STEIN ROE MUTUAL FUNDS
ANNUAL REPORT
SEPTEMBER 30, 2000
PHOTO: HANDS AND LEAF
STEIN ROE EQUITY FUNDS
GROWTH FUNDS
Stein Roe Growth Investor Fund Class S
A class of Liberty Growth Investor Fund
LOGO: STEIN ROE MUTUAL FUNDS
SENSIBLE RISKS. INTELLIGENT INVESTMENTS.(R)
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CONTENTS
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FROM THE PRESIDENT.............................................1
Stephen Gibson's thoughts on the markets and investing
Performance Summary............................................3
Questions & Answers............................................4
Interview with the co-portfolio manager and
a summary of investment activity
Portfolio of Investments.......................................8
A complete list of investments with market values
Financial Statements...........................................11
Statements of assets and liabilities, operations
and changes in net assets
Notes to Financial Statements.................................18
Financial Highlights..........................................22
Selected per-share data and ratios
Report of Independent
Accountants...................................................23
Must be preceded or accompanied by a prospectus.
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FROM THE PRESIDENT
--------------------------------------------------------------------------------
TO OUR SHAREHOLDERS
I am pleased to present the fiscal year 2000 annual report for the Stein Roe
Growth Investor Fund. Although it was a very volatile 12 months for U.S. stocks,
the Fund delivered strong results and outperformed its benchmark, the Standard &
Poor's 500 Index.
The 12 months ended September 30, 2000 began with an exuberant stock
market. Between September 1999 and March 2000, investor enthusiasm for the
"new economy" and the underlying technology and telecommunications stocks was
enormous. Investors pushed the technology-laden NASDAQ Composite Index and the
Standard & Poor's 500 Index, which also contains a significant number of
technology stocks, to ever-higher levels. However, these results masked a basic
fact: the record gains were driven by price increases in a narrowly focused
group of growth stocks, and almost everything outside that group languished.
The situation changed quickly after mid-March, as investors began to question
the exceptionally high valuations for technology. They also began to worry about
the possible impact of robust economic growth on inflation, corporate profits
and, ultimately, earnings per share. Even though the Federal Reserve had boosted
key short-term interest rates repeatedly since June 1999, the economy continued
to expand at a rate that could lead to shortages and spark higher costs for
goods and services.
The widespread concern triggered a rapid sell-off in the equity markets, and
the high-flying technology sector tumbled. Investors retrenched and, amid the
volatility and uncertainty, went in search of companies that appeared to have
more reasonable prices and more solid fundamental characteristics - in other
words, value stocks. The resurgence of value stocks was good news for sectors as
varied as financial services, health care and utilities. Notwithstanding this
enormous volatility, the S&P 500 Index gained 13.27% for the full 12 months.
Looking back at the turmoil in the markets, I am reminded once again of the
importance of diversification in investing. Growth Investor Fund has been
managed so that it includes many sectors of the market. The portfolio managers
have made a point of diversifying across industry sectors, market
capitalizations and investment styles. This broad diversification helped to
Photo of: Stephen E. Gibson
1
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FROM THE PRESIDENT CONTINUED
--------------------------------------------------------------------------------
keep the Fund's total return very competitive when technology fell out of favor
and investors turned their attention elsewhere.
In the following report, you will find detailed information about the Fund
and the strategies used to achieve a one-year total return of more than 29%. I
encourage you to review the report carefully and to visit us on the Internet at
www.steinroe.com for quarterly updates on the progress of the markets and the
Fund.
As always, we thank you for choosing the Stein Roe funds and for giving us
the opportunity to serve your investment needs.
Sincerely,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
November 20, 2000
Because market and economic conditions change frequently, there can be no
assurance that the trends described above or on the following pages will
continue.
2
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PERFORMANCE SUMMARY
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIOD ENDED SEPTEMBER 30, 2000
1 5 LIFE OF
YEAR YEARS FUND
GROWTH INVESTOR FUND ----------------------------
(INCEPTION 4/29/94) 29.42% 22.74% 24.14%
Morningstar Large Growth Category 30.68 22.62 23.12
Stein Roe Growth Investor Fund commenced operations on 3/31/99. The Fund is a
feeder fund in a master/feeder structure and invests all of its assets in SR&F
Growth Investor Portfolio which has the same investment objective and policies
as the Fund. The Fund's historical performance for all periods prior to 3/31/99
is the performance of Stein Roe Young Investor Fund, a separate feeder fund of
the SR&F Growth Investor Portfolio, which commenced operations on April 29,
1994. Performance for Stein Roe Young Investor Fund is not restated for any
difference in expenses between the Fund and Young Investor Fund. Performance
after 3/31/1999 is the performance of Growth Investor Fund.
