Annual Report
September 30, 1996
STEIN ROE
EQUITY
FUNDS
Growth and Income Funds
Balanced Fund
Growth & Income Fund
Growth Funds
Growth Stock Fund
Special Fund
Special Venture Fund
Capital Opportunities Fund
International Fund
Stein Roe Mutual Funds
Building Wealth For Generations
photographic image of small girl
<PAGE>
Contents
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From the President................................................ 1
Tim Armour's thoughts on the markets and investing
Performance....................................................... 4
How the Stein Roe equity funds have done over time
Q&A
Balanced Fund..................................................... 8
Growth & Income Fund.............................................. 12
Growth Stock Fund................................................. 17
Special Fund...................................................... 21
Special Venture Fund.............................................. 23
Capital Opportunities Fund........................................ 29
International Fund................................................ 34
Interviews with the portfolio managers and a summary of major
shifts in the Funds' investments over the past 12 months
Investments....................................................... 43
A complete list of each Fund's investments with
market values
Financial Statements.............................................. 66
Balance sheets, statements of operations and
changes in net assets
Notes to Financial Statements..................................... 74
Financial Highlights.............................................. 79
Selected per-share data
Report of Independent Auditors.................................... 91
This report must be preceded or accompanied by a prospectus.
<PAGE>
From the President
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TO OUR SHAREHOLDERS
We're pleased to present this annual report for Stein Roe's growth and income
funds -- Balanced Fund and Growth & Income Fund -- and Stein Roe's growth
funds -- Growth Stock Fund, Special Fund, Special Venture Fund, Capital
Opportunities Fund and International Fund.
THE ECONOMY HEATS UP AND THE STOCK MARKET STUMBLES...AND RECOVERS Early in the
Stein Roe funds' fiscal year, most signs pointed to slowing economic growth.
This prompted the Federal Reserve to cut short-term interest rates in December
1995 and again in January 1996. In early March, however, the government
released a string of stronger-than-expected economic reports, setting this
slow-growth scenario on its head. Other signs of renewed growth soon followed,
including price increases in several key commodities, fanning inflation fears.
As a result, many investors switched gears, leading to selloffs in some areas
of the market, particularly among growth stocks that tend to perform better in
a slow-growth environment. Eventually, however, the stock market recovered.
STOCK PRICES FOLLOW EARNINGS SOUTH Then, in early July, the Labor Department
released yet another strong employment report, once again raising fears the
Federal Reserve would have to raise interest rates to prevent a possible
outbreak of inflation. By the following week, however, investor sentiment had
undergone a seismic shift. Following the release of disappointing earnings
results by several market bellwethers, investors suddenly went from thinking
the economy was so strong it might trigger inflation, to thinking the economy
was so fragile it could no longer support earnings growth. Moreover, market
analysts worried about the erosion -- and possible collapse -- of the three
pillars that had supported the stock market for so long: interest rates were
no longer declining; corporate profits were no longer soaring; and investors
were no longer pouring money into stock mutual funds. In fact, the Investment
Company Institute reported that investors had pulled more than $4 billion out
of stock funds in just one week in July.
Slowly but surely, however, some good news trickled in. Commodity prices
fell, the government announced a sharp reduction in the deficit, several
companies released encouraging earnings-related news and the Federal Reserve
decided to hold steady on interest rates. Buying picked up somewhat and,
despite a lack of any real dramatic change in the economic data, the stock
photographic image of Tim Armour, President
<PAGE>
market staged a powerful late-summer rally. Investors, worried at the prospect
of being light on equities, flooded back into the market.
WHAT A DIFFERENCE A DAY -- OR A FEW MONTHS -- CAN MAKE
At a glance, the stock market offers no hint of these stormier days. Since
hitting an intraday trough of 5,170 on July 16, the Dow Jones Industrial
Average climbed more than 730 points by September 30, 1996, for a gain of
roughly 13 percent. Similarly, by September 30, 1996, the S&P 500 had regained
roughly 13 percent since its mid-summer low, and the Nasdaq Composite Index
had picked up more than 17 percent.
DOW BREAKS 6,000 -- NOW WHAT?
Since then, the stock market has continued its ascent almost without
interruption, and on October 14, 1996, the Dow closed above 6,000 -- the
latest milestone in a run that has lifted the century-old stock index more
than 150 percent over the past six years. Opinions of this event's
significance varied widely. Some believed it would give investors renewed
confidence in the stock market's strength. Others were far less optimistic,
believing it indicated the bull market was entering its final stages. Still
others believed it was just another record close that had very little
significance -- after all, prior to breaking the 6,000-point mark, the Dow had
reached 27 new highs in 1996.
There is one thing, however, that most experts agree on: The Dow probably
won't top 7,000 any time soon. That's because, although companies continue to
meet or exceed their earnings expectations, corporate profitability appears to
have reached a plateau. For the past several years, companies haven't had to
raise prices to make money because unit labor costs were so low. With wages
increasing and unemployment hovering near a seven-year low, however, unit
labor costs are starting to increase. This means many companies will probably
either have to raise prices or watch their profit margins slip. Moreover, we
think a stronger dollar and higher interest rates could also begin to eat away
at corporate profits. Consequently, while we think earnings will remain
generally positive, there may be some cases where we see declines for a number
of companies and industries.
Nonetheless, as long as the economy continues to grow, inflation remains
subdued, and there's not an appreciable rise in interest rates, we believe the
stock market still has room to run -- albeit probably not at the same pace as
this past year.
THE BASICS
No one can predict what might happen to the stock market or stock funds in the
future. Nonetheless, we believe investors must understand the factors that
move the markets -- not just to profit from them, but to gain the patience to
<PAGE>
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,
/S/ Timothy K. Armour
Timothy K. Armour
President
October 30, 1996
The Dow Jones Industrial Average, the S&P 500 and
the Nasdaq Composite Index are unmanaged groups of stocks that differ from the
composition of any Stein Roe fund. They are not available for direct
investment.
<PAGE>
Fund Performance
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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).
<TABLE>
<CAPTION>
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AVERAGE ANNUAL TOTAL RETURNS
Periods ended September 30, 1996
PAST 1 PAST 3 PAST 5 PAST 10
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------
BALANCED FUND 14.83% 9.68% 10.93% 10.58%
GROWTH STOCK FUND 21.04 16.57 13.75 14.12
SPECIAL FUND 17.89 11.29 13.85 15.53
CAPITAL OPPORTUNITIES FUND 49.55 28.12 24.47 16.33
S&P 500 20.32 17.40 15.21 14.97
S&P MidCap 14.00 13.36 15.24 15.52
Nasdaq Industrials 12.83 12.39 13.42 12.40
Russell 2000 13.13 12.73 15.76 11.92
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<CAPTION>
PAST 1 PAST 3 PAST 5 LIFE
YEAR YEARS YEARS OF FUND1
<S> <C> <C> <C> <C>
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GROWTH & INCOME FUND 22.67% 15.62% 15.76% 11.80%
S&P 500 20.32 17.40 15.21 12.83
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<CAPTION>
PAST 1 LIFE
YEAR OF FUND1
<S> <C> <C>
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SPECIAL VENTURE FUND2 31.81% 30.22%
S&P 500 20.32 24.69
Russell 2000 13.13 19.26
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<CAPTION>
PAST 1 LIFE
YEAR OF FUND1
<S> <C> <C>
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INTERNATIONAL FUND 8.23% 4.98%
MSCI EAFE 8.61 5.80
<FN>
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. Total
return performance includes changes in share price and reinvestment of income
and capital gains distributions.
1 Inception Dates: International Fund -- March 1, 1994; Special Venture Fund
- -- October 17, 1994; Growth & Income Fund -- March 23, 1987. Because index
returns are calculated on a monthly basis, the index returns marked "Life of
Fund" are calculated from the month-end results that fell closest to the Funds'
inception dates.
2 In July 1996, Special Venture Fund's benchmark index was changed from the
S&P 500 to the Russell 2000 Index. We believe the median market value of the
Russell 2000 is more reflective of the Fund's performance than the S&P 500.
</FN>
</TABLE>
<PAGE>
<TABLE>
Investment Comparison
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COMPARISON of change in value of a $10,000 investment for the years ended
September 30.
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Capital Opportunities, Special, Growth Stock and Balanced Funds
<CAPTION>
Capital Growth
Year Opportunities Fund Balanced Fund Stock Fund S&P 500 Special Fund
<S> <C> <C> <C> <C> <C>
9/30/86 10000 10000 10000 10000 10000
9/30/87 15099 11859 15103 14342 13821
9/30/88 11584 11162 11222 12564 13120
9/30/89 15833 13479 15022 16705 18368
9/30/90 9894 12554 14396 15161 16755
9/30/91 15188 16279 19671 19875 22147
9/30/92 16098 18091 22498 22070 24131
9/30/93 21573 20727 23643 24932 30731
9/30/94 22071 20802 24140 25849 31352
9/30/95 30339 23816 30943 33529 35929
9/30/96 45372 27348 37453 40342 42357
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</TABLE>
<TABLE>
Growth & Income Fund
<CAPTION>
Growth
DATE & Income Fund S&P 500
<S> <C> <C>
3/31/87 10000 10000
9/30/87 10000 11195
9/30/88 8610 9808
9/30/89 11247 13040
9/30/90 10657 11835
9/30/91 13227 15514
9/30/92 15079 17227
9/30/93 17790 19461
9/30/94 18507 20178
9/30/95 22416 26172
9/30/96 27498 31490
</TABLE>
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. These
graphs compare the performance of Stein Roe's funds to the S&P 500, an
unmanaged group of stocks that differs from the composition of each Stein Roe
fund; it is not available for direct investment. Total return performance
includes changes in share price and reinvestment of income and capital gains
distributions.
<PAGE>
Investment Comparison CONTINUED
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COMPARISON of change in value of a $10,000 investment for the years ended
September 30.
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Special Venture Fund
<TABLE>
<CAPTION>
DATE Special Venture Russell 2000
<S> <C> <C>
10/31/94 10000 10000
12/31/94 10244 9854
3/31/95 10805 10309
6/30/95 11219 11276
9/30/95 12401 12390
12/31/95 13029 12659
03/31/96 14039 13305
06/30/96 15151 13970
09/30/96 16346 14018
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</TABLE>
<TABLE>
International Fund
<CAPTION>
Date International MSCIEAFE
<S> <C> <C>
3/31/94 10000 10000
6/30/94 10236 10511
9/30/94 10872 10522
12/31/94 10346 10414
3/31/95 9770 10608
6/30/95 10241 10685
9/30/95 10734 11131
12/31/95 10749 11582
3/31/96 11183 11916
6/30/96 11862 12105
9/30/96 11618 12089
</TABLE>
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. These
graphs compare the performance of Stein Roe's funds to the Russell 2000 and the
Morgan Stanley Capital International Europe, Australia and Far East (MSCI EAFE)
Indices, both of which are unmanaged groups of stocks that differ from the
composition of each Stein Roe fund. The indices are not available for direct
investment. Total return performance includes changes in share price and
reinvestment of income and capital gains distributions.
<PAGE>
Investment Comparison CONTINUED
MAKING THE MOST OF PERFORMANCE
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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 Stein Roe account representative
at 800-338-2550.
<PAGE>
Q&A
AN INTERVIEW WITH BALANCED FUND'S PORTFOLIO MANAGER
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FUND DATA
INVESTMENT OBJECTIVE:
Seeks long-term growth of
capital and current income,
consistent with reasonable
investment risk.
FUND INCEPTION:
August 25, 1949
TOTAL NET ASSETS:
$231.1 Million
photo of : Harvey B. Hirschhorn
Q: HOW HAS THE FUND PERFORMED?
A: The Fund's performance has improved throughout the year. For the one-year
period ended September 30, 1996, the Fund posted a 14.83 percent return, which
outperformed the 12.02 percent median return of our Lipper flexible portfolio
fund peer group, but trailed the 20.32 percent return of the S&P 500. The S&P,
however, is made up entirely of stocks, while the Fund is a balanced fund
composed of both stocks and bonds. Consequently, when the stock market goes up
more than the bond market, the Fund will tend to underperform the S&P. But the
Fund's objective is not to outperform the S&P. Instead, our goal is to pursue
both income and growth in capital, consistent with reasonable investment risk.
I think our efforts to refocus the portfolio have helped us achieve a little
of both this year.
Q: WHAT FACTORS HELPED THE FUND OUTPERFORM ITS PEERS?
A: I think a good part of the Fund's performance was
due to good domestic industry selection. Based on some of my longer-term
thinking, I overweighted certain key areas -- technology, health care and
financial services, in particular -- all of which were positive contributors
to performance. Likewise, the Fund was underweighted in other areas, such as
utilities, that underperformed.
On a less positive note, the Fund's international holdings have provided
mixed performance recently, and the Fund's fixed income exposure certainly
didn't help much this year, either. Nonetheless, the strength of some of the
Fund's equity holdings, namely Intel and Danka Business Systems (1.1 percent
and 0.7 percent of total net assets), was more than enough to offset this
weakness and help the Fund outperform its competitors.
<PAGE>
Q: YOU MENTIONED THE FUND'S INTERNATIONAL HOLDINGS HAVE PROVIDED MIXED
PERFORMANCE THIS YEAR, YET YOU REMAIN QUITE BULLISH ABOUT THE PROSPECTS FOR
FOREIGN STOCKS. WHY IS THAT?
A: Many foreign stocks have lagged their U.S. counterparts, but I think they
may catch up. There are a number of reasons for this. First, we are beginning
to see an improving world climate, in which many countries' economies are
beginning to gain momentum, interest rates are generally falling and corporate
profits are strengthening.
In addition, some of the factors that helped drive the American expansion,
such as corporate reorgani - zations and mergers, are starting to take hold in
other areas of the world, most notably in Europe, where sluggish profit growth
has increased pressure on managers to improve shareholder returns. As a
result, many foreign companies are beginning to utilize downsizing,
outsourcing, spinoffs and other American-bred techniques that I think will
help boost their profitability.
Finally, I think the earnings of many domestic companies may taper off
somewhat as the U.S. economy starts to slow by late 1996 or early 1997. This
could present a bit of a test for some U.S. companies, particularly those that
have already seen their profit margins squeezed by slowing productivity growth
and wage pressures from a tighter labor market.
Consequently, I continue to believe it's a good time to increase the Fund's
non-U.S. stock exposure, especially to those companies whose valuations appear
attractive relative to their U.S. counterparts. To help reduce the risks
associated with investing in international securities, I am trying to broadly
diversify our foreign exposure, both across countries and industries. I search
for companies that have the same kind of characteristics that I look for in
U.S. companies, namely unique competitive advantages, solid management, and
steady to improving earnings and sales prospects.
Q: AS THE FIRM'S CHIEF ECONOMIST, GAUGING THE CONDITION OF THE ECONOMY IS A
BIG PART OF YOUR JOB. CAN YOU HELP PUT THE STOCK MARKET'S RECENT VOLATILITY
INTO PERSPECTIVE, AND CAN YOU SHARE YOUR THOUGHTS FOR THE COMING MONTHS?
A: In my opinion, there are a number of reasons for the recent increase in
volatility -- some psychological, some market driven. For much of this year
investors have vacillated between worrying that the economy is running too hot
and worrying that it's running too cold. In January and February of this year,
for instance, many feared the economy might be slipping into a recession. A
month later, when stronger-than-expected economic reports were released, many
<PAGE>
investors worried the economy was suddenly growing too fast, and the Federal
Reserve would have to raise short-term interest rates to avert inflation. As a
result, investors switched gears, leading to selloffs in some parts of the
market, and runups in others.
As you can see, by focusing on short-term changes in the economy, investors
were actually helping to exacerbate market swings. In July, however, the stock
market suffered another setback. This one was more market driven, since it was
set off when several market bellwethers announced earnings shortfalls. In
response, the stock market tumbled. Since that time, however, the stock market
has regained its footing.
