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[picture]
Liberty Young
Investor(SM) Fund
Annual Report - September 30, 2000
The investment that's also an education
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FUND HIGHLIGHTS
Liberty Young Investor Fund Class A shares returned 30.47% without a sales
charge for the 12-month period ended 9/30/00. In the early months of the period,
the Fund benefited from its investments in technology stocks, and later it was
helped by a reduction in technology holdings.
TABLE OF CONTENTS
To Our Shareholders ......................1
Portfolio Managers' Report ...............2
Portfolio of Investments .................6
Financial Statements .....................9
Notes to Financial Statements ...........14
Financial Highlights ....................17
Report of Independent Accountants .......18
Activity Pages
Ages three to five .............19
Ages six to eight ..............21
Ages nine to 12 ................23
--------------------------------
Not FDIC May Lose Value
Insured No Bank Guarantee
--------------------------------
All information is for Class A shares unless otherwise noted. Performance
including sales charge reflects the 2% contingent deferred sales charge (CDSC)
which would be applied if shares are redeemed within three years. Liberty Young
Investor Fund invests all of its investable assets in SR&F Growth Investor
Portfolio, which has the same investment objective and substantially the same
investment policies as the Fund.
Past performance is not a guarantee of future results. Share price and
investment returns will vary, resulting in a gain or loss when you sell shares.
<PAGE> 3
TO OUR SHAREHOLDERS
DEAR SHAREHOLDER:
[photo]
You may have noticed that your Fund has a new name. As of July 14, the names of
all our funds were changed to include Liberty. Although the name is different,
the Fund's goals and management style remain the same. We believe the new name
better reflects that your Fund is a part of Liberty Funds, a diverse "family" of
funds representing a wide selection of investment styles. The goal of all
Liberty funds is to help you reach for financial freedom - however you define
it.
During the past 12 months, the stock market experienced a great deal of
volatility (a series of rapid ups and downs). Despite this, the Fund delivered
strong results for you, our shareholders. For the 12-month period ended
September 30, 2000, the Liberty Young Investor Fund Class A shares returned
30.47% without a sales charge. This compares favorably to the Standard and
Poor's 500 Index, which returned 13.27% for the same period.
The 12 months ended September 30, 2000 began with investors feeling very
enthusiastic about stocks. Technology stocks performed particularly well during
these early months. In fact, they were responsible for most of the positive
performance in the market. At the same time, many stocks outside the technology
sector were going through difficult times.
The situation changed quickly after mid-March. Investors became more concerned
that maybe technology stocks had reached prices that were too high to continue
rising. At the same time, there was increasing concern about whether our economy
might begin to have some difficulties. Investors began to sell many of the
stocks that had previously been so successful, and prices declined as a result -
even on technology stocks.
Looking at the past year, I am reminded that it is important to own a variety of
stocks to help minimize the impact of a single stock performing badly. Young
Investor Fund is managed to include many different types of stocks, representing
a variety of industries.
The following report gives you more insights from the Fund's managers. For
additional information, visit us on the Internet at www.libertyfunds.com or
www.younginvestor.com.
As always, we thank you for choosing the Liberty Young Investor Fund and for
giving us the opportunity to serve your investment needs.
Sincerely,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
November 20, 2000
Because market and economic conditions change frequently, there can be no
assurance that the trends described above or on the following pages will
continue.
1
<PAGE> 4
PORTFOLIO MANAGERS' REPORT
[photo] [photo]
Mr. Brady and Mr. Gustafson, senior vice presidents of the Advisor, have been
portfolio managers of the Portfolio since 1997, and managed its predecessor
since 1995.
Q: How did the Fund perform over the past year?
A: From September 30, 1999 to September 30, 2000, Liberty Young Investor Fund
returned 30.47% without a sales charge. This was much better than the
performance of the stock market as a whole, as measured by the total return
of 13.27% for the Standard & Poor's 500 Stock Index. The Fund's strong
performance is mainly a result of our investments in technology stocks
(during the first half of the year) and our utilities and financial
services holdings (during the second half of the year). Although technology
stocks had a more difficult time beginning in March 2000, the earlier gains
were more than enough to make up for the later difficulties.
Q: Were there specific stocks that helped the Fund's performance?
A: Among the stocks that gained the most during the year were EMC (2.7% of net
assets) and Network Appliance (2.2% of net assets). As more and more
companies realize their increased need for data storage devices, these two
companies are seeing their businesses grow quickly.
AVERAGE ANNUAL TOTAL RETURNS
(as of 9/30/00)
<TABLE>
<CAPTION>
CLASS A CLASS K
without with without
sales sales sales
charge charge charge
---------------------------------------------------------
<S> <C> <C> <C>
One year 30.47% 28.47% 30.68%
---------------------------------------------------------
Five years 22.11 22.11 22.30
---------------------------------------------------------
Since inception (4/29/94) 23.56 23.56 23.71
---------------------------------------------------------
</TABLE>
Past performance is not a guarantee of future results. Investment returns and
principal value will fluctuate, resulting in a gain or loss on sale. Liberty
Young Investor Fund invests all of its investable assets in SR&F Growth Investor
Portfolio, which has the same investment objective and substantially the same
investment policies as the Fund. The Fund commenced operations on 2/14/97, but
until 1/26/98, only offered the shares that are now designated as Class K
shares. Performance results reflect any voluntary waivers or reimbursements of
Fund expenses by the Advisor or its affiliates. Without these waivers or
reimbursement arrangements, performance results would have been lower. The
historical performance of both share classes, prior to inception, is based on
the performance of the SR&F Growth Investor Portfolio, restated to reflect sales
charges, 12b-1 fees and other expenses applicable to that class as set forth in
the prospectus "Fee Table," without giving effect to any fee waivers described
therein and assuming reinvestment of dividends and capital gains. Past
performance is not indicative of future results.
