-end funds raise money in an initial public offering and shares are listed and traded on an exchange. Open-end mutual funds continuously issue and redeem shares at net asset value. Shares of closed-end funds frequently trade at a discount to net asset value. The price of the Fund’s shares is determined by a number of factors, several of which are beyond the control of the Fund. Therefore, the Fund cannot predict whether its shares will trade at, below or above net asset value.

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The following are the major ($6 million or more) stock changes - both purchases and sales - that were made in the Fund’s portfolio during the second quarter of 2024.

DISTRIBUTION POLICY 

The current policy 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. Sources of distributions to shareholders may include ordinary dividends, long-term capital gains and return of capital. The final determination of the source of all distributions in 2024 for tax reporting purposes will be made after year end. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Fund’s investment experience during its fiscal year and may be subject to changes based on tax regulations. If a distribution includes anything other than net investment income, the Fund provides a Section 19(a) notice of the best estimate of its distribution sources at that time. These estimates may not match the final tax characterization (for the full year’s distributions) contained in shareholder 1099-DIV forms after the end of the year. If the Fund’s ordinary dividends and long-term capital gains for any year exceed the amount distributed under the distribution policy, the Fund may, in its discretion, retain and not distribute capital gains and pay income tax thereon to the extent of such excess.

 June 30, 2024 (Unaudited)

(Unaudited)

THE FUND’S ASSETS ARE APPROXIMATELY EQUALLY DISTRIBUTED AMONG THREE

VALUE MANAGERS AND TWO GROWTH MANAGERS:

ALPS Advisors, Inc., the investment advisor to the Fund, has the ultimate authority (subject to oversight by the Board of Trustees) to oversee the investment managers and recommend their hiring, termination and replacement.

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 a multi-managed portfolio. The characteristics are different for each of the Fund’s five investment managers. These differences are a reflection of the fact that each pursues a different investment style. The shaded column highlights the characteristics of the Fund as a whole, while the final column shows portfolio characteristics for the S&P 500^® Index.

PORTFOLIO CHARACTERISTICS As of June 30, 2024 (Unaudited)

	Investment Style Spectrum
	Value			Growth
						TOTAL	S&P 500®
	PZENA	FIDUCIARY	ARISTOTLE	SUSTAINABLE	TCW	FUND	INDEX
Number of Holdings	34	31	42	29	31	144*	503
Percent of Holdings in Top 10	40%	47%	34%	47%	59%	22%	36%
Weighted Average Market Capitalization (billions)	$79	$267	$264	$866	$1,175	$536	$1,022
Average Five-Year Earnings Per Share Growth	7%	10%	12%	17%	21%	13%	17%
Dividend Yield	2.8%	1.3%	1.8%	0.7%	0.4%	1.4%	1.4%
Price/Earnings Ratio**	15x	21x	22x	36x	45x	24x	27x
Price/Book Value Ratio	1.5x	3.7x	3.1x	7.9x	7.7x	3.3x	4.6x

(Unaudited)

Brandon D. Bond, CFA Managing Director and Portfolio Manager TCW Investment Management Company

TCW FOCUSES ON TRENDS WITH THE POTENTIAL FOR GROWTH EVEN IN CHALLENGING ENVIRONMENTS

TCW Investment Management Company invests in companies that have superior sales growth, leading and/or rising market shares, and high and/or rising profit margins. TCW’s concentrated growth equity strategy seeks companies with distinct advantages in their business model. We recently spoke with Brandon D. Bond, CFA, Managing Director and Portfolio Manager at TCW. The Fund’s Investment Advisor, ALPS Advisors, Inc., conducted the interview.

TCW has identified a set of secular trends that it believes will drive attractive long-term opportunities for investors. What are those trends and the investment thesis behind each?

While not an exhaustive list, four of the secular trends represented in the portfolio that we most often talk about are Generative AI; Data as the New Currency; Cybersecurity; and Electronification of Payments. Generative AI has received plenty of airtime, so we’ll focus on the other three here. As more of the world moves digital, data have become the lifeblood, oil or currency—you can pick your metaphor—of business. The value of unique data sets, technology to store, process and analyze those data sets and businesses that can better translate data insights into real revenue continues to grow as a result. Generative AI only enhances the value already accruing to data-centered businesses and acts as a force multiplier to our next secular trend, Cybersecurity. Cybercrime continues to increase, and new Securities and Exchange Commission (SEC) disclosure requirements make the damage even more public, more quickly. Although companies have historically used a plethora of programs, each built to solve just a single problem (referred to as point solutions), we are seeing cybersecurity platforms emerge that can outcompete point solutions and innovate fast enough to keep up with an ever-changing landscape. Lastly, the Electronification of Payments has been a multi-decade trend. Yet, trillions of dollars are still exchanged with cash and checks, leaving many more years of digital payments growth ahead.

