STEIN ROE MUTUAL FUNDS
ANNUAL REPORT
SEPTEMBER 30, 2000
STEIN ROE EQUITY FUNDS
GROWTH AND INCOME FUNDS
BALANCED FUND
LOGO: STEIN ROE MUTUAL FUNDS
SENSIBLE RISKS. INTELLIGENT INVESTMENTS.(R)
<PAGE>
CONTENTS
----------------------------------------------------------------------
From the President................................................ 1
Stephen Gibson's thoughts on the markets and investing
Performance Summary............................................... 2
Questions & Answers............................................... 3
Interview with the portfolio manager and
a summary of investment activity
Fund Highlights................................................... 6
Portfolio of Investments.......................................... 7
A complete list of investments with market values
Financial Statements.............................................. 14
Statements of assets and liabilities, operations
and changes in net assets
Notes to Financial Statements..................................... 20
Financial Highlights.............................................. 24
Selected per-share data
Report of Independent
Accountants....................................................... 26
Must be preceded or accompanied by a prospectus.
<PAGE>
FROM THE PRESIDENT
--------------------------------------------------------------------------------
TO OUR SHAREHOLDERS
Despite an erratic year in the equity markets, and a slow start for fixed-income
securities, the Stein Roe Balanced Fund Class S shares turned in a solid
performance for the 12 months ended September 30, 2000. The Fund delivered a
total return of 11.55% for the period, which compares favorably against the
total returns of 13.27% and 6.99% for the S&P 500 Index and the Lehman Brothers
Aggregate Bond Index, respectively.
U.S. equities finished 1999 on a roll, centered on a select group of stocks,
mainly in the technology and telecommunications area. By March 2000, as it
became apparent many of these firms could not generate profits to match
investors' expectations, things changed. Investors turned to stocks in other
industries such as finance and health care, although the market as a whole
remained volatile and gained little ground in the last six months of the fiscal
year.
Bonds were initially held back by fears of inflation and higher interest
rates. Then, as the Federal Reserve enacted its fifth and sixth interest rate
hikes in less than a year, investors adopted a new attitude.
Convinced that the Fed would ultimately curb any inflationary pressures,
yields on long-term bonds drifted downward and prices rose.
Looking back at these results, I am reminded once again that, when it comes
to investing, diversification is a valuable strategy. By owning a balanced mix
of equities, high-quality bonds and cash, your Fund achieved a healthy return
during a period of considerable turmoil.
Take a look inside the report for a further discussion on the economic and
market factors that affected the Fund's performance. Thank you for choosing the
Stein Roe Balanced Fund and for giving us the opportunity to serve your
investment needs.
Sincerely,
/S/ Stephen E. Gibson
Stephen E. Gibson
President
November 20, 2000
Because economic and market conditions change frequently, there can be no
assurance that the trends described in this report will continue or come to
pass.
Photo of: Stephen E. Gibson
Stephen E. Gibson
1
<PAGE>
PERFORMANCE SUMMARY
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIOD ENDED SEPTEMBER 30, 2000
ONE FIVE TEN
YEAR YEARS YEARS
--------------------------------------------------------------------------------
Stein Roe Balanced Fund Class S 11.55% 12.91% 13.28%
S&P 500 Index 13.27 21.68 19.42
Lehman Bros. Aggregate Bond Index 6.99 6.47 8.05
Morningstar Domestic Hybrid Category 11.07 12.23 12.54
INVESTMENT COMPARISONS
--------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT SEPTEMBER 30, 1990 TO SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
BALANCED FUND
LINE CHART
<TABLE>
<CAPTION>
Unmanaged Blend:
60% MSCI World
Index/40% Lehman
Balanced Fund S&P 500 Index Morningstar Domestic Lehman Brothers Brothers Aggregate
Class S Hybrid Category Aggregate Bond Index Bond Index
<S> <C> <C> <C> <C> <C>
9/30/00 10000 10000 10000 10000 10000
10649 10895 10677 10506 10783
11969 12475 11771 10799 11538
12119 12445 11818 10976 11379
9/30/91 12967 13109 12533 11600 12117
13800 14207 13358 12188 12666
13615 13849 13214 12032 11980
13902 14112 13378 12518 12303
9/30/92 14411 14556 13834 13056 12637
14888 15287 14375 13091 12631
15698 15954 14979 13632 13489
15770 16030 15212 13993 14123
9/30/93 16511 16444 15737 14359 14668
16726 16825 15959 14367 14813
16228 16187 15453 13955 14697
15989 16255 15289 13811 14901
9/30/94 16570 17049 15731 13895 15129
16036 17045 15575 13948 15086
16918 18704 16577 14651 15813
17950 20486 17799 15543 16604
9/30/95 18970 22113 18788 15848 17291
19668 23444 19604 16523 18078
20887 24703 20113 16231 18392
21058 25810 20586 16323 18754
9/30/96 21783 26607 21148 16625 19042
23020 28824 22296 17124 19794
23045 29599 22312 17028 19784
25318 34761 24639 17653 21861
9/30/97 26923 37365 26319 18239 22526
27041 38437 26654 18775 22459
28680 43795 28719 19068 24528
28740 45249 29050 19514 25057
9/30/98 26961 40761 27220 20340 23678
30339 49434 30347 20409 26709
30882 51896 30720 20307 27228
31932 55550 32060 20128 27912
9/30/99 31207 52089 30678 20265 27740
34063 59835 33022 20241 30534
35224 61205 33894 20688 30993
34506 59577 33480 21048 30550
9/30/00 34808 58999 32336 21682 30324
</TABLE>
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. The
above illustration assumes a $10,000 investment made on September 30, 1990, and
reinvestment of income and capital gains distributions. Each index shown above
is an unmanaged group of securities that differs from the composition of each
Stein Roe Fund; they are not available for direct investment. The MSCI World
Index includes both U.S. and foreign stocks. Foreign investing involves market,
political, currency and accounting risks not associated with domestic
securities. Source: Lipper Inc., Morningstar
The Fund's return is also compared to the average return of the funds included
in the Morningstar Domestic Hybrid Funds category average (Morningstar Average).
This Morningstar Average is composed of funds with similar investment styles as
measured by their underlying portfolio holdings. Morningstar does not warrent
their information to be accurate, correct, complete or timely. They shall not be
responsible for investment decisions, damages or other losses resulting from use
of the averages. Morningstar, Inc. has not granted consent for it to be
considered or deemed an "expert" under the Securities Act of 1933. Sales charges
are not reflected in the Morningstar's averages.