INVESTMENT COMPARISONS
--------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT April 29, 1994 to September 30, 2000
Stein Roe Growth Investor Fund
STEIN ROE MORNINGSTAR
GROWTH LARGE
INVESTOR S&P 500 GROWTH
FUND INDEX COMPANY
4/29/94 10000 10000 10000
10040 10163 10017.9
9699.64 9914.01 9612.88
9859.69 10239.2 9873.1
10299.4 10658 10399.7
9/30/94 10239.7 10397.9 10221.8
10659.5 10630.8 10435.2
10449.5 10243.9 10042.2
10737.9 10395.5 10131.1
10778.7 10664.7 10189.6
11031 11079.6 10559.1
3/31/95 11413.7 11406.4 10874.3
11545 11741.8 11097.9
11736.6 12210.3 11427.7
12723.7 12493.5 12023.8
13489.7 12907.1 12680.9
13661 12939.4 12759.8
9/30/95 14395.9 13485.4 13159.4
14103.7 13436.8 13012.7
14909 14025.4 13428.8
15010.4 14296.1 13395.5
15597.3 14782.1 13682.1
15806.3 14919.6 14033.6
3/31/96 16465.4 15062.8 14097.8
17575.2 15284.3 14603.1
18422.3 15677.1 15026.1
18777.9 15736.6 14810.8
17532.9 15041.1 13853.3
18318.4 15358.4 14353.5
9/30/96 19510.9 16221.6 15343.4
19782.1 16669.3 15395.4
20557.6 17927.8 16313.1
20278 17572.9 15943.8
21220.9 18669.4 16911.6
20669.2 18816.9 16511.6
3/31/97 19292.6 18045.4 15652.7
20158.8 19120.9 16358.1
21719.1 20289.2 17559
22759.5 21192.1 18249.9
24341.3 22876.8 19949.2
23506.4 21595.7 19149.8
9/30/97 24655.8 22777 20204.2
23940.8 22016.3 19449.4
24536.9 23035.6 19766.6
25606.7 23431.8 19940.3
25760.4 23689.6 20178.2
27826.4 25397.6 21772.5
3/31/98 28903.2 26698 22765.1
29232.7 26970.3 23114.8
28233 26506.4 22473.3
29847.9 27582.6 23772.3
28868.9 27290.2 23507.5
23513.7 23346.8 19686.8
9/30/98 24931.6 24843.3 21104.5
26646.9 26860.6 22449.4
28219.1 28488.3 24042
30123.8 30129.2 26580.6
31521.6 31388.6 28247.5
30405.7 30412.4 27024.1
3/31/99 32783.4 31628.9 28619.9
33668.6 32853 28855.7
32554.2 32077.6 27997.2
34126.5 33851.5 29962.1
32324.7 32798.8 29166
31700.8 32634.8 29163.6
9/30/99 30978 31740.6 28926.5
33502.7 33749.8 30900.2
35600 34434.9 32753.9
39665.5 36459.6 36827.5
38812.7 34629.4 35442.8
41828.4 33974.9 38352.3
3/31/00 43008 37297.6 40031
39597.5 36175 37628.3
35958.5 35433.4 35414.6
39270.2 36305 38057.3
38221.7 35738.7 37193.4
42024.8 37958 40440.4
9/30/00 40104 35981 37975.5
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 in the Fund on April 29,
1994, and reinvestment of income and capital gains distributions. The S&P 500
Index is an unmanaged group of stocks that differs from the composition of the
Fund; it is not available for direct investment.
The Fund's return is also compared to the average return of the funds included
in the Morningstar Large Growth category. This Morningstar category is composed
of funds with similar investment styles as measured by their underlying
portfolio holdings. Morningstar does not warrant 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 averages.
3
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QUESTIONS & Answers
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AN INTERVIEW WITH DAVE BRADY, CO-PORTFOLIO MANAGER
FOR STEIN ROE GROWTH INVESTOR FUND
FUND DATA
INVESTMENT OBJECTIVE AND STRATEGY:
Stein Roe Growth Investor Fund seeks long-term growth by
investing primarily in common stocks believed to have long-term growth
potential.
FUND INCEPTION:
March 31, 1999
NET ASSETS:
$39.6 million
Q: HOW DID THE FUND PERFORM DURING THE PAST 12 MONTHS?
BRADY: For the 12 months ended September 30, 2000, Stein Roe Growth Investor
Fund generated a total return of 29.42%, outperforming the 13.27% total return
for the Standard & Poor's 500 Index by a wide margin. We attribute the Fund's
strong results primarily to our investments in technology stocks (during the
initial half-year) and to utilities and financial services holdings (during the
latter half of the year).
Q: PLEASE EXPLAIN MORE ABOUT THE TECHNOLOGY SECTOR'S IMPACT ON THE FUND'S
PERFORMANCE.
BRADY: Technology's gains in the early months of the period were great enough
that this sector remains the leading contributor to the Fund's total return in
fiscal 2000, despite a downturn after mid-March in many areas of the technology
sector. Among the stocks that gained the most during the year were EMC (2.7% of
net assets) and Network Appliance (2.2% of net assets). Both are large-
capitalization companies that have benefited from growing demand for devices
used to store data.
