SEGALL BRYANT AND HAMILL GROWTH AND INCOME FUND
ANNUAL REPORT
Dated April 30, 1998
SEGALL BRYANT AND HAMILL GROWTH AND INCOME FUND
Segall Bryant & Hamill Investment Counsel is sub-advisor to and has
day-to-day management responsibility for the Segall Bryant & Hamill growth and
Income Fund. Ralph M. Segall and David Kalis are co-Portfolio Managers for the
Segall Bryant & Hamill Growth and Income Fund.
For the fiscal year ending April 30, 1998, the Segall Bryant & Hamill
Growth and Income Fund's total return at NAV was 30.39%*. This compares to the
performance of the S&P 500 Index of 41.04% for the same time period.
The last several years have seen unprecedented returns in the equity
markets accompanied by historically low volatility. The result has been a
near-perfect environment for equity investing. Although we remain bullish on
equities long term, we know that, like all good things, that state of affairs
will someday come to an end. Being prudent managers of your capital, we feel
caution is warranted. This cautionary stance is expressing itself in portfolio
activity in three ways. First, we continue to believe that current price
valuations for stocks are overly expensive-- especially in the
large-capitalization sector of the market. Due primarily to these valuation
levels, our focus has emphasized stock selections in the realm of
mid-capitalization stocks (i.e., those with a market value of between $1 billion
and $5 billion). By focusing the Fund in the mid-capitalization area of the
market, we feel that attractive stocks can be purchased at reasonable valuations
with comparable growth rates to the large capitalization stocks.
Second, we have reduced our exposure to Asia and are focusing more on
domestic issues that will be insulated from continued downturns in these
economies. The past six months have seen tremendous change occurring over the
global landscape, stemming from large currency swings, political unrest and
slowing Asian economies. While we still believe these economies will resume
their growth, we are concerned that current conditions over the next year or so
will affect a number of the multinational companies we have held in the
portfolio.
Third, we are concerned about the overall pace of profit growth for the
economy. Corporate margins are in the midst of a squeeze arising from the need
to pay higher wages in a full- employment economy and an inability to raise
prices to offset the higher costs. Profits could be under pressure for the next
year or so. To deal with this issue, we believe that our fundamental approach to
investment selection, which emphasizes Return on Investment (ROI), will play a
key role. Our philosophy for selecting stocks in the Fund is to invest in
companies that we believe are in unique businesses with potential to achieve
above-average growth in earnings, return on investment and dividends. We use
in-depth research and analysis to identify companies that are committed to
building long-term shareholder value through the effective use of corporate
assets. Specifically, we search for companies that have demonstrated strong or
improving Return on Investment (ROI) over an extended period of time. (ROI is
calculated by dividing a company's total capital--its common and preferred stock
equity plus its long-term funded debt--into earnings before interest, taxes and
dividends are paid.) As a measure of a company's management, operational
efficiency and profitability, we believe that companies with superior ROI will,
over time, demonstrate above average growth, thereby leading to an appreciation
in their stock prices. As of April 30, 1998, stocks in the Fund averaged an ROI
of 21.50%* compared to 16.74% for the S&P 500.
Two examples of recent purchases in the Fund which overcome these three
concerns are Safeway and Ceridian. Safeway is one of the largest grocery chains
in the United States, and is widely recognized as the best managed and most
profitable company in this industry. As the food retailing industry continues to
consolidate, Safeway's strategy is to purchase underperforming assets and use
its merchandising and cost control initiatives to increase profitability. We
feel this strategy will allow the company to grow its earnings and profitability
at double-digit rates.
As one of the largest payroll processors domestically and in the U.K.,
Ceridian benefits from low unemployment rates, a strong economy and the trend
toward outsourcing. Over the past year, Ceridian has sold off its non-core
defense and gaming businesses resulting in a higher ROI and more consistency in
its business. Our hope is that as investors realize the change occurring at the
company, the stock will perform well.
