STEIN ROE MUTUAL FUNDS
ANNUAL REPORT
SEPTEMBER 30, 2000
PHOTO OF: HANDS HOLDING PLANT.
STEIN ROE EQUITY FUNDS
GROWTH FUNDS
CAPITAL OPPORTUNITIES FUND
LOGO: STEIN ROE MUTUAL FUNDS
SENSIBLE RISKS. INTELLIGENT INVESTMENTS.(R)
<PAGE>
Contents
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From the President................................................ 1
Stephen E. Gibson's thoughts on the equity markets and investing
Performance Summary............................................... 2
Questions & Answers............................................... 3
An interview with your Portfolio Managers David Brady
and Steve Hayward
Fund Highlights................................................... 6
Portfolio of Investments.......................................... 7
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..................................... 14
Financial Highlights.............................................. 18
Selected per-share data and ratios
Report of Independent Accountants................................. 20
Must be preceded or accompanied by a prospectus.
<PAGE>
From the President
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DEAR SHAREHOLDER:
It has been a good year for the Stein Roe Capital Opportunities Fund Class S
shares. During an extraordinary period for mid-cap stocks, the Fund delivered a
positive total return of 66.20% compared to a positive total return of 43.22%
for its benchmark, the S&P MidCap 400 Index1 for the year ended September 30,
2000. Like many of the major market indices, mid-cap stocks exhibited volatility
between October 1999 and September 2000. For every two months of gains, the S&P
MidCap 400 Index had one month of losses. Still, this segment of the market
proved to be a strong performer over the 12-month period.
Your Fund's portfolio managers, David Brady and Steve Hayward, believe
mid-cap stocks hold a unique position in the market. In their view, stocks with
market capitalizations between approximately $5 billion and $10 billion
represent one of the few opportunities to invest in fast-growing companies that
are reasonably valued. By contrast, they believe larger companies have
difficulty growing quickly enough to keep up with their current valuations,
while many smaller, younger firms are still looking to generate consistent
profits.
Early in the fiscal year, investors were focused on a narrow group of rapidly
evolving technology and telecommunications stocks, which soared to record levels
between October 1999 and March 2000. Then concerns about higher inflation and
interest rates changed investors' perspectives. Widespread selling resulted, and
investors went in search of alternatives to technology that appeared reasonably
valued and better able to deliver reliable earnings.
Take a look at the report inside for a further discussion on the economic and
market factors that affected the Fund's performance. Thank you for choosing the
Stein Roe Capital Opportunities Fund and for giving us the opportunity to serve
your investment needs.
Sincerely,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
November 20, 2000
1 See benchmark index chart on page 2 for performance results.
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
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Performance Summary
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AVERAGE ANNUAL TOTAL RETURNS
Period Ended September 30, 2000
ONE FIVE TEN
YEAR YEARS YEARS
--------------------------------------------------------------------------------
CAPITAL OPPORTUNITIES FUND CLASS S 66.20% 18.06% 21.54%
S&P MidCap 400 Index 43.22 21.71 21.75
Morningstar Mid-Cap Growth category 65.70 23.49 22.00
Investment Comparisons
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GROWTH OF A $10,000 INVESTMENT September 30, 1990 to September 30, 2000
--------------------------------------------------------------------------------
Stein Roe Capital Opportunities Fund
LINE CHART:
Stein Roe Capital S&P MidCap Morningstar Mid-Cap
Opportunities Fund Class S 400 Index Growth Category
9/30/90 10000 10000 10000
10760 11244 11018
13439 13826 13682.2
13558 13725 13412.6
9/30/91 15351 15031 14861.2
17516 16879 16665.3
16636 16793 16462
15715 16270 15222.4
9/30/92 16271 16903 15765.9
17942 18888 18130.7
18125 19507 18272.2
19242 19962 18893.4
9/30/93 21805 20966 20573
22880 21523 20953.6
21651 20706 20218.2
20280 19950 18950.5
9/30/94 22308 21300 20635.2
22882 20751 20637.2
24740 22430 22096.3
27058 24408 24354.5
9/30/95 30662 26790 27442.7
34495 27173 27939.4
39265 28847 29758.3
44656 29678 31743.1
9/30/96 45853 30541 32660.5
41525 32392 32745.4
33901 31910 30096.3
41139 36600 35038.1
9/30/97 42986 42486 40392
44078 42838 38457.2
49587 47555 43456.6
49825 46537 43565.3
9/30/98 37299 39803 35597.2
43372 51024 45169.3
42174 47768 46786.3
44819 54528 52171.4
9/30/99 42309 49947 52369.7
60861 58533 74789.2
71549 65961 87795
65310 63784 82562.4
9/30/00 70338 71534 86434.6
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. The S&P MidCap 400 Index
is an unmanaged group of mid-cap stocks that differs from the composition of the
Fund; it is not available for direct investment. Source: Liberty Funds
Distributor, Inc., Morningstar.