2
<PAGE>
QUESTIONS & ANSWERS
--------------------------------------------------------------------------------
AN INTERVIEW WITH HARVEY HIRSCHHORN, PORTFOLIO
MANAGER OF THE STEIN ROE BALANCED FUND AND SR&F BALANCED PORTFOLIO
FUND DATA
--------------------------------------------------------------------------------
INVESTMENT OBJECTIVE:
Stein Roe Balanced Fund seeks long-term growth of capital and current income,
consistent with reasonable investment risk, by investing primarily in a
diversified portfolio of equities, debt securities and cash.
FUND INCEPTION:
August 25, 1949
TOTAL NET ASSETS:
$235.6 million
Q: HOW DID THE BALANCED FUND
PERFORM DURING THE 12 MONTHS ENDED SEPTEMBER 30, 2000?
HIRSCHHORN: Class S shares of Stein Roe Balanced Fund, which invests in a
combination of equities, fixed-income securities and money market instruments,
performed well during the period. The Fund generated a total return of 11.55%,
which was not much lower than the 13.27% total return for S&P 500 Index, but was
higher than the 6.99% total return for the Lehman Brothers Aggregate Bond Index.
Q: WHAT CONTRIBUTED MOST TO THE PERFORMANCE OF THE FUND?
HIRSCHHORN: We attribute the Fund's results to a shift in our asset allocation
during the first half of the year, to our investments in technology, and to the
portfolio's broad diversification. From October 1999 through March 2000 -- a
period when the broad equity market posted a gain of roughly 20% -- we increased
the Fund's allocation to stocks from 54% to 64% of net assets. During this time,
our investments in large-capitalization technology companies such as Cisco
Systems (2.6% of net assets) were major contributors to the Fund's performance.
Investors began to shun technology stocks because of concerns of high valuations
and of lower than expected earnings, and the technology-laden NASDAQ Index
declined more than 30%.
Following the decline of technology stocks from March through May, we
invested in the
photo of HARVEY HIRSCHHORN
HARVEY HIRSCHHORN
3
<PAGE>
sector once again. We selectively purchased stocks of companies with "new
technology," specialized or advanced technologies created in the past 3 to 4
years. For instance, we see strong potential in companies like Brocade
Communications (0.4% of net assets), which is a leading manufacturer of switches
that connect computers and storage devices to networks. Brocade has grown to $25
billion in market capitalization since its initial public offering in May 1999.
QUESTIONS & ANSWERS Continued
--------------------------------------------------------------------------------
Q: DID THE FUND BENEFIT FROM SECTORS OTHER THAN TECHNOLOGY?
HIRSCHHORN: We also invested in lagging sectors of the domestic market, such as
financial services, energy and health care. When investors turned away from
technology and sought more reasonably valued stocks, the Fund benefited from
investments in companies like financial services provider Goldman Sachs (0.4% of
net assets) and Enron (1.5% of net assets), a company that participates at the
forefront of both the telecommunications and energy industries.
Q: WHAT WAS THE FUND'S EXPOSURE TO FOREIGN MARKETS?
HIRSCHHORN: By fiscal year-end foreign securities comprised approximately 2.0%
of net assets. In selecting these overseas investments, we sought to insulate
the portfolio to some extent from volatility here at home and to enhance its
return. Among our selections were two Chinese initial public offerings (IPOs):
Petro China (0.4% of net assets) and China Unicom (0.1% of net assets). Though
newly public, these companies are established businesses, and rank among China's
largest enterprises. Given their size, the IPOs appeared extremely well priced
and have proven to date to be worthwhile investments.
Q: WHAT WERE THE RESULTS FOR THE FIXED-INCOME PORTION OF THE FUND'S PORTFOLIO?
HIRSCHHORN: Our primary tactic for managing the Fund's fixed-income portfolio
was to fine-tune its duration, a measure that reflects its sensitivity to
changes in interest rates. In anticipation of rising interest rates (and
declining bond
4
<PAGE>
prices) last fall, we scaled back the Fund's investments in long-term
securities, thus shortening duration, since these generally lose the most value
when interest rates climb.
Later, we increased the allocation to long-term Treasurys, which increased
duration. As the U.S. Treasury Department initiated a program to buy back
long-term government debt and the supply of long-term Treasurys dwindled, prices
for these securities rose. In the second quarter of 2000, we again shifted our
emphasis to shorter-maturity issues and replaced Treasury bonds with
investment-grade corporate securities. The latter had lagged Treasury securities
during the market rally and represented a relatively attractive way to capture
additional yield for the portfolio. In the final months of the fiscal year,
corporate bonds closed some of the gap with Treasurys, which worked to the
Fund's advantage.
QUESTIONS & Answers Continued
--------------------------------------------------------------------------------
Q: WHAT IS YOUR OUTLOOK FOR THE FUND?
HIRSCHHORN: The economy has begun to slow, and inflation has been holding in the
2.5% to 3% range. We believe this situation is likely to persist for the next
few calendar quarters, and that the equity and bond markets will settle into
trading ranges for the foreseeable future. In anticipation of this, we are
searching for traditional companies that we believe will benefit from the use of
new technologies to boost profit margins and/or improve their products. We are
also assessing companies that have histories of paying sizable dividends. In an
environment where the stock market may make limited progress, we believe that
stocks that pay higher yields will become more attractive to investors.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Share price and investment
returns will vary, so you may have a gain or loss when you sell shares. Total
return includes changes in share price and reinvestment of all distributions.
Portfolio holdings are as of 9/30/00 and are subject to change. Foreign
investing involves market, political, currency and accounting risks not
associated with domestic securities.