Going forward, the general consensus, and one that I share, is that the
economic growth rate is slowing. If we are indeed seeing a real moderation in
economic activity, I think the next move by the Federal Reserve will be a rate
cut, probably next spring. I also think long-term rates are too high, and, as
a result, I expect them to drop by early next year. Given this environment, I
believe the fixed income markets have the potential to outperform U.S.
equities. And that's why I intend to keep a healthy weighting of bonds in
Balanced Fund's portfolio.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURNS WILL VARY, SO YOU MAY HAVE A GAIN OR A LOSS WHEN YOU SELL SHARES.
Portfolio holdings are as of September 30, 1996, and are subject to change.
Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. The S&P 500 is an unmanaged group of
stocks that differs from the composition of Balanced Fund; it is not available
for direct investment. According to Lipper Analytical Services, Inc., an
independent monitor of mutual fund performance, the median returns for the
Fund's flexible portfolio fund peer group for the one-, five- and 10-year
periods ended September 30, 1996, were 12.02 percent, 11.03 percent and 10.58
percent, respectively.
Foreign investments involve market, political and
currency risks not generally associated with U.S. investments.
<PAGE>
<TABLE>
<CAPTION>
Fund Highlights
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Balanced Fund
TOP 10 EQUITY HOLDINGS (% OF TOTAL NET ASSETS)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
General Electric Company 2.3% Electronic Data Systems Corporation 1.6%
Citicorp 2.1 British Petroleum PLC ADR 1.6
Emerson Electric 1.9 Enron Corporation 1.5
BankAmerica Corporation 1.9 Sandoz ADR 1.4
LM Ericsson Telecommunications Eli Lilly & Company 1.4
Conv. Pfd. Deb. 1.7
- -------------------------------------------------------------------------------------
Total 17.4%
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
EQUITY PORTFOLIO HIGHLIGHTS
PORTFOLIO S&P 500
<S> <C> <C>
- --------------------------------------------------------------------------------------
Number of Holdings 51 500
Median Market Value ($ Mil.) $12,916 $5,187
- --------------------------------------------------------------------------------------
</TABLE>
PIE CHART:
ECONOMIC SECTOR BREAKDOWN
As of September 30, 1996
Equity
Portfolio S&P 500
Basic Materials 7% 5%
Consumer Cyclical 7 13
Consumer Noncyclical 17 24
Energy 12 9
Financial 19 14
Industrial 14 10
Technology 16 15
Utilities 8 10
- ------------------------------------------------------------------------------
PIE CHART
ASSET ALLOCATION
As of As of
September September
30, 1995 30,1996
Equities $97.3 (42.6%) $109.7 (47.5%)
Convertibles $99.3 (43.4%) $32.4 (14.0%)
Bonds $24.9 (10.9%) $71.8 (31.1%)
Cash & Equivalents $7.1 (3.1%) $17.2 (7.4%)
<PAGE>
Q&A
- -----------------------------------------------------------------------------
AN INTERVIEW WITH GROWTH & INCOME FUND'S PORTFOLIO MANAGER
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, the Fund will
normally emphasize investments in the 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:
$204.4 Million
photo: Daniel K. Cantor
Q: HOW HAS THE FUND PERFORMED OVER THE PAST YEAR?
A: The Fund performed exception ally well. For the one-year period ended
September 30, 1996, the Fund posted a 22.67 percent return, easily beating
both the 20.32 percent return of the S&P 500 and the 17.69 percent median
return of its Lipper growth and income fund peer group. According to Lipper
Analytical Services, Inc., this performance ranked in the top 10 percent of
growth and income funds for the one-year period (#48 of 503 funds). In
addition, the Fund ranked in the top 16 percent for the five-year period (#32
out of 204 funds) and the top 28 percent since inception (#36 out of 132
funds) through September 30, 1996.
Moreover, the Fund achieved this return with lower-than-average risk. Its
beta, a measure of a fund's sensiti vity to market fluctuations, was 0.77 at
September 30, 1996, which indicates that it was less volatile than the broader
stock market as measured by the S&P 500's beta of 1.00. A fund with a beta
lower than the benchmark index is considered to be less volatile than the
market.
Q: WHAT FACTORS DROVE PERFORMANCE?
A: Once again, stock selection was the key to the Fund's solid performance.
Especially strong individual performers were concentrated in the financial
services, health care and consumer-related industries. Standouts this year
included Warner Lambert, whose strong comeback was driven in large part by its
improved product pipeline; Honeywell, whose commercial avionics business
benefited from an upswing in commercial aircraft orders; and Federal National
Mortgage Association (Fannie Mae), which benefited from a benign interest rate
environment and improved earnings (2.5 percent, 2.9 percent and 2.7 percent of
total net assets, respectively).
<PAGE>
On a less positive note, the Fund's cyclical holdings, especially its
railroad, paper and chemical stocks, hurt performance somewhat, as did our
telecommunications holdings. The strength of our top-performing issues more
than made up for this moderate weakness, however.
Q: ALTHOUGH IT ISN'T IMMEDIATELY APPARENT BY LOOKING AT THE BROAD
MARKET AVERAGES, IT'S BEEN A RATHER TUMULTUOUS YEAR, CHARACTERIZED BY ROTATING
MARKET LEADERSHIP AND MINI-CORRECTIONS THAT AFFECTED INDIVIDUAL SECTORS. DID
YOU CHANGE YOUR INVESTMENT STRATEGY TO DEAL WITH THIS INCREASED VOLATILITY?
A: Not at all. I continued to do what I think I do best -- that is, picking
stocks. I manage the Fund on a "bottom-up" basis, which means I don't base my
investment decisions on which sectors I think will outperform, or which
direction I think the economy or interest rates are headed. I simply think
these variables are too difficult to predict with any degree of certainty, and
this year certainly proved that. Moreover, while I think demographic or
economic trends can be beneficial to many companies, they simply aren't
enough. In my opinion, it's more important that a company be in a good
business and have management that is capable of executing its strategies to
make that business grow. I think that excellent management and execution can
eventually overcome many macroeconomic problems affecting an industry, while
poor management or poor execution can limit a company's ability to benefit
from even the most powerful economic trends.
Q: DO YOU THINK THAT STOCK SELECTION WILL BECOME EVEN MORE IMPORTANT IN THE
COMING MONTHS?
A: Yes, especially if, as many expect, corporate earnings become more erratic.
Going forward, it won't be enough to look at things generically, picking
sectors that have the potential to beat the overall market. Instead, I think
real outperformance will be driven by picking good companies that have the
potential to outperform the market and their own industry.
Q: CAN YOU GIVE US AN EXAMPLE OF AN INVESTMENT THAT DID WELL THIS YEAR, EVEN
THOUGH ITS PARTICULAR INDUSTRY DID NOT?
A: A good example would be Monsanto (3.2 percent of total net assets).
Although most other chemical companies have been beleaguered lately, this
stock was the single largest contributor to the Fund's performance, up more
than 80 percent this year. Much of this performance was due to positive steps
the company's new management team has taken to accelerate growth. The stock
soared as the investment community took notice of the long-term potential for
its agricultural biotech business, as well as the turnaround of its health
care business.
<PAGE>
Q: WHERE ARE YOU FINDING INTERESTING IDEAS RIGHT NOW?
A: I recently established a significant new commitment to Burlington Northern
Santa Fe (BNSF) Corporation (1.8 percent of total net assets). Following the
1995 merger between the Burlington Northern and Santa Fe railroads, BNSF is
now the largest railroad in North America, with more than 31,000 miles of
track in 27 states and two Canadian provinces. I think a favorable earnings
story is developing as the company's talented and proven management team
capitalizes on the synergy of these two railroads to cut costs, improve
efficiency and gain market share.
There is some concern among investors that the earnings of BNSF, whose
primary business is transporting Powder River Basin coal and agricultural
commodities, could be negatively affected by a late grain harvest this year. I
think this is only a temporary concern, however, and, over the long run, BNSF
has the potential to benefit from favorable demand outlooks for both coal and
agricultural products over the next several years.
Another stock that really hasn't participated in the recent rally, and
which I think has good upside potential, is Union Carbide (2.0 percent of
total net assets). For more than 70 years, Union Carbide laboratories have
been a steady source of innovation in developing chemicals. That tradition of
technology leadership and innovation continues today. Consequently, I think
the recent concern about the more cyclical nature of its commodity chemical
business has overshadowed the value of its larger, specialty chemical
business, which is less cyclical and has fewer competitors. At the same time,
the company has been instituting a number of potentially successful joint
ventures. Company insiders, including the CEO, also have been increasing their
stock ownership. I think this demonstrates that the company's
shareholder-oriented management is predisposed to take actions that can
improve the com pany's long-term profitability as well as shareholder returns.
<PAGE>
Q: WHAT'S YOUR OUTLOOK?
A: Although the market's recent strength has made it more challenging to
identify interesting opportunities, I think there still are a number of
potentially attractive investments available. In particular, I think the
recent weakness in some cyclical industries may provide the opportunity to
increase the Fund's exposure to selected cyclical stocks with strong upside
potential.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURNS WILL VARY, SO YOU MAY HAVE A GAIN OR A LOSS WHEN YOU SELL SHARES.
Portfolio holdings are as of September 30, 1996, and are subject to change.
Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. The S&P 500 is an unmanaged group of
stocks that differs from the composition of Growth & Income Fund; it is not
available for direct investment. According to Lipper Analytical Services,
Inc., an independent monitor of mutual fund performance, the median returns
for the Fund's growth and income fund peer group for the one- and five-year
and Life of Fund periods ended September 30, 1996, were 17.69 percent, 13.76
percent and 11.20 percent, respectively. Because benchmark returns are calcul
ated on a monthly basis, those marked "Life of Fund" are from the month-end
date that fell closest to the Fund's inception date.
<PAGE>
<TABLE>
<CAPTION>
Fund Highlights
- -------------------------------------------------------------------------------------
Growth & Income Fund
TOP 10 EQUITY HOLDINGS (% OF TOTAL NET ASSETS)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Monsanto Company 3.2% The Gillette Company 2.6%
Honeywell Inc. 2.9 Warner Lambert 2.5
General Electric Company 2.9 Electronic Data Systems Corporation 2.4
Citicorp 2.7 Hubbell Inc. 2.4
Federal National Mortgage Assn. 2.7 American Express 2.4
- -------------------------------------------------------------------------------------
Total 26.7%
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
EQUITY PORTFOLIO HIGHLIGHTS
PORTFOLIO S&P 500
--------------------------------------
<S> <C> <C>
Number of Holdings 51 500
Median Market Value ($ Mil.) $12,793 $5,187
- --------------------------------------------------------------------------------------
</TABLE>
PIE CHART:
ECONOMIC SECTOR BREAKDOWN
As of September 30, 1996
Equity
Portfolio S&P 500
Basic Materials 8% 5%
Consumer Cyclical 14 13
Consumer Noncyclical 23 24
Energy 6 9
Financial 16 14
Industrial 22 10
Technology 7 15
Utilities 4 10
- ------------------------------------------------------------------------------
ASSET ALLOCATION
As of As of
September September
30,1995 30, 1996
Equities* $104.9 (75.2%*) $163.2 (79.9%*)
Cash & Equivalents $31.5 (22.6%) $38.1 (18.6%)
Bonds $3.1 (2.2%) $3.1 (1.5)
* Excludes S&P Futures * Excludes S&P Futures
(Long) = 10.5% 95 (Long) = 8.5% 96
<PAGE>
Q&A
- ------------------------------------------------------------------------------
AN INTERVIEW WITH GROWTH STOCK FUND'S PORTFOLIO MANAGER
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:
$418.0 Million
photo: Erik P. Gustafson
Q: HOW HAS THE FUND PERFORMED OVER THE PAST YEAR?
A: It performed quite well. At 21.04 percent, the Fund's one-year return for
the period ended September 30, 1996, not only topped the 16.63 percent median
return of its Lipper growth fund peer group, but it also outpaced the 20.32
percent return of the S&P 500.
Q: WHAT FACTORS DROVE PERFORMANCE?
A: There were several reasons for the Fund's strong performance. First,
despite a marked increase in volatility this year, growth stocks performed
well. This was due to a favorable economic environment in which lower interest
rates, mild inflation and a slow yet steadily improving economy combined to
provide a perfect backdrop for the kind of large-cap, high-quality growth
stocks in which the Fund invests.
Additionally, many of the Fund's specific holdings -- all of which are part
of three larger investment themes that I believe will contribute to its
performance for years to come -- performed well this year. Specifically,
global consumer franchises, like Coca-Cola, Gillette, Johnson & Johnson and
Procter & Gamble (3.4 percent, 3.5 percent, 2.8 percent and 2.7 percent of
total net assets, respectively) all had outstanding years, driven in large
part by above-average earnings growth. Our technology holdings, including
Cisco Systems, Intel and Microsoft (1.5 percent, 2.8 percent and 3.2 percent
of total net assets, respectively) also were able to outperform, as the huge
demand for technology upgrades by both consumers and corporations helped these
companies wrestle market share away from their competitors. Finally, our
financial services and health care-related holdings, which I think are well
positioned to benefit from America's aging population, also contributed to our
solid performance.
<PAGE>
Q: TECHNOLOGY, ONE OF THE FUND'S MAJOR INVESTMENT THEMES, TOOK A BEATING IN
THE MID-SUMMER SELLOFF. ARE YOU STILL CONFIDENT ABOUT THE SECTOR'S LONG-TERM
PROSPECTS?
A: I am more confident than ever. In my opinion, what we saw this summer was
merely a correction, where investors took a critical look at the technology
sector and separated the strong -- companies like Intel and Microsoft (2.8
percent and 3.2 percent of total net assets, respectively) -- from the weak,
primarily Internet startups that were both overvalued and overhyped. There was
no significant change in company fundamentals, however, and I think the demand
for technology companies remains strong, particularly for those companies that
can provide the products and services that help businesses enhance their
productivity and become more competitive.
Q: WHAT ABOUT THE LONG-TERM PROSPECTS FOR THE FUND'S OTHER TWO INVESTMENT
THEMES?
A: I remain extremely enthusiastic about global consumer franchises. Today,
few companies are able to raise prices. Consequently, I think companies that
can respond to this sluggish pricing by boosting their share of the worldwide
market are extremely well positioned. In particular, I think those companies
that can introduce a steady stream of higher-margin new products in the United
States, while extending the life of their older products in global markets,
especially the fast-growing markets of Eastern Europe and Asia, should perform
especially well. A good example of this would be Gillette (3.5 percent of
total net assets), which launches about 20 new products per year in the United
States, but achieves a major ity of its revenue growth, roughly 70 percent,
from abroad.
Likewise, I also remain confident about the long-term prospects for
companies that provide products and services that appeal to the nation's baby
boomers. From the baby food companies that fed them in the 1950s to the
retailers and realtors who clothed and housed them in the consumption-crazed
1980s, baby boomers have driven many compan ies' earnings -- and their stock
prices -- way up. Now, as boomers age, I think there are a number of
industries poised to potentially benefit from this "aging" trend. I am par
ticularly enthusiastic about the long-term prospects for financial services
firms and health care providers, since studies indicate that boomers are
increasingly concerned about two things -- their health and saving for
retirement. Consequently, I think companies that can help boomers prepare for
a financially secure retirement, and drug companies whose products are geared
toward the prevention or cure of age-related ailments, should do particularly
well.
<PAGE>
Q: DO YOU THINK THE RECENT ELECTION WILL HAVE ANY EFFECT ON THE STOCK MARKET?
A: In my opinion, the election would have had a dramatic effect on the stock
market only if one party had been able to win the presidency and a significant
majority in both houses of Congress. Over the course of the last two years the
markets have benefited from the inherent conflict that exists between a
Democratic president and a Republican-led Congress.
If only one party were to dominate both the executive branch and Congress,
I think the markets would react negatively because the checks and balances
that have helped to protect against the extremists in both parties would no
longer exist. Since this did not happen, however, I don't think the election
will have a significant impact on how the stock market performs.