The Fund also benefited from its holdings of Sun Microsystems (2.0% of net
assets), a manufacturer of computer servers; Intuit (2.8% of net assets), a
premier accounting software company; and Rational Software (2.6% of net assets),
a software tools company. As more
businesses have embraced the Internet, there has arisen a growing need for
customized software. Rational Software specializes in creating tools that allow
businesses to write such proprietary programs.
Q: HOW DID THE MARKET CHANGE DURING THE YEAR?
BRADY: At mid-year, the picture for U.S. economic growth and inflationary
pressures was quite murky.
Photo of: Dave Brady
4
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Q&A CONTINUED
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Some economic indicators pointed toward an economy growing too quickly to remain
stable and noninflationary. Others suggested that the economy could slow more
rapidly than the Federal Reserve had intended when making a series of interest
rate hikes between June 1999 and March 2000. In the face of this uncertainty,
the market rotated away from more expensive sectors -- namely technology and
telecommunications. As this rotation occurred, investors increasingly focused on
fundamentally sound areas that they had largely ignored, such as utilities and
financial services.
In May 2000, the Federal Reserve raised interest rates for the sixth time in
a year, this time by 0.50%. The move signaled that the central bank was very
serious about keeping economic growth and inflationary pressures at manageable
levels. In August and September, the Fed opted not to change its interest rate
targets. Again, the market interpreted this as a positive sign, assuming that
interest rates would not rise again soon. As a result, financial services stocks
chalked up gains in the final quarter the fiscal year.
Q: HOW DID THE FUND'S NON-TECHNOLOGY HOLDINGS PERFORM DURING THE PERIOD?
BRADY: Independent power producers such as Calpine (3.2% of net assets) and AES
Corp. (2.1% of net assets) did exceptionally well. Both have benefited from
deregulation of the power industry and from growing demand for power. In the
financial services arena, the Fund did well by holdings in Goldman Sachs,
Citigroup and Household International (2.4%, 3.4%, and 3.2%, respectively, of
net assets).
Many of the telecommunications stocks in the portfolio, including both
service and equipment providers, proved to be disappointments. In some cases,
the fault lay with the particular company; for instance, Worldcom's (1.1% of net
assets) failed attempt to merge with Sprint and Lucent Technologies' (0.8% of
net assets) problems in executing its business model. In all cases, unreasonable
expectations were at least part of the reason the stocks languished. In the past
18 months, stiff competition has hurt the profitability of companies providing
wire-based services, while excessive costs to develop key broadband technology
have hampered progress for the wireless companies. We are currently rethinking
our strategy for investing in the telecommunications sector.
5
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Q&A CONTINUED
--------------------------------------------------------------------------------
Q: WHAT DO YOU EXPECT IN THE MONTHS TO COME?
BRADY: We do not believe that the coming year will bring the exceptional rate of
earnings growth (18%) that we saw in the last fiscal year. If the Federal
Reserve is successful (as we expect it will be) in moderating economic growth
from the present 5% annually to the 3% to 4% range, then it stands to reason
that sales, revenues and earnings for at least some businesses would be tempered
as well. Thus we look for earnings-per-share growth rates to decelerate, which
would likely take the market back to its normal (i.e., historical long-term
average) total return.
Nonetheless, we expect a favorable environment for equity investors. We
anticipate corporate profit growth in the 14% to 16% range, with stable
interest rates. All these factors working together could create a favorable
equity marketplace in the months to come.
An investment in the Fund offers significant long-term growth potential, but
also involves certain risks. The Fund may be affected by stock market
fluctuations that occur in response to economic and business developments.
Holdings are calculated as a percentage of net assets in the SR&F Growth
Investor Portfolio. Because the Portfolio is actively managed, there can be no
guarantee the Portfolio will continue to maintain the holdings described in this
report.