For the 12 months ended 9/30/00, the Liberty Young Investor
Fund Class A shares returned 30.47% without a sales charge.
Technology stocks boosted Fund performance in the early
months of the period, while utilities and financial services
holdings performed well later in the year.
2
<PAGE> 5
Until March 2000, the stock market's strong performance was
generated in large part by stocks of technology-oriented
companies, many of which benefited from the Internet boom.
In March, investors changed their focus, as they worried
about the ability of many technology companies to earn a
profit on their fast-growing businesses.
SECTOR BREAKDOWN AS OF 9/30/00
[Chart]
Technology 31%
Consumer Cyclical 17%
Utilities 14%
Consumer Non-Cyclical 10%
Industrial 10%
Financial 15%
Energy 2%
Basic Materials 1%
Sector breakdowns are calculated as a percentage of the total holdings in SR&F
Growth Investor Portfolio. Because the Portfolio is actively managed, there can
be no guarantee that the Portfolio will continue to maintain this breakdown of
these holdings in the future.
The Fund also benefited from the performance of stocks such as:
- Sun Microsystems (2.0% of net assets), a manufacturer of computer servers
and software which are more critical than ever in this Internet age.
- Intuit (2.8% of net assets), maker of the popular financial software
programs Quicken and TurboTax.
- Rational Software (2.6% of net assets), a company that creates software
tools to help businesses write their own personalized software.
Q: You mentioned that things changed in the market in March. What happened?
A: Many investors appeared to become a bit confused about what would happen to
the economy in the United States. For several years, it has been growing
very nicely, helping to create new jobs and giving people more money to
spend and invest. Some investors began to believe that things wouldn't
continue going so well, so they began to change their focus.
Investors turned away from technology companies, which had been the best
performers in the market. Instead, they began to favor other types of
stocks, such as utilities and financial services companies.
Some companies that provide electrical power benefited from this shift; for
example, Calpine and AES Corp. (3.2% and 2.1%, respectively, of net
assets). Some companies that provide financial services also enjoyed strong
stock
3
<PAGE> 6
A strong economy usually helps companies be more profitable
and successful. If our economy weakens significantly, many
firms could face more difficulties. But fortunately, the
U.S. economy has remained fairly strong. We're hopeful that
growth in the economy can continue.
performance. Among the Fund's holdings that were particularly strong were
Goldman Sachs (a major investment banker), Citigroup (one of the world's
largest diversified financial services companies) and Household
International, a low-cost consumer finance company (2.4%, 3.4%, and 3.2%,
respectively, of net assets).
Q: Telecommunications stocks have played an important role in the portfolio.
How did they perform over the past year?
A: They generally experienced difficult times in the past year. We all had
high expectations for companies like WorldCom (1.1% of net assets), which
was to merge with long-distance provider MCI, and Lucent Technologies (0.8%
of net assets). Unfortunately, they and other big names in the telephone
and telecommunications business disappointed us. Even with the explosive
growth of technologies like the Internet and cellular phones, the market
has been difficult for these stocks because of the increased number of
competitors and the high costs involved in upgrading technologies. These
factors have made it more difficult for them to perform well.
TOP TEN HOLDINGS AS OF 9/30/00
(AS A PERCENTAGE OF NET ASSETS)
----------------------------------------
1. CITIGROUP 3.4%
----------------------------------------
2. CALPINE 3.2%
----------------------------------------
3. HOUSEHOLD INTERNATIONAL 3.2%
----------------------------------------
4. GENERAL ELECTRIC 3.1%
----------------------------------------
5. JOHNSON & JOHNSON 2.9%
----------------------------------------
6. SAFEWAY 2.8%
----------------------------------------
7. INTUIT 2.8%
----------------------------------------
8. EMC 2.7%
----------------------------------------
9. RATIONAL SOFTWARE 2.6%
----------------------------------------
10. WALGREEN 2.6%
----------------------------------------
Holdings are calculated as a percentage of the net assets in SR&F Growth
Investor Portfolio. Because the Portfolio is actively managed, there can be no
guarantee the Portfolio will continue to maintain these holdings.
4
<PAGE> 7
The S&P 500 Index is made up of 500 companies usually
considered to be a good representation of the thousands of
companies that make up the overall U.S. stock market.
Q: What do you expect will happen in the next year?
A: For starters, it looks as if many companies will have a more difficult time
increasing their profits than they had in recent years. This is likely
because we expect that the rate of growth in the U.S. economy will slow
down a bit.
We have enjoyed an amazingly strong period of performance in the stock
market in recent years. While there is reason to believe the general
positive trend for stocks will continue, it is not likely to grow at such a
rapid rate year after year. Just be sure that your expectations are
reasonable, and remember that an investment in the Liberty Young Investor
Fund should be a long-term proposition. Your investment plan should match
your time horizons, risk tolerance and your objectives, regardless of
current market conditions.
An investment in the Fund offers significant long-term growth potential, but
also involves certain risks, including more volatility than the stock market in
general. The Fund may be affected by stock market fluctuations that occur in
response to economic and business developments.
Past performance is no guarantee of future results. Share price and investment
return will vary, so you may have a gain or loss when you sell shares. Total
return includes changes in share price and reinvestment of income and capital
gains distributions. Portfolio holdings are as of 9/30/00.
Stock markets don't always go up 20-30% each year, even
though that has happened lately. It is smart to expect stock
prices to move up and down a lot, and prepare for returns
that are below what we've become used to in the last few
years. Still, the Fund will pursue a diversified, selective
investment approach designed to identify the best
investments available in the stock market today.