Finally, we have attempted to structure the Fund's portfolio to take on
less risk than that of a portfolio consisting of securities representing the
broader market. As of April 30, 1998, the Fund had a Beta of .88, which means
the Fund in theory is only 88% as volatile as the S&P 500. Beta is intended to
be a statistical measure of relative risk based on financial models, and it is
possible that the Fund's volatility may be greater or less than the broader
market indices.
While we are cautious near term on the valuations levels in the stock
market, we remain bullish on interest rates. Given our current outlook for
moderate/slowing growth, low inflation, and increased fiscal responsibility from
Washington, long term interest rates should continue to trend downward from the
6% range prevailing today. Given this outlook, we continue to hold a position in
US Treasury Strips due in 2021. This position will allow the Fund to realize
significant returns if our forecast proves correct.
We remain confident that our selection process will lead to
above-average results over time. In coming months, there will undoubtedly be
tests of investor's enthusiasm for stocks, which could produce greater
volatility in prices. Under these circumstances, we believe that the stocks we
are emphasizing will prove to be ones toward which investors will gravitate.
We appreciate your continued support.
*Past performance is no guarantee of future results. Investment return
and principal value will fluctuate.
3
SEGALL BRYANT & HAMILL GROWTH AND INCOME FUND
Growth of $10,000 Inveted Since Inception
GROWTH AND INCOME FUND CLASS A SHARES
[PLOT POINTS CHART]
Growth and Income Fund (ending value $16,287)
9/7/95 10,000
9/8/95 10,000
9/30/95 9,980
10/31/95 9,890
11/30/95 10,320
12/31/95 10,743
1/31/96 10,773
2/29/96 10,823
3/31/96 10,984
4/30/96 11,264
5/31/96 11,575
6/30/96 11,385
7/31/96 10,863
8/31/96 11,124
9/30/96 11,525
10/31/96 11,415
11/30/96 12,106
12/31/96 12,056
1/31/97 12,584
2/28/97 12,522
3/31/97 12,190
4/30/97 12,490
5/31/97 13,331
6/30/97 13,870
7/31/97 14,782
8/31/97 14,212
9/30/97 14,730
10/31/97 14,181
11/30/97 14,326
12/31/97 14,528
1/31/98 14,622
2/28/98 15,543
3/31/98 16,004
4/30/98 16,297
Standard & Poor's 500 Index (ending value $20,531)
9/7/95 10,000
9/8/95 10,042
9/29/95 10,264
10/31/95 10,227
11/30/95 10,675
12/30/95 10,881
1/31/96 11,251
2/29/96 11,356
3/29/96 11,465
4/30/96 11,634
5/31/96 11,933
6/28/96 11,979
7/31/96 11,449
8/30/96 11,692
9/30/96 12,239
10/31/96 12,690
11/29/96 13,648
12/31/96 13,378
1/31/97 14,213
2/28/97 14,324
3/31/97 13,737
4/30/97 14,556
5/30/97 15,442
6/30/97 16,134
7/31/97 17,417
8/29/97 16,442
9/30/97 17,342
10/31/97 18,763
11/28/97 17,539
12/31/97 17,840
1/30/98 18,037
2/27/98 19,337
3/31/98 20,326
4/30/98 20,531
AVERAGE ANNUAL TOTAL RETURNS
1 Year Since 9/7/95*
- ------- -------------
30.39% 20.22%
Performance quoted represents past performance and is not indicative of
future results.
*Commencement of operations.
The Standard & Poor's 500 Index is an unmanaged, market value weighted
index of 500 widely held common stocks. The index includes industrial, utility,
financial and transportation stocks primarily, but not exclusively, trades on
the New York Stock exchange. The S&P 500 represents approximately 77% of the
NYSE market capitalization. The index assumes that no operating expenses,
transaction fees or sales charges are incurred by a hypothetical investor who
directly owns the securities maintained in the index. In order to outperform the
index over any specific time frame, a fund must return to investors an amount
greater than that provided by the index plus total operating expenses.