6
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FUND HIGHLIGHTS AS OF SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
SR&F GROWTH INVESTOR FUND
TOP 10 HOLDINGS (% OF NET ASSETS)
--------------------------------------------------------------------------------
Citigroup 3.4% Safeway 2.8%
Calpine 3.2 Intuit 2.8
Household International 3.2 EMC 2.7
General Electric 3.1 Rational Software 2.6
Johnson & Johnson 2.9 Walgreen 2.6
--------------------------------------------------------------------------------
[PIE CHARTS]
EQUITY PORTFOLIO HIGHLIGHTS
S&P 500
PORTFOLIO INDEX
--------------------------------------------------------------------------------
Number of Holdings 48 500
Dollar Weighted Median
Market Capitalization ($mil.) 40,279 80,912
--------------------------------------------------------------------------------
[PIE CHARTS]
ECONOMIC SECTOR BREAKDOWN
Equity Portfolio S&P 500 Index
1% Basic Materials 2%
17% Consumer Cyclical 10%
10% Consumer Non-Cyclical 18%
2% Energy 7%
15% Financial 16%
10% Industrial 8%
31% Technology 30%
14% Utilities 9%
--------------------------------------------------------------------------------
ASSET ALLOCATION
As of September 30, 1999 As of September 30, 2000
96.6% Equities 92.5%
3.4 Cash, Equivalents and Other 7.5
7
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SR&F GROWTH INVESTOR PORTFOLIO
--------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
September 30, 2000 (In thousands)
COMMON STOCKS - 92.5% SHARES VALUE
--------------------------------------------------------------------------------
CONSUMER DISCRETIONARY - 12.9%
AUTOMOBILES & COMPONENTS - 0.8%
AUTOMOBILE MANUFACTURERS
Ford Motor Co..................................... 437 $ 11,063
----------
CONSUMER DURABLES & APPAREL - 1.4%
LEISURE PRODUCTS
Mattel, Inc. ..................................... 1,800 20,138
----------
HOTELS, RESTAURANTS & LEISURE - 2.0%
LEISURE FACILITIES - 0.4%
Cedar Fair, LP.................................... 315 5,808
----------
RESTAURANTS - 1.6%
McDonald's Corp. ................................. 750 22,641
----------
MEDIA - 7.0%
BROADCASTING & CABLE - 4.8%
AT&T Corp.-Liberty Media Group, Class A (a) ...... 1,400 25,200
Clear Channel Communications, Inc. (a) ........... 450 25,425
Hispanic Broadcasting Corp. (a) .................. 650 18,119
----------
68,744
----------
MOVIES & ENTERTAINMENT - 2.2%
The Walt Disney Co. ............................. 850 32,513
----------
RETAILING - 1.7%
APPAREL RETAIL
The Gap, Inc. .................................... 1,250 25,156
----------
CONSUMER STAPLES - 5.4%
FOOD & DRUG RETAILING - 2.6%
DRUG RETAIL
Walgreen Co. ..................................... 1,000 37,938
----------
FOOD RETAIL - 2.8%
Safeway, Inc. (a) ................................ 880 41,085
----------
FINANCIALS - 13.7%
BANKS - 3.0%
Texas Regional Bancshares, Inc., Class A ......... 375 10,641
Wells Fargo & Co. ................................ 700 32,156
----------
42,797
----------
CONSUMER FINANCE - 5.0%
Household International, Inc. .................... 805 45,583
MBNA Corp......................................... 700 26,950
--------
72,533
--------
DIVERSIFIED FINANCIAL SERVICES - 5.7%
Citigroup, Inc. .................................. 900 48,656
The Goldman Sachs Group, Inc. .................... 300 34,181
----------
82,837
----------
8
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SR&F GROWTH INVESTOR PORTFOLIO CONTINUED
--------------------------------------------------------------------------------
SHARES VALUE
--------------------------------------------------------------------------------
HEALTH CARE - 6.2%
PHARMACEUTICALS & BIOTECHNOLOGY - 1.3%
BIOTECHNOLOGY
Genentech, Inc. (a) .............................. 100 $ 18,569
----------
PHARMACEUTICALS - 4.9%
American Home Products Corp. .................... 500 28,281
Johnson & Johnson ................................ 450 42,272
----------
70,553
----------
INDUSTRIALS - 7.2%
CAPITAL GOODS - 5.0%
INDUSTRIAL CONGLOMERATES
General Electric Co. ............................. 765 44,131
Tyco International Ltd. .......................... 550 28,531
----------
72,662
----------
COMMERCIAL SERVICES & SUPPLIES - 2.2%
DATA PROCESSING SERVICES - 2.2%
Paychex, Inc. .................................... 615 32,288
----------
INFORMATION TECHNOLOGY - 32.3%
SOFTWARE & SERVICES - 12.1%
APPLICATIONS SOFTWARE - 5.4%
Intuit, Inc. (a).................................. 700 39,900
Rational Software Corp. (a) ...................... 550 38,156
----------
78,056
----------
INTERNET SOFTWARE & SERVICES - 2.4%
America Online, Inc. ............................. 650 34,937
----------
SYSTEMS SOFTWARE - 4.3%
Microsoft Corp. (a) .............................. 560 33,740
VERITAS Software Corp. (a)........................ 200 28,400
----------
62,140
----------
TECHNOLOGY HARDWARE & EQUIPMENT - 20.2%
COMPUTER HARDWARE - 3.2%
Apple Computer, Inc. ............................. 675 17,381
Sun Microsystems, Inc. (a) ....................... 250 29,188
----------
46,569
----------
COMPUTER STORAGE & PERIPHERALS - 5.0%
EMC Corp. (a)..................................... 400 39,650
Network Appliance, Inc. (a)....................... 250 31,844
----------
71,494
----------
NETWORKING EQUIPMENT - 1.7%
Cisco Systems, Inc. (a) .......................... 450 24,862
----------
SEMICONDUCTOR EQUIPMENT - 0.9%
KLA-Tencor Corp. (a).............................. 300 12,356
----------
SEMICONDUCTORS - 3.0%
Bookham Technology PLC (a) ...................... 265 11,362
Maxim Integrated Products, Inc. (a) .............. 400 32,175
----------
43,537
----------
9
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SR&F GROWTH INVESTOR PORTFOLIO CONTINUED
--------------------------------------------------------------------------------