Q: WHAT'S YOUR OUTLOOK?
A: There's been a marked increase in volatility this year, as investors
reacted negatively to the sharply conflicting signals that each new economic
report brought. As a result, I remain somewhat cautious near term, since I
think investors remain skittish. Still, despite this year's turmoil, I'm
certainly not bearish. In fact, I think we are in the midst of what could be a
prolonged bull market for stocks.
To start with, earnings are still coming in strong, with positive reports
beating negative surprises by about two to one. Furthermore, the economy is
still solid -- wages are moving up and employment growth is strong, yet
inflation remains under 3 percent. Finally, I also expect the nation's savings
rate to increase as baby boomers start saving for retirement, which should
provide a steady flow of capital into the stock market for years to come.
In this sort of environment, I am encouraged about the prospects for the
stock market -- and growth stocks in particular -- over the next several
years.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURNS WILL VARY, SO YOU MAY HAVE A GAIN OR A LOSS WHEN YOU SELL SHARES.
Portfolio holdings are as of September 30, 1996, and are subject to change.
Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. The S&P 500 is an unmanaged group of
stocks that differs from the composition of Growth Stock Fund; it is not
available for direct investment. According to Lipper Analytical Services,
Inc., an independent monitor of mutual fund performance, the median returns
for the Fund's growth fund peer group for the one-, five- and 10-year periods
ended September 30, 1996, were 16.63 percent, 13.68 percent and 13.54 percent,
respectively.
<PAGE>
<TABLE>
<CAPTION>
Fund Highlights
- ---------------------------------------------------------------------------------------
Growth Stock Fund
TOP 10 EQUITY HOLDINGS (% OF TOTAL NET ASSETS)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Home Depot, Inc. 4.1% General Electric Company 3.1%
HFS, Inc. 4.0 Federal National Mortgage Assn. 3.0
The Gillette Company 3.5 First Data Corporation 2.9
The Coca-Cola Company 3.4 Intel Corporation 2.8
Microsoft Corporation 3.2 Johnson & Johnson 2.8
- ----------------------------------------------------------------------------------------
Total 32.8%
- ----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
EQUITY PORTFOLIO HIGHLIGHTS
PORTFOLIO S&P 500
<S> <C> <C>
- -------------------------------------------------------------------------------
Number of Holdings 43 500
Median Market Value ($ Mil.) $20,700 $5,187
- -------------------------------------------------------------------------------
</TABLE>
PIE CHART:
ECONOMIC SECTOR BREAKDOWN
As of September 30, 1996
Equity
Portfolio S&P 500
Basic Materials 1% 5%
Consumer Cyclical 16 13
Consumer Noncyclical 28% 24
Energy 4 9
Financial 14 14
Industrial 10 10
Technology 25 15
Utilities 2 10
- ------------------------------------------------------------------------------
ASSET ALLOCATION
PIE CHART:
As of As of
September September
30, 1995 30, 1996
Equities $339.9 (94.3%) $397.7 (95.2%)
Cash & Equivalents $20.4 (5.7%) $20.2 (4.8%)
<PAGE>
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:
$1,158.5 Million
photo: E. Bruce Dunn and Richard B. Peterson
- ------------------------------------------------------------------------------
SPECIAL FUND Q & A
Q: HOW DID SPECIAL FUND PERFORM?
A: For the year ended September 30, 1996, the Fund posted a 17.89 percent
total return, outpacing the 16.63 percent return of its Lipper growth fund
peer group. The Fund lagged the 20.32 percent return of the S&P 500 -- the S&P
was boosted during the year by its weighting in technology, which was not a
contributor to the Fund's performance.
Special Fund holds large-, mid- and small-cap companies. The Fund's median
market capitalization on September 30, 1996, was $1.7 billion -- mid-cap
companies range in capitalization from $1 billion to $5 billion. As a result,
we think it also is useful to compare the Fund to the S&P MidCap, one of the
most comprehensive mid-cap stock indices. For the year ended September 30,
1996, Special Fund outpaced the 14.00 percent return of the S&P MidCap.
Q: WHAT DROVE PERFORMANCE?
A: For the year, Special Fund's health care, financial services and consumer
cyclicals holdings made solid contributions to performance. The consumer
sector, in fact, has been one of the year's strongest performers. That's
because consumer confidence, bolstered by strong gains in personal net worth
- -- perhaps driven by the bull market we're experiencing -- is now at its
highest level in six years.1 As a result, consumers now may be more
comfortable spending than they were in 1995, and retailing stocks have
benefited accordingly. We think this may be the beginning of a sustainable
trend.
<PAGE>
As of September 30, 1996, Special Fund's holdings of consumer cyclical
stocks weighed in at nearly twice that of the S&P MidCap. A sampling of the
year's standouts includes Borders, a superstore retailer of books; Proffitt's,
a regional specialty department store chain; Zale, a specialty retailer of
jewelry; and U.S. motor cycle manufac turer Harley Davidson (3.9 percent, 2.3
percent, 2.5 percent and 3.6 percent of total net assets, respectively).
Our consumer noncyclical holdings also fared well, particularly Cardinal
Health, a distributor of drugs and related services; and Boston Scientific, a
developer and marketer of less-invasive surgical products (2.5 percent and 3.1
percent of total net assets, respectively).
Q: WHAT HINDERED THE FUND'S PERFORMANCE?
A: In the stocks where we had negative returns of more than $1 million, more
than half resulted from earnings shortfalls, with the other causes divided
between a change in outlook or in management factors. We experienced earnings
disappointments among certain technology and industrial-related holdings,
including AVX, Superior Industries, General Instrument and Molex
(1.4 percent, 1.6 percent, 1.1 percent and 2.0 percent of total net assets,
respectively).
On another level, the Fund was underweighted in areas that did well.
Technology, for example, outperformed the S&P 500 by more than 11 percent. In
addition, small- and mid-cap stocks underperformed the S&P 500 -- while
smaller stocks represented less than 10 percent of the S&P 500 as of September
30, 1996, Special Fund's weighting, consistent with its investment process,
was nearly 75 percent at the end of the fiscal year.
Q: IN TODAY'S ENVIRONMENT OF LOW INFLATION AND INCREASING COMPETITION, WHAT
MAKES COMPANIES SUCCESSFUL?
A: In our opinion, what creates a winner is management that has the ability to
execute well, coupled with a unique way of doing business. Borders is one
example. This company has a sophisticated inventory system in an industry
where inventory is key. And because they emphasize knowledge in their staff,
Borders maintains a higher service level.
We also think the ability to provide quality products and services at lower
costs is an increasingly important determinant of success. And while we think
the Fund is well positioned to take advantage of these trends, we are focusing
on ensuring that our investments continue to meet our standards for
competitive advantage, superior management and attractive valuation.
<PAGE>
Q: ANY FINAL THOUGHTS?
A: As we discussed earlier, Special Fund has outperformed both its growth fund
peer group and the most comprehensive measure of mid-cap growth. We're pleased
with Special Fund's results.
We're committed to managing risk, and our emphasis on long-term
performance, attractive valuation and good management is key to our approach.
Since it was established in 1968, the Fund has sought to build shareholder
wealth not only by selecting winners, but by avoiding losers. It's an approach
that we believe has made Special Fund a strong investment over the long term.
1Source: Investor's Business Daily, August 28, 1996
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURNS WILL VARY, SO YOU MAY HAVE A GAIN OR A LOSS WHEN YOU SELL SHARES.
Portfolio holdings are as of September 30, 1996, and are subject to change.
Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. The S&P 500 and S&P MidCap are
unmanaged groups of stocks that differ from the composition of Special Fund;
they are not available for direct investment. According to Lipper Analytical
Services, Inc., an independent monitor of mutual fund performance, the median
returns for the Fund's growth fund peer group for the one-, five- and 10-year
periods were 16.63 percent, 13.68 percent and 13.54 percent, respectively.
- -----------------------------------------------------------------------------
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. Funds that emphasize investments
in smaller companies may experience short-term volatility.
FUND INCEPTION:
October 17, 1994
TOTAL NET ASSETS:
$144.5 Million
- ------------------------------------------------------------------------------
SPECIAL VENTURE FUND Q & A
Q: HOW DID THE FUND PERFORM?
A: Special Venture performed very well, outpacing both its benchmark index and
its peer group. For the year ended September 30, 1996, the Fund posted a 31.81
percent total return, compared with the 16.33 percent return of its Lipper
small company fund peer group and the 13.13 percent return of the Russell
2000, a widely used index measuring small-cap performance.
In fact, according to Lipper Analytical Services, Inc., Special Venture
Fund ranked in the top 9 percent and the top 24 percent of all small company
growth funds for the one-year and Life of Fund periods (#34 of 350 funds and
#67 of 280 funds, respectively).
<PAGE>
Q: WHICH OF THE FUND'S HOLDINGS MADE POSITIVE CONTRIBUTIONS DURING THE YEAR?
A: While returns have been gener ated across a broad range of industry groups,
the consumer cyclical and business services sectors have been among the Fund's
strongest performers, with many of our larger holdings making significant
contributions to total return.
AmeriSource (4.9 percent of total net assets), a distributor of
pharmaceuticals, continues to benefit from strong growth in its market, the
recent difficulties of a leading competitor, and excellent company-level
execution. We believe the company's outlook is positive given several
favorable trends, including the increased use of pharmaceutical distributors
by health care organizations, an aging population, and continued growth in
pharmaceutical therapies.
Other standouts included Zale (2.7 percent of total net assets), a jewelry
retailer that continues a turnaround driven by its return to solid retailing
practices, and Keane (4.2 percent of total net assets), a software services
company that designs, develops and implements software solutions, which has
benefited this year from continuing growth in information technology
outsourcing.
Q: KEANE HAS BEEN A CONSISTENTLY SOLID HOLDING DURING THE YEAR. WOULD YOU SAY
THIS COMPANY IS AN EXAMPLE OF YOUR INVESTMENT STRATEGY AT ITS BEST?
A: We think Keane fits our investment philosophy well. In our opinion, it is a
well-managed company run by an entrepreneurial management team. It has a
strong business model, is well financed, and also is competing for a share of
a very large market oppor tunity, a portion of which is, in our opinion,
unique.
We believe Keane is poised to benefit from the extraordinary opportunity of
the "year 2000" computer problem. Much of the computer software currently in
use employs a two-digit data field. As a result, at the turn of the century,
software used in computers owned by many businesses and government agencies
will not be able to function properly as the last two digits change from 99 --
as in 1999 -- to 00 -- as in 2000. This, in turn, could block the transfer of
critical information in almost every sector of the economy. It is estimated
that reformatting computer systems to recognize the year 2000 will cost
hundreds of billions of dollars.
Keane has signed several substantial contracts to provide manpower and
information technology expertise that will help corporations reprogram their
systems.
<PAGE>
Q: WHERE ARE YOU FINDING NEW INVESTMENT IDEAS?
A: Some of our more recent purchases reflect our confidence in the energy
sector, where we see good value and strong prospects -- a good example would
be United Meridian, a petroleum exploration and production company (1.9
percent of total net assets). In addition, we continue to invest in companies
benefiting from trends toward outsourcing, particularly those opportunities
that tend to experience a high degree of recurring revenue. One such purchase,
FiServ (2.0 percent of total net assets), provides transaction processing,
primarily to banks. Banks are increasingly focusing their attention on their
core business -- making loans -- and, as a result, are turning to outside
sources to process their transactions. FiServ has a strong, hands-on
management team, and we believe the stock was attractively valued at the time
we purchased it.
Q: WE'VE TALKED ABOUT WHAT FACTORS INTEREST YOU IN A STOCK. CAN YOU TELL US
WHAT PROMPTS YOU TO SELL A HOLDING?
A: We try to keep Special Venture's portfolio fairly concentrated -- we
typically hold fewer than 55 stocks and our top 10 holdings usually represent
30 percent to 40 percent of the portfolio's value. Our valuation discipline
spurs us to prune holdings that appear to have less upside potential than new
investment opportunities. We also sell when a change in strategy, management,
or competitive environment undermines our confidence in a company's ability to
succeed. But we're patient investors, so an earnings disappointment isn't an
automatic trigger to sell. We evaluate disappointments on a case-by-case basis
to see whether temporary factors are affecting the stock, or if there is a
fundamental problem with management or strategy. Sometimes a one-time factor
may be a great opportunity to increase our holdings in a company.
Q: CAN YOU GIVE US AN EXAMPLE?
A: A good example is CFC International, a specialty materials business (1.2
percent of total net assets). CFC makes such "invisible" materials as the
holograms and magnetic strips you find on your credit cards. The shares of
this small company have been weak recently, but we think this weakness has
been driven more by timing of contracts and reinvestment spending than by any
fundamental problems. While any slowdown in earnings momentum will temporarily
affect the stock, we believe its long-term prospects are excellent.
Q: WHAT'S YOUR OUTLOOK?
A: We continue to believe Special Venture's prospects are bright. Part of our
optimism stems from the Fund's positive relative valuation and earnings growth
<PAGE>
rate characteristics compared to the market as a whole. In our opinion, the
portfolio's earnings outlook is positive, while valuation levels remain
reasonable. As a result, we think Special Venture can continue to reward
investors in the year ahead. Still, investors should remember that while
small-cap stocks offer significant growth potential, they also, at times,
experience greater price volatility than the stock market in general.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURNS WILL VARY, SO YOU MAY HAVE A GAIN OR A LOSS WHEN YOU SELL SHARES.
Portfolio holdings are as of September 30, 1996, and are subject to change.
Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. The Russell 2000 is an unmanaged group
of stocks that differs from the composition of Special Venture Fund; it is not
available for direct investment. According to Lipper Analytical Services,
Inc., an independent monitor of mutual fund performance, the median returns
for the Fund's small company growth fund peer group for the one-year and Life
of Fund periods were 16.33 percent and 22.21 percent, respectively. Because
benchmark returns are calculated on a monthly basis, those marked "Life of
Fund" are from the month-end date that fell closest to the Fund's inception
date. Special Venture Fund's Adviser currently limits expenses to 1.25 percent
of average net assets, subject to termination on 30 days' notice to the Fund.
Absent past limits, total return would have been less.
<PAGE>
<TABLE>
<CAPTION>
Fund Highlights
- ------------------------------------------------------------------------------------
Special Fund
TOP 10 EQUITY HOLDINGS (% OF TOTAL NET ASSETS)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Borders Group 3.9% Littelfuse, Inc. 2.5%
Harley Davidson, Inc. 3.6 Cardinal Health 2.5
The Progressive Corporation 3.4 Renaissance Energy 2.5
Boston Scientific 3.1 Household International Inc. 2.4
Zale Corporation 2.5 Proffitt's 2.3
- -------------------------------------------------------------------------------------
Total 28.7%
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
EQUITY PORTFOLIO HIGHLIGHTS
PORTFOLIO S&P 500
---------------------------------------
<S> <C> <C>
Number of Holdings 50 500
Median Market Value ($ Mil.) $1,657 $5,187
- -------------------------------------------------------------------------------------
</TABLE>
PIE CHART:
ECONOMIC SECTOR BREAKDOWN
As of September 30, 1996
Equity
Portfolio S&P 500
Basic Materials 6% 5%
Consumer Cyclical 27 13
Consumer Noncyclical 20 24
Energy 5 9
Financial 16 14
Industrial 16 10
Technology 7 15
Utilities 3 10
- -----------------------------------------------------------------------------
ASSET ALLOCATION
As of As of
September September
30, 1995 30, 1996
Equities $1,127.3 (93.8%) $1,047.3 (90.4%)
Cash $63.1 (5.3) $111.2 (9.6%)
Bond $11.1 (0.9)
<PAGE>
<TABLE>
<CAPTION>
Fund Highlights
- ----------------------------------------------------------------------------------------
Special Venture Fund
TOP 10 EQUITY HOLDINGS (% OF TOTAL NET ASSETS)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
AmeriSource Distribution
Corporation 4.9% Twentieth Century Industries 2.8%
Keane, Inc. 4.2 Barrett Resources Corporation 2.8
Danka Business Systems 3.6 Zale Corporation 2.7
OM Group, Inc. 3.3 Central European Media 2.5
G&K Services, Inc. 3.1 Invacare Corporation 2.4
- ------------------------------------------------------------------------------------------
Total 32.3%
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
EQUITY PORTFOLIO HIGHLIGHTS
PORTFOLIO S&P 500
--------------------------------------
<S> <C> <C>
Number of Holdings 58 500
Median Market Value ($ Mil.) $521 $5,187
- -------------------------------------------------------------------------------------
</TABLE>
PIE CHART:
ECONOMIC SECTOR BREAKDOWN
As of September 30, 1996
Equity
Portfolio S&P 500
Basic Materials 7% 5%
Consumer Cyclical 19 13
Consumer Noncyclical 17 24
Energy 12 9
Financial 13 14
Industrial 13 10
Technology 18 15
Utilities 1 10
- ----------------------------------------------------------------------------
ASSET ALLOCATION
As of As of
September September
30, 1995 30, 1996
Equities $52.2 (86.2%) $136.0 (94.1%)
Cash & Equivalents $8.3 (13.8%) $8.5 (5.9%)
<PAGE>
Q&A
AN INTERVIEW WITH CAPITAL OPPORTUNITIES FUND'S PORTFOLIO MANAGERS
- -----------------------------------------------------------------------------
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. Funds
that emphasize investments in smaller companies may experience short-term
volatility.