5
<PAGE>
FUND HIGHLIGHTS As of September 30, 2000
==============================================================================
SR&F BALANCED PORTFOLIO
TOP 10 EQUITY HOLDINGS (% OF NET ASSETS)
--------------------------------------------------------------------------------
General Electric 8.5% Bank America Corp. 2.0%
Citigroup 5.7 Intel 2.0
Cisco Systems 2.6 Oracle Corp. 2.0
BPAmoco PLC 2.4 America Int'l. Group 1.8
Sun Microsystems, Inc. 2.1 Exxon 1.8
--------------------------------------------------------------------------------
EQUITY PORTFOLIO HIGHLIGHTS
PORTFOLIO S&P 500 INDEX
-------------------------------------
Number of Equity & Convertible Holdings 98 500
Dollar Weighted Median
Market Capitalization ($mil.) 124,921 80,912
--------------------------------------------------------------------------------
ECONOMIC SECTOR BREAKDOWN
EQUITY PORTFOLIO S&P 500 Index
[pie chart] [pie chart]
Basic Materials 1% Basic Materials 2%
Consumer Cyclical 9% Consumer Cyclical 10%
Consumer Non-Cyclical 11% Consumer Non-Cyclical 18%
Energy 10% Energy 7%
Financial 17% Financial 16%
Industrial 18% Industrial 8%
Technology 27% Technology 30%
Utilities 7% Utilities 9%
--------------------------------------------------------------------------------
ASSET ALLOCATION
September 30, 1999 September 30, 2000
[pie chart] [pie chart]
Equities 54.1% Equities 64.7%
Bonds 33.9% Bonds 29.5%
Cash Equivalents Cash Equivalents
& Other 12.0% & Other 5.8%
6
<PAGE>
SR&F BALANCED PORTFOLIO
--------------------------------------------------------------------------------
SEPTEMBER 30, 2000 (IN THOUSANDS)
NUMBER MARKET
COMMON STOCKS - 77.6% COUNTRY OF SHARES VALUE
--------------------------------------------------------------------------------
AUTOMOBILES & COMPONENTS - 1.0%
AUTOMOBILE MANUFACTURERS
Ford Motor Co. ..................... 54 $ 1,372
General Motors Corp. ............... 15 975
--------
2,347
--------
CAPITAL GOODS - 11.5%
AEROSPACE & DEFENSE - 0.1%
General Dynamics Corp. ............. 6 345
--------
CONSTRUCTION & FARM MACHINERY - 0.2%
Caterpillar, Inc. .................. 15 506
--------
ELECTRICAL COMPONENTS & EQUIPMENT - 1.2%
Emerson Electric Co. ............... 42 2,814
--------
INDUSTRIAL CONGLOMERATES - 10.0%
General Electric Co. ............... 351 20,248
Tyco International Ltd. ............ 66 3,424
--------
23,672
--------
CHEMICALS - 0.4%
DIVERSIFIED CHEMICALS
E.I. DuPont De Nemours & Co. ....... 23 967
--------
COMMERCIAL SERVICES & SUPPLIES - 0.6%
DIVERSIFIED COMMERCIAL SERVICES
Concord EFS, Inc. .................. 41 1,454
--------
DIVERSIFIED FINANCIALS - 7.7%
CONSUMER FINANCE - 0.6%
Capital One Financial Corp. ........ 20 1,401
--------
DIVERSIFIED FINANCIAL SERVICES - 7.1%
Bayerische HypoVereinsbank.......... G 9 503
Citigroup, Inc. .................... 249 13,462
Fannie Mae.......................... 12 858
Freddie Mac......................... 21 1,135
The Goldman Sachs Group, Inc. ...... 8 877
--------
16,835
--------
DIVERSIFIED TELECOMMUNICATION SERVICES - 3.1%
ALTERNATIVE CARRIERS - 0.2%
Infonet Services Corp. Class B (a). 44 465
--------
INTEGRATED TELECOMMUNICATION SERVICES - 2.9%
China Unicom Ltd. (a)............... HK 36 81
China Unicom Ltd. ADR (a).......... 12 266
MCI WorldCom, Inc. (a)............. 60 1,823
Nippon Telegraph & Telephone Corp. . Ja (b) 392
Nippon Telegraph & Telephone Corp. ADR (b) 20
SBC Communications, Inc., Class A... 47 2,369
Verizon Communications.............. 32 1,550
Williams Communications Group, Inc. (a) 25 502
--------
7,003
--------
7
<PAGE>
SR&F Balanced Portfolio Continued
--------------------------------------------------------------------------------
NUMBER MARKET
COUNTRY OF SHARES VALUE
--------------------------------------------------------------------------------
ENERGY - 6.4%
INTEGRATED OIL & GAS - 4.7%
Conoco, Inc. Class B................ 49 $ 1,324
Exxon Mobil Corp. .................. 47 4,186
The British Petroleum Co. PLC ADR... 107 5,669
--------
11,179
--------
OIL & GAS EQUIPMENT & SERVICES - 1.3%
Kinder Morgan Energy Partners, L.P. 20 947
Schlumberger Ltd. .................. 25 2,058
--------
3,005
--------
OIL & GAS EXPLORATION & PRODUCTION - 0.4%
PetroChina Co., Ltd. ADR............ 54 1,059
--------
FINANCIAL INSTITUTIONS - 4.0%
BANKS
BankAmerica Corp. .................. 93 4,868
Chase Manhattan Corp. .............. 14 624
Royal Bank of Scotland Group
PLC-Value Shares (a)................ UK 133 159
Royal Bank of Scotland Group PLC.... UK 133 2,787
The Bank of Tokyo-Mitsubishi,
Ltd. ADR ........................... 35 409
Wells Fargo & Co. .................. 12 551
--------
9,398
--------
FOOD, BEVERAGES & TOBACCO - 0.8%
SOFT DRINKS
PepsiCo, Inc. ...................... 39 1,794
--------
FOOD & DRUG RETAILING - 0.8%
FOOD RETAIL
Safeway, Inc. (a)................... 40 1,867
--------
HEALTH CARE - 0.4%
HEALTH CARE EQUIPMENT
Medtronic, Inc. .................... 20 1,036
--------
HOTELS, RESTAURANTS & LEISURE - 0.5%
RESTAURANTS
McDonald's Corp. ................... 43 1,298
--------
HOUSEHOLD & PERSONAL PRODUCTS - 0.4%
HOUSEHOLD PRODUCTS
Procter & Gamble Co. ............... 15 1,005
--------
INSURANCE - 3.0%
INSURANCE BROKERS - 0.7%
Marsh & McLennan Companies, Inc. ... 12 1,593
--------
MULTI-LINE INSURANCE - 1.8%
American International Group, Inc. . 45 4,306
--------
PROPERTY & CASUALTY INSURANCE - 0.5%
Ace, Ltd. .......................... 20 785
Tokio Marine & Fire Insurance Co., Ltd. Ja 55 549
--------
1,334
--------
8
<PAGE>
SR&F BALANCED PORTFOLIO CONTINUED
--------------------------------------------------------------------------------
NUMBER MARKET
COUNTRY OF SHARES VALUE
--------------------------------------------------------------------------------
MEDIA - 2.2%
ADVERTISING - 0.1%
Young & Rubicam, Inc. .............. 7 $ 337
--------
BROADCASTING & CABLE - 1.5%