SHARES VALUE
--------------------------------------------------------------------------------
TECHNOLOGY HARDWARE & EQUIPMENT - 20.2% (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT - 6.4%
Comverse Technology, Inc. (a) .................... 300 $ 32,400
Corning, Inc. .................................... 106 31,482
Lucent Technologies, Inc.......................... 400 12,225
Motorola, Inc. ................................... 600 16,950
----------
93,057
----------
MATERIALS - 1.0%
CHEMICALS - 1.0%
SPECIALTY CHEMICALS
Minerals Technologies, Inc. ...................... 300 13,800
----------
TELECOMMUNICATION SERVICES - 6.6%
DIVERSIFIED TELECOM SERVICES - 5.3%
ALTERNATIVE CARRIERS - 4.2%
Level 3 Communications, Inc. (a) ................. 425 32,778
Qwest Communications International, Inc. (a) ..... 583 28,023
----------
60,801
----------
INTEGRATED TELECOM SERVICES - 1.1%
WorldCom, Inc. (a) ............................... 500 15,188
----------
WIRELESS TELECOM SERVICES - 1.3%
Vodafone Group PLC, ADR .......................... 500 18,500
----------
UTILITIES - 7.2%
ELECTRIC UTILITIES - 5.4%
AES Corp. (a)..................................... 450 30,824
Calpine Corp. (a) ................................ 450 46,969
----------
77,793
----------
GAS UTILITIES - 1.8%
Kinder Morgan, Inc. ............................. 650 26,609
----------
TOTAL COMMON STOCKS (cost of $907,041) (b)........... 1,337,024
----------
--------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 4.6% PAR
--------------------------------------------------------------------------------
COMMERCIAL PAPER - 4.6%
Associates Corp. of North America 6.790% (c) 10/2/00 $ 47,415 47,406
Houston Industries Financial Corp. 7.100% (c) 10/2/00 19,430 19,426
----------
TOTAL SHORT-TERM OBLIGATIONS......................... 66,832
----------
--------------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - 2.9%............... 41,388
----------
NET ASSETS - 100%.................................... $1,445,244
==========
--------------------------------------------------------------------------------
NOTES TO INVESTMENT PORTFOLIO
--------------------------------------------------------------------------------
(a) Non-income producing.
(b) Cost for federal income tax purposes is $909,541.
(c) Rate represents yield at time of purchase.
Acronym Name
----------- ----------
ADR American Depositary Receipt
10
<PAGE>
SR&F GROWTH INVESTOR PORTFOLIO
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2000
(In thousands)
ASSETS
Investments, at market value (cost $907,041)...... $1,337,024
Short-term obligations............................ 66,832
Cash.............................................. 3
Receivable for:
Investments sold............................... 74,140
Dividends...................................... 474
----------
Total Assets .................................. 1,478,473
----------
LIABILITIES
Payable for investments purchased ................ 32,534
Accrued:
Management fee ................................ 685
Bookkeeping fee................................ 5
Transfer agent fee............................. 1
Other............................................. 4
----------
Total Liabilities ............................. 33,229
----------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTEREST $1,445,244
==========
See notes to financial statements.
11
<PAGE>
SR&F GROWTH INVESTOR PORTFOLIO
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended September 30, 2000
(In thousands)
INVESTMENT INCOME
Dividends ........................................ $ 6,720
Interest ......................................... 1,457
--------
Total investment income ....................... 8,177
--------
EXPENSES
Management fee ................................... 7,245
Bookkeeping fee .................................. 56
Trustees' fee..................................... 27
Audit fee......................................... 12
Legal fee......................................... 1
Transfer agent fee ............................... 6
Custodian fee..................................... 29
Other ............................................ 39
--------
7,415
--------
Net investment income ......................... 762
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments.................. 140,322
Net change in unrealized appreciation/depreciation 187,931
--------
Net Gain................................ 328,253
--------
Increase in net assets resulting from operations $329,015
========
See notes to financial statements.
12
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SR&F GROWTH INVESTOR PORTFOLIO
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
(In thousands)
YEARS ENDED
SEPTEMBER 30,
2000 1999
---------- ----------
OPERATIONS
Net investment income............................. $ 762 $ 2,122
Net realized gain on investments.................. 140,322 944
Net change in unrealized appreciation/depreciation 187,931 169,408
---------- ----------
Net increase in net assets resulting
from operations............................ 329,015 172,474
---------- ----------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions..................................... 885,014 274,918
Withdrawals ...................................... (755,625) (183,222)
---------- ----------
Net increase from transactions in investors'
beneficial interest......................... 129,389 91,696
---------- ----------
Net increase in net assets........................ 458,404 264,170
NET ASSETS
Beginning of year................................. 986,840 722,670
---------- ----------
End of year....................................... $1,445,244 $ 986,840
========== ==========
See notes to financial statements.
