STEIN ROE MUTUAL FUNDS
ANNUAL REPORT
SEPTEMBER 30, 2000
PHOTO: HANDS AND LEAF
STEIN ROE EQUITY FUNDS
GROWTH FUNDS
GROWTH STOCK FUND
LOGO: STEIN ROE MUTUAL FUNDS
SENSIBLE RISKS. INTELLIGENT INVESTMENTS.(R)
<PAGE>
CONTENTS
--------------------------------------------------------------------------------
From the President................................................ 1
Stephen Gibson's thoughts on the markets and investing
Performance Summary............................................... 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..................................... 17
Financial Highlights.............................................. 20
Selected per-share data
Report of Independent
Accountants....................................................... 22
Must be preceded or accompanied by a prospectus.
<PAGE>
FROM THE PRESIDENT
--------------------------------------------------------------------------------
TO OUR SHAREHOLDERS
I am pleased to present the fiscal year 2000 annual report for the Stein Roe
Growth Stock Fund. Although it was a very volatile 12 months for U.S. stocks,
the Fund delivered excellent results and outperformed its benchmark, the
Standard & Poor's 500 Index.
The past year initially brought the exhilaration of a rapidly rising U.S.
equity market, particularly for growth stocks. As enthusiasm for a "new,"
technology-intensive economy swelled, the market split into the "haves"
(companies that create, deliver, or extensively utilize technology and
telecommunications) and the "have-nots" (almost anything else). The former
sprinted well ahead of the market. By March 2000, however, it became
increasingly obvious that it could take a while longer for some technology
businesses to generate solid profits and earnings.
By March it also was clear that the Federal Reserve had not yet managed to
rein in the inflationary pressures in the U.S. economy. Faced with the prospect
of higher inflation and additional interest rate hikes (after the Fed enacted
four between June 1999 and February 2000), investors became increasingly
uncertain whether businesses, especially those with minimal profits, could
handle the higher costs of doing business.
In search of more predictable earnings and less expensive valuations,
investors turned to stocks in other sectors during the second half of the year.
Previously overlooked and in many cases undervalued stocks in non-technology
industries advanced, while most growth stocks retreated. Notwithstanding this
enormous volatility, the S&P 500 Index gained 13.27% for the 12-month period.
Looking back at these results, I am reminded once again of the importance of
maintaining a long-term perspective when investing. Uncertainty and periodic
dips in the valuation of high-flying stocks are as much a part of the investing
experience as growth potential and dividends. Yet over time the markets have
continued to advance.
In the following report from portfolio manager Erik Gustafson, you will find
detailed information about the Fund and the strategies used to achieve a
one-year total return of more than 35%. I encourage you to review the report
carefully.
Photo of: Stephen E. Gibson
1
<PAGE>
FROM THE PRESIDENT CONTINUED
--------------------------------------------------------------------------------
As always, we thank you for choosing 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 economic and market conditions change frequently, there can be no
assurance that the trends described above or on the following pages will
continue.
2
<PAGE>
PERFORMANCE SUMMARY
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIOD ENDED SEPTEMBER 30, 2000
1 5 10
YEAR YEARS YEARS
--------------------------------------------------------------------------------
Growth Stock Fund 35.04% 25.37% 20.87%
Morningstar Large Growth Category 30.68 22.62 20.02
INVESTMENT COMPARISONS
--------------------------------------------------------------------------------
GROWTH OF A $10,000 Investment September 30, 1990 to September 30, 2000