SEGALL BRYANT & HAMILL GROWTH AND INCOME FUND
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Shareholders
VAM Institutional Funds, Inc.
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments in securities, of Segall Bryant & Hamill
Growth and Income Fund (a fund within VAM Institutional Funds, Inc.) as of April
30, 1998, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year period
ended April 30, 1998, and the financial highlights for the periods presented in
note 5. These financial statements and the financial highlights are the
responsibility of Fund management. Our responsibility is to express an opinion
on these financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards 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 and the
financial highlights. Investment securities held in custody are confirmed to us
by the custodian. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Segall Bryant &
Hamill Growth and Income Fund at April 30, 1998 and the results of its
operations, changes in its net assets and the financial highlights for the
periods stated in the first paragraph above, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
June 5, 1998
5
<TABLE>
<CAPTION>
SEGALL BRYANT & HAMILL GROWTH AND INCOME FUND
Statement of Assets and Liabilities April 30, 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Assets
Investments in securities, at market value (note 1)
(identified cost: $5,368,941)........................................... $ 6,681,618
Cash in bank on demand deposit............................................. 359,612
Dividends and interest receivable.......................................... 3,863
Due from adviser........................................................... 19,987
Organizational costs (note 1).............................................. 14,890
-------------
Total assets............................................................ 7,079,970
-----------
Liabilities
Accrued expenses........................................................... 16,503
-------------
Total liabilities....................................................... 16,503
-------------
Net assets applicable to outstanding capital stock......................... $7,063,467
==========
Represented by:
Capital Stock - $.01 par value (note 1)................................ $ 5,121
Additional paid-in capital.............................................. 5,479,192
Accumulated net realized gain on investments............................ 266,477
Unrealized appreciation on investments.................................. 1,312,677
-----------
Total net assets...................................................... $7,063,467
==========
Shares outstanding and net asset value per share
Shares of capital stock outstanding: 512,082 (note 4)................... $13.79
======
</TABLE>
See accompanying notes to financial statements.
6
<TABLE>
<CAPTION>
SEGALL BRYANT & HAMILL GROWTH AND INCOME FUND
Statement of Operations Year ended April 30, 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Dividends............................................................... $ 54,761
Interest................................................................ 32,419
-------------
Total investment income............................................... 87,180
-------------
Expenses (note 2):
Investment advisory and management fee.................................. 44,267
Dividend disbursing, administrative and accounting services fees........ 30,987
Distribution fee-Class A ............................................... 14,669
Distribution fee-Class B ............................................... 366
Printing, postage and supplies.......................................... 7,269
Legal fees.............................................................. 2,389
Custodian fees.......................................................... 4,027
Compensation of directors............................................... 456
Audit and accounting fees............................................... 9,000
Registration fees....................................................... 20,331
Amortization of organizational costs.................................... 6,380
Other expenses.......................................................... 831
---------------
Total expenses........................................................ 140,972
------------
Less (note 2):
Expenses waived or absorbed............................................. (37,379)
-------------
Total net expenses.................................................... 103,593
------------
Investment loss-net................................................... (16,413)
------------
Realized and unrealized gain on investments:
Net realized gain on investments...................................... 770,537
Net increase in unrealized appreciation or depreciation of
investments......................................................... 800,826
------------
Net gain on investments............................................... 1,571,363
-----------
Net increase in net assets resulting from operations....................... $1,554,950
==========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
SEGALL BRYANT & HAMILL GROWTH AND INCOME FUND
Statements of Changes in Net Assets