(Unaudited)

Honestly, it’s impossible to know for sure but we balance three key inputs as we manage our NVIDIA (NVDA) position size: a long-term price target, an intermediate-term price target and our active weight relative to the Russell 1000^® Growth Index. Our long-term price target receives the most focus and has helped us stay meaningfully invested in NVIDIA since our initial purchase in April 2018 despite the rapid stock price appreciation. In deriving our long-term price target, we look out five-plus years at potential end market sizes, NVIDIA’s possible market share and likely cost structures at various scales to derive a range of free cash flow forecasts. We then discount those back to inform us how much potential upside remains and what kind of scenarios need to play out to realize further upside. While we anchor to this longer-term valuation methodology, partial adds and trims can be influenced by a view of how full valuation appears over the next 12 to 18 months (i.e. an intermediate-term price target). Lastly, we seek to keep our active weight in a range that aligns with our conviction level and risk tolerances. This combination of inputs has led to consistent trimming of our position over the last 18 months as the stock has continued to appreciate. Our conviction in the long-term potential remains high as does our outlook for the stock’s fundamentals for the remainder of the year. However, a healthy respect and recognition of “hype cycles” leaves us expecting a sharp drawdown at some point between the very near-term and our five-plus year outlook. Hence, we are keeping our active weight at a tolerable level as the absolute weight has continued to increase.

To date, the economy remains strong as inflation has moderated and there has been a catalyst, AI, to spark returns. What fundamental factors are you watching that could move the market higher or lower over the next year?

What could go right and what could go wrong is a discussion we have every week. Inflation and employment trends are two key factors that signal a still-constructive macro backdrop. On the micro front, there are quite a few companies with stable or even improving outlooks with undemanding valuations that could take the handoff from mega-cap leadership if the economy avoids a hard landing. On the other hand, causes for concern are the still-inverted yield curve, weak demand at the wholesale level (as represented by the Purchasing Managers’ Index), the general slowdown in consumer spending, tepid GDP growth and stubborn inflation—all accompanied by heightened geopolitical risk. Increasing index concentration and the lack of market breadth also create a less healthy picture than year-to-date market returns may suggest. Overall, we think the outlook is mixed and the market could go either way over the next year. As always, however, our resolute focus remains on identifying resilient companies that we believe can thrive in a variety of economic environments.  

Thank you, Brandon. As you have identified beyond AI there are some trends with potential to drive attractive growth rates. We hope to have the opportunity to follow up on them in the future.

 June 30, 2024 (Unaudited)

See Notes to Financial Statements.

 June 30, 2024 (Unaudited)

See Notes to Financial Statements.

 June 30, 2024 (Unaudited)

See Notes to Financial Statements.

 June 30, 2024 (Unaudited)

See Notes to Financial Statements.

 June 30, 2024 (Unaudited)

See Notes to Financial Statements.

 June 30, 2024 (Unaudited)

See Notes to Financial Statements.

 June 30, 2024 (Unaudited)

See Notes to Financial Statements.

 June 30, 2024 (Unaudited)

See Notes to Financial Statements.

June 30, 2024 (Unaudited)

See Notes to Financial Statements.

For the Six Months Ended June 30, 2024 (Unaudited)

See Notes to Financial Statements.

See Notes to Financial Statements.

Liberty All-Star^® Equity Fund

Financial Highlights

See Notes to Financial Statements.

Financial Highlights

June 30, 2024 (Unaudited)

NOTE 1. ORGANIZATION

Liberty All-Star^® Equity Fund (the “Fund”) is a Massachusetts business trust registered under the Investment Company Act of 1940 (the “1940 Act”), as amended, as a diversified, closed-end management investment company.

Investment Goal

The Fund seeks total investment return comprised of long-term capital appreciation and current income through investing primarily in a diversified portfolio of equity securities.

Fund Shares 

The Fund may issue an unlimited number of shares of beneficial interest.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The Fund is considered an investment company under U.S. generally accepted accounting principles (“GAAP”) and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946 Financial Services - Investment Companies.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from these estimates.

Security Valuation 

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

Cash collateral from securities lending activity is reinvested in the State Street Navigator Securities Lending Government Money Market Portfolio (“State Street Navigator”), a registered investment company under the 1940 Act, which operates as a money market fund in compliance with Rule 2a-7 under the 1940 Act. Shares of registered investment companies are valued daily at that investment company’s net asset value ("NAV") per share.