--------------------------------------------------------------------------------
STEIN ROE GROWTH STOCK FUND
--------------------------------------------------------------------------------
Line Chart:
MORNINGSTAR STEIN ROE
LARGE GROWTH GROWTH STOCK S&P 500
CATEGORY FUND INDEX
9/30/90 10000 10000 10000
9894 9868.4 9958
10295.7 10541.9 10600
10672.5 10886 10895
11295.8 11643.4 11368
12062.8 12478.8 12179
12403 12965.2 12474
12379.4 12857.6 12504
13113.5 13452.2 13042
12533.9 12726.9 12445
13407.5 13547.3 13024
14024.2 14077.5 13332
9/30/91 13663.8 13969 13109
13975.3 14279.4 13285
13764.3 13775.7 12751
15581.2 15550.3 14207
15138.7 15501.2 13943
15284 15634.3 14123
14911.1 15064.3 13849
14765 14866 14254
15049.9 15009.2 14324
14663.1 14521.9 14111
15302.5 15057.4 14686
15353 14741.2 14387
9/30/92 15626.2 14984.8 14557
16051.3 15370.3 14606
16780 16181.1 15103
16863.9 16450.5 15288
16691.9 16610.4 15417
16104.3 16207.9 15627
16494 16681.2 15956
15623.2 16083.7 15570
16171.5 16795.2 15986
16124.6 16867.4 16032
15966.6 16772 15968
16421.7 17523.7 16573
9/30/93 16421.7 17806.7 16446
16863.4 18026.4 16786
16618.9 17623.2 16627
17341.8 18152.1 16828
17825.7 18733.5 17400
17285.5 18593.7 16928
16340 17647.8 16192
16340 17678.7 16399
16652.1 17710.4 16667
15862.8 16994.3 16258
16246.7 17454.4 16792
17093.1 18385.4 17478
9/30/94 16766.7 18070.8 17052
16966.2 18448.2 17434
16518.3 17753.4 16799
16688.4 17910.5 17048
16868.6 18013.8 17489
17428.7 18667.2 18170
17897.5 19224.4 18706
18382.5 19619.7 19256
18761.2 20202.8 20024
19517.3 21256.6 20489
20233.6 22418.2 21167
20448 22557.7 21220
9/30/95 21493 23264.2 22115
21370.4 23004.8 22035
22398.4 23740.5 23001
22635.8 23681.6 23445
23115.7 24188.2 24242
23423.1 24809.5 24467
23704.2 24923.2 24702
23983.9 25816.4 25065
25015.2 26564.3 25709
25285.3 26183.7 25807
23740.4 24490.9 24666
24336.3 25375.2 25187
9/30/96 26017.9 27125.1 26602
26559.1 27217.1 27337
28022.5 28839.5 29400
27378 28186.6 28818
29773.6 29897.5 30617
29175.1 29190.4 30858
27310.8 27671.9 29593
29460.2 28919.1 31357
31363.3 31042 33273
32806 32263.6 34754
35338.7 35267.6 37516
32985.1 33854.4 35416
9/30/97 34634.4 35718.5 37353
33879.3 34384 36105
34665.3 34944.8 37777
36041.6 35252 38427
35915.4 35672.6 38849
38494.1 38491 41650
40176.3 40245.8 43783
40718.7 40864 44229
40270.8 39730 43469
42695.1 42026.4 45233
42110.2 41558.3 44754
34829.3 34803.8 38287
9/30/98 36260.8 37310 40741
39103.7 39687.8 44049
41997.3 42503.2 46719
45247.9 46991.2 49410
49071.4 49938 51475
47682.7 47775.2 49874
50701 50596.3 51869
49854.3 51013.2 53877
48518.2 49495.6 52605
52113.4 52969.2 55514
50451 51561.8 53788
49805.2 51557.6 53519
9/30/99 49312.1 51138.5 52052
52354.7 54627.7 55347
54747.3 57904.8 56471
61815.2 65106.4 59791
61926.4 62658.4 56790
68075.7 67802 55716
71568 70769.7 61166
68011.1 66522.1 59324
62774.2 62608.6 58108
68367.4 67280.5 59538
66056.6 65753.2 58609
72450.9 71493.4 62249
9/30/00 66567.3 67139.9 58994
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 500 Index is an
unmanaged group of large-cap 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
<PAGE>
QUESTIONS & ANSWERS
--------------------------------------------------------------------------------
AN INTERVIEW WITH ERIK GUSTAFSON, CO-PORTFOLIO MANAGER FOR STEIN ROE GROWTH
STOCK FUND AND SR&F GROWTH STOCK PORTFOLIO
FUND DATA
INVESTMENT OBJECTIVE:
Stein Roe Growth Stock Fund seeks long-term growth by investing in the common
stocks of companies with large market capitalizations, with an emphasis on
the technology, financial services, health care and global franchise sectors.
FUND INCEPTION:
July 1, 1958
TOTAL NET ASSETS:
$1.08 billion
Q: HOW DID THE STEIN ROE GROWTH STOCK FUND PERFORM DURING THE LAST 12 MONTHS?
GUSTAFSON: For the 12 months ended September 30, 2000, Stein Roe Growth Stock
Fund generated a total return of 35.04%, outperforming the 13.27% total return
for the Standard & Poor's 500 Index by a wide margin.
