STEIN ROE ADVISOR Tax-Managed Growth Fund Annual report
Managed by Stein Roe & Farnham Incorporated
October 31, 1998
Not FDIC May Lose Value
Insured No Bank Guarantee
Stein Roe Advisor Tax-Managed
Growth Fund Highlights
November 1, 1997 -- October 31, 1998
Investment Objective: Stein Roe Advisor Tax-Managed Growth Fund seeks long-
term capital growth while reducing shareholder exposure to taxes.
The Fund is Designed to Offer:
[X] Premier growth management
[X] A sensitivity to taxes
[X] The potential for attractive returns before and after taxes
Portfolio Management Commentary: "U.S. stock prices became increasingly
volatile during the period, as a variety of external factors fueled
expectations of declining corporate earnings growth. The Fund's performance
during the period was above its Lipper peer group average,1 and our tax-
managed strategies helped boost the Fund's after-tax returns relative to its
peers."
- Mel Hughes and Steve Berman
Stein Roe Advisor Tax-Managed Growth Fund Performance
<TABLE>
<CAPTION>
Class A Class B Class C
Inception date 12/30/96 12/30/96 12/30/96
- --------------------------------------------------------------------------
<S> <C> <C> <C>
12-month total returns, assuming 11.21% 10.37% 10.37%
reinvestment of all distributions
and no sales charge or contingent
deferred sales charge (CDSC)
- --------------------------------------------------------------------------
Net asset value per share on 10/31/98 $13.39 $13.20 $13.20
- --------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Top Five Holdings (as of 10/31/98)(2) Top Five Sectors (as of 10/31/98)(2)
- ------------------------------------- ------------------------------------
<S> <C> <C> <C>
1. Procter & Gamble Co. 3.3% 1. Financials 21.9%
2. Alza Corp. .3.3% 2. Consumer Cyclicals 15.4%
3. S&P Depository Receipts 3.1% 3. Consumer Staples 13.6%
4. Philip Morris Co., Inc. 3.1% 4. Technology 11.4%
5. Fannie Mae 3.0% 5. Health Care 10.4%
</TABLE>
Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Advisor and its affiliates. Absent these waivers or
reimbursement arrangements, performance results would have been lower.
[FN]
<F1> Lipper Analytical Services, Inc., a widely respected data provider in
the industry, calculates an average total return for mutual funds with
similar investment objectives as the Fund. The total return calculated
for the Growth Funds peer group of 945 mutual funds was 9.61% for the
12 months ended October 31, 1998. The Fund had a total return of
11.21% for Class A shares at net asset value and was ranked 507 out of
945 funds.
<F2> Holdings and sectors are calculated as a percentage of total net
assets. The sector classifications used on this page are based upon
Stein Roe's defined criteria. Industry sectors in the following
financial statements are based upon the standard industrial
classifications (SIC) as published by the U.S. Office of Management
and Budget.
</FN>
Because the Fund is actively managed, there can be no guarantee the Fund
will continue to hold these securities or invest in these sectors in the
future.
President's Message
To Fund Shareholders
In June 1998, Harold Cogger retired as president of Stein Roe Advisor Tax-
Managed Growth Fund. I would like to take this opportunity to thank him for
his guidance over the past few years and wish him well. As the new president
of the Fund, I present you with your Fund's annual report for the 12-month
period ended October 31, 1998.
Over the past 12 months, a variety of global events contributed to higher
levels of volatility in stock markets throughout the world, including the
U.S. Early in the period, turmoil in Southeast Asia and the subsequent
concern over a global economic slowdown created an investment environment of
uncertainty. In a search for stability, investors worldwide gravitated
toward stocks of large, well-known blue-chip companies, which helped push
the Standard & Poor's 500 Index to a record high in July 1998. That same
month, however, a monetary and political crisis in Russia and continued
concerns about Asia set the stage for a dramatic correction in U.S. stock
prices. Stocks did end the period on a positive note, as two rate cuts by
the Federal Reserve in the fall helped reduce fears of a U.S. recession.
It was another very challenging period for broad-based equity fund managers.
In a trend that has existed throughout 1997 and most of 1998, strong U.S.
equity market performance was led by stocks of only a handful of large,
well-established U.S. companies, making it difficult for equity fund
managers to maintain proper diversification and still outperform the market.
Fortunately, the Stein Roe Advisor Tax-Managed Growth Fund sought to
maximize after-tax returns by paying out no taxable distributions to
shareholders.
The following report will provide you with more specific information about
your Fund's performance and the strategies used to increase the Fund's
after-tax returns. Thank you for choosing Stein Roe Advisor Tax-Managed
Growth Fund and for giving us the opportunity to serve your investment
needs.
Respectfully,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
December 11, 1998
Because market and economic conditions change frequently, there can be no
assurance that the trends described above and on the following pages will
continue.
Portfolio Management Report
Mel Hughes and Steve Berman are senior equity analysts at Stein Roe &
Farnham Incorporated and members of the ten-person investment management
team for Stein Roe Advisor Tax-Managed Growth Fund. What follows is a
discussion of the Fund's performance for the 12-month period ended October
31, 1998.
Economic uncertainty increased volatility in equity markets
Volatility became the norm during the period, as a variety of global events
caused U.S. equities to experience dramatic price swings in both directions.
Financial and economic turmoil in the developing regions of Southeast Asia,
Latin America and Russia had a ripple effect in the U.S., impacting our
financial markets and the economy as a whole. Fearing a global economic
slowdown, equity investors sought refuge in stocks of large, well-
established U.S. companies. Following an equity market peak in July 1998,
the prolonged rally came to an abrupt end when Russia experienced serious
political and financial problems. U.S. stock prices did end the period on a
positive note, however, as two short-term interest rate cuts by the Federal
Reserve in the fall helped to reduce investor concerns of a U.S. recession.
