SteinRoe Equity Funds
Annual Report
September 30, 1995
Growth & Income Funds
Total Return Fund
Prime Equities
Growth Funds
Growth Stock Fund
Special Fund
Special Venture Fund
Capital Opportunities Fund
International Fund
STEINROE MUTUAL FUNDS
Building Wealth for Generations(SM)
Photographic image of little girl.
<PAGE>
Contents
From the President 1
Tim Armour's thoughts on the markets and investing
Performance 3
How the SteinRoe Equity Funds have done over time
Q&A
Total Return Fund 7
Prime Equities 11
Growth Stock Fund 15
Special Fund 19
Special Venture Fund 21
Capital Opportunities Fund 26
International Fund 30
Interviews with the portfolio managers and a
summary of major shifts in the Funds' investments
over the past 12 months
Investments 36
A complete list of each Fund's investments with
market values
Financial Statements 58
Balance sheets, statements of operations,
and changes in net assets
Notes to Financial Statements 66
Financial Highlights 71
Selected per-share data
Report of Independent Auditors 83
General Information 84
<PAGE>
From the President
To Our Shareholders
We are pleased to present this annual report for the SteinRoe Growth & Income
Funds -- Total Return Fund and Prime Equities -- and the SteinRoe Growth Funds
- -- Growth Stock Fund, Special Fund, Special Venture Fund,
Capital Opportunities Fund and International Fund.
All of these Funds have a fiscal year that ends September 30, so I'd like to
recap how the equity markets performed since September 30, 1994, and share
with you some of our expectations of what's ahead for the economy and the
markets in the near future.
1994 in Review
The U.S. economy sizzled in 1994 as the Gross Domestic Product (GDP) topped 4
percent. A mature economy like the United States, however, can seldom maintain
a growth rate of more than 3 percent without also experiencing higher
inflation. That's why the Federal Reserve -- worried that inflation might soon
catch up to the fast pace of the economy -- raised short-term interest rates
seven times in the 12-month period between February 1994 and February 1995.
These sharp spikes in interest rates caused the stock market to flounder as
higher interest rates led to depressed stock valuations.
Photographic image of Tim Armour.
The Economy Slows, the Stock Market Rebounds
Once the economy started to slow, the Fed not only ceased raising interest
rates, but altered its policy to actually lower interest rates. This helped to
cool inflation and gave the stock market a much-needed lift. As a result, the
stock market rebounded strongly during the first nine months of 1995.
The Dow Jones Industrial Average, which measures the performance of the U.S.
equity markets, broke the 4,800 barrier this year --well ahead of all investor
expectations. Technology stocks led the rally as the almost limitless demand
for products that can enhance productivity helped to push prices of these
stocks higher. The shares of many growth companies also performed particularly
well in this economic environment as these companies generally sustained
higher earnings despite slower economic growth. Financial stocks -- helped by
the Federal Reserve's reversal in interest rate policy and continued industry
consolidation -- also posted favorable returns. Other market sectors that
enjoyed positive performance in 1995 include selected transportation and
health care companies.
The international equity markets didn't fare as well this year. Japan's market
crumbled as the yen took a nosedive, and most exchanges in Europe, Latin
America and Southeast Asia were down -- or up only modestly -- for the year.
The good news is that history suggests that a period of outperformance in the
U.S. equity markets is often followed by a period of outperformance overseas,
so it might be a good time to diversify your investments abroad.
<PAGE>
What's Ahead
While no one can predict with any certainty what lies ahead for investors, our
outlook for the U.S. economy remains bullish for the rest of 1995 and into
1996. With firmer -- yet still moderate -- economic growth and subdued
inflation, interest rates should continue to decline. Lower interest rates
should help jumpstart the economy, which, in turn, should support higher stock
valuations and push corporate earnings higher.
The Basics
While past performance is no guarantee of future results, and while no one can
foresee what might happen to stock funds or the markets in the future, we
believe investors must understand the factors that move the markets, not just
to profit from them, but to gain the patience to ride out short-term
volatility in their investments. As always, no matter what direction you think
the economy is heading, it's important to remember the basics. Think long term
and re-evaluate your investment portfolio from time to time to make sure it
continues to match your goals, risk tolerance and time horizon. And try to
follow a regular investment plan. By investing a certain amount of money each
month or quarter, you can take advantage of dollar-cost averaging. Of course,
not everyone is in a position to follow a regular investment plan. And it
neither ensures a profit nor protects against a loss in a declining market.
This simple strategy, however, can help you meet your investment objectives
across various market cycles.
Please call us at 800-338-2550 with your comments and suggestions. As always,
we look forward to serving your investment needs.
Sincerely,
Timothy K. Armour
President
November 1, 1995
<PAGE>
<TABLE>
Fund Performance
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each performance
figure includes changes in a fund's share price, plus reinvestment of any
dividends (net investment income) and capital gains (the profits the fund
earns when it sells stocks that have grown in value).
Average Annual Total Returns
Periods ended September 30, 1995
<CAPTION>
Past 1 Past 3 Past 5 Past 10
Year Years Years Years
<S> <C> <C> <C> <C>
Total Return Fund 14.5% 9.6% 13.7% 11.6%
Growth Stock Fund 28.2 11.2 16.5 14.7
Special Fund 14.6 14.2 16.5 16.3
Capital Opportunities Fund 37.5 23.5 25.1 14.8
S&P 500 29.7 15.0 17.2 16.0
S&P MidCap 25.8 16.6 21.8 17.4
Nasdaq Industrial 26.3 16.5 21.7 13.2
Russell 2000 23.0 18.9 21.6 12.7
<CAPTION>
Past 1 From
year Inception*
<S> <C> <C>
International Fund -1.3% 3.0%
EAFE 5.8 4.1
<CAPTION>
From Inception*
<S> <C>
Special Venture Fund 27.0%
S&P 500 29.3
<CAPTION>
Past 1 Past 3 Past 5 From
Year Years Years Inception*
<S> <C> <C> <C> <C>
Prime Equities 21.1% 14.1% 16.0% 10.6%
S&P 500 29.7 15.0 17.2 12.0
<FN>
Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. This past performance is no guarantee
of future results. Share price and investment return will vary so you may have
gain or a loss when you sell shares.
* International Fund -- from 3/1/94 to 9/30/95. Special Venture Fund -- from
10/17/94 to 9/30/95. Prime Equities -- from 4/1/87 to 9/30/95.
</TABLE>
<PAGE>
<TABLE>
Investment Comparison
Comparison of change in value of a $10,000 investment for the years ended
September 30.
Special, Growth Stock, Capital Opportunities and Total Return
This graph compares the performance of the SteinRoe Funds to the S&P 500
Index, an unmanaged group of stocks that differs from the composition of each
SteinRoe Fund.
<CAPTION>
Capital Total Growth
Year Opportunities Fund Return Fund Stock Fund S&P 500 Special Fund
<S> <C> <C> <C> <C> <C>
9/30/85 10000 10000 10000 10000 10000
9/30/86 13133 12574 12755 13174 12538
9/30/87 19832 14910 19265 18894 17333
9/30/88 15217 14034 14312 16553 16453
9/30/89 20800 16948 19158 22007 23037
9/30/90 12998 15785 18360 19974 21015
9/30/91 19954 20469 25087 26184 27777
9/30/92 21149 22748 28693 29075 30266
9/30/93 28342 26062 30155 32846 38544
9/30/94 28997 26155 30788 34054 39324
9/30/95 39857 29944 39463 44171 45067
Prime Equities
This graph compares the performance of Prime Equities to the S&P 500 Index, an
unmanaged group of stocks that differs from the composition of Prime Equities.
<CAPTION>
DATE Prime Equities S&P 500
<S> <C> <C>
3/31/87 10000 10000
9/30/87 10746 11195
9/30/88 9248 9808
9/30/89 12080 13040
9/30/90 11446 11835
9/30/91 14206 15514
9/30/92 16195 17227
9/30/93 19107 19461
9/30/94 19887 20178
9/30/95 24075 26172
<FN>
Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. This 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 shares.
</TABLE>
<PAGE>
Investment Comparison
Comparison of change in value of a $10,000 investment for the years ended
September 30.
Special Venture Fund
This graph compares the performance of Special Venture Fund to the S&P 500
Index, an unmanaged group of stocks that differs from the composition of
Special Venture Fund.
<TABLE>
<CAPTION>
DATE Special Venture S&P 500
Fund
<S> <C> <C>
10/31/94 10000 10000
12/31/94 10244 9779
3/31/95 10805 10729
6/30/95 10805 10729
9/30/95 12401 12686
International Fund
This graph compares the performance of International Fund to the Morgan
Stanley EAFE Index, an unmanaged group of stocks that differs from the
composition of International Fund. The Index refers to Europe, Australia and
the Far East and includes 18 country sub-indices.
<CAPTION>
Date International MSCI EAFE
Fund or EAFE Index
<S> <C> <C>
3/31/94 10000 10000
6/30/94 10236 10511
9/30/94 10871 10512
12/31/94 10345 10414
3/31/95 9769 10608
6/30/95 10240 10685
9/30/95 10732 11130
<FN>
Total return performance includes changes in share price and reinvestment of
income and capital gains distribu-tions. This 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 shares.
</TABLE>
<PAGE>
Investment Comparison Continued
Making the Most of Performance
The wide assortment of performance data available today can be a mixed
blessing. On one hand, a fund's performance results can be a valuable source
of information when considering an investment. On the other hand, even
seasoned investors may find the wide array of data and the different methods
of interpretation confusing.
That's why one of the most important pieces of advice we can give you is to
remember that a fund's past performance is just that -- past. While a fund's
past performance is not a guarantee of how it will perform in the future, it
can help you make rational decisions about the funds you currently hold or
about funds you might be considering. Many equity funds, for example, have a
history of growth over the long term, but will nonetheless experience
occasional downturns in the short term. The price and total return of a mutual
fund will change daily and if you sell your shares during a downturn in the
market, you might lose money. But, if you can ride out the market's ups and
downs, your fund might achieve a gain.
When your fund experiences a temporary downturn, it's important to remember
why you chose that fund in the first place. If your fund has an investment
strategy in which you believe and which is properly matched to your financial
goals, there is probably no reason to change course. It can be shortsighted to
sell an investment at its lowest point. In fact, that may be the time when you
should be investing more, to take advantage of a potential upturn.
No one can make your financial decisions better than you. We hope this
annual report helps you to better understand and evaluate your fund's
performance, and serves as a helpful aid in making intelligent, appropriate
investment decisions. If you have any questions, please call a SteinRoe
account representative at 800-338-2550.
<PAGE>
Q&A
An Interview with Total Return Fund's Portfolio Managers
Fund Data
Investment Objective:
Seeks current income and capital appreciation to achieve maximum total return,
consistent with reasonable investment risk, by investing in a combination of
equity, convertible and fixed income securities.
Fund Inception:
August 25, 1949
Total Net Assets:
$228,560 million
Photographic image of Robert A. Christensen and Lynn C. Maddox
Q: How did the Fund perform this fiscal year?
A: Not as well as we would have liked. At 14.5 percent for the year, the Fund
provided an attractive return to its shareholders, but the defensive nature of
its portfolio caused it to underperform both its Lipper equity income peer
group median return of 20.1 percent and the 29.7 percent return of the S&P
500.(1) Fixed income securities, which made up roughly 15 percent of the
portfolio at September 30, produced returns considerably below the S&P. As
measured by the Lehman Corporate/ Government Index, bonds returned 11.3
percent for the year ended September 30. Adding to the Fund's underperformance
was its underweighting in industry groups that did especially well, such as
technology.
Q: As investors, how would you describe yourself?
A: We're "buy and hold" investors. That means we invest for the long term and
we tend to have little turnover in the portfolio -- we usually hold a
relatively static mix of 15 percent in high-quality bonds and cash, 45 percent
in convertible securities and 40 percent in large-cap stocks with strong
dividend histories. We're also value-conscious investors. That means we look
for companies that we think are attractive based on fundamental measures such
as a low price/earnings ratio or high dividend yields.
Q: How are you finding investments that fit this profile in today's surging
market?
A: While dividend yields have dropped to near historically low levels, many of
the other valuation measures we use are showing signs that there are still
attractively valued opportunities in the market. Thanks to strong corporate
profits, many companies have price/earnings levels that are reasonable.
Additionally, certain sectors of the market simply haven't participated in the
current rally, creating pockets of value.
<PAGE>
Q: Where are you finding "pockets of value" now?
A: We believe REITs could be an attractive investment, especially over the
next year or so. Following a string of strong years in the early 1990s, REITs
have underperformed over the past year and a half, even though operating
results have been right on target. Lower interest rates, however, could
translate into a sustained rally for real estate stocks. In addition, most
sectors of the real estate industry appear healthy, characterized by rising
rents and occupancy levels and modest new construction activity. Finally, many
real estate issues fit our income profile -- as of September 30, they were
paying dividends of about 8 percent on average -- and they are consistent with
our strategy of seeking income to help dampen return volatility caused by
price fluctuation in a portfolio. We're also optimistic about the financial
services sector. While many companies in the brokerage, insurance and banking
industries have participated in the stock market rally, we believe the recent
easing of interest rates still makes many of these stocks potentially good
buys. Finally, we've also elected to increase our exposure to some
economically sensitive areas, such as chemical and auto parts companies, to
take advantage of what we believe to be market weakness in these groups.
Q: Recently, as the economy has slowed and interest rates have started to
fall, many strategists have suggested that investors should go "defensive." Do
you plan to maintain the Fund's more defensive posture?
A: Although our defensive posture has hindered the Fund's performance over the
last year, we have no plans to change our stance at this time. We believe a
declining interest rate environment will help the performance of fixed income
securities as well as many of the more defensive stocks in the Fund's
portfolio, such as telephone companies and utilities. While we may have been a
little early in making our defensive investments, especially in light of the
market's action over the first nine months of 1995, we find it unlikely that
the market will continue to forge ahead at the same pace. We believe a
slowdown in the market, which will certainly occur at some point, or a
rotation of interest to some of the lagging sectors (such as REITs), would
benefit the Fund.
Q: What's your outlook?
A: The stock market is near its all-time high, and we believe many stocks
appear fully valued at best, and overvalued by such measures as
dividend yield and the ratio of price/earnings multiples to expected earnings
growth. In addition, we believe many stocks have not made any allowance for
possible earnings disappointments. All in all, we believe these conditions
warrant our more defensive posture. Furthermore, when the market eventually
declines, we believe the Fund should do well.
1 Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. Past performance is no guarantee of
future results. Share price and investment return will vary, so you may have a
gain or a loss when you sell shares. The S&P 500 is an unmanaged group
of stocks that differs from the composition of each SteinRoe Fund; the S&P 500
is not available for direct investment. The Lehman Intermediate
Government/Corporate Bond Index is an unmanaged group of intermediate-term
bonds that differs from the composition of each SteinRoe Fund; it is not
available for direct investment. According to Lipper Analytical Services, an
independent monitor of mutual fund performance, the median returns for the
Fund's equity income fund peer group for the five- and ten-year periods ended
September 30, 1995, were 15.3 percent and 12.7 percent, respectively.
<PAGE>
<TABLE>
Fund Highlights
Total Return Fund
<CAPTION>
Top Ten Holdings (% of Total Net Assets)
<S> <C>
Citicorp. 2.2%
General Electric Company 2.2
LM Ericsson Telecom. 2.2
Abbott Labs. 1.9
AT&T Corp. 1.9
BankAmerica 1.9
General Motors Corp. 1.8
United Dominion Realty 1.8
Danka Business Systems 1.8
Emerson Electric Co. 1.8
Total 19.5%
Equity Portfolio Highlights
<CAPTION>
Equity Portfolio S&P 500
<S> <C> <C>
Number of Holdings 40 500
Median Market Value ($ Mil.) 8,827 4,542
Economic Sector Breakdown
As of September 30, 1995
<CAPTION>
Equity Portfolio S&P 500
Pie Charts:
<S> <C> <C>
Basic Materials 13% 6%
Consumer Cyclical 9 14
Consumer Non-Cyclical 13 21
Energy 7 9
Financial 25 13
Industrial 17 10
Technology 6 14
Utilities 10 13
Total 100% 100%
</TABLE>
Asset Allocation
As of September 30, 1994 As of September 30, 1995
Pie Charts:
Bonds $24.5 (10.7%) Bonds $24.9 (10.9%)
Cash & Equivalents $10.8 (4.7%) Cash & Equivalents $7.1 (3.1%)
Stocks $101.1 (44.1%) Stocks $97.3 (42.6%)
Convertibles $92.8 (40.5%) Convertibles $99.3 (43.4%)
<PAGE>
Q&A
An Interview with Prime Equities' Portfolio Managers
Fund Data
Investment Objective:
Seeks capital growth by investing primarily in common stocks, convertible
securities and other equity-type investments issued by well-established
companies. In an effort to limit volatility, 65 percent of the Fund's total
assets are normally invested in equity securities of companies with market
capitalizations greater than $1 billion. The Fund is designed to provide more
dividend income than a portfolio focused exclusively on growth.
Fund Inception:
March 24, 1987
Total Net Assets:
$139,539 million
Photographic image of Robert A. Christensen and Daniel K. Cantor
Effective February 1, 1996, SteinRoe Prime Equities will change its name to
SteinRoe Growth & Income Fund. The Fund's portfolio managers will not change.
Q: How has the Fund performed this year?
A: The Fund's performance has improved dramatically throughout the year, but
its one-year return of 21.1 percent still trailed both the 23.2 percent median
return of its Lipper growth and income peer group and the 29.7 percent return
of the S&P 500.(1) Much of the Fund's underperformance can be traced to early
1995 when the Fund had a sizable stake in more defensive issues, as well as a
greater exposure to small- and mid-cap companies and international stocks,
none of which matched the performance of large-cap stocks at that time. We
have since made a number of changes to the Fund's portfolio, resulting in
steadily improving performance relative to both the S&P 500 and the Fund's
Lipper peer group. For each of the two consecutive quarters ended September
30, 1995, the Fund registered performance above the median for its Lipper peer
group.(2)
Q: What do you look for when you're shopping for an investment?
A: We invest primarily in large, well-established companies. We don't invest
in themes or do much economic forecasting. Instead, we're what's known as
"bottom-up" investors. That means we'll examine a company to see whether or
not it has what we believe are the characteristics needed to provide superior
investment performance potential, without relying too heavily on how its
particular industry or the economy is performing. Some of the specific
characteristics we look for are improving fundamentals, sustainable
competitive advantages, realistic business strategies and the ability to
generate long-term earnings growth. And because the Fund was designed to offer
more income potential than an equity fund that invests for capital
appreciation alone, we also have a bias toward companies that have the
capability to pay attractive dividends.
<PAGE>
Q: With all the attention that's focused on these kinds of companies, isn't it
difficult to find opportunities that others have missed?