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Year ended Year ended
April 30, 1998 April 30, 1997
Operations:
Investment income gain (loss) - net.................... $ (16,413) $ 34,815
Realized gain on investments - net..................... 770,537 260,524
Net change in unrealized appreciation or depreciation
of investments....................................... 800,826 209,479
----------- ------------
Net increase in net assets resulting from operations... 1,554,950 504,818
---------- ------------
Distributions to shareholders from:
Investment income - net:
Class A............................................ (23,030) (22,265)
Class B.............................................. -- (395)
Net realized gain on investments:
Class A............................................. (685,903) (141,429)
Class B............................................. -- (5,650)
---------------- ------------
Total distributions................................ (708,933) (169,739)
---------- ----------
Capital share transactions (note 4): Proceeds from sale of shares (note 2):
Class A.............................................. 1,682,033 1,247,582
Class B.............................................. -- 212,813
Net asset value of shares issued in reinvestment of net investment income and
net realized gain distributions:
Class A.......................................... 696,385 153,267
Class B......................................... -- 3,486
Payments for redemption of shares:
Class A.............................................. (1,136,892) (723,029)
Class B.............................................. (201,605) (25,225)
------------- ---------------
Increase in net assets from capital share transactions. 1,039,921 868 ,894
----------- --------------
Total increase in net assets......................... 1,885,938 1,203,973
Net assets at beginning of period......................... 5,177,529 3,973,556
----------- ------------
Net assets at end of period (including undistributed
net investment income of $0 and $23,030,
respectively)........................................ $7,063,467 $5,177,529
========== ==========
</TABLE>
See accompanying notes to financial statements.
8
SEGALL BRYANT & HAMILL GROWTH AND INCOME FUND
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(1) Summary of Significant Accounting Policies
The Segall Bryant and Hamill Growth and Income Fund (the "Fund"), a series
within VAM Institutional Funds, Inc., is registered under the Investment Company
Act of 1940 (as amended) as a diversified open-end management investment
company. The Fund's investment objective is growth of capital. The Fund's
secondary objective is current income. The Fund seeks to achieve these
objectives by investing in a diversified portfolio of securities including
common stock, preferred stock, bonds, convertible securities, and warrants and
rights to purchase common stock.
On April 30, 1997, the Fund reorganized by transferring substantially all of
its assets and liabilities to a new series of VAM Institutional Funds, Inc.
Prior to April 30, the Fund was a series of Voyageur Mutual Funds III, Inc. The
Fund's investment objective was not changed as a result of the reorganization.
The financial history of the Fund continued from the prior series of Voyageur
Mutual Funds III, Inc. to the new series of VAM Institutional Funds, Inc.
During the year ended April 30, 1998, the Fund stopped offering Class B and
Class C shares. All outstanding Class B shares (17,765 shares) were converted to
Class A shares in a transaction which was expense free for the Class B
shareholders. There were no Class C shares outstanding. The current shares of
the fund (formerly referred to as "Class A") are no-load shares. They are sold
without a front end load and without a contingent deferred sales charge.
Pursuant to its articles of incorporation, Voyageur Institutional Funds, Inc.
has 10 trillion shares of authorized capital stock that may be issued.
The significant accounting policies followed by the Fund are summarized as
follows:
Use of Estimates
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 net increases (decreases) in net assets resulting from
operations during the reporting period. Actual results could differ from those
estimates. Investments in Securities
Investments in securities traded on national or international securities
exchanges are valued at the last sales price on that exchange; securities traded
in the over-the-counter market and listed securities for which no sale was
reported on the valuation date are valued on the basis of the last current bid
price. The values of fixed income securities are determined by using pricing
services or prices quoted by independent brokers. When market quotations are not
readily available, or in certain other circumstances, securities are valued at
fair value according to methods selected in good faith by the Board of
Directors. Investments in short-term securities with maturities of more than 60
days from the valuation date are valued at the last bid price or at fair value
as determined by a pricing service approved by the Board of Directors.
Short-term securities with maturities of less than 60 days are valued at
amortized cost which approximates market value.