Narrow market performance challenges equity fund managers
The vast majority of U.S. equity market performance in 1998 was due to a
continuation of the narrow market leadership we witnessed in 1997. Sustained
investor demand for the highest quality blue-chip stocks resulted in a
market where a relatively small number of stocks made the largest
contribution to the return of the S&P 500, which gained over 22% in the past
12 months. This type of market environment made it very challenging for
diversified investment managers to post similar returns. While the Fund is
invested predominantly in large-cap stocks, it has a larger weighting in
mid-cap stocks than the S&P 500.
The Fund performed well relative to its peer group
Compared to other funds in its Lipper peer group, the Stein Roe Advisor Tax-
Managed Growth Fund outperformed the group's average return. For the 12
months ended October 31, 1998, the Fund's Class A shares had a total return
of 11.21%, based on net asset value. By comparison, the average total return
for the Lipper Growth Funds category was 9.61% for the same 12-month period.
After-tax returns were enhanced by the Fund's 100% tax efficiency during the
period. There were no net capital gains distributed
to shareholders.
Market correction provided an opportunity to manage taxes
During the past 12 months, periods of volatility provided a number of
opportunities, both to capture capital losses and upgrade the portfolio with
attractively priced, high-quality stocks. For example, an opportunity came
during the market downturn in August 1998, when we selectively harvested
losses that could be used to offset gains. The most common strategy we use
is a "tax switch," where we sell a stock and invest the proceeds in another
stock within the same sector. For example, in the energy sector, we realized
a loss when we sold Ocean Energy and switched into Amoco (2.0% of total net
assets), another energy stock that offered equal or greater upside growth
potential and comparatively less risk. In another instance, we sold only a
portion of our Citicorp holdings (1.1% of total net assets), a stock that
continued to offer strong fundamentals and good upside potential. After
capturing a tax loss on this sale, we used the proceeds to purchase
Sunamerica, Inc. (0.9% of total net assets), another attractive financial
stock which is now in the process of being acquired by AIG, a premier global
insurance company.
Earnings growth can continue, but at a slower pace
Looking ahead, we expect a period of continued, albeit more modest, earnings
growth against a backdrop of stable or declining interest rates. Such a
climate should have a generally positive influence on stock prices. While we
anticipate continued earnings growth, we believe it will come at a slower
pace as global economic, political and financial uncertainties begin to
impact the profitability of U.S. companies.
We have a positive bias toward the market, but expect continued volatility
in the months to come. However, we believe the Fund is well positioned for
this type of environment. In forming the core of our portfolio, we continue
to focus on identifying attractive, quality growth stocks, particularly
those that are not dependent on a strong economy. Going forward, we continue
to believe that quality growth stocks offer two important advantages for the
Fund's shareholders. First, their above-average earnings growth prospects
underlie our expectation for attractive investment returns over the longer
term. Second, growth stocks are relatively tax-efficient, particularly when
combined with the tax-sensitive strategies and tactics we employ.
Stein Roe Advisor Tax-Managed Growth Fund vs.
The Standard & Poor's 500 Index
Change in Value of $10,000 from 12/31/96 -- 10/31/98
Class A shares based on NAV and POP
<TABLE>
<CAPTION>
S&P 500 NAV POP
------- --- ---
<S> <C> <C> <C>
12/96 10,000 10,000 10,000
1/97 10,624 10,428 9,829
2/97 10,708 10,269 9,678
3/97 10,269 9,711 9,153
4/97 10,861 10,000 9,425
5/97 10,546 10,767 10,148
6/97 12,060 11,285 10,636
7/97 13,019 12,181 11,481
8/97 12,290 11,643 10,974
9/97 12,963 12,400 11,687
10/97 12,531 11,992 11,302
11/97 13,110 12,271 11,565
12/97 13,335 12,440 11,725
1/98 13,482 12,679 11,950
2/98 14,454 13,556 12,776
3/98 15,194 14,143 13,330
4/98 15,349 14,133 13,321
5/98 15,086 13,785 12,992
6/98 15,698 14,094 13,283
7/98 15,532 13,984 13,180
8/98 13,288 11,723 11,049
9/98 14,140 12,480 11,762
10/98 15,289 13,337 12,570
</TABLE>
<TABLE>
<CAPTION>
Value of a
Average Annual Total Returns $10,000 investment
As of 10/31/98 made on 12/31/96
- --------------------------------------------------------------------------
Class* 1 year Life As of 10/31/98
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A NAV 11.21% 16.70% $13,337
POP 4.82 13.00 12,570
B NAV 10.37 15.80 13,161
w/CDSC 5.37 13.86 12,761
C NAV 10.37 15.80 13,161
w/CDSC 9.37 15.80 13,161
E NAV 11.15 16.56 13,307
POP 5.59 13.35 12,641
F NAV 10.36 15.85 13,170
w/CDSC 5.36 13.91 12,770
G NAV 11.13 16.66 13,327
POP 6.13 13.77 12,727
H NAV 10.45 15.85 13,170
w/CDSC 5.45 13.91 12,770
<F*> Inception date for all classes is 12/30/96.
</TABLE>
Past performance cannot predict future results. Returns and value of an
investment will vary, resulting in a gain or loss on sale. All results
shown assume reinvestment of distributions. Net asset value (NAV) returns do
not include sales charges or contingent deferred sales charges (CDSC).
