STEIN ROE ADVISOR FUNDS
Annual Report
September 30, 1999
Photo of: corn stalk
Stein Roe Advisor Fund
Growth and Income Fund
Stein Roe Advisor Growth & Income Fund
LOGO: Stein Roe Mutual Funds
Sensible Risks. Intelligent Investments.(R)
<PAGE>
Contents
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From the President.......................................................... 1
Stephen E. Gibson's thoughts on the equity markets and investing
Performance Summary ........................................................ 2
Questions & Answers
Growth & Income Fund - An interview with Portfolio Manager Dan Cantor.... 3
Portfolio of Investments.................................................... 6
A complete list of investments with market values
Financial Statements........................................................ 9
Statements of assets and liabilities, operations and changes in
net assets
Notes to Financial Statements............................................... 14
Financial Highlights........................................................ 17
Selected per-share data
Report of Independent Accountants........................................... 18
Must be accompanied or preceded by a prospectus.
<PAGE>
FROM THE PRESIDENT
- --------------------------------------------------------------------------------
TO OUR SHAREHOLDERS
Five years ago fear of higher inflation and rising interest rates dominated the
news. The Federal Reserve Board had raised borrowing rates. Some investors
believed America's robust economy would overheat. The stock market was volatile.
Now, at the threshold of a new century, inflation and interest rates are
again at the top of Wall Street's worries. Market volatility has returned, and
the returns from many large-cap growth stocks in fiscal year 1999 were modest.
Stocks of mid-size and smaller companies generally lagged. Long-term interest
rates soared to 6.15%
For Stein Roe Advisor Growth & Income Fund, fiscal 1999 was fairly good.
Strong weightings in pharmaceutical and financial companies and exposure to
midcap stocks -- areas that had provided superior results for much of the 1990s
- -- hurt performance in the past year amid drug pricing concerns, rising interest
rates and investors' focus on large-cap stocks.
The Fund's returns were less than the return of the average large-cap value
fund for the 12 months ended September 30, 1999, as determined by Lipper Inc.
Lipper placed the Fund in this new category this past summer while eliminating
its growth & income category.
Advisor Growth & Income Fund invests primarily in a broad mix of
established large-company stocks that may appeal to risk-sensitive equity
investors. The Fund augments its portfolio with some mid-size company stocks.
In selecting equity investments for each portfolio over the years, your
Fund's manager has consistently sought stocks with the potential to stand the
test of time.
Take General Electric, for example. It was one of the largest equity
holdings in Growth & Income Portfolio as of September 30, 1999 (2.8% of net
assets) and a contributor to the Fund's total returns in fiscal 1999. Perhaps
more than in any decade since the 1920s, advances in technology are
revolutionizing American business. Consider that five years ago, hardly anyone
used the Internet. Now it is becoming the communication tool of choice, and
we're investing in time-tested companies like GE with the resources and
potential to capitalize on this trend.
A PERSPECTIVE ON INTELLIGENT INVESTING
We're sure you'll agree that a year is far too short a period to judge the
performance of an equity fund. Keep in mind that over the past 73 years, annual
returns from stocks have averaged 11%, with some years of negative returns of
more than 20%.* Investors should consider that such volatility is normal for
growth-oriented investments. Financial advisors are often in a strong position
to offer such lessons of history as they help clients build their portfolios.
As shareholders, you can expect that each Fund's manager has a commitment
to a disciplined, research intensive approach to stock selection that has the
potential to help you meet your long-term investment goals. On the pages that
follow, Dan Cantor, your Fund's portfolio manager, details the Fund's strategy
and provides an outlook for the year ahead. We encourage you to carefully review
this report.
Sincerely,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
November 15, 1999
*Source: Wiesenberger(R), based on average annual returns of the S&P 500 Index,
12/31/25 to 9/30/99.
On November 2, 1999, Stephen E. Gibson was named President of Stein Roe Mutual
Funds. Mr. Gibson is President and Chief Executive Officer of Liberty Funds
Group, LLC, a part of Liberty Financial Companies Inc. Liberty Financial is
Stein Roe's Boston parent organization. Mr. Gibson joined Liberty Financial in
1996 and has more than 20 years of mutual fund industry experience that
includes senior management positions at Putnam Investments and Kemper
Corporation.
1
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PERFORMANCE SUMMARY
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AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
One Five 10
Year Years Years
- --------------------------------------------------------------------------------
STEIN ROE ADVISOR GROWTH & INCOME FUND 18.85% 18.79% 14.42%
Standard & Poor's 500 Index 27.79% 25.03% 16.80%
Lipper Large-Cap Value Fund Average 20.68% 20.38% 14.03%
Number of Funds in Peer Group 250 104 44
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.