A: Many fund managers that invest in stocks tend to work from the same, widely
available Wall Street research. As a result, information is often broadly
disseminated, making it difficult to have a decided edge. There are, however,
gaps and misperceptions in the common knowledge base, which can be uncovered
by managers who have spent the time and effort to conduct independent research
to find opportunities that the broader investment community may have missed.
Q: You have a modest S&P futures (long) position. Do you plan on maintaining
it?
A: We expect to eventually eliminate this position altogether, but the process
is taking longer than we had envisioned. It's just been more challenging to
uncover what we believe are attractively priced stocks in today's soaring
market than we originally anticipated. We're starting to make progress,
however, and we've reduced the position, from 13 percent to roughly 10
percent.
Q: One of the main reasons to buy a mutual fund is to get broad
diversification, yet some fund managers drastically limit the number of
holdings in a fund's portfolio, concentrating on the three or four sectors
where they expect to get the best results. In your opinion, which method is
better?
A: Portfolio concentration can work both ways. While a concentrated
portfolio can allow you to better participate in the growth potential of a
select group of companies, funds with fewer holdings are also more likely to
suffer gut-wrenching dips. On the other hand, if a fund is invested in a large
number of stocks, it usually won't be materially affected by the
underperformance of any single holding, but the impact of its best
performing holdings also will be more modest. We take the middle road in that
we try to moderately concentrate the Fund's holdings, limiting the
number of holdings to what we believe are the 40 or so best stocks available
at that particular time. By owning a more manageable number of stocks, we can
carefully monitor each stock in the portfolio, and it helps us to better
leverage our ideas while still maintaining the Fund's diversity. Plus, we
think we only need to pick a few big winners to potentially outdo the market
and our peer group.
Q: What's your outlook for the next six months?
A: We remain cautiously optimistic about the outlook for the Fund. Following
the run up in financial services and consumer stocks -- both of which have
done extremely well for the Fund -- we may do some profit taking, redeploying
the proceeds into selected cyclical issues, some of which are approaching more
attractive valuation levels. We will continue to focus on individual stocks,
making sure we understand both the upside potential and the downside exposure.
<PAGE>
Q: Why are you changing the name of the Fund?
A: We believe the new name, Growth & Income Fund, more accurately reflects the
Fund's investment philosophy by recognizing both its growth and income
components. The Fund will continue to invest in a diversified portfolio of
securities that offers the opportunity for long-term growth, while also
providing a steady stream of income.
1 Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. Past performance is no guarantee of
future results. Share price and investment return will vary, so you may have a
gain or a loss when you sell shares. The S&P 500 is an unmanaged group of
stocks that differs from the composition of each SteinRoe Fund; the S&P 500 is
not available for direct investment. According to Lipper Analytical Services,
an independent monitor of mutual fund performance, the median returns for the
Fund's growth and income fund peer group for the five- and ten-year periods
ended September 30, 1995, were 15.9 percent and 13.7 percent, respectively.
2 For the second quarter ended June 30, 1995, Prime Equities posted a return
of 8.2 percent, outpacing the 8.0 percent median return of its Lipper growth
and income peer group and ranking it 211th out of 460 funds. In the third
quarter ended September 30, Prime Equities posted a return of 7.5 percent,
outperforming the 7.2 percent median return of its Lipper growth and income
fund peer group and ranking 207th out of 471 funds. For the one- and five-year
periods ended September 30, 1995, Prime Equities ranked 272nd out of 395 funds
and 86th out of 186 funds, respectively, in its Lipper growth and income fund
peer group.
<PAGE>
<TABLE>
Fund Highlights
Prime Equities
<CAPTION>
Top Ten Holdings (% of Total Net Assets)
<S> <C>
General Electric Company 2.9%
American Express 2.5
Fed. Natl. Mortgage Assoc. 2.5
The Procter & Gamble Co. 2.5
Honeywell Inc. 2.5
General Motors, Class E 2.4
Emerson Electric Co. 2.4
Walgreen Co. 2.4
Philip Morris Companies 2.4
The Gillette Company 2.3
Total 24.8%
Equity Portfolio Highlights
<CAPTION>
Equity Portfolio S&P 500
<S> <C> <C>
Number of Holdings 44 500
Median Market Value ($ Mil.) 11,725 4,542
Economic Sector Breakdown
As of September 30, 1995
<CAPTION>
Equity Portfolio S&P 500
Pie Charts:
<S> <C> <C>
Basic Materials 7% 6%
Consumer Cyclical 15% 14%
Consumer Non-Cyclical 24% 21%
Energy 8% 9%
Financial 18% 13%
Industrial 19% 10%
Technology 7% 14%
Utilities 2% 13%
Total 100% 100%
</TABLE>
Asset Allocation
As of September 30, 1994 As of September 30, 1995
Pie Charts:
Equities $120.0 (92.5%) Equities $104.9 (75.2%)*
Cash & Equivalents $8.7 (6.7%) Cash & Equivalents $31.5 (22.6%)
Bonds $1.0 (0.8%) Bonds $3.1 (2.2%)
*Excludes S&P Futures (Long) = 10.5%
<PAGE>
Q&A
An Interview with Growth Stock Fund's Portfolio Managers
Fund Data
Investment Objective:
Seeks long-term capital appreciation by investing, under normal conditions, at
least 65 percent of its total assets in common stocks and other equity-type
securities that are believed to have long-term appreciation possibilities.
Fund Inception:
July 1, 1958
Total Net Assets:
$360,336 million
Photographic image of Erik P. Gustafson and Harvey B. Hirschhorn
Q: How has the Fund performed this year?
A: The Fund finished its fiscal year with a return of 28.2 percent,
outperforming its Lipper growth fund peer group median return of 26.0 percent,
and trailing just behind the 29.7 percent return of the S&P 500.(1) The S&P's
return reflected a continued rally by the technology sector -- led, in
particular, by semiconductor and semiconductor equipment companies. Although
the Fund maintains a significant technology exposure, its holdings are
concentrated in the more conservative technology services companies. The rally
in semiconductor stocks has been so powerful that even our significant
weighting in the technology sector did not allow us to beat the performance of
the S&P.
Q: What areas look attractive right now?
A: We remain extremely enthusiastic about the Fund's technology holdings. Not
only do we think that they have excellent growth potential, but we believe
demand for productivity-enhancing products will only increase their
attractiveness. Financial services and interest rate-sensitive sectors also
should continue to perform well in this lower interest rate, low inflation
environment. We think the health care sector should do well as investors look
for stocks that provide a defensive hedge in times of uncertainty and
volatility. We're also enthusiastic about the opportunities available in the
telecommunications industry. As we enter the information age, we believe
companies that deal with the collection, sorting and transmission of data will
be among the fastest growing growth opportunities available. We're also
starting to see a revival in the lodging industry. Following a tremendous
amount of hotel construction in the 1980s, new building has slowed to a
virtual standstill. Recently, however, we've started to see demand pick up,
creating a tighter supply and allowing hotel operators to charge higher
prices, which usually goes straight to the bottom line.
<PAGE>
Q: For more than 100 years, AT&T has believed that "bigger is better." Then,
on September 20, they announced that they were splitting up into three
separate companies. As of September 30, AT&T made up 2.7 percent of the Fund's
total net assets and was its fifth largest holding.(2) What does the breakup
mean for investors?
A: We believe the breakup is a good thing, and it seems investors and the
market agree -- the day of the announcement, the value of AT&T's stock went up
10 percent. Bob Allen is doing something uncharacteristic of most
empire-building CEOs -- he's breaking up the company in an attempt to make its
parts worth more than the whole, and we think this voluntary restructuring
should prove successful. It should allow each company to concentrate its
energies more effectively, enabling one to focus on global telecommunications,
one to capitalize on the soon-to-be deregulated U.S. telecommunications market
and one to move more efficiently into new markets, such as information
networks. We're optimistic that the market will assign a greater value to each
company so we plan to maintain our exposure.
Q: For much of the last year, large-cap multinational growth stocks have been
the "kings" of the market. Will they continue to rule the market or will they
have to relinquish their crown?
A: Since early 1994, large-cap multinational growth stocks have been helped by
ideal market conditions, including a strong U.S. economy and a weak dollar
that boosted sales abroad. As economic growth started to slow, the backdrop
became more favorable for small- and mid-cap stocks that have the ability to
sustain rapid earnings growth, despite the slower economy. The renewed
strength of the dollar also helped to jumpstart small- and mid-cap stocks as
many larger, multinational companies lost the edge they had selling their
goods overseas. While we think the economic environment will help small- and
mid-cap stocks, we don't think it necessarily precludes large-cap stocks from
doing well. In fact, if the capital gains tax cut doesn't get passed or
Congress fails to balance the budget, investors will probably migrate back to
the large-cap market for safety.
<PAGE>
Q: You mentioned the capital gains tax cut. Do you think the promised
reduction could get left on the cutting-room floor?
A: We don't think so. This item is high on Washington's agenda, and judging
from the way equities have been performing, the market concurs. The real
question is what the capital gains cut will look like when the dust settles.
While it appears unlikely that capital gains will be indexed for
inflation, signs suggest that the tax rate itself will be a key discussion
point during the budget process. So while the capital gains tax cut may not be
as dramatic as many had hoped, we believe it will pave the way for additional
action, particularly if the Republicans retain control of Congress and capture
the White House in the next presidential election.
Q: What's your outlook?
A: We remain committed to investing in high-quality growth stocks as we
believe that investors will continue to pay a premium for companies that can
continue to show considerable growth -- even in a slower economy. We are,
however, cautiously optimistic about prospects for the stock market. We think
that for the stock market to perform poorly, there would have to be an
unfavorable interest rate environment, a setback in earnings growth or a
disappointment out of Washington. We don't see that happening -- in fact, we
believe the Fed will continue to lower interest rates in 1996 and that
financial assets should continue to perform well. The year 1995, however, has
been an exceptional one for stocks, and typically an exceptional year is
seldom followed by an even more exceptional year. So while we think that
stocks -- and growth stocks in particular -- will have solid growth potential
in this lower interest rate, low inflation environment that we see going
forward, we don't think we'll see the same sort of robust growth that has
occurred this year.
1 Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. Past performance is no guarantee of
future results. Share price and investment return will vary, so you may have a
gain or a loss when you sell shares. The S&P 500 is an unmanaged group of
stocks that differs from the composition of each
SteinRoe Fund; the S&P 500 is not available for direct investment. According
to Lipper Analytical Services, an independent monitor of mutual fund
performance, the median returns for the Fund's growth fund peer group for the
five- and ten-year periods ended September 30, 1995, were 16.9
percent and 14.7 percent, respectively.
2 Portfolio holdings are as of September 30, 1995, and are subject to change.
<PAGE>
Fund Highlights
<TABLE>
Growth Stock Fund
<CAPTION>
Top Ten Holdings (% of Total Net Assets)
<S> <C>
The Home Depot, Inc. 3.7%
Motorola, Inc. 3.6
Medtronic Incorporated 3.0
General Electric Company 2.8
AT&T Corp. 2.7
The Coca Cola Company 2.7
The Gillette Company 2.6
Fed. Natl. Mortgage Company 2.6
The Procter & Gamble Co. 2.5
Green Tree Acceptance 2.5
Total 28.7%
Equity Portfolio Highlights
<CAPTION>
Equity Portfolio S&P 500
<S> <C> <C>
Number of Holdings 50 500
Median Market Value ($ Mil.) 10,813 4,542
As of September 30, 1995
Economic Sector Breakdown
<CAPTION>
Equity Portfolio S&P 500
Pie Charts:
<S> <C> <C>
Basic Materials 1% 6%
Consumer Cyclical 16 14
Consumer Non-Cyclical 29 21
Energy 2 9
Financial 15 13
Industrial 10 10
Technology 22 14
Utilities 5 13
Total 100% 100%
</TABLE>
<PAGE>
Asset Allocation
As of September 30, 1994 As of September 30, 1995
Pie Charts:
Stocks $296.7 (92.3%) Stocks $339.9 (94.3%)
Cash & Equivalents $24.8 (7.7%) Cash & Equivalents $20.4 (5.7%)
Q&A
An Interview with Special Fund's and Special Venture Fund's Portfolio Managers
Fund Data
Investment Objective:
Seeks to achieve capital appreciation by investing primarily in equity
securities that are considered to have limited downside risk relative to their
potential for above-average growth, including securities of undervalued,
underfollowed or out-of-favor companies.
Fund Inception:
May 22, 1968
Total Net Assets:
$1,201,469 million
Photographic image of E. Bruce Dunn and Richard B. Peterson
Special Fund Q & A
Q: While the stock market has had an exceptional year, the Fund's performance
has been lagging. What factors have contributed to its underperformance?
A: For the fiscal year ended September 30, 1995, Special Fund had a total
return of 14.6 percent, compared to a 29.7 percent return for the S&P 500.(1)
The U.S. stock market has produced unexpectedly strong returns this year,
largely because of technology stocks in which the Fund was underweighted
relative to the Index.
Our investment approach, which focuses on companies rather than sectors or
industries, still resulted in a well-diversified portfolio, but it produced a
lower than market concentration in technology. Our technology exposure
increased slowly from 2 percent to 8 percent of equities during the fiscal
year, but we were still below the S&P's 14 percent weighting at September 30,
1995. Additionally, we did not own any drug stocks (versus 8 percent for the
S&P 500), which was another strong sector during the fiscal year.
We were also hurt by the fact that non-U.S. stocks were out of favor until
April or May. The MSCI EAFE Index, which measures foreign stock performance,
had a 5.8 percent return this fiscal year -- more than 20 percentage points
below the return of the S&P.1 Although our total non-U.S. exposure declined
from a high of 16 percent of equities to 9 percent at September 30, it
continued to hurt performance.
<PAGE>
Q: Why doesn't the Fund own more technology stocks?
A: Short-lived product cycles can make it difficult for managements to
estimate long-term demand, cash flow and earnings. As a result, we believe
technology stocks can be volatile holdings.
Instead, we favor what we believe are more reliable, less volatile companies
within the technology sector. A good example would be Molex (2.5 percent of
total net assets), a manufacturer of electrical connectors with broad end-user
markets, and Xerox (2.0 percent), which we believe has a promising document
printing business.
Q: Have you made any changes in strategy during the year?
A: We reduced the number of holdings in the Fund from 76 to 59 to increase our
exposure to the companies that we believe are best positioned to succeed over
the next several years. For the same reason, we increased the concentration of
our top ten holdings from 22 percent to 29 percent of equities. In recent
months, we've seen these actions begin to have a positive effect on the
portfolio.
Q: Which of the Fund's holdings made positive contributions over the past
year?
A: Financial stocks, which have been particularly strong, were led by insurers
Allstate, Progressive and 20th Century Industries (3.0, 2.2 and 1.2 percent of
total net assets, respectively).
Allstate and 20th Century have bounced back after weathering the natural
catastrophes of 1994, while Progressive is successfully balancing market share
growth and underwriting profitability. And First Fidelity, which we sold
during the quarter, benefited from a buyout.
Health care has also done well, with three stocks -- Boston Scientific,
Invacare and Stryker (3.9, 1.8 and 1.4 percent of total net assets,
respectively) -- making large contributions to performance. Boston Scientific
continues to capitalize on open-ended opportunities in less-invasive surgical
procedures. Invacare's strong strategic direction has allowed it to realize a
competitive advantage in the home medical equipment business during the past
year. Stryker, which makes orthopedic implants, has expanded
its growth overseas.
Finally, our business service companies, including Alco Standard and Unitog
(2.2 and 1.0 percent of total net assets, respectively) continue to benefit
from consolidation of their respective industries.
<PAGE>
Q: With the stock markets experiencing strong gains, are you finding companies
that are attractively valued?
A: Overall, we believe the Fund's portfolio is attractively valued. Our direct
field research helps us find companies before they are recognized -- and hyped
- -- by other investors. Special Fund continues to find companies that we
believe have wealth-building managements, attractive business characteristics
and that appear undervalued relative to their longer-term growth potential.
Three new holdings that we believe are attractive include: AVX, a leading
worldwide manufacturer of capacitors, which are the components that control
electricity as it flows through a printed circuit board; Schlumberger, a
premier worldwide oil field services company; and Borders Group, an operator
of book superstores (1.2, 1.6 and 1.4 percent of total net assets,
respectively).
Q: Any final thoughts?
A: We believe 1995 has been a highly unusual year for the market. Over the
long term, Special Fund has rewarded its investors, and we continue to believe
that our strategy can provide attractive total return potential for
shareholders with a longer-term investment horizon of three to five years or
more.
1 Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. Past performance is no guarantee of
future results. Share price and investment return will vary, so you may have a
gain or a loss when you sell shares. The S&P 500 and the MSCI EAFE (Morgan
Stanley Capital International Europe, Australia and Far East Index) are
unmanaged groups of stocks that differ from the composition of each SteinRoe
Fund; they are not available for direct investment. Foreign investments
involve greater risks and potential rewards than U.S. investments. These risks
include political and economic uncertainties of foreign countries, as well as
the risk of currency fluctuations.
<PAGE>
Special Venture Fund Q & A
Fund Data
Investment Objective:
Seeks to achieve long-term capital appreciation by investing primarily in
entrepreneurially managed companies. The Fund emphasizes investments in
financially strong small and medium-sized companies based principally on
management appraisal and stock valuation.(2)
Fund Inception:
October 17, 1994
Total Net Assets:
$60,533 million
Q: Special Venture is approaching its first anniversary. How has it performed
since it was launched in October 1994?
A: From its inception on October 17, 1994, through September 30, 1995, Special
Venture posted a total return of 27.0 percent, versus a 27.9 percent total
return for the S&P 500.1 While the S&P 500 is comprised primarily of large-cap
stocks, the Fund's holdings are concentrated in smaller-cap stocks, which
underperformed large-cap issues for most of the year. Because the Fund invests
primarily in smaller stocks (under $1 billion market cap), we believe it may
also be of interest to measure the Fund's performance against indices that
gauge small- and mid-cap performance. From October 17, 1994, to September 30,
the principal-only returns of the Russell 2000, which measures small-cap
performance, and the S&P MidCap, were 21.8 percent and 23.2 percent,
respectively. For the same time period, the principal-only returns of the Fund
and the S&P 500 were 26.2 percent and 24.6 percent, respectively.(1)
Q: How is the Fund positioned?
A: Since inception assets have grown to $60 million. At September 30, the Fund
owned 39 companies, with a median market value of about $400 million. The
Fund's largest industry concentrations were in health care, business services
and specialty chemical manufacturers. Our non-U.S. based holdings are a
relatively small part of the portfolio.
<PAGE>
Q: What types of stocks do you find attractive?
A: One of the most important parts of our stock selection process is finding
companies that we believe have exceptional wealth-building managements. In
addition, we look for companies that we think offer exposure to large business
opportunities, a sustainable competitive advantage and financial strength.
Finally, we believe the company's stock price should be attractively
valued relative to its long-term growth prospects.
Q: Which of the Fund's holdings have made positive contributions to its
performance this year?