13
<PAGE>
LIBERTY GROWTH INVESTOR FUND
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2000
(All amounts in thousands, except per-share data)
ASSETS
Investment in Portfolio, at value................. $ 39,662
Receivable for expense reimbursement due from Advisor 7
Other............................................. 4
--------
Total Assets.................................. 39,673
--------
LIABILITIES
Accrued:
Administration fee............................ 5
Distribution fee - Class B.................... 1
Other............................................. 34
--------
Total Liabilities ............................. 40
--------
NET ASSETS ....................................... $ 39,633
========
ANALYSIS OF NET ASSETS
Paid-in capital................................... $ 36,768
Accumulated net realized loss allocated from Portfolio (1,735)
Net unrealized appreciation allocated from Portfolio 4,600
--------
Net Assets........................................ $ 39,633
========
Net asset value and redemption price
per share - Class A ($4,198/344)............... $ 12.22(a)
--------
Maximum offering price
per share - Class A ($12.22/0.9425)............ $ 12.97(b)
--------
Net asset value and offering price
per share - Class B ($14,744/1,214)............ $ 12.15(a)
--------
Net asset value and offering price
per share - Class C ($700/58).................. $ 12.13(a)
--------
Netasset value, offering and redemption price per share -
Stein Roe Growth Investor Fund,
Class S ($19,990/1,634)........................ $ 12.23
--------
Net asset value, offering and and redemption price
per share - Class Z ($1/(c))................... $ 12.24
--------
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
(b) On sales of $50,000 or more the offering price is reduced.
(c) Rounds to less than one.
See notes to financial statements.
14
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LIBERTY GROWTH INVESTOR FUND
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED SEPTEMBER 30, 2000
(All amounts in thousands)
INVESTMENT INCOME
Dividend Income allocated from Portfolio.......... $ 115
Interest Income allocated from Portfolio.......... 31
--------
Total investment income........................ 146
--------
EXPENSES
Expenses allocated from Portfolio................. 142
Administration fee................................ 38
12b-1 Service and Distribution fees............... 77
Transfer agent fee................................ 61
Bookkeeping fee................................... 25
Trustees' fee..................................... 9
Custodian fee..................................... 1
Audit fee......................................... 10
Legal fee......................................... 3
Registration fee.................................. 111
Reports to shareholders........................... 10
Other............................................. 57
--------
Total Expenses................................. 544
Fees waived or borne by Advisor................... (189)
Fees waived by Distributor - Class A.............. (1)
--------
Net Expenses...................................... 354
--------
Net Investment Loss............................... (208)
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
ALLOCATED FROM PORTFOLIO
Net realized loss................................. (484)
Net change in unrealized appreciation/depreciation 4,134
--------
Net Gain ...................................... 3,650
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 3,442
========
See accompanying Notes to Financial Statements.
15
<PAGE>
LIBERTY GROWTH INVESTOR FUND
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
(All amounts in thousands)
YEAR ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000(a) 1999(b)
------------- -------------
OPERATIONS
Net investment loss............................... $ (208) $ (13)
Net realized loss ................................ (484) (1,265)
Net change in unrealized appreciation/depreciation 4,134 466
--------- ---------
Net increase (decrease) in net assets resulting
from operations................................ 3,442 (812)
--------- ---------
SHARE TRANSACTIONS:
Receipts for shares sold - Class A................ 4,558 --
Cost of shares repurchased - Class A.............. (295) --
--------- ---------
4,263 --
--------- ---------
Receipts for shares sold - Class B................ 16,473 --
Cost of shares repurchased - Class B.............. (1,663) --
--------- ---------
14,810 --
--------- ---------
Receipts for shares sold - Class C................ 792 --
Cost of shares repurchased - Class C.............. (95) --
--------- ---------
697 --
--------- ---------
Stein Roe Growth Investor Fund:
Receipts for shares sold - Class S................ 19,447 13,533
Cost of shares repurchased - Class S.............. (14,356) (1,392)
--------- ---------
5,091 12,141
--------- ---------
Receipt for shares sold - Class Z................. 1 --
--------- ---------
Net increase from Fund share transactions......... 24,862 12,141
--------- ---------
Net increase in net assets........................ 28,304 11,329
TOTAL NET ASSETS
Beginning of period............................... 11,329 --
--------- ---------
End of period..................................... $ 39,633 $ 11,329
========= =========
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME $ -- $ --
========= =========
(a) Class A, Class B, Class C and Class Z shares were initially offered on
December 1, 1999.
(b) From commencement of operations on March 31, 1999.
See notes to financial statements.