Charter Communications, Inc. (a).... 80 1,301
Clear Channel Communications, Inc. (a) 11 621
Comcast Corp. Special Class A,...... 36 1,474
--------
3,396
--------
MOVIES & ENTERTAINMENT - 0.6%
Time Warner, Inc. .................. 18 1,408
--------
METALS & MINING - 0.5%
ALUMINUM - 0.3%
Alcoa, Inc. ........................ 30 759
--------
STEEL - 0.2%
Nucor Corp. ........................ 15 452
--------
PHARMACEUTICALS & BIOTECHNOLOGY - 6.1%
BIOTECHNOLOGY - 0.9%
Amgen, Inc. (a)..................... 13 908
Genentech, Inc. (a)................. 6 1,114
--------
2,022
--------
PHARMACEUTICALS - 5.2%
American Home Products Corp. ....... 39 2,206
Bristol-Myers Squibb Co. ........... 52 2,971
Elan Corp. PLC ADR.................. 34 1,862
Eli Lilly & Co. .................... 47 3,772
Merck & Co., Inc. .................. 20 1,489
--------
12,300
--------
RETAILING - 3.3%
DEPARTMENT STORES - 0.5%
Kohl's Corp. (a).................... 20 1,154
--------
GENERAL MERCHANDISE STORES - 1.7%
Wal-Mart Stores, Inc. .............. 85 4,091
--------
HOME IMPROVEMENT RETAIL - 1.1%
Home Depot, Inc. ................... 51 2,706
--------
SOFTWARE & SERVICES - 6.2%
APPLICATIONS SOFTWARE - 0.4%
Siebel Systems, Inc. ............... 8 890
--------
INTERNET SOFTWARE & SERVICES - 1.5%
America Online, Inc. (a)............ 35 1,881
Crayfish Co., Ltd. ADR (a).......... 24 81
Exodus Communications, Inc. (a)..... 13 642
Inktomi Corp. (a)................... 5 513
Softbank Corp. ..................... Ja 4 383
--------
3,500
--------
9
<PAGE>
SR&F BALANCED PORTFOLIO CONTINUED
--------------------------------------------------------------------------------
NUMBER MARKET
COUNTRY OF SHARES VALUE
--------------------------------------------------------------------------------
SOFTWARE & SERVICES - (CONTINUED)
IT CONSULTING & SERVICES - 0.5%
Affiliated Computer Services, Inc. Class A (a) 25 $ 1,247
--------
SYSTEMS SOFTWARE - 3.8%
Microsoft Corp. (a)................. 60 3,615
Oracle Corp., (a)................... 60 4,725
Veritas Software Corp. (a).......... 5 639
--------
8,979
--------
TECHNOLOGY HARDWARE & EQUIPMENT - 14.7%
COMPUTER HARDWARE - 2.4%
Fujitsu Ltd. ....................... Ja 20 464
Sun Microsystems, Inc. (a).......... 42 4,903
Sycamore Networks, Inc. (a)......... 4 432
--------
5,799
--------
COMPUTER STORAGE & PERIPHERALS - 2.0%
EMC Corp. (a)....................... 32 3,172
Network Appliance, Inc. (a)......... 12 1,529
--------
4,701
--------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.6%
Agilent Technologies, Inc. (a)...... 27 1,321
--------
NETWORKING EQUIPMENT - 3.0%
Brocade Communications Systems, Inc. (a) 5 1,062
Cisco Systems, Inc. (a)............. 111 6,133
--------
7,195
--------
SEMICONDUCTOR EQUIPMENT - 0.2%
Teradyne, Inc. (a).................. 15 525
--------
SEMICONDUCTORS - 2.6%
Broadcom Corp. Class A (a).......... 3 731
Infineon Technologies AG ADR (a).... 14 670
Intel Corp. ........................ 116 4,829
--------
6,230
--------
TELECOMMUNICATIONS EQUIPMENT - 3.9%
Corning, Inc. ...................... 11 3,267
JDS Uniphase Corp. (a).............. 12 1,136
Lucent Technologies, Inc. .......... 35 1,070
Motorola, Inc. ..................... 67 1,890
Nokia Oyj ADR....................... 20 796
TyCom, Ltd. (a)..................... 23 898
UTStarcom, Inc. (a)................. 9 184
--------
9,241
--------
UTILITIES - 2.5%
ELECTRIC UTILITIES - 1.0%
AES Corp. (a)....................... 32 2,192
Southern Energy, Inc. (a).......... 6 195
--------
2,387
--------
MULTI-UTILITIES - 1.5%
Enron Corp. ........................ 40 3,505
--------
10
<PAGE>
SR&F BALANCED PORTFOLIO CONTINUED
--------------------------------------------------------------------------------
NUMBER MARKET
COUNTRY OF SHARES VALUE
--------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES - 1.5%
WIRELESS TELECOMMUNICATION SERVICES
AT&T Wireless Group (a)............ 23 $ 488
General Mills, Inc. ................ 23 816
Sprint Corp. (PCS Group) (a)....... 18 631
Vodafone Group PLC ADR.............. 42 1,554
--------
3,489
--------
TOTAL COMMON STOCKS
(cost of $90,438)...................... 184,317
--------
--------------------------------------------------------------------------------
PREFERRED STOCKS - 0.5%
--------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.5%
COMMUNICATIONS
TCI Pacific, Class A 5.000%
(cost of $1,253).................... 7 1,260
--------
--------------------------------------------------------------------------------
BONDS & NOTES - 29.5% PAR
--------------------------------------------------------------------------------
US GOVERNMENT & AGENCY OBLIGATIONS - 18.0%
FEDERAL HOME LOAN MORTGAGE CORP.:
6.500% 2011....................... $ 3,274 3,210
6.500% 2026-2028.................. 7,707 7,403
7.000% 2028-2030.................. 4,006 3,929
--------
14,542
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION:
5.125% 2004....................... 2,623 2,510
6.625% 2009....................... 3,200 3,162
7.125% 2005....................... 2,250 2,296
--------
7,968
--------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION:
6.000% 2029....................... 4,395 4,123
8.000% 2025-2026.................. 675 692
--------
4,815
--------
U.S. TREASURY BONDS:
7.625% 2/15/25.................... 2,350 2,807
8.125% 8/15/19.................... 3,075 3,756
--------
6,563
--------
U.S. TREASURY NOTES:
6.250% 2/15/07.................... 2,450 2,490
7.250% 8/15/04.................... 5,200 5,436
7.875% 11/15/04................... 1,000 1,070
--------
8,996
--------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(cost of $42,415)...................... 42,884
--------
--------------------------------------------------------------------------------
11
<PAGE>
SR&F Balanced Portfolio Continued
--------------------------------------------------------------------------------
