STEIN ROE MUTUAL FUNDS
ANNUAL REPORT
SEPTEMBER 30, 2000
PHOTO OF: PLANT
STEIN ROE EQUITY FUNDS
GROWTH AND INCOME FUND
GROWTH & INCOME FUND CLASS S
A CLASS OF LIBERTY VALUE OPPORTUNITIES FUND
LOGO: STEIN ROE MUTUAL FUNDS
SENSIBLE RISKS. INTELLIGENT INVESTMENTS.(R)
<PAGE>
Contents
--------------------------------------------------------------------------------
From the President................................................ 1
Stephen E. Gibson's thoughts on the equity markets and investing
Performance Summary .............................................. 2
Questions & Answers
An interview with Portfolio Managers,
Harvey Hirschhorn and Scott Schermerhorn....................... 3
Portfolios of Investments......................................... 7
A complete list of investments with market values
Financial Statements.............................................. 10
Statements of assets and liabilities, operations
and changes in net assets
Notes to Financial Statements..................................... 17
Financial Highlights.............................................. 22
Selected per-share data and ratios
Report of Independent
Accountants....................................................... 24
Must be preceded or accompanied by a prospectus.
<PAGE>
From the President
--------------------------------------------------------------------------------
TO OUR SHAREHOLDERS:
I am pleased to present the Stein Roe Growth and Income Fund, Class S annual
report for fiscal year 2000, a period in which investors discovered, once again,
the merits of value investing.
The 12 months ended September 30, 2000, began with an exuberant stock market.
Between September 1999 and March 2000, investor enthusiasm for a narrow group of
technology and telecommunications stocks pushed the markets to ever-higher
levels.
The situation changed quickly after mid-March, as investors became concerned
about exceptionally high valuations of these stocks, a growing inflation threat
and higher interest rates. This triggered a rapid selloff in the high-flying
technology sector. Investors turned instead to companies that offered more
reasonable prices and solid fundamental characteristics--in other words, value
stocks. The resurgence of value stocks was good news for sectors as varied as
financial services, healthcare and energy.
This rotation in market leaders is a fresh reminder that any well-balanced
portfolio should be diversified by market capitalization, sector and investment
style. Historically, growth and value stocks have taken turns leading the
market. A well-conceived investment strategy that includes both may go a long
way in pursuit of long-term goals while controlling risk.
In the following report, you will find detailed information about the Fund
and what factors drove its performance in the past 12 months. Please read the
report carefully and visit us on the Internet at www.steinroe.com for updates on
the progress of the markets and the Fund.
As always, we thank you for choosing the Stein Roe Funds and for the
opportunity to serve your investment needs.
Sincerely,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
November 20, 2000
Because economic and market conditions change frequently, there can be no
assurance that the trends described in this report will continue or come to
pass.
Photo of: Stephen E. Gibson
1
<PAGE>
Performance Summary
--------------------------------------------------------------------------------
Six-Month Cumulative and Average Annual Total Returns
Periods ended September 30, 2000
ONE FIVE TEN
YEAR YEARS YEARS
--------------------------------------------------------------------------------
Growth & Income Fund 10.00% 16.87% 16.45%
Morningstar Large-Value Category 9.62 14.61 15.64
--------------------------------------------------------------------------------
Investment Comparisons
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
9/30/1990 - 9/30/2000
--------------------------------------------------------------------------------
Growth & Income Fund
Line Chart:
Growth & Income Fund S&P 500 Index Morningstar
Large-Value
Category
9/30/90 10000 10000 10000
10527 10895 10762
11747.1 12474.8 12292.4
11585 12444.8 12281.3
9/30/91 12411 13109.4 12971.5
13938.8 14206.6 13838
13749.2 13848.6 13869.8
13591.1 14111.8 14018.2
9/30/92 14149.7 14556.3 14361.7
15334 15287 15167.4
15883 15953.5 15984.9
15827.4 16030.1 16154.3
9/30/93 16693.1 16443.7 16779.5
17305.8 16825.2 17111.7
16746.8 16187.5 16572.7
16793.7 16255.5 16635.7
9/30/94 17366.3 17048.7 17291.1
17281.3 17045.3 16985.1
18084.8 18703.9 18413.5
19569.6 20486.3 19881.1
9/30/95 21033.4 22112.9 21352.3
22491 23444.1 22469
23784.3 24703.1 23749.8
24538.2 25809.8 24405.2
9/30/96 25801.9 26607.3 25122.8
27396.5 28823.7 27155.2
27684.2 29599.1 27606
31604.2 34761.1 31421.1
9/30/97 33753.3 37364.7 34167.3
34441.9 38437.1 34491.9
38729.9 43795.2 38413.6
39535.5 45249.2 38198.5
9/30/98 34917.7 40760.5 33511.6
41171.5 49434.4 38927
41999.1 51896.2 39238.4
45434.6 55549.7 43017.1
9/30/99 41690.8 52088.9 38934.8
45759.8 59834.6 41520.1
45119.1 61204.8 41652.9
44117.5 59576.7 40707.4
9/30/00 45862.5 58998.8 42665.4
--------------------------------------------------------------------------------
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 Value Category (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 averages.