FUND INCEPTION:
March 31, 1969
TOTAL NET ASSETS:
$1,684.5 Million
photo: Gloria Santella and Eric S. Maddox
Q: HOW DID THE FUND PERFORM THIS YEAR?
A: The Fund had an extraordinary year. For the one-year period ended September
30, 1996, the Fund posted a return of 49.55 percent, easily outdistancing the
20.32 percent return of the S&P 500, as well as the 15.49 percent median
return of its Lipper capital appreciation fund peer group. The Fund also
outperformed what we believe are the most representative small- and mid-cap
benchmarks, surpassing the 12.83 percent return of the Nasdaq Industrials
Index and the 14.00 percent return of the S&P MidCap Index. According to
Lipper Analytical Services, Inc., this performance also helped the Fund
outpace more than 99 percent of all other equity funds this year (#20 of 3,670
funds), which, on average, gained just 14.07 percent for the one-year period
ended September 30, 1996. We also should note that the Fund's long-term record
is just as impressive -- it ranked in the top 2 percent and the top 12 percent
of all equity funds for the five- and 10-year periods ended September 30, 1996
(#23 of 1,193 and #75 of 631 funds, respectively).
Q: HAS THE RAPID EXPANSION OF CAPITAL OPPORTUNITIES FUND -- WHOSE ASSETS HAVE
GROWN BY ALMOST $1.5 BILLION OVER THE PAST YEAR -- FORCED YOU TO CHANGE HOW
YOU INVEST?
A: Not at all. Over the past year, the number of stocks in the portfolio has
inched up to 55 from 45, and the median market value of those stocks has risen
<PAGE>
to $1.7 billion from $1.2 billion, but we have not had to meaningfully change
our investment strategy. That's because the Fund had long been structured to
handle increased inflows of this magnitude. In fact, we think one of the most
important things we've done as managers was to prepare for the Fund's growth
by always treating it as if it were larger -- by intentionally avoiding stocks
that were so small we couldn't own them as the Fund grew, for instance. We
simply never wanted to get into a situation where we had to change our
strategy just because the Fund was successful.
Consequently, the Fund was able to absorb the asset growth of the last
year, and the past nine months in particular. However, we knew the Fund's
strategy could not accommodate unconstrained growth without our eventually
having to make some changes to our strategy. As a result, when we reached a
point where we thought the Fund could no longer digest the growth, we chose to
close the Fund to new investors, rather than compromise the investment process
that has made it so successful.
Q: HOW DID YOU DEAL WITH THE INFLOW?
A: We found that we already owned our best ideas, so it was extremely
important to us that we preserve our selectivity. Therefore, our first
priority was to maintain the concentration in the Fund's top 10 holdings.
Then, we added to other existing holdings, although we were somewhat limited
by self-imposed liquidity constraints. Consequently, even though there has
been a substantial increase in the Fund's assets since September 30, 1995, we
added new names at a pace which was consistent with the number of holdings
we've purchased in the past. As of September 30, 1996, new holdings accounted
for about 35 percent of the Fund.
Q: WHAT AREAS DROVE PERFORMANCE?
A: The Fund's largest sectors this year also were among its top-
contributing sectors. For the year ended September 30, 1996, technology was
the largest sector weighting, at 20.6 percent, while leisure and entertainment
made up 14.5 percent of the portfolio. Together, these two sectors comprised
35.1 percent of the Fund, but accounted for more than half of its performance.
Q: YOU LOOK FOR COMPANIES WITH SUSTAINABLE EARNINGS GROWTH THAT YOU CAN HOLD
FOR THE LONG TERM. CAN YOU GIVE US AN EXAMPLE OF A FEW STOCKS THAT ILLUSTRATE
THIS?
A: It's interesting to note that our top-contributing stocks also exemplify
our long-term strategy in action. Each one has been held for approximately two
or three years, yet each remains among the Fund's top contributors -- not just
for the year, but for the entire time we've owned them.
<PAGE>
Within the technology sector, the top contributor this year was Cascade
Communications (2.9 percent of total net assets), which is a global
telecommunications company that designs the switching equipment used in wide
area networks (WANs) that link computers and local area networks (LANs) across
the country and around the world. Cascade pioneered the concept of a single
switch that simultaneously operates with different high-speed broadband data
transfer technologies, such as frame relay. The company's mission is to be the
leading supplier of high-performance, cost-effective access switching products
for public and private networks. We think it's well on its way to achieving
this goal, since it has already developed strategic relationships with a
number of large end users, including Bell operating companies, Internet access
providers, worldwide financial institutions and international
telecommunications companies. In an environment where companies increasingly
require cost-effective networking systems to stay efficient and competitive,
we think Cascade is in the position to dominate its market. Since we purchased
the stock, its price is up more than 723 percent -- 326 percent in the last 12
months alone. This price appreciation has been supported by average annual
earnings growth of more than 200 percent, however, so we remain confident that
it has the earnings potential to back up this phenomenal growth.
Another example of a stock that exemplifies our long-term strategy is our
top-contributing leisure and entertainment holding, Clear Channel
Communications (3.9 percent of total net assets), considered by many to be the
nation's premiere radio and television broadcasting company. We purchased
Clear Channel in September of 1993 for a little more than $14 per share. As of
September 30, it was priced at $88.50. Clear Channel has recently benefited
from deregulation in the broadcasting industry, which lifted restrictions on
the number of stations a company could own in any given market. By stepping up
its acquisition of TV and radio stations, Clear Channel has become the
dominant player in several markets. But, in our opinion, Clear Channel was a
good company with a successful operating record even before deregulation. As a
result, we think Clear Channel has the potential to realize further
efficiencies, which, in turn, could help it achieve even higher growth and
profit margins over the next several years.
<PAGE>
Q: WHAT ARE YOUR EXPECTATIONS FOR THE COMING MONTHS?
A: Although we think the potential for earnings growth in the small- to
mid-cap sector will continue to be robust, we think some companies could have
a harder time meeting their earnings estimates if the economic slowdown occurs
as expected.
Consequently, we think stock selection will be more important than ever in
the coming year. That said, however, we think this is the kind of environment
in which discerning stockpickers can reap big rewards. As a result, we will
continue to focus on those companies that we believe have the ability to
sustain their earnings growth over the long term, regardless of economic
conditions.
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.
Portfolio holdings are as of September 30, 1996, and are subject to change.
Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. The S&P 500, the S&P MidCap and the
Nasdaq Industrials Index are unmanaged groups of stocks that differ from the
composition of Capital Opportunities Fund; they are not available for direct
investment. According to Lipper Analytical Services, Inc., an independent
monitor of mutual fund performance, the median returns for all equity funds
for the one-, five- and 10-year periods ended September 30, 1996, were 14.07
percent, 13.20 percent and 12.59 percent, respectively.
<PAGE>
<TABLE>
<CAPTION>
Fund Highlights
- -------------------------------------------------------------------------------------
Capital Opportunities Fund
TOP 10 EQUITY HOLDINGS (% OF TOTAL NET ASSETS)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
HFS, Inc. 4.0% Cascade Communications Corporation 2.9%
Clear Channel Communications, Inc. 3.9 Gartner Group, Inc. 2.8
HBO and Company 3.4 PhyCor, Inc. 2.7
Paychex, Inc. 3.3 Omnicare, Inc. 2.5
Idexx Laboratories 3.0 Corporate Express, Inc. 2.3
- ----------------------------------------------------------------------------------------
Total 30.8%
- ----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
EQUITY PORTFOLIO HIGHLIGHTS
PORTFOLIO S&P 500
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Number of Holdings 55 500
Median Market Value ($ Mil.) $1,681 $5,187
- ----------------------------------------------------------------------------------------
</TABLE>
PIE CHART:
ECONOMIC SECTOR BREAKDOWN
As of September 30, 1996
Equity
Portfolio S&P 500
Basic Materials 0% 5%
Consumer Cyclical 25 13
Consumer Noncyclical 19 24
Energy 0 9
Financial 0 14
Industrial 32 10
Technology 24 15
Utilities 0 10
- ------------------------------------------------------------------------------
ASSET ALLOCATION
As of As of
September September
30, 1995 30, 1996
Equities $208.6 (86.1%) $1,448.6 (86.0%)
Convertibles $27.1 (11.2%) $223.3 (13.3%)
Cash & Equivalents $ 6.6 (2.7%) $12.6 (0.7%)
<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:
$135.5 Million
photographic image of Bruno Bertocci and David Harris
Q: HOW DID THE FUND PERFORM?
A: For the year ended September 30, 1996, the Fund posted a return of 8.23
percent, which trailed both the 8.61 percent return of the Morgan Stanley
Capital International Europe, Australia and Far East (MSCI EAFE) Index and the
9.44 percent return of the Lipper international fund peer group.
Many of the markets that have historically helped international investors
beat the MSCI EAFE Index have not contributed to results during the trailing
one-year period. For instance, for the year ended September 30, 1996, emerging
markets, as measured by the MSCI Emerging Markets Index, returned only 4.8
percent. In contrast, the MSCI EAFE Index, which is composed primarily of
mature, developed markets, returned 8.6 percent. In addition, because the Fund
is invested in a number of markets that are not represented in the Index, such
as Korea and Indonesia, the Fund can experience short-term fluctuations versus
the benchmark when these markets are volatile. We continue to believe,
however, that although these markets can add to short-term volatility, they
offer excellent long-term potential.
Q: RECENTLY, INTERNATIONAL EQUITIES HAVE LAGGED THE U.S. MARKET. WHAT IS YOUR
OUTLOOK FOR NON-U.S. EQUITIES IN THE COMING MONTHS?
A: Relative to the U.S. stock market, international equity market returns have
continued to disappoint investors. As measured by the MSCI EAFE Index,
<PAGE>
non-U.S. equities have underperformed U.S. equities for a record nine
consecutive quarters. Previously, the longest streak of underperformance had
been six quarters, so this period of persistent underperformance is highly
unusual in the context of historical returns. Since the inception of the MSCI
EAFE Index on January 1, 1970, international markets have out performed U.S.
equity markets for 53 quarters and underperformed for 54.
We're optimistic that a turnaround is near for non-U.S. equities, how ever.
For instance, despite this recent prolonged slump, non-U.S. equities have
outperformed U.S. equities on an annualized basis, returning 1.8 percent more
than U.S. stocks over the measurable historical period, according to Morgan
Stanley Capital International. In addition, we see improving fundamentals that
we believe have not been factored into foreign equity prices. Fiscal spending,
for example, is being curtailed throughout Europe as governments reduce their
budgets to comply with European Monetary Union (EMU) criteria that limit 1997
fiscal deficits to 3 percent of GDP. Furthermore, except for Germany, monetary
policy in Europe has been tight, contributing to lower inflation. Moreover,
Japan finally seems to have emerged from its recession, although we believe
the double-digit GDP growth it registered in the second quarter of 1996 is not
sustainable. Finally, most of the emerging market economies of Asia continue
to grow rapidly, and Latin America has resumed its growth path following the
severe recessions that took place in Mexico and Argentina in 1995.
Q: HAVE YOU MADE ANY NEW PURCHASES RECENTLY?
A: We have purchased several new holdings, including Hong Kong Ferry, a Hong
Kong real estate and transport company; L.G. Securities, a Korean securities
firm; and Koor Industries, an Israeli conglomerate (0.6 percent, 1.0 percent
and 0.5 percent of total net assets, respectively).
Hong Kong Ferry operates the traditional ferry service across the Hong Kong
harbor. In addition to its ferry operations, Hong Kong Ferry also owns two
valuable tracts of land in West Kowloon. L.G. Securities is a way to invest in
the recovery of the Korean market, about which we remain enthusiastic.
Historically, when markets recover, the first stocks to rise are the brokerage
firms. Israel, on the other hand, is a new market for us, and we think Koor
Industries, one of the country's largest and most visible companies, has the
ability to capture investor attention if the Israeli economy gains momentum.
<PAGE>
Q: HOW DID THE U.S. STOCK MARKET'S MID-SUMMER SLUMP AFFECT FOREIGN
MARKETS?
A: The U.S. stock market's July jitters shook markets worldwide. As we have
seen in the past, however, the effect of the U.S. stock market on other
markets tends to be temporary. We have found that the correlation coefficient
(a statistical measure of tracking that ranges from -1.0 to 1.0) between the
U.S. market and foreign markets has remained stable at about 0.5, which is an
indication that the markets are not highly linked. Moreover, the linkage has
been relatively stable since the inception of the data about 20 years ago. We
continue to think that over the longer term, most foreign markets will more
closely track developments in their respective local markets and company
outlooks, rather than moving in tandem with the U.S. stock market.
Q: DOES THIS PICKUP IN GLOBAL GROWTH MEAN THERE COULD BE A WHOLESALE
TIGHTENING OF GLOBAL LIQUIDITY ANY TIME SOON?
A: We don't think so, since inflation remains fairly benign on a global basis.
In addition, it appears that many foreign governments are concentrating on
keeping their budgets in check. The governments of Italy, Belgium, Spain and
Sweden, for instance, have all proposed budgets that were lower than expected.
The bottom line: We think global interest rates should stay subdued until well
into 1997.
Q: IS THERE ANYTHING THAT COULD CLOUD YOUR POSITIVE OUTLOOK?
A: There are always risks. That's the nature of international investing. Over
the long run, however, we continue to think that, despite the risks, there are
a number of exciting and potentially quite profitable investment opportunities
available outside the United States. As a result, we think the coming year has
the potential to be a particularly fruitful one for investors who cast a
global net.
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.
Portfolio holdings are as of September 30, 1996, and are subject to change.
Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. The MSCI EAFE Index is an unmanaged
group of foreign stocks that differs from the composition of International
Fund; it is not available for direct investment. According to Lipper
Analytical Services, Inc., an independent monitor of mutual fund performance,
the median returns for the Fund's international fund peer group for the
one-year and Life of Fund periods ended September 30, 1996, were 9.44 percent
and 4.89 percent, respectively. Because benchmark returns are calculated on a
monthly basis, those marked "Life of Fund" are from the month-end date that
fell closest to the Fund's inception date. International Fund's Adviser
currently limits expenses to 1.65 percent of average net assets, subject to
termination on 30 days' notice to the Fund. Absent past limits, total return
would have been less.