MARKET
PAR VALUE
--------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - 10.2%
AEROSPACE & DEFENSE - 0.6%
AEROSPACE & DEFENSE
Raytheon Co. 6.750% 8/15/07......... $ 1,500 $ 1,441
--------
BANKS & HOLDING COMPANIES - 4.4%
BANKING & FINANCIAL SERVICES - 2.0%
Citicorp, 8.040% 12/15/19 (e)....... 1,900 1,900
Den Danske Bank, 6.550% 9/15/03 (e). 2,250 2,206
First Union Cap 7.950% 11/15/29..... 750 668
--------
4,774
--------
FINANCE COMPANIES - 0.8%
Household Finance Corp., 5.875% 11/1/02 2,000 1,954
--------
INSURANCE - 0.6%
Transamerica Finance Corp., 6.125% 11/1/01 1,500 1,483
--------
OTHER BANKING & FINANCIAL - 1.0%
Deutsche Ausbank, 7.000% 9/24/01.... 2,250 2,253
--------
ENERGY - 1.1%
OIL & GAS SERVICES - 1.1%
BOC Group PLC, 5.875% 1/29/01....... 2,500 2,491
--------
MANUFACTURING - 2.5%
CHEMICALS - 0.9%
Hanson Overseas BV, 6.750% 9/15/05.. 2,250 2,187
--------
OTHER CORPORATE BONDS - 1.6%
Florida Windstorm Underwriting Assoc.,
7.125% 2/25/19 (e)................ 1,900 1,785
National Rural Utilities Cooperative Finance Corp.
5.000% 10/1/02.................... 2,000 1,941
--------
3,726
--------
SERVICES - 0.7%
BUSINESS
FDX Corp., Series A1, 7.530% 9/23/06 1,556 1,553
--------
UTILITIES - 0.9%
ELECTRIC
Israel Electric Corp., 7.750% 3/1/09 (e) 2,300 2,248
--------
TOTAL CORPORATE FIXED INCOME BONDS & NOTES
(cost of $24,262)...................... 24,110
--------
--------------------------------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED & ASSET-BACKED SECURITIES - 1.3%
ASSET-BACKED SECURITIES - 0.4%
LB Commercial Conduit Mortgage Trust,
Series 1998-C4, Class A1B, 6.210% 10/15/08 1,000 946
--------
12
<PAGE>
SR&F BALANCED PORTFOLIO CONTINUED
--------------------------------------------------------------------------------
MARKET
PAR VALUE
--------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.9%
American Mortgage Trust 1993-3,
8.190% 9/27/22 (e)................ $ 1,016 $ 915
United Airlines, Inc., 9.200% 3/22/08 1,185 1,257
--------
2,172
--------
TOTAL NON-AGENCY MORTGAGE-BACKED & ASSET-BACKED SECURITIES
(cost of $3,128)....................... 3,118
--------
TOTAL BONDS & NOTES (cost of $69,805).. 70,112
--------
-------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost of $161,496)(c) 255,689
--------
-------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 4.8%
-------------------------------------------------------------------------------
COMMERCIAL PAPER
Associates Corp of North America.,
6.700%(d) 10/02/00.................. 11,315 11,313
--------
-------------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - (12.4)% (29,536)
--------
NET ASSETS - 100.0%.................... $237,466
========
-------------------------------------------------------------------------------
SECURITIES SOLD SHORT AT SEPTEMBER 30, 2000 WERE AS FOLLOWS:
BankAmerica Corp.................... 68 3,556
BP Amoco PLC, ADR................... 71 3,779
Citigroup, Inc...................... 150 8,109
Eli Lilly & Co...................... 20 1,623
Emerson Electric Co................. 20 1,340
General Electric Co................. 210 12,114
Intel Corp.......................... 32 1,332
--------
TOTAL VALUE OF SECURITIES SOLD SHORT (Proceeds of $15,138) $ 31,853
--------
--------------------------------------------------------------------------------
NOTES TO INVESTMENT PORTFOLIO
--------------------------------------------------------------------------------
(a)Non-income producing.
(b)Rounds to less than one.
(c)Cost for federal income tax purposes is the same. (d)Rate represents yield at
time of purchase.
(e)Security is exempt from registration under Rule 144A of the Securities Act
1993. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At September 30,
2000, the value of these securities amounted to $9,054 or 3.8% of net assets.
Summary of Securities
by Country Country Value % of Total
--------------------------------------------------------------------------------
United States $250,371 97.9
United Kingdom UK 2,946 1.2
Japan Ja 1,788 0.7
Germany G 503 0.2
Hong Kong HK 81 (b)
-------- -----
$255,689 100.0
======== =====
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
Acronym Name
---------- --------
ADR American Depositary Receipt
See notes to financial statements.
13
<PAGE>
SR&F Balanced Portfolio
--------------------------------------------------------------------------------
Statement of Assets and Liabilities
September 30, 2000
(All amounts in thousands)
ASSETS
Investments, at market value (cost of $161,496).................. $255,689
Short-term obligations........................................... 11,313
--------
267,002
Cash including foreign currencies (cost of $37).................. 36
Receivable for:
Investments sold.............................................. 1,335
Interest...................................................... 696
Dividends..................................................... 195
Cash on deposit with broker for securities sold short (note 1)... 375
--------
Total Assets.................................................. 269,639
--------
LIABILITIES
Securities sold short, at market value (proceeds of $15,138)..... 31,853
Payable for investments purchased................................ 98
Dividends payable on short sales................................. 87
Accrued:
Management fee................................................ 111
Bookkeeping fee............................................... 2
Transfer agent fee............................................ 1
Other ........................................................... 21
--------
Total Liabilities............................................. 32,173
--------
NET ASSETS....................................................... $237,466
========
See notes to financial statements.