GROWTH OF $10,000 INVESTMENT
APRIL 29, 1994 TO SEPTEMBER 30, 2000
[Chart]
<TABLE>
<CAPTION>
Young Investor Fund S&P 500 Index
<S> <C> <C>
4/29/94 10000 10000
9800 10128
9839.2 10293.1
9505.65 10040.9
9662.49 10370.3
10093.4 10794.4
10034.9 10531
10446.3 10766.9
10240.5 10375
10523.2 10528.5
10563.2 10801.2
10810.3 11221.4
11185.5 11552.4
11314.1 11892.1
11501.9 12366.6
12469.2 12653.5
13219.9 13072.3
13387.8 13105
14108 13658
13821.6 13608.8
14610.8 14204.9
14710.2 14479.1
15285.4 14971.3
15490.2 15110.6
16136.1 15255.6
17223.7 15479.9
18053.9 15877.7
18402.3 15938.1
17182.2 15233.6
17952 15555
19120.7 16429.2
19386.5 16882.7
20146.4 18157.3
19872.4 17797.8
20796.5 18908.4
20255.8 19057.8
18906.8 18276.4
19755.7 19365.7
21284.8 20548.9
22304.3 21463.3
23854.4 23169.7
23036.2 21872.2
24162.7 23068.6
23462 22298.1
24046.2 23330.5
25094.6 23731.8
25245.2 23992.8
27269.8 25722.7
28325.2 27039.7
28648.1 27315.5
27668.3 26845.7
29251 27935.6
28291.5 27639.5
23043.4 23645.6
24433 25161.3
26114 27204.4
27654.7 28853
29521.4 30514.9
30891.2 31790.4
29797.6 30801.7
32127.8 32033.8
32943.8 33273.5
31807.3 32488.2
33362.6 34284.8
31597.8 33218.6
30956.3 33052.5
30272.2 32146.8
32766.6 34181.8
34840.7 34875.6
38871.8 36926.3
37970 35072.6
41448 34409.8
42674.9 37775
39154.2 36638
35540.3 35886.9
38827.8 36769.7
38191 36196.1
42013.9 38443.9
9/30/00 38912 35981
</TABLE>
Past performance is no guarantee of future results. Share price and investment
return will vary, so you may have a gain or loss when you sell your shares. The
above illustration assumes a $10,000 investment made on April 29, 1994, and
reinvestment of income and capital gains distributions. The S&P 500 Index is an
unmanaged group of stocks that differs from the composition of the Fund and is
not available for direct investment. The index is shown from 4/30/94.
5
<PAGE> 8
SR&F Growth Investor Portfolio
INVESTMENT PORTFOLIO AT SEPTEMBER 30, 2000
(In thousands)
COMMON STOCKS - 92.5% SHARES VALUE
--------------------------------------------------------------------
CONSUMER DISCRETIONARY - 12.9%
AUTOMOBILES & Components - 0.8%
Automobile Manufacturers
Ford Motor Co. 437 $ 11,063
----------
CONSUMER DURABLES & APPAREL - 1.4%
Leisure Products
Mattel, Inc. 1,800 20,138
----------
HOTELS, RESTAURANTS & LEISURE - 2.0%
Leisure Facilities - 0.4%
Cedar Fair, LP 315 5,808
----------
RESTAURANTS - 1.6%
McDonald,s Corp. 750 22,641
----------
MEDIA - 7.0%
BROADCASTING & CABLE - 4.8%
AT&T Corp.-Liberty Media Group,
Class A (a) 1,400 25,200
Clear Channel Communications, Inc. (a) 450 25,425
Hispanic Broadcasting Corp. (a) 650 18,119
----------
68,744
----------
MOVIES & ENTERTAINMENT - 2.2%
The Walt Disney Co. 850 32,513
----------
RETAILING - 1.7%
Apparel Retail
The Gap, Inc. 1,250 25,156
----------
CONSUMER STAPLES - 5.4%
FOOD & DRUG RETAILING - 2.6%
Drug Retail
Walgreen Co. 1,000 37,938
----------
COMMON STOCKS (Continued) SHARES VALUE
--------------------------------------------------------------------
FOOD RETAIL - 2.8%
Safeway, Inc. (a) 880 $ 41,085
----------
FINANCIALS - 13.7%
BANKS - 3.0%
Texas Regional Bancshares, Inc., Class A 375 10,641
Wells Fargo & Co. 700 32,156
----------
42,797
----------
CONSUMER FINANCE - 5.0%
Household International, Inc. 805 45,583
MBNA Corp. 700 26,950
----------
72,533
----------
DIVERSIFIED FINANCIAL SERVICES - 5.7%
Citigroup, Inc. 900 48,656
The Goldman Sachs Group, Inc. 300 34,181
----------
82,837
----------
HEALTH CARE - 6.2%
PHARMACEUTICALS & BIOTECHNOLOGY - 1.3%
Biotechnology
Genentech, Inc. (a) 100 18,569
----------
PHARMACEUTICALS - 4.9%
American Home Products Corp. 500 28,281
Johnson & Johnson 450 42,272
----------
70,553
----------
INDUSTRIALS - 7.2%
CAPITAL GOODS - 5.0%
Industrial Conglomerates
General Electric Co. 765 44,131
Tyco International Ltd. 550 28,531
----------
72,662
----------
COMMERCIAL SERVICES & SUPPLIES - 2.2%
Data Processing Services
Paychex, Inc. 615 32,288
----------
6
<PAGE> 9
COMMON STOCKS (Continued) SHARES VALUE
--------------------------------------------------------------------
INFORMATION TECHNOLOGY - 32.3%
SOFTWARE & SERVICES - 12.1%
APPLICATIONS SOFTWARE - 5.4%
Intuit, Inc. (a) 700 $ 39,900
Rational Software Corp. (a) 550 38,156
----------
78,056
----------
INTERNET SOFTWARE & SERVICES - 2.4%
America Online, Inc. 650 34,937
----------
SYSTEMS SOFTWARE - 4.3%
Microsoft Corp. (a) 560 33,740
VERITAS Software Corp. (a) 200 28,400
----------
62,140
----------
TECHNOLOGY HARDWARE & EQUIPMENT - 20.2%
COMPUTER HARDWARE - 3.2%
Apple Computer, Inc. 675 17,381
Sun Microsystems, Inc. (a) 250 29,188
----------
46,569
----------
COMPUTER STORAGE & PERIPHERALS - 5.0%
EMC Corp. (a) 400 39,650
Network Appliance, Inc. (a) 250 31,844
----------
71,494
----------
NETWORKING EQUIPMENT - 1.7%
Cisco Systems, Inc. (a) 450 24,862
----------
SEMICONDUCTOR EQUIPMENT - 0.9%
KLA-Tencor Corp. (a) 300 12,356
----------
SEMICONDUCTORS - 3.0%
Bookham Technology PLC (a) 265 11,362