INVESTMENT COMPARISON
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GROWTH OF A $10,000 INVESTMENT September 30, 1989 to September 30, 1999
- --------------------------------------------------------------------------------
Line Chart:
Lipper Large-Cap Stein Roe Advisor
S&P 500 Value Fund Average Growth & Income
Index (44 Funds) Fund
09/30/89 10000 10000 10000
09/30/90 9075.84 8869.84 9453
09/30/91 11897.8 11667.6 11687
09/30/92 13211.6 12818.7 13293
09/30/93 14924.9 14860.3 15653
09/30/94 15473.9 15323.1 16250
09/30/95 20070.9 19136 19612
09/30/96 24149.4 22736.4 24001
09/30/97 33911.8 30683.9 31347
09/30/98 36991.9 31580 32344
09/30/99 47270.3 37834.2 38445
- --------------------------------------------------------------------------------
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. Each
illustration assumes a $10,000 investment on September 30, 1989, and
reinvestment of income and capital gains distributions. The index shown above is
an unmanaged group of securities that differs from the composition of each Stein
Roe fund; it is not available for direct investment Source: Lipper Inc. As of
9/30/99, Lipper had reclassified Advisor Growth & Income Fund from its growth &
income category to a new large-cap value category. The Advisor currently limits
expenses to 1.40% of average daily net assets; absent these limits, returns
would be less. Historical performance for Class K shares for the period prior to
2/14/97 is based on the performance of SR&F Growth & Income Portfolio, restated
to reflect 12b-1 fees and any other expenses applicable to that class, without
giving any effect to fee waivers and assuming reinvestment of dividends and
capital gains.
2
<PAGE>
Q&A
- --------------------------------------------------------------------------------
AN INTERVIEW WITH DAN CANTOR, PORTFOLIO MANAGER
OF STEIN ROE ADVISOR GROWTH & INCOME FUND AND SR&F GROWTH & INCOME PORTFOLIO
FUND DATA
INVESTMENT OBJECTIVE AND STRATEGY:
Stein Roe Advisor Growth & Income Fund seeks capital growth and current
income by investing primarily in common stocks, of well-established companies
having large market capitalizations. The portfolio may also invest in
companies having midsize market capitalizations.
On November 2, 1999 Liberty-Stein Roe Advisor Trust's Board of Trustees voted
to liquidate Stein Roe Advisor Growth & Income Fund Class K on November 30,
1999 or before that time if all shareholders have redeemed their interests in
the fund.
Q: HOW DID THE FUND PERFORM IN FISCAL 1999?
CANTOR: Our results were fairly good despite our underweight position in
technology stocks, which outperformed virtually all other industry groups for
the period. The Fund provided a total return of 18.85% for the year ended
September 30, 1999. The unmanaged Standard & Poor's 500 Index rose 27.79% for
the period, led by a narrow group of big technology stocks (see page 2) that
were generally not in the portfolio.
Early in the fiscal year, cyclical stocks--or companies whose fortunes are
tied to the economy--performed very well for us. Later in the period, however,
nearly every industry group with the exception of technology came under
pressure. The Fund, which had limited exposure to technology, gave back some of
its early year gains as a result.
Q: CAN YOU EXPLAIN WHY THE FUND HAD A LOWER TECHNOLOGY EMPHASIS?
CANTOR: We focus on growth at reasonable prices, which has made it difficult for
us to fully participate in technology given the sector's high valuations. If you
look at the technology companies in the S&P 500, most are selling at peak
price/earnings (P/E) multiples. P/E is an indicator of how much investors are
paying for a company's earning power--the higher the P/E, the more they are
paying; the lower the P/E, the less they are paying. While we want to own
companies that are growing, we generally focus on stocks that are selling at
attractive multiples.
Over the long term, we believe investors are well-served by paying close
attention to the risk profile of a stock's underlying company. Sometimes
investors appear willing to pay any price for select companies' earnings growth.
At other times investors use more discriminating selection parameters. When
there is a market shift towards such value parameters, we think our approach has
the potential to provide outstanding results.
Q: AMONG THE PORTFOLIO'S TECHNOLOGY HOLDINGS, WHAT PERFORMED WELL?
CANTOR: Standout performers included IBM and Intel (3.9% and 0.6% of net assets,
respectively), both of which have nearly doubled in price over the course of
1999. We also held a small position in Applied Materials (0.6% of net assets)
that performed well.
Q: IN WHAT SECTORS DID YOU FOCUS THE FUND'S INVESTMENT SELECTION, AND HOW DID
HOLDINGS IN THESE SECTORS PERFORM?
CANTOR: Financial services stocks represented the Portfolio's second largest
sector allocation. Holdings in American Express and Citigroup (3.7% and 3.1% of
net assets, respectively) posted strong results early in the fiscal year, but
subsequently lost ground as a result of the negative impact of rising short-term
interest rates on the financial sector.
The Portfolio's holdings in health care, our largest sector weighting,
provided mixed results. We're focusing on companies that we believe have
improving product develop ment pipelines, lengthy patent protection, and are
attractively priced relative to company earnings. One example is Pharmacia &
Upjohn (0.7% of net assets). We increased our position in Pharmacia & Upjohn
based on these factors and given what we think are excellent growth prospects
for the company.
Within the food, beverage and tobacco industry, Phillip Morris (1.8% of net
assets) hurt the Portfolio's performance. The stock fell in response to ongoing
litigation brought against tobacco product manufacturers. As of September 30,
1999, we continued to believe the stock's risk/reward profile was attractive.