<PAGE>
<TABLE>
<CAPTION>
Fund Highlights
- --------------------------------------------------------------------------------------
International Fund
TOP 10 EQUITY HOLDINGS (% OF TOTAL NET ASSETS)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Telecom Italia 2.0% Avesta Sheffield 1.7%
Bladex 1.9 Mannesmann 1.7
Kemira 1.8 Inchcape 1.7
R.O.C. Taiwan Fund 1.7 SSAB 1.6
Matsushita Electric 1.7 Jusco 1.6
- ---------------------------------------------------------------------------------------
Total 17.4%
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
EQUITY PORTFOLIO HIGHLIGHTS
PORTFOLIO MSCI EAFE
-----------------------------------------
<S> <C> <C>
Number of Holdings 104 1,110
Median Market Value ($ Bil.) $1.44 $2.11
- -----------------------------------------------------------------------------------------
</TABLE>
PIE CHART:
ECONOMIC SECTOR BREAKDOWN
As of September 30, 1996
Equity
Portfolio MSCI EAFE
Capital Equipment 13.0% 12.7%
Consumer Goods 12.9 19.7
Energy 10.3 10.1
Finance 17.8 25.6
Materials 15.6 10.5
Multi-Industry 7.5 3.4
Services 22.9 18.0
- ------------------------------------------------------------------------------
ASSET ALLOCATION
As of As of
September September
30, 1995 30, 1996
Equities $74.9 (90.1%) $132.3 (97.7%)
Cash & Equivalents $5.9 (7.0%) $3.2 (2.3%)
Bonds $2.4 (2.9%)
<PAGE>
Shareholders Approve Proposals
- ------------------------------------------------------------------------------
At a special meeting on June 18, 1996, shareholders of Stein Roe Balanced
Fund, Stein Roe Growth & Income Fund, Stein Roe Growth Stock Fund, Stein Roe
Special Fund, Stein Roe Special Venture Fund, Stein Roe Capital Opportunities
Fund and Stein Roe International Fund voted to approve proposals relating to
the election of the Funds' Board of Trustees, modifications to certain
investment policies and new management and administrative agreements. The
approved proposals include:
(A) Expansion of Board of Trustees
The Fund's Board was expanded from seven to nine members; nine members were
elected to the Board. This expansion will help make it easier for Stein Roe to
transfer responsibilities from retiring board members to new board members
over an 18-month period.
(B) Interfund Borrowing
(C) Interfund Lending
Cash management is an important part of the investment process for mutual
funds. An interfund lending program -- a program that allows mutual funds to
borrow cash from and lend cash to each other -- gives the funds an additional
way to meet emergency cash needs at terms that would be at least as favorable
as a third party transaction, such as a bank line of credit. Stein Roe expects
to engage in interfund borrowing only when we think it would be more favorable
to both funds than borrowing from a third party.
(D) Administrative and Management Agreements
The Investment Advisory agreements for Stein Roe Special Venture Fund and
Stein Roe International Fund are replaced by separate a) Administrative and b)
Portfolio Management Agreements. These new agreements essentially carry
forward, under two separate agreements, the investment advisory and management
services Stein Roe & Farnham already provides to each Fund. Separate
agreements will facilitate, at a future date, the pooling of each Fund's
assets with assets of other funds that have identical investment objectives.
The resulting larger pool of assets would be managed by Stein Roe & Farnham.
<PAGE>
<TABLE>
<CAPTION>
RECORD TOTAL SHARE
DATE SHARE POSITION
POSITION VOTED AFFIRMATIVE WITHHOLD
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
BALANCED FUND.............. 7,850,876 4,625,890
A) Expansion of Board
of Trustees
Timothy K. Armour....... 4,525,492 100,398
Kenneth L. Block........ 4,519,082 106,808
William W. Boyd......... 4,523,744 102,146
Lindsay Cook............ 4,528,472 97,417
Douglas A. Hacker....... 4,500,444 125,446
Francis W. Morley....... 4,516,997 108,893
Charles R. Nelson....... 4,528,111 97,779
Thomas C. Theobald...... 4,512,364 113,526
Gordon R. Worley........ 4,511,031 114,859
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
B) Interfund Borrowing..... 4,122,472 285,985 217,432
C) Interfund Lending...... 4,153,104 260,419 212,366
<CAPTION>
RECORD TOTAL SHARE
DATE SHARE POSITION
POSITION VOTED AFFIRMATIVE WITHHOLD
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
GROWTH & INCOME FUND....... 9,869,053 5,641,766
A) Expansion of Board
of Trustees
Timothy K. Armour....... 5,507,130 134,636
Kenneth L. Block........ 5,483,937 157,829
William W. Boyd......... 5,501,983 139,783
Lindsay Cook............ 5,509,961 131,805
Douglas A. Hacker....... 5,473,229 168,538
Francis W. Morley....... 5,496,366 145,400
Charles R. Nelson....... 5,496,486 145,280
Thomas C. Theobald...... 5,479,309 162,457
Gordon R. Worley........ 5,479,277 162,489
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
B) Interfund Borrowing..... 5,017,244 329,052 295,470
C) Interfund Lending....... 5,009,873 337,982 293,912
<PAGE>
<CAPTION>
RECORD TOTAL SHARE
DATE SHARE POSITION
POSITION VOTED AFFIRMATIVE WITHHOLD
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
GROWTH STOCK FUND ......... 14,781,910 8,508,725
A) Expansion of Board
of Trustees
Timothy K. Armour....... 8,337,354 171,371
Kenneth L. Block........ 8,340,811 167,914
William W. Boyd......... 8,339,511 169,214
Lindsay Cook............ 8,352,606 156,119
Douglas A. Hacker....... 8,296,014 212,712
Francis W. Morley....... 8,334,513 174,212
Charles R. Nelson....... 8,351,937 156,788
Thomas C. Theobald...... 8,310,029 198,696
Gordon R. Worley........ 8,327,485 181,240
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------
B) Interfund Borrowing..... 7,680,559 398,558 429,608
C) Interfund Lending....... 7,659,677 409,919 439,130
<CAPTION>
RECORD TOTAL SHARE
DATE SHARE POSITION
POSITION VOTED AFFIRMATIVE WITHHOLD
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------
SPECIAL FUND .............. 43,695,888 27,373,693
A) Expansion of Board
of Trustees
Timothy K. Armour....... 26,550,291 823,402
Kenneth L. Block........ 26,407,652 966,041
William W. Boyd......... 26,514,353 859,340
Lindsay Cook............ 26,546,193 827,500
Douglas A. Hacker....... 26,410,558 963,135
Francis W. Morley....... 26,384,999 988,694
Charles R. Nelson....... 26,539,095 834,598
Thomas C. Theobald...... 26,512,595 861,098
Gordon R. Worley........ 26,384,871 988,822
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
B) Interfund Borrowing..... 19,335,328 1,581,313 6,457,051
C) Interfund Lending....... 19,350,199 1,545,264 6,478,230
<PAGE>
<CAPTION>
RECORD TOTAL SHARE
DATE SHARE POSITION
POSITION VOTED AFFIRMATIVE WITHHOLD
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------
SPECIAL VENTURE FUND ...... 7,290,067 4,502,893
A) Expansion of Board
of Trustees
Timothy K. Armour....... 4,447,210 55,683
Kenneth L. Block........ 4,443,051 59,842
William W. Boyd......... 4,441,875 61,019
Lindsay Cook............ 4,446,799 56,094
Douglas A. Hacker....... 4,436,550 66,344
Francis W. Morley....... 4,441,317 61,577
Charles R. Nelson....... 4,446,915 55,978
Thomas C. Theobald...... 4,437,269 65,624
Gordon R. Worley........ 4,445,435 57,459
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
B) Interfund Borrowing..... 4,248,105 81,259 173,529
C) Interfund Lending....... 4,251,878 79,161 171,854
D) Administrative and
Management Agreements
a) Administrative...... 4,261,852 60,579 180,462
b) Management.......... 4,260,171 63,704 179,018
<CAPTION>
RECORD TOTAL SHARE
DATE SHARE POSITION
POSITION VOTED AFFIRMATIVE WITHHOLD
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------
CAPITAL OPPORTUNITIES FUND 29,796,462 16,762,880
A) Expansion of Board
of Trustees
Timothy K. Armour....... 16,474,448 288,432
Kenneth L. Block........ 16,454,554 308,326
William W. Boyd......... 16,444,520 318,360
Lindsay Cook............ 16,468,700 294,180
Douglas A. Hacker....... 16,400,809 362,071
Francis W. Morley....... 16,421,808 341,072
Charles R. Nelson....... 16,446,678 316,201
Thomas C. Theobald...... 16,426,842 336,037
Gordon R. Worley........ 16,412,935 349,945
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------
B) Interfund Borrowing..... 12,402,552 863,494 3,496,834
C) Interfund Lending....... 12,357,202 878,288 3,527,389
<PAGE>
<CAPTION>
RECORD TOTAL SHARE
DATE SHARE POSITION
POSITION VOTED AFFIRMATIVE WITHHOLD
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------
INTERNATIONAL FUND ........ 10,935,666 6,043,098
A) Expansion of Board
of Trustees
Timothy K. Armour....... 6,026,060 17,038
Kenneth L. Block........ 6,024,113 18,984
William W. Boyd......... 6,025,377 17,721
Lindsay Cook............ 6,025,807 17,291
Douglas A. Hacker....... 6,020,953 22,145
Francis W. Morley....... 6,020,881 22,217
Charles R. Nelson....... 6,022,906 20,192
Thomas C. Theobald...... 5,997,810 45,288
Gordon R. Worley........ 6,023,484 19,614
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
B) Interfund Borrowing..... 5,689,518 108,697 244,884
C) Interfund Lending....... 5,688,945 110,017 244,135
D) Administrative and
Management Agreements
a) Administrative...... 5,724,948 72,451 245,699
b) Management.......... 5,724,662 73,713 244,723
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Balanced Fund
- ------------------------------------------------------------------------------------
Investments as of September 30, 1996
(Dollar Amounts In Thousands)
Number Market
EQUITY-RELATED SECURITIES (61.5%) of Shares Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (47.5%)
AUTOMOTIVE (0.8%)
General Motors Corp.................................. 38,000 $ 1,824
BANKS (5.4%)
BankAmerica Corporation.............................. 53,000 4,353
Citicorp............................................. 53,000 4,803
Royal Bank of Scotland Group Plc..................... 228,000 1,747
Westpac Banking Corporation Ltd...................... 320,000 1,656
--------
12,559
BUILDING AND CONSTRUCTION (0.8%)
Fluor Corporation.................................... 28,000 1,722
BROADCAST/MEDIA (0.1%)
*Univision Communications Incorporated............... 8,600 288
CHEMICALS (1.3%)
Dupont (E.I.) De NeMours & Company................... 34,000 3,000
COMPUTERS (0.9%)
International Business Machines Corp................. 17,000 2,116
COMPUTER SOFTWARE AND SERVICES (1.6%)
Electronic Data Systems Corporation.................. 60,000 3,682
CONGLOMERATES AND MISCELLANEOUS (1.0%)
Harris Corporation................................... 35,000 2,279
DATA PROCESSING & DUPLICATING (1.7%)
Canon, Inc........................................... 97,000 1,907
Xerox................................................ 36,000 1,931
--------
3,838
DISTRIBUTION (1.0%)
Wal-Mart Stores, Inc................................. 84,000 2,215
DRUGS AND HEALTH PRODUCTS (3.9%)
Bristol-Myers Squibb Company......................... 28,000 2,698
Eli Lilly & Co....................................... 49,000 3,160
Sandoz ADRs.......................................... 54,000 3,244
--------
9,102
ELECTRICAL EQUIPMENT (5.4%)
Emerson Electric Co. ................................ 48,500 4,371
General Electric Company............................. 58,500 5,323
Hubbell Inc. Class B................................. 78,000 2,886
--------
12,580
ELECTRONICS (1.1%)
Intel Corporation.................................... 27,000 2,577
FERTILIZERS (0.4%)
Potash Corporation of Saskatchewan Inc............... 14,000 1,024
<PAGE>
<CAPTION>
Balanced Fund CONTINUED
- -----------------------------------------------------------------------------------
Number Market
of Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
FOOD, BEVERAGE & TOBACCO (2.0%)
General Mills, Inc................................... 26,000 $ 1,570
PepsiCo., Inc........................................ 45,000 1,271
Philip Morris Companies.............................. 20,000 1,795
--------
4,636
HOLDING (0.9%)
Swire Pacific Ltd. Class A........................... 240,000 2,149
INSURANCE (0.9%)
American States Financial Corporation................ 85,000 1,976
MEDICAL SUPPLIES (1.2%)
Baxter International Inc............................. 60,000 2,805
MISCELLANEOUS (0.5%)
*World Equity Benchmark Shares - Japan............... 75,000 1,111
OIL AND NATURAL GAS (5.8%)
Baker Hughes Inc..................................... 100,000 3,038
British Petroleum Company Plc ADRs................... 29,344 3,668
Enron Corp. ......................................... 84,000 3,423
Mobil Corporation.................................... 9,000 1,042
Sonat Inc. .......................................... 20,000 885
Unocal Corp.......................................... 35,000 1,260
--------
13,316
PAPER & FOREST PRODUCTS (1.2%)
Plum Creek Timber Company, L.P....................... 105,000 2,678
REAL ESTATE (2.7%)
Kimco Realty Corporation............................. 81,000 2,410
The Rouse Company.................................... 70,587 1,835
Security Capital Industrial Trust.................... 108,333 1,977
--------
6,222
RETAIL (2.2%)
Credit Saison Co. Ltd. .............................. 42,000 1,007
Jusco Co. ........................................... 64,000 1,948
*Starbucks Corporation............................... 66,666 2,200
--------
5,155
TELECOMMUNICATIONS (2.7%)
*Airtouch Communications, Inc. ...................... 65,000 1,796
Frontier Corp........................................ 100,000 2,663
Telefonica de Argentina S.A. ADRs.................... 68,000 1,692
--------
6,151
TRANSPORTATION (0.7%)
Canadian National Railway............................ 80,000 1,640
UTILITIES-ELECTRIC (1.3%)
Empresa Nacional de Electricidad, S.A. de C.V., ADRs. 52,000 3,088
--------
TOTAL COMMON STOCK (Cost $72,130)................................. 109,733
- --------------------------------------------------------------------------------
<PAGE>
<CAPTION>
Balanced Fund CONTINUED
- ----------------------------------------------------------------------------------
Number Market
of Shares Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS (1.1%)
COMPUTER SOFTWARE (0.5%)
Salomon Inc. (Microsoft Corp. ELKS) $3.994........... 10,000 $ 1,099
MINING (0.6%)
Freeport-McMoran Gold & Copper Inc. $1.750 Cv........ 50,000 1,525
--------
TOTAL PREFERRED STOCKS (Cost $2,200).............................. 2,624
- --------------------------------------------------------------------------------
Principal
CONVERTIBLE SUBORDINATED DEBENTURES (12.9%) Amount
- ----------------------------------------------------------------------------------
<S> <C> <C>
ELECTRONICS (1.7%)
LM Ericsson 4.250% 6/30/00......................... $ 1,150 3,953
ENERGY (1.1%)
SFP Pipelines Holdings 11.160% 8/15/10.............. 2,000 2,440
FINANCIAL (1.1%)
Elan International Financial Ltd. Zero Coupon
(Effective Yield 4.652%) 10/16/12................. 4,000 2,580
HEALTH CARE (2.3%)
Nationwide Health Properties 6.250% 1/01/99.......... 2,700 2,744
**Roche Holdings Ltd. Zero Coupon (Effective
Yield 4.750%) 9/23/08 3,500 2,651
--------
5,395
INSURANCE (1.2%)
Fremont General Zero Coupon (Effective
Yield 9.270%) 10/12/13 5,000 2,800
RETAIL (1.0%)
Home Depot Inc. 3.250% 10/01/01..................... 950 965
Starbucks 4.250% 11/01/02............................ 900 1,341
--------
2,306
SERVICES (3.7%)
Danka Business Systems 6.750% 4/01/02................ 1,100 1,623
**U.S. Filter 6.000% 9/15/05......................... 2,000 3,810
Valhi, Inc. Zero Coupon (Effective Yield 8.693%)
(Convertible into shares
of Dresser) 10/20/07.............................. 7,000 3,054
--------
8,487
TECHNOLOGY (0.8%)
WMX Technologies, Inc. 2.000% 1/24/05................ 2,000 1,830
--------
TOTAL CONVERTIBLE SUBORDINATED DEBENTURES (Cost $21,119).......... 29,791
- -----------------------------------------------------------------------------------
TOTAL EQUITY-RELATED SECURITIES (Cost $95,449).................... 142,148
- -----------------------------------------------------------------------------------
<PAGE>
<CAPTION>
Balanced Fund CONTINUED
- -----------------------------------------------------------------------------------
Principal Market
Amount Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
BONDS AND NOTES (31.1%)
U.S. GOVERNMENT OBLIGATION (20.2%)
U.S. Treasury Bonds
8.125% 8/15/19.................................... $ 12,500 $ 13,979
7.250% 8/15/22.................................... 6,200 6,330
U.S. Treasury Notes
5.750% 9/30/97.................................... 1,800 1,799
6.125% 3/31/98.................................... 1,700 1,703
5.125% 6/30/98.................................... 2,000 1,970
5.875% 3/31/99.................................... 4,000 3,971
7.875% 8/15/01.................................... 9,000 9,522
7.500% 2/15/05.................................... 5,250 5,522
6.500% 8/15/05.................................... 2,000 1,974
--------
46,770
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (3.4%)
Federal Home Loan Mortgage Corporation Gold
6.500% 2/01/11.................................... 1,912 1,858
6.500% 4/01/11.................................... 2,712 2,630
6.500% 6/01/26.................................... 1,006 946
Federal National Mortgage Association (Multi-family Housing)
(Floating Rate) 9.148% 6/01/97.................... 39 39
Government National Mortgage Association
8.000% 7/15/25.................................... 1,444 1,459
8.000% 3/15/26.................................... 938 946
--------
7,878
AIR TRANSPORTATION (1.6%)
Federal Express Corporation 1994 Pass-Through Certificates
Series A310-A1 7.530% 9/23/06..................... 2,215 2,222
United Airlines Series 1991 9.200% 3/22/08........... 1,383 1,484
--------
3,706
COMMERCIAL BANK (0.9%)
Den Danske Bank 6.550% 9/15/03....................... 2,250 2,159
FINANCIAL (1.3%)
ALPS Pass-Through Trust Series 1994-1 Class C2
9.350% 9/15/04........................................ 2,487 2,528
MDC Mortgage Funding Corporation Series Q Class 5
8.850% 3/20/18..................................... 440 454
--------
2,982
FOREIGN GOVERNMENT REGIONAL BONDS (0.7%)
**Corporacion Andina de Fomento 6.625% 10/14/98...... 1,500 1,494
MORTGAGE-BACKED SECURITIES (1.8%)
American Mortgage Trust Series 1993-3 Class 3B
8.190% 9/27/22...................................... 2,279 2,124
**Lennar 8.120% 9/15/02.............................. 2,000 1,999
--------
4,123
UTILITIES - ELECTRIC (1.2%)
Public Service Electric and Gas (New Jersey) 8.875% 6/01/03 2,500 2,717
--------
TOTAL BONDS AND NOTES (Cost $71,148).............................. 71,829
- -----------------------------------------------------------------------------------
<PAGE>
<CAPTION>
Balanced Fund CONTINUED
- -----------------------------------------------------------------------------------
Principal Market
Amount Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM OBLIGATIONS (7.7%)
COMMERCIAL PAPER (7.7%)
Lehman Brothers Holdings Inc. 5.900% 10/01/96........ $ 9,800 $ 9,800
Pooled Accounts Receivable Capital Corp. 5.350% 10/02/96 8,000 7,999
--------
TOTAL SHORT-TERM OBLIGATIONS (Amortized Cost $17,799)............. 17,799
- -----------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.3%)
(Cost $184,396)................................................... 231,776
OTHER ASSETS, LESS LIABILITIES (-0.3%) .......................... (713)
--------
TOTAL NET ASSETS (100.0%)......................................... $231,063
========
- -----------------------------------------------------------------------------------
<FN>
* Non-income producing.