Public offering price (POP) returns include the maximum sales charge of
5.75% for Class A shares, 5% for Class E shares and 4.50% for Class G
shares. The CDSC returns reflect charges of 5% for one year and 4% since
inception for Class B, F and H shares, and 1% for one year for Class C
shares. Performance for different share classes will vary based on
differences in sales charges and fees associated with each class.
The Standard & Poor's 500 Index is an unmanaged index that tracks the
performance of U.S. stock market securities. Unlike mutual funds, indexes
are not investments, do not incur fees or expenses and are not
professionally managed. It is not possible to invest directly in an index.
Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Advisor. Absent these waivers or reimbursement arrangements,
performance results would have been lower.
INVESTMENT PORTFOLIO
OCTOBER 31, 1998 (IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCKS 94.8% COUNTRY SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCE, INSURANCE & REAL ESTATE - 21.8%
Depository Institutions - 9.5%
BankAmerica Corp. 75 $ 4,288
Chase Manhattan Corp. 36 2,068
U.S. Bancorp 107 3,916
Washington Mutual, Inc. 100 3,729
Wells Fargo & Co. 13 4,847
--------
18,848
--------
Insurance Carriers - 6.2%
Allstate Corp. 103 4,444
Citigroup. Inc. 46 2,141
Nationwide Financial Services, C 95 3,926
Sunamerica, Inc. 25 1,763
--------
12,274
--------
Investment Companies - 3.1%
Standard and Poor's Depository R 56 6,164
--------
Nondepository Credit Institution - 3.0%
Fannie Mae 85 6,012
--------
- --------------------------------------------------------------------------
MANUFACTURING - 48.7%
Chemicals & Allied Products - 16.4%
Alza Corp. (a) 135 6,449
Ecolab, Inc. 180 5,372
Eli Lilly & Co. 71 5,763
Monsanto Co. 119 4,814
Pfizer, Inc. 33 3,574
Procter & Gamble Co. 73 6,452
--------
32,424
--------
Communications Equipment - 5.0%
LM Ericsson ADR Sw 214 4,844
Motorola, Inc. 99 5,158
--------
10,002
--------
Electrical Industrial Equipment - 5.2%
Emerson Electric Co. 87 5,716
General Electric Co. 51 4,504
--------
10,220
--------
Electronic Components - 4.4%
Intel Corp. 58 5,146
Molex, Inc., Class A 109 3,563
--------
8,709
--------
Fabricated Metal - 1.9%
Gillette Co. 82 3,685
--------
Food & Kindred Products - 5.7%
Nabisco Holdings Corp. 140 5,266
Philip Morris Companies, Inc. 119 6,094
--------
11,360
--------
Machinery & Computer Equipment - 3.7%
Cisco Systems, Inc. (a) 64 4,011
US Filter (a) 157 3,333
--------
7,344
--------
Measuring & Analyzing Instruments - 2.4%
Medtronic, Inc. 72 4,693
--------
Petroleum Refining - 2.0%
Amoco Corp. (a) 70 3,929
--------
Transportation Equipment - 2.0%
Lear Corp. 126 4,051
--------
- --------------------------------------------------------------------------
MINING & ENERGY - 0.4%
Oil & Gas Field Services
Conoco, Inc. 34 838
--------
- --------------------------------------------------------------------------
RETAIL TRADE - 6.5%
Building, Hardware & Garden Supply - 2.4%
Home Depot, Inc. 110 4,768
--------
General Merchandise Stores - 4.1%
Dollar General Corp. 149 3,559
Wal-Mart Stores, Inc. 66 4,526
--------
8,085
--------
- --------------------------------------------------------------------------
SERVICES - 7.9%
Auto Repair, Rental & Parking - 1.6%
Hertz Corp., Class A 89 3,173
--------
Computer Related Services - 1.3
IMS Health, Inc. 39 2,610
--------
Motion Pictures - 2.7%
Time Warner, 58 5,383
--------
Personal Services - 2.3%
Stewart Enterprises, Inc. 194 4,467
--------
- --------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 9.5%
Broadcasting - 4.1%
CBS Corp. (a) 123 3,422
Clear Channel Communications, Inc. (a) 92 4,192
Heftel Broadcasting Corp. (a) 14 555
--------
8,169
--------
Electric Services - 2.8%
AES Corp. (a) 135 5,506
--------
Telecommunication - 2.6%
MCI WorldCom (a) 92 5,055
--------
TOTAL COMMON STOCKS (cost of $167,664)(b) 187,769
--------
SHORT-TERM OBLIGATIONS - 8.2% PAR
- --------------------------------------------------------------------------
Repurchase agreement with ABN AMRO Chicago Corp.,
dated 10/30/98 due 11/02/98 at 5.380% collateralized by
U.S. Treasury notes with various maturities
to 2021, market value $16,491 (repurchase
proceeds $16,296) $16,289 16,289
--------
OTHER ASSERS & LIABILITIES - (3.0)% (5,940)
- --------------------------------------------------------------------------
NET ASSETS - 100% $198,118
--------
<FN>
NOTES TO INVESTMENT PORTFOLIO:
<Fa> Non-income producing.
<Fb> Cost for federal income tax purposes is $167,687.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Summary of Securities by Country Country Value % of Total
- --------------------------------------------------------------------------
<S> <C> <C> <C>
United States $182,925 97.4
Sweden Sw 4,844 2.6
--------------------
$187,769 100.0
====================
</TABLE>
Certain securities are listed by country of underlying exposure but may
trade predominantly on other exchanges.