Security transactions are accounted for on trade date. Realized gains and
losses are calculated on the identified cost basis. Dividend income is
recognized on the ex- dividend date. Interest income, including level-yield
amortization of premium and discount, is accrued daily.
Federal Taxes
The Fund's policy is to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to shareholders in amounts that will avoid or minimize federal
income or excise taxes for the Fund.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of losses deferred for
tax purposes due to "wash sale" transactions. The character of distributions
made during the year from net investment income or net realized gains may differ
from their ultimate characterization for federal income tax purposes. Also, due
to the timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or realized gains (losses)
were recorded by the Fund.
On the statement of assets and liabilities, as a result of permanent
book-to-tax differences, reclassification entries have been made to increase
undistributed net investment income and decrease additional paid-in capital by
$6,381.
9
SEGALL BRYANT & HAMILL GROWTH AND INCOME FUND
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Distributions to Shareholders
Distributions to shareholders from net investment income, if any, are
declared and paid annually. Net realized capital gains, if any, are also
distributed annually. All distributions are payable in cash or reinvested in
additional shares of each Fund.
Organizational Costs
Organizational costs of the Fund are being amortized over 60 months on a
straight line basis.
(2) Expenses and Sales Charges
The Fund has an investment advisory agreement with Voyageur Asset Management
LLC (Voyageur). Under the investment advisory agreement, Voyageur provides the
Fund with office facilities, equipment and personnel, and monitors the
performance of various organizations performing services for the Fund. The
investment advisory agreement provides for the payment on a monthly basis of a
fee equal to an annual rate of .75% of the Fund's average daily net assets.
Investment decisions for the Fund are made and executed by Segall Bryant and
Hamill, the Fund's sub-adviser. Voyageur pays Segall Bryant and Hamill for their
services a sub-advisory fee equal to .75% of average daily net assets. The Fund
paid no direct fees to the sub-adviser.
The Fund also pays a fee to Voyageur for acting as the Fund's transfer agent,
dividend-disbursing and accounting services agent. The fee for the Fund is equal
to the sum of $1.25 per shareholder account per month, a fixed monthly fee
ranging from $1,000 to $1,500 based on the level of the Fund's average daily net
assets and an annualized percentage of average daily net assets at reducing
rates from .11% to .035%. The Fund is also responsible for reimbursing
Voyageur's out-of-pocket expenses in connection with the performance of transfer
agency, dividend disbursing and accounting services.
In addition to the advisory fee and the transfer agency, dividend disbursing
and accounting services fees, the Fund is responsible for paying most other
operating expenses including outside directors' fees and expenses, custodian
fees, registration fees, printing and shareholder reports, legal and auditing
fees and other miscellaneous expenses.
The Fund has a distribution agreement under Rule 12b-1 of the Investment
Company Act of 1940. Under this plan, the Fund pays a monthly distribution fee
at an annual rate of .25% of the Fund's average daily net assets.
Voyageur and Segall, Bryant and Hamill have voluntarily agreed to pay all
expenses (excluding fees paid indirectly, stock transfer fees, taxes, interest
and brokerage commissions) which exceed 1.75% of average daily net assets.
During the year ended April 30, 1998, Voyageur and Segall Bryant and Hamill
voluntarily absorbed $37,379 for the Fund.
(3) Investment Securities Transactions
Cost of purchases and proceeds from sales of investment securities (other
than short-term securities) aggregated $5,992,035 and $5,831,235 for the Fund
during the year ended April 30, 1998.