** These securities are subject to contractual or legal restrictions on their
resale. At September 30, 1996, the aggregate value of these securities
represented 4.3 percent of net assets.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Growth & Income Fund
- -----------------------------------------------------------------------------------
Investments as of September 30, 1996
(Dollar Amounts In Thousands)
Number Market
COMMON STOCKS (79.9%) of Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
AIRCRAFT (2.1%)
McDonnell Douglas Corporation........................ 82,000 $ 4,305
AUTO/TRUCK PARTS & EQUIPMENT (1.5%)
*Lear Corporation.................................... 90,000 2,970
BANKS (7.3%)
Chase Manhattan Corporation.......................... 45,400 3,637
Citicorp............................................. 60,616 5,493
Republic New York Corporation........................ 25,000 1,728
Wells Fargo & Company................................ 15,666 4,073
--------
14,931
BROADCASTING & COMMUNICATIONS (0.9%)
The Interpublic Group of Companies, Inc.............. 40,400 1,909
COMPUTERS (1.3%)
International Business Machines Corp. ............... 22,000 2,739
COMPUTER SERVICES (2.6%)
*DST Systems Inc. ................................... 12,000 384
Electronic Data Systems Corporation.................. 79,000 4,849
--------
5,233
CONSTRUCTION (1.5%)
Fluor Corp. ......................................... 48,300 2,970
CONSUMER-RELATED (6.6%)
The Gillette Company................................. 72,200 5,207
Nike, Inc. Class B................................... 29,000 3,524
The Procter & Gamble Co. ............................ 48,000 4,680
--------
13,411
DISTRIBUTION (4.2%)
Albertson's Inc. .................................... 96,000 4,044
Walgreen Co. ........................................ 120,000 4,440
--------
8,484
DRUGS (3.1%)
SmithKline Beecham Plc. ADRs......................... 20,000 1,218
Warner-Lambert....................................... 78,000 5,148
--------
6,366
ELECTRICAL EQUIPMENT (4.7%)
Emerson Electric Co. ................................ 52,000 4,687
Hubbell Incorporated, Class B........................ 131,000 4,847
--------
9,534
ENERGY (4.4%)
Amoco Corporation.................................... 36,500 2,573
British Petroleum Company Plc ADRs................... 31,552 3,944
Enron Corp. ......................................... 62,500 2,547
--------
9,064
ENTERTAINMENT (0.7%)
The Walt Disney Co. ................................. 22,035 1,396
<PAGE>
<CAPTION>
Growth & Income Fund CONTINUED
- ----------------------------------------------------------------------------------
Number Market
of Shares Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES (5.0%)
American Express Co. ................................ 104,000 $ 4,810
Federal National Mortgage Association................ 156,000 5,440
--------
10,250
FOOD, BEVERAGE & TOBACCO (4.4%)
PepsiCo, Inc. ....................................... 80,000 2,260
Phillip Morris Companies............................. 48,000 4,308
Sara Lee Corporation................................. 67,000 2,395
--------
8,963
HEALTH CARE (4.3%)
Abbott Laboratories.................................. 58,500 2,881
Baxter International Inc. ........................... 95,000 4,441
Roche Holdings Ltd. ................................. 200 1,473
--------
8,795
MEDIA (1.4%)
Tribune Company...................................... 25,000 1,950
*Viacom, Inc., Class B............................... 27,190 965
--------
2,915
MULTI-INDUSTRY (7.0%)
General Electric Company............................. 64,000 5,824
Honeywell Inc. ...................................... 95,000 5,997
Kansas City Southern Industries...................... 22,300 953
Minnesota Mining & Manufacturing Company............. 20,000 1,398
--------
14,172
PAPER AND FOREST PRODUCTS (2.4%)
Alco Standard Corporation............................ 49,000 2,444
Champion International............................... 20,000 918
Georgia Pacific...................................... 20,000 1,583
--------
4,945
PRINTING (1.7%)
Deluxe Corp.......................................... 90,000 3,398
REAL ESTATE (0.5%)
Nationwide Health Properties, Inc.................... 50,000 1,100
RUBBER, PLASTICS, AND RELATED PRODUCTS (1.0%)
Goodyear Tire & Rubber Co. .......................... 45,000 2,076
SCIENTIFIC - INSTRUMENTS (0.4%)
Millipore Corporation................................ 20,000 790
SPECIALTY CHEMICALS (5.2%)
Monsanto Co.......................................... 180,000 6,570
Union Carbide Corporation ........................... 91,100 4,156
--------
10,726
TELECOMMUNICATIONS (2.6%)
AT & T............................................... 30,222 1,579
Nynex Corp........................................... 85,000 3,698
--------
5,277
TRANSPORTATION-RAIL (3.1%)
Burlington Northern Santa Fe......................... 44,000 3,713
Conrail Inc. ........................................ 38,000 2,750
--------
6,463
--------
TOTAL COMMON STOCKS (Cost $109,941)............................... 163,182
- -----------------------------------------------------------------------------------
<PAGE>
<CAPTION>
Growth & Income Fund CONTINUED
- -----------------------------------------------------------------------------------
Principal Market
Amount Value
- -----------------------------------------------------------------------------------
NOTES (1.5%)
U.S. GOVERNMENT OBLIGATION
U.S. Treasury Note 7.125% 9/30/99
(Cost $2,964)..................................... $ 3,000 $ 3,069
- -----------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS (18.5%)
COMMERCIAL PAPER (17.8%)
American Home Food Products 5.350% 10/03/96.......... 9,000 8,997
Goldman Sachs Group 5.350% 10/01/96.................. 9,000 9,000
Lehman Brothers Holdings Inc. 5.900% 10/01/96........ 9,390 9,390
Pooled Accounts Receivable Capital Corporation
5.350% 10/02/96 9,000 8,999
--------
36,386
U.S. GOVERNMENT OBLIGATION (0.7%)
**U.S. Treasury Bill 5.020% 11/07/96................. 1,500 1,492
--------
TOTAL SHORT-TERM OBLIGATIONS
(Amortized cost $37,878).......................................... 37,878
- -----------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.9%)
(Cost $150,783)................................................... 204,129
OTHER ASSETS, LESS LIABILITIES (0.1%)............................. 258
--------
TOTAL NET ASSETS (100.0%)........................................ $204,387
========
- -----------------------------------------------------------------------------------
<FN>
**Non-income producing.
**Security was pledged to cover margin requirements for open futures contracts.
Futures contracts which were open at September 30, 1996, were as follows:
Unrealized
Number of Contract Gain
Type Contracts Value Expiration at 9/30/96
- ---- --------- ------- --------- ---------
Standard & Poor's
500 Index (Long) 50 $17,285 Dec. 1996 $ 137
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Growth Stock Fund
- -----------------------------------------------------------------------------------
Investments as of September 30, 1996
(Dollar Amounts In Thousands)
Number Market
COMMON STOCKS (95.2%) of Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
BANKS & SAVINGS AND LOANS (5.6%)
Citicorp............................................. 110,000 $ 9,969
Fifth Third Bancorp.................................. 100,000 5,813
MBNA Corp. .......................................... 225,000 7,818
--------
23,600
BUSINESS SERVICES (5.1%)
Electronic Data Systems Corporation.................. 150,000 9,206
First Data Corporation............................... 150,000 12,243
--------
21,449
CHEMICALS (1.3%)
Hercules Inc. ....................................... 100,000 5,475
COMPUTERS AND COMPUTER SOFTWARE (8.7%)
*Cisco Systems Inc. ................................. 100,000 6,206
Intel Corporation.................................... 125,000 11,929
*Microsoft Corporation............................... 100,000 13,187
*Parametric Technology Company....................... 100,000 4,937
--------
36,259
CONSTRUCTION (1.8%)
Fluor Corp. ......................................... 125,000 7,687
CONSUMER-RELATED (10.8%)
*CUC International Inc. ............................. 275,000 10,965
The Gillette Company................................. 200,000 14,425
*Kohl's Corporation.................................. 220,000 7,920
The Procter & Gamble Co. ............................ 120,000 11,700
--------
45,010
DISTRIBUTION-RETAIL (5.9%)
*Corporate Express Inc. ............................. 200,000 7,775
The Home Depot, Inc. ................................ 300,000 17,063
--------
24,838
ELECTRICAL EQUIPMENT (5.2%)
General Electric Company............................. 140,000 12,740
Thermo Electron Corp. ............................... 225,000 9,113
--------
21,853
ENERGY (3.4%)
*Renaissance Energy Ltd.............................. 200,000 5,865
Schlumberger Ltd. ................................... 100,000 8,450
--------
14,315
FINANCIAL SERVICES (3.0%)
Federal National Mortgage Association................ 360,000 12,555
FOOD, BEVERAGE & TOBACCO (6.4%)
The Coca Cola Company................................ 280,000 14,245
Nabisco Holdings Corp. .............................. 250,000 7,906
Philip Morris Companies.............................. 50,000 4,488
--------
26,639
HEALTH CARE (4.3%)
Johnson & Johnson.................................... 230,000 11,788
United Healthcare.................................... 150,000 6,244
--------
18,032
<PAGE>
<CAPTION>
Growth Stock Fund CONTINUED
- -----------------------------------------------------------------------------------
Number Market
of Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
HOTELS (6.2%)
*HFS Incorporated.................................... 250,000 $ 16,719
*Sun International Hotels Ltd........................ 175,000 8,969
--------
25,688
INSURANCE (5.0%
American International Group, Inc.................... 97,500 9,823
The Travelers........................................ 225,000 11,053
--------
20,876
LEISURE & ENTERTAINMENT (1.5%)
The Walt Disney Co................................... 100,000 6,338
MEDICAL SUPPLIES (3.7%)
Baxter International Inc............................. 150,000 7,013
Medtronic, Inc....................................... 130,000 8,336
--------
15,349
PHARMACEUTICAL (5.9%)
Eli Lilly & Co....................................... 150,000 9,675
Merck and Company, Inc. ............................. 125,000 8,797
SmithKline Beecham Plc ADRs.......................... 100,000 6,088
--------
24,560
RESTAURANTS (2.0%)
McDonalds Corporation................................ 175,000 8,291
RUBBER, PLASTIC & RELATED (2.2%)
Illinois Tool Works Inc. ............................ 125,000 9,016
TECHNOLOGY SERVICES (1.7%)
*Tellabs Inc......................................... 100,000 7,063
TELECOMMUNICATIONS (5.5%)
*Airtouch Communications............................. 225,000 6,216
LM Ericsson Telecommunications ADRs Class B.......... 350,000 8,881
Motorola, Inc. ...................................... 150,000 7,744
--------
22,841
--------
TOTAL COMMON STOCKS (Cost $239,065)............................... 397,734
- ----------------------------------------------------------------------------------
Principal
Amount
- ----------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
SHORT-TERM OBLIGATIONS (4.7%)
COMMERCIAL PAPER (4.7%)
Lehman Brothers Holdings Inc. 5.900% 10/01/96........ $ 14,795 14,795
Pooled Accounts Receivable Capital Corp. 5.350% 10/02/96 5,000 4,999
--------
TOTAL SHORT-TERM OBLIGATIONS
(Amortized cost $19,794).......................................... 19,794
- ----------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.9%)
(Cost $258,859)................................................... 417,528
OTHER ASSETS, LESS LIABILITIES (0.1%)............................ 436
--------
TOTAL NET ASSETS (100.0%) ........................................ $417,964
========
- ----------------------------------------------------------------------------------
<FN>
* Non-income producing.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Special Fund
- ----------------------------------------------------------------------------------
Investments as of September 30, 1996
(Dollar Amounts In Thousands)
Number Market
COMMON STOCKS (90.4%) of Shares Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
ADVERTISING (1.7%)
The Interpublic Group of Companies Inc............... 425,000 $ 20,081
AUTOMOTIVE (2.2%)
Mark IV Industries................................... 350,000 7,613
Superior Industries International, Inc. ............. 751,000 18,118
--------
25,731
BANKS (2.9%)
*Bank United Corp Class A............................ 477,000 11,865
Golden West Financial................................ 380,000 22,182
--------
34,047
BROADCASTING (3.1%)
*Cox Communications.................................. 1,048,300 19,263
Grupo Radio Centro, S.A. de C.V. ADSs................ 522,500 4,311
*Scandinavian Broadcasting System S.A................ 560,000 12,600
--------
36,174
BUSINESS SERVICES (6.7%)
Alco Standard Corporation............................ 494,000 24,638
*Interim Services Inc. .............................. 450,000 19,238
The Olsten Corporation............................... 772,600 19,218
Unitog Company....................................... 488,850 14,788
--------
77,882
CONSUMER-RELATED (2.3%)
*CUC International Inc. ............................. 300,000 11,963
Newell Company....................................... 500,000 15,000
--------
26,963
DRUGS (2.2%)
Sandoz AG............................................ 21,000 25,230
ELECTRICAL EQUIPMENT (2.5%)
*Littelfuse, Inc.