Maxim Integrated Products, Inc. (a) 400 32,175
----------
43,537
COMMON STOCKS (Continued) SHARES VALUE
--------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 6.4%
Comverse Technology, Inc. (a) 300 $ 32,400
Corning, Inc. 106 31,482
Lucent Technologies, Inc. 400 12,225
Motorola, Inc. 600 16,950
----------
93,057
----------
MATERIALS - 1.0%
CHEMICALS - 1.0%
Specialty Chemicals
Minerals Technologies, Inc. 300 13,800
----------
TELECOMMUNICATION SERVICES - 6.6%
DIVERSIFIED TELECOM SERVICES - 5.3%
ALTERNATIVE CARRIERS - 4.2%
Level 3 Communications, Inc. (a) 425 32,778
Qwest Communications
International, Inc. (a) 583 28,023
----------
60,801
----------
INTEGRATED TELECOM SERVICES - 1.1%
WorldCom, Inc. (a) 500 15,188
----------
WIRELESS TELECOM SERVICES - 1.3%
Vodafone Group PLC, ADR 500 18,500
----------
UTILITIES - 7.2%
ELECTRIC UTILITIES - 5.4%
AES Corp. (a) 450 30,824
Calpine Corp. (a) 450 46,969
----------
77,793
----------
GAS UTILITIES - 1.8%
Kinder Morgan, Inc. 650 26,609
----------
TOTAL COMMON STOCKS
(cost of $907,041)(b) 1,337,024
----------
7
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SHORT-TERM OBLIGATIONS - 4.6% PAR VALUE
--------------------------------------------------------------------
COMMERCIAL PAPER - 4.6%
Associates Corp. of North America
6.790% (c) 10/02/00 $47,415 $ 47,406
Houston Industries Financial Corp.
7.100% (c) 10/02/00 19,430 19,426
----------
TOTAL SHORT-TERM
OBLIGATIONS 66,832
----------
Other Assets & Liabilities, Net - 2.9% 41,388
----------
NET ASSETS - 100.0% $1,445,244
==========
Notes to Investment Portfolio:
(a) Non-income producing.
(b) Cost for federal income tax purposes is $909,541.
(c) Rate represents yield at time of purchase.
Acronym Name
------- ----
ADR American Depositary Receipt
See notes to financial statements.
8
<PAGE> 11
SR&F GROWTH INVESTOR PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2000
(ALL AMOUNTS IN THOUSANDS)
Assets
Investments, at market value (cost $907,041) $1,337,024
Short-term obligations 66,832
Cash 3
Receivable for:
Investments sold 74,140
Dividends 474
----------
Total Assets 1,478,473
----------
Liabilities
Payable for investments purchased 32,534
Accrued:
Management fee 685
Bookkeeping fee 5
Transfer agent fee 1
Other 4
----------
Total Liabilities 33,229
----------
Net Assets applicable to investors'
beneficial interest $1,445,244
==========
See notes to financial statements.
9
<PAGE> 12
SR&F GROWTH INVESTOR PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
(ALL AMOUNTS IN THOUSANDS)
Investment Income
Dividends $ 6,720
Interest 1,457
----------
Total investment income 8,177
----------
Expenses
Management fee 7,245
Bookkeeping fee 56
Trustees' fee 27
Audit fee 12
Legal fee 1
Transfer agent fee 6
Custodian fee 29
Other 39
----------
7,415
----------
Net investment income 762
----------
Realized and Unrealized Gain on Investments
Net realized gain on investments 140,322
Net change in unrealized appreciation/depreciation 187,931
----------
Net Gain 328,253
----------
Increase in net assets resulting from operations $ 329,015
==========
SR&F GROWTH INVESTOR PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
(ALL AMOUNTS IN THOUSANDS)
Years Ended September 30,
2000 1999
---------- ----------
Operations
Net investment income $ 762 $ 2,122
Net realized gain on investments 140,322 944
Net change in unrealized appreciation/
depreciation 187,931 169,408
---------- ----------
Net increase in net assets
resulting from operations 329,015 172,474
---------- ----------
Transactions in Investors'
Beneficial Interest
Contributions 885,014 274,918
Withdrawals (755,625) (183,222)
---------- ----------
Net increase from transactions
in investors' beneficial interest 129,389 91,696
---------- ----------
Net increase in net assets 458,404 264,170
Net Assets
Beginning of year 986,840 722,670
---------- ----------
End of year $1,445,244 $ 986,840
========== ==========
See notes to financial statements
10
<PAGE> 13
LIBERTY YOUNG INVESTOR FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER-SHARE DATA)
Assets
Investment in Portfolio, at value $ 173,519
Receivable for Fund shares sold 518
Receivable for expense reimbursement due
from Advisor 100
Other 38
----------
Total Assets 174,175
----------
Liabilities
Payable for Fund shares repurchased 5,294
Accrued:
Administration fee 29
Service fee 41
Bookkeeping fees 2
Transfer agent 101
Other 26
----------
Total Liabilities 5,493
----------
Net Assets $ 168,682
==========
Class A
Net asset value & redemption price per
share - ($168,110/9,216) $ 18.24(a)
----------
Class K
Net asset value, redemption and offering price per
share - ($572/31) $ 18.40
----------
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
Analysis of Net Assets
Paid-in capital $ 132,807
Accumulated net realized loss allocated
from Portfolio (782)
Net unrealized appreciation allocated
from Portfolio 36,657
----------
$ 168,682
==========
See notes to financial statements.