3
<PAGE>
Q&A Continued
- --------------------------------------------------------------------------------
Q: DID YOU ADD ANY NEW NAMES TO THE PORTFOLIO, AND IN WHAT TYPES OF COMPANIES DO
YOU ANTICIPATE INCREASING HOLDINGS?
CANTOR: We added Federated Department Stores (0.6% of net assets) to our retail
holdings. Federated, whose operating divisions include Bloomingdale's and
Macy's, is at the forefront of online retailing and should continue to be a big
beneficiary of electronic commerce.
- --------------------------------------------------------------------------------
WHILE WE WANT TO OWN COMPANIES THAT ARE GROWING, WE GENERALLY FOCUS ON STOCKS
THAT ARE SELLING AT ATTRACTIVE MULTIPLES.
- --------------------------------------------------------------------------------
Generally speaking, we've been finding attractive investment opportunities in
sectors that were hit hardest by the stock market's correction, including
financials, health care and various cyclical groups--specifically, automotive,
paper and chemical companies. Many of these groups are selling at attractive
multiples, so we may add positions in these types of companies.
We'll also continue to search for opportunities in technology since it's such
an important part of the economy. Specifically, we'll look for individual issues
that may get discounted for reasons we don't think are justified.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURNS WILL VARY, SO YOU MAY HAVE GAIN OR LOSS WHEN YOU SELL SHARES. Total
return includes changes in share price and reinvestment of all distributions. An
expense limit of 1.40% of average net assets was in effect of the period shown.
Return would have been lower without the limit. Portfolio holdings are disclosed
as a percentage of SR & F Growth & Income Portfolio of 9/30/99 and are subject
to change. The S & P 500 Index mentioned is an unmanaged group of stocks that
differs from the composition of any Stein Roe fund; indices are not available
for direct investment. Source: Lipper Inc.
4
<PAGE>
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
SR&F Growth & Income Portfolio
As of September 30, 1999
TOP 10 EQUITY HOLDINGS
- --------------------------------------------------------------------------------
% OF
COMPANY NET ASSETS
IBM 3.9%
American Express 3.7
BP Amoco 3.6
Bell Atlantic 3.4
Wal-Mart 3.3
Citigroup 3.1
Bristol Myers-Squibb 3.0
Warner Lambert 3.0
General Electric 2.8
Fannie Mae 2.7
- --------------------------------------------------------------------------------
EQUITY PORTFOLIO HIGHLIGHTS
PORTFOLIO S&P 500 INDEX
- --------------------------------------------------------------------------------
Number of Equity & Convertible Holdings 60 500
Median Market Capitalization (Billions) $27.0 $65
Price/Earnings Ratio 25.5x 25.3x
Beta (Volatility) 0.97 1.00
- --------------------------------------------------------------------------------
ECONOMIC SECTOR BREAKDOWN
Equity Portfolio S&P 500 Index
Consumer Noncyclical 22% 19%
Financial 18% 18%
Consumer Cyclical 17% 12%
Industrial 15% 8%
Energy 10% 26%
Technology 9% 3%
Basic Materials 5% 3%
Utilities/Chemicals 4% 11%
5
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<TABLE>
<CAPTION>
SR&F GROWTH & INCOME PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio of Investments at September 30, 1999
(All amounts in thousands)
Number Market
COMMON STOCKS (91.2%) of Shares Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AEROSPACE (1.1%)
Boeing Co........................................................................................ 100 $ 4,245
AUTO/TRUCK PARTS & EQUIPMENT (2.7%)
Hertz Corp., Class A............................................................................. 60 2,640
Federal-Mogul Corp............................................................................... 51 1,411
Lear Corp. (a)................................................................................... 170 5,982
-----------
10,033
-----------
BANKS (8.1%)
BankAmerica Corp................................................................................. 68 3,781
Chase Manhattan Corp............................................................................. 129 9,708
Citigroup, Inc. ................................................................................. 265 11,652
Wells & Fargo & Co. ............................................................................. 137 5,415
-----------
30,556
-----------
BROADCASTING AND COMMUNICATIONS (2.6%)
Interpublic Group Cos., Inc..................................................................... 121 4,984
Tribune Co. ..................................................................................... 100 4,975
-----------
9,959
-----------
CHEMICALS (0.5%)
E. I. du Pont de Nemours & Co., Inc.............................................................. 29 1,776
COMPUTERS AND COMPUTER-RELATED (7.1%)
Applied Materials (a)............................................................................ 30 2,336
Cisco Systems, Inc. (a).......................................................................... 45 3,085
Compaq Computer Corp............................................................................. 195 4,473
Intel Corp. ..................................................................................... 30 2,229
International Business Machines Corp............................................................. 120 14,565
-----------
26,688
-----------
CONSUMER RELATED (3.9%)
Avon Products, Inc............................................................................... 80 1,985
Gillette Co...................................................................................... 144 4,901
Procter & Gamble Co.............................................................................. 81 7,594
-----------
14,480
-----------
DISTRIBUTION (8.7%)
Federated Department Stores, Inc. (a)............................................................ 50 2,184
Kmart Corp. ..................................................................................... 210 2,454
TJX Co., Inc..................................................................................... 313 8,778
Walgreen Co. .................................................................................... 280 7,105
Wal-Mart Stores, Inc. ........................................................................... 260 12,366
-----------
32,887
-----------
ELECTRICAL EQUIPMENT (2.7%)