The Fund’s investments are valued at market value or, in the absence of market value with respect to any portfolio securities, at fair value according to procedures adopted by the Fund's Board of Trustees (the "Board"). The Board has designated ALPS Advisors, Inc. (the "Advisor") as the Fund's Valuation Designee (as defined in Rule 2a-5 under the 1940 Act). The Valuation Designee is responsible for determining fair value in good faith for all Fund investments, subject to oversight by the Board. When market quotations are not readily available, or in management’s judgment they do not accurately reflect fair value of a security, or an event occurs after the market close but before the Fund is priced that materially affects the value of a security, the security will be valued by the Advisor’s Valuation Committee using fair valuation procedures established by the Valuation Designee. Examples of potentially significant events that could materially impact a Fund’s net asset value include, but are not limited to: single issuer events such as corporate actions, reorganizations, mergers, spin-offs, liquidations, acquisitions and buyouts; corporate announcements on earnings or product offerings; regulatory news; and litigation and multiple issuer events such as governmental actions; natural disasters or armed conflicts that affect a country or a region; or significant market fluctuations. Potential significant events are monitored by the Advisor, Sub-Advisers and/or the Valuation Committee through independent reviews of market indicators, general news sources and communications from the Fund’s custodian.

June 30, 2024 (Unaudited)

Security Transactions

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

Income Recognition 

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

Dividend income is recognized on the ex-dividend date, or for certain foreign securities, as soon as information is available to the Fund. Withholding taxes on foreign dividends are paid (a portion of which may be reclaimable) or provided for in accordance with the applicable country’s tax rules and rates and are disclosed in the Statement of Operations.

The Fund estimates components of distributions from real estate investment trusts (“REITs”). Distributions received in excess of income are recorded as a reduction of the cost of the related investments. Once the REIT reports annually the tax character of its distributions, the Fund revises its estimates. If the Fund no longer owns the applicable securities, any distributions received in excess of income are recorded as realized gains.

Lending of Portfolio Securities

The Fund may lend its portfolio securities only to borrowers that are approved by the Fund’s securities lending agent, State Street Bank & Trust Co. (“SSB”). The Fund will limit such lending to not more than 30% of the value of its total assets. The borrower pledges and maintains with the Fund collateral consisting of cash (U.S. Dollar only), securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, or by irrevocable bank letters of credit issued by a person other than the borrower or an affiliate of the borrower. The initial collateral received by the Fund is required to have a value of no less than 102% of the market value of the loaned securities for securities traded on U.S. exchanges and a value of no less than 105% of the market value for all other securities. The collateral is maintained thereafter, at a market value equal to no less than 100% of the current value of the securities on loan. The market value of the loaned securities is determined at the close of each business day and any additional required collateral is delivered to the Fund on the next business day. During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

June 30, 2024 (Unaudited)

Any cash collateral received is reinvested in State Street Navigator. Non-cash collateral, in the form of securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, is not disclosed in the Fund’s Statement of Assets and Liabilities or the contractual maturity table below as it is held by the lending agent on behalf of the Fund and the Fund does not have the ability to re-hypothecate these securities. Income earned by the Fund from securities lending activity is disclosed in the Statement of Operations.

The following is a summary of the Fund's securities lending positions and related cash and non-cash collateral received as of June 30, 2024:

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by SSB. SSB’s indemnity allows for full replacement of securities lent wherein SSB will purchase the unreturned loaned securities on the open market by applying the proceeds of the collateral, or to the extent such proceeds are insufficient or the collateral is unavailable, SSB will purchase the unreturned loan securities at SSB’s expense. However, the Fund could suffer a loss if the value of the investments purchased with cash collateral falls below the value of the cash collateral received.

The following table reflects a breakdown of transactions accounted for as secured borrowings, the gross obligation by the type of collateral pledged or securities loaned, and the remaining contractual maturity of those transactions as of June 30, 2024:

Fair Value Measurements

The Fund discloses the classification of its fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.

June 30, 2024 (Unaudited)

Valuation techniques used to value the Fund’s investments by major category are as follows:

Equity securities that are valued based on unadjusted quoted prices in active markets are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the mean of the most recent quoted bid and ask prices on such day and are generally categorized as Level 2 in the hierarchy. Investments in open-end mutual funds are valued at their closing NAV each business day and are categorized as Level 1 in the hierarchy.

Various inputs are used in determining the value of the Fund’s investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments.

These inputs are categorized in the following hierarchy under applicable financial accounting standards:

The following is a summary of the inputs used to value the Fund’s investments as of June 30, 2024:

The Fund did not have any securities that used significant unobservable inputs (Level 3) in determining fair value during the period. There were no transfers into or out of Level 3 during the six months ended June 30, 2024.