<TABLE>
<CAPTION>
Acronym Name
------- ----
<S> <C>
ADR American Depositary Receipt
</TABLE>
See notes to financial statements.
STATEMENT OF ASSETS & LIABILITIES
OCTOBER 31, 1998
<TABLE>
(in thousands except for per share amounts and footnotes)
<S> <C> <C>
ASSETS
Investments at value (cost $167,664) $187,769
Short-term obligations 16,289
--------
204,058
Receivable for:
Fund shares sold $1,644
Dividends 638
Expense reimbursement due
from Advisor/Administrator 125
Other 17 2,424
------------------
Total Assets 206,482
LIABILITIES
Payable for:
Investments purchased 7,853
Fund shares repurchased 179
Accrued:
Management fee 91
Administration fee 61
Service fee 39
Distribution fee - Class B 72
Distribution fee - Class C 11
Distribution fee - Class E (a)
Distribution fee - Class F 1
Distribution fee - Class G (a)
Distribution fee - Class H 2
Transfer agent fee 36
Bookkeeping fee 6
Deferred Trustee fees 1
Other 12
------
Total Liabilities 8,364
--------
NET ASSETS $198,118
========
Net asset value & redemption price per share -
Class A ($45,472/3,396) $ 13.39(b)
========
Maximum offering price per share - Class A
($13.39/0.9425) $ 14.21(c)
========
<Fa> Rounds to less than one.
<Fb> Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
<Fc> On sales of $50,000 or more the offering price is reduced.
</TABLE>
Continued on next page.
See notes to financial statements.
STATEMENT OF ASSETS & LIABILITIES-CONT.
<TABLE>
<S> <C> <C>
Net asset value & offering price per share -
Class B ($124,829/9,457) $ 13.20(a)
========
Net asset value & offering price per share -
Class C ($18,786/1,423) $ 13.20(a)
========
Net asset value & redemption price per share -
Class E ($680/51) $ 13.36
========
Maximum offering price per share - Class E
($13.36/0.9500) $ 14.06(b)
========
Net asset value & offering price per share -
Class F ($1,105/84) $ 13.21(a)
========
Net asset value & redemption price
per share - Class G ($3,359/251) $ 13.38
========
Maximum offering price per share - Class G
($13.38/0.9550) $ 14.01(b)
========
Net asset value & offering price per share -
Class H ($3,887/294) $ 13.21(a)
========
COMPOSITION OF NET ASSETS
Capital paid in $188,181
Accumulated net investment loss (2)
Accumulated net realized loss (10,166)
Net unrealized appreciation 20,105
--------
$198,118
========
<Fa> Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
<Fb> On sales of $50,000 or more the offering price is reduced.
</TABLE>
See notes to financial statements.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1998
<TABLE>
<S> <C> <C>
(in thousands)
INVESTMENT INCOME
Dividends $1,687
Interest 687
------
Total Investment Income (net of nonrebatable
foreign taxes withheld at source which
amounted to $5) 2,374
EXPENSES
Management fee $ 796
Administration fee 528
Service fee 329
Distribution fee - Class B 601
Distribution fee - Class C 99
Distribution fee - Class E 1
Distribution fee - Class F 6
Distribution fee - Class G 3
Distribution fee - Class H 19
Transfer agent fee 366
Bookkeeping fee 56
Trustees fee 12
Custodian fee 15
Audit fee 15
Legal fee 5
Registration fee 82
Reports to shareholders 8
Other 29
-------
2,970
Fees waived by the Advisor/
Administrator (159) 2,811
------- ------
Net Investment Loss (437)
------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized loss (9,588)
Net change in unrealized appreciation
during the period 15,288
-------
Net Gain 5,700
------
Increase in Net Assets from Operations $5,263
======
</TABLE>
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended Period ended
(in thousands) October 31 October 31
---------- ------------
1998 1997(a)(b)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment loss $ (437) $ (25)
Net realized loss (9,588) (578)
Net unrealized appreciation 15,288 4,810
-------- -------
Net Increase from Operations 5,263 4,207
-------- -------
Fund Share Transactions:
Receipts for shares sold - Class A 33,019 16,100
Cost of shares repurchased - Class A (6,257) (615)
-------- -------
26,762 15,485
-------- -------
Receipts for shares sold - Class B 89,269 36,603
Cost of shares repurchased - Class B (5,858) (747)
-------- -------
83,411 35,856
-------- -------
Receipts for shares sold - Class C 14,237 5,703
Cost of shares repurchased - Class C (1,755) (90)
-------- -------
12,482 5,613
-------- -------
Receipts for shares sold - Class E 312 224
Cost of shares repurchased - Class E (20) -
-------- -------
292 224
-------- -------
Receipts for shares sold - Class F 652 277
Cost of shares repurchased - Class F (8) -
-------- -------
644 277
-------- -------
Receipts for shares sold - Class G 1,975 1,067
Cost of shares repurchased - Class G (54) -
-------- -------
1,921 1,067
-------- -------
Receipts for shares sold - Class H 2,703 991
Cost of shares repurchased - Class H (88) -
-------- -------
2,615 991
-------- -------
Net Increase from Fund Share Transactions 128,127 59,513
-------- -------
Total Increase 133,390 63,720
NET ASSETS
Beginning of period 64,728 1,008
-------- -------
End of period (net of accumulated net
investment loss of $2 and $0, respectively) $198,118 $64,728
=======================
NUMBER OF FUND SHARES
Sold - Class A 2,450 1,437
Repurchased - Class A (478) (53)
-------- -------
1,972 1,384
-------- -------
Sold - Class B 6,699 3,269
Repurchased - Class B (457) (64)
-------- -------
6,242 3,205
-------- -------
Sold - Class C 1,066 493
Repurchased - Class C (138) (8)
-------- -------
928 485
-------- -------
Sold - Class E 24 19
Repurchased - Class E (2) -
-------- -------
22 19
-------- -------
Sold - Class F 49 25
Repurchased - Class F (c) -
-------- -------
49 25
-------- -------
Sold - Class G 148 97
Repurchased - Class G (4) -
-------- -------
144 97
-------- -------
Sold - Class H 204 87
Repurchased - Class H (7) -
-------- -------
197 87
-------- -------
<Fa> The Fund commenced investment operations on December 16, 1996.