10
SEGALL BRYANT & HAMILL GROWTH AND INCOME FUND
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(4) Capital Stock Transactions in shares during the periods shown were as
follows:
<TABLE>
<CAPTION>
Class A Class B
------------------------------ ----------------------------
Year Year Year Year
ended ended ended ended
April 30, April 30, April 30, April 30,
1998 1997 1998 1997
---------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Shares sold.......................... 127,913 107,367 -- 18,645
Shares reinvested.................... 56,617 13,179 -- 301
Shares redeemed..................... (84,513) (61,006) (17,765) (2,175)
---------- ---------- --------- --------
Increase (decrease) in
shares outstanding............... 100,017 59,540 (17,765) 16,771
========= ========== ========== ========
</TABLE>
11
<TABLE>
<CAPTION>
SEGALL BRYANT & HAMILL GROWTH AND INCOME FUND
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(5) Financial Highlights
Per share data (rounded to the next cent) for a share of capital stock
outstanding and selected information for each period are as follows:
Class A
-----------------------------------------------
Year Year Period from
ended ended September 7, 1995*
April 30, April 30, to April 30,
1998 1997 1996
-------------- -------------------------------
<S> <C> <C> <C>
Net asset value:
Beginning of period.................... $12.05 $11.24 $10.00
------ ------ ------
Operations:
Net investment income (loss)........... (.03) .08 .02
Net realized and unrealized gain on
investments.......................... 3.48 1.13 1.24
------ -------- --------
Total from operations.............. 3.45 1.21 1.26
------ -------- --------
Distributions to shareholders:
From net investment income............. (.06) (.05) (.02)
From net realized gains................ (1.65) (.35) --
------- --------- ----------
Total from distributions........... (1.71) (.40) (.02)
------- --------- ----------
Net asset value:
End of period.......................... $13.79 $12.05 $11.24
====== ====== ======
Total investment return (c)............... 30.39% 10.89% 12.64%
Net assets at end of
period (000's omitted)................. $7,063 $4,965 $3,962
Ratios:
Expenses to average net assets (d)..... 1.75% 1.86% 1.98%(a)
Expenses to average net assets
(net of expenses paid indirectly).... 1.75% 1.75% 1.75%(a)
Net investment income (loss) to
average net assets................... (.28)% .76% .36%(a)
Assuming no voluntary waivers and
reimbursements and expense
reductions:
Expenses................ 2.39% 2.58% 2.97%(a)
Net investment income
(loss)............... (.92)% .04% (.63)%(a)
Portfolio turnover rate (excluding
short-term securities)................. 104.5% 108.0% 56.1%
Average commission rate (b)............... $0.06 $0.05 N/A
</TABLE>
* Commencement of operations
12
<TABLE>
<CAPTION>
SEGALL BRYANT & HAMILL GROWTH AND INCOME FUND
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(5) Financial Highlights (continued)
Class B
-----------------------------------------------
Period from Year Period from
May 1, 1997 ended December 28, 1995*
to July 22, April 30, to April 30,
1997 1997 1996
------------ -------------------------------
<S> <C> <C> <C>
Net asset value:
Beginning of period.................... $11.96 $11.21 $10.64
------ ------ ------
Operations:
Net investment income (loss)........... -- .04 (.01)
Net realized and unrealized gain on
investments.......................... 1.52 1.08 .58
-------- -------- ---------
Total from operations.............. 1.52 1.12 .57
-------- -------- ---------
Distributions to shareholders:
From net investment income............. -- (.02) --
----------
From net realized gains................ -- (.35) --
---------- --------- ---------
Total from distributions........... -- (.37) --
---------- --------- ---------
Net asset value, date of conversion (e)... (13.48)
-------
Net asset value:
End of period.......................... $ -- $11.96 $11.21
========== ====== ======
Total investment return (c)............... -- 10.10% 5.36%
Net assets at end of
period (000's omitted)................. $ -- $ 212 $ 11
Ratios:
Expenses to average net assets (d)..... 2.50%(a) 2.60% 2.68%(a)
Expenses to average net assets
(net of expenses paid indirectly).... 2.50%(a) 2.48% 2.45%(a)
Net investment income (loss) to
average net assets................... (1.03)%(a) .10% (.37)%(a)
Assuming no voluntary waivers and
reimbursements and expense
reductions:
Expenses................ 3.14%(a) 3.32% 3.50%(a)
Net investment income
(loss)............... (1.67)%(a) ( .62)% (1.19)%(a)
Portfolio turnover rate (excluding
short-term securities)................. -- 108.0% 56.1%
Average commission rate (b)............... $ -- $ 0.05 N/A
</TABLE>
* Commencement of operations
13
SEGALL BRYANT & HAMILL GROWTH AND INCOME FUND
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(5) Financial Highlights (continued)
Notes to Financial Highlights
(a) Adjusted to an annual basis.