Q: PLEASE DESCRIBE THE BEHAVIOR OF THE U.S. EQUITY MARKET DURING THE PERIOD.
GUSTAFSON: U.S. equity markets chalked up strong, even phenomenal, gains between
October 1999 and mid-March 2000. Driven by a belief in technological advances
and their potential to transform economies worldwide, investors rapidly bid up
the prices of technology and telecommunications stocks, elevating the major
stock market indexes to record levels. However, as it became clear that many
tech companies would not be able to meet investors' expectations for profits and
earnings, the market lost confidence in technology's near-term prospects, and
the indexes plummeted even more quickly than they had risen. The final months of
the fiscal year were marked by substantial short-term price swings.
Q: HOW DID TECHNOLOGY HOLDINGS IMPACT THE FUND'S PERFORMANCE?
GUSTAFSON: The technology sector proved to be the biggest contributor to the
Fund's healthy total return, despite the price declines for this sector in the
second half of the period. One reason was our emphasis on premier
companies--industry- leading competitors that are involved in the buildout of
the Internet or rebuilding the existing telecommunications infrastructure.
Though not immune to technology's woes, holdings like Cisco Systems, Nortel and
Corning (3.3%, 2.6% and
Photo of: Erik Gustafson
4
<PAGE>
QUESTIONS & ANSWERS CONTINUED
--------------------------------------------------------------------------------
4.6%, respectively, of net assets) managed to make sizable contributions to the
Fund's bottom line. Another technology stock that performed well was EMC (4.4%
of net assets), a dominant company in the rapidly expanding area of data
storage.
These positive results were offset by a very disappointing outcome for our
semiconductor stocks. Although semiconductors come in greater variety and are
used in an ever-growing number of applications, demand and profits remain highly
cyclical. Fortunately, our holdings in this area were relatively small, so the
impact of the most recent downturn was limited.
Q: HOW DID YOU MAINTAIN THE FUND'S STRONG PERFORMANCE DURING THE TECHNOLOGY
SELL-OFF IN LATTER HALF OF THE PERIOD?
GUSTAFSON: Recognizing that the upheaval in technology would take some time to
sort itself out, we opted at mid-year to reduce the Fund's allocation to that
sector from 53% of net assets to 42%. We shifted our attention to health care
and financial services, two areas that dominated the market after March.
Government and regulatory issues had kept health-care stocks in the doldrums
for the prior two years. Despite this, we have had sizable investments in health
care, as we believe that baby boomers will demand better health care in the
future. When investors turned away from technology in favor of companies with
more reliable earnings, our large-cap health-care stocks definitely benefited.
Q: WHICH NON-TECHNOLOGY STOCKS WERE KEY TO THE FUND'S STRONG PERFORMANCE?
GUSTAFSON: Noteworthy contributors included Johnson & Johnson (2.9% of net
assets) and Pfizer (3.6% of net assets). Johnson & Johnson lay fallow for two
years, until investors recently recognized the innovations it has wrought in its
core product line. Pfizer, one the world's largest pharmaceuticals companies,
has several points in its favor. Following its recent merger with
Warner-Lambert, management should have significant cost-cutting opportunities.
It also possesses one of the strongest sales forces in the industry and a
well-stocked product pipeline.
As for our financial services stocks, the leaders included companies like
Citigroup and General Electric (4.2% and 3.8%, respectively, of net assets).
(Though perceived as an industrial company, GE is in reality a hybrid that
derives the majority of its profits from its GE Capital unit.) Financial
services stocks lost ground last fall as the Federal Reserve raised interest
rates. Then, as indications of higher inflation abated, they recovered as the
market came to believe that the Fed would soon complete its rate-hike program.
5
<PAGE>
QUESTIONS & ANSWERS CONTINUED
--------------------------------------------------------------------------------
Q: WHAT IS YOUR OUTLOOK GOING FORWARD?
GUSTAFSON: At this point, we believe that "the glass is half-full, not
half-empty." The U.S. economy remains strong and, driven by the hunger for
information and technology-based innovation, should continue to grow. Inflation
will likely remain muted, which may mean an end to rising interest rates. In
fact, the Federal Reserve may even need to ease rates, to ensure that it does
not turn the long-sought "soft landing" into a rough splashdown. In such an
environment, we would expect profit growth to be positive, particularly for
companies at the forefront of creating or applying technology.