Emerson Electric Co.............................................................................. 100 6,319
Hubbell Inc., Class B............................................................................ 120 3,838
-----------
10,157
-----------
ENERGY (6.2%)
BP Amoco PLC ADR................................................................................. 121 13,453
Conoco, Inc.:
Class A....................................................................................... 105 2,908
Class B....................................................................................... 61 1,681
Enron Corp....................................................................................... 125 5,156
-----------
23,198
-----------
ENTERTAINMENT (0.2%)
Walt Disney Productions.......................................................................... 30 776
6
<PAGE>
SR&F GROWTH & INCOME PORTFOLIO CONTINUED
- ---------------------------------------------------------------------------------------------------------------------------------
Number Market
of Shares Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES (10.9%)
American Express Co. ............................................................................ 104 $ 14,001
Associates First Capital Corp., Class A.......................................................... 95 3,420
Fannie Mae....................................................................................... 161 10,093
Kansas City Southern Industries, Inc............................................................. 217 10,072
Nationwide Financial Services, Class A........................................................... 37 1,309
Washington Mutual, Inc. ......................................................................... 78 2,282
-----------
41,177
-----------
FOOD, BEVERAGE AND TOBACCO (4.0%)
PepsiCo, Inc..................................................................................... 160 4,840
Philip Morris Co., Inc........................................................................... 203 6,940
Sara Lee Corp.................................................................................... 144 3,375
-----------
15,155
-----------
HEALTH CARE (11.0%)
Abbott Laboratories.............................................................................. 117 4,300
Baxter International, Inc. ...................................................................... 120 7,230
Bristol-Meyers Squibb Co. ....................................................................... 170 11,475
Pharmacia & Upjohn, Inc.......................................................................... 50 2,481
Roche Holdings Limited .......................................................................... (b) 2,321
SmithKline Beecham - ADR......................................................................... 40 2,305
Warner Lambert Co. .............................................................................. 170 11,284
-----------
41,396
-----------
MULTI-INDUSTRY (6.9%)
General Electric Co.............................................................................. 88 10,434
Honeywell, Inc................................................................................... 84 9,350
Monsanto Co...................................................................................... 175 6,245
-----------
26,029
-----------
PAPER AND FOREST PRODUCTS (2.3%)
Georgia-Pacific Corp............................................................................. 170 6,885
Georgia-Pacific Timber Group..................................................................... 75 1,716
-----------
8,601
-----------
RUBBER, PLASTICS AND RELATED PRODUCTS (0.6%)
Goodyear Tire & Rubber Co........................................................................ 45 2,166
SPECIALTY CHEMICALS (4.0%)
Ecolab, Inc. .................................................................................... 260 8,873
Union Carbide Corp. ............................................................................. 111 6,312
-----------
15,185
-----------
TELECOMMUNICATIONS (4.8%)
AT & T Corp...................................................................................... 65 2,842
Bell Atlantic Corp. ............................................................................. 190 12,811
Lucent Technologies, Inc......................................................................... 39 2,542
-----------
18,195
-----------
TRANSPORTATION (2.9%)
Burlington Northern Santa Fe Corp................................................................ 200 5,500
Continental Airlines, Class B (a)................................................................ 170 5,568
-----------
11,068
-----------
TOTAL COMMON STOCKS (Cost $181,143).............................................................. 343,727
-----------
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7
<PAGE>
SR&F GROWTH & INCOME PORTFOLIO CONTINUED
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Principal Market
SHORT TERM OBLIGATIONS (8.5%) Amount Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER (7.7%)
Associates First Capital 5.600% 10/01/99 ........................................................ $ 15,010 $ 15,010
Limited 5.700% 10/01/99.......................................................................... 2,000 2,000
Western Resources 5.570% 10/05/99................................................................ 12,000 11,993
-----------
(COST $28,983)................................................................................... 29,003
-----------
U.S. GOVERNMENT OBLIGATION (0.8%)
U.S. Treasury Bills 4.760% 03/23/00
(COST $2,931).................................................................................... 3,000 2,929
-----------
TOTAL SHORT-TERM OBLIGATIONS (Cost $31,914)...................................................... 31,932
-----------
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.7%) (Cost $213,057) (c).................................................... 375,659
-----------
OTHER ASSETS, LESS LIABILITIES (0.3%)............................................................ 1,076
-----------
NET ASSETS (100.0%).............................................................................. $376,735
===========
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NOTES TO PORTFOLIO OF INVESTMENTS
- ---------------------------------------------------------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Rounds to less than one.