2
<PAGE>
Questions & Answers
--------------------------------------------------------------------------------
AN INTERVIEW WITH HARVEY B. HIRSHHORN AND SCOTT SCHERMERHORN, PORTFOLIO MANAGERS
OF STEIN ROE GROWTH & Income Fund and SR&F Growth and Income Portfolio
Fund Data
INVESTMENT OBJECTIVE:
Stein Roe Growth & Income Fund seeks both growth of capital and current
income by investing substantially all of its investable assets in SR&F Growth
and Income Portfolio. This Portfolio invests primarily in common stocks of
well-established companies having large market capitalizations. The portfolio
manager looks for common stocks that have the potential to appreciate in
value and pay dividends.
FUND INCEPTION:
March 24, 1987
TOTAL NET ASSETS:
$306.1 million
Q: DESCRIBE THE INVESTMENT ENVIRONMENT FOR THE PERIOD.
Against a backdrop of considerable volatility, Stein Roe Growth and Income
Fund's Class S shares generated a one-year total return through September 30,
2000, of 10.00%. While this result surpassed the average one-year return for
large-capitalization value funds, according to Morningstar, Inc., it lagged the
13.27% one-year total return for the Standard & Poor's 500 Index. We attribute
the underperformance to investors' intense focus on technology stocks during the
first two quarters of the fiscal year. The S&P 500 contains a fair number of
technology stocks; the Fund does not, since most technology stocks have not fit
our investment parameters.
Q: HOW DID THE FUND'S MANAGEMENT RESPOND TO THE ECONOMIC ENVIRONMENT?
Rather than pursue high-growth stocks or take on the additional risk associated
with high valuations, we focus on quality companies that are undervalued but
have a catalyst for improvement in their stock prices. Using multifactor
models--quantitatively-based computer programs that evaluate many
characteristics of a company and its stock--we screen the universe of
large-capitalization U.S.
Photos of: Harvey Hirschhorn and Scott Schermerhorn
3
<PAGE>
Questions & Answers Continued
--------------------------------------------------------------------------------
companies. Our goal is to identify those that, relative to the company's
long-term history and the marketplace, appear low-priced. The undervaluation may
be a function of a short-term issue confronting the company or its industry. Or,
as occurred often in the past year, it may be a case of a quality company with
no visible problems that has simply been overlooked, even ignored, by investors
whose attention was focused elsewhere.
Once investors turned their attention away from technology, they began
looking for more reasonable prices in return for more predictable earnings,
gravitating toward sectors such as financial services, healthcare and utilities.
At the same time, rising prices for oil and gas gave a boost to energy stocks,
such as the top-performing stock in the portfolio, Enron (3.0% of net assets).
Enron's stock price climbed quickly as shortages in reserves of both oil and gas
triggered rapid price increases--crude oil prices topped out at $40 per barrel,
up from just $10 last winter. The stock has also benefited from Enron's
participation in the utilities industry, an area where deregulation is allowing
companies to raise product prices and increase revenues.
Other strong contributors to performance included Biomet and Pharmacia (2.2%
and 2.9%, respectively, of net assets). Biomet manufactures orthopedic devices.
Despite a good R&D effort and a superior product, the stock had been beaten down
by intense competition from a Bristol-Meyers division that was recently sold. We
owned shares of Monsanto when it merged with Pharmacia (previously Pharmacia &
Upjohn) in the first half of the fiscal year. Since then, investors have
realized that the combined company appears to be poised to generate higher
growth rates by bringing innovative drugs to market, bolstering its research and
development effort, and effecting cost efficiencies.
At fiscal year-end, the upturn for value had yet to reach cyclical stocks in
areas like auto parts and retailing. We believe the retailing sector is
suffering from oversupply, due to a surfeit of bricks-and-mortar stores and the
availability of merchandise via Internet websites. We were especially
disappointed with results for Kmart and have sold our shares.