At this juncture, we feel much of the overvaluation has been stripped out of
growth stocks, and look for improvement in the equity market as we head into
2001. We have positioned the portfolio accordingly and maintain our commitment
to technology and telecommunications. We believe investors will be rewarded in
the long run for their support of quality technology companies.
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 Stock
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
<PAGE>
FUND HIGHLIGHTS AS OF SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
SR&F Growth Stock Portfolio
Top 10 Equity Holdings (% of Net Assets)
--------------------------------------------------------------------------------
Corning Inc 4.6% America Online Inc 3.8%
EMC Corp 4.4 Pfizer Inc 3.6
Enron Corp 4.3 Tyco International Ltd 3.6
Citigroup Inc 4.2 Calpine Co 3.5
General Electric Co 3.9 Cisco Systems Inc 3.3
--------------------------------------------------------------------------------
EQUITY PORTFOLIO HIGHLIGHTS
S&P 500
PORTFOLIO INDEX
--------------------------------------------------------------------------------
Number of Holdings 38 500
Dollar Weighted Median
Market Capitalization ($Mil.) 87,314.1 80,911.7
--------------------------------------------------------------------------------
ECONOMIC SECTOR BREAKDOWN
[pie charts]
EQUITY PORTFOLIO S&P 500 Index
Technology 42% Technology 30%
Consumer Non-Cyclical 16% Consumer Non-Cyclical 18%
Industrial 13% Industrial 8%
Utilities 9% Utilities 9%
Consumer Cyclical 8% Consumer Cyclical 10%
Financial 7% Financial 16%
Energy 5% Energy 7%
Basic Materials 2%
-------------------------------------------------------------------------------
ASSET ALLOCATION
[pie charts]
AS OF SEPTEMBER 30, 1999 AS OF SEPTEMBER 30, 2000
Equities 95.5% Equities 95.0%
Cash, Equivalents and Other 4.5% Cash, Equivalents and Other 5.0%
7
<PAGE>
SR&F Growth Stock Portfolio
--------------------------------------------------------------------------------
Investment Portfolio
September 30, 2000 (in thousands)
COMMON STOCKS - 95.0% SHARES VALUE
--------------------------------------------------------------------------------
CONSUMER DISCRETIONARY - 9.6%
CONSUMER DURABLES & APPAREL - 1.7%
CONSUMER ELECTRONICS
Gemstar-TVGuide International, Inc. (a)........ 450 $ 39,234
--------
MEDIA - 3.0%
BROADCASTING & CABLE
AT&T Corp-Liberty Media Group, Class A (a) ....... 2,000 36,000
Comcast Corp., Class A, Special ............... 750 30,703
--------
66,703
--------
RETAILING - 4.9%
DEPARTMENT STORES - 2.6%
Kohl's Corp. (a).................................. 1,000 57,687
--------
HOME IMPROVEMENT RETAIL - 2.3%
The Home Depot, Inc. ............................ 975 51,736
--------
FINANCIALS - 6.2%
DIVERSIFIED FINANCIALS
DIVERSIFIED FINANCIAL SERVICES
Citigroup, Inc. ................................. 1,750 94,609
The Goldman Sachs Group, Inc................... 400 45,575
--------
140,184
--------
FOOD & DRUG RETAILING - 2.6%
FOOD RETAIL
Safeway, Inc. (a)................................. 1,250 58,359
--------
HEALTH CARE - 13.3%
BIOTECHNOLOGY & PHARMACEUTICALS - 10.4%
BIOTECHNOLOGY - 3.9%
Amgen, Inc. ...................................... 700 48,880
Immunex Corp. (a).............................. 900 39,150
--------
88,030
--------
PHARMACEUTICALS - 6.5%
Johnson & Johnson................................ 700 65,756
Pfizer, Inc. ................................... 1,800 80,888
--------
146,644
--------
HEALTH CARE EQUIPMENT & SERVICES - 2.9%
HEALTH CARE EQUIPMENT
Medtronic, Inc. ................................ 1,250 64,765
--------
INDUSTRIALS - 7.4%
CAPITAL GOODS
INDUSTRIAL CONGLOMERATES
General Electric Co.............................. 1,500 86,531
Tyco International Ltd........................... 1,550 80,406
--------
166,937
--------
8
<PAGE>
SR&F GROWTH STOCK PORTFOLIO CONTINUED
--------------------------------------------------------------------------------
SHARES VALUE
--------------------------------------------------------------------------------
SOFTWARE & SERVICES - 9.0%
INTERNET SOFTWARE & SERVICES - 4.3%
America Online, Inc.............................. 1,600 $ 86,000
VeriSign, Inc. (a)................................ 50 10,128
--------
96,128