(b) Beginning in the year ended April 30, 1997, the average commission rate
paid per share for security transactions is a required disclosure.
(c) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(d) The expense ratio reflects the effect of gross expenses attributable to
earnings credits on uninvested cash balances received by the Fund.
(e) On July 22, 1997 the Fund ceased to offer Class B shares. All outstanding
Class B shares were converted to Class A shares in an expense free
transaction.
14
<TABLE>
<CAPTION>
SEGALL BRYANT & HAMILL GROWTH AND INCOME FUND
Investments in Securities (continued) April 30, 1998
- -------------------------------------------------------------------------------------------------------------------
MARKET
ISSUER NUMBER OF SHARES VALUE(a)
- -------------------------------------------------------------------------------------------------------------------
(Percentages of each investment category relate to total net assets)
COMMON STOCKS (89.9%):
CAPITAL GOODS (13.2%):
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Avery Dennison Corporation 3,700 $ 193,788
Dover Corporation 2,500 98,750
General Electric 2,400 204,300
Illinois Tool Works 2,800 197,400
Littelfuse Incorporated(c) 5,000 126,250
Molex Incorporated Class A 4,281 115,052
----------
935,540
COMMERCIAL SERVICES (9.9%):
- -------------------------------------------------------------------------------------------------------------------
Ceridian Corporation (c) 3,000 169,687
First Data Corporation 3,500 118,560
Grainger (W.W.) Incorporated 900 98,044
Interpublic Group Company 2,500 159,688
New England Business Service 4,700 155,981
----------
701,960
CONSUMER CYCLICAL (9.5%):
- -------------------------------------------------------------------------------------------------------------------
Dollar General 3,750 142,031
Home Depot 3,000 208,875
Jones Apparel Group(c) 2,000 119,625
Mattel Incorporated 3,000 114,938
Steelcase Incorporated 2,500 86,563
------------
672,032
CONSUMER NON-DURABLE (9.5%):
- -------------------------------------------------------------------------------------------------------------------
Gillette Company 1,400 161,612
Kimberly Clark Corporation 3,000 152,250
Safeway Incorporated(c) 5,400 206,550
Walt Disney 1,200 149,175
-----------
669,587
------------------------------------------------------------------------------------------------------------------
CONSUMER SERVICES (1.4%):
Tribune Company 1,500 99,000
-----------
ENERGY (5.3%):
- -------------------------------------------------------------------------------------------------------------------
British Petroleum 500 47,250
Camco International Incorporated 2,000 135,750
Enron Corporation 3,000 147,562
Schlumberger, LTD 500 41,438
------------
372,000
See accompanying notes to investments in securities.