The activity shown is from the effective date of registration
(December 30, 1996) with the Securities and Exchange Commission.
<Fb> Effective July 1, 1997, Class D shares were redesignated Class C
shares.
<Fc> Rounds to less than one.
</TABLE>
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998
NOTE 1. ACCOUNTING POLICIES
Organization: Stein Roe Advisor Tax-Managed Growth Fund (the Fund),
formerly Colonial Tax-Managed Growth Fund, a series of Colonial Trust I, is
a diversified portfolio of a Massachusetts business trust, registered under
the Investment Company Act of 1940, as amended, as an open-end management
investment company. The Fund's investment objective is to maximize long-
term capital growth while reducing shareholder exposure to taxes. The Fund
may issue an unlimited number of shares. The Fund offers seven classes of
shares: Class A, Class B, Class C, Class E, Class F, Class G and Class H.
Class A shares are sold with a front-end sales charge and a 1.00% contingent
deferred sales charge on redemptions made within eighteen months on an
original purchase of $1 million to $5 million. Class B shares are subject
to an annual distribution fee and a contingent deferred sales charge. Class
B shares will convert to Class A shares when they have been outstanding
approximately eight years. Class C shares are subject to a contingent
deferred sales charge on redemptions made within one year after purchase and
an annual distribution fee. Class E, Class F, Class G and Class H shares
are trust shares. Class E and Class G shares are sold with a front-end
sales charge and are subject to an annual distribution fee and Class F and
Class H shares are subject to an annual distribution fee and a contingent
deferred sales charge. Class F and Class H shares will convert to Class E
and Class G shares, respectively, after they have been outstanding
approximately eight years.
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 revenues and expenses during the
period. Actual results could differ from those estimates. The following is
a summary of significant accounting policies that are consistently followed
by the Fund in preparation of its 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 prices.
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 and 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 applicable 12b-1 fees) (see Note 2:
Underwriting discounts, service and distribution 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.
Per share data was calculated using the average shares outstanding during
the period. Net investment income per share data reflects the distribution
fee per share where applicable.
Ratios are calculated by adjusting the expense and net investment income
ratios for the Fund for the entire period by the distribution fee where
applicable.
Federal income taxes: Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income,
no federal income tax has been accrued.
Distributions 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: Corporate actions are recorded on the ex-date. Interest income is
recorded on the accrual basis.
The Fund's custodian takes possession through the federal book-entry system
of securities collateralizing repurchase agreements. Collateral is marked-
to-market daily to ensure that the market value of the underlying assets
remains sufficient to protect the Fund. The Fund may experience costs and
delays in liquidating the collateral if the issuer defaults or enters
bankruptcy.
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES
Management fee: Stein Roe & Farnham, Inc. (the Advisor) is the the
investment Advisor of the Fund and receives a monthly fee equal to 0.60%
annually of the Fund's average daily net assets.
Administration fee: Colonial Management Associates, Inc. (the
Administrator), an affiliate of the Advisor, provides accounting and other
services for a monthly fee equal to 0.40% annually of the Fund's average
daily net assets.
Bookkeeping fee: The Administrator provides bookkeeping and pricing
services for $27,000 per year plus 0.035% of the Fund's average net assets
over $50 million.
Transfer agent: Liberty Funds Services, Inc., formerly Colonial Investors
Service Center, Inc. (the Transfer Agent), an affiliate of the
Administrator, provides shareholder services for a monthly fee equal to
0.236% annually of the Fund's average net assets and receives reimbursement
for certain out-of-pocket expenses.
Effective October 1, 1997 and continuing through September 1998, the
Transfer Agent fee was reduced by 0.0012% in cumulative monthly increments,
resulting in a decrease in the fee from 0.25% to 0.236% annually.
Underwriting discounts, service and distribution fees: Liberty Funds
Distributor, Inc., formerly Liberty Financial Investments, Inc., (the
Distributor), a subsidiary of the Administrator, is the Fund's principal
underwriter. During the year ended October 31, 1998, the Fund has been
advised that the Distributor retained net underwriting discounts of $161,718
on sales of the Fund's Class A shares and received contingent deferred sales
charges (CDSC) of $14,072, $134,496, $9,332, none, and none on Class A,
Class B, Class C, Class F and Class H share redemptions, respectively.
The Fund has adopted a 12b-1 plan which requires the payment of a service
fee to the Distributor equal to 0.25% annually of the Fund's net assets as
of the 20th of each month. The plan also requires the payment of a
distribution fee to the Distributor equal to 0.75% annually of the average
net assets attributable to Class B, Class C, Class F and Class H shares;
0.10% of the average net assets attributable to Class E shares; and up to
0.25% of average net assets attributable to Class G shares. The actual fee
with respect to Class G shares will be 0.10% on Class G assets attributable
to shares outstanding for less than five years and 0.25% on Class G assets
attributable to shares outstanding five years or more.