The Fund's return is also compared to the average return of the funds included
in the Morningstar Mid-Cap Growth 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 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's averages.
2
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Q&A
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AN INTERVIEW WITH DAVID BRADY AND STEVE HAYWARD, PORTFOLIO MANAGERS OF STEIN ROE
CAPITAL OPPORTUNITIES FUND
FUND DATA
INVESTMENT OBJECTIVE AND STRATEGY:
Stein Roe Capital Opportunities Fund seeks long-term growth by investing in
the stocks of aggressive growth companies. An aggressive growth company has
the ability to increase its earnings at an above-average rate.
FUND INCEPTION:
March 31, 1969
NET ASSETS:
$564.1 million
Photo: STEVE HAYWARD
Q: HOW DID THE FUND PERFORM DURING THE PERIOD?
A: The Stein Roe Capital Opportunities Fund returned 66.20% for the 12 months
ended September 30, 2000 compared to 43.22% for its benchmark, the S&P MidCap
400 Index during the same period.
Q: TO WHAT DO YOU ATTRIBUTE THIS STRONG PERFORMANCE?
A: The Fund's strong performance is attributed to our repositioning and
diversification of the portfolio. Throughout the fiscal year, we worked to shift
the Fund's focus to medium-sized companies with growth potential. By the end of
the current fiscal year, the transition was nearly completed, with only a few
large-cap companies such as Northern Trust, Kohl's and Broadcom remaining in the
portfolio. These large-cap holdings have appreciated since we acquired them so
we are selling them with caution to avoid large capital gains. For new
purchases, we targeted companies with market capitalizations below $10 billion,
particularly those in the $5-$7 billion range.
Photo of: David Brady
David Brady
Photo of: Steve Hayward
Steve Hayward
Q: WHICH SECTORS WERE MOST SUCCESSFUL DURING THE PERIOD?
A: Technology and telecommunications stocks were the unquestioned leaders of the
market and for the Fund during the first half of the fiscal year. Investors were
enthusiastic about the potential of technology to restructure our economy, and
stock prices reflected this positive attitude. We invested a significant amount
in companies
3
<PAGE>
Q&A Continued
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providing component parts and infrastructure for this major transformation, such
as semiconductors, communications antennas and lasers. The strategy worked well,
and our technology holdings were major contributors to performance. In March,
the markets grew increasingly volatile as a result of robust economic growth,
inflation fears, rising oil prices and signs that some companies would not hit
their earnings targets. Since technology and telecommunications stocks suffered
most during the downturn, the Fundholdings in these sectors were not significant
contributors to performance in the latter half of the year.
Although we continue to believe in the viability of technology over the long
run, we responded to the skittish market by trimming our technology allocation
slightly and adding to our holdings of consumer products and financial services.
Q: IN LIGHT OF THE DECLINE OF TECHNOLOGY STOCKS OVER THE LAST SIX MONTHS, DID
OTHER SECTORS PROSPER?
A: Yes. As prices for technology stocks declined, other sectors of the market
blossomed including financial services, health care and energy. Thus, the Fund
benefited in the second half of the fiscal year from its investments in
companies like Northern Trust (2.8%) and MGIC (1.9%), companies which provide
trust/asset management services. Fiserv (3.4%), a provider of information
management services, also rose over the period. We also benefited from Forest
Labs, which develops and manufactures name brand and generic prescription drugs,
and over-the-counter drugs that are sold primarily in the United Kingdom.
Other late contributors to performance were consumer products companies such
as Kohl's (3.1%), an aggressively expanding, Midwest-based department store
chain; Harley-Davidson (3.0%), the motorcycle manufacturer; and Starbucks
(1.4%), the nationwide chain of coffee shops.