16
<PAGE>
LIBERTY GROWTH INVESTOR FUND
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
(All amounts in thousands)
YEAR ENDED PERIOD ENDED
SEPTEMBER 30 SEPTEMBER 30
2000(a) 1999(b)
------------ ------------
CHANGES IN SHARES OF BENEFICIAL INTEREST
Sold - Class A.................................... 367 --
Repurchased - Class A............................. (23) ---
--------- ---------
344 --
Sold - Class B.................................... 1,349 --
Repurchased - Class B............................. (135) --
--------- ---------
1,214 --
Sold - Class C.................................... 65 --
Repurchased - Class C............................. (7) --
--------- ---------
58 --
Stein Roe Growth Investor Fund:
Sold - Class S.................................... 1,604 1,337
Repurchased - Class S............................. (1,169) (138)
--------- ---------
435 1,199
Sold - Class Z.................................... (c) --
--------- ---------
Net increase in fund shares....................... 2,051 --
Shares outstanding at beginning of period......... 1,199 --
--------- ---------
Shares outstanding at end of period............... 3,250 1,199
========= =========
(a) Class A, Class B, Class C and Class Z shares were initially offered on
December 1, 1999.
(b) From commencement of operations on March 31, 1999.
(c) Rounds to less than one.
See notes to financial statements.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Stein Roe Growth Investor Fund - Class S and Liberty Growth Investor Fund -
Class A, B, C and Z are the collective series of shares of Liberty Growth
Investor Fund (the "Fund" - formerly Stein Roe Growth Investor Fund) 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 Growth Investor Portfolio (the
"Portfolio"), which seeks to achieve long-term capital appreciation by investing
primarily in common stocks and other equity-type securities that are believed to
have long term appreciation potential. The Fund may issue an unlimited number of
shares. The Fund offers five classes of shares: Class A, Class B, Class C, Class
S and Class Z. This report is intended for the shareholders of Stein Roe Growth
Investor Fund - Class S Shares. Effective October 31, 1999, Class S shares
closed to new investors. Each share class has its own sales charge and expense
structure, please refer to the Liberty Growth Investor Fund's prospectus for
more information on Class A, Class B, Class C and Class Z shares. The financial
highlights for Class A, Class B, Class C and Class Z are presented in a separate
annual report.
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 2.7% 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 for the 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 their financial statements.
SECURITY VALUATION AND TRANSACTIONS
Equity securities generally are valued at the last sale price or, in the case of
unlisted or listed securities for which there were no sales during the day, at
current quoted bid price.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
--------------------------------------------------------------------------------
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 12b-1 service fees 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.
The per share data was calculated using the average shares outstanding during
the period.
FEDERAL INCOME TAXES
No provision is made for federal income taxes since (a) the Fund elects to be
taxed as a "regulated investment company" and makes distributions to its
shareholders to be relieved of all federal income taxes under provisions of
current federal tax law; and (b) the Portfolio is treated as a partnership for
federal income tax purposes and all of its income is allocated to its owners
based on methods approved by the Internal Revenue Service.
The Fund intends to utilize provisions of the federal income tax law, which
allow the Fund to carry a realized capital loss forward up to eight years
following the year of the loss, and offset such losses against any future
realized gains. At September 30, 2000, the Fund had capital loss carryforwards
of $1,272,613 which expires in 2008.
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.
OTHER
Interest income is recorded on the accrual basis. Corporate actions and
dividends are recorded on the ex-date.
--------------------------------------------------------------------------------
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT FEE
Stein Roe and Farnham Inc. (the Advisor) is the investment Advisor of the
Portfolio and receives a monthly fee as follows:
Average Net Assets Annual Fee Rate
------------------ ---------------
First $500 million 0.60%
Next $500 million 0.55%
Over $1 billion 0.50%
ADMINISTRATION FEE
The Advisor also provides accounting and other services to the Fund for a
monthly fee as follows:
Average Net Assets Annual Fee Rate
------------------ ---------------
First $500 million 0.150%
Next $500 million 0.125%
Over $1 billion 0.100%
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
--------------------------------------------------------------------------------
BOOKKEEPING FEE
The Advisor provides bookkeeping and pricing services to the Fund for a monthly
fee to equal to $25,000 annually plus 0.0025% annually of the Fund's and
Portfolio's average 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
Class S's average daily net assets and receives reimbursement for certain out of
pocket expenses. Transfer agent fees for Class A, Class B, Class C and Class Z
are described in the Fund's Class A, Class B, Class C and Class Z's prospectus.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES
Liberty Funds Distributor, Inc. (the Distributor), a subsidiary of the Advisor,
is the Fund's principal underwriter.
The Fund has adopted a 12b-1 plan which requires it to pay the Distributor
a service fee on Class A, Class B and Class C net assets. The plan also requires
the payment of a distribution fee to the Distributor on Class A, Class B and
Class C shares only. The fee structure for the 12b-1 plan is defined in the
Class A, Class B and Class C prospectus.
EXPENSE LIMITS
The Advisor has agreed, until further notice, to waive fees and bear certain
Fund expenses to the extent that total expenses (exclusive of service fees,
distribution fees, brokerage commissions, interest, taxes and extraordinary
expenses, if any) exceed 1.10% annually of the Fund's average net assets.