A: The Fund's health care, technology and financial services holdings have
provided good gains this year. The best-performing holding was Boston
Scientific (2.9 percent of total net assets), which seeks to capitalize on
open-ended opportunities in less-invasive surgical procedures. In addition,
the Fund's top five holdings have also performed well. They include Triad
Guaranty (4.0 percent), a low-cost underwriter of private mortgage insurance;
Keane (4.0 percent), which has taken advantage of large opportunities
resulting from corporate outsourcing of software applications and computer
services; G&K Services (3.8 percent), which we believe has successfully grown
its uniform rental business through internal growth and strategic
acquisitions; OM Group (3.8 percent), a specialty chemical business that has
capitalized on low raw material costs and distribution strengths; and finally,
Invacare, (3.6 percent) whose powerful distribution and low-cost manufacturing
has allowed the company to realize a large competitive advantage in the home
medical equipment business.
<PAGE>
Q: Smaller companies are typically more volatile than larger companies. How do
you manage the additional risk?
A: We are not an emerging growth or a maximum gain portfolio. Instead, we
emphasize a longer investment time horizon of three to five years or more.
Because we do our own direct field research, we try to find companies before
other investors have driven up their stock prices. As a result, we believe the
valuations of the stocks in the portfolio are especially attractive relative
to their long-term growth prospects. Additionally, at September 30, the
portfolio's beta was 0.87, versus 1.00 for the S&P.
Q: Do you have any final thoughts?
A: The year-to-date relative strength of certain market sectors, particularly
technology, has been overwhelming. During the last quarter of our fiscal year,
however, the market appeared to be broadening its interest beyond technology,
which we regard as healthy -- both for the Fund and in general. While we're
pleased with the Fund's performance in its first year, we'd like to stress
that investors shouldn't focus on its short-term performance. We emphasize a
three- to five-year time horizon for the investments we make, and we encourage
investors to have that same time frame.
1 Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. Past performance is no guarantee of
future results. Share price and investment return will vary, so you may have a
gain or a loss when you sell shares. The S&P 500, the Russell 2000 and the S&P
MidCap are indices that represent unmanaged groups of stocks that differ from
the composition of each SteinRoe Fund; they are not available for direct
investment. Principal-only returns do not include reinvestment of income and
capital gains distributions.
2 Funds that emphasize investments in smaller companies may experience
short-term volatility.
<PAGE>
<TABLE>
Fund Highlights
Special Fund
<CAPTION>
Top Ten Holdings (% of Total Net Assets)
<S> <C>
Boston Scientific Corp. 3.9%
The Allstate Corporation 3.0
Superior Industries Intl. 2.8
Revco D. S., Inc. 2.7
The Olsten Corporation 2.7
Harley-Davidson Inc. 2.6
Molex Inc. 2.5
Airtouch Communications 2.5
Unifi Inc. 2.4
American Express 2.3
Total 27.4%
Equity Portfolio Highlights
<CAPTION>
Portfolio S&P 500
<S> <C> <C>
Number of Holdings 56 500
Median Market Value ($ Mil.) 996 4,542
Economic Sector Breakdown
As of September 30, 1995
<CAPTION>
Equity Portfolio S&P 500
Pie Charts:
<S> <C> <C>
Basic Materials 6% 6%
Consumer Cyclical 30 14
Consumer Non-Cyclical 10 21
Energy 4 9
Financial 18 13
Industrial 17 10
Technology 8 14
Utilities 7 13
</TABLE>
Asset Allocation
As of September 30, 1994 As of September 30, 1995
Pie Charts:
Equities $1,125.7 (90.5%) Equities $1,127.3 (93.8%)
Cash & Equivalents $115.7 (9.3%) Cash & Equivalents 63.1% (5.3%)
Convertibles $2.5 (0.2%)
*Bond holdings represented $11.1
million, or 0.0% of net assets.
<PAGE>
<TABLE>
Fund Highlights
Special Venture Fund
<CAPTION>
Top Ten Holdings (% of Total Net Assets)
<S> <C>
Triad Guaranty Inc. 4.0%
Keane 4.0
G & K Services Inc. 3.8
OM Group Inc. 3.8
Invacare Corp. 3.6
Patterson Dental 3.5
Zale Corp. 3.3
AmeriSource 3.0
Boston Scientific Corp. 2.9
Proffitts 2.7
Total 34.6%
Equity Portfolio Highlights
<CAPTION>
Portfolio S&P 500
<S> <C> <C>
Number of Holdings 39 500
Median Market Value ($ Mil.) 378 4,542
Economic Sector Breakdown
As of September 30, 1995
<CAPTION>
Equity Portfolio S&P 500
Pie Charts:
<S> <C> <C>
Basic Materials 13% 6%
Consumer Cyclical 17 14
Consumer Non-Cyclical 30 21
Energy 8 9
Financial 7 13
Industrial 11 10
Technology 14 14
Utilities 0 13
Total 100% 100%
Asset Allocation
As of September 30, 1995
Pie Chart:
Equities $52.2 (86.2%)
Cash $8.3 (13.8%)
</TABLE>
<PAGE>
Q&A
An Interview with Capital Opportunities Fund's Portfolio Manager
Fund Data
Investment Objective:
Seeks long-term capital appreciation by investing in aggressive growth
companies, including securities of smaller emerging companies as well as
securities of any size that offer strong earnings growth potential.(2)
Fund Inception:
March 31, 1969
Total Net Assets:
$242,381 million
Photographic image of Gloria Santella
Q: How did the Fund perform this year?
A: The Fund performed extremely well, beating indices we compare ourselves
against. We ended the fiscal year with a 37.5 percent return, which topped
both the S&P 500's return of 29.7 percent and the 25.7 percent median return
of the Fund's Lipper capital appreciation peer group. The Fund also
outperformed both the small- and mid-cap sectors, outpacing the NASDAQ
Industrial Index and the S&P MidCap Index, which returned 26.3 percent and
25.8 percent, respectively.(1)
Q: What factors contributed to the Fund's strong performance?
A: The Fund's primary source of outperformance was its exposure to technology
stocks. The technology sector led the market for the past year, and the Fund's
average technology weighting of 20 percent, versus 10 percent for the S&P 500,
helped boost the Fund's relative performance. In fact, technology stocks
accounted for approximately one-third of the Fund's return for the year.
Renewed strength in the small- to mid-cap growth sector also helped propel the
Fund's performance. The year-end rally in this sector was noteworthy as it
represented a marked shift in leadership from large-cap stocks, which
dominated the market during the first three quarters of the Fund's fiscal
year.
<PAGE>
Q: After several quarters of phenomenal growth, many are starting to speculate
that technology stocks are overvalued, overhyped and headed for a fall. How
long do you think the technology sector can sustain such strong growth?
A: In order to assess the situation, it's necessary to look at the reasons
behind the performance of the technology group. First of all, earnings growth
in the technology sector has been explosive. For example, the average growth
in earnings for the Fund's technology holdings during the past fiscal year was
92 percent. So, for the most part, the exceptional performance can be
justified by the earnings growth alone. Additionally, technology has become a
larger portion of most growth portfolios than in the past, and this increased
demand has driven up prices.
Going forward, we believe it's reasonable to expect some profit taking to
occur among short-term investors. Current valuations, however, remain within
historical ranges and are not necessarily excessive, especially in light of
the growth most technology companies are experiencing. Furthermore, we believe
technology will continue to play a large role in many growth portfolios.
Technology is no longer an exotic, isolated sector of the economy. And as a
result, growth portfolios will need to reflect society's increased demand for
technology.
One thing that makes us wary is the inherent volatility of the group. We
believe, however, that the Fund's current technology weighting, 19 percent on
September 30, represents a reasonable balance between growth and volatility.
Q: What are your expectations for the coming months?
A: We're optimistic about the prospects for small- to mid-cap growth stocks.
We think earnings growth in this sector will continue to be robust.
Furthermore, as economic growth moderates, it will be difficult for many
large, economically sensitive companies to sustain their recent earnings
growth. As the overall supply of rapidly growing companies becomes
increasingly limited, we believe the market will place a higher value on high
growth companies such as those held in the Fund.
<PAGE>
Q: With technology stocks headlining the market rally, many people are well
aware of that sector's strong points. Are there any other sectors that appear
attractive right now?
A: Yes, there are other areas that appear attractive in terms of both
projected earnings growth and valuation. While technology stocks led the stock
market this year, it is interesting to note that strong performance during the
Fund's fourth fiscal quarter broadened beyond the technology group. We view
this as a positive sign -- not only for other growth sectors of the market,
but for the sustainability of the recent rally in small- to mid-cap stocks as
well.
One area we find particularly attractive is the lodging industry. We believe
the strong earnings growth projected for this sector is supported by an
improving balance in supply and demand. The lodging industry suffered from
overbuilding in the 1980s due to tax incentives and lenient lending policies
on the part of financial institutions. Today, however, in most markets, it's
less expensive to acquire an existing hotel than it is to build one, and as a
result there is little new supply. As supply tightens, the dominant lodging
companies should be well-positioned to raise prices, improve their occupancy
levels and experience solid increases in profitability.
1 Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. Past performance is no guarantee of
future results. Share price and investment return will vary, so you may have a
gain or a loss when you sell shares. The S&P 500, NASDAQ Industrial and S&P
MidCap are indices that represent unmanaged groups of stocks that differ from
the composition of each SteinRoe fund; they are not available for direct
investment. According to Lipper Analytical Services, an independent monitor of
mutual fund performance, the median returns for the Fund's capital
appreciation peer group for the five- and ten-year periods ended September 30,
1995, were 18.1 percent and 14.8 percent, respectively.
2 Funds that emphasize investments in smaller companies may experience greater
price volatility than securities of larger companies.
<PAGE>
<TABLE>
Fund Highlights
Capital Opportunities Fund
<CAPTION>
Top Ten Holdings (% of Total Net Assets)
<S> <C>
Hospitality Franchise 4.3%
Gartner Group Inc. 4.1
Paychex, Inc. 3.8
PhyCor, Inc. 3.8
Stratacom Strm. 3.4
Tellabs, Inc. 3.3
Clear Channel Comm., Inc. 3.1
Sunglass Hut 3.1
IDEXX Laboratories, Inc. 3.1
Green Tree Financial 3.0
Total 35.0%
Equity Portfolio Highlights
<CAPTION>
Portfolio S&P 500
<S> <C> <C>
Number of Holdings 45 500
Median Market Value ($ Mil.) 1,215 4,542
Economic Sector Breakdown
As of September 30, 1995
<CAPTION>
Equity Portfolio S&P 500
Pie Charts:
<S> <C> <C>
Basic Materials 1% 6%
Consumer Cyclical 35 14
Consumer Non-Cyclical 19 21
Energy 0 9
Financial 6 13
Industrial 20 10
Technology 19 14
Utilities 0 13
Table 100% 100%
</TABLE>
Asset Allocation
As of September 30, 1994 As of September 30, 1995
Pie Charts:
Cash & Equivalents $22.3 (12.7%) Cash & Equivalents $27.1 (11.2%)
Convertibles $9.8 (5.6%) Convertibles $6.6 (2.7%)
Stocks $143.6 (81.7%) Stocks $208.6 (86.1%)
<PAGE>
Q&A
An Interview with International Fund's Portfolio Managers
Fund Data
Investment Objective:
Seeks long-term growth of capital by investing primarily in a diversified
portfolio of foreign securities. Under normal market conditions, the Fund will
invest at least 65 percent of its total assets in foreign securities of at
least three countries outside of the United States.
Fund Inception:
March 1, 1994
Total Net Assets:
$83,020 million
Photographic image of Bruno Bertocci and David Harris
Q: How did the Fund perform?
A: For the fiscal year ended September 30, the Fund's total return declined
1.3 percent, compared to a gain of 5.8 percent for the Morgan Stanley Capital
International Europe, Australia and Far East Index (MSCI EAFE).(1) We
underperformed the Index in the first two quarters of the fiscal year, but
rebounded to outperform it by 5 percent over the last two fiscal quarters.(2)
A major reason the Fund underperformed relative to EAFE was its overweighting
in Latin America, a position that was built up toward the end of the first
quarter after the Mexican peso devaluation. Historically, investing in markets
after devaluation has been a successful strategy since equity markets
typically rise when their currencies are devalued. However, after the peso
devaluation, the turmoil in Mexico persisted and negatively impacted all the
markets in Latin America, the so-called "Tequila Effect." As a result, the
stocks in the Fund's portfolio declined sharply during this period. While our
Latin American exposure hurt our performance during the first two fiscal
quarters relative to EAFE (since Latin America has a 0 percent weighting in
EAFE), it contributed to the outperformance generated in the last two
quarters.
Another reason the Fund underperformed early in 1995 was its lack of
representation in the banking and insurance sector in Japan, which accounts
for 35 percent of that market. This sector rallied during the first quarter as
the merger of Mitsubishi Bank and Bank of Tokyo created heightened
expectations of a quick fix to Japan's banking crisis. In addition, the
earthquake in Kobe propelled many construction stocks to rally over 100
percent as speculative fervor in the sector was rampant. We avoid placing
short-term sector bets, and these companies' high valuation levels do not fit
our long-term strategy.
<PAGE>
Q: The U.S. dollar slumped against the Japanese yen and the German mark early
in the year, before snapping back and eventually stabilizing. What effect has
this had on the Fund?
A: The gyrating dollar made investing abroad difficult as the dollar's
fluctuations and movements in foreign stock markets tended to cancel each
other out. For example, profits made when the dollar fell sharply against the
yen early this year couldn't offset falling Japanese stock prices. Then, when
shares rebounded in Japan, the higher dollar offset much of the yen-based
market gains for U.S. investors.
Q: Did you use any hedging strategies to limit the effects of these currency
fluctuations?
A: We had been hedging approximately 25 percent of the portfolio's Japanese
yen and German mark exposure early in 1995, but our longer-term strategy
continues to be to hedge infrequently. Hedging, which involves entering into
contracts to purchase or sell a country's currency in the future at a pre-set
price, can reduce losses associated with currency volatility, but it can also
limit potential gains and adds to trading costs. We believe that many of our
export-oriented stocks provide a natural hedge against dollar appreciation.
Although some competitors using currency hedges performed slightly better
during the year, we believe our strategy will be effective in the long run
since we believe that much of the volatility we've seen in the last year
appears to be an aberration -- currency fluctuations historically have been
more consistent, moving within a narrower range. This year, however, currency
exchange rates have been 50 to 60 percent more volatile than their
historical averages, a level that we believe is unusual and unsustainable.
<PAGE>
Q: For the year ended September 30, the U.S. stock market, as measured by the
S&P 500, has gone up roughly 29 percent, while the non-U.S. stock market, as
measured by EAFE, climbed only 5 percent -- one of the biggest gaps on record.
Can this gap persist, and if not, is this a good time to be looking abroad for
superior return potential?
A: Right now, we're seeing an unusual disparity in valuations between
comparable industries in the United States and those in foreign stock markets.
For example, paper stocks rallied in the United States because P/E ratios were
maintained while earnings grew. In Europe, however, as earnings grew,
multiples declined, and as a result stock prices of paper companies have
remained flat. We believe that this situation will not persist, and eventually
low foreign stock valuations will resemble those of domestic stocks. This
suggests that non-U.S. opportunities are not only attractive, but a potential
source for above-average returns.
In any case, we believe diversifying abroad is a rewarding portfolio strategy.
Since U.S. and foreign markets seldom move in tandem, adding international
investments to your portfolio can help to enhance your portfolio's return
potential when the U.S. market is down.
Q: There seems to be a thaw in Sino-U.S. relations. Is now a good time to
invest in China?
A: Despite improved relations, tension remains -- particularly about the
emotionally charged issues of human rights violations, Taiwan, overseas arms
sales and China's entry into the World Trade Organization. Still, we think
China could be a potentially great global growth story. Unfortunately, right
now it's difficult to invest directly -- its stock exchanges in Shanghai and
Shenzen are relatively small, with few shares available for investment to
outside investors. As a result, we believe the best way to invest in China's
growth potential is through Hong Kong. Not only does it offer some
attractively valued stocks, but the Hong Kong dollar is pegged to the U.S.
dollar, which eliminates foreign currency fluctuation concerns.
Q: What about emerging markets?
A: Despite increased volatility, emerging markets still offer some of the best
prospects for robust economic and earnings growth. The International Monetary
Fund estimates that developing nations will grow twice as rapidly as the
industrial world for the rest of the decade. With more than 3 billion new
consumers poised to enter the global economy, many emerging markets are on the
brink of an economic explosion. The relaxation of import and export
restrictions and increasing competition is spurring many companies to move
their manufacturing and production sites to these emerging markets to take
advantage of less-expensive labor. As a result, many emerging markets are
attracting substantial foreign investment, which is paying for improved road,
rail and shipping infrastructure, and enabling these new markets to become
more sophisticated manufacturing and distribution centers. In addition, as a
country's economy begins to thrive, it creates investment opportunities in
banking, consumer goods and telecommunications.
<PAGE>
Q: What areas look attractive?
A: We are quite optimistic about investment opportunities in South Korea. For
example, Samsung Electronics, the Fund's largest holding (2.8 percent of total
net assets as of September 30) has experienced surging semiconductor sales,
yet it trades at a low P/E ratio of less than four. Many of the Korean
conglomerates ("chaebol") have begun to sell stakes in their subsidiaries at
extremely attractive valuations. For example, Hyundai Corp. has sold a portion
of Hyundai Merchant Marine, a shipbuilder that is now listed for the first
time on the Korean market. Hyundai Merchant Marine stock was priced at 9,000
won per share in its initial public offering. This is a remarkably low
valuation considering it is less than the value of just one of its
investments, 14,000 won per share worth of Hyundai Electronics, a sister
company within the Hyundai Corp. chaebol.
In Europe, we continue to favor some of the "soft currency" countries -- such
as Sweden, Spain and Italy -- because their relatively weak currencies make
their exports more competitive. We're also enthusiastic about the
opportunities available in Europe's cellular industry, and we believe many
European forest product companies are attractively valued
relative to their U.S. counterparts.
In the Latin American markets, we believe Mexico should prove to be a good
investment on a longer-term basis. After struggling to set things right
following last year's crash, the Zedillo government seems to have Mexico back
on the right track -- the trade balance is in the black, the peso now appears
more stable and the Mexican stock market has rebounded more than 50 percent
over the past six months.
We also continue to find many interesting investment ideas from businesses or
companies that have been successful in the United States. For example, NTT
Data, one of the Fund's 10 largest holdings (1.7 percent of total net assets
as of September 30), provides computer and information systems consulting
services within Japan, much like EDS does here. Japan's management information
systems infrastructure is several years behind that of the United States,
providing an opportunity to invest in a business that has already proven
viable both here and in Europe, but is still in a rapid growth phase there.