11
<PAGE> 14
LIBERTY YOUNG INVESTOR FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
Investment Income
Dividend income allocated from
Portfolio $ 732
Interest income allocated from
Portfolio 163
----------
Total Investment Income 895
----------
Expenses
Expenses allocated from
Portfolio $ 810
Administration fee 284
Service fee - Class A 354
Distribution fee - Class A 148
Distribution fee - Class K 1
Transfer agent fee 654
Bookkeeping fee 27
Trustees' fee 8
Custodian fee 1
Audit fee 7
Legal fee 2
Registration fee 34
Reports to shareholders 31
----------
2,361
Fees and expenses waived or borne
by Advisor (171)
Fee waived by Distributor -
Class A (71) 2,119
---------- ----------
Net investment loss (1,224)
----------
Net Realized and Unrealized
Gain on Investments Allocated
from Portfolio
Net realized gain 6,685
Net change in unrealized
appreciation/depreciation 25,474
----------
Net Gain 32,159
----------
Increase in net assets resulting
from operations $ 30,935
==========
LIBERTY YOUNG INVESTOR FUND
STATEMENT OF CHANGES IN NET ASSETS
(ALL AMOUNTS IN THOUSANDS)
Years ended September 30,
2000 1999
---------- ----------
Operations
Net investment loss $ (1,224) $ (488)
Net realized gain (loss) on
investments 6,685 (2,036)
Net change in unrealized
appreciation/depreciation
on investments 25,474 10,756
---------- ----------
Net increase in net assets
resulting from operations 30,935 8,232
---------- ----------
Share Transactions
Subscriptions to Fund shares -
Class A 344,145 100,236
Redemptions of Fund shares -
Class A (304,075) (47,993)
---------- ----------
40,070 52,243
---------- ----------
Subscriptions to Fund shares -
Class K 97 100
Redemptions of Fund shares -
Class K (63) (106)
---------- ----------
34 (6)
---------- ----------
Net increase from Fund
Share Transactions 40,104 52,237
---------- ----------
Net increase in net assets 71,039 60,469
Net Assets
Beginning of year 97,643 37,174
---------- ----------
End of year $ 168,682 $ 97,643
========== ==========
Undistributed (overdistributed)
Net Investment Income $ - $ -
========== ==========
See notes to financial statements.
12
<PAGE> 15
LIBERTY YOUNG INVESTOR FUND
STATEMENT OF CHANGES IN NET ASSETS
(ALL AMOUNTS IN THOUSANDS)
Years ended September 30,
2000 1999
---------- ----------
Number of Fund Shares
Sold - Class A 19,789 7,022
Repurchased - Class A (17,528) (3,312)
---------- ----------
2,261 3,710
---------- ----------
Sold - Class K 6 8
Repurchased - Class K (4) (8)
---------- ----------
2 -
---------- ----------
See notes to financial statements.
13
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Liberty Young Investor Fund (the "Fund") (formerly Stein Roe Advisor Young
Investor Fund), is a multi-class series of Liberty Stein Roe Advisor Trust (the
"Trust"), an open-end management investment company organized as a Massachusetts
business trust. The Fund invests substantially all of its assets in SR&F Growth
Investor Portfolio (the "Portfolio"), which seeks to achieve long-term capital
appreciation by investing primarily in common stocks and other equity-type
securities that are believed to have long-term appreciation potential. The Fund
also has an educational objective to teach investors, especially young people,
about basic economic principles and personal finance through a variety of
educational materials prepared and paid for by the Fund. The Fund currently
offers two classes of shares at net asset value: Class A and Class K. Class A
shares are subject to a maximum contingent deferred sales charge of 2.00% on
redemptions made within three years of purchase. A 1.00% contingent deferred
sales charge is assessed to Class A shares redeemed within eighteen months on an
original purchase of $1 million to $5 million.
The Portfolio is a series of SR&F Base Trust, a Massachusetts common law trust
organized under an Agreement and Declaration of Trust dated August 23, 1993. The
Portfolio commenced operations February 3, 1997. The Portfolio allocates income,
expenses, realized and unrealized gains and losses to each investor on a daily
basis, based on methods approved by the Internal Revenue Service. At September
30, 2000, Liberty Young Investor Fund owned 12.0% of the Portfolio.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of 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 and Portfolio
in the preparation of the financial statements.
SECURITY VALUATION AND TRANSACTIONS
Equity securities generally are valued at the last sale price or, in the case of
unlisted or listed securities for which there were no sales during the day, at
current quoted bid price.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains or losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS
All income, expenses (other than Class A and Class K service fees, Class A and
Class K distribution fees and Class A and Class K Transfer Agent fees), and
realized and unrealized gains (losses) are allocated to each class
proportionately on a daily basis for purposes of determining the net asset value
of each class.
Class A and Class K per share data and ratios are calculated by adjusting the
expense and net investment income per share data and ratios for the Fund for the
entire period by the service, distribution and transfer agent fees per share
applicable to Class A and Class K.