Q: WHAT IS YOUR OUTLOOK FOR THE MARKET AND MID-CAP STOCKS?
A: As fiscal 2001 begins, we believe that higher earnings will provide support
for higher valuations of mid-cap technology and telecommunications stocks.
Although we believe that some large-cap stocks, and a significant number of
small-cap stocks will be unable to generate reliable earnings, we do not believe
the problem will become so widespread or persist long enough to encompass
mid-cap stocks. Finally, it is our belief that a period of
4
<PAGE>
Q&A Continued
--------------------------------------------------------------------------------
uncertainty will continue, generated by interest rate volatility and stagnant
corporate profits, which should help to keep values reasonable and should allow
us to find new opportunities to purchase stocks with strong growth prospects at
attractive prices.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Total return performance
includes changes in share price and reinvestment of income and capital gains
distributions. Share price and investment returns will vary, so you may have a
gain or loss when you sell your shares. Portfolio holdings are as of 9/30/00 and
are subject to change. The S&P MidCap 400 Index is an unmanaged group of stocks
not associated with any Liberty Fund; it is not available for direct investment.
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5
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Fund Highlights As of September 30, 2000
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Stein Roe Capital Opportunities Fund
TOP 10 HOLDINGS (% OF NET ASSETS)
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SDL, Inc. 4.9% Kohls 3.1%
Network Appliance 4.5 Harley Davidson 3.0
Sanmina 4.1 Flextronics Intl. 2.9
Comverse Technology 3.8 Northern Trust 2.8
Fiserv 3.4 Broadcom 2.4
--------------------------------------------------------------------------------
EQUITY PORTFOLIO HIGHLIGHTS
S&P MIDCAP
PORTFOLIO 400 INDEX
---------------------------
Number of Holdings 57 400
Dollar Weighted Median
Market Capitalization ($Mil.) 10,214.3 3,277.49
--------------------------------------------------------------------------------
PIE CHARTS:
ECONOMIC SECTOR BREAKDOWN
Equity S&P MidCap
Portfolio 400 Index
Basic Materials 0% 2%
Consumer Cyclical 22 12
Consumer Noncyclical 6 14
Energy 6 10
Financial 7 12
Industrial 2 8
Technology 54 31
Utilities 3 11
--------------------------------------------------------------------------------
PIE CHARTS:
ASSET ALLOCATION
As of As of
September 30, 1999 September 30, 2000
Equities 99.0% 99.7%
Bonds, Cash Equivalents
& Other 1.0% 0.3%
6
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Stein Roe Capital Opportunities Fund
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Investment Portfolio
September 30, 2000 (In thousands)
COMMON STOCKS - 99.7% SHARES VALUE
--------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES - 6.8%
DATA PROCESSING SERVICES - 3.5%
Fiserv, Inc. (a).................................. 325 $ 19,459
--------
DIVERSIFIED COMMERCIAL SERVICES - 2.0%
Diamond Technology Partners, Inc. (a)............. 150 11,138
--------
EMPLOYMENT SERVICES - 1.3%
Korn/Ferry International (a)...................... 200 7,563
--------
CONSUMER DISCRETIONARY - 7.1%
AUTOMOBILES & COMPONENTS - 0.8%
Gentex Corp. (a).................................. 175 4,375
--------
HOTELS, RESTAURANTS & LEISURE - 1.9%
HOTELS - 1.9%
Four Seasons Hotels, Inc.......................... 150 10,978
--------
MOTORCYCLE MANUFACTURERS - 3.0%
Harley-Davidson, Inc.............................. 350 16,756
--------
RESTAURANTS - 1.4%
Starbucks Corp. (a)............................... 200 8,013
--------
CONSUMER STAPLES - 2.9%
FOOD, BEVERAGES & TOBACCO - 1.3%
Suiza Foods Corp. (a)............................. 150 7,603
--------
HOUSEHOLD & PERSONAL PRODUCTS - 1.6%
Steiner Leisure Ltd. (a).......................... 400 8,950
--------
ENERGY - 4.1%
OIL & GAS DRILLING - 2.8%
Noble Drilling Corp. (a).......................... 200 10,050
Rowan Companies, Inc. (a)......................... 200 5,800
--------
15,850
--------
OIL & GAS EXPLORATION & PRODUCTS - 1.3%
Unocal Corp....................................... 200 7,088
--------
FINANCIALS - 6.0%
BANKS - 2.8%
Northern Trust Corp............................... 175 15,553
--------
DIVERSIFIED FINANCIAL SERVICES - 1.3%
Raymond James Financial, Inc...................... 225 7,411
--------
PROPERTY & CASUALTY INSURANCE - 1.9%