June 30, 2024 (Unaudited)

Distributions to Shareholders

The Fund currently has a policy of paying distributions on its shares of beneficial interest 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.

NOTE 3. RISKS

Investment and Market Risk

An investment in shares is subject to investment risk, including the possible loss of the entire amount invested. An investment in shares represents an indirect investment in the securities owned by the Fund, most of which are anticipated to be traded on a national securities exchange or in the over-the-counter markets. The value of these securities, like other market investments, may move up or down, sometimes rapidly and unpredictably. Shares at any point in time may be worth less than their original cost, even after taking into account the reinvestment of dividends and other distributions.

Common Stock Risk

The Fund is not limited in the percentage of its assets that may be invested in common stocks and other equity securities, and therefore a risk of investing in the Fund is common stock or equity risk. Equity risk is the risk that the market value of securities held by the Fund will fall due to general market or economic conditions, perceptions regarding the industries in which the issuers of securities held by the Fund participate, and the particular circumstances and performance of particular companies whose securities the Fund holds. In addition, common stock of an issuer in the Fund’s portfolio may decline in price if the issuer fails to make anticipated dividend payments because, among other reasons, the issuer of the security experiences a decline in its financial condition. Common equity securities in which the Fund will invest are structurally subordinated to preferred stocks, bonds and other debt instruments in a company’s capital structure, in terms of priority to corporate income, and therefore will be subject to greater payment risk than preferred stocks or debt instruments of such issuers. In addition, while broad market measures of common stocks have historically generated higher average returns than fixed income securities, common stocks have also experienced significantly more volatility in their returns.

Growth stocks are stocks of companies believed to have above-average potential for growth in revenue and earnings. In certain market conditions, prices of growth stocks may be more sensitive to changes in current or expected earnings than the prices of other stocks. Growth stocks may not perform as well as the stock market in general.

Foreign Currency Risk

Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Portfolios do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Portfolios books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the fair values of assets and liabilities, other than investments insecurities at fiscal period end, resulting from changes in exchange rates.

June 30, 2024 (Unaudited)

Market Disruption and Geopolitical Risk

Social, political, and economic events, such as natural disasters and health emergencies (e.g., epidemics and pandemics, such as the recent COVID-19 outbreak), ongoing U.S military activities and political developments, as well as the threat of terrorist attacks, could have significant adverse effects on the U.S. economy, the stock market, world economies and markets generally, and may lead to volatility in the value of the Fund’s investments. These types of events may develop quickly and unexpectedly and could significantly impact issuers, industries, governments and other systems, including financial markets. Global systems are increasingly interconnected, and an event in one area of the world may have adverse effects in other economies and financial markets. It is difficult to predict the timing or duration of an event, or its impact on the Fund and its shareholders.

NOTE 4. FEDERAL TAX INFORMATION AND TAX BASIS 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. If, for any calendar year, the total distributions made under the distribution 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 distribution 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. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations.

Classification of Distributions to Shareholders

Net investment income/(loss) and net realized gain/(loss) may differ for financial statement and tax purposes. The character of distributions made during the year from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. Due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain was recorded by the Fund. The amounts and characteristics of tax basis distributions and composition of distributable earnings/(accumulated losses) are determined at the time in which distributions are paid, which may occur after the fiscal year end. Accordingly, tax basis balances have not been determined as of June 30, 2024.

June 30, 2024 (Unaudited)

The tax character of distributions paid during the year ended December 31, 2023 were as follows:

The Fund declared a distribution of $41,063,648 with an ex-date in 2023 that was paid in 2024. Such amount is not included above, and the tax character of such distributions will be determined at the end of 2024.

As of June 30, 2024, the cost of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments was as follows:

The differences between book-basis and tax-basis are primarily due to deferral of losses from wash sales. In addition, certain tax cost basis adjustments are finalized at fiscal year-end and therefore have not been determined as of June 30, 2024.

Federal Income Tax Status 

For federal income tax purposes, the Fund currently qualifies, and intends to remain qualified, as a regulated investment company under the provisions of Subchapter M of the Internal Revenue Code of 1986, as amended, by distributing substantially all of its investment company taxable net income including realized gain, not offset by capital loss carryforwards, if any, to its shareholders. Accordingly, no provision for federal income or excise taxes has been made.

As of and during the six months ended June 30, 2024, the Fund did not have a liability for any unrecognized tax benefits. The Fund files U.S. federal, state, and local tax returns as required. The Fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.