FEDERAL INCOME TAXES
No provision is made for federal income taxes since (a) the Fund elects to be
taxed as a "regulated investment company" and make distributions to its
shareholders to be relieved of all federal income taxes under provisions of
current federal tax law; and (b) the Portfolio is treated as a partnership for
federal income tax purposes and all of its income is allocated to its owners
based on methods approved by the Internal Revenue Service.
The Fund intends to utilize provisions of the federal income tax law, which
allow the Fund to carry a realized capital loss forward up to eight years
following the year of the loss, and offset such losses against any future
realized gains. At September 30, 2000, the Fund had capital loss carryforwards
of $224,983 and $383,042 which expire in 2006 and 2007, respectively.
DISTRIBUTION TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-date.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforwards) under income tax regulations.
OTHER
Interest income is recorded on the accrual basis.
Corporate actions are recorded on the ex-date. Dividend income is recorded on
the ex-dividend date.
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<PAGE> 17
NOTE 2. FEES AND COMPENSATION
PAID TO AFFILIATES
MANAGEMENT FEE
Stein Roe and Farnham Inc. (the Advisor) is the investment Advisor of the
Portfolio and receives a monthly fee as follows:
Average Net Assets Annual Fee Rate
------------------ ---------------
First $500 million 0.60%
Next $500 million 0.55%
Over $1 billion 0.50%
ADMINISTRATION FEE
The Advisor also provides accounting and other services to the Fund for a
monthly fee as follows:
Average Net Assets Annual Fee Rate
------------------ ---------------
First $500 million 0.200%
Next $500 million 0.150%
Over $1 billion 0.125%
BOOKKEEPING FEE
The Advisor provides bookkeeping and pricing services to the Portfolio and Fund
for a monthly fee equal to $25,000 plus 0.0025% annually of the Portfolio's and
Fund's average daily net assets over $50 million.
TRANSFER AGENT FEE
Liberty Funds Services, Inc. (the Transfer Agent), an affiliate of the Advisor,
provides shareholder services to the Fund and receives reimbursement for certain
out of pocket expenses. Transfer agent fees are computed at an annual rate of
0.236% of the average daily net assets attributable to Class A. Transfer agent
fees for Class K shares are computed at an annual rate of 0.30% of Class K's
average daily net assets. The Portfolio pays the Transfer Agent a monthly fee
equal to $6,000 annually.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES
Liberty Funds Distributor, Inc. (the Distributor) a subsidiary of the Advisor,
is the Fund's principal underwriter. For the year ended September 30, 2000, the
Fund has been advised that the Distributor retained net underwriting discounts
of $561 on sales of the Fund's Class A shares and received contingent deferred
sales charges of $79,558 and none on Class A and Class K share redemptions,
respectively.
The Fund has adopted a 12b-1 plan, which requires the payment of a monthly
service fee equal to 0.25% annually on Class A net assets as of the 20th of each
month. The plan also requires the payment of a distribution fee equal to 0.10%
and 0.25% annually of the average net assets attributable to Class A and Class K
shares, respectively. The Distributor has voluntarily agreed to waive a portion
of the Class A distribution fee so that it will not exceed 0.05% annually.
The CDSC and the fees received from the 12b-1 plan are used principally as
repayment to the Distributor for amounts paid by the Distributor to dealers who
sold such shares.
OTHER
The Fund pays no compensation to its officers, all of whom are employees of the
Advisor.
EXPENSE LIMITS
The Advisor has agreed, until further notice, to waive fees and bear certain
Fund expenses to the extent that total expenses (exclusive of service fees,
distribution fees, brokerage commissions, interest, taxes and extraordinary
expenses, if any) exceed 1.50% annually of the Fund's average net assets.
NOTES 3. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY
During the year ended September 30, 2000 purchases and sales of investments,
other than short-term obligations, were $976,309,339 and $915,033,633,
respectively. Unrealized appreciation (depreciation) for the year ended
September 30, 2000 based on cost of investments for federal income tax purposes
was:
Gross unrealized appreciation $502,478,058
Gross unrealized depreciation (74,995,022)
------------
Net unrealized appreciation $427,483,036
------------
OTHER
The Portfolio may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
NOTE 4. LINE OF CREDIT
The Liberty-Stein Roe Funds Investment Trust and SR&F Base Trust participate in
unsecured line of credit agreements provided by the custodian bank consisting of
two components. The committed line of credit entitles the Trusts to borrow from
the custodian at any time upon notice from the Trust. The uncommitted line of
credit permits the Trust to borrow from the custodian at the custodian's sole
discretion. The aggregate borrowings available to the Trust for the committed
and uncommitted lines of credit are $200 million and $100 million, respectively.
Borrowings may be made to temporarily finance repurchase of Fund shares.
Interest is charged to the trust and, ultimately, the Fund based on its
borrowings. In addition, a commitment fee of 0.10% per annum on the Fund's
unused commitment shall be paid quarterly by the Fund based on the relative
asset size of the Fund to the Trust as a whole. The commitment fee is included
in other expenses on the Statement of Operations. For the year ended September
30, 2000, the Trust and Fund had no borrowings under the agreement.
15
<PAGE> 18
NOTE 5. OTHER RELATED PARTY TRANSACTIONS
During the year ended September 30, 2000, the Portfolio used Alphatrade, a
wholly owned subsidiary of Colonial Management Associates, Inc., as a broker.
Total commissions paid to Alphatrade during the year were $63,249.
At September 30, 2000, the Fund had one shareholder, Liberty Financial
Companies, Inc., which owned 32% of the Fund's Class K's shares outstanding.
16
<PAGE> 19
FINANCIAL HIGHLIGHTS
LIBERTY YOUNG INVESTOR FUND
Selected per-share data (for a share outstanding throughout the period), ratios
and supplemental data.