1 Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. Past performance is no guarantee of
future results. Share price and investment return will vary, so you may have a
gain or a loss when you sell shares. The MSCI EAFE is an unmanaged group of
stocks that differs from the composition of each SteinRoe Fund; it is not
available for direct investment. Foreign investments involve greater risks and
potential rewards than U.S. investments. These risks include political and
economic uncertainties of foreign countries, as well as the risk of currency
fluctuations.
2 For the six-month period ended March 31, 1995, International Fund's total
return declined 10.1 percent, compared to a 1.0 percent gain for the MSCI
EAFE. For the six-month period ended September 30, 1995, International Fund
posted a gain of 9.9 percent, while the MSCI EAFE rose only 4.9 percent.
<PAGE>
<TABLE>
Fund Highlights
International Fund
<CAPTION>
Top Ten Holdings (% of Total Net Assets)
<S> <C>
Samsung Electronics 2.8%
Bladex 2.2
Fortis Amev 2.2
Astra 2.1
Ito-Yokado 1.8
Matsushita Electric 1.8
Hitachi 1.8
Telecom Italia Mobile 1.7
KPN 1.7
NTT Data 1.7
Total 19.8%
Equity Portfolio Highlights
<CAPTION>
Portfolio S&P 500
<S> <C> <C>
Number of Holdings 101 500
Median Market Value ($ Bil.) 1.2 1.9
Economic Sector Breakdown
<CAPTION>
As of September 30, 1995
Equity Portfolio MSCI EAFE
Pie Charts:
<S> <C> <C>
Capital Equipment 19.1% 13.6%
Consumer Goods 19.2 19.3
Energy 9.2 9.4
Finance 16.4 26.2
Materials 11.3 11.1
Multi-Industry 5.5 3.5
Services 19.3 16.9
Total 100% 100%
</TABLE>
Asset Allocation
As of September 30, 1994 As of September 30, 1995
Pie Charts:
Equities $71.6 (95.7%) Equities $74.9 (90.1%)
Cash & Equivalents $1.6 (2.2%) Cash & Equivalents $5.9 (7.0%)
Bonds $1.6 (2.1%) Bonds $2.4 (2.9%)
<PAGE>
<TABLE>
Special Notice
Shareholders Approve New Agreements
At a special meeting on August 15, 1995, shareholders of SteinRoe Total Return
Fund, Prime Equities, Growth Stock Fund, Special Fund and Capital
Opportunities Fund voted to approve a proposal that replaced each Fund's
investment advisory agreement with two new agreements. These new agreements
essentially carry forward the services Stein Roe & Farnham already provides to
shareholders, separating into two agreements the provision of administrative
and investment management services. In addition, shareholders approved a
management agreement between SR&F Base Trust and the Adviser that would
replace the proposed management agreement between Investment Trust and the
Adviser if and when the Funds converted to a master/feeder structure.
The new agreements took effect on September 1, 1995.
The agreements are:
(A) Administrative Agreement
(B) Management Agreement
(C) Management Agreement between SR&F Base Trust and the Adviser
The outcome of the vote was as follows:
<CAPTION>
Record Total share
date share position
position: voted: For Against Abstentions
<S> <C> <C> <C> <C> <C>
Total Return Fund 226,829,921 139,113,878
(A) 109,454,105 24,013,461 5,646,311
(B) 110,934,878 21,526,961 6,652,039
(C) 109,671,661 21,344,186 8,098,031
Prime Equities 129,522,400 85,136,495
(A) 65,576,097 15,956,752 3,603,645
(B) 67,311,643 14,802,518 3,022,334
(C) 68,657,329 12,565,596 3,913,569
Growth Stock Fund 330,239,507 212,218,569
(A) 166,859,312 32,391,560 12,967,697
(B) 167,289,954 31,867,128 13,061,510
(C) 166,439,159 29,690,817 16,088,616
Special Fund 1,205,305,823 727,462,858
(A) 514,475,010 183,026,984 29,960,865
(B) 517,451,101 179,246,366 30,765,391
(C) 522,822,435 166,161,468 38,478,978
Capital
Opportunities
Fund 200,931,190 118,979,569
(A) 96,352,230 18,408,524 4,218,815
(B) 96,244,743 18,565,833 4,168,956
(C) 97,211,534 16,098,791 5,669,281
</TABLE>
<PAGE>
<TABLE>
Total Return Fund
Investments as of September 30, 1995
(Dollar Amounts In Thousands)
<CAPTION>
Number Market
Equity-Related Securities (85.9%) of Shares Value
<S> <C> <C>
Common Stocks (37.0%)
Banking (4.1%)
Amsouth Bancorporation 46,000 $1,748
Bank America Corporation 71,000 4,251
Fleet Financial Group 88,000 3,322
------
9,321
Chemicals (1.3%)
Dupont (E.I.) DeNeMours & Company 45,000 3,094
Conglomerates and Miscellaneous (2.5%)
Hanson Plc ADRs 180,000 2,925
Harris Corporation 52,000 2,854
------
5,779
Data Products & Reproduction (1.0%)
Xerox 17,000 2,284
Distribution (1.0%)
Wal-Mart Stores, Inc. 91,500 2,276
Drugs and Health Products (2.7%)
Bristol-Meyers Squibb Company 45,000 3,279
Eli Lilly & Co. 32,000 2,876
------
6,155
Electrical Equipment (3.9%)
Emerson Electric Co. 56,000 4,004
General Electrical Company 78,000 4,973
------
8,977
Food, Beverage & Tobacco (1.1%)
General Mills, Inc. 46,000 2,565
Health Care (1.9%)
Abbott Laboratories 104,000 4,433
Machinery (1.2%)
Tenneco, Inc. 60,000 2,775
Natural Gas (1.6%)
Enron Corp. 112,000 3,752
Paper & Forest Products (1.7%)
Plum Creek Timber Company, L.P. 155,000 3,797
Petroleum (1.7%)
British Petroleum Company Plc ADRs 42,344 3,806
Publishing & Broadcasting (1.2%)
Hubbell Inc. Class B 45,000 2,638
<PAGE>
<CAPTION>
Number Market
of Shares Value
<S> <C> <C>
Real Estate (4.3%)
Kimco Realty Corporation 92,000 $ 3,669
RFS Hotel Investors, Inc. 130,000 1,982
United Dominion Realty Trust Inc. 293,000 4,175
-------
9,826
Retail (1.1%)
Penny (J.C.) Company, Inc. 52,000 2,580
Telecommunications (3.3%)
American Telephone and Telegraph Company 65,000 4,274
Frontier Corp. 120,000 3,195
-------
7,469
Utilities-Electric (1.4%)
Empressa Nacional de Electricidad, S.A. de C.V., ADRs 60,000 3,090
-------
Total Common Stock (Cost $57,681) 84,617
Preferred Stocks (20.2%)
Computer Software (0.9%)
Salomon Inc. (Microsoft Corp. ELKS) $3.994 20,000 2,065
Consumer (1.5%)
James River Corporation of Virginia DECS 110,000 3,355
Electronics (2.2%)
LM Ericsson $1.578 Cv. 1,500,000 4,922
Extractive Energy (0.5%)
**Gerrity Oil & Gas Corporation $1.500 Cv. 104,800 1,114
Financial (3.4%)
Citicorp $5.375 Cv. 26,000 5,083
GATX Corporation Series A $3.875 Cv. 45,000 2,723
-------
7,806
Food, Beverage & Tobacco (1.2%)
RJR Nabisco Holdings Corp. PERCS 400,000 2,700
Gaming (1.0%)
Salomon Inc. (Promus Companies ELKS) $3.017 55,000 2,241
Investments (1.5%)
SunAmerica Inc. PERCS $2.780 Cv. 70,000 3,377
Industrial Products (1.1%)
Corning Delaware $0.680 Cv. 53,500 2,501
Mining (1.4%)
Freeport-McMoran Gold & Copper Inc. $1.750 Cv. 117,000 3,217
Oil & Natural Gas (1.4%)
**Unocal Corporation $3.500 Cv. 60,000 3,173
Real Estate Management (1.4%)
Rouse $3.205 Cv. 60,000 3,292
<PAGE>
<CAPTION>
Number Market
of Shares Value
<S> <C> <C>
Services (1.8%)
General Motors Corporation Class E Series C $3.250 Cv. 65,000 $ 4,217
Telephone (0.9%)
Telefonos de Mexico PRIDES 65,000 2,186
--------
Total Preferred Stocks (Cost $40,748) 46,166
<CAPTION>
Principal
Convertible Subordinated Debentures (28.7%) Amount
<S> <C> <C>
Automotive (1.0%)
Mascotech 4.500% 12/15/03 $ 3,000 2,269
Broadcasting & Publishing (1.9%)
Comcast Corp. 1.125% 4/15/07 5,000 2,581
Time Warner Inc. 8.750% 1/10/15 1,645 1,713
------
4,294
Business Services (1.3%)
**Laidlaw ADT 6.000% 1/15/99 2,500 2,938
Energy (2.2%)
Kelley Oil & Gas Partners Ltd. 8.500% 4/01/00 2,470 1,948
SFP Pipeline Holdings 10.410% 8/15/10 2,500 3,150
--------
5,098
Fabricated Metal Products (0.9%)
TriMas Corporation 5.000% 8/01/03 2,000 2,085
Financial (1.3%)
Elan International Financial Ltd. Zero Coupon
(Effective Yield 4.652%) 10/16/12 6,500 2,958
Health Care (5.6%)
Integrated Health Services Inc. 6.000% 1/01/03 3,000 3,169
Nationwide Health Inc. 6.250% 1/01/99 3,500 3,482
Olsten Corporation 4.875% 5/15/03 2,400 2,778
**Roche Holdings Ltd. Zero Coupon(Effective Yield 4.750%) 9/23/085,000 3,506
--------
12,935
Insurance (1.5%)
Fremont General Zero Coupon (Effective Yield 9.270%) 10/12/13 9,000 3,532
Retail (0.9%)
Federated Department Stores Inc. 9.720% 2/15/04 2,000 2,005
Restaurants (1.6%)
Boston Market Zero Coupon (Effective Yield 7.597%) 6/01/15 15,000 3,637
Services (6.8%)
Danka Business Systems 6.750% 4/01/02 3,000 4,140
LTC Properties 8.500% 1/01/00 2,000 2,013
OHM Corporation 8.000% 10/01/06 2,800 2,569
Service Corporation 6.500% 9/01/01 1,500 2,820
**U.S. Filter 6.000% 9/15/05 500 535
Valhi, Inc. Zero Coupon (Effective Yield 8.693%)
(Convertible into shares of Dresser) 10/20/07 9,000 3,375
--------
15,452
<PAGE>
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
Technology (1.3%)
WMX Technologies, Inc. 2.000% 1/24/05 $ 3,452 $ 2,934
Transportation (1.1%)
Roadmaster Industries, Inc. 8.000% 8/15/03 3,000 2,505
Utilities (1.3%)
National Power 6.250% 9/23/08 1,600 3,027
--------
Total Convertible Subordinated Debentures (Cost $59,527) 65,669
Total Equity-Related Securities (Cost$157,956) 196,452
Bonds and Notes (10.9%)
U.S. Government and Agency Obligations (1.6%)
Federal National Mortgage Association 8.000% 4/13/05 2,500 2,578
U.S. Treasury Note 7.500% 11/15/01 1,000 1,072
--------
3,650
U.S. Government Agency Mortgage-Backed Securities (1.5%)
Federal Home Loan Mortgage Corporation Gold 8.000% 11/01/22 1,019 1,044
Federal National Mortgage Association (Multi-family housing)
(Variable Rate) 9.038% 6/01/97 39 39
Government National Mortgage Association
9.000% 3/15/20 167 176
9.000% 4/15/20 113 119
6.500% 7/20/25 (ARM) 2,033 2,057
--------
3,435
Air Transportation (0.7%)
United Airlines Series 1991 9.200% 3/22/08 1,422 1,535
<PAGE>
Automotive (2.0%)
Ford Motor Corporation
5.750% 5/14/98 3,000 2,959
8.875% 1/15/22 1,500 1,749
--------
4,708
Commercial Bank (0.9%)
Den Danske Bank 6.550% 9/15/03 2,250 2,168
Financial (3.3%)
Alps 94-1 Pass Thru Trust 9.350% 9/15/04 2,487 2,583
American Mortgage Trust 8.190% 9/27/22 2,353 2,272
American Residential Mortgage Medium Term Note 6.110% 2/03/99 2,000 1,985
MDC Mortgage Funding Corporation Series Q Class 5 8.850% 3/20/18 598 620
--------
7,460
Mortgage-Backed Securities (0.9%)
** Lennar 8.120% 9/15/02 2,000 2,013
--------
Total Bonds and Notes (Cost $23,789) 24,969
<PAGE>
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
Short-Term Obligation (0.9%)
Commercial Paper (0.9%)
Associate Corporation of North Amercia 6.750% 10/02/95
(Cost $1,985) $1,985 $ 1,985
Total Investments (97.7%)
(Cost basis $183,730) 223,406
Other Assets, Less Liabilities (2.3%) 5,154
--------
Total Net Assets (100.0%) $228,560
========
<FN>
* Non-income producing.
** These securities are subject to contractual or legal
restrictions on their resale. At September 30, 1995, the
aggregate value of these securities represented 5.8%.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Prime Equities
Investments as of September 30, 1995
(Dollar Amounts In Thousands)
<CAPTION>
Number Market
Equity-Related Securities (75.2%) of Shares Value
<S> <C> <C>
Common Stocks (69.4%)
Aircrafts (2.1%)
McDonnell Douglas Corporation 36,000 $ 2,979
Banks (4.6%)
Citicorp 20,000 1,415
First Interstate Bancorp 27,500 2,771
Republic New York Corporation 40,000 2,340
-------
6,526
Broadcasting & Communications (2.9%)
Capital Cities ABC, Inc. 21,000 2,470
The Interpublic Group of Companies, Inc. 40,400 1,606
-------
4,076
Construction (1.1%)
Fluor Corp. 26,300 1,473
Consumer Products (6.8%)
The Gillette Company 67,200 3,200
Nike, Inc. Class B 27,000 2,778
The Procter & Gamble Co. 45,000 3,465
-------
9,443
Distribution (4.5%)
Albertson's Inc. 86,000 2,935
Walgreen Co. 120,000 3,360
-------
6,295
Drugs (2.8%)
SmithKline Beecham 20,000 1,012
Warner-Lambert 30,000 2,858
-------
3,870
Electrical Equipment (9.8%)
Emerson Electric Co. 47,000 3,360
General Electric Company 63,000 4,016
Honeywell Inc. 80,000 3,430
Hubbell Incorporated, Class B 49,700 2,914
-------
13,720
<PAGE>
Energy (5.6%)
Amoco Corporation 36,500 2,341
British Petroleum Company Plc ADRs 31,220 2,806
Enron Corp. 82,500 2,764
-------
7,911
Financial (5.1%)
American Express Co. 80,000 3,550
Federal National Mortgage Association 34,000 3,519
-------
7,069
Food, Beverage & Tobacco (5.4%)
PepsiCo, Inc. 40,000 2,040
Philip Morris Companies 40,000 3,340
Sara Lee Corporation 72,000 2,142
-------
7,522
<PAGE>
<CAPTION>
Number Market
of Shares Value
<S> <C> <C>
Health Care (3.8%)
Abbott Laboratories 73,500 $ 3,133
Roche Holding Ltd. 300 2,131
--------
5,264
Media (2.2%)
Tribune Company 25,000 1,659
Viacom International Incorporated, Class B 27,190 1,353
--------
3,012
Paper and Forest Products (4.5%)
Alco Standard Corporation 27,000 2,288
Champion International 20,000 1,077
Georgia Pacific 20,000 1,750
Minnesota Mining & Manufacturing Co. 20,000 1,130
--------
6,245
Real Estate (1.7%)
Equity Residential Properties 36,000 1,084
Nationwide Health Properties, Inc. 30,000 1,230
--------
2,314
Rubber, Plastics, and Related Products (1.3%)
Goodyear Tire & Rubber Co. 45,000 1,772
Specialty Chemicals (3.0%)
Minerals Technologies Inc., Class A 57,300 2,156
Monsanto Co. 20,400 2,055
-------
4,211
Telecommunications (1.9%)
American Telephone and Telegraph Company 40,222 2,645
Other (0.3%)
Kansas City Southern Industries, Inc. 10,000 455
--------
Total Common Stocks (Cost $69,429) 96,802
<PAGE>
Preferred Stocks (5.8%)
Banks (1.8%)
Citicorp $5.375 Cv. 13,000 2,541
Broadcasting (0.9%)
News Corp. Ltd. ADRs $0.500 65,000 1,292
Industrial Products (0.7%)
Corning Inc. Cv. $3.000 20,000 935
Technology Services (2.4%)
General Motors Corporation Series E-1 $2.860 Cv. 74,0003,367
--------
Total Preferred Stocks (Cost $5,668) 8,135
Total Equity-Related Securities (Cost $75,097) 104,937
<PAGE>
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
Note (2.2%)
U.S. Government Obligation (2.2%)
U.S. Treasury Note 7.125% 9/30/99
(Cost $2,964) $ 3,000 $ 3,118
Short-Term Obligations (22.9%)
Commerical Paper (21.9%)
Countrywide Funding Corp. 5.850% 10/06/95 6,400 6,395
General Signal Corp.5.820% 10/05/95 6,600 6,596
ITT Corp. 5.810% 10/03/95 5,390 5,388
GMAC 6.800% 10/02/95 6,130 6,129
Orix America Corp. 5.875% 10/02/95 6,000 5,999
--------
30,507
U.S. Government Obligation (1.0%)
**U.S. Treasury Bill 5.385% 11/02/95 1,500 1,493
--------
Total Short-Term Obligations
(Amortized cost $32,000) 32,000
Total Investments (100.3%)
(Cost basis $110,061) 140,055
Other Assets, Less Liabilities (-0.3%) (516)
--------
Total Net Assets (100.0%) $139,539
========
<FN>
* Non-income producing.
** Security was pledged to cover margin requirements
for open futures contracts.