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.
Expense limits: The Advisor/Administrator have agreed, until further
notice, to waive fees and bear certain Fund expenses to the extent that
total expenses (exclusive of service fees and distribution fees, brokerage
commissions, interest, taxes and extraordinary expenses, if any) exceed
1.25% annually of the first $100 million of the Fund's average net assets
and 1.50% annually thereafter.
Other: The Fund pays no compensation to its officers, all of whom are
employees of the Advisor or Administrator.
The Fund's Trustees may participate in a deferred compensation plan which
may be terminated at any time. Obligations of the plan will be paid solely
out of the Fund's assets.
NOTE 3. PORTFOLIO INFORMATION
Investment activity: For the year ended October 31, 1998, purchases and
sales of investments, other than short-term obligations, were $229,071,039
and $107,450,194, respectively.
Unrealized appreciation (depreciation) at October 31, 1998, based on cost of
investments for federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $27,746,306
Gross unrealized depreciation (7,663,901)
-----------
Net unrealized appreciation $20,082,405
===========
</TABLE>
Capital loss carryforwards: At October 31, 1998, capital loss carry-
forwards available (to the extent provided in regulations) to offset future
realized gains were approximately as follows:
<TABLE>
<CAPTION>
Year of Capital loss
expiration carryforward
---------- ------------
<C> <C>
2005 $ 559,000
2006 9,584,000
-----------
$10,143,000
===========
</TABLE>
Expired capital loss carryforwards, if any, are recorded as a reduction of
capital paid in.
To the extent loss carryforwards are used to offset any future realized
gains, it is unlikely that such gains would be distributed since they may be
taxable to shareholders as ordinary income.
Other: The Fund may focus its investments in certain industries, subjecting
it to greater risk than a fund that is more diversified.
NOTE 4. OTHER OPERATIONAL AND CAPITAL ACTIVITY
For the period December 16, 1996 through December 30, 1996, the Fund had net
investment income of $1,054 and unrealized appreciation of $6,829. The
following is a summary of capital activity from December 16, 1996 through
December 30, 1996.
<TABLE>
<CAPTION>
Shares
<S> <C> <C>
Receipts for shares sold - Class A $400,000 40,000
Receipts for shares sold - Class B $100,000 10,000
Receipts for shares sold - Class C $100,000 10,000
Receipts for shares sold - Class E $100,000 10,000
Receipts for shares sold - Class F $100,000 10,000
Receipts for shares sold - Class G $100,000 10,000
Receipts for shares sold - Class H $100,000 10,000
</TABLE>
NOTE 5. LINE OF CREDIT
The Fund may borrow up to 33 1/3 % of its net assets under a line of credit
for temporary or emergency purposes. Any borrowings bear interest at one of
the following options determined at the inception of the loan: (1) federal
funds rate plus 1/2 of 1%, (2) the lending bank's base rate or (3) IBOR
offshore loan rate plus 1/2 of 1%. There were no borrowings under the line
of credit during the year ended October 31, 1998.
NOTE 6. RESULTS OF SPECIAL MEETING OF SHAREHOLDERS (UNAUDITED)
On October 30, 1998, a Special Meeting of Shareholders of the Fund was held
to approve the following items, all as described in the Proxy Statement for
the Meeting. On August 21,1998, the record date for the Meeting, the Fund
had outstanding 13,558,606 shares of beneficial interest. The votes cast at
the Meeting were as follows:
<TABLE>
<CAPTION>
Authority
For Withheld
--- ---------
<S> <C> <C>
To elect a Board of Trustees:
Robert J. Birnbaum 6,978,815 314,385
Tom Bleasdale 6,999,672 293,528
John Carberry 6,994,039 299,161
Lora S. Collins 6,992,583 300,617
James E. Grinnell 6,994,039 299,161
Richard W. Lowry 6,993,494 299,706
Salvatore Macera 6,994,039 299,161
William E. Mayer 6,991,784 301,416
James L. Moody, Jr. 6,989,483 303,717
John J. Neuhauser 6,985,162 308,038
Thomas E. Stitzel 6,986,140 307,060
Robert L. Sullivan 6,993,894 299,306
Anne-Lee Verville 6,994,039 299,161
</TABLE>
To amend fundamental investment policies regarding borrowing and lending:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<C> <C> <C>
5,250,303 175,905 392,979
</TABLE>
To approve policies for a master fund/feeder fund structure:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<C> <C> <C>
5,214,990 193,857 410,341
</TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout the period
is as follows:
<TABLE>
<CAPTION>
Year ended October 31
-----------------------------------------------
1998
Class A Class B Class C Class E
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $12.040 $ 11.960 $11.960 $12.020
-----------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income
Net investment income (loss)(a)(b) 0.029 (0.069) (0.069) 0.016
Net realized and unrealized gain 1.321 1.309 1.309 1.324
-----------------------------------------------
Total from Investment
Operations 1.350 1.240 1.240 1.340
-----------------------------------------------
Net asset value -
End of period $13.390 $ 13.200 $13.200 $13.360
===============================================
Total return (c)(d) 11.21% 10.37% 10.37% 11.15%
===============================================
RATIOS TO AVERAGE NET ASSETS
Expenses (e) 1.56% 2.31% 2.31% 1.66%
Net investment income (loss) (e) 0.22% (0.53)% (0.53)% 0.12%
Fees and expenses waived or borne by
the Advisor/Administrator (e) 0.12% 0.12% 0.12% 0.12%
Portfolio turnover 91% 91% 91% 91%
Net assets at end
of period (000) $45,472 $124,829 $18,786 $ 680
<FN>
<Fa> Net of fees and expenses waived or borne by the Advisor/Administrator
which amounted to:
$0.016 $0.016 $0.016 $0.016
<Fb> Per share data was calculated using average shares outstanding during
the period.