--------
SYSTEMS SOFTWARE - 4.7%
Microsoft Corp. (a).............................. 700 42,175
Oracle Corp. (a) ................................. 800 63,000
--------
105,175
--------
TECHNOLOGY HARDWARE & EQUIPMENT - 30.3%
COMPUTER STORAGE & PERIPHERALS - 4.4%
EMC Corp. (a)..................................... 1,000 99,125
--------
NETWORKING EQUIPMENT - 3.3%
Cisco Systems, Inc. (a).......................... 1,350 74,587
--------
SEMICONDUCTOR EQUIPMENT - 3.2%
Applied Materials, Inc. (a)....................... 750 44,484
Novellus Systems, Inc. (a)........................ 600 27,938
--------
72,422
--------
SEMICONDUCTORS - 3.4%
LSI Logic Corp. (a).............................. 1,000 29,250
Texas Instruments, Inc. ......................... 1,000 47,188
--------
76,438
--------
TELECOMMUNICATIONS EQUIPMENT - 16.0%
Comverse Technology, Inc. (a).................. 500 54,000
Corning, Inc. ................................... 350 103,950
JDS Uniphase Corp. (a)........................... 550 52,078
Motorola, Inc. ................................... 1,850 52,263
Nortel Networks Corp. .......................... 1,000 59,563
Telefonaktiebolaget LM Ericsson ............... 2,500 37,031
--------
358,885
--------
TELECOMMUNICATION SERVICES - 7.1%
DIVERSIFIED TELECOM SERVICES - 5.4%
ALTERNATIVE CARRIERS - 3.4%
Global Crossing Ltd. (a)......................... 1,750 54,250
Level 3 Communications, Inc. (a)............... 300 23,138
--------
77,388
--------
INTEGRATED TELECOM SERVICES - 2.0%
WorldCom, Inc. (a) ........................... 1,500 45,563
--------
WIRELESS TELECOM SERVICES - 1.7%
American Tower Corp., Class A (a).............. 1,000 37,688
--------
9
<PAGE>
SR&F GROWTH STOCK PORTFOLIO CONTINUED
--------------------------------------------------------------------------------
SHARES VALUE
--------------------------------------------------------------------------------
UTILITIES - 9.5%
ELECTRIC UTILITIES - 5.2%
AES Corp. (a) ................................... 550 $ 37,675
Calpine Corp. (a) ................................ 750 78,281
----------
115,956
----------
MULTI-UTILITIES - 4.3%
Enron Corp. ...................................... 1,100 96,388
----------
TOTAL COMMON STOCKS (cost of $1,390,469)(b).......... 2,136,022
----------
--------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 5.5% PAR
--------------------------------------------------------------------------------
COMMERCIAL PAPER
Associates Corp. of North America
6.70% (c) 10/2/00............................... $ 34,660 34,654
Houston Industries Financial Companies
7.00% (c) 10/2/00................................ 50,000 49,990
Illinois Power 7.05% (c) 10/2/00................. 40,000 39,992
----------
124,636
----------
--------------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES - (0.5)% ................. (11,849
----------
NET ASSETS - 100.0%.................................. $2,248,809
==========
--------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
--------------------------------------------------------------------------------
(a) Non-income producing
(b) Cost for federal income tax purposes is $1,394,863.
(c) Rate represents yield at time of purchase.
See notes to financial statements.
10
<PAGE>
SR&F GROWTH STOCK PORTFOLIO
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2000
(All amounts in thousands)
ASSETS
Investments at value (cost $1,390,469)............ $2,136,022
Short term obligations............................ 124,636
----------
2,260,658
Cash ............................................. $ 5
Receivable for:
Investments sold............................... 4,667
Dividends...................................... 274 4,946
------- ----------
Total Assets .................................. 2,265,604
LIABILITIES
Payable for investments purchased ................ 15,858
Accrued:
Management fee ................................ 878
Bookkeeping fee................................ 7
Transfer agent fee............................. 1
Other............................................. 51
-------
Total Liabilities ............................. 16,795
----------
NET ASSETS ....................................... $2,248,809
==========
See notes to financial statements.