Futures contracts which were open at September 30, 1995 were as follows:
<CAPTION>
Unrealized
Number of Contract Gain
Type Contracts Value Expiration at 9/30/95
<S> <C> <C> <C> <C>
Standard & Poor's
500 Index (Long) 50 $14,705 December, 1995 $286
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Growth Stock Fund
Investments as of September 30, 1995
(Dollar Amounts In Thousands)
<CAPTION>
Number Market
Equity-Related Securities (94.3%) of Shares Value
<S> <C> <C>
Common Stocks (93.4%)
Banks & Savings and Loans (3.8%)
Fifth Third Bancorp 108,000 $ 6,197
MBNA Corp. 175,000 7,284
-------
13,481
Business Services (1.7%)
First Data Corporation 100,000 6,200
Chemicals (1.0%)
Hercules Inc. 65,000 3,770
Computers and Computer Software (3.9%)
Hewlett-Packard 60,000 5,003
*Microsoft Corporation 100,000 9,050
-------
14,053
Construction (1.6%)
Fluor Corp. 100,000 5,600
Consumer-Related (10.8%)
Autozone, Inc. 200,000 5,100
*CUC International Inc. 150,000 5,231
The Gillette Company 200,000 9,525
*Kohl's Corporation 110,000 5,706
The Loewen Group Inc. 100,000 4,125
The Proctor & Gamble Co. 120,000 9,240
-------
38,927
Distribution-Retail (5.5%)
Albertson's Inc. 190,000 6,484
The Home Depot, Inc. 333,333 13,292
-------
19,776
Distribution-Wholesale (1.7%)
Sysco Corporation 220,000 5,995
<PAGE>
Electrical Equipment (4.8%)
General Electric Company 160,000 10,200
Thermo Electron Corp. 150,000 6,956
-------
17,156
Energy (2.6%)
*Renaissance Energy Ltd. 200,000 4,492
Schlumberger Ltd. 75,000 4,894
-------
9,386
Financial Services (6.5%)
Federal National Mortgage Association 90,000 9,315
First Financial Management Corporation 50,000 4,881
Green Tree Acceptance Inc. 150,000 9,150
-------
23,346
Food, Beverage & Tobacco (4.3%)
The Coca Cola Company 140,000 9,660
Nabisco Holdings Corp. 200,000 5,925
-------
15,585
<PAGE>
<CAPTION>
Number Market
of Shares Value
<S> <C> <C>
Health Care (8.2%)
Abbott Laboratories 185,000 $ 7,886
Johnson & Johnson 115,000 8,524
**Roche Holding Ltd. ADSs 100,000 7,102
United Healthcare 125,000 6,109
--------
29,621
Hotels (1.0%)
*HFS Incorporated 70,000 3,666
Insurance (4.5%)
American International Group, Inc. 97,500 8,287
The Travelers 150,000 7,969
--------
16,256
Leisure & Entertainment (3.6%)
Carnival Cruise Lines Inc. 300,000 7,200
Disney (Walt) Co. 100,000 5,737
--------
12,937
Media (1.0%)
*Viacom International Incorporated, Class B 75,000 3,731
Medical Supplies (3.0%)
Medtronic, Inc. 200,000 10,750
Mining (0.7%)
Barrick Gold Corp. 100,000 2,587
Pharmaceutical (1.9%)
Eli Lilly & Co. 75,000 6,741
Restaurants (1.9%)
McDonalds Corporation 175,000 6,694
Rubber, Plastic & Related (2.0%)
Illinois Tool Works Inc. 125,000 7,359
<PAGE>
Services (1.2%)
Cintas Corp. 100,000 4,400
Technology Services (6.0%)
Cisco Systems, Inc. 109,400 7,549
*Cerner Corp. 100,000 3,425
General Motors Corp. Series E-1 140,000 6,370
Tellabs Inc. 100,000 4,213
--------
21,557
Telecommunications (10.2%)
*Airtouch Communications 200,000 6,125
American Telephone and Telegraph Company 150,000 9,862
LM Ericsson Telecommunications ADRs Class B 320,000 7,840
Motorola, Inc. 170,000 12,984
--------
36,811
--------
Total Common Stocks (Cost $217,212) 336,385
<PAGE>
<CAPTION>
Number Market
of Shares Value
<S> <C> <C>
Preferred Stock (0.9%)
Electronics (0.9%)
Nokia Corp. ADSs (Cost $1,869) 50,000 $ 3,487
--------
Total Equity-Related Securities (Cost $219,081) 339,872
<CAPTION>
Principal
Amount
<S> <C> <C>
Short-Term Obligations (6.6%)
Commercial Paper (6.6%)
Associate Corp. of North America 6.750% 10/02/95 $12,345 12,343
Countrywide Funding Corp. 5.780% 10/02/95 11,370 11,368
--------
Total Short-Term Obligations (Cost $23,711) 23,711
Total Investments (100.9%)
(Cost basis $242,792) 363,583
Other Assets, Less Liabilities (-0.9%) (3,247)
--------
Total Net Assets (100.0%) $360,336
========
<FN>
* Non-income producing.
**These securities are subject to contractual or legal
restrictions on their resale. At September 30, 1995,
the aggregate value of these securities represented 2.0%
of net assets.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Special Fund
Investments as of September 30, 1995
(Dollar Amounts In Thousands)
<CAPTION>
Number Market
Common Stocks (93.8%) of Shares Value
<S> <C> <C>
Automotive (4.0%)
Mark IV Industries 630,000 $ 14,018
Superior Industries International, Inc. 1,251,000 33,621
--------
47,639
Banks (2.6%)
First Interstate Bancorp 43,000 4,332
Golden West Financial 250,000 12,625
Wilmington Trust Company 489,200 14,431
--------
31,388
Broadcasting (2.2%)
*Cox Communications 1,150,000 23,287
Grupo Radio Centro, S.A. de C.V. ADSs 337,500 2,784
--------
26,071
Business Services (9.6%)
Alco Standard Corporation 307,000 26,018
*Interim Service Inc. 705,000 19,035
The Interpublic Group of Companies Inc. 650,000 25,837
The Olsten Corporation 846,400 32,904
Unitog Company 488,850 11,610
--------
115,404
Chemicals (1.2%)
Reliance Industries GDS 100,000 1,800
**Reliance Industries GDS 660,000 11,880
Shanghai Petrochemical Company Limited ADRs 53,300 1,624
--------
15,304
Conglomerate (1.1%)
*Grupo Carso S.A. de C.V. 2,215,000 13,703
Consumer-Related (3.4%)
Harley-Davidson, Inc. 1,292,000 31,492
Quilmes Industrial 487,000 9,010
--------
40,502
<PAGE>
Data Products and Reproduction (2.0%)
Xerox 175,000 23,516
Electrical Equipment (2.3%)
*Littlefuse, Inc.
Common 635,000 20,638
Warrants 293,600 7,267
--------
27,905
Electronics & Instrumentation (4.7%)
*AVX Corporation 428,400 14,351
*General Instrumental Corp. ADRs 410,000 12,300
Molex Inc. Class A 898,828 30,111
--------
56,762
Energy & Related Services (6.0%)
Cross Timbers Oil Company 996,100 14,194
*
**Renaissance Energy Ltd. 40,000 913
*Renaissance Energy Ltd. 945,000 21,208
Southwestern Energy Company 1,165,000 15,873
<PAGE>
<CAPTION>
Number Market
of Shares Value
<S> <C> <C>
Energy & Related Services (continued)
*Schlumberger Ltd. 300,000 $ 19,575
--------
71,763
Financial Services (12.6%)
The Allstate Corporation 1,003,000 35,481
American Express Co. 630,000 27,956
*National Mutual Asia Ltd. 28,350,000 21,818
The Progressive Corporation 592,300 26,505
TCF Financial Corp. 440,000 25,630
*20th Century Industries 920,100 14,147
--------
151,537
Health Care (8.6%)
*Boston Scientific 1,103,000 47,015
Invacare Corp. 445,000 21,360
*Ligand Pharmaceutical Incorporated Class B 146,243 1,444
Stryker Corporation 359,800 16,776
*Sunrise Medical, Inc. 615,300 16,921
--------
103,516
Industrial Products (2.6%)
Carlisle Corp. 360,100 14,989
Hon Industries 578,000 16,762
--------
31,751
Media (3.1%)
*International Family Entertainment, Inc. Class B 347,300 6,599
*Scandinavian Broadcasting 530,000 14,973
*Viacom International Incorporated, Class B 303,500 15,099
--------
36,671
Real Estate (2.0%)
The Newhall Land and Farming Company 982,100 13,136
The Town and Country Trust Class A 837,000 10,986
--------
24,122
<PAGE>
Retail (9.3%)
*Borders Group 1,000,000 17,125
**Hornbach Baumarket Bearer Shares 10,189 5,754
Nordstrom 450,000 18,788
*Proffitt's Inc. 625,700 17,207
*Revco D.S., Inc. 1,401,965 32,946
*Zale Corp. 1,437,200 19,941
--------
111,761
Rubber, Plastics and Related Products (1.6%)
Goodyear Tire & Rubber Company 500,000 19,688
Specialty Chemicals (7.2%)
*Lydall, Inc. 854,000 21,243
Minerals Technology Corp. Class A 594,200 22,357
OM Group, Inc. 673,000 20,442
A. Schulman, Inc. 865,937 21,648
--------
85,690
Textiles & Apparel (2.4%)
Unifi, Inc. 1,198,475 29,363
<PAGE>
<CAPTION>
Number Market
of Shares Value
<S> <C> <C>
Telecommunications (5.3%)
*Airtouch Communications 969,500 $ 29,691
*Cellular Communications Inc., Series A 325,000 17,713
*PriCellular 1,250,000 15,781
----------
63,185
----------
Total Common Stocks (Cost $848,400) 1,127,241
<CAPTION>
Principal
Amount
<S> <C> <C>
Bond (0.9%)
Young Broadcasting Inc. 11.750% 11/15/04
(Cost $10,083) $10,000 11,100
Short-Term Obligations (4.6%)
Commercial Paper (4.4%)
Associate Corp. of North America 6.750% 10/02/95 35,810 35,803
Phone Mate Corp. 5.950% 10/03/95 16,500 16,495
----------
52,298
U.S. Government Obligation (0.2%)
U.S. Treasury Bill 5.425% 11/02/95 3,000 2,986
----------
Total Short-Term Obligations (Amortized cost $55,284) 55,284
Total Investments (99.3%)
(Cost basis $913,767) 1,193,625
Other Assets, Less Liabilities (0.7%) 7,844
----------
Total Net Assets (100.0%) $1,201,469
==========
<FN>
* Non-income producing.
**These securities are subject to contractual or legal restrictions
on their resale. At September 30, 1995, the value of these securities
represented 1.5% of net assets.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Special Venture Fund
Investments as of September 30, 1995
(Dollar Amounts In Thousands)
<CAPTION>
Number Market
Common Stocks (86.2%) of Shares Value
<S> <C> <C>
Automotive (1.1%)
*Tower Automotive 48,000 $ 660
Bank (1.8%)
*Southern National Corp. 41,000 1,076
Broadcasting (4.6%)
*Central European Media Enterprises 57,500 1,452
*Cox Communications 67,000 1,357
-------
2,809
Business Services (10.8%)
G & K Services Class A 100,000 2,325
*Interim Services Inc. 41,000 1,107
*Keane Inc. 83,500 2,411
Unitog Company 30,000 713
-------
6,556
Consumer Products (2.6%)
Thomas Nelson, Inc. 62,000 1,565
Electrical Equipment (2.3%)
*Littelfuse, Inc.
Common 20,000 650
Warrants 30,000 742
-------
1,392
Electronics (6.0%)
*Kent Electronics Corp. 17,000 746
*Sheldahl Co. 40,000 770
Woodhead Inds. Inc. 71,500 1,019
*Zytec Corp 132,000 1,122
-------
3,657
Extractive-Energy (6.9%)
*Alexander Energy Corp. 145,000 580
Cross Timbers Oil Company 88,400 1,260
*Renaissance Energy Ltd. 51,000 1,145
Vintage Petroleum, Inc. 57,000 1,197
-------
4,182
<PAGE>
Health Services & Equipment (20.2%)
*American Medical Response 40,000 1,135
*AmeriSource Distribution Corp. 66,300 1,790
*Boston Scientific 41,000 1,748
*HealthPlan Services Corporation 42,500 866
*Integrated Healthcare Services 40,000 1,130
Invacare Corp. 45,000 2,160
*Patterson Dental 81,000 2,146
Stryker Corp 27,000 1,259
-------
12,234
Industrial Products (1.1%)
Hon Industries Inc. 22,000 638
<PAGE>
<CAPTION>
Number Market
of Shares Value
<S> <C> <C>
Insurance (6.7%)
National Mutual Asia Ltd 2,074,000 $ 1,596
*Triad Guaranty Inc. 94,000 2,444
-------
4,040
Petroleum (1.9%)
*Barrett Resources Corp. 50,000 1,125
Retail (7.6%)
*Proffitt's Inc. 59,000 1,623
Quality Food Centers 45,000 934
*Zale Corp 146,000 2,026
-------
4,583
Specialty Chemicals (10.4%)
*Cambrex Corp. 29,900 1,203
Minerals Technology Corp Class A 34,000 1,279
OM Group Inc. 75,000 2,278
A. Schulman Inc. 62,000 1,550
-------
6,310
Telecommunications (2.2%)
ABC Communication Holdings Ltd. 1,170,000 235
*Plantronics Inc. 30,000 1,091
-------
1,326
-------
Total Common Stocks (Cost $46,218) 52,153
<PAGE>
<CAPTION>
Principal
Amount
<S> <C> <C>
Short-Term Obligations (13.5%)
Commercial Paper (13.5%)
Associate Corp. of North Amercia 6.750% 10/02/95 $2,174 2,174
Florida Power Corp. 6.400% 10/06/95 2,000 1,998
ITT Corp. 5.850% 10/03/95 2,000 1,999
Lehman Brothers Holdings 5.900% 10/03/95 2,000 1,999
-------
Total Short-Term Obligations (Amortized cost $8,170 ) 8,170
Total Investments (99.7%)
(Cost basis $54,389) 60,323
Other Assets, Less Liabilities (0.3%) 210
-------
Total Net Assets (100.0%) $60,533
=======
<FN>
*Non-income producing.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Capital Opportunities Fund
Investments as of September 30, 1995
(Dollar Amounts In Thousands)
<CAPTION>
Number Market
Equity-Related Securities (88.8%) of Shares Value
<S> <C> <C>
Common Stocks (86.1%)
Business Services (14.1%)
*Alternative Resources Corporation 100,000 $ 3,200
*Danka Business Systems PLC 170,000 6,120
First Financial Management Corporation 60,000 5,857
*Gartner Group, Inc. 300,000 9,825
Paychex, Inc. 200,000 9,250
-------
34,252
Consumer Products (4.0%)
*Authentic Fitness Corporation 200,000 4,500
Thomas Nelson, Inc. 160,000 4,040
*Oakley, Inc. 40,000 1,185
-------
9,725
Financial Services (5.0%)
CWM Mortgage Holdings, Inc. 150,000 2,025
*Credit Acceptance Corporation 100,000 2,700
Green Tree Financial Corporation 120,000 7,320
-------
12,045
Health Care (17.0%)
*Gulf South Medical Supply, Inc. 130,000 3,201
*HCIA Inc. 62,000 1,597
*Integrated Health Services, Inc. 240,000 6,780
*IDEXX Laboratories, Inc. 200,000 7,450
*Medaphis Corporation 210,000 5,880
Omnicare, Inc. 122,000 4,758
*PhyCor, Inc. 270,000 9,248
*Physician Sales & Service, Inc. 45,000 2,160
-------
41,074
Industrial Products (4.5%)
*Airgas, Inc. 120,000 3,195
*Gentex Corporation 170,000 4,080
Greenfield Industries, Inc. 120,000 3,690
-------
10,965
<PAGE>
Leisure & Entertainment (13.2%)
Carnival Cruise Lines, Inc. 100,000 2,400
*Clear Channel Communications, Inc. 100,000 7,575
*HFS Incorporated 200,000 10,475
LaQuinta Inns, Inc. 220,000 6,160
*Prime Hospitality Corp. 200,000 2,050
*Promus Hotel Corporation 150,000 3,413
-------
32,073
Restaurants (2.8%)
*Outback Steakhouse, Inc. 120,000 3,690
*Papa John's International, Inc. 70,000 3,150
-------
6,840
<PAGE>
<CAPTION>
Number Market
of Shares Value
<S> <C> <C>
Specialty Retailing (8.5%)
*Autozone, Inc. 120,000 $ 3,060
*Baby Superstore, Inc. 40,000 1,805
*The Gymboree Corporation 100,000 3,012
*Kohl's Corporation 70,000 3,631
*Sunglass Hut International, Inc. 150,000 7,500
The Talbots, Inc. 40,000 1,585
--------
20,593
Technology (16.9%)
*ADC Telecommunications Inc. 160,000 7,280
*Aspen Technology, Inc. 65,000 1,950
*Atmel Corporation 90,000 3,037
*Atria Software, Inc. 130,000 3,802
*Cascade Communications Corp. 70,000 3,447
*StrataCom, Inc. 150,000 8,288
*Synopsys, Inc. 160,000 4,920
*Tellabs, Inc. 190,000 8,004
--------
40,728
Misc. (0.1%) 338
--------
Total Common Stocks (Cost $129,394) 208,633
<PAGE>
<CAPTION>
Principal
Convertible Subordinated Debentures (2.7%) Amount
<S> <C> <C>
Leisure & Entertainment (1.1%)
Carnival Cruise Lines, Inc. 4.500% 7/01/97 $ 2,000 2,775
Specialty Retailing (1.6%)
Starbucks Corporation 4.500% 8/01/03 3,000 3,825
--------
Total Convertible Subordinated Debentures (Cost $5,204) 6,600
Total Equity-Related Securities (Cost $134,598) 215,233
Short-Term Obligations (10.9%)
Commercial Paper (10.9%)
Associates Corp. of North America 6.750% 10/02/95 10,360 10,358
Countrywide Funding Corporation 5.900% 10/04/95 8,000 7,996
Lehman Brothers Holding Company 5.900% 10/03/95 8,000 7,998
--------
Total Short-Term Obligations
(Amortized cost $26,352) 26,352
Total Investments (99.7%)
(Cost basis $160,950) 241,585
Other Assets, Less Liabilities (0.3%) 796
--------
Total Net Assets (100.0%) $242,381
========
<FN>
*Non-income producing.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
International Fund
Investments as of September 30, 1995
(Dollar Amounts In Thousands)
<CAPTION>
Number Market
Equity-Related Securities (90.2%) of Shares Value
<S> <C> <C>
Common Stocks (86.9%)
Argentina (2.0%)
Telecom Argentina GDSs 17,700 $ 741
YPF Sociedad Anonima Sponsored ADRs 50,000 900
-------
1,641
Australia (2.1%)
Burns-Philip & Co. 480,864 1,016
*Peptide Technology 261,000 118
*Southern Pacific Petroleum ADRs 620,000 484
*Werrie Gold 354,300 134
-------
1,752
Austria (0.3%)
BWT (New Shares) 2,100 261
Belgium (1.2%)
Generale de Banque 3,200 1,007
Finland (2.9%)
Enso - Gutzeit (Ordinary R Shares) 120,000 1,020
Kemira Oy 47,000 377
Metsa - Serla Oy (B Shares) 25,000 998
-------
2,395
France (2.9%)
*Escott 5,500 406
Europe 1 Communications 1,200 264
M6 - Metropole Television 3,000 265
*Moulinex 20,000 411
Total Petroles CIass B 17,674 1,073
-------
2,419
Germany (5.9%)
*Agiv AG 33,000 856
Fresenius AG New Shares 680 583
Henkel KGAA 2,500 954
Mannesmann AG 4,000 1,314
*Veba 30,000 1,194
-------
4,901
<PAGE>
Hong Kong (5.6%)
Companion Building 1,723,200 312
*Far East Hotels 600,000 139
Guangdong Investment Ltd. 410,000 245
Hong Kong & China Gas Co. 852,000 1,372
International Bank of Asia 800,000 481
National Mutual Asia Ltd. 386,000 297
*Vitasoy 999,364 420
World Houseware Holdings 1,207,680 231
Yizheng Chemical Fibre Company 3,852,000 1,133
-------
4,630
Indonesia (0.2%)
Panin Bank (Foreign Shares) 68,750 83
Summarecon (Foreign Shares) 144,690 102
-------
185
<PAGE>
<CAPTION>
Number Market
of Shares Value
<S> <C> <C>
Italy (4.6%)
*Olivetti 1,450,000 $ 1,242
Telecom Italia (Savings Shares) 846,000 1,108
*Telecom Italia (Mobile) 1,300,000 1,436
-------
3,786
Japan (25.5%)
Amano Corp. 87,000 1,094
Canon Inc. 70,000 1,256
*DDI 152 1,260
Hitachi 135,000 1,478
Ito Yokado 27,000 1,500
*Kaneshita Construction 28,000 420
Kuraya Corp. 62,600 1,060
*Kokusai Securities 87,000 1,120
Matsushita Electric Industrial 96,000 1,479
*Mori Seiki 61,000 1,218
Murata Manufacturing 26,000 980
Mr. Max Corp. 56,700 989
*NTT Data 60 1,405
Promise Co. 27,000 1,149
Sharp Corp. 69,000 972
Sony Corp. 10,000 521
Suzuki Motor 101,000 1,095
Tokyo Style 55,000 859
*Wako Securities 165,000 1,280
-------
21,135
Malaysia (1.1%)
*Arab-Malaysian Finance 29,666 116
Berjaya Sports 85,000 179
Kim Hin Industry Berhad 35,000 93
Land and General Holdings 82,500 217
Sungei Way Holdings 87,500 298
-------
903
Mexico (3.4%)
*Grupo Carso Series A1 90,000 566
*Grupo Situr Series BCP 839,000 419
Tolmex S.A. De C.V. Series B2 181,600 1,033
*Transportation Maritima Mexicana ADRs 90,000 765
-------
2,783
<PAGE>
Netherlands (4.7%)
Fortis AMEV 30,811 1,805
IHC Caland N.V. 11,800 336
KPN 40,026 1,420
Sphinx Kon CVA 12,713 381
-------
3,942
New Zealand (4.2%)
Brierley Investment Ltd. Ord. Shares 1,624,884 1,239
Fletcher Challenge Ltd. Ord. Shares 279,000 807
Fletcher Challenge Ltd. Forestry Division Shares 39,586 53
Lion Nathan Ltd. Ord. Shares 656,000 1,373
-------
3,472
Norway (1.7%)