Common............................................ 535,000 20,731
Warrants.......................................... 273,600 8,482
--------
29,213
ELECTRONICS & INSTRUMENTATION (6.2%)
AVX Corporation...................................... 718,400 16,523
*General Instrument Corp............................. 495,000 12,251
*Kent Electronics Corp............................... 900,000 19,463
Molex Inc. Class A................................... 688,827 23,248
--------
71,485
ENERGY & RELATED SERVICES (4.6%)
Cross Timbers Oil Company............................ 996,100 23,906
*Renaissance Energy Ltd. ............................ 985,000 28,888
--------
52,794
<PAGE>
<CAPTION>
Special Fund CONTINUED
- ----------------------------------------------------------------------------------
Number Market
of Shares Value
- ----------------------------------------------------------------------------------
FINANCIAL SERVICES (11.1%)
The Allstate Corporation............................. 113,000 $ 5,565
American Express Co.................................. 385,000 17,806
Household International Inc.......................... 340,000 27,965
National Mutual Asia Ltd. ........................... 25,450,000 22,379
The Progressive Corporation.......................... 692,300 39,634
*20th Century Industries............................. 880,100 15,512
--------
128,861
HEALTH SERVICES AND EQUIPMENT (14.7%)
*Boston Scientific................................... 623,000 35,822
Cardinal Health Inc.................................. 350,000 28,919
*Healthcare Compare Corp. ........................... 500,000 23,687
Invacare Corp. ...................................... 900,000 25,200
*Lincare Holdings Inc. .............................. 450,000 18,000
Stryker Corporation.................................. 799,600 24,088
*Sybron International Corporation.................... 500,000 14,500
------
0,216
INDUSTRIAL PRODUCTS (1.9%)
Carlisle Corp. ...................................... 385,100 21,373
LEISURE & ENTERTAINMENT (4.9%)
Carnival Corp. Class A............................... 500,000 15,500
Harley-Davidson, Inc. ............................... 962,000 41,366
----------
56,866
RETAIL (9.5%)
*Borders Group....................................... 1,200,000 44,700
*Consolidated Stores Corp............................ 225,000 9,000
*Proffitt's Inc...................................... 676,600 26,726
*Zale Corp........................................... 1,337,200 29,251
----------
109,677
SECURITY (1.7%)
Pittston Brinks Group................................ 637,600 20,005
SPECIALTY CHEMICALS (7.3%)
Cabot Corp. ......................................... 389,800 10,866
*Lydall, Inc. ....................................... 1,079,000 26,301
Minerals Technology Corp. Class A.................... 599,200 22,395
OM Group, Inc. ...................................... 673,000 25,574
----------
85,136
TEXTILES & APPAREL (1.9%)
Unifi, Inc........................................... 778,475 21,408
TELECOMMUNICATIONS (3.0%)
*Airtouch Communications............................. 874,500 24,158
*PriCellular......................................... 700,000 10,062
----------
34,220
----------
TOTAL COMMON STOCKS
(Cost $678,354)................................................... 1,047,362
- ----------------------------------------------------------------------------------
<PAGE>
<CAPTION>
Special Fund CONTINUED
- ----------------------------------------------------------------------------------
Principal Market
Amount Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM OBLIGATIONS (9.6%)
COMMERCIAL PAPER (9.6%)
GATX 5.500% 10/01/1996............................... $ 18,700 $ 18,700
Goldman Sachs Group 5.350% 10/01/96.................. 3,000 3,000
Lehman Brothers Holdings Inc. 5.900% 10/01/96........ 22,590 22,590
Merrill Lynch Corp. 5.850% 10/01/96.................. 10,275 10,275
Sundstrand 5.900% 10/01/96........................... 12,000 12,000
Working Capital Management 5.450% 10/04/96........... 44,300 44,280
----------
TOTAL SHORT-TERM OBLIGATIONS
(Amortized cost $110,845)......................................... 110,845
- ----------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.0%)
(Cost $789,199)................................................... 1,158,207
OTHER ASSETS, LESS LIABILITIES (0.0%)............................. 291
----------
TOTAL NET ASSETS (100.0%)......................................... $1,158,498
==========
- ----------------------------------------------------------------------------------
<FN>
*Non-income producing.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Special Venture Fund
- ----------------------------------------------------------------------------------
Investments as of September 30, 1996
(Dollar Amounts In Thousands)
Number Market
COMMON STOCKS (94.1%) of Shares Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
BANK (2.0%)
Southtrust Corporation............................... 94,000 $ 2,867
BROADCAST/MEDIA (4.5%)
*Central European Media Enterprises.................. 123,200 3,634
Hollinger International, Inc......................... 230,000 2,588
*Univision Communications Inc........................ 6,800 228
--------
6,450
BUSINESS SERVICES (13.4%)
*Caribiner International............................. 52,600 2,222
Danka Business Systems Plc ADRs...................... 130,900 5,203
G & K Services Class A............................... 152,100 4,449
*Keane Inc. ......................................... 126,600 6,077
Unitog Company....................................... 50,000 1,513
--------
19,464
COMMERCIAL SERVICES (2.6%)
*CellNet Data Systems................................ 50,000 788
*National Processing, Inc. .......................... 152,800 2,980
--------
3,768
COMPUTERS AND COMPUTER SOFTWARE (0.9%)
US International, Inc. .............................. 75,600 1,323
COMPUTER SERVICES (5.5%)
*FactSet Research Systems Inc. ...................... 79,700 1,524
*Fiserv, Inc. ....................................... 75,000 2,869
*Intelligroup, Inc. ................................. 22,500 312
*Microware Systems Corporation....................... 90,300 1,648
*Zebra Technologies Corporation...................... 60,000 1,538
--------
7,891
ELECTRICAL EQUIPMENT (1.9%)
*Ballantyne of Ohama, Inc............................ 131,000 1,801
*Littelfuse, Inc. Warrants........................... 30,000 930
--------
2,731
ELECTRONICS & INSTRUMENTATION (1.1%)
*Kent Electronics Corp. ............................. 71,000 1,535
ENERGY (2.0%)
*Renaissance Energy Ltd. ............................ 96,400 2,827
FABRICATED METAL PRODUCTS (2.4%)
Quanex Corporation................................... 50,000 1,344
*Wolverine Tube, Inc. ............................... 50,000 2,150
--------
3,494
<PAGE>
<CAPTION>
Special Venture Fund CONTINUED
- ----------------------------------------------------------------------------------
Number Market
of Shares Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
HEALTH SERVICES & EQUIPMENT (10.7%)
*Boston Scientific................................... 43,000 $ 2,473
*Electroscope, Inc. ................................. 32,200 274
*InControl, Inc. .................................... 36,800 345
Invacare Corp. ...................................... 123,100 3,447
Medtronic, Inc....................................... 46,000 2,950
Respironics Inc. .................................... 71,100 1,724
Stryker Corp......................................... 103,800 3,127
*Urologix, Inc. ..................................... 75,700 1,164
--------
15,504
INSURANCE (10.2%)
Meadow Brook Insurance............................... 105,600 2,957
Mutual Risk Management Ltd........................... 83,333 2,417
National Mutual Asia Ltd. ........................... 2,605,000 2,291
Protective Life Corporation.......................... 55,000 2,076
*Triad Guaranty Inc. ................................ 34,200 958
*Twentieth Century Industries........................ 230,700 4,066
--------
14,765
OIL/GAS (9.0%)
*Barrett Resources Corp.............................. 112,500 3,965
Cross Timbers Oil Company............................ 138,800 3,331
*Diamond Offshore Drilling, Inc. .................... 55,000 3,025
*United Meridian Corporation......................... 60,000 2,730
--------
13,051
REAL ESTATE (0.4%)
Beacon Properties Corporation........................ 20,000 580
RETAIL (11.6%)
*Garden Botanika, Inc. .............................. 141,000 1,586
*Oakley, Inc. ....................................... 70,000 2,975
*Proffitt's Inc. .................................... 29,800 1,177
Quality Food Centers................................. 69,600 2,419
*Sunglass Hut International, Inc..................... 183,000 2,916
Video Update, Inc. .................................. 393,000 1,891
*Zale Corp. ......................................... 176,600 3,863
--------
16,827
SEMI-CONDUCTORS (2.2%)
*Dupont Photomasks, Inc.............................. 111,200 3,114
SPECIALTY CHEMICALS (6.0%)
*CFC International, Inc. ............................ 138,200 1,727
Minerals Technology Corp. Class A.................... 61,800 2,309
OM Group Inc......................................... 122,800 4,665
--------
8,701
TELECOMMUNICATIONS (2.1%)
*Advanced Fibre Communications....................... 4,500 113
*Plantronics Inc. ................................... 53,900 2,028
*Western Wireless Corporation........................ 50,000 850
--------
2,991
WHOLESALE DISTRIBUTION (5.6%)
*AmeriSource Distribution Corp....................... 158,600 7,058
*Thompson PBE, Inc................................... 105,000 1,050
--------
8,108
--------
TOTAL COMMON STOCKS (Cost $110,927)............................... 135,991
<PAGE>
<CAPTION>
Special Venture Fund CONTINUED
- ----------------------------------------------------------------------------------
Principal Market
Amount Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM OBLIGATIONS (6.8%)
COMMERCIAL PAPER (6.8%)
Lehman Brothers Holdings Inc. 5.900% 10/01/96........ $ 5,160 $ 5,160
New York State Electric & Gas 5.500% 10/02/96........ 4,700 4,699
--------
TOTAL SHORT-TERM OBLIGATIONS
(Amortized cost $9,859)........................................... 9,859
- ----------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.9%)
(Cost $120,786)................................................... 145,850
OTHER ASSETS, LESS LIABILITIES (-0.9%)............................ (1,322)
--------
TOTAL NET ASSETS (100.0%)......................................... $144,528
========
- ----------------------------------------------------------------------------------
<FN>
* Non-income producing.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Capital Opportunities Fund
- ----------------------------------------------------------------------------------
Investments as of September 30, 1996
(Dollar Amounts In Thousands)
Number Market
EQUITY-RELATED SECURITIES (86.7%) of Shares Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (86.0%)
BUSINESS SERVICES (19.1%)
*ABR Information Services, Inc....................... 200,000 $ 14,400
*Alternative Resources Corporation................... 460,000 12,938
*APAC TeleServices, Inc.............................. 540,000 27,675
*The Bisys Group, Inc. .............................. 440,000 18,040
*CBT Group Plc....................................... 600,000 28,200
*CSG Systems International, Inc...................... 135,000 2,734
*Corporate Express, Inc. ............................ 1,000,000 38,875
*Danka Business Systems Plc.......................... 630,000 25,043
First Data Corporation............................... 400,000 32,650
*Gartner Group, Inc. ................................ 1,400,000 47,600
Paychex, Inc......................................... 960,000 55,680
*PMT Services, Inc................................... 920,000 18,630
--------
322,465
CONSUMER PRODUCTS (2.9%)
*CUC International Inc............................... 800,000 31,900
*Oakley, Inc......................................... 400,000 17,000
--------
48,900
HEALTH CARE (16.1%)
*Gulf South Medical Supply, Inc. .................... 290,000 7,468
HBO & Co. ........................................... 850,000 56,737
*HCIA Inc............................................ 300,000 18,000
*IDEXX Laboratories, Inc............................. 1,100,000 49,775
*IDX Systems Corp. .................................. 220,000 7,700
Omnicare, Inc........................................ 1,355,900 41,355
*PhyCor, Inc......................................... 1,200,000 45,675
*Physician Sales & Service, Inc...................... 1,000,000 23,500
*Quintiles Transnational Corp........................ 279,000 20,437
--------
270,647
INDUSTRIAL PRODUCTS (6.0%)
*Airgas, Inc......................................... 510,000 12,941
*Gentex Corporation.................................. 900,000 20,475
*MSC Industrial Direct Co., Inc...................... 570,400 20,320
*OEA, Inc............................................ 400,000 15,900
*United States Filter Corp. ......................... 900,000 30,713
--------
100,349
LEISURE & ENTERTAINMENT (12.6%)
Carnival Cruise Lines, Inc........................... 950,000 29,450
*Clear Channel Communications, Inc................... 740,000 65,490
*HFS Incorporated ................................... 1,000,000 66,875
LaQuinta Inns, Inc................................... 850,000 16,575
*Outdoor Systems, Inc................................ 250,000 11,750
*Promus Hotel Corporation............................ 800,000 22,600
--------
212,740
RESTAURANTS (1.7%)
*Papa John's International, Inc. .................... 550,000 28,875
<PAGE>
<CAPTION>
Capital Opportunities Fund CONTINUED
- ----------------------------------------------------------------------------------
Number Market
of Shares Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
SPECIALTY RETAILING (4.6%)
*Autozone, Inc....................................... 600,000 $ 17,400
*Kohl's Corporation.................................. 450,000 16,200
*PETsMART, Inc....................................... 400,000 10,350
*Starbucks Corporation............................... 500,000 16,500
*Sunglass Hut International, Inc..................... 1,040,000 16,575
--------
77,025
TECHNOLOGY (20.6%)
*ADC Telecommunications Inc. ........................ 500,000 32,000
*Andrew Telecommunications, Inc...................... 330,000 16,459
*Ascend Communications, Inc.......................... 550,000 36,369
*Aspen Technology, Inc............................... 240,000 16,260
*Cascade Communications Corp. ....................... 600,000 48,900
*Cisco Systems Inc................................... 600,000 37,237
Fore Systems, Inc.................................... 500,000 20,687
*Parametric Technology Corp. ........................ 660,000 32,588
*Premisys Communications, Inc........................ 280,000 10,290
*Pure Atria Corporation ............................. 648,738 24,490
*Shiva Corporation................................... 320,000 18,360
*Synopsys, Inc....................................... 400,000 18,450
*Tellabs Inc......................................... 500,000 35,312
----------
347,402
MISCELLANEOUS (2.4%)
*Apollo Group, Inc................................... 510,000 13,642
*Corrections Corporation of America.................. 850,000 26,562
----------
40,204
----------
TOTAL COMMON STOCKS (Cost $1,107,652)............................. 1,448,607
- ----------------------------------------------------------------------------------
Principal
CONVERTIBLE SUBORDINATED DEBENTURES (0.7%) Amount
- ----------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
BUSINESS SERVICES (0.5%)
Corporate Express 4.500% 7/01/00..................... $ 9,000 9,068
LEISURE & ENTERTAINMENT (0.2%)
Carnival Cruise Lines, Inc. 4.500% 7/01/97........... 2,000 3,555
----------
TOTAL CONVERTIBLE SUBORDINATED DEBENTURES (Cost $11,294).......... 12,623
- ----------------------------------------------------------------------------------
TOTAL EQUITY-RELATED SECURITIES (Cost $1,118,946)................. 1,461,230
- ----------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS (14.5%)
COMMERCIAL PAPER (14.5%)
American Home Food Products 5.350% 10/01/96 ......... 50,000 50,000
Conagra 5.430% 10/03/96.............................. 50,000 49,985
Countrywide Funding Corporation 5.440% 10/07/96...... 50,000 49,954
Lehman Brothers Holdings Inc. 5.900% 10/01/96........ 20,000 20,000
Merrill Lynch Corp. 5.850% 10/01/96.................. 39,725 39,725
Working Capital Management 5.500% 10/02/96........... 34,500 34,495
----------
TOTAL SHORT-TERM OBLIGATIONS
(Amortized cost $244,159)......................................... 244,159
- ----------------------------------------------------------------------------------
<PAGE>
<CAPTION>
Capital Opportunities Fund CONTINUED
- ----------------------------------------------------------------------------------
Market
Value
- ----------------------------------------------------------------------------------
<S> <C>
TOTAL INVESTMENTS (101.2%)
(Cost $1,363,105)................................................. $1,705,389
OTHER ASSETS, LESS LIABILITIES (-1.2%)............................ (20,851)