<Fc> Total return at net asset value assuming no initial sales charge or
contingent deferred sales charge.
<Fd> Had the Advisor/Administrator not waived or reimbursed a portion of
expenses, total return would have been reduced.
<Fe> The benefits derived from custody credits and directed brokerage
arrangements had no impact.
</FN>
</TABLE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout the period
is as follows:
<TABLE>
<CAPTION>
Year ended October 31
---------------------------------
1998
Class F Class G Class H
------- ------- -------
<S> <C> <C> <C>
Net asset value -
Beginning of period $11.970 $12.040 $11.960
---------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (a)(d) (0.069) 0.016 (0.069)
Net realized and unrealized gain 1.309 1.324 1.319
---------------------------------
Total from Investment
Operations 1.240 1.340 1.250
---------------------------------
Net asset value -
End of period $13.210 $13.380 $13.210
=================================
Total return (e)(f) 10.36% 11.13% 10.45%
=================================
RATIOS TO AVERAGE NET ASSETS
Expenses (h) 2.31% 1.66% 2.31%
Net investment income (loss)(h) (0.53)% 0.12% (0.53)%
Fees and expenses
waived or borne by the
Advisor/Administrator (h) 0.12% 0.12% 0.12%
Portfolio turnover 91% 91% 91%
Net assets at end
of period (000) $ 1,105 $ 3,359 $ 3,887
<FN>
<Fa> Net of fees and expenses waived or borne by the Advisor/Administrator
which amounted to: $ 0.016 $ 0.016 $ 0.016
<Fb> The Fund commenced investment operations on December 16, 1996. The
activity shown is from the effective date of registration (December
30, 1996) with the Securities and Exchange Commission.
<Fc> Effective July 1, 1997, Class D shares were redesignated Class C shares.
<Fd> Per share data was calculated using average shares outstanding during the
period.
<Fe> Total return at net asset value assuming no initial sales charge or
contingent deferred sales charge.
<Ff> Had the Advisor/Administrator not waived or reimbursed a portion of
expenses, total return would have been reduced.
<Fg> Not annualized.
<Fh> The benefits derived from custody credits and directed brokerage
arrangements had no impact.
<Fi> Annualized.
</FN>
</TABLE>
FINANCIAL HIGHLIGHTS - CONT.
<TABLE>
<CAPTION>
Period ended October 31
-----------------------------------------------------------------------------------------
1997 (b)
Class A Class B Class C (c) Class E Class F Class G Class H
------- ------- ----------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value -
Beginning of period $10.080 $10.080 $10.080 $10.080 $10.080 $10.080 $10.080 $10.080
-----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (a)(d) 0.040 (0.032) (0.032) 0.030 (0.032) 0.030 (0.032)
Net realized and
unrealized gain 1.920 1.912 1.912 1.910 1.922 1.930 1.912
-----------------------------------------------------------------------------------------
Total from Investment
Operations 1.960 1.880 1.880 1.940 1.890 1.960 1.880
-----------------------------------------------------------------------------------------
Net asset value -
End of period $12.040 $11.960 $11.960 $12.020 $11.970 $12.040 $11.960
=========================================================================================
Total return (e)(f) 19.44%(g) 18.65%(g) 18.65%(g) 19.25%(g) 18.75%(g) 19.44%(g) 18.65%(g)
=========================================================================================
RATIOS TO AVERAGE NET ASSETS
Expenses (h) 1.50%(i) 2.25%(i) 2.25%(i) 1.60%(i) 2.25%(i) 1.60%(i) 2.25%(i)
Net investment income (loss)(h) 0.39%(i) (0.36)%(i) (0.36)%(i) 0.29%(i) (0.36)%(i) 0.29%(i) (0.36)%(i)
Fees and expenses
waived or borne by the
Advisor/Administrator (h) 0.98%(i) 0.98%(i) 0.98%(i) 0.98%(i) 0.98%(i) 0.98%(i) 0.98%(i)
Portfolio turnover 51%(g) 51%(g) 51%(g) 51%(g) 51%(g) 51%(g) 51%(g)
Net assets at end
of period (000) $17,142 $38,452 $ 5,923 $ 346 $ 421 $ 1,288 $ 1,156
<FN>
<Fa> Net of fees and expenses waived or borne by the Advisor/Administrator
which amounted to: $ 0.096 $ 0.096 $ 0.096 $ 0.096 $ 0.096 $ 0.096 $ 0.096
<Fb> The Fund commenced investment operations on December 16, 1996. The
activity shown is from the effective date of registration (December
30, 1996) with the Securities and Exchange Commission.
<Fc> Effective July 1, 1997, Class D shares were redesignated Class C shares.
<Fd> Per share data was calculated using average shares outstanding during the
period.
<Fe> Total return at net asset value assuming no initial sales charge or
contingent deferred sales charge.
<Ff> Had the Advisor/Administrator not waived or reimbursed a portion of
expenses, total return would have been reduced.
<Fg> Not annualized.
<Fh> The benefits derived from custody credits and directed brokerage
arrangements had no impact.
<Fi> Annualized.