14
<PAGE>
SR&F BALANCED PORTFOLIO
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
September 30, 2000
(All amounts in thousands)
INVESTMENT INCOME
Interest.......................................... $ 5,893
Dividends......................................... 1,858
--------
Total Investment Income (net of nonreclaimable foreign
taxes withheld at source of $18)............. 7,751
EXPENSES
Management fee.................................... 1,336
Transfer agent fee................................ 6
Bookkeeping fee................................... 30
Trustees' fee..................................... 15
Custodian fee..................................... 14
Audit fee......................................... 16
Legal fee......................................... 6
Dividend expense on short sales................... 361
Other............................................. 8
--------
Total expenses.................................... 1,792
--------
Net Investment Income.......................... 5,959
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net Realized Gain (Loss) on:
Investments.................................... $ 11,752
Closed futures contracts....................... (111)
Foreign currency transactions.................. (5)
--------
Net realized gain.............................. 11,636
Net Change in Unrealized Appreciation/Depreciation during the
period on investments and foreign currency transactions 10,430
--------
Net Gain ...................................... 22,066
--------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.. $ 28,025
========
See notes to financial statements.
15
<PAGE>
SR&F BALANCED PORTFOLIO
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
(All amounts in thousands)
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
------------- -------------
OPERATIONS
Net investment income............................. $ 5,959 $ 7,352
Net realized gain on investments.................. 11,636 20,920
Net change in unrealized appreciation/depreciation
on investments................................. 10,430 10,921
-------- --------
Net increase in net assets
resulting from operations................. 28,025 39,193
-------- --------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions..................................... 12,365 4,122
Withdrawals....................................... (57,490) (36,994)
-------- --------
Net decrease from transactions in investors'
beneficial interest........................... (45,125) (32,872)
-------- --------
Net increase (decrease) in net assets............. (17,100) 6,321
TOTAL NET ASSETS
Beginning of period............................... 254,566 248,245
-------- --------
End of period..................................... $237,466 $254,566
======== ========
See notes to financial statements.
16
<PAGE>
STEIN ROE BALANCED FUND
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2000
(All amounts in thousands, except per-share data)
ASSETS
Investments in Portfolio, at value............................... $237,325
Receivable for Fund shares sold.................................. 15
Other............................................................ 25
--------
Total Assets.................................................. 237,365
--------
LIABILITIES
Payable for Fund shares repurchased.............................. 1,636
Accrued:
Administration fee............................................ 30
Transfer agent fee............................................ 52
Bookkeeping fee............................................... 2
Other............................................................ 39
--------
Total Liabilities............................................. 1,759
--------
Net Assets....................................................... $235,606
--------
ANALYSIS OF NET ASSETS
Paid-in capital.................................................. $147,984
Overdistributed net investment income............................ (6)
Accumulated net realized gains allocated from Portfolio.......... 10,169
Net unrealized appreciation on investments and foreign currencies
allocated from Portfolio...................................... 77,459
--------
$235,606
--------
SHARES OUTSTANDING (UNLIMITED NUMBER AUTHORIZED)................. 7,199
========
NET ASSET VALUE PER SHARE........................................ $ 32.73
========
See notes to financial statements.
17
<PAGE>
Stein Roe Balanced Fund
--------------------------------------------------------------------------------
Statement of Operations
For the Year Ended September 30, 2000
(All amounts in thousands)
INVESTMENT INCOME
Interest allocated from Portfolio................. $ 5,890
Dividends allocated from Portfolio................ 1,857
--------
Total investment income........................ 7,747
EXPENSES
Expenses allocated from Portfolio................. 1,791
Administration fee................................ 364
Transfer agent fees............................... 565
Bookkeeping fee................................... 30
Trustees' fee..................................... 8
Custodian fees.................................... 1
Audit fee......................................... 9
Legal fee......................................... 1
Registration fee.................................. 24
Reports to shareholders........................... 22
Other............................................. 23
-------
Total expenses................................. 2,838
--------
Net Investment Income............................. 4,909
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ALLOCATED
FROM PORTFOLIO
Net Realized Gain (Loss) on:
Investments.................................. 11,752
Closed futures contracts..................... (111)
Foreign currency transactions................ (5)
-------
Net realized gain............................ 11,636
Net Change in Unrealized Appreciation/Depreciation during the
period on investments and foreign currency transactions 10,411
--------
Net Gain....................................... 22,047
--------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.. $ 26,956
========
See notes to financial statements.
18
<PAGE>
STEIN ROE BALANCED FUND
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
(All amounts in thousands)
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
------------ ----------
OPERATIONS:
Net investment income............................. $ 4,909 $ 6,346
Net realized gain ................................ 11,636 20,922
Net change in unrealized appreciation /depreciation 10,411 10,843
-------- --------
Net Increase from Operations................... 26,956 38,111
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income.......... (4,806) (6,767)
Distributions from net realized gains............. (19,324) (17,075)
-------- --------
Total Distributions to Shareholders............ (24,130) (23,842)
-------- --------
SHARE TRANSACTIONS:
Subscriptions to Fund shares...................... 20,743 16,749
Value of distributions reinvested................. 20,711 20,674
Redemptions of Fund shares........................ (59,364) (48,854)
-------- --------
Net Decrease from Fund Share Transactions...... (17,910) (11,431)
-------- --------
Total Decrease in net assets.................. (15,084) 2,838
TOTAL NET ASSETS
Beginning of period............................... 250,690 247,852
-------- --------
End of period (net of overdistributed net investment
income of $6 and $5, respectively)............. $235,606 $250,690
======== ========
ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL INTEREST:
Subscriptions to Fund shares...................... 636 517
Value of distributions reinvested................. 653 670
Redemptions of Fund shares........................ (1,840) (1,511)
--------- ---------
(551) (324)
--------- ---------
See notes to financial statements.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
September 30, 2000
NOTE 1. ORGANIZATION
Stein Roe Balanced Fund (the Fund) is a series of Liberty-Stein Roe Funds
Investment Trust (the Trust), an open-end management investment company
organized as a Massachusetts business trust. The Fund invests substantially all
of its assets in SR&F Balanced Portfolio (the Portfolio). The Fund may issue an
unlimited number of shares.