11
<PAGE>
SR&F GROWTH STOCK PORTFOLIO
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended September 30, 2000
(All amounts in thousands)
INVESTMENT INCOME
Dividends (net of nonreclaimable foreign taxes
withheld at source of $63)..................... $ 5,011
Interest ......................................... 4,450
--------
9,461
EXPENSES
Management fee ................................... $ 10,085
Transfer agent fee ............................... 6
Bookkeeping fee .................................. 70
Trustees' fee..................................... 28
Custodian fee..................................... 49
Audit fee......................................... 17
Legal fee......................................... 44
Other ............................................ 50
--------
10,349
--------
Net Investment Loss .............................. (888)
--------
REALIZED & UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments ................. 195,941
Net change in unrealized appreciation /depreciation
during the period.............................. 257,706
--------
Net Gain ............................... 453,647
--------
INCREASE IN NET ASSETS FROM OPERATIONS............ $452,759
========
See notes to financial statements.
12
<PAGE>
SR&F GROWTH STOCK PORTFOLIO
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
(All amounts in thousands)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
INCREASE (DECREASE) IN NET ASSETS 2000 1999
------------ ----------
OPERATIONS
<S> <C> <C>
Net investment income (loss)...................... $ (888) $ 2,164
Net realized gain on investments ................. 195,941 76,399
Net change in unrealized appreciation/depreciation
on investments ................................ 257,706 189,808
---------- ----------
Net increase in net assets
resulting from operations .................. 452,759 268,371
---------- ----------
Transactions in Investors' Beneficial Interest
Contributions..................................... 1,075,716 680,228
Withdrawals ...................................... (527,819) (431,989)
---------- ----------
Net increase from transactions in investors'
beneficial interest......................... 547,897 248,239
---------- ----------
Net increase in net assets........................ 1,000,656 516,610
---------- ----------
NET ASSETS
Beginning of period............................... 1,248,153 731,543
---------- ----------
End of period .................................... $2,248,809 $1,248,153
========== ==========
</TABLE>
See notes to financial statements.
13
<PAGE>
STEIN ROE GROWTH STOCK FUND
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2000
(in thousands except for per share data)
ASSETS
Investment in Portfolio, at value................. $1,085,657
Receivable for Fund shares sold .................. 604
Other............................................. 46
----------
Total Assets .................................. 1,086,307
----------
LIABILITIES
Payable for Fund shares repurchased............... 2,543
Accrued:
Administration fee ............................ 162
Bookkeeping fee ............................... 4
Transfer agent fee............................. 239
Other............................................. 88
----------
Total Liabilities ............................. 3,036
----------
Net Assets ....................................... $1,083,271
----------
Shares outstanding (unlimited number authorized).. 18,155
----------
Net asset value................................... $ 59.67
==========
ANALYSIS OF NET ASSETS
Paid-in capital .................................. $ 389,546
Accumulated net realized gain allocated from Portfolio 141,083
Net unrealized appreciation allocated from Portfolio 552,642
----------
$1,083,271
==========
See notes to financial statements.
14
<PAGE>
STEIN ROE GROWTH STOCK FUND
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended September 30, 2000
(All amounts in thousands)
INVESTMENT INCOME
Dividends allocated from Portfolio................ $ 2,854
Interest allocated from Portfolio................. 2,486
--------
Total investment income ....................... 5,340
EXPENSES
Expenses allocated from Portfolio ................ $ 5,819
Administration fee ............................... 1,423
Transfer agent fee ............................... 2,404
Bookkeeping fee .................................. 50
Trustees' fee .................................... 9
Custodian fee..................................... 1
Audit fee......................................... 7
Legal fee ........................................ 10
Registration fee.................................. 35
Reports to shareholders .......................... 73
Other ............................................ 88
-------
9,919
--------
Net Investment Loss .............................. (4,579)
--------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
ALLOCATED FROM PORTFOLIO
Net realized gain allocated from Portfolio ....... 177,043
Net change in unrealized appreciation /depreciation
allocated from Portfolio ...................... 113,653
--------
Net Gain ...................................... 290,696
--------
INCREASE IN NET ASSETS FROM OPERATIONS............ $286,117
========
See notes to financial statements.