(c) At September 30, 1999, the cost of investments for federal income tax
purposes was $213,202. Net unrealized appreciation was $162,457 consisting
of gross unrealized appreciation of $170,930 and gross unrealized
depreciation of $8,473.
The following futures contracts were open at September 30, 1999:
</TABLE>
<TABLE>
<CAPTION>
Unrealized
Type Position Contracts Value Expiration Loss
---- -------- --------- ------- -------------- ----------
<S> <C> <C> <C> <C> <C>
S&P 500 Index Long 10 $12,982 December, 1999 $(550)
<CAPTION>
ACRONYM NAME
------- -----
<S> <C>
ADR American Depositary Receipt
</TABLE>
See accompanying Notes to Financial Statements.
8
<PAGE>
SR&F GROWTH & INCOME PORTFOLIO
Statement of Assets and Liabilities
September 30, 1999
(All amounts in thousands)
ASSETS
Investments, at market value (cost $213,057)......................... $375,659
Variation margin receivable on futures transactions.................. 933
Dividend and interest receivable..................................... 359
--------
Total Assets...................................................... 376,951
--------
LIABILITIES
Payable to Advisor................................................... 194
Other liabilities.................................................... 22
--------
Total Liabilities................................................. 216
--------
Net assets applicable to investors' beneficial interest........... $376,735
========
<TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1999
(All amounts in thousands)
<CAPTION>
<S> <C>
INVESTMENT INCOME
Interest........................................................................ $ 3,011
Dividends....................................................................... 4,649
-------
7,660
Foreign taxes withheld.......................................................... (28)
-------
Total Investment income...................................................... 7,632
-------
EXPENSES
Management fees................................................................. 2,497
Accounting fees................................................................. 34
Trustees' fees.................................................................. 18
Audit and legal fees............................................................ 16
Custodian fees.................................................................. 14
Other expenses.................................................................. 23
-------
2,602
Other........................................................................... (84)
-------
Net expenses................................................................. 2,518
-------
Net investment income........................................................ 5,114
-------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES TRANSACTIONS
Net realized gain on investments................................................ 13,333
Net realized gain on futures transactions....................................... 5,040
Net change in unrealized appreciation or depreciation on investments
and futures transactions..................................................... 49,677
-------
Net gain on investments and futures transactions............................. 68,050
-------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ $73,164
=======
See accompanying Notes to Financial Statements.
9
</TABLE>
<PAGE>
<TABLE>
SR&F GROWTH & INCOME PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
(All amounts in thousands)
<CAPTION>
Years ended September 30,
1999 1998
----------- -----------
<S> <C> <C>
OPERATIONS
Net investment income............................................................................ $ 5,114 $ 5,246
Net realized gain on investments and futures transactions........................................ 18,373 7,017
Net change in unrealized appreciation or depreciation on investments and futures transactions.... 49,677 (242)
----------- -----------
Net increase in net assets resulting from operations.......................................... 73,164 12,021
----------- -----------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions.................................................................................... 22,804 36,636
Withdrawals...................................................................................... (72,426) (33,209)
----------- -----------
Net increase (decrease) from transactions in investors' beneficial interest................... (49,622) 3,427
----------- -----------
Net increase in net assets.................................................................... 23,542 15,448
NET ASSETS
Beginning of year............................................................................... 353,193 337,745
----------- -----------
End of year...................................................................................... $ 376,735 $ 353,193
=========== ===========
See accompanying Notes to Financial Statements.
10
</TABLE>
<PAGE>
ADVISOR GROWTH & INCOME FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1999
(All amounts in thousands, except per-share amount)
ASSETS
Investment in Portfolio, at value...................................... $ 646
Cash................................................................... 8
------
Total Assets........................................................ 654
------
LIABILITIES
Payable due to Advisor................................................. 9
Other liabilities...................................................... 23
------
Total Liabilities................................................... 32
------
Net Assets.......................................................... $ 622
------
ANALYSIS OF NET ASSETS
Paid-in capital........................................................ $ 381
Accumulated net realized loss on investments and futures transactions.. (215)
Net unrealized appreciation on investments and futures transactions.... 456
------
Net Assets.......................................................... $ 622
------
Shares outstanding (unlimited number authorized)....................... 46
------
Net asset value per share.............................................. $13.66
======
See accompanying Notes to Financial Statements.
11
<PAGE>
ADVISOR GROWTH & INCOME FUND
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1999
(All amounts in thousands)
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
Interest allocated from Portfolio................................................................. $ 14
Dividends allocated from Portfolio................................................................ 21
--------
35
--------
EXPENSES
Expenses allocated from Portfolio................................................................. 12
Accounting fees................................................................................... 25
Trustees' fees.................................................................................... 10
Printing and postage.............................................................................. 6
Transfer agent fees............................................................................... 5
12b-1 distribution and service fees............................................................... 5
SEC and state registration fees................................................................... 30
Audit and legal fees.............................................................................. 14
Administrative fees............................................................................... 3
Other net......................................................................................... (36)
--------
Total expenses................................................................................. 74
Reimbursement of expenses by Advisor.............................................................. (48)
--------
Net expenses................................................................................... 26
--------
Net investment income.......................................................................... 9
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES TRANSACTIONS
ALLOCATED FROM SR&F GROWTH & INCOME PORTFOLIO
Net realized gain on investments and futures transactions......................................... 41
Change in unrealized appreciation or depreciation on investments and futures transactions......... 449
--------
Net gain on investments and futures transactions............................................... 490
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............................................. $ 499
========
See accompanying Notes to Financial Statements.