MGIC Investment Corp.............................. 175 10,697
--------
7
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Stein Roe Capital Opportunities Fund
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Continued SHARES VALUE
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HEALTH CARE - 5.2%
BIOTECHNOLOGY - 1.3%
PE Corp-Celera Genomics Group (a)................. 75 $ 7,472
--------
PHARMACEUTICALS - 3.9%
Alza Corp. (a).................................... 125 10,812
Forest Laboratories, Inc. (a)..................... 100 11,469
--------
22,281
--------
MEDIA - 6.4%
BROADCASTING & CABLE - 4.9%
Hispanic Broadcasting Corp. (a)................... 300 8,363
USA Networks, Inc. (a)............................ 300 6,581
Univision Communications, Inc. Class A (a)........ 200 7,475
XM Satellite Radio Holdings, Inc. Class A (a)..... 125 5,383
--------
27,802
--------
PUBLISHING & PRINTING - 1.5%
Tribune Co........................................ 200 8,725
--------
RETAILING - 7.9%
DEPARTMENT STORES - 3.1%
Kohl's Corp. (a).................................. 300 17,306
--------
GENERAL MERCHANDISE STORES - 2.0%
Dollar Tree Stores, Inc. (a)...................... 275 11,155
--------
SPECIALTY STORES - 2.8%
Bed Bath & Beyond, Inc.(a)........................ 400 9,756
Tiffany & Co...................................... 150 5,784
--------
15,540
--------
SOFTWARE & SERVICES - 16.8%
APPLICATIONS SOFTWARE - 3.6%
Mercury Interactive Corp. (a)..................... 75 11,756
Rational Software Corp. (a)....................... 125 8,672
--------
20,428
--------
INTERNET SOFTWARE & SERVICES - 10.3%
Exodus Communications, Inc. (a)................... 250 12,344
Inktomi Corp. (a)................................. 90 10,260
VeriSign, Inc. (a)................................ 60 12,154
Sanmina Corp (a) ................................. 250 23,406
--------
58,164
--------
TECHNOLOGY SERVICES - 2.9%
Contract manufacturing
Flextronics Int'l Ltd. (a) ....................... 200 16,425
--------
TECHNOLOGY HARDWARE & EQUIPMENT - 24.8%
COMPUTER STORAGE & PERIPHERALS - 4.5%
Network Appliance, Inc. (a)....................... 200 25,475
--------
8
<PAGE>
Stein Roe Capital Opportunities Fund
--------------------------------------------------------------------------------
Continued SHARES VALUE
--------------------------------------------------------------------------------
NETWORKING EQUIPMENT - 1.6%
Proxim, Inc. (a).................................. 200 $ 8,900
--------
SEMICONDUCTOR EQUIPMENT - 1.0%
Novellus Systems, Inc. (a)........................ 125 5,820
--------
SEMICONDUCTORS - 7.1%
Broadcom Corp. Class A (a)........................ 55 13,406
SIPEX Corp. (a)................................... 75 3,155
TranSwitch Corp. (a).............................. 100 6,375
TriQuint Semiconductor, Inc. (a).................. 225 8,198
Vitesse Semiconductor Corp. (a)................... 100 8,894
--------
40,028
--------
TELECOMMUNICATIONS EQUIPMENT - 10.6%
JDS Uniphase Corp. (a)............................ 50 4,734
Research in Motion Ltd.(a)........................ 75 7,392
Scientific-Atlanta, Inc........................... 200 12,725
SDL, Inc. (a)..................................... 90 27,720
Tellabs, Inc. (a)................................. 150 7,163
--------
59,734
--------
TELECOMMUNICATION SERVICES - 10.1%
ALTERNATIVE CARRIERS - 1.7%
Level 3 Communications, Inc. (a).................. 125 9,640
--------
INTEGRATED TELECOM SERVICES - 0.9%
NEXTLINK Communications, Inc. Class A (a)......... 150 5,278
--------
WIRELESS TELECOM SERVICES - 7.5%
American Tower Corp. Class A (a).................. 200 7,538
Comverse Technology, Inc. (a)..................... 200 21,600
Crown Castle International Corp. (a).............. 175 5,436
Nextel Partners, Inc. Class A (a)................. 75 2,184
Pinnacle Holdings, Inc. (a)....................... 113 3,009
Spectrasite Holdings, Inc. (a).................... 125 2,320
--------
42,087
--------
UTILITIES - 1.6%
ELECTRIC UTILITIES - 0.3%
Southern Energy, Inc.............................. 50 1,568
--------
GAS UTILITIES - 1.3%
Kinder Morgan, Inc................................ 175 7,164
--------
TOTAL COMMON STOCKS (cost of $340,509)............... 562,426
--------
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9
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Stein Roe Capital Opportunities Fund
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Continued PAR VALUE