15
<PAGE>
STEIN ROE GROWTH STOCK FUND
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
(All amounts in thousands)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
------------ ----------
OPERATIONS
<S> <C> <C>
Net investment loss............................... $ (4,579) $ (1,309)
Net realized gain ................................ 177,043 78,805
Net change in unrealized appreciation / depreciation
during the period ............................. 113,653 143,323
--------- ---------
Net Increase from Operations................... 286,117 220,819
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net realized capital gains .... (60,169) --
--------- ---------
SHARE TRANSACTIONS
Subscriptions to Fund shares ..................... 411,079 481,319
Value of distributions reinvested ................ 54,569 --
Redemptions of Fund shares ....................... (439,663) (486,145)
--------- ---------
Net Increase (Decrease) from Fund Share Transactions 25,985 (4,826)
--------- ---------
Net Increase in Net Assets ....................... 251,933 215,993
--------- ---------
TOTAL NET ASSETS
Beginning of period............................... 831,338 615,345
--------- ---------
End of period .................................... $1,083,271 $ 831,338
========= =========
ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to Fund shares ..................... 7,148 10,293
Issued in reinvestment of distributions .......... 1,083 --
Redemptions of Fund shares ....................... (7,689) (10,410)
--------- ---------
Net increase (decrease) in fund shares 542 (117)
Shares outstanding at beginning of the year....... 17,613 17,730
--------- ---------
Shares outstanding at end of the year............. 18,155 17,613
========= =========
</TABLE>
See notes to financial statements.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
September 30, 2000
NOTE 1. ORGANIZATION
Stein Roe Growth Stock Fund (the "Fund") is a series of Liberty-Stein Roe Funds
Investment Trust (the "Trust"), an open-end management investment company
organized as a Massachusetts business trust. The Fund invests substantially all
of its assets in SR&F Growth Stock Portfolio (the "Portfolio"). The Fund may
issue an unlimited number of shares.
The Portfolio is a series of SR&F Base Trust, a Massachusetts common law
trust organized under an Agreement and Declaration of Trust dated August 23,
1993. The Portfolio commenced operations on February 3, 1997. The Portfolio
allocates income, expenses, realized and unrealized gains (losses) to each
investor on a daily basis, based on methods approved by the Internal Revenue
Service. At September 30, 2000, the Fund owned 48.3% of the Portfolio.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund and Portfolio
in the preparation of the financial statements.
SECURITY VALUATION AND TRANSACTIONS
Equity securities generally are valued at the last sale price or, in the case of
unlisted or listed securities for which there were no sales during the day, at
current quoted bid price.
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.
FEDERAL INCOME TAXES
No provision is made for federal income taxes since (a) the Fund elects to be
taxed as a "regulated investment company" and make distributions to its
shareholders to be relieved of all federal income taxes under provisions of
current federal tax law; and (b) the Portfolio is treated as a partnership for
federal income tax purposes and all of its income is allocated to its owners
based on methods approved by the Internal Revenue Service.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
--------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders of the Fund 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. 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 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%
BOOKKEEPING FEE
The Advisor provides bookkeeping and pricing services for a monthly fee equal to
$25,000 to the Portfolio and Fund annually plus 0.0025% annually of the
Portfolio's and Fund's average daily net assets over $50 million.
TRANSFER AGENT FEE
Liberty Funds Services, Inc. (the Transfer Agent), an affiliate of the
Advisor, provides shareholder services for a monthly fee equal to 0.22% annually
of the Fund's average daily net assets and receives reimbursement for certain
out of pocket expenses. The Portfolio pays the Transfer Agent a monthly fee
equal to $6,000 annually.
OTHER
The Fund pays no compensation to its officers, all of whom are employees of the
Advisor.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
--------------------------------------------------------------------------------
NOTE 3. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY
During the year ended September 30, 2000, purchases and sales of investments,
other than short-term obligations, were $1,814,331,994 and $1,329,399,616,
respectively.
Unrealized appreciation (depreciation) at September 30, 2000 based on cost of
investments for federal income tax purposes was:
Gross unrealized
appreciation $811,408,221
Gross unrealized
depreciation (70,249,419)
------------
Net unrealized
appreciation $741,158,802
------------
OTHER
The Portfolio may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
--------------------------------------------------------------------------------
NOTE 4. LINE OF CREDIT
The Liberty-Stein Roe Funds Investment Trust and SR&FBase 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 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 Portfolio used Alphatrade, a
wholly owned subsidiary of Colonial Management Associates, Inc., as a broker.