*Petroleum Geo Services 15,625 391
Saga Petroleum A Free 80,000 1,036
-------
1,427
<PAGE>
<CAPTION>
Number Market
of Shares Value
<S> <C> <C>
Panama (2.2%)
Bladex ADRs 46,200 $ 1,865
Portugal (2.0%)
* 90,000 664
**Portugal Industrial ADSs
*Portugal Telecom S.A. ADR 52,157 1,004
-------
1,668
Russia (1.0%)
*Fleming Russia Securities Fund 128,000 864
Singapore (1.8%)
Jardine Matheson Holdings Ltd. 160,376 1,083
Super Coffeemix 330,000 171
United Overseas Bank Foreign Registered Shares 28,800 249
-------
1,503
South Korea (0.0%)
Samsung Electronics 148 16
Spain (0.5%)
Acerinox SA 3,400 389
Sweden (5.0%)
Arjo 44,200 632
Astra AB Series B 49,700 1,751
Avesta-Sheffield 110,000 1,199
*Sintercas Series A Free Shares 12,028 530
-------
4,112
Switzerland (0.7%)
AFG Arbonia Forster 13 15
Danzas Holding Registered Shares 280 251
Sarna Kunststroff Werte Registered D Shares 280 309
-------
575
<PAGE>
Thailand (0.2%)
Sino Thai Engineering & Construction 16,000 193
United Kingdom (5.2%)
Helene of London Plc 868,068 240
Intrum Justita Plc 305,000 401
Lasmo Plc 382,000 1,004
MISYS Plc 32,220 293
Powerscreen International Plc 90,000 513
Smithkline Beecham Plc Class A 126,000 1,276
Transtec Plc 382,535 575
-------
4,302
Misc. (0.0%) 17
-------
Total Common Stocks (Cost $69,965) 72,143
Preferred Stocks (3.3%)
Germany (0.5%)
Jil Sander DEM 50 570 444
<PAGE>
<CAPTION>
Number Market
of Shares Value
<S> <C> <C>
South Korea (2.8%)
Samsung Electronics Pfd 18,000 $ 2,309
-------
Total Preferred Stocks (Cost $2,052) 2,753
-------
Total Equity-Related Securities (Cost $72,017) 74,896
<CAPTION>
Principal
Bond and Notes (3.0%) Amount
<S> <C> <C>
Italy (1.8%)
IMI Bank International Zero Coupon
(Effective Rate 11.586%) 6/13/06 8,000,000 ITL 1,471
New Zealand (1.2%)
New Zealand Treasury Bonds 8.000% 4/15/04 1,450 966
-------
Total Bonds and Notes (Cost $2,582) 2,437
Short-Term Obligations (7.1%)
United States (7.1%)
Commercial Paper (7.1%)
Associate Corp of N.A. 6.750% 10/02/95 2,915,000 2,915
Oak Funding Corp. 6.750% 10/06/95 3,000,000 2,997
-------
Total Short-Term Obligations
(Amortized cost $5,912) 5,912
Total Investments (100.3%)
(Cost basis $80,511) 83,245
Other Assets, Less Liabilities (-0.3%) (225)
-------
Total Net Assets (100.0%) $83,020
=======
<FN>
* Non-income producing.
**This security is subject to contractual or legal restrictions on its resale.
At September 30, 1995, the value of this security represented 0.8% of net
assets.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Balance Sheets
September 30, 1995
(All Amounts In Thousands)
<CAPTION>
Total Growth
Return Prime Stock Special
Fund Equities Fund Fund
<S> <C> <C> <C> <C>
Assets
Investments, at market value $223,406 $140,055 $363,583 $1,193,625
Receivable for investments and currencies sold 5,278 317 -- 8,816
Receivable for fund shares sold 9 21 76 193
Dividends and interest receivable 1,641 364 338 792
Cash and other assets 180 283 246 1,583
-------- -------- -------- ----------
Total Assets $230,514 $141,040 $364,243 $1,205,009
======== ======== ======== ==========
Liabilities
Payable for investments and currencies purchased $ 1,489 $ 1,166 $ 1,404 $ 959
Payable for fund shares redeemed 109 178 2,093 1,283
Payable to investment adviser and transfer agent 178 112 288 1,080
Other liabilities 178 45 122 218
-------- -------- --------- ----------
Total Liabilities 1,954 1,501 3,907 3,540
-------- -------- --------- ----------
Capital
Paid-in capital 183,010 96,547 207,119 842,089
Net unrealized appreciation of investments and foreign
currencies 39,676 30,287 120,791 279,858
Accumulated undistributed (overdistributed) net
investment income 1,180 942 1,122 4,642
Accumulated undistributed net realized gains (losses) on
investments and foreign currency transactions 4,694 11,763 31,304 74,880
-------- -------- -------- ----------
Total Capital (Net Assets) 228,560 139,539 360,336 1,201,469
-------- -------- -------- ----------
Total Liabilities and Capital $230,514 $141,040 $364,243 $1,205,009
======== ======== ======== ==========
Shares Outstanding (Unlimited Number Authorized) 8,217 8,381 13,790 47,569
======== ======== ======== ==========
Net Asset Value (Capital) Per Share $ 27.82 $ 16.65 $ 26.13 $ 25.26
======== ======== ======== ==========
<PAGE>
<CAPTION>
Special Capital
Venture Opportunities International
Fund Fund Fund
<S> <C> <C> <C>
Assets
Investments, at market value $60,323 $241,585 $83,245
Receivable for investments and currencies sold 405 -- 5,239
Receivable for fund shares sold 43 195 313
Dividends and interest receivable 11 63 230
Cash and other assets 48 1,075 63
------- -------- -------
Total Assets $60,830 $242,918 $89,090
======= ======== =======
Liabilities
Payable for investments and currencies purchased $ 204 $ -- $ 5,792
Payable for fund shares redeemed -- 267 65
Payable to investment adviser and transfer agent 51 221 83
Other liabilities 42 49 130
------- -------- -------
Total Liabilities 297 537 6,070
------- -------- -------
Capital
Paid-in capital 51,614 148,688 81,351
Net unrealized appreciation of investments and foreign
currencies 5,934 80,635 2,740
Accumulated undistributed (overdistributed) net
investment income (6) 97 865
Accumulated undistributed net realized gains (losses) on
investments and foreign currency transactions 2,991 12,961 (1,936)
------- -------- -------
Total Capital (Net Assets) 60,533 242,381 83,020
------- -------- -------
Total Liabilities and Capital $60,830 $242,918 $89,090
======= ======== =======
Shares Outstanding (Unlimited Number Authorized) 4,806 11,173 8,100
======= ======== =======
Net Asset Value (Capital) Per Share $ 12.60 $ 21.69 $ 10.25
======= ======== =======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Operations
For The Year Ended
September 30, 1995
(All Amounts In Thousands)
<CAPTION>
Total Growth
Return Prime Stock Special
Fund Equities Fund Fund
<S> <C> <C> <C> <C>
Investment Income
Dividends $ 6,511 $ 2,129 $ 3,852 $ 12,936
Interest 6,846 1,341 1,171 5,963
------- ------- ------- --------
13,357 3,470 5,023 18,899
Foreign taxes withheld -- -- -- --
------- ------- ------- --------
Total Investment Income 13,357 3,470 5,023 18,899
------- ------- ------- --------
Expenses
Management fees and administrative fees 1,263 764 2,397 9,109
Transfer agent fees 397 248 532 2,149
Custodian fees 19 11 30 105
SEC and state registration fees 23 24 29 45
Accounting fees 20 18 21 36
Trustees' fees 13 13 19 37
Amortization of organization expenses -- -- -- --
Other 207 139 195 735
------- ------- ------- --------
1,942 1,217 3,223 12,216
Reimbursement of expenses by investment adviser -- -- -- --
------- ------- ------- --------
Total Expenses 1,942 1,217 3,223 12,216
------- ------- ------- --------
Net Investment Income 11,415 2,253 1,800 6,683
------- ------- ------- --------
Realized and Unrealized Gains (Losses)
on Investments and Foreign Currency Transactions
Net realized gains (losses) on investments 4,680 10,492 35,566 88,558
Net realized losses on foreign currency transactions -- -- -- --
Net realized gains (losses) on futures transactions -- 2,039 -- (2,982)
Net change in unrealized appreciation or depreciation
of investments and foreign currency transactions 13,869 9,832 44,475 70,232
------- ------- ------- --------
Net Gains (Losses) on Investments and Foreign
Currency Transactions 18,549 22,363 80,041 155,808
------- ------- ------- --------
Net Increase (Decrease) in Net Assets Resulting
from Operations $29,964 $24,616 $81,841 $162,491
======= ======= ======= ========
<PAGE>
<CAPTION>
Special Capital
Venture Opportunities International
Fund* Fund Fund
<S> <C> <C> <C>
Investment Income
Dividends $ 165 $ 441 $ 1,658
Interest 284 1,772 686
------ ------- -------
449 2,213 2,344
Foreign taxes withheld -- -- (153)
------ ------- -------
Total Investment Income 449 2,213 2,191
------ ------- -------
Expenses
Management fees and administrative fees 295 1,479 737
Transfer agent fees 68 360 113
Custodian fees 21 14 67
SEC and state registration fees 4 27 30
Accounting fees 24 19 25
Trustees' fees 8 13 14
Amortization of organization expenses 39 -- 18
Other 79 149 156
------ ------- -------
538 2,061 1,160
Reimbursement of expenses by investment adviser (128) -- --
------ ------- -------
Total Expenses 410 2,061 1,160
------ ------- -------
Net Investment Income 39 152 1,031
------ ------- -------
Realized and Unrealized Gains (Losses)
on Investments and Foreign Currency Transactions
Net realized gains (losses) on investments 3,073 18,194 (1,789)
Net realized losses on foreign currency transactions -- -- (31)
Net realized gains (losses) on futures transactions -- -- --
Net change in unrealized appreciation or depreciation
of investments and foreign currency transactions 5,934 45,624 (33)
------ ------- -------
Net Gains (Losses) on Investments and Foreign
Currency Transactions 9,007 63,818 (1,853)
------ ------- -------
Net Increase (Decrease) in Net Assets Resulting
from Operations $9,046 $63,970 $ (822)
====== ======= =======
<FN>
* From commencement of operations on October 17, 1994.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
For The Periods Ended September 30, 1994 and 1995
(All Amounts In Thousands)
<CAPTION>
Total Return Fund Prime Equities
1994 1995 1994 1995
<S> <C> <C> <C> <C>
Operations
Net investment income $ 10,292 $ 11,415 $ 1,365 $ 2,253
Net realized gains on investments and foreign
currency transactions 2,616 4,680 4,432 12,531
Net change in unrealized appreciation or depreciation
of investments and foreign currency transactions (12,214) 13,869 (1,368) 9,832
------- -------- -------- --------
Net Increase in Net Assets Resulting from Operations 694 29,964 4,429 24,616
------- -------- -------- --------
Distributions To Shareholders
Dividends from net investment income (9,985) (10,573) (1,246) (1,706)
Capital gains distributions (5,841) (2,423) (5,029) (5,016)
------- -------- -------- --------
Total Distributions to Shareholders (15,826) (12,996) (6,275) (6,722)
------- -------- -------- --------
Share Transactions
Subscriptions to fund shares 51,989 27,078 49,000 27,756
Investment income dividends reinvested 7,805 8,385 1,044 1,429
Capital gains distributions reinvested 5,123 2,142 4,618 4,619
Redemptions of fund shares (42,803) (55,287) (23,501) (41,839)
-------- -------- -------- --------
Net Increase (Decrease) from Share Transactions 22,114 (17,682) 31,161 (8,035)
-------- -------- -------- --------
Net Increase (Decrease) in Net Assets 6,982 (714) 29,315 9,859
Total Net Assets
Beginning of Period 222,292 229,274 100,365 129,680
-------- -------- -------- --------
End of Period $229,274 $228,560 $129,680 $139,539
======== ======== ======== ========
Accumulated Undistributed (Overdistributed) Net
Investment Income at End of Period $ 338 $ 1,180 $ 395 $ 942
======== ======== ======== ========
Analyses of Changes in Shares of Beneficial Interest
Subscriptions to fund shares 1,964 1,052 3,371 1,884
Investment income dividends reinvested 298 329 72 99
Capital gains distributions reinvested 193 89 323 337
-------- -------- -------- --------
2,455 1,470 3,766 2,320
Redemptions of fund shares (1,625) (2,146) (1,617) (2,856)
-------- -------- -------- --------
Net increase (decrease) in fund shares 830 (676) 2,149 (536)
Shares outstanding at beginning of period 8,063 8,893 6,768 8,917
-------- -------- -------- --------
Shares outstanding at end of period 8,893 8,217 8,917 8,381
======== ======== ======== ========
<PAGE>
<CAPTION>
Growth Stock Fund
1994 1995
<S> <C> <C>
Operations
Net investment income $ 1,726 $ 1,800
Net realized gains on investments and foreign
currency transactions 39,191 35,566
Net change in unrealized appreciation or depreciation
of investments and foreign currency transactions (33,109) 44,475
-------- --------
Net Increase in Net Assets Resulting from Operations 7,808 81,841
-------- --------
Distributions To Shareholders
Dividends from net investment income (1,725) (1,950)
Capital gains distributions (24,671) (39,914)
-------- --------
Total Distributions to Shareholders (26,396) (41,864)
-------- --------
Share Transactions
Subscriptions to fund shares 48,719 30,276
Investment income dividends reinvested 1,458 1,611
Capital gains distributions reinvested 22,247 35,003
Redemptions of fund shares (106,255) (68,033)
-------- --------
Net Increase (Decrease) from Share Transactions (33,831) (1,143)
-------- --------
Net Increase (Decrease) in Net Assets (52,419) 38,834
Total Net Assets
Beginning of Period 373,921 321,502
-------- --------
End of Period $321,502 $360,336
======== ========
Accumulated Undistributed (Overdistributed) Net
Investment Income at End of Period $ 1,272 $ 1,122
======== ========
Analyses of Changes in Shares of Beneficial Interest
Subscriptions to fund shares 2,031 1,358
Investment income dividends reinvested 61 80
Capital gains distributions reinvested 932 1,733
-------- --------
3,024 3,171
Redemptions of fund shares (4,412) (3,017)
-------- --------
Net increase (decrease) in fund shares (1,388) 154
Shares outstanding at beginning of period 15,024 13,636
-------- --------
Shares outstanding at end of period 13,636 13,790
======== ========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
For The Periods Ended September 30, 1994 and 1995
(All Amounts In Thousands)
<CAPTION>
Special
Special Fund Venture Fund
1994 1995 1995*
<S> <C> <C> <C>
Operations
Net investment income $ 10,736 $ 6,683 $ 39
Net realized gains (losses) on investments and foreign
currency transactions 66,155 85,576 3,073
Net change in unrealized appreciation or depreciation
of investments and foreign currency transactions (54,800) 70,232 5,934
---------- ---------- -------
Net Increase (Decrease) in Net Assets Resulting
from Operations 22,091 162,491 9,046
---------- ---------- -------
Distributions To Shareholders
Dividends from net investment income (9,600) (7,700) (45)
Capital gains distributions (79,302) (69,358) (82)
---------- ---------- -------
Total Distributions to Shareholders (88,902) (77,058) (127)
---------- ---------- -------
Share Transactions
Subscriptions to fund shares 432,282 189,907 57,989
Investment income dividends reinvested 8,798 7,014 33
Capital gains distributions reinvested 75,860 65,654 79
Redemptions of fund shares (283,062) (390,424) (6,487)
---------- ---------- -------
Net Increase (Decrease) from Share Transactions 233,878 (127,849) 51,614
---------- ---------- -------
Net Increase (Decrease) in Net Assets 167,067 (42,416) 60,533
Total Net Assets
Beginning of Period 1,076,818 1,243,885 --
---------- ---------- -------
End of Period $1,243,885 $1,201,469 $60,533
========== ========== =======
Accumulated Undistributed (Overdistributed) Net
Investment Income at End of Period $ 5,659 $ 4,642 $ (6)
========== ========== =======
Analyses of Changes in Shares of Beneficial Interest
Subscriptions to fund shares 18,327 8,272 5,362
Investment income dividends reinvested 377 327 3
Capital gains distributions reinvested 3,256 3,064 8
----------- ---------- -------
21,960 11,663 5,373
Redemptions of fund shares (12,127) (16,938) (567)
----------- ---------- -------
Net increase (decrease) in fund shares 9,833 (5,275) 4,806
Shares outstanding at beginning of period 43,011 52,844 --
----------- ---------- -------
Shares outstanding at end of period 52,844 47,569 4,806
=========== ========== =======
<PAGE>
<CAPTION>
Capital
Opportunities Fund International Fund
1994 1995 1994** 1995
<S> <C> <C> <C> <C>
Operations
Net investment income $ 69 $ 152 $ 210 $ 1,031
Net realized gains (losses) on investments and foreign
currency transactions 15,801 18,194 1,076 (1,820)
Net change in unrealized appreciation or depreciation
of investments and foreign currency transactions (13,678) 45,624 2,774 (33)
-------- -------- ------- -------
Net Increase (Decrease) in Net Assets Resulting
from Operations 2,192 63,970 4,060 (822)
-------- -------- ------- -------
Distributions To Shareholders
Dividends from net investment income (65) (105) -- (340)
Capital gains distributions -- -- -- (1,229)
-------- -------- ------- -------
Total Distributions to Shareholders (65) (105) -- (1,569)
-------- -------- ------- -------
Share Transactions
Subscriptions to fund shares 100,413 90,143 72,981 26,531
Investment income dividends reinvested 54 87 -- 242
Capital gains distributions reinvested -- -- -- 1,153
Redemptions of fund shares (80,008) (87,401) (2,224) (17,332)
-------- -------- ------- -------
Net Increase (Decrease) from Share Transactions 20,459 2,829 70,757 10,594
-------- -------- ------- -------
Net Increase (Decrease) in Net Assets 22,586 66,694 74,817 8,203
Total Net Assets
Beginning of Period 153,101 175,687 -- 74,817
-------- -------- ------- -------
End of Period $175,687 $242,381 $74,817 $83,020
======== ======== ======= =======
Accumulated Undistributed (Overdistributed) Net
Investment Income at End of Period $ 50 $ 97 $ 210 $ 865
======== ======== ======= =======
Analyses of Changes in Shares of Beneficial Interest
Subscriptions to fund shares 3,192 8,276 7,268 2,669
Investment income dividends reinvested 2 2 -- 25
Capital gains distributions reinvested -- -- -- 118
-------- -------- ------- -------
3,194 8,278 7,268 2,812
Redemptions of fund shares (2,588) (2,669) (214) (1,766)
-------- -------- ------- -------
Net increase (decrease) in fund shares 606 5,609 7,054 1,046
Shares outstanding at beginning of period 4,958 5,564 -- 7,054
-------- -------- ------- -------
Shares outstanding at end of period 5,564 11,173 7,054 8,100
======== ======== ======= =======
<FN>
* From commencement of operations on October 17, 1994.