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. The Portfolio
allocates income, expenses, realized and unrealized gains (losses) to each
investor on a daily basis, based on methods approved by the Internal Revenue
Service. At September 30, 2000, the Fund owned 99.9% of the Portfolio.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund and Portfolio
in the preparation of the financial statements.
Security valuation and transactions
Equity securities generally are valued at the last sale price or, in the
case of unlisted or listed securities for which there were no sales during the
day, at current quoted bid price.
Debt securities generally are valued by a pricing service based upon market
transactions for normal, institutional-size trading units of similar securities.
When management deems it appropriate, an over-the-counter or exchange bid
quotation is used.
Futures contracts are valued based on the difference between the last sale
price and the opening price of the contract.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
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.
SECURITIES SOLD SHORT AGAINST THE BOX
The Portfolio engages in selling securities short against the box: that is,
enter into short sales of securities that it currently owns or has the right to
acquire through conversion or exchange of other securities that it owns at no
additional costs. The Portfolio may
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
--------------------------------------------------------------------------------
make short sales of securities only if at all times when a short position is
open it owns at least an equal amount of such securities or securities
convertible into or exchangeable for securities of the same issue as, and equal
in amount to, the securities sold short, at no additional cost.
In connection with the Fund's investment in short sales, the Fund had
borrowed the proceeds on the securities sold short against the broker margin
account. As a result, interest is charged on this borrowing, which is offset by
interest income earned on the margin account. These amounts are included net in
interest income on the Statement of Operations.
FEDERAL INCOME TAXES
No provision is made for federal income taxes since (a) the Fund elects to be
taxed as a "regulated investment company" and make distributions to its
shareholders to be relieved of all federal income taxes under provisions of
current federal tax law; and (b) the Portfolio is treated as a partnership for
federal income tax purposes and all of its income is allocated to its owners
based on methods approved by the Internal Revenue Service.
Interest income, debt discount and premium
Interest income is recorded on the accrual basis. Original issue discount
is accreted to interest income over the life of a security with a corresponding
increase in the cost basis; premium and market discount are not amortized or
accreted.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-date.
The amount and character of income and gains to be 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.
Foreign currency transactions
Net realized and unrealized gains (losses) on foreign currency transactions
includes the gains (losses) arising from the fluctuations in exchange rates
between trade and settlement dates on securities transactions, gains (losses)
arising from the disposition of foreign currency and currency gains (losses)
between the accrual and payment dates on dividends and interest income and
foreign withholding taxes.
The Portfolio does not distinguish that portion of gains (losses) on
investments which is due to changes in foreign exchange rates from that which is
due to changes in market prices of the investments. Such fluctuations are
included with the net realized and unrealized gains (losses) from investments.
FORWARD CURRENCY CONTRACTS
The Portfolio may enter into forward currency contracts to purchase or sell
foreign currencies at predetermined exchange rates in connection with the
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
--------------------------------------------------------------------------------
settlement of purchases and sales of securities. The Fund may also enter into
forward currency contracts to hedge certain other foreign currency denominated
assets. The contracts are used to minimize the exposure to foreign exchange rate
fluctuations during the period between trade and settlement date of the
contracts. All contracts are marked-to-market daily, resulting in unrealized
gains (losses) which become realized at the time the forward currency contracts
are closed or mature. Realized and unrealized gains (losses) arising from such
transactions are included in net realized and unrealized gains (losses) on
foreign currency transactions. Forward currency contracts do not eliminate
fluctuations in the prices of the Funds portfolio securities. While the maximum
potential loss from such contracts is the aggregate face value in U.S. dollars
at the time the contract is opened, the actual exposure is typically limited to
the change in value of the contract (in U.S. dollars) over the period it remains
open. Risks may also arise if counterparties fail to perform their obligations
under the contracts.
OTHER
Corporate actions are recorded on the ex-date (except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware of
such), net of nonrebatable tax withholdings. Where a high level of uncertainty
as to collection exists, income on securities is recorded net of all tax
withholdings with any rebates recorded when received.
--------------------------------------------------------------------------------
NOTE 2. FEES AND COMPENSATION
PAID TO AFFILIATES
MANAGEMENT FEE
Stein Roe and Farnham Inc. (the Advisor) is the investment Advisor of the
Portfolio and receives a monthly fee as follows:
Average Net Assets Annual Fee Rate
-------------- -------------
1st $500 million 0.55%
Next $500 million 0.50%
Over $1 billion 0.45%
ADMINISTRATION FEE
The Advisor also provides accounting and other services for a monthly fee to the
Fund as follows:
Average Net Assets Annual Fee Rate
-------------- -------------
1st $500 million 0.150%
Next $500 million 0.125%
Over $1 billion 0.010%
BOOKKEEPING FEE
The Advisor provides bookkeeping and pricing services for a monthly fee equal to
$25,000 plus 0.0025% annually of the Portfolio's and Fund's average daily net
assets over $50 million.
Transfer agent fee
Liberty Funds Services, Inc. (the Transfer Agent), an affiliate of the
Advisor, provides shareholder services for a monthly fee equal to 0.22% annually
of the Fund's average daily net assets and receives reimbursement for certain
out of pocket expenses. The Portfolio pays the Transfer Agent a monthly fee
equal to $6,000 annually.
OTHER
The Fund pays no compensation to its officers, all of whom are employees of the
Advisor.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
--------------------------------------------------------------------------------
NOTE 3. PORTFOLIO INFORMATION
During the year ended September 30, 2000, purchases and sales of investments,
other than short-term obligations, were $70,113,000 and $91,249,000
respectively.
Unrealized appreciation (depreciation) for the year ended September 30, 2000
based on cost of investments for federal income tax purposes was:
Gross unrealized
appreciation $103,172,938
Gross unrealized
depreciation (25,695,720)
-----------
Net unrealized
appreciation $ 77,477,218
-----------
OTHER
There are certain additional risks involved when investing in foreign securities
that are not inherent with investments in domestic securities. These risks may
involve foreign currency exchange rate fluctuations, adverse political and
economic developments and the possible prevention of foreign currency exchange
or the imposition of other foreign governmental laws or restrictions.
The Portfolio may focus its investments in certain industries, subjecting it
to greater risk than a fund that is more diversified.
--------------------------------------------------------------------------------
NOTE 4. LINE OF CREDIT
The Liberty-Stein Roe Funds Investment Trust participates in unsecured line of
credit agreements provided by the custodian bank consisting of two components.