</TABLE>
12
<PAGE>
ADVISOR GROWTH & INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
(All amounts in thousands)
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
1999 1998
-------- --------
<S> <C> <C>
OPERATIONS
Net investment income............................................................................ $ 9 $ 5
Net realized gain (loss) on investments and futures transactions
allocated from SR&F Growth & Income Portfolio................................................ 41 (250)
Net change in unrealized appreciation or depreciation on investments and futures transactions
allocated from SR&F Growth & Income Portfolio................................................ 449 (13)
-------- --------
Net increase (decrease) in net assets resulting from operations............................... 499 (258)
-------- --------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income........................................................ (13) (1)
Distributions in excess of net investment income................................................. (2) --
-------- --------
Total distributions declared to shareholders.................................................. (15) (1)
-------- --------
SHARE TRANSACTIONS
Subscriptions to fund shares..................................................................... 430 3,150
Value of distributions reinvested................................................................ 15 1
Redemptions of fund shares....................................................................... (2,316) (997)
-------- --------
Net increase (decrease) from share transactions............................................... (1,871) 2,154
-------- --------
Net increase (decrease) in net assets......................................................... (1,387) 1,895
NET ASSETS
Beginning of year................................................................................ 2,009 114
-------- --------
End of year...................................................................................... $ 622 $ 2,009
======== ========
Undistributed Net Investment Income........................................................... $ -- $ 4
-------- --------
ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to fund shares ................................................................... 34 248
Issued in reinvestment of distributions.......................................................... 1 --
Redemptions of fund shares....................................................................... (163) (84)
-------- --------
Net increase (decrease) in fund shares........................................................ (128) 164
Shares outstanding at beginning of year.......................................................... 174 10
-------- --------
Shares outstanding at end of year............................................................... 46 174
======== ========
</TABLE>
See accompanying Notes to Financial Statements.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(All amounts in thousands)
NOTE 1. ORGANIZATION
Stein Roe Advisor Growth & Income Fund (the "Fund") is a series of Liberty-Stein
Roe Advisor Trust (the "Trust"), formerly Stein Roe Advisor Trust, an open-end
management investment company organized as a Massachusetts business trust.
Advisor Growth & Income Fund invests substantially all of its assets in SR&F
Growth & Income Portfolio (the "Portfolio").
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 on February 3, 1997. At commencement,
Stein Roe Growth & Income Fund contributed $239,175 in securities and other
assets to SR&F Growth & Income Portfolio, in exchange for beneficial ownership
of the Portfolio. At February 14, 1997, Advisor Growth & Income Fund contributed
cash of $100 to the Portfolio. 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,
1999, Growth & Income Fund and Advisor Growth & Income Fund owned 99.8 % and
0.2%, respectively, of SR&F Growth & Income Portfolio.
- --------------------------------------------------------------------------------
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following summarizes the significant accounting policies of the Fund and the
Portfolio. These policies are in conformity with generally accepted accounting
principles, which requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on trade date. Dividend income is
recorded on the ex-dividend date, and interest income is recorded on the accrual
basis. Interest income includes discount accretion on fixed income securities.
Realized gains and losses from investment transactions are reported on an
identified cost basis.
SECURITY VALUATIONS
Securities are valued at, depending on the security involved, the last reported
sales price, last bid or asked price, or the mean between last bid and asked
prices as of the close of the appropriate exchange or other designated time. A
security that is listed or traded on more than one exchange is valued at the
quotation on the exchange determined to be the primary exchange for such
security. Securities and other assets for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Trustees.
CURRENCY TRANSLATIONS
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates. Purchases and sales
of securities are translated into U.S. dollars using the prevailing exchange
rate on the dates of such transactions. The effect of changes in foreign
exchange rates on realized and unrealized security gains and losses is reflected
as a component of such gains and losses.
FUTURES CONTRACTS
During the year ended September 30, 1999, SR&F Growth & Income Portfolio entered
into stock index futures contracts to invest cash pending direct investments in
stocks and to enhance its return. Risks of entering into futures contracts
include the possibility that there may be an illiquid market at the time the
Portfolio seeks to close out a contract, and changes in the value of the futures
contract may not correlate with changes in the value of the portfolio securities
being hedged. Upon entering into a future contract, the Portfolio deposits with
its custodian, cash or securities in an amount sufficient to meet the initial
margin requirements. Subsequent payments are made or received by the Portfolio
equal to the daily change in the contract value and are recorded as unrealized
gains or losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
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 makes 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 the owners
based on methods approved by the Internal Revenue Service.