** From commencement of operations on March 1, 1994.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to the Financial Statements
Note 1. Significant Accounting Policies
The following are the significant accounting policies of SteinRoe Total Return
Fund, SteinRoe Prime Equities, SteinRoe Growth Stock Fund, SteinRoe Special
Fund, SteinRoe Special Venture Fund, SteinRoe Capital Opportunities Fund and
SteinRoe International Fund (the "Funds"), each a series of the SteinRoe
Investment Trust (a Massachusetts business trust).
Security Valuations
All securities are valued as of September 29, 1995, the last business day of
the Funds' fiscal year. Domestic securities traded on national securities
exchanges are valued at the last reported sales price or, if there are no
sales, at the latest bid quotation. Each domestic over-the-counter security
for which the last sales price is available from NASDAQ is valued at that
price. All other domestic over-the-counter securities for which reliable
quotations are available are valued at the latest bid quotation. Domestic
securities convertible into equity securities and long-term debt obligations
are valued at a fair value using a procedure determined in good faith by the
Board of Trustees, which has authorized the use of valuations provided by a
pricing service. Foreign security valuations are generally based upon local
convention or regulation, which may be last sales price, last bid or asked
price, or the mean between last bid and asked priced as of, in each case, the
close of the appropriate exchange or other designated time.
Other assets and securities are valued by a method that the Board of Trustees
believes represents a fair value.
Futures Contracts
During the year ended September 30, 1995, Prime Equities and Special Fund
entered into stock index futures contracts to either hedge against expected
declines of its portfolio securities or as a temporary substitute for the
purchase of individual stocks. Risks of entering into futures contracts
include the possibility that there may be an illiquid market at the time the
Fund seeks to close out a contract, and changes in the value of the futures
contract may not correlate with changes in the value of the portfolio
securities being hedged.
Upon entering into a futures contract, the Fund deposits with its custodian
cash or securities in an amount sufficient to meet the initial margin
requirements. Subsequent payments are made or received by the Fund equal to
the daily change in the contract value and are recorded as unrealized gains or
losses. The Fund recognizes a realized gain or loss when the contract is
closed or expires.
<PAGE>
Federal Income Taxes
No provision is made for federal income taxes since the Funds elect to be
taxed as a "regulated investment company" and make such distributions to its
shareholders as to be relieved of all federal income taxes under provisions of
current federal tax law.
The Funds intend to utilize provisions of the federal income tax laws, which
allow them to carry a realized capital loss forward up to eight years
following the year of the loss, and offset such losses against any future
realized gains.
Distributions to Shareholders
On November 2, 1995, the Board of Trustees declared a dividend from net
investment income of $0.29 per share for Total Return Fund and $0.05 per share
for Prime Equities, payable November 20, 1995, to Shareholders of record on
November 10, 1995.
Distributions in excess of tax basis earnings are reported in the financial
statements as a return of capital. Differences in the recognition or
classification of income between
the financial statements and tax earnings that result in temporary
overdistributions are classified as distributions in excess of net investment
income or net realized gains, and any permanent differences are reclassified
to paid-in-capital.
None of the funds had distributions in excess of net investment income or net
realized gains for the year ended September 30, 1995.
Foreign Currency Translations
The books and records of the Funds are maintained in U.S. dollars. All assets
and liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at the mean between the bid and asked market rates for such
currencies. Purchases and sales of foreign securities are converted at the
prevailing rate of exchange on the respective dates of such transactions. The
Funds may enter into "forward currency contracts" with its custodian bank
for purchases and sales of securities denominated in foreign currency, thus
fixing the U.S. dollar price of the security traded.
<PAGE>
Note 2. Transactions with Affiliates and Trustees' Fees
The Funds pay monthly management and, certain Funds, administrative fees to
Stein Roe & Farnham Incorporated (the "Adviser"), an indirect, wholly owned
subsidiary of Liberty Mutual Insurance Company, for its services as investment
adviser and manager.
Effective September 1, 1995, the management and administrative fees for the
following Funds are computed at annual rates as a percentage of daily net
assets as follows:
Total Return Fund
Management Fee
0.55% up to $500 million
0.50% of next $500 million
0.45% thereafter
Administrative Fee
0.15% up to $500 million
0.125% of next $500 million
0.10% thereafter
Prime Equities & Growth Stock Fund
Management Fee
0.60% up to $500 million
0.55% of next $500 million
0.50% thereafter
Administrative Fee
0.15% up to $500 million
0.125% of next $500 million
0.10% thereafter
Capital Opportunities Fund & Special Fund
Management Fee
0.75% up to $500 million
0.70% of next $500 million
0.65% of next $500 million
0.60% thereafter
Administrative Fee
0.15% up to $500 million
0.125% of next $500 million
0.10% of next $500 million
0.075% thereafter
Prior to September 1, 1995, the Adviser provided both portfolio management and
administrative services under an investment advisory agreement for Total
Return Fund, Prime Equities, Growth Stock Fund, Capital Opportunities Fund,
and Special Fund. The fee under this agreement for Total Return Fund was
computed at an annual rate of 0.625 percent of the first $100 million of
average daily net assets and .50 percent thereafter. The fee for Prime
Equities was computed at an annual rate of .60 percent of the first $100
million of average daily net assets, .55 percent of the next $100 million and
.50 percent thereafter. The fee for Growth Stock Fund was computed at an
annual rate of .75 percent of the first $250 million of daily average net
assets, .70 percent of the next $250 million, and .60 percent thereafter. The
fees for Capital Opportunities Fund and Special Fund were computed at an
annual rate of .75 percent of average daily net assets.
The management fee for Special Venture Fund is .90 percent of average daily
net assets and the fee for International Fund is 1 percent of average daily
net assets.
<PAGE>
The administrative agreement for Total Return Fund, Prime Equities, Growth
Stock Fund, Capital Opportunities Fund and Special Fund and the investment
advisory agreement for Special Venture Fund and International Fund provide
that the Adviser will reimburse each Fund to the extent that annual expenses,
excluding certain expenses, exceed the applicable limits prescribed by any
state in which shares of each Fund are offered for sale. In addition, the
Adviser has agreed to reimburse Special Venture Fund to the extent that its
expenses exceed 1.25 percent of average daily net assets. This expense
limitation expires January 31, 1996, subject to earlier termination by the
Adviser on 30 days' notice.
Effective May 1, 1995, the Adviser also agreed to reimburse International Fund
to the extent that its expenses exceed 1.65 percent of average daily net
assets. This limitation expires on January 31, 1996, subject to earlier
termination by the Adviser on 30 days' notice.
The Transfer Agent fees of the Funds are paid to SteinRoe Services Inc., an
indirect, wholly owned subsidiary of Liberty Mutual Insurance Company.
Pursuant to an agreement with the Funds, the Adviser provides certain
accounting services. For the period ended September 30, 1995, Total Return
Fund, Prime Equities Fund, Growth Stock Fund, Special Fund, Special Venture
Fund, Capital Opportunities Fund and the International Fund incurred charges
of $20, $18, $21, $36, $24, $19 and $25, respectively.
Certain officers and trustees of the Trust are also officers of the Adviser.
The compensation of trustees not affiliated with the Adviser for Total Return
Fund, Prime Equities, Growth Stock Fund, Special Fund, Special Venture Fund,
Capital Opportunities Fund and International Fund for the period ended
September 30, 1995, was $13, $13, $19, $37, $8, $13 and $14, respectively. No
remuneration was paid to any other trustee or officer of the Trust.
Note 3. Short-Term Debt
To facilitate portfolio liquidity, the Funds maintain borrowing arrangements
under which they can borrow against portfolio securities. There were no
borrowings for the Funds during the period ended September 30, 1995.
<PAGE>
<TABLE>
Note 4. Investment Transactions
The aggregate cost of purchases and proceeds from sales of securities other
than short-term obligations for the period ended September 30, 1995, were:
<CAPTION>
Fund Purchases Sales
<S> <C> <C>
Total Return $ 95,366 $111,396
Prime Equities 73,786 107,571
Growth Stock 108,739 145,604
Special 464,765 612,106
Special Venture 69,140 25,995
Capital Opportunities 103,143 104,753
International 47,449 42,597
At September 30, 1995, unrealized appreciation and depreciation of investments
on a tax basis and the cost of investments for financial reporting purposes
and for federal income tax purposes were as follows:
<CAPTION>
Cost of Investments
Federal
Net Financial Income
Fund Appreciation Depreciation Appreciation Reporting Tax
<S> <C> <C> <C> <C> <C>
Total Return $ 48,570 $ 8,335 $ 40,235 $183,730 $183,171
Prime Equities 30,140 146 29,994 110,061 110,061
Growth Stock 121,112 321 120,791 242,792 242,792
Special 313,411 32,890 280,521 913,767 913,104
Special Venture 6,872 938 5,934 54,389 54,389
Capital Opportunities 81,650 1,015 80,635 160,950 160,950
International 8,246 5,512 2,734 80,511 80,511
</TABLE>
<PAGE>
<TABLE>
Financial Highlights
Special Venture Fund
Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.
<CAPTION>
Period
Ended
Sept. 30,
1995(a)
<S> <C>
Net Asset Value, Beginning of Period $ 10.00
-------
Income From Investment Operations
Net investment income 0.01
Net realized and unrealized gains on investments 2.67
-------
Total from investment operations 2.68
-------
Distributions
Net investment income (0.03)
Net realized capital gains (0.05)
-------
Total distributions (0.08)
-------
Net Asset Value, End of Period $ 12.60
=======
Ratio of net expenses to average net assets (b) 1.25%*
Ratio of net investment income to average net assets (c) 1.64%*
Portfolio turnover rate 84%
Total return 26.96%
Net assets, end of period $60,533
<FN>
*Annualized
(a) From commencement of operations on October 17, 1994.
(b) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by the investment Adviser, this ratio would have
been 2.87 percent for the year ended September 30, 1995.
(c) Computed giving effect to investment Adviser's expense limitation
undertaking.
</TABLE>
<PAGE>
<TABLE>
Total Return Fund
Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.
<CAPTION>
Nine
Months
Ended
Years Ended Dec. 31, Sept. 30,
1985 1986 1987 1988
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 21.37 $ 25.04 $ 25.07 $ 22.25
-------- -------- -------- --------
Income From Investment Operations
Net investment income 1.41 1.33 1.32 0.97
Net realized and unrealized gains (losses)
on investments 3.87 2.75 (1.06) 0.45
-------- -------- -------- --------
Total from investment operations 5.28 4.08 0.26 1.42
-------- -------- -------- --------
Distributions
Net investment income (1.42) (1.35) (1.63) (0.90)
Net realized capital gains (0.19) (2.70) (1.45) (0.11)
-------- -------- -------- --------
Total distributions (1.61) (4.05) (3.08) (1.01)
-------- -------- -------- --------
Net Asset Value, End of Period $ 25.04 $ 25.07 $ 22.25 $ 22.66
======== ======== ======== ========
Ratio of expenses to average net assets 0.77% 0.79% 0.80% 0.87%*
Ratio of net investment income to average net assets 6.30% 5.21% 5.12% 5.68%*
Portfolio turnover rate 100% 108% 86% 85%
Total return 25.78% 17.11% 0.74% 6.51%
Net assets, end of period $128,676 $149,831 $140,279 $134,225
<PAGE>
<CAPTION>
` Years Ended Sept. 30,
1989 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 22.66 $ 25.41 $ 21.68 $ 26.08 $ 26.91 $ 27.57 $ 25.78
-------- -------- -------- -------- -------- -------- --------
Income From Investment Operations
Net investment income 1.37 1.28 1.32 1.31 1.26 1.15 1.33
Net realized and unrealized gains (losses) on
investments 3.10 (2.92) 4.85 1.48 2.37 (1.06) 2.22
-------- -------- -------- -------- -------- -------- --------
Total from investment operations 4.47 (1.64) 6.17 2.79 3.63 0.09 3.55
-------- -------- -------- -------- -------- -------- --------
Distributions
Net investment income (1.34) (1.36) (1.26) (1.34) (1.30) (1.17) (1.23)
Net realized capital gains (0.38) (0.73) (0.51) (0.62) (1.67) (0.71) (0.28)
-------- -------- -------- -------- -------- -------- --------
Total distributions (1.72) (2.09) (1.77) (1.96) (2.97) (1.88) (1.51)
-------- -------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $ 25.41 $ 21.68 $ 26.08 $ 26.91 $ 27.57 $ 25.78 $ 27.82
======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.90% 0.88% 0.87% 0.85% 0.81% 0.83% 0.87%
Ratio of net investment income to average net assets 5.83% 5.36% 5.50% 4.94% 4.69% 4.53% 5.14%
Portfolio turnover rate 93% 75% 71% 59% 53% 29% 45%
Total return 20.76% (6.86%) 29.67% 11.13% 14.57% 0.36% 14.49%
Net assets, end of period $144,890 $124,592 $150,689 $173,417 $222,292 $229,274 $228,560
<FN>
*Annualized
Note: For the year ended December 31, 1986, the average amount of debt
outstanding was $2, the average number of shares outstanding was 5,506, and
the average amount of debt outstanding per share was $0.0004. The Fund had no
borrowings during any other periods.
</TABLE>
<PAGE>
<TABLE>
Prime Equities
Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.
<CAPTION>
Period Ended
Sept. Years Ended Sept. 30,
1987 (a) 1988 1989 1990
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.00 $ 10.49 $ 8.88 $ 11.34
------- ------- ------- -------
Income From Investment Operations
Net investment income 0.05 0.17 0.22 0.26
Net realized and unrealized gains (losses)
on investments 0.47 (1.64) 2.46 (0.85)
------- ------- ------- -------
Total from investment operations 0.52 (1.47) 2.68 (0.59)
------- ------- ------- -------
Distributions
Net investment income (0.03) (0.14) (0.22) (0.26)
Net realized capital gains -- -- -- --
------- ------- ------- -------
Total distributions (0.03) (0.14) (0.22) (0.26)
------- ------- ------- -------
Net Asset Value, End of Period $ 10.49 $ 8.88 $ 11.34 $ 10.49
======= ======= ======= =======
Ratio of net expenses to average net assets (b) 1.91%* 1.47% 1.24% 1.08%
Ratio of net investment income to average
net assets (c) 1.43%* 2.03% 2.28% 2.40%
Portfolio turnover rate 32% 105% 63% 51%
Total return 5.20% (13.90%) 30.63% (5.25%)
Net assets, end of period $22,863 $23,002 $32,562 $43,446
<PAGE>
<CAPTION>
Years Ended Sept. 30,
1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.49 $ 12.27 $ 13.42 $ 14.83 $ 14.54
------- ------- -------- -------- --------
Income From Investment Operations
Net investment income 0.26 0.19 0.17 0.18 0.34
Net realized and unrealized gains (losses)
on investments 2.17 1.49 2.16 0.40 2.56
------- ------- -------- -------- --------
Total from investment operations 2.43 1.68 2.33 0.58 2.90
------- ------- -------- -------- --------
Distributions
Net investment income (0.29) (0.18) (0.16) (0.16) (0.20)
Net realized capital gains (0.36) (0.35) (0.76) (0.71) (0.59)
------- ------- -------- -------- --------
Total distributions (0.65) (0.53) (0.92) (0.87) (0.79)
------- ------- -------- -------- --------
Net Asset Value, End of Period $ 12.27 $ 13.42 $ 14.83 $ 14.54 $ 16.65
======= ======= ======= ======== ========
Ratio of net expenses to average net assets (b) 1.00% 0.97% 0.88% 0.90% 0.96%
Ratio of net investment income to average net
assets (c) 2.27% 1.46% 1.23% 1.18% 1.78%
Portfolio turnover rate 48% 40% 50% 85% 70%
Total return 24.12% 14.00% 17.98% 4.03% 21.12%
Net assets, end of period $54,820 $70,724 $100,365 $129,680 $139,539
<FN>
*Annualized
(a) From commencement of operations on March 23, 1987.