15
SEGALL BRYANT & HAMILL GROWTH AND INCOME FUND
Investments in Securities (continued) April 30, 1998
- -------------------------------------------------------------------------------------------------------------------
MARKET
ISSUER NUMBER OF SHARES VALUE(a)
- -------------------------------------------------------------------------------------------------------------------
FINANCIAL (15.1%):
- -------------------------------------------------------------------------------------------------------------------
Allstate Corporation 1,800 $ 173,250
American International Group 1,000 131,563
CMAC 1,000 64,563
First Union Corporation 3,000 181,125
Norwest Corporation 4,000 158,750
Protective Life Corporation 5,000 185,625
Royal Bank of Canada - ADR 1,900 113,644
Security Capital Group - Class B(c) 2,000 60,500
Security Capital Group - Class B Warrants(c) 21 59
----------------
1,069,079
HEALTH CARE (10.6%):
- -------------------------------------------------------------------------------------------------------------------
Abbott Laboratories 2,000 146,250
Biomet Incorporated 2,000 60,000
Dentsply International 6,000 197,250
Johnson & Johnson 2,500 178,438
Pfizer Incorporated 1,000 113,812
Roche Group - ADR 500 50,850
-----------
746,600
TECHNOLOGY (12.6%):
- -------------------------------------------------------------------------------------------------------------------
Applied Power Incorporated - Class A 5,200 194,350
Methode Electronics 5,500 88,000
Microsoft Corporation(c) 1,700 153,213
Symbol Technologies 3,600 138,600
Worldcom Incorporated(c) 2,000 85,562
Xerox Corporation 2,000 227,000
----------
886,725
UTILITIES (2.8%):
- -------------------------------------------------------------------------------------------------------------------
New Century Energies 2,400 114,000
SBC Communications 2,000 82,875
----------
196,875
Total Investments in Common Stock (cost: $5,072,589) $6,349,398
-----------
</TABLE>
See accompanying notes to investments in securities.
16
<TABLE>
<CAPTION>
SEGALL BRYANT & HAMILL GROWTH AND INCOME FUND
Investments in Securities (continued) April 30, 1998
- -------------------------------------------------------------------------------------------------------------------
MARKET
ISSUER PRINCIPAL AMOUNT VALUE(a)
- -------------------------------------------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS (2.1%):
FINANCIAL (2.1%):
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Rockefeller Center, 12.3% due 12/31/00 (d) 200,000 150,750
-----------
Total Investments in Convertible Corporate Bonds (cost: $138,336) 150,750
-----------
U.S. TREASURY OBLIGATIONS (2.6%)
- -------------------------------------------------------------------------------------------------------------------
U.S. Treasury Strips, 6.06% due 11/15/21 (d) 750,000 181,470
------------
Total Investments in U.S. Treasury Obligations (cost: $158,016) 181,470
------------
Total Investments in Securities (cost: $5,368,941)(b) $6,681,618
==========
</TABLE>
See accompanying notes to investments in securities.
17
SEGALL BRYANT & HAMILL GROWTH AND INCOME FUND
Notes to Investments in Securities
- --------------------------------------------------------------------------------
(a) Securities are valued by procedures described in note 1 to the financial
statements.
(b) The cost of securities for federal income tax purposes for the Fund is
$5,370,879. The aggregate gross unrealized appreciation and depreciation on
investments based on this cost is:
Gross Gross Net
Unrealized Unrealized Unrealized
Appreciation (Depreciation) Appreciation
------------ ------------- ------------
$1,395,195 $(82,456) $1,310,739
(c) Presently non-income producing security.
(d) Zero coupon security. Interest rate disclosed is the effective yield as of
the date of acquisition.
18
FEDERAL INCOME TAX INFORMATION
- --------------------------------------------------------------------------------
Information for federal income tax purposes is presented as an aid to
shareholders in reporting the dividend distributions for the periods ended April
30, 1998 shown below. Each shareholder should consult a tax adviser about
reporting this income for state and local purposes. In January 1998, the Fund
separately provided each shareholder with tax information for calendar year
1997.
Year
ended
April 30,
1998
Net investment income distribution..................... $0.2416
Short-term capital gain distribution................... $0.4625
Mid-term capital gain distribution..................... $0.0768
Long-term capital gain distribution.................... $0.9338
-------
Total distributions................................. $1.7147
=========
The short-term capital gain distributions above are taxable as ordinary income
to shareholders for federal and state income tax purposes. 17.36% of the
ordinary income distributions qualify for deduction by corporations. The new
mid-term capital gain distributions above are taxable at a maximum rate of 28%.
Long-term capital gain distributions above are taxable at a new maximum rate of
20%.
19