The committed line of credit entitles the Trust to borrow from the custodian at
any time upon notice from the Trust. The uncommitted line of credit permits the
Trust to borrow from the custodian at the custodian's sole discretion. The
aggregate borrowings available to the Trust for the committed and uncommitted
lines of credit are $200 million and $100 million, respectively. Borrowings may
be made to temporarily finance repurchase of Fund shares. Interest is charged to
each trust and, ultimately, the Fund based on its borrowings. In addition, a
commitment fee of 0.10% per annum on the Fund's unused commitment shall be paid
quarterly by each Fund based on the relative asset size of the Fund to the Trust
as a whole. The commitment fee is included in other expenses on the Statement of
Operations. For the year ended September 30, 2000, the Trust and Fund had no
borrowings under the agreement.
--------------------------------------------------------------------------------
NOTE 5. OTHER RELATED PARTY TRANSACTIONS
During the year ended September 30, 2000, the Portfolio used Alphatrade, a
wholly owned subsidiary of Colonial Management Associates, Inc., as a broker.
Total commissions paid to Alphatrade during the year were $1,992.
23
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
BALANCED FUND
Selected data for a share outstanding throughout the period are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 32.35 $ 30.70 $ 33.41 $ 30.07 $ 27.82
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) 0.66 0.78 0.95 0.95 1.00
Net realized and unrealized gain (loss) on investments 2.91 3.85 (0.90) 5.61 2.96
-------- -------- -------- -------- --------
Total from investment operations 3.57 4.63 0.05 6.56 3.96
-------- -------- -------- -------- --------
DISTRIBUTIONS
Net investment income (0.69) (0.90) (0.76) (0.96) (1.01)
Net realized capital gains (2.50) (2.08) (2.00) (2.26) (0.70)
-------- -------- -------- -------- --------
Total distributions (3.19) (2.98) (2.76) (3.22) (1.71)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 32.73 $ 32.35 $ 30.70 $ 33.41 $ 30.07
======== ======== ======== ======== ========
Ratio of net expenses to average net assets (b) 1.17% 1.14%(c) 1.03% 1.05% 1.05%
Ratio of net investment income to average net assets (b) 2.03% 2.35%(c) 2.90% 3.02% 3.45%
Portfolio turnover rate N/A N/A N/A 15%(d) 87%
Total return (e) 11.55% 15.74% 0.14% 23.60% 14.83%
Net assets, end of year (000's) $235,606 $250,690 $247,852 $284,846 $231,063
(a) Per share data was calculated using average shares outstanding during the period.
(b) The benefits derived from custody credits and directed brokerage arrangements had no impact.
(c) During the year ended September 30, 1999, the Fund experienced a one-time reduction in its
expenses of seven basis points as a result of expenses accrued in a prior
period. The Fund's ratios disclosed above reflect the actual rate at which
expenses were incurred throughout the current fiscal year without the
reduction.
(d) Prior to commencement of operations of the Portfolio.
(e) Total return at net asset value assuming all distributions reinvested.
</TABLE>
--------------------------------------------------------------------------------
SR&F BALANCED PORTFOLIO
<TABLE>
<CAPTION>
PERIOD ENDED
YEARS ENDED SEPTEMBER 30, SEPTEMBER 30,
2000 1999 1998 1997(A)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Ratio of net expenses to average net assets........................... 0.74% 0.71%(c) 0.61% 0.60%(c)
Ratio of net investment income to average net assets.................. 2.46% 2.78%(c) 3.31% 3.52%(c)
Portfolio turnover rate............................................... 30% 41% 61% 21%
</TABLE>
(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
reflects the actual rate at which expenses were incurred throughout the
current fiscal year without the reduction.
(c) Annualized.
--------------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
For the fiscal year ended September 30, 2000, the Fund designates long-term
capital gains of $11,697,491.
--------------------------------------------------------------------------------
24
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
To the Trustees of Liberty-Stein Roe
Funds Investment Trust and SR&F
Base Trust and the Shareholders of
Stein Roe Balanced Fund
In our opinion, the accompanying statements of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Stein Roe Balanced Fund (the
"Fund") (a series of Liberty-Stein Roe Funds Investment Trust) and Stein Roe
Balanced Portfolio (the "Portfolio") (a series of SR&F Base Trust) at September
30, 2000, the results of each of their operations for the year then ended, the
changes in each of their net assets and their financial highlights for the two
years then ended, in conformity with accounting principles generally accepted in
the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's and the Portfolio's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States of America, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at September 30, 2000 by correspon dence with the custodian and
brokers, provide a reasonable basis for our opinion.
The financial highlights of the Fund and the Portfolio for periods through
September 30, 1998 were audited by other independent accountants, whose report
dated November 16, 1998 expressed an unqualified opinion on those financial
highlights.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 20, 2000
25
<PAGE>
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26
<PAGE>
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27
<PAGE>
LIBERTY-STEIN ROE FUNDS INVESTMENT TRUST
--------------------------------------------------------------------------------
TRUSTEES
John A. Bacon Jr. Private Investor
William W. Boyd
Chairman and Director, Sterling Plumbing
Group Inc.
Lindsay Cook
Executive Vice President, Liberty Financial
Companies, Inc.
Douglas A. Hacker
Executive Vice President and Chief Financial
Officer, United Airlines
Janet Langford Kelly
Executive Vice President-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
OFFICERS
Stephen E. Gibson, President
William D. Andrews, Executive Vice President
Loren A. Hansen, Executive Vice President
Kevin M. Carome, Executive Vice President,
Secretary
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 and Portfolio
PricewaterhouseCoopers LLP
Independent Accountants
<PAGE>
THE STEIN ROE MUTUAL FUNDS
FIXED INCOME FUNDS
Cash Reserves Fund
Municipal Money Market Fund
Intermediate Municipals Fund
Managed Municipals Fund
High-Yield Municipals Fund
Intermediate Bond Fund
Income Fund
High Yield Fund
EQUITY FUNDS
Balanced Fund
Growth & Income Fund
Disciplined Stock Fund
Growth Stock Fund
Growth Investor Fund
Young Investor Fund
Midcap Growth Fund
Focus Fund
Capital Opportunities Fund
Small Company Growth Fund
INTERNATIONAL FUNDS
Asia Pacific Fund
Small Cap Tiger Fund
International Fund
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.
S31-02/209D-0900 (11/00) 00/2099