The Fund intends to utilize provisions of federal income tax law, which
allow it 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, 1999, Advisor Growth & Income Fund had a capital loss
carryforward of $216, which expires in 2006. Carryforward may not be utilized
because of the future liquidation on the Fund.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
The Fund declares and pays dividends of any net investment income at least
quarterly, and any net realized capital gains annually. Shareholder
distributions are recorded on the ex-dividend date. Dividends are determined in
accordance with income tax principles, which may treat certain transactions
differently from generally accepted accounting principles. Distributions in
excess of tax basis earnings are reported in the financial statements as a
return of capital. Permanent differences in the recognition or classification of
income between the financial statements and tax earnings are reclassified to
paid-in capital.
- --------------------------------------------------------------------------------
NOTE 3. TRUSTEES' FEES AND TRANSACTIONS WITH AFFILIATES
The Fund and the Portfolio pay monthly management and administrative fees to
Stein Roe & Farnham Incorporated (the "Advisor"), an indirect, wholly owned
subsidiary of Liberty Financial Companies, Inc. ("Liberty"), for its services as
investment advisor and administrator. The management fee for the Portfolio is
computed at an annual rate of 0.60% of the Portfolio's average daily net assets
up to $500 million, 0.55% of the next $500 million, and 0.50% thereafter. The
administrative fee for the Fund is computed at an annual rate of 0.15% of the
Fund's average daily net assets up to $500 million, 0.125% of the next $500
million, and 0.10% thereafter.
The Advisor also provides fund accounting services.
The Advisor has agreed to reimburse the Fund to the extent that annual
expenses exceed 1.40% of average daily net assets. The expense limitation
expires on January 31, 2000.
Shares of the Fund are distributed by Liberty Funds Distributor, Inc. (the
"Distributor"), an indirect, wholly-owned subsidiary of Liberty. The trustees of
the Trust have adopted a plan of distribution and service pursuant to Rule 12b-1
under the Investment Company Act of 1940 (the "Plan"). The Plan provides that,
as compensation for services and/or distribution, the Distributor receives from
the Fund a fee at an annual rate not to exceed 0.25% of average daily net
assets.
Transfer agent fees are paid to Liberty Funds Services, Inc., an indirect,
wholly owned subsidiary of Liberty.
Certain officers and trustees of the Trust are also officers of the Advisor.
No remuneration was paid to any trustee or officer of the Trust who is
affiliated with the Advisor.
- --------------------------------------------------------------------------------
NOTE 4. SHORT-TERM DEBT
To facilitate portfolio liquidity, the Fund and the Portfolio maintain borrowing
arrangements under which they can borrow against portfolio securities. Neither
the Fund nor the Portfolio had short-term borrowings during the year ended
September 30, 1999.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------
NOTE 5. INVESTMENT TRANSACTIONS
The aggregate cost of purchases and proceeds from sales other than short-term
obligations for the year ended September 30, 1999, were $23,694 and $43,796,
respectively.
- --------------------------------------------------------------------------------
NOTE 6. SIGNIFICANT SHAREHOLDERS AND OTHER RELATED PARTY TRANSACTION
At September 30, 1999, the Fund had five shareholders who each owned greater
than 5% of the Fund's shares outstanding totaling 64%. Liberty Financial
Companies, Inc., a related party, owned 22%.
- --------------------------------------------------------------------------------
NOTE 7. SUBSEQUENT EVENT
Sales of Stein Roe Advisor Growth & Income Fund shares were suspended as of
November 5, 1999. The Fund will be liquidated on November 30, 1999, or before
that time if all shareholders have redeemed their interests in the Fund. In the
case of shares held in qualified retirement plans for which Stein Roe does not
receive transfer instructions by liquidation date, Stein Roe will transfer such
shares to Stein Roe Cash Reserves Fund.
- --------------------------------------------------------------------------------
Change in Independent Accountants
Based on the recommendation of the Audit Committee of the Stein Roe Advisor
Growth & Income Fund and the SR&F Growth & Income Portfolio, on August 3, 1999
the Board of Trustees determined not to retain Arthur Andersen LLP as the Fund's
and the Portfolio's independent accountant and voted to appoint
PricewaterhouseCoopers LLP for the year ended September 30,1999. During the two
most recent fiscal years, Arthur Andersen LLP audit reports contained no adverse
opinion or disclaimer of opinion; nor were its reports qualified or modified as
to uncertainty, audit scope, or accounting principle. There were no
disagreements in accounting principles or practices, financial statement
disclosure or auditing scope or procedure, which if not resolved to the
satisfaction of Arthur Andersen LLP would have caused it to make reference to
the disagreement in its report on the financial statements for such years.