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BONDS & NOTES - 0.4%
GOVERNMENT OBLIGATIONS
U.S Treasury Note:
6.500% 2/28/02.................................. $ 400 $ 402
7.500% 5/15/02.................................. 2,000 2,043
--------
TOTAL BONDS & NOTES (cost of $2,437)................. 2,445
--------
TOTAL INVESTMENTS (cost of $342,946) (b)............. 564,871
--------
--------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 2.9%
COMMERCIAL PAPER
Associates Corp. of North America
6.70%(c) 10/2/00................................ 16,385 16,382
--------
--------------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - (3.0)%............. (17,169)
--------
NET ASSETS - 100%.................................... $564,084
========
--------------------------------------------------------------------------------
NOTES TO INVESTMENT PORTFOLIO:
--------------------------------------------------------------------------------
(a) Non-income producing.
(b) Cost for federal income tax purposes is $343,544.
(c) Rate represents yield at time of purchase.
See notes to financial statements.
10
<PAGE>
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
September 30, 2000
(In thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $342,946).............. $564,871
Short-term obligations............................ 16,382
--------
581,253
Cash.............................................. $ 2
Receivable for:
Investments sold............................... 3,409
Fund shares sold............................... 1,386
Interest....................................... 59
Dividends...................................... 49
Other............................................. 103 5,008
-------- --------
Total Assets................................... 586,261
LIABILITIES
Payable for:
Fund shares repurchased........................ 20,027
Investments purchased.......................... 1,479
Accrued:
Management fee................................. 370
Administration fee............................. 76
Bookkeeping fee................................ 3
Transfer agent fee............................. 131
Other............................................. 91
------
Total Liabilities.............................. 22,177
--------
NET ASSETS........................................ $564,084
========
Class A
Net asset value and redemption price
per share ($1/(c))........................... $ 42.21(a)
--------
Maximum offering price per share ($42.21/0.9425) $ 44.79(b)
--------
Class S
Net asset value, redemption and offering
price per share ($564,083/13,354)............ $ 42.24
--------
COMPOSITION OF NET ASSETS
Capital paid in................................... $269,401
Accumulated net realized gain..................... 72,758
Net unrealized appreciation....................... 221,925
--------
$564,084
========
(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.
11
<PAGE>
Statement of Operations
--------------------------------------------------------------------------------
For the year ended September 30, 2000
(In thousands)
INVESTMENT INCOME
Interest.......................................... $ 1,135
Dividends......................................... 417
--------
Total Investment Income........................ 1,552
EXPENSES
Management fee.................................... $ 4,023
Transfer agent fee................................ 1,294
Administration fee................................ 799
Bookkeeping fee................................... 37
Custodian fee..................................... 28
Trustees' fees.................................... 24
Audit fee......................................... 20
Legal fee......................................... 14
Registration fees................................. 29
Reports to shareholders........................... 59
Other............................................. 97
--------
6,424
--------
Net Investment Loss............................ (4,872)
--------
NET REALIZED & UNREALIZED GAIN (LOSS)
ON PORTFOLIO POSITIONS
Net realized gain (loss) on
Investments.................................... 166,172
Closed futures contracts....................... (2,036)
--------
164,136
--------
Net change in unrealized appreciation/
depreciation during the period................. 92,469
--------
Net Gain..................................... 256,605
--------
Increase in Net Assets from Operations............ $251,733
========
See notes to financial statements.