We also have been disappointed by our investments in Lucent Technologies and
in paper company Georgia Pacific. For all the company's positive points, Georgia
Pacific has not been able to withstand the dramatic downturn in prices for paper
and other wood products. After skyrocketing in 1999, prices have fallen from
what we knew were unrealistic and
4
<PAGE>
Questions & Answers Continued
--------------------------------------------------------------------------------
unsustainable levels, but the selloff has been more drastic than we anticipated.
The driving factor in Lucent's low valuation is the turmoil in
telecommunications. As the many regionally based telecom companies jumped on the
national-global competitor bandwagon, they flooded the market with services. The
resulting oversupply and competition for customers has kept earnings down. We
have eliminated our position and will wait to see how the industry resolves
these issues.
Q: WHAT OPPORTUNITIES DO YOU SEE IN THE FUTURE?
It is not our policy to predict the direction of equity markets, but we do
believe there is one trend we can forecast with some confidence: As long as
there is a high level of uncertainty in the market, investors should continue to
pay more attention to valuations. And that should bode well for the Fund. As we
begin the new fiscal year, the Fund is overweighted in energy and consumer
staples stocks and underweighted in technology, an area where growth rates
appear to be slowing. We are actively looking for additional financial services
and healthcare opportunities to invest in and would expect the rally in value
stocks to spread to other sectors in the coming months.
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.
5
<PAGE>
Fund Highlights as of 9/30/2000
--------------------------------------------------------------------------------
Growth & Income Portfolio
Top 10 Holdings (% of Net Assets)
--------------------------------------------------------------------------------
Pfizer 4.5% Fannie Mae 3.8%
General Electric 4.4 American Express 3.6
BP Amoco PLC 4.2 Procter and Gamble 3.5
Citigroup 4.0 Walgreen Co. 3.5
IBM 3.9 AT&T 3.0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Equity Portfolio Highlights
S&P 500
PORTFOLIO INDEX
--------------------------------------------------------------------------------
Number of Holdings 45 500
Dollar Weighted Median
Market Capitalization ($mil.) 66,301 80,912
--------------------------------------------------------------------------------
Pie Chart:
Economic Sector Breakdown
Equity Portfolio S&P 500 Index
Basic Material 0% 2%
Consumer Cyclical 11% 10%
Consumer Non-cyclical 27% 18%
Energy 13% 7%
Financial 20% 16%
Industrial 10% 8%
Technology 13% 30%
Utilities 6% 9%
--------------------------------------------------------------------------------
Pie Chart:
Asset Allocation
As of September 30, As of September 30,
1999 (%) 2000 (%)
Equities 91.2% 99.8%
Cash Equivalents and Other 8.8% 0.2%
6
<PAGE>
SR&F Growth & Income Portfolio
--------------------------------------------------------------------------------
Investment Portfolio
September 30, 2000 (in thousands)
NUMBER MARKET
COMMON STOCKS - 99.8% OF SHARES VALUE
--------------------------------------------------------------------------------
CONSUMER DISCRETIONARY - 8.7%
ADVERTISING - 1.3%
Interpublic Group of Cos., Inc.................... 121 $ 4,128
--------
DEPARTMENT STORES - 0.9%
J.C. Penney Co., Inc.............................. 225 2,653
--------
GENERAL MERCHANDISE STORES - 2.3%
Wal-Mart Stores, Inc.............................. 150 7,219
--------
HOME IMPROVEMENT RETAIL - 1.1%
Sherwin-Williams Co............................... 150 3,213
--------
PHOTOGRAPHIC EQUIPMENT - 1.7%
Eastman Kodak Co.................................. 128 5,224
--------
PUBLISHING & PRINTING - 1.4%
Tribune Co........................................ 100 4,362
--------
CONSUMER STAPLES - 15.4%
AGRICULTURAL PRODUCTS - 1.5%
Archer Daniels Midland Co......................... 523 4,511
--------
DRUG RETAIL - 3.5%
Walgreen Co....................................... 280 10,622
--------
HOUSEHOLD PRODUCTS - 3.5%
Procter & Gamble Co............................... 160 10,700
--------
PACKAGED FOODS - 2.7%
Sara Lee Corp..................................... 415 8,428
--------
PERSONAL PRODUCTS - 1.3%
Gillette Co....................................... 134 4,150
--------