OTHER
The Fund pays no compensation to its officers, all of whom are employees of the
Advisor.
--------------------------------------------------------------------------------
NOTE 3. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY
During the year ended September 30, 2000, purchases and sales of investments,
other than short-term obligations, were $976,309,339 and $915,033,633
respectively.
Unrealized appreciation (depreciation) at September 30, 2000 based on cost of
investments for federal income tax purposes was:
Gross unrealized
appreciation $502,478,058
Gross unrealized
depreciation (74,995,022)
------------
Net unrealized
appreciation $427,483,036
------------
OTHER
The Portfolio may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
--------------------------------------------------------------------------------
NOTE 4. LINE OF CREDIT
The Liberty-Stein Roe Funds Investment Trust and SR&F Base Trust participate in
unsecured line of credit agreements provided by the custodian bank consisting of
two components. The committed line of credit entitles the 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 the Fund based on the relative
asset size of the Fund to the Trust as a whole. The commitment fee is included
in other expenses on the Statement of Operations. For the year ended September
30, 2000, the Trust and the 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 $63,249.
21
<PAGE>
FINANCIAL HIGHLIGHTS - CLASS S
--------------------------------------------------------------------------------
STEIN ROE GROWTH INVESTOR FUND
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 (a)
-------------- --------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................. $ 9.45 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (b)(c)........................... (0.05) (0.02)
Net realized and unrealized gain (loss) on investments 2.83 (0.53)
------- -------
Total from investment operations..................... 2.78 (0.55)
------- -------
NET ASSET VALUE, END OF PERIOD....................... $ 12.23 $ 9.45
======= =======
Ratio of net expenses to average net assets (f)...... 1.08% 1.10%(e)
Ratio of net investment loss to average net assets (f) (0.51)% (0.34)%(e)
Total return......................................... 29.42%(f) (5.50)%(g)
Net assets, end of
period (000's).................................... $19,990 $11,329
(a) From commencement of operations on March 31, 1999.
(b) Net of fees and expenses waived or borne
by the Advisor which amounted to:................ $ 0.088 $ 0.064
(c) Per share data was calculated using average shares outstanding during the
period.
(d) If the Fund had paid all of its expenses and there had been no reimbursement
by the Advisor, this ratio would have been 1.82% for the year ended
September 30, 2000 and 2.34% (annualized) for the year ended
September 30, 1999.
(e) Annualized.
(f) Computed giving effect to the Advisor's expense limitation undertaking.
(g) Not annualized.
</TABLE>
--------------------------------------------------------------------------------
SR&F GROWTH INVESTOR PORTFOLIO
<TABLE>
<CAPTION>
PERIOD ENDED
YEARS ENDED SEPTEMBER 30, SEPTEMBER 30,
2000 1999 1998 1997(a)
----- ----- --------------------
<S> <C> <C> <C> <C>
Ratio of net expenses to
average net assets......... 0.57% 0.59% 0.62% 0.63%(b)
Ratio of net investment income
to average net assets...... 0.06% 0.25% 0.42% 0.54%(b)
Portfolio turnover rate....... 72% 45% 45% 38%
(a) From commencement of operations on February 3, 1997.
(b) Annualized.
</TABLE>
22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
To the Trustees of Liberty-Stein Roe
Funds Investment Trust and SR&F
Base Trust and Stein Roe Growth
Investor Fund - Class S Shareholders
of Liberty Growth Investor Fund
In our opinion, the accompanying statements of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the Portfolio and Class S financial highlights present
fairly, in all material respects, the financial position of Liberty Growth
Investor Fund (the "Fund")(a series of Liberty-Stein Roe Funds Investment Trust)
and SR&F Growth Investor Portfolio (the "Portfolio")(a series of SR&FBase 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 the
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's and the Portfolio's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States of America, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at September 30, 2000 by correspondence with the custodian,
provide a reasonable basis for our opinion. The financial highlights of the
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
23
<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
Joseph R. Palombo
Chairman of the Board of Trustees
Executive Vice President and Director,
Colonial Management Associates
Thomas C. Theobald
Managing Partner, William Blair Capital Partners
OFFICERS
Stephen E. Gibson, President
William D. Andrews, Executive Vice President
Kevin M. Carome, Executive Vice President,
Secretary
Loren A. Hansen, Executive Vice President
Joseph R. Palombo, Executive Vice President
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
Young Investor Fund
Midcap Growth Fund
Focus Fund
Capital Opportunities Fund
Small Company Growth Fund
INTERNATIONAL FUNDS
Asia Pacific Fund
International Fund
Small Cap Tiger Fund
Stein Roe Mutual Funds
P.O. Box 8900
Boston, MA 02205-8900
800-338-2550
www.steinroe.com
Liberty Funds Distributor, Inc.
S38-02/187D-0900 (11/00) 00/2078