Total commissions paid to Alphatrade during the year were $44,736.
19
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
GROWTH STOCK FUND
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
2000 1999 1998 1997 1996
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE - BEGINNING OF PERIOD................... $ 47.20 $ 34.71 $ 35.29 $ 28.79 $ 26.13
---------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (a)..................... (0.25) (0.08) (0.04) 0.01 0.08
Net realized and unrealized gain .................... 16.16 12.57 1.61 8.79 5.01
---------- -------- -------- -------- --------
Total from investment operations.................. 15.91 12.49 1.57 8.80 5.09
---------- -------- -------- -------- --------
DISTRIBUTIONS:
Net investment income................................ -- -- -- (0.07) (0.10)
Net realized capital gains........................... (3.44) -- (2.15) (2.23) (2.33)
---------- -------- -------- -------- --------
Total distributions.............................. (3.44) -- (2.15) (2.30) (2.43)
---------- -------- -------- -------- --------
NET ASSET VALUE - END OF PERIOD......................... $ 59.67 $ 47.20 $ 34.71 $ 35.29 $ 28.79
========== ======== ======== ======== ========
Total return (b)........................................ 35.04% 35.98% 4.69% 33.10% 21.04%
RATIOS TO AVERAGE NET ASSETS
Expenses (c)............................................ 0.95% 0.97%(e) 1.03% 1.07% 1.08%
Net investment income (loss) (c)........................ (0.44)% (0.18)%(e) (0.10)% 0.04% 0.32%
Portfolio turnover rate................................. N/A N/A N/A 5%(d) 39%(d)
Net assets, end of period (000's)....................... $1,083,271 $831,338 $615,345 $607,699 $417,964
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(d) Prior to commencement of operations of the Portfolio.
(e) During the year ended September 30, 1999, the Fund experienced a one-time
reduction in its expenses of three basis points as a result of expenses
accrued in a prior period. The Fund's ratios disclosed above reflect the
actual rate at which expenses were incurred throughout the fiscal year ended
September 30, 1999 without the reduction.
--------------------------------------------------------------------------------
SR&F GROWTH STOCK 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 0.55% 0.58%(b) 0.61% 0.63%(c)
Ratio of net investment income (loss)
to average net assets (0.05)% 0.20%(b) 0.31% 0.52%(c)
Portfolio turnover rate 74% 57% 39% 22%
</TABLE>
(a) From commencement of operations on February 3, 1997.
(b) During the year ended September 30, 1999, the Portfolio experienced a
one-time reduction in its expenses as a result of expenses accrued in a
prior period. The expense adjustment was not large enough to change the
Portfolio's ratios.
(c) Annualized.
20
<PAGE>
--------------------------------------------------------------------------------
Federal Income Tax information (unaudited)
For the fiscal year ended September 30, 2000, the Fund designates long-term
capital gains of $165,020,989
--------------------------------------------------------------------------------
21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
To the Trustees of Liberty-Stein Roe
Funds Investment Trust and SR&F
Base Trust and the Shareholders of
Stein Roe Growth Stock Fund
In our opinion, the accompanying statements of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Stein Roe Growth Stock Fund (the
"Fund") (a series of Liberty-Stein Roe Funds Investment Trust) and SR&F Growth
Stock Portfolio (the "Portfolio") (a series of SR&F Base Trust) at September 30,
2000, the results of each of their operations for the year then ended, the
changes in each of their net assets and their financial highlights for the two
years then ended, in conformity with accounting principles generally accepted in
the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's and the Portfolio's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States of America, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at September 30, 2000 by correspon dence with the custodian,
provide a reasonable basis for our opinion. The financial highlights of the Fund
and the Portfolio for periods through September 30, 1998 were audited by other
independent accountants, whose report dated November 16, 1998 expressed an
unqualified opinion on those financial highlights.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 20, 2000
22
<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, Secretary and General
Counsel, Kellogg Company
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 Director, 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, LLC
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
Financial Advisors
call: 800-322-0593
Shareholders call: 800-338-2550
www.steinroe.com
Liberty Funds Distributor, Inc.
S34-02/212D-0900 00/2085