TOBACCO - 2.9%
Philip Morris Companies, Inc...................... 300 8,831
--------
ENERGY - 9.6%
INTEGRATED OIL & GAS - 9.6%
Amerada Hess Corp................................. 91 6,071
BPAmoco PLC ADR................................... 243 12,869
Conoco, Inc. Class A.............................. 105 2,738
Conoco, Inc. Class B.............................. 61 1,654
USX-Marathon Group................................ 218 6,194
--------
29,526
--------
7
<PAGE>
SR&F Growth & Income Portfolio Continued
--------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
--------------------------------------------------------------------------------
FINANCIALS - 20.0%
BANKS - 5.3%
Chase Manhattan Corp.............................. 193 $ 8,923
Wells Fargo & Co.................................. 157 7,197
--------
16,120
--------
DIVERSIFIED FINANCIALS - 13.1%
American Express Co............................... 182 11,032
Citigroup, Inc.................................... 228 12,341
Fannie Mae........................................ 161 11,512
Stilwell Financial, Inc........................... 119 5,159
--------
40,044
--------
INSURANCE - 1.6%
Aon Corp.......................................... 128 5,008
--------
HEALTH CARE - 15.5%
HEALTH CARE EQUIPMENT - 5.3%
Baxter International, Inc......................... 67 5,316
Biomet, Inc....................................... 191 6,668
Boston Scientific Corp., (a)..................... 252 4,149
--------
16,133
--------
PHARMACEUTICALS - 10.2%
Bristol-Myers Squibb Co........................... 150 8,569
Pfizer, Inc....................................... 306 13,762
Pharmacia Corp.................................... 150 8,998
--------
31,329
--------
INDUSTRIALS - 10.8%
AEROSPACE & DEFENSE - 2.0%
Boeing Co......................................... 100 6,275
--------
CONSTRUCTION & FARM MACHINERY - 1.0%
Deere & Co........................................ 96 3,202
--------
DIVERSIFIED COMMERCIAL SERVICES - 2.9%
Ecolab, Inc....................................... 250 9,016
--------
ELECTRICAL COMPONENTS & EQUIPMENT - 0.3%
Littlefuse, Inc. (a).............................. 35 1,039
--------
INDUSTRIAL CONGLOMERATES - 4.6%
General Electric Co............................... 234 13,499
--------
8
<PAGE>
SR&F Growth & Income Portfolio Continued
--------------------------------------------------------------------------------
NUMBER MARKET
of SHARES VALUE
--------------------------------------------------------------------------------
INFORMATION TECHNOLOGY - 10.8%
COMPUTER HARDWARE - 5.6%
Compaq Computer Corp.............................. 195 $ 5,378
International Business Machines Corp.............. 105 11,812
--------
17,190
--------
INFORMATION TECHNOLOGY CONSULTING & SERVICES - 1.3%
Electronic Data Systems Corp...................... 97 4,009
--------
NETWORKING EQUIPMENT - 1.0%
Cisco Systems, Inc. (a)........................... 54 2,961
--------
SEMICONDUCTORS - 0.6%
Intel Corp........................................ 44 1,815
--------
SEMICONDUCTOR EQUIPMENT - 0.9%
Applied Materials, Inc. (a)....................... 44 2,610
--------
SYSTEMS SOFTWARE - 1.4%
Computer Associates International, Inc............ 165 4,163
--------
TELECOMMUNICATION SERVICES - 6.0%
INTEGRATED TELECOM SERVICES - 6.0%
AT&T Corp......................................... 314 9,236
Verizon Communications............................ 190 9,219
--------
18,455
--------
UTILITIES - 3.0%
MULTI-UTILITIES - 3.0%
Enron Corp........................................ 105 9,201
--------
TOTAL COMMON STOCKS (cost of $162,447) (b)........... 305,636
========
SHORT-TERM OBLIGATIONS - 0.5% PAR
--------------------------------------------------------------------------------
Associates Corp. of North America
6.700% (c) 10/2/00................................ $ 1,685 1,685
--------
--------------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - (0.3)%............. (872)
--------
NET ASSETS - 100.0%.................................. $306,449
========
--------------------------------------------------------------------------------
NOTES TO INVESTMENT PORTFOLIO:
--------------------------------------------------------------------------------
(a) Non-income producing.
(b) Cost for federal income tax purposes is $162,517.
(c) Rate represents yield at time of purchase.
Acronym Name
ADR American Depositary Receipt
See notes to financial statements.