12
<PAGE>
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
(In thousands)
YEARS ENDED
SEPTEMBER 30,
--------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 2000 (a) 1999
OPERATIONS:
Net investment loss............................... $ (4,872) $ (3,501)
Net realized gain................................. 164,136 99,234
Net change in unrealized appreciation/depreciation 92,469 (9,404)
--------- ---------
Net Increase from Operations................... 251,733 86,329
DISTRIBUTIONS:
From net realized gains - Class S................. (53,552) --
--------- ---------
198,181 86,329
--------- ---------
FUND SHARE TRANSACTIONS:
Receipts for shares sold - Class A................ 1 --
--------- ---------
Receipts for shares sold - Class S............... 764,687 --
Value of distributions reinvested - Class S....... 49,654 267,484
Cost of shares repurchased - Class S.............. (859,786) (623,599)
--------- ---------
(45,445) (356,115)
--------- ---------
Net Decrease from Fund Share Transactions...... (45,444) (356,115)
--------- ---------
Total Increase (Decrease).................... 152,737 (269,786)
NET ASSETS
Beginning of period............................... 411,347 681,133
--------- ---------
End of period .................................... $ 564,084 $ 411,347
========= =========
NUMBER OF FUND SHARES
Sold - Class A.................................... (b) --
--------- ---------
Sold - Class S.................................... 20,076 9,598
Issued for distributions reinvested - Class S..... 1,581 --
Repurchased - Class S............................. (22,664) (22,199)
--------- ---------
(1,007) (12,601)
--------- ---------
(a) Class A shares were initially offered on July 31, 2000.
(b) Rounds to less than one.
See notes to financial statements.
13
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Notes to Financial Statements
--------------------------------------------------------------------------------
September 30, 2000
NOTE 1. ORGANIZATION
Stein Roe Capital Opportunities Fund - Class S and Liberty Capital Opportunities
Fund--Class A (collectively 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 may issue an unlimited
number of shares. Effective July 31, 2000, the Fund began offering Class A
shares. The Fund offers two classes of shares: Class A, and Class S. Class S
shares are offered continuously at net asset value. Class A has its own sales
charge and expense structure, please refer to the Fund's Class A prospectus for
more information on Class A shares. The financial highlights for Class A are
presented in a separate annual report.
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 in the
preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS
Equity securities generally are valued at the last sale price or, in the case of
unlisted or listed securities for which there were no sales during the day, at
current quoted bid price.
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.
Portfolio positions for which market quotations are not readily available
are valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS
All income, expenses (other than the Class A 12b-1 service fee and Class A and
Class S Transfer Agent fee), 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.
14
<PAGE>
Notes to Financial Statements Continued
--------------------------------------------------------------------------------
FEDERAL INCOME TAXES
Consistent with the Fund's policy to qualify as a regulated investment company
and to distribute all of its taxable income, no federal income tax has been
accrued.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-date.
The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations, which may differ from generally
accepted accounting principles. Reclassifications are made to the Fund's capital
accounts to reflect income and gains available for distribution (or available
capital loss carryforwards) under income tax regulations.
OTHER
Interest income is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date. Corporate actions 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 Fund
and receives a monthly fee as follows:
Average Net Assets Annual Fee Rate
First $500 million 0.75%
Next $500 million 0.70%
Next $500 million 0.65%
Over $1.5 billion 0.60%
ADMINISTRATION FEE
The Advisor also provides accounting and other services for a monthly fee as
follows:
Average Net Assets Annual Fee Rate
First $500 million 0.150%
Next $500 million 0.125%
Next $500 million 0.100%
Over $1.5 billion 0.075%
BOOKKEEPING FEE
The Advisor provides bookkeeping and pricing services for a monthly fee equal to
$25,000 annually plus 0.0025% annually of the 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. For more information on the Transfer Agent fee applicable to
Class A shares, please refer to the Fund'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.
15
<PAGE>
Notes to Financial Statements Continued
--------------------------------------------------------------------------------
The Fund has adopted a 12b-1 plan which requires it to pay the Distributor a
service fee on Class A net assets. The fee structure for the 12b-1 plan is
defined in the Class A prospectus.