</FN>
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
T0 THE TRUSTEES OF COLONIAL TRUST I AND THE SHAREHOLDERS
OF STEIN ROE ADVISOR TAX-MANAGED GROWTH FUND
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of
operations, changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Stein Roe
Advisor Tax-Managed Growth Fund, formerly Colonial Tax-Managed Growth Fund,
(a series of Colonial Trust I) at October 31, 1998, the results of its
operations, the changes in its net assets and the financial highlights for
the periods indicated, 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 management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audits of these
financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audits 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 October 31, 1998 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 11, 1998
How to Reach Us
by Phone or by Mail
By Telephone
Customer Connection - 1-800-345-6611
For 24-hour account information, call from your touch-tone phone. (Rotary
callers will be automatically connected to a representative during business
hours.) A recorded message will guide you through the menu:
For fund prices, dividends and capital gains information press [1]
For account information press [2]
To speak to a service representative press [3]
For yield and total return information press [4]
For duplicate statements or new supply of checks press [5]
To order duplicate tax forms and year-end statements press [6]
(February through May)
To review your options at any time during your call press [*]
To speak with a shareholder services representative about your account, call
Monday to Friday, 8:00 a.m. to 8:00 p.m. ET, and Saturdays from February
through mid-April, 10:00 a.m. to 2:00 p.m. ET.
Telephone Transaction Department -- 1-800-422-3737
To purchase, exchange or sell shares by telephone, call Monday to Friday,
9:00 a.m. to 7:00 p.m. ET. Transactions received after the close of the
New York Stock Exchange will receive the next business day's closing price.
Literature -- 1-800-426-3750
To request literature on any fund distributed by Liberty Funds Distributor,
Inc., call Monday to Friday, 8:30 a.m. to 6:30 p.m. ET.
By Mail
Liberty Funds Services, Inc.
P.O. Box 1722
Boston, MA 02105-1722
Shareholder Communications
to Keep You Informed
To make recordkeeping easy and keep you up-to-date on the performance of
your investments, you can expect to receive the following information about
your account:
Transaction Confirmations: Each time you make a purchase, sale or exchange,
you receive a confirmation statement within just a few days.
Quarterly Statements: Every three months, if any transactions are made that
affect your share balance, this statement reports on your account activity
during the quarter (including any reinvestment of dividends). This statement
also provides year-to-date information.
Liberty Funds Distributor Investor Opportunities: Mailed with your quarterly
account statements, this newsletter highlights timely investment strategies,
portfolio manager commentary and shareholder service updates.
Tax Forms and Year-End Tax Guide: Easy-to-use forms and timely information
are designed to make tax reporting simpler. (Usually mailed in January.)
Average Cost Basis Statements: If you sold or exchanged shares during the
year, this statement may help you calculate your gain/loss for tax purposes.
(Usually mailed in February.)
Important Information About This Report
The Transfer Agent for Stein Roe Advisor Tax-Managed Growth Fund is:
Liberty Funds Services, Inc.*
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Stein Roe Advisor Tax-Managed Growth Fund mails one shareholder report to
each shareholder address. If you would like more than one report, please
call 1-800-426-3750 and additional reports will be sent to you.
This report has been prepared for shareholders of Stein Roe Advisor
Tax-Managed Growth Fund. It 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 with the most recent copy of the Liberty Funds Distributor, Inc.
Performance Update.
* Effective October 1, 1998, Colonial Investors Service Center, Inc. -- the
Transfer Agent for Colonial, Crabbe Huson, Newport and Stein Roe Advisor
Funds -- changed its name to Liberty Funds Services, Inc.
Trustees
Robert J. Birnbaum
Consultant (formerly Special Counsel, Dechert, Price & Rhoads; President and
Chief Operating Officer, New York Stock Exchange, Inc.; President, American
Stock Exchange, Inc.)
Tom Bleasdale
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore
Bank & Trust Company)
John Carberry
Senior Vice President of Liberty Financial Companies, Inc. (formerly
Managing Director, Salomon Brothers)
Lora S. Collins
Attorney (formerly Attorney, Kramer, Levin, Naftalis & Frankel)
James E. Grinnell
Private Investor (formerly Senior Vice President--Operations, The Rockport
Company)
Richard W. Lowry
Private Investor (formerly Chairman and Chief Executive Officer, U.S.
Plywood Corporation)
Salvatore Macera
Private Investor (formerly Executive Vice President of Itek Corp. and
President of Itek Optical & Electronic Industries, Inc.)
William E. Mayer
Partner, Development Capital, LLC (formerly Dean, College of Business and
Management, University of Maryland; Dean, Simon Graduate School of Business,
University of Rochester; Chairman and Chief Executive Officer, CS First
Boston Merchant Bank; and President and Chief Executive Officer, The First
Boston Corporation)
James L. Moody, Jr.
Retired (formerly Chairman of the Board, Chief Executive Officer and
Director, Hannaford Bros. Co.)
John J. Neuhauser
Dean, Boston College School of Management
Thomas E. Stitzel
Professor of Finance, College of Business, Boise State University; Business
Consultant and Author
Robert L. Sullivan
Retired Partner, KPMG Peat Marwick LLP (formerly Management Consultant,
Saatchi and Saatchi Consulting Ltd. and Principal and International Practice
Director, Management Consulting, Peat Marwick Main & Co.)
Anne-Lee Verville
Consultant (formerly General Manager, Global Education Industry, and
President, Applications Solutions Division, IBM Corporation)
LIBERTY
COLONIAL * CRABBE HUSON * NEWPORT * STEIN ROE ADVISOR
Liberty Funds Distributor, Inc. (c) 1998
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
Visit us at www.libertyfunds.com MG-02/177G-1198 (12/98) 98/1316