9
<PAGE>
SR&F Growth & Income Portfolio
--------------------------------------------------------------------------------
Statement of Assets and Liabilities
September 30, 2000
(All amounts in thousands)
ASSETS
Investments at value (cost $162,447).............. $305,636
Short-term obligations ........................... 1,685
--------
$307,321
Cash.............................................. $ 2
Receivable for:
Dividends....................................... 445
Investments sold................................ 383 830
------- --------
Total Assets.................................. 308,151
LIABILITIES
Payable for:
Investments purchased.......................... 1,495
Accrued:
Management fee................................. 153
Bookkeeping fee................................ 2
Transfer agent fee............................. 1
Other............................................. 51
-------
Total Liabilities................................. 1,702
--------
NET ASSETS........................................ $306,449
========
See notes to financial statements.
10
<PAGE>
SR&F Growth & Income Portfolio
--------------------------------------------------------------------------------
Statement of Operations
For the Year Ended September 30, 2000
(All amounts in thousands)
INVESTMENT INCOME
Dividends......................................... $ 4,481
Interest.......................................... 521
--------
Total investment income (net of nonreclaimable. 5,002
foreign taxes withheld at source which
amounted to $28)
EXPENSES
Management fee.................................... $ 2,042
Transfer agent fee................................ 6
Bookkeeping fee................................... 32
Trustees' fee..................................... 17
Custodian fee..................................... 12
Audit fee......................................... 13
Legal fee......................................... 10
Other............................................. 33 2,165
------- --------
Net Investment Income.......................... 2,837
--------
NET REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS
Net Realized Gain (Loss) on :
Investments.................................... 49,594
Closed futures contracts....................... 587
Foreign currency transactions.................. (1)
-------
Net realized gain.............................. 50,180
Net change in unrealized appreciation/depreciation on
Investments.................................... (18,863)
Foreign currency transactions.................. (1)
-------
Net change in unrealized appreciation/depreciation (18,864)
--------
Net Gain..................................... 31,316
--------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.. $ 34,153
========
See notes to financial statements.
11
<PAGE>
SR&F Growth & Income Portfolio
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
(All amounts in thousands)
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
------------ ----------
OPERATIONS
Net investment income............................ $ 2,837 $ 5,114
Net realized gain................................ 50,180 18,373
Net change in unrealized appreciation/
depreciation.................................. (18,864) 49,677
-------- --------
Net increase in net assets resulting
from operations............................... 34,153 73,164
-------- --------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions.................................... 2,640 22,804
Withdrawals...................................... (107,079) (72,426)
-------- --------
Net Decrease from transactions in investors'
beneficial interest......................... (104,439) (49,622)
-------- --------
Total Increase (Decrease)..................... (70,286) 23,542
NET ASSETS
Beginning of period.............................. 376,735 353,193
-------- --------
End of period.................................... $306,449 $376,735
======== ========
See notes to financial statements.
12
<PAGE>
Liberty Value Opportunities Fund
--------------------------------------------------------------------------------
Statement of Assets and Liabilities
September 30, 2000
(All amounts in thousands, except per-share data and footnotes)
ASSETS
Investments at value, allocated from Portfolio.... $306,268
Receivable for:
Fund shares sold............................... $ 49
Other............................................. 18 67
-------- --------
Total Assets................................. 306,335
LIABILITIES
Payable for:
Fund shares repurchased........................ 92
Accrued:
Administration fee............................. 38
Bookkeeping fee................................ 3
Transfer agent fee............................. 44
Other............................................. 96
--------
Total Liabilities............................ 273
--------
NET ASSETS........................................ $306,062
--------
Class A
Net asset value & redemption price per share ($397/15) $ 27.44(a)
--------
Maximum offering price per share - Class A ($27.44/0.9425) $ 29.11(b)
--------
Class B
Net asset value & offering price per share ($1,772/65) $ 27.29(a)
--------
Class C
Net asset value & offering price per share ($106/4) $ 27.29(a)
--------
Class S
Net asset value, offering and redemption price per share
($303,786/11,075)................................. $ 27.43
--------
Class Z
Net asset value, offering and redemption price per share
($1/(c)).......................................... $ 27.44
--------
ANALYSIS OF NET ASSETS
Capital paid in................................... $118,711
Undistributed net investment income............... 58
Accumulated net realized gain allocated from Portfolio 44,619
Net unrealized appreciation allocated from Portfolio 142,674
--------
$306,062
========
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charges.
(b) On sales of $50,000 or more the offering price is reduced.
(c) Rounds to less than one.