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 $618,636,449 and $719,475,184 of which
$2,436,938 and none represent U.S. Government securities, 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 $230,347,764
Gross unrealized
depreciation 9,020,872
-------------
Net unrealized
appreciation $221,326,892
-------------
OTHER
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified. The Fund may purchase or sell
futures contracts. The Fund will use these instruments to hedge against the
effects of changes in the portfolio securities due to market conditions and not
for trading purposes. The use of futures contracts involves certain risks which
include (1) imperfect correlation between the price movement of the instruments
and the underlying securities, (2) inability to close out a position due to
different trading hours, or the absence of a liquid market for either the
instrument or the underlying securities or (3) an inaccurate prediction by the
Advisor of the future direction of the market or stock price or interest rate
trends. Any of these risks may involve amounts exceeding the variation margin
recorded in the Fund's Statement of Assets and Liabilities at any given time.
16
<PAGE>
Notes to Financial Statements Continued
--------------------------------------------------------------------------------
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
the trust and, ultimately, the Fund based on its borrowings. In addition, a
commitment fee of 0.10% per annum on the Fund's unused commitment shall be paid
quarterly by the Fund based on the relative asset size of the Fund to the Trust
as a whole. The commitment fee is included in other expenses on the Statement of
Operations. For the year ended September 30, 2000, the Trust and Fund had no
borrowings under the agreement.
--------------------------------------------------------------------------------
NOTE 5. OTHER RELATED PARTY TRANSACTIONS
During the year ended September 30, 2000, the Fund used Alphatrade, a wholly
owned subsidiary of Colonial Management Associates, Inc., as a broker. Total
commissions paid to Alphatrade during the year were $26,100.
17
<PAGE>
<TABLE>
Financial Highlights
--------------------------------------------------------------------------------
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<CAPTION>
CLASS S YEARS ENDED SEPTEMBER 30,
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................... $ 28.64 $ 25.25 $ 29.10 $ 31.04 $ 21.69
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (a)..................................... (0.34) (0.17) (0.25) (0.17) (0.06)
Net realized and unrealized gain (loss) on investments...... 17.93 3.56 (3.60) (1.77) 10.41
-------- -------- -------- -------- --------
Total from investment operations......................... 17.59 3.39 (3.85) (1.94) 10.35
-------- -------- -------- -------- --------
DISTRIBUTIONS
Net investment income....................................... -- -- -- -- (0.01)
Net realized capital gains.................................. (3.99) -- -- -- (0.99)
-------- -------- -------- -------- --------
Total distributions...................................... (3.99) -- -- -- (1.00)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD................................. $ 42.24 $ 28.64 $ 25.25 $ 29.10 $ 31.04
======== ======== ======== ======== ========
Ratio of net expenses to average net assets (c)................ 1.19% 1.19%(b) 1.20% 1.17% 1.22%
Ratio of net investment income (loss) to average
net assets (c).............................................. (0.90)% (0.72)%(b) (0.72)% (0.69)% (0.40)%
Portfolio turnover rate........................................ 119% 88% 47% 35% 22%
Total return (d)............................................... 66.20% 13.43% (13.23)% (6.25)% 49.55%
Net assets, end of period (000's).............................. $564,083 $411,347 $681,133 $1,110,642 $1,684,538
(a) Per share data was calculated using average shares outstanding during the
period.
(b) During the year ended September 30, 1999, the Fund experienced a one-time
reduction in its expenses of twelve basis points as a result of expenses
accrued in a prior period. The Fund's ratios disclosed above reflects the
actual rate at which expenses were incurred throughout the current fiscal
year without the reduction.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(d) Total return at net asset value assuming all distributions reinvested.
--------------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
For the fiscal year ended September 30, 2000, the Fund designates long-term
capital gains of $97,651,294.
--------------------------------------------------------------------------------
18-19 (spread)
</TABLE>
<PAGE>
Report of Independent Accountants
--------------------------------------------------------------------------------
To the Trustees of Liberty-Stein Roe Funds Investment Trust and Class S
Shareholders of Stein Roe Capital Opportunities Fund
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the Class S financial highlights present fairly, in
all material respects, the financial position of Stein Roe Capital Opportunities
Fund (the "Fund")(a series of Liberty-Stein Roe Funds Investment Trust) at
September 30, 2000, the results of its operations for the year then ended, the
changes in its net assets and the 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 management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 2000 by
correspondence with the custodian, provide a reasonable basis for our opinion.
The financial highlights of the Fund 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
20
<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
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
Financial Advisors call:
800-322-0593
Shareholders call: 800-338-2550
www.steinroe.com
Liberty Funds Distributor, Inc.
S33-02/211D-0900(11/00) 00/2230