<TABLE>
<CAPTION>
Period
Years Ended Ended
September 30, September 30,
Class A 2000 1999 1998(a)
---------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 13.98 $ 11.35 $ 11.67
---------- ---------- ----------
Income From Investment Operations
Net investment loss (b) (0.15)(c) (0.10)(c) (0.02)
Net realized and
unrealized gain (loss)
on investments 4.41 2.73 (0.30)
---------- ---------- ----------
Total from investment
operations 4.26 2.63 (0.32)
---------- ---------- ----------
Net Asset Value,
End of Period $ 18.24 $ 13.98 $ 11.35
========== ========== ==========
Ratio of net expenses to
average net assets (d) 1.49% 1.65%(d) 1.65%(f)
Ratio of net investment
loss to average
net assets (e) (0.86)%(c) (0.69)%(c) (0.52)%(f)
Total return (e) 30.47%(g) 23.17% (2.74)%(g)
Net assets, end of
year (000's) $ 168,110 $ 97,233 $ 36,843
</TABLE>
(a) From commencement of multi-class offering on January 26, 1998.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Net of fees waived by the Distributor which amounted to $0.009 per share
and 0.05% in 2000 and $0.007 and 0.05% in 1999.
(d) If the Fund had paid all of its expenses and there had been no
reimbursement by the Advisor and/or Distributor, this ratio would have been
1.66% and 1.74% for the years ended September 30, 2000 and 1999,
respectively, and 2.02% for the period ended September 30, 1998.
(e) Computed giving effect to the Advisor's and/or Distributor's expense
limitation undertaking.
(f) Annualized.
(g) Not annualized.
<TABLE>
<CAPTION>
Period
Ended
Years Ended September 30, September 30,
Class K 2000 1999 1998 1997(a)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period $ 14.08 $ 11.41 $ 11.49 $ 10.00
---------- ---------- ---------- ----------
Income From Investment Operations
Net investment
loss (b) (0.15) (0.09) (0.03) (0.02)
Net realized and
unrealized
gain (loss) on
investments 4.47 2.76 (0.04) 1.51
---------- ---------- ---------- ----------
Total from
investment
operations 4.32 2.67 (0.07) 1.49
---------- ---------- ---------- ----------
Distributions
Net investment
income - - (0.01) -
---------- ---------- ---------- ----------
Net Asset Value,
End of Period $ 18.40 $ 14.08 $ 11.41 $ 11.49
========== ========== ========== ==========
Ratio of net
expenses to
average
net assets (c) 1.50% 1.50% 1.50% 1.50%(e)
Ratio of net
investment
loss to average
net assets (d) (0.87)% (0.64)% (0.48)% (0.24)%(e)
Total return (d) 30.68%(f) 23.40% (0.62)% 14.90%(f)
Net assets, end of
period (000's) $ 572 $ 410 $ 331 $ 116
</TABLE>
(a) From commencement of operations on February 14, 1997.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) If the Fund had paid all of its expenses and there had been no
reimbursement by the Advisor, this ratio would have been 1.62%, 1.70% and
20.42% for the years ended September 30, 2000, 1999 and 1998, respectively,
and 89.45% for the period ended September 30, 1997.
(d) Computed giving effect to the Advisor's expense limitation undertaking.
(e) Annualized.
(f) Not annualized.
SR&F GROWTH INVESTOR PORTFOLIO
<TABLE>
<CAPTION>
Period
Ended
Years Ended September 30, September 30,
2000 1999 1998 1997(a)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Ratio of net expenses
to average net assets 0.57% 0.59% 0.62% 0.63%(b)
Ratio of net
investment income to
average net assets 0.06% 0.25% 0.42% 0.54%(b)
Portfolio turnover rate 72% 45% 45% 38%
</TABLE>
(a) From commencement of operations on February 3, 1997.
(b) Annualized.
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<PAGE> 20
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Stein Roe Advisor Trust and SR&F Base Trust and the
Shareholders of Liberty Young Investor Fund
In our opinion, the accompanying statements of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Liberty Young Investor Fund (the
"Fund")(a series of Stein Roe Advisor Trust) and SR&F Growth Investor Portfolio
(the "Portfolio") (a series of SR&F Base Trust) at September 30, 2000, the
results of each of their operations for the year then ended, the changes in each
of their net assets and their financial highlights for the two years then ended,
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 and
the Portfolio'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 September 30, 2000 by
correspondence with the custodian, provide a reasonable basis for our opinion.
The financial highlights of the Fund and the Portfolio for periods through
September 30, 1998 were audited by other independent accountants, whose report
dated November 16, 1998 expressed an unqualified opinion on those financial
highlights.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 20, 2000
18
<PAGE> 21
ACTIVITY PAGES
PUZZLES AND GAMES (AGES THREE TO FIVE)
FIND THE QUARTERS
How many quarters can
you find in this picture?
[picture]
Answer: Seven.
How Much Is the Eraser?
Circle the coins you will need to buy the eraser.
[picture]
Answer: Five.
19
<PAGE> 22
DESIGN A STATE QUARTER
Lots of kids - and adults - are collecting the new state quarters. The U.S. Mint
plans to issue a new quarter approximately every ten weeks between 1999 and
2008. Use the space below to design your own quarter.
[picture]
20
<PAGE> 23
PUZZLES AND GAMES (AGES SIX TO EIGHT)
FIND A FUND MAZE
Different types of mutual funds invest in different things and can help you
reach different goals. They also have different levels of risk. Money market
funds invest in short-term debt-sometimes called cash-equivalents. Bond funds
own bonds, which are a type of loan. Corporations or governments issue bonds to
pay for things they need. When you-or a mutual fund-buy a bond, the issuer
promises to make regular payments of interest until the bond matures. When a
bond matures, it returns the amount originally invested. Stock funds own stocks.