See notes to financial statements.
13
<PAGE>
Liberty Value Opportunities Fund
--------------------------------------------------------------------------------
Statement of Operations
For the Year Ended September 30, 2000
(All amounts in thousands)
INVESTMENT INCOME
Dividend.......................................... $ 4,478
Interest income allocated from Portfolio.......... 520
--------
Total investment income (net of nonreclaimable. 4,998
foreign taxes withheld at source which
amounted to $28)
EXPENSES
Expenses allocated from Portfolio................. $ 2,164
Administrative fee................................ 509
12b-1 Service and Distribution fees............... 7
Transfer agent fee................................ 788
Bookkeeping fee................................... 32
Trustees fee...................................... 10
Custodian fee..................................... 2
Audit fee......................................... 11
Legal fee......................................... 7
Reports to shareholders........................... 96
Registration fee.................................. 99
Other............................................. 69
--------
3,794
--------
Net Investment Income..................... 1,204
--------
NET REALIZED & UNREALIZED GAIN (LOSS) ALLOCATED
FROM PORTFOLIO
Net realized gain on:
Investments.................................... 49,604
Closed futures contracts....................... 587
Foreign currency transactions.................. (1) 50,190
--------
Net change in unrealized appreciation/depreciation
during the period: ............................ (18,922)
--------
Net Gain.................................. 31,268
--------
INCREASE IN NET ASSETS FROM OPERATIONS............ $ 32,472
========
See notes to financial statements.
14
<PAGE>
Liberty Value Opportunities Fund
--------------------------------------------------------------------------------
Statement of Changes in Net Assets
(All amounts in thousands)
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000(a) 1999
------------ ----------
OPERATIONS:
Net investment income............................. $ 1,204 $ 3,410
Net realized gain................................. 50,190 18,333
Net unrealized change in appreciation/
depreciation................................... (18,922) 49,228
--------- ---------
Net Increase from Operations................... 32,472 70,971
--------- ---------
Distributions to Shareholders:
Distributions from net investment income - Class A (b) --
Distributions from net investment income - Class S (1,547) (3,859)
From net realized capital gains - Class S......... (16,297) (5,981)
Distributions from net investment income - Class Z (b) --
--------- ---------
(17,844) (9,840)
--------- ---------
FUND SHARE TRANSACTIONS:
Receipts for shares sold - Class A................ 424 --
Value of distributions reinvested - Class A....... (b) --
Cost of shares repurchased - Class A.............. (38) --
--------- ---------
386 --
--------- ---------
Receipts for shares sold - Class B................ 1,760 --
Cost of shares repurchased - Class B.............. (30) --
--------- ---------
1,730 --
--------- ---------
Receipts for shares sold - Class C................ 130 --
Cost of shares repurchased - Class C.............. (24) --
--------- ---------
106 --
--------- ---------
Receipts for shares sold - Class S................ 22,261 91,029
Value of distributions reinvested - Class S....... 16,642 9,089
Cost of shares repurchased - Class S.............. (125,481) (136,512)
--------- ---------
(86,578) (36,394)
--------- ---------
Receipts for shares sold - Class Z................ 1 --
Value of distributions reinvested - Class Z....... (b) --
--------- ---------
1 --
--------- ---------
Net Decrease from Fund Share Transactions..... (84,355) (36,394)
--------- ---------
Total Increase (Decrease)..................... (69,727) 24,737
NET ASSETS
Beginning of period............................... 375,789 351,052
--------- ---------
End of period (including undistributed net
investment income of $58 and $406,
respectively).................................. $ 306,062 $375,789
========= =========
(a) Class A, Class B, Class C and Class Z shares were initially offered on
December 1, 1999.
(b) Rounds to less than one.
See notes to financial statements.
15
<PAGE>
Liberty Value Opportunities Fund
--------------------------------------------------------------------------------
Statement of Changes in Net Assets Continued
(All amounts in thousands)
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000(a) 1999
------------ ----------
ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL
INTEREST
Sold - Class A................................... 17 --
Issued for distributions reinvested - Class A.... (b) --
Repurchased - Class A............................ (2) --
-------- --------
15 --
-------- --------
Sold - Class B................................... 66 --
Repurchased - Class B............................ (1) --
-------- --------
65 --
-------- --------
Sold - Class C................................... 5 --
Repurchased - Class C............................ (1) --
-------- --------
4 --
-------- --------
Sold - Class S................................... 838 3,502
Issued for distributions reinvested - Class S.... 630 367
Repurchased - Class S............................ (4,772) (5,124)
-------- --------
(3,304) (1,255)
-------- --------
Sold - Class Z................................... (b) --
Issued for distributions reinvested - Class Z.... (b) --
-------- --------
(b) --
-------- --------
(a) Class A, Class B, Class C and Class Z shares were initially offered on
December 1, 1999.