16
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
Advisor Growth & Income Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<CAPTION>
PERIOD ENDED
YEARS ENDED SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1997(a)
-------- -------- --------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......................................... $ 11.58 $ 11.36 $ 10.00
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b)................................................. 0.07 0.13 0.03
Net realized and unrealized gain on investments........................... 2.15 0.23 1.33
-------- -------- --------
Total from investment operations........................................ 2.22 0.36 1.36
-------- -------- --------
DISTRIBUTIONS
Net investment income..................................................... (0.12) (0.14) --
In excess of net investment income........................................ (0.02) -- --
-------- -------- --------
Total distributions declared to shareholders............................ (0.14) (0.14) --
-------- -------- --------
NET ASSET VALUE, END OF PERIOD............................................... $ 13.66 $ 11.58 $ 11.36
======== ======== ========
Ratio of net expenses to average net assets (c) ............................. 1.40% 1.40% 1.40%(d)
Ratio of net investment income to average net assets (e) .................... 0.49% 0.58% 0.54%(d)
Total return (e)............................................................. 18.85% 3.18% 13.60%
Net assets, end of period (000's)............................................ $ 622 $2,009 $ 114
(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 4.07%, including
one-time reduction in its expenses for the year ended September 30, 1999,
10.68% for the year ended September 30, 1998, and 88.76% for the period
ended September 30, 1997.
(d) Annualized.
(e) Computed giving effect to Advisor's expense limitation undertaking.
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------
SR&F GROWTH & INCOME PORTFOLIO
<CAPTION>
YEARS ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30,
SELECTED RATIOS 1999 1998 1997(a)
------- ------ -------
<S> <C> <C> <C>
Ratio of net expenses to average net assets ................................. 0.63%(b) 0.65% 0.65%(c)
Ratio of net investment income to average net assets......................... 1.22%(b) 1.44% 2.04%(c)
Portfolio turnover rate...................................................... 7% 11% 7%
(a) From commencement of operations on February 3, 1997.
(b) During the year ended September 30, 1999, the Portfolio experienced a
one-time reduction in its expenses of two basis points as a result of
expenses accrued in a prior period. The Portfolio's ratios disclosed above
reflect the actual rate at which expenses were incurred throughout the
current fiscal year without the reduction.
(c) Annualized.
</TABLE>
17
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees and Shareholders of
Liberty-Stein Roe Advisor Trust
Stein Roe Advisor Growth & Income Fund
SR&F Base Trust
SR&F Growth & Income Portfolio
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 Stein Roe Advisor Growth & Income
Fund (the "Fund") (a series of Liberty-Stein Roe Advisor Trust, formerly Stein
Roe Advisor Trust) and SR&F Growth & Income Portfolio (the "Portfolio") (a
series of SR&F Base Trust) at September 30, 1999, the results of each of their
operations, the changes in each of their net assets and the financial highlights
for the period then ended in conformity with generally accepted accounting
principles. These financial statements and the 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 generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of portfolio positions at September 30, 1999 by correspondence with
the custodian and brokers, provide a reasonable basis for the opinion expressed
above. The financial statements of the Fund and the Portfolio for periods prior
to October 1, 1998 were audited by other independent accountants whose report
dated November 16, 1998 expressed an unqualified opinion on those statements.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 15, 1999
18
<PAGE>
<PAGE>
Liberty-Stein Roe Advisor Trust
- --------------------------------------------------------------------------------
TRUSTEES
John A. Bacon, Jr.
Private Investor
William W. Boyd
Chairman and Director, Sterling Plumbing
Group Inc.
Lindsay Cook
Senior Vice President, Liberty Financial
Companies, Inc.
Douglas A. Hacker
Senior Vice President and Chief Financial Officer,
United Airlines
Janet Langford Kelly
Vice President-Corporate Development, General
Counsel and Secretary, Kellogg Co.
Charles R. Nelson
Van Voorhis Professor of Political Economy,
University of Washington
Thomas C. Theobald
Managing Partner, William Blair Capital Partners
AGENTS AND ADVISORS
Stein Roe & Farnham Incorporated
Investment Advisor
State Street Bank and Trust Company
Custodian
Liberty Funds Services Inc.
Transfer Agent
Bell, Boyd & Lloyd
Legal Counsel to the Fund
PricewaterhouseCoopers LLP
Independent Accountants
OFFICERS
Stephen E. Gibson, President
William D. Andrews, Executive Vice President
Loren A. Hansen, Executive Vice President
Kevin M. Carome, Executive Vice President,
Assistant Secretary
Timothy Jacoby, Senior Vice President
Christine Balzano, Vice President
David Brady, Vice President
Daniel Cantor, Vice President
J. Kevin Connaughton, Vice President, Treasurer
William Garrison, Vice President
Erik Gustafson, Vice President
Harvey Hirschhorn, Vice President
Michael Kennedy, Vice President
Gail D. Knudsen, Vice President, Controller
Steve Lockman,Vice President
Lynn C. Maddox, Vice President
Mary D. McKenzie, Vice President
Art McQueen, Vice President
Maureen Newman, Vice President
Nicholas Norton, Vice President
Nicolette D. Parrish, Vice President,
Assistant Secretary
Heidi J. Walter, Vice President, Secretary
Michael Fisher, Assistant Treasurer
Stein Roe Mutual Funds
P.O. Box 8900
Boston, MA 02205-8900
Financial Advisors call: 800-322-0593
Shareholders call: 800-338-2550
www.steinroe.com
Liberty Funds Distributor, Inc.
AGI11A 11/99