(b) If the Fund had paid all of its expenses and there had been no
reimbursement by the investment Adviser, this ratio would have been 2.49
percent for the period ended September 30, 1987, and 1.09 percent for the year
ended September 30, 1990.
(c) Computed giving effect to investment Adviser's expense limitation
undertaking.
</TABLE>
<PAGE>
<TABLE>
Growth Stock Fund
Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.
<CAPTION>
Nine
Months
Ended
Years Ended Dec. 31, Sept. 30,
1985 1986 1987 1988
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 14.04 $ 17.43 $ 16.97 $ 14.67
-------- -------- -------- --------
Income From Investment Operations
Net investment income 0.31 0.26 0.24 0.19
Net realized and unrealized gains (losses) on investments 3.38 2.75 0.46 (0.11)
-------- -------- -------- --------
Total from investment operations 3.69 3.01 0.70 0.08
-------- -------- -------- --------
Distributions
Net investment income (0.30) (0.25) (0.29) (0.15)
Net realized capital gains -- (3.22) (2.71) --
-------- -------- -------- --------
Total distributions (0.30) (3.47) (3.00) (0.15)
-------- -------- -------- --------
Net Asset Value, End of Period $ 17.43 $ 16.97 $ 14.67 $ 14.60
======== ======== ======== ========
Ratio of expenses to average net assets 0.67% 0.67% 0.65% 0.76%*
Ratio of net investment income to average net assets 1.89% 1.34% 1.25% 1.62%*
Portfolio turnover rate 114% 137% 143% 84%
Total return 26.35% 16.91% 5.57% 0.54%
Net assets, end of period $224,371 $226,604 $232,658 $195,641
<PAGE>
<CAPTION>
Years Ended Sept. 30,
1989 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 14.60 $ 19.05 $ 17.90 $ 22.79 $ 24.65 $ 24.89 $ 23.58
-------- -------- -------- -------- -------- -------- --------
Income From Investment Operations
Net investment income 0.34 0.39 0.33 0.18 0.15 0.13 0.12
Net realized and unrealized gains
(losses) on investments 4.51 (1.17) 5.90 3.01 1.14 0.41 5.60
-------- -------- -------- -------- -------- -------- --------
Total from investment operations 4.85 (0.78) 6.23 3.19 1.29 0.54 5.72
-------- -------- -------- -------- -------- -------- --------
Distributions
Net investment income (0.34) (0.37) (0.42) (0.16) (0.10) (0.12) (0.15)
Net realized capital gains (0.06) -- (0.92) (1.17) (0.95) (1.73) (3.02)
-------- -------- -------- -------- -------- -------- --------
Total distributions (0.40) (0.37) (1.34) (1.33) (1.05) (1.85) (3.17)
-------- -------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $ 19.05 $ 17.90 $ 22.79 $ 24.65 $ 24.89 $ 23.58 $ 26.13
======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.77% 0.73% 0.79% 0.92% 0.93% 0.94% 0.99%
Ratio of net investment income to average
net assets 2.05% 2.03% 1.63% 0.75% 0.59% 0.50% 0.56%
Portfolio turnover rate 47% 40% 34% 23% 29% 27% 36%
Total return 33.86% (4.17%) 36.64% 14.37% 5.09% 2.10% 28.18%
Net assets, end of period $206,476 $206,031 $291,767 $372,758 $373,921 $321,502 $360,336
<FN>
*Annualized
Note: For the periods indicated below, bank borrowing activity was as follows:
<CAPTION>
Debt Average Average Shares
Outstanding Debt Outstanding Outstanding Average Debt
at End During Period During Period Per Share
Period Ended (in thousands) (in thousands) During Period
<S> <C> <C> <C> <C>
September 30, 1989 -- $124 11,745 $0.0106
There were no bank borrowings during any other periods.
</TABLE>
<PAGE>
<TABLE>
Special Fund
Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.
<CAPTION>
Nine
Months
Ended
Years Ended Dec. 31, Sept. 30,
1985 1986 1987 1988
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 14.88 $ 18.41 $ 16.95 $ 12.83
-------- -------- -------- --------
Income From Investment Operations
Net investment income 0.25 0.35 0.23 0.14
Net realized and unrealized gains (losses)
on investments 4.01 2.33 0.12 2.16
-------- -------- -------- --------
Total from investment operations 4.26 2.68 0.35 2.30
-------- -------- -------- --------
Distributions
Net investment income (0.19) (0.34) (0.57) (0.01)
Net realized capital gains (0.54) (3.80) (3.90) --
-------- -------- -------- --------
Total distributions (0.73) (4.14) (4.47) (0.01)
-------- -------- -------- --------
Net Asset Value, End of Period $ 18.41 $ 16.95 $ 12.83 $ 15.12
======== ======== ======== ========
Ratio of expenses to average net assets 0.92% 0.92% 0.96% 0.99%*
Ratio of net investment income to average
net assets 2.07% 1.75% 1.32% 1.31%*
Portfolio turnover rate 96% 116% 103% 42%
Total return 29.41% 14.70% 4.27% 17.94%
Net assets, end of period $278,082 $253,693 $187,997 $224,628
<PAGE>
<CAPTION>
Years Ended Sept. 30,
1989 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 15.12 $ 20.79 $ 16.64 $ 19.87 $ 20.90 $ 25.04 $ 23.54
-------- -------- -------- -------- ---------- ---------- ----------
Income From Investment Operations
Net investment income 0.36 0.42 0.34 0.21 0.17 0.15 0.13
Net realized and unrealized gains (losses)
on investments 5.58 (2.10) 4.55 1.50 5.31 0.33 3.05
-------- -------- -------- -------- ---------- ---------- ----------
Total from investment operations 5.94 (1.68) 4.89 1.71 5.48 0.48 3.18
-------- -------- -------- -------- ---------- ---------- ----------
Distributions
Net investment income (0.21) (0.39) (0.34) (0.37) (0.18) (0.21) (0.15)
Net realized capital gains (0.06) (2.08) (1.32) (0.31) (1.16) (1.77) (1.31)
-------- -------- -------- -------- ---------- ---------- ----------
Total distributions (0.27) (2.47) (1.66) (0.68) (1.34) (1.98) (1.46)
-------- -------- -------- -------- ---------- ---------- ----------
Net Asset Value, End of Period $ 20.79 $ 16.64 $ 19.87 $ 20.90 $ 25.04 $ 23.54 $ 25.26
======== ======== ======== ======== ========== ========== ==========
Ratio of expenses to average net assets 0.96% 1.02% 1.04% 0.99% 0.97% 0.96% 1.02%
Ratio of net investment income to average
net assets 2.12% 2.33% 2.11% 0.99% 0.92% 0.91% 0.56%
Portfolio turnover rate 85% 70% 50% 40% 42% 58% 41%
Total return 40.00% (8.78%) 32.18% 8.96% 27.35% 2.02% 14.60%
Net assets, end of period $322,056 $361,065 $587,259 $626,080 $1,076,818 $1,243,885 $1,201,469
<FN>
*Annualized
Note: For the periods indicated below, bank borrowing activity was as follows:
<CAPTION>
Debt Average Average Shares
Outstanding Debt Outstanding Outstanding Average Debt
at End During Period During Period Per Share
Period Ended of Period (in thousands) (in thousands) During Period
<S> <C> <C> <C> <C>
December 31, 1986 -- $203 15,251 $0.0133
There were no bank borrowings during any other periods.
</TABLE>
<PAGE>
<TABLE>
Capital Opportunities Fund
Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.
<CAPTION>
Nine
Months
Ended
Years Ended Dec. 31, Sept. 30,
1985 1986 1987 1988
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.69 $ 11.91 $ 13.38 $ 10.62
-------- -------- -------- --------
Income From Investment Operations
Net investment income 0.10 0.03 0.03 0.03
Net realized and unrealized gains (losses) on investments 2.27 1.97 0.62 0.13
-------- -------- -------- --------
Total from investment operations 2.37 2.00 0.65 0.16
-------- -------- -------- --------
Distributions
Net investment income (0.15) (0.10) (0.05) --
Net realized capital gains -- (0.43) (3.36) --
-------- -------- -------- --------
Total distributions (0.15) (0.53) (3.41) --
-------- -------- -------- --------
Net Asset Value, End of Period $ 11.91 $ 13.38 $ 10.62 $ 10.78
======== ======== ======== ========
Ratio of expenses to average net a ssets 0.95% 0.95% 0.95% 1.01%*
Ratio of net investment income to average net assets 0.94% 0.19% 0.18% 0.34%*
Portfolio turnover rate 90% 116% 133% 164%
Total return 24.58% 16.77% 9.38% 1.51%
Net assets, end of period $176,099 $191,415 $171,973 $194,160
<PAGE>
<CAPTION>
Years Ended Sept. 30,
1989 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.78 $ 14.58 $ 7.32 $ 11.00 $ 11.56 $ 15.44 $ 15.79
-------- ------- -------- -------- -------- -------- --------
Income From Investment Operations
Net investment income 0.05 0.06 0.11 0.06 0.01 0.02 0.01
Net realized and unrealized gains (losses)
on investments 3.86 (4.72) 3.73 0.60 3.91 0.34 5.91
-------- ------- -------- -------- -------- -------- --------
Total from investment operations 3.91 (4.66) 3.84 0.66 3.92 0.36 5.92
-------- ------- -------- -------- -------- -------- --------
Distributions
Net investment income (0.05) (0.06) (0.08) (0.10) (0.04) (0.01) (0.02)
Net realized capital gains (0.06) (2.54) (0.08) -- -- -- --
-------- ------- -------- -------- -------- -------- --------
Total distributions (0.11) (2.60) (0.16) (0.10) (0.04) (0.01) (0.02)
-------- ------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $ 14.58 $ 7.32 $ 11.00 $ 11.56 $ 15.44 $ 15.79 $ 21.69
======== ======= ======== ======= ======= ======= ========
Ratio of expenses to average net assets 1.09% 1.14% 1.18% 1.06% 1.06% 0.97% 1.05%
Ratio of net investment income to average
net assets 0.42% 0.43% 1.19% 0.42% 0.09% 0.04% 0.08%
Portfolio turnover rate 245% 171% 69% 46% 55% 46% 60%
Total return 36.68% (37.51%) 53.51% 5.99% 34.01% 2.31% 37.46%
Net assets, end of period $272,805 $86,342 $129,711 $118,726 $153,101 $175,687 $242,381
<FN>
*Annualized
All per share amounts and Average Shares Outstanding During Period on
the debt table reflect a two-for-one stock split effective August 25, 1995.
Note: For the periods indicated below, bank borrowing activity was as follows:
<CAPTION>
Debt Outstanding Average Average Shares
at End Debt Outstanding Outstanding Average Debt
of Period During Period During Period Per Share
Period Ended (in thousands) (in thousands) (in thousands) During Period
<S> <C> <C> <C> <C>
December 31, 1985 $ -- $ 43 17,050 $0.0026
December 31, 1986 -- 55 13,906 0.0039
December 31, 1987 -- 292 16,008 0.0183
September 30, 1988 -- 56 17,206 0.0033
September 30, 1989 -- 422 16,066 0.0263
September 30, 1990 200 1,042 15,944 0.0654
There were no bank borrowings during any other periods.
</TABLE>
<PAGE>
<TABLE>
International Fund
Selected per-share data (for a share outstanding throughout each period), ratios and supplemental data.
<CAPTION>
Period Year
Ended Ended
Sept. 30, Sept. 30,
1994 (a) 1995
<S> <C> <C>
Net Asset Value, Beginning of Period $ 10.00 $ 10.61
------- -------
Income From Investment Operations
Net investment income 0.03 0.12
Net realized and unrealized gains (losses) on investments
and foreign currency transactions 0.58 (0.26)
------- -------
Total from investment operations 0.61 (0.14)
------- -------
Distributions
Net investment income -- (0.05)
Net realized capital gains -- (0.17)
------- -------
Total distributions -- (0.22)
------- -------
Net Asset Value, End of Period $ 10.61 $ 10.25
======= =======
Ratio of net expenses to average net assets 1.61%* 1.59%
Ratio of net investment income to average net assets 0.61%* 1.41%
Portfolio turnover rate 48% 59%
Total return 6.10% (1.28%)
Net assets, end of period $74,817 $83,020
<FN>
*Annualized
(a) From commencement of operations on March 1, 1994.
</TABLE>
<PAGE>
Report of Independent Auditors
To the Board of Trustees and Shareholders of SteinRoe Investment Trust
SteinRoe Total Return Fund
SteinRoe Prime Equities
SteinRoe Growth Stock Fund
SteinRoe Special Fund
SteinRoe Special Venture Fund
SteinRoe Capital Opportunities Fund
SteinRoe International Fund
We have audited the accompanying balance sheets, including the schedule of
investments, of the SteinRoe Total Return Fund, SteinRoe Prime Equities,
SteinRoe Growth Stock Fund, SteinRoe Special Fund, SteinRoe Special Venture
Fund, SteinRoe Capital Opportunities
Fund and SteinRoe International Fund, as of September 30, 1995, and the
related statements of operations and the statements of changes in net assets
for the periods indicated thereon, and the financial highlights of SteinRoe
Total Return Fund for the periods subsequent to December 31, 1987 and the
financial highlights of SteinRoe Prime Equities, SteinRoe Growth Stock Fund,
SteinRoe Special Fund, SteinRoe Special Venture Fund, SteinRoe Capital
Opportunities Fund and SteinRoe International Fund for the periods indicated
thereon. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and 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 and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of September 30, 1995, by correspondence with the custodian and
brokers. As to securities purchased but not received, we requested
confirmation from brokers and, when replies were not received, we carried out
other auditing procedures. An audit also includes assessing the 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 the SteinRoe Total Return
Fund, SteinRoe Prime Equities, SteinRoe Growth Stock Fund, SteinRoe Special
Fund, SteinRoe Special Venture Fund, SteinRoe Capital Opportunities Fund and
SteinRoe International Fund, as of September 30, 1995, the results of their
operations and the changes in their net assets for the periods indicated
thereon, and the financial highlights of SteinRoe Total Return Fund for
periods subsequent to December 31, 1987 and the financial highlights of
SteinRoe Prime Equities, SteinRoe Growth Stock Fund, SteinRoe Special Fund,
SteinRoe Special Venture Fund, SteinRoe Capital Opportunities Fund and
SteinRoe International Fund for the periods indicated thereon, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
November 21, 1995
<PAGE>
To Contact Us. . .
By Phone 800-338-2550
You can discuss your investment questions with a SteinRoe account
representative by calling us toll free. We'll be happy to answer questions
about your current account, or to provide you with information about opening a
SteinRoe Fund account, including SteinRoe IRAs. We're available seven days a
week, from 7 a.m. to 8 p.m. weekdays and from 8 a.m. to 5 p.m. Saturday and
Sunday (central time).
SteinRoe's Funds-on-CallR
24-Hour Service Line
Using a touch-tone phone, call our toll-free number, day or night, for your
current account balance, the latest SteinRoe Fund prices and yields, and other
information. In addition, if you have a Personal Identification Number (PIN),
you may place orders for the following transactions 24 hours a day:
* Exchange shares between your SteinRoe accounts;
* Purchase Fund shares by electronic transfer;
* Order additional account statements and Money Market Fund checks;
* Redeem shares by check, wire or electronic transfer.
Please contact an account representative if you would like to apply for a PIN.
Retirement Plan Accounts
Call us for information about how we can assist you with your defined
contribution plan, including 401(k) plans. You can reach us toll free at
800-322-1130.
By Mail
If you prefer to contact us by mail, please address all correspondence to:
P.O. Box 804058, Chicago, IL 60680.
In Person
If you are in the Chicago area, please visit our Investor Center located in
downtown Chicago at One South Wacker Drive, 32nd Floor. Our account
representatives can answer questions about your current Fund investments or
provide you information about any of the SteinRoe Funds and retirement plans.
Stop by weekdays between 8 a.m. and 5:15 p.m.
This report must be preceded or accompanied by a prospectus.
<PAGE>
Investment Trust
Trustees
Timothy K. Armour
President, Mutual Fund Division and
Director, Stein Roe & Farnham Incorporated
Kenneth L. Block
Chairman Emeritus, A. T. Kearney, Inc.
William W. Boyd
Chairman and Director, Sterling Plumbing
Group Inc.
Lindsay Cook
Senior Vice President, Liberty Financial
Companies, Inc.
Francis W. Morley
Chairman, Employer Plan Administrators
and Consultants Co.
Charles R. Nelson
Van Voorhis Professor of Political Economy,
University of Washington
Gordon R. Worley
Private investor
Officers
Timothy K. Armour, President
Jilaine H. Bauer, Executive Vice President,
Secretary
N. Bruce Callow, Executive Vice President
Hans P. Ziegler, Executive Vice President
Gary A. Anetsberger, Senior Vice President,
Chief Financial Officer
Bruno Bertocci, Vice President
David P. Brady, Vice President
Thomas W. Butch, Vice President
Daniel K. Cantor, Vice President
Robert A. Christensen, Vice President
E. Bruce Dunn, Vice President
Erik P. Gustafson, Vice President
David P. Harris, Vice President
Philip D. Hausken, Vice President
Harvey B. Hirschhorn, Vice President
Stephen P. Lautz, Vice President
Eric S. Maddix, Vice President
Lynn C. Maddox, Vice President
Anne E. Marcel, Vice President
Nicolette D. Parrish, Vice President,
Assistant Secretary
Richard B. Peterson, Vice President
Gloria J. Santella, Vice President
Thomas P. Sorbo, Vice President
Sharon R. Robertson, Controller
Margaret O. Zwick, Treasurer
Janet B. Rysz, Assistant Secretary
<PAGE>
Agents and Advisers
Stein Roe & Farnham Incorporated
Investment Adviser
State Street Bank and Trust Company
Custodian
SteinRoe Services Inc.
Transfer Agent
Bell, Boyd & Lloyd
Legal Counsel to the Trust
Arthur Andersen LLP
Independent Auditors
<PAGE>
The SteinRoe Funds
SteinRoe Government Reserves Fund
SteinRoe Cash Reserves Fund
SteinRoe Limited Maturity Income Fund
SteinRoe Government Income Fund
SteinRoe Intermediate Bond Fund
SteinRoe Income Fund
SteinRoe Municipal Money Market Fund
SteinRoe Intermediate Municipals Fund
SteinRoe Managed Municipals Fund
SteinRoe High-Yield Municipals Fund
SteinRoe Total Return Fund
SteinRoe Prime Equities
SteinRoe Young Investor Fund
SteinRoe Growth Stock Fund
SteinRoe Capital Opportunities Fund
SteinRoe Special Fund
SteinRoe Special Venture Fund
SteinRoe International Fund
P.O. Box 804058
Chicago, Illinois 60680
800-338-2550
In Chicago, visit our Investor Center at One South Wacker Drive
Liberty Securities Corporation, Distributor
Member, SIPC
11/95
20056-E11A