(b) Rounds to less than one.
See notes to financial statements.
16
<PAGE>
Notes to Financial Statements
--------------------------------------------------------------------------------
September 30, 2000
NOTE 1. ORGANIZATION
Stein Roe Growth &Income Fund - Class S and Liberty Value Opportunities Fund -
Class A, B, C and Z are the collective series of shares of Liberty Value
Opportunities Fund (the "Fund") (formerly the Stein Roe Advisor Select Growth
&Income 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
& Income Portfolio (the Portfolio). 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. Class A, Class B, Class C and Class Z shares were initially
offered on December 1, 1999. This report is intended for the shareholders of
Stein Roe Growth &Income Fund - Class S shares. Effective October 31, 1999,
Class S shares closed to new investors. Class A, Class B and Class C shares have
their own sales charge and expense structure, please refer to the 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 99.9% of the Portfolio.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates. The following is a
summary of significant accounting policies consistently followed by the Fund and
Portfolio in the preparation of the financial statements.
SECURITY VALUATION AND TRANSACTIONS
Equity securities generally are valued at the last sale price or, in the case of
unlisted or listed securities for which there were no sales during the day, at
17
<PAGE>
Notes to Financial Statements Continued
--------------------------------------------------------------------------------
current quoted bid price. Forward currency contracts are valued based on the
weighted value of the exchange traded contracts with similar durations.
Futures contracts are valued based on the difference between the last sale
price and the opening price of the contract.
Forward currency contracts are valued based on the weighted value of the
exchange traded contracts with similar durations.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
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 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.
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.
18
<PAGE>
Notes to Financial Statements Continued
--------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSACTIONS
Net realized and unrealized gains (losses) on foreign currency, transactions
includes the fluctuations in exchange rates on gains (losses) between trade and
settlement dates on securities transactions, gains (losses) arising from the
disposition of foreign currency and currency gains (losses) between the accrual
and payment dates on dividends and interest income and foreign withholding
taxes.
The Portfolio does not distinguish that portion of gains (losses) on
investments which is due to changes in foreign exchange rates from that which is
due to changes in market prices of the investments. Such fluctuations are
included with the net realized and unrealized gains (losses) from investments.
FORWARD CURRENCY CONTRACTS
The Portfolio may enter into forward currency contracts to purchase or sell
foreign currencies at predetermined exchange rates in connection with the
purchases and sales of securities. The Portfolio may also enter into forward
currency contracts to hedge certain other foreign currency denominated assets.
The contracts are used to minimize the exposure to foreign exchange rate
fluctuations during the period between trade and settlement date of the
contracts. All contracts are marked-to-market daily, resulting in unrealized
gains (losses) which become realized at the time the forward currency contract
is closed or mature. Realized and unrealized gains (losses) arising from such
transactions are included in net realized and unrealized gains (losses) on
foreign currency transactions. Forward currency contracts do not eliminate
fluctuations in the prices of the Portfolio's securities. While the maximum
potential loss from such contracts is the aggregate face value in U.S. dollars
at the time the contract was opened, exposure is typically limited to the change
in value of the contract (in U.S. dollars) over the period it remains open.
Risks may also arise if counterparties fail to perform their obligations under
the contracts.
OTHER
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
------------------ ---------------
1st $500 million 0.60%
Next $500 million 0.55%
Over $1 billion 0.50%
19
<PAGE>
Notes to Financial Statements Continued
--------------------------------------------------------------------------------
ADMINISTRATION FEE
The Advisor also provides accounting and other services to the Portfolio for a
monthly fee as follows:
Average Net Assets Annual Fee Rate
------------------ ---------------
1st $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 to equal
to $25,000 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
average daily net assets attributable to Class S shares and receives
reimbursement for certain out of pocket expenses. The Portfolio pays a monthly
fee equal to $6,000 annually.
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.
OTHER
The Fund pays no compensation to its officers, all of whom are employees of the
Advisor.