Stock shares represent partial ownership of a specific company. Help Johnny
match the types of funds to the types of things they own.
[picture]
COUNT THE MONEY!
Play this game with a friend. See who can count the money faster!
[picture]
21
<PAGE> 24
SO YOU WANT TO BE A BUSINESS TYCOON
One of the most important jobs for any business tycoon is managing his or her
money. Try this brainteaser to test your money skills:
Taking the advice in our June Dollar Digest(r), you open your own lemonade
stand. Your special recipe makes your lemonade a popular choice with all the
kids and even the adults in your neighborhood. Yesterday was your busiest day
yet; you sold 50 cups of lemonade for 50(cent) each. But, to make this much
lemonade, you had to buy the following ingredients:
- 50 lemons at a cost of 10(cent) each
- Two pounds of sugar at a cost of $2.00 a pound
- 50 paper cups at a cost of 5(cent) each
After paying for these supplies, how much money did you make for the day?
[picture]
Answer: After expenses, your profit for the day is $13.50.
22
<PAGE> 25
How Are You Spending Your Weekend? (ages nine to 12)
Making a budget can be a great way to manage your money. That's because a budget
can help you organize your goals and show you what you can afford to do with
your money. Try making a budget for the upcoming weekend using the following
examples. Start with $20 in spending money and try to do at least three
different things. Prioritize your spending and see how far your money goes.
Ticket to see the smash movie The Six Cents $8
Munchies $5
A new CD from your favorite band, the Cash Cows $12
Rental for the cool Gold and I video game $3.50
Lunch from your favorite take-out restaurant $4.50
T-shirt depicting your favorite team, The Bulls $10
Admission to the local skating rink $6
So, how are you going to spend your weekend?
------------------------------------------------- ------
------------------------------------------------- ------
------------------------------------------------- ------
Total weekend budget ______
[picture]
23
<PAGE> 26
BRAIN TEASER
In each blank below, write the letter representing the person pictured on that
bill. (If you need help, check the Web site for the U.S. Treasury Department at
www.ustreas.gov.)
BILL AMOUNT
$1
-----
$2
-----
$5
-----
$10
-----
$20
-----
$50
-----
$100
-----
$500
-----
$1,000
-----
PERSON FEATURED
a) Grover Cleveland
b) Thomas Jefferson
c) Abraham Lincoln
d) Benjamin Franklin
e) Ulysses Grant
f) William McKinley
g) George Washington
h) Andrew Jackson
i) Alexander Hamilton
[picture]
Answers: $1 (g); $2 (b); $5 (c); $10 (i); $20 (h); $50 (e); $100 (d); $500 (f);
$1,000 (a).
MUSIC-O-RAMA
Q: You walk into Music-O-Rama, a local record store, and buy a new CD. The
total, with tax, comes to $13.53, and you hand the cashier $15. How many ways
can she make change using no more than seven coins?
[picture]
A: Answer: Seven. (1) a one-dollar bill, one quarter, two dimes and two pennies;
(2) a one-dollar bill, one quarter, one dime, two nickels and two pennies; (3) a
one-dollar bill, one quarter, four nickels and two pennies; (4) a one-dollar
bill, four dimes, a nickel and two pennies; (5) two half-dollars, one quarter,
two dimes and two pennies; (6) one silver dollar, one quarter, two dimes and two
pennies; and (7) one silver dollar, one quarter, one dime, two nickels and two
pennies.
24
<PAGE> 27
[picture]
TRUSTEES
JOHN A. BACON, JR.
Private Investor
WILLIAM W. BOYD
Chairman and Director, Sterling Plumbing
Group Inc.
LINDSAY COOK
Executive Vice President, Liberty Financial
Companies, Inc.
DOUGLAS A. HACKER
Executive Vice President and Chief Financial
Officer, United Airlines
JANET LANGFORD KELLY
Executive Vice President, Secretary and General
Counsel, Sara Lee Corporation
CHARLES R. NELSON
Van Voorhis Professor of Political Economy,
University of Washington
JOSEPH R. PALOMBO
Chairman of the Board of Trustees
Executive Vice President and Director,
Colonial Management Associates
THOMAS C. THEOBALD
Managing Partner, William Blair Capital Partners
IMPORTANT INFORMATION
ABOUT THIS REPORT
The Transfer Agent for Liberty Young Investor Fund is:
Liberty Funds Services, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
The Fund mails one shareholder report to each shareholder address. If you would
like more than one report, please call 800-426-3750 and additional reports will
be sent to you.
This report has been prepared for shareholders of Liberty Young Investor Fund.
This report may also be used as sales literature when preceded or accompanied by
the current prospectus which provides details of sales charges, investment
objectives and operating policies of the Fund and the most recent copy of
Liberty Funds Distributor's Performance Update.
<PAGE> 28
[picture]
OUR "FAMILY" OF MUTUAL FUNDS
Liberty Young Investor Fund is part of a family of funds distributed by Liberty
Funds Distributor, Inc. Liberty offers a wide spectrum of funds, from
conservative tax-free bonds to more aggressive international funds. Each fund
within the Liberty family follows a consistent investment style and adheres to
its stated investment objective.
For more information on Liberty-distributed funds, including All-Star, Colonial,
Crabbe Huson, Newport and Liberty funds, please consult your financial advisor
or call 1-800-426-3750.
LIBERTY YOUNG INVESTOR(SM) FUND ANNUAL REPORT - SEPTEMBER 30, 2000
[LIBERTY FUNDS LOGO]
All-STAR - Colonial - Crabbe Huson - Newport - Stein Roe Advisor
Liberty Finds Distributor, Inc. (c)2000
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
www.libertyfunds.com
BULK RATE
U.S. POSTAGE
PAID
Holliston, MA
PERMIT NO. 20
712-02/193D-0900 (11/00) 00/2017