--------------------------------------------------------------------------------
NOTE 3. PORTFOLIO INFORMATION
During the year ended September 30, 2000, purchases and sales of investments,
other than short-term obligations, were $94,293,158 and $162,582,773,
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 $151,293,959
Gross unrealized
depreciation (8,174,731)
------------
Net unrealized
appreciation $143,119,228
------------
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
--------------------------------------------------------------------------------
The Portfolio may purchase or sell futures contracts. The Portfolio 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
future 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 Portfolio's Statement of Assets
and Liabilities at any given time.
--------------------------------------------------------------------------------
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 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 $76,224.
21
<PAGE>
<TABLE>
Financial Highlights Continued
--------------------------------------------------------------------------------
Stein Roe Growth & Income Fund
Selected data for a share outstanding throughout the period are as follows:
<CAPTION>
CLASS S YEARS ENDED SEPTEMBER 30,
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 26.14 $ 22.45 $ 22.91 $ 18.39 $ 16.65
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) 0.09 0.22 0.24 0.30 0.27
Net realized and unrealized gain 2.47 4.10 0.55 5.15 3.22
-------- -------- -------- -------- --------
Total from investment operations 2.56 4.32 0.79 5.45 3.49
-------- -------- -------- -------- --------
DISTRIBUTIONS
Net investment income (0.12) (0.25) (0.28) (0.28) (0.32)
Net realized capital gains (1.15) (0.38) (0.97) (0.65) (1.43)
-------- -------- -------- -------- --------
Total distributions (1.27) (0.63) (1.25) (0.93) (1.75)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR $ 27.43 $ 26.14 $ 22.45 $ 22.91 $ 18.39
======== ======== ======== ======== ========
Total return (b) 10.00% 19.39% 3.45% 30.81% 22.67%
RATIOS TO AVERAGE NET ASSETS
Ratio of net expenses to average net assets (c) 1.12% 1.06%(d) 1.07% 1.13% 1.18%
Ratio of net investment income to average net assets (c) 0.35% 0.79%(d) 1.02% 1.52% 1.65%
Portfolio turnover rate N/A N/A N/A 2%(e) 13%
Net assets, end of period (000's) $303,786 $375,789 $351,052 $337,466 $204,387
(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) During the year ended September 30, 1999, the Fund experienced a one-time
reduction in its expenses of four 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
without the reduction.
(e) Prior to commencement of operations of the Portfolio. Federal Income Tax
Information (unaudited) For the fiscal year ended September 30, 2000, the
Fund designates long-term capital gains of $50,353,451.
</TABLE>
--------------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
For the fiscal year ended September 30, 2000, the Fund designates long-term
capital gains of $50,353,451.
--------------------------------------------------------------------------------
<TABLE>
SR&F Growth & Income Portfolio
<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................... 0.64% 0.63%(b) 0.65% 0.65%(c)
Ratio of net investment income to average net assets.......... 0.83% 1.22%(b) 1.44% 2.04%(c)
Portfolio turnover rate....................................... 29% 7% 11% 7%
(a) From commencement of operations on February 3, 1997
(b) During the year ended September 30, 1999, the Portfolio experienced a
one-time reduction in its expenses of two basis points as a result of
expenses accrued in a prior period. The Portfolio's ratios disclosed above
reflect the actual rate at which expenses were incurred throughout the
fiscal year without the reduction.
(c) Annualized.
22-23 Spread
</TABLE>
<PAGE>
Report of Independent Accountants
--------------------------------------------------------------------------------
To the Trustees of Liberty-Stein Roe Funds Investment Trust and SR&F Base Trust
and Stein Roe Growth &Income Fund - Class S Shareholders of Liberty Value
Opportunities 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 Value
Opportunities Fund (the "Fund") (formerly Stein Roe Advisor Select Growth &
Income Fund) (a series of Liberty-Stein Roe Funds Investment Trust) and Stein
Roe Growth & Income 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 correspondence 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
24
<PAGE>
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
Christine Balzano, Vice President
David Brady, Vice President
Daniel Cantor, Vice President
J. Kevin Connaughton, Vice President, Treasurer
William Garrison, Vice President
Erik Gustafson, Vice President
Harvey Hirschhorn, Vice President
Gail D. Knudsen, Vice President, Controller
Lynn C. Maddox, Vice President
Mary D. McKenzie, Vice President
Art McQueen, Vice President
Nicholas Norton, Vice President
Michael Fisher, Assistant Treasurer
AGENTS AND ADVISORS
Stein Roe & Farnham Incorporated
Investment Advisor
State Street Bank and Trust Company
Custodian SteinRoe 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.
S11-02/202D-0900(12/00) 00/2071