----------
TOTAL NET ASSETS (100.0%)......................................... $1,684,538
==========
- ----------------------------------------------------------------------------------
<FN>
*Non-income producing.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
International Fund
- ----------------------------------------------------------------------------------
Investments as of September 30, 1996
(Dollar Amounts In Thousands)
Number Market
of Shares Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
STOCKS (97.7%)
ARGENTINA (3.0%)
*Indupa S.A.......................................... 2,204,226 $ 983
Telecom Argentina GDSs............................... 32,600 1,316
YPF Sociedad Anonima Sponsored ADRs.................. 76,000 1,739
-------
4,038
AUSTRALIA (1.0%)
Reinsurance Australia Corp........................... 489,000 1,401
BELGIUM (1.3%)
Generale de Banque
Ordinary Shares................................... 5,200 1,797
Rights............................................ 5,200 11
-------
1,808
BRAZIL (2.0%)
Coteminas Pfd........................................ 2,200,000 793
*Globex Utilidades S.A. Pfd.......................... 71,000 1,321
*Perdigao S.A. Comercio e Industria Pfd.............. 364,700,000 572
-------
2,686
FINLAND (5.3%)
Enso Gutzeit (Ordinary R Shares)..................... 240,000 1,881
Kemira Oy............................................ 210,000 2,414
Metsa-Serla Oy (B Shares)............................ 252,000 1,655
Neste Oy............................................. 60,600 1,234
-------
7,184
FRANCE (4.4%)
Alcatel Alsthom...................................... 17,786 1,501
Generale Des Eaux.................................... 14,274 1,552
*Moulinex............................................ 55,500 968
Total Petroles CIass B............................... 24,616 1,939
-------
5,960
GERMANY (5.4%)
Agiv AG.............................................. 78,000 1,199
Friedrick Grohe AG................................... 6,300 1,731
Henkel KGAA
Ordinary Shares................................... 6,500 281
Preferred Shares.................................. 42,100 1,830
Mannesmann AG........................................ 6,100 2,287
-------
7,328
HONG KONG (7.0%)
Companion Building................................... 4,443,840 925
HKR International Ltd................................ 1,215,500 1,415
Hong Kong Ferry...................................... 470,000 830
International Bank of Asia........................... 1,400,000 846
Jardine Matheson Holdings Ltd........................ 159,576 997
New World Development................................ 290,615 1,526
Tian An China Investment............................. 2,536,000 338
Vitasoy.............................................. 999,364 381
World Houseware Holdings............................. 6,293,680 383
Yizheng Chemical Fibre Company....................... 7,602,000 1,848
-------
9,489
<PAGE>
<CAPTION>
International Fund CONTINUED
- ----------------------------------------------------------------------------------
Number Market
of Shares Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
INDIA (0.8%)
Indian Petrochem GDRs................................ 77,000 $ 789
**Reliance Industries GDSs........................... 29,000 312
-------
1,101
INDONESIA (3.0%)
Chareon Pokphand..................................... 415,000 554
*Ever Shine Text
Ordinary Shares................................... 1,711,600 627
Bonus Shares...................................... 308,088 113
Kawasan Industri Jababeka............................ 850,000 1,217
Matahari Putra Prime
Ordinary Shares................................... 851,000 926
Rights............................................ 851,000 559
-------
3,996
ISRAEL (0.5%)
Koor Industries...................................... 37,000 666
ITALY (3.7%)
*Olivetti............................................ 4,066,000 1,491
Telecom Italia
Savings Shares.................................... 1,466,000 2,702
Mobile Shares..................................... 654,000 812
-------
5,005
JAPAN (21.3%)
Canon Inc............................................ 71,000 1,396
DDI.................................................. 200 1,618
Hitachi.............................................. 171,000 1,658
Ito Yokado........................................... 30,000 1,705
*Japan OTC Fund...................................... 840 935
Jusco Co. ........................................... 73,000 2,222
Kaneshita Construction............................... 73,000 839
Kokusai Securities................................... 123,000 1,657
Matsushita Electric Industrial....................... 138,000 2,317
Mitsui Marine & Fire Insurance Co.................... 268,000 1,935
Mori Seiki........................................... 93,000 1,436
Murata Manufacturing................................. 50,000 1,787
Promise Co........................................... 46,000 2,148
Suzuki Motor......................................... 139,000 1,697
Tokyo Style.......................................... 105,000 1,716
*World Equity Benchmark Shares - Japan............... 134,000 1,985
Yamazen Corporation.................................. 376,000 1,850
-------
28,901
MALAYSIA (0.3%)
Kim Hin Industry Berhad.............................. 185,000 341
MEXICO (1.1%)
Transportation Maritima Mexicana ADRs................ 180,000 1,418
NETHERLANDS (4.1%)
Fortis AMEV.......................................... 63,247 1,893
IHC Caland N.V. ..................................... 24,000 1,264
KPN.................................................. 40,651 1,399
Sphinx Kon CVA....................................... 56,427 966
-------
5,522
<PAGE>
<CAPTION>
International Fund CONTINUED
- ----------------------------------------------------------------------------------
Number Market
of Shares Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
NEW ZEALAND (2.2%)
Brierley Investments Ltd. ........................... 1,824,883 $ 1,776
Lion Nathan Ltd. .................................... 496,000 1,235
-------
3,011
NORWAY (3.8%)
Helikopter Service................................... 129,000 1,518
Norsk Hydro AS....................................... 42,800 2,005
Saga Petroleum A Free................................ 103,000 1,663
--------
5,186
PANAMA (1.9%)
Bladex ADRs.......................................... 46,200 2,593
PORTUGAL (2.3%)
*Portucel Industrial Local Shares.................... 33,000 215
**Portucel Industrial ADSs........................... 110,000 701
*Portugal Telecom S.A. ADRs.......................... 85,157 2,192
--------
3,108
RUSSIA (1.0%)
*Fleming Russia Securities Fund...................... 139,000 1,303
SOUTH KOREA (3.5%)
Korea Exchange Bank.................................. 91,900 1,058
LG Securities........................................ 81,000 1,363
Samchully Co.
Ordinary Shares................................... 13,630 1,122
New 1 Shares...................................... 2,224 172
New 2 Shares...................................... 889 68
Samchully Electronics
Ordinary Shares................................... 689 54
New 1 Shares...................................... 207 16
Samsung Electronics
Ordinary Preferred Shares......................... 5,424 189
Bonus Issue Preferred Shares...................... 18,000 727
--------
4,769
SPAIN (1.0%)
Acerinox SA.......................................... 12,000 1,397
SWEDEN (4.5%)
Avesta-Sheffield..................................... 221,000 2,302
SSAB Svenskt Stal AB B Shares........................ 145,000 2,233
*Diligentia AB....................................... 130,000 1,550
--------
6,085
SWITZERLAND (2.0%)
Danzas Holding AG.................................... 650 679
Sandoz AG............................................ 1,700 2,042
--------
2,721
TAIWAN (1.7%)
ROC Taiwan Fund...................................... 216,400 2,326
THAILAND (0.3%)
Sino Thai Engineering & Construction................. 136,200 426
<PAGE>
<CAPTION>
International Fund CONTINUED
- ----------------------------------------------------------------------------------
Number Market
of Shares Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
UNITED KINGDOM (8.2%)
British Gas Plc...................................... 699,000 $ 2,180
*Celsis International Plc............................ 374,700 656
Inchcape Plc......................................... 536,000 2,275
Intrum Justita Plc................................... 305,000 494
Lasmo Plc............................................ 436,000 1,472
Powerscreen International Plc........................ 164,200 1,411
Smithkline Beecham Plc Class A....................... 130,516 1,593
Transtec Plc......................................... 595,054 1,047
--------
11,128
UNITED STATES (1.1%)
Tele-Communications International, Inc. ............. 96,000 1,452
--------
TOTAL STOCKS (Cost $124,749)...................................... 132,349
- ----------------------------------------------------------------------------------
Principal
SHORT-TERM OBLIGATIONS (3.3%) Amount
- ----------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
UNITED STATES (3.3%)
COMMERCIAL PAPER (3.3%)
Lehman Brothers Holdings Inc. 5.900% 10/01/96
(Amortized cost $4,510).............................. $ 4,510 4,510
- ----------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.0%)
(Cost Basis $129,259) ............................................ 136,859
OTHER ASSETS, LESS LIABILITIES (-1.0%)............................ (1,314)
--------
TOTAL NET ASSETS (100.0%)......................................... $135,545
========
- ----------------------------------------------------------------------------------
<FN>
* Non-income producing.
** These securities are subject to contractual or legal restrictions on their
resale. At September 30, 1996, the aggregate value of these securities
represented 0.7 percent of net assets.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Balance Sheets
===========================================================================================================================
September 30, 1996
(All Amounts In Thousands, except per-share data)
GROWTH GROWTH
BALANCED &INCOME STOCK
FUND FUND FUND
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
Investments, at market value...................... $231,776 $204,129 $417,528
Receivable for investments and currencies sold.... 2,575 -- --
Receivable for fund shares sold................... 36 617 277
Dividends and interest receivable................. 1,056 262 413
Cash and other assets............................. 162 243 283
--------- --------- ---------
Total Assets................................... $235,605 $205,251 $418,501
======== ======== ========
LIABILITIES
Payable for investments and currencies purchased.. $ 3,946 $ 461 $ --
Payable for fund shares redeemed.................. 267 131 42
Payable to investment adviser and transfer agent.. 176 165 354
Other liabilities................................. 153 107 141
--------- --------- ---------
Total Liabilities.............................. 4,542 864 537
--------- --------- ---------
CAPITAL
Paid-in capital .................................. 167,769 143,141 225,199
Net unrealized appreciation of investments and
foreign currencies............................. 47,380 53,483 158,669
Accumulated undistributed net
investment income (loss)....................... (555) 716 957
Accumulated undistributed net realized
gains (losses) on investments and
foreign currency transactions.................. 16,469 7,047 33,139
--------- --------- ---------
Total Capital (Net Assets)..................... 231,063 204,387 417,964
--------- --------- ---------
Total Liabilities and Capital.................. $235,605 $205,251 $418,501
======== ======== ========
Shares Outstanding
(Unlimited Number Authorized).................. 7,685 11,116 14,517
======== ======== ========
Net Asset Value (Capital) Per Share............... $ 30.07 $ 18.39 $ 28.79
======== ======== ========
SPECIAL CAPITAL
SPECIAL VENTURE OPPORTUNITIES INTERNATIONAL
FUND FUND FUND FUND
----------- -------- --------- ---------
<CAPTION>
<S> <C> <C> <C> <C>
ASSETS
Investments, at market value...................... $1,158,207 $145,850 $1,705,389 $136,859
Receivable for investments and currencies sold.... 6,456 2,322 3,890 1,601
Receivable for fund shares sold................... 170 234 12,122 31
Dividends and interest receivable................. 480 59 161 291
Cash and other assets............................. 677 1,080 1,770 133
----------- --------- ----------- ---------
Total Assets................................... $1,165,990 $149,545 $1,723,332 $138,915
========== ======== ========== ========
LIABILITIES
Payable for investments and currencies purchased.. $ 4,434 $ 4,570 $ 35,466 $ 3,062
Payable for fund shares redeemed.................. 1,782 -- -- 59
Payable to investment adviser and transfer agent.. 961 148 1,283 136
Other liabilities................................. 315 299 2,045 113
----------- --------- ----------- ---------
Total Liabilities.............................. 7,492 5,017 38,794 3,370
----------- --------- ----------- ---------
CAPITAL
Paid-in capital .................................. 706,675 110,699 1,353,886 126,003
Net unrealized appreciation of investments and
foreign currencies............................. 368,965 25,064 342,284 7,599
Accumulated undistributed net
investment income (loss)....................... (2,611) (214) (3,208) 933
Accumulated undistributed net realized gains (loss
investments and foreign currency transactions.. 85,469 8,979 (8,424) 1,010
----------- --------- ----------- ---------
Total Capital (Net Assets)..................... 1,158,498 144,528 1,684,538 135,545
----------- --------- ----------- ---------
Total Liabilities and Capital.................. $1,165,990 $149,545 $1,723,332 $138,915
========== ======== ========== ========
Shares Outstanding
(Unlimited Number Authorized).................. 42,299 9,106 54,262 12,369
========== ======== ========== ========
Net Asset Value (Capital) Per Share............... $ 27.39 $ 15.87 $ 31.04 $ 10.96
========== ======== ========== ========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of Operations
===========================================================================================================================
For The Year Ended September 30, 1996
(All Amounts In Thousands)
GROWTH GROWTH
BALANCED &INCOME STOCK
FUND FUND FUND
-------- -------- --------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends......................................... $ 4,190 $ 2,719 $ 3,893
Interest.......................................... 6,020 1,951 1,515
-------- -------- --------
10,210 4,670 5,408
Foreign taxes withheld -- -- --
-------- -------- --------
Total Investment Income........................ 10,210 4,670 5,408
-------- -------- --------
EXPENSES
Management fees................................... 1,247 989 2,316
Transfer agent fees............................... 499 363 849
Administrative fees............................... 340 247 579
Custodian fees.................................... 35 21 29
SEC and state registration fees................... 26 40 31
Accounting fees................................... 29 28 34
Trustees' fees.................................... 18 18 25
Amortization of organization expenses............. -- -- --
Other............................................. 192 236 310
-------- -------- --------
2,386 1,942 4,173
Reimbursement of expenses by
investment adviser............................. -- -- --
-------- -------- --------
Total Expenses................................. 2,386 1,942 4,173
-------- -------- --------
Net Investment Income (Loss)................... 7,824 2,728 1,235
-------- -------- --------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS
Net realized gains (losses) on investments........ 15,855 5,675 34,712
Net realized gains (losses) on foreign
currency transactions.......................... -- -- --
Net realized gains on futures transactions........ -- 1,985 --
Net change in unrealized appreciation
or depreciation of investments and
foreign currency transactions................... 7,704 23,196 37,878
-------- -------- --------
Net Gains on Investments and Foreign
Currency Transactions........................ 23,559 30,856 72,590
-------- -------- --------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $31,383 $33,584 $73,825
========== ========== ==========
SPECIAL CAPITAL
SPECIAL VENTURE OPPORTUNITIES INTERNATIONAL
FUND FUND FUND FUND
-------- -------- -------- --------
<CAPTION>
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends......................................... $ 8,589 $ 335 $ 784 $ 2,697
Interest.......................................... 4,993 643 5,701 403
--------- -------- --------- --------
13,582 978 6,485 3,100
Foreign taxes withheld -- -- -- (320)
--------- -------- --------- --------
Total Investment Income........................ 13,582 978 6,485 2,780
--------- -------- --------- --------
EXPENSES
Management fees................................... 7,921 808 5,695 1,055
Transfer agent fees............................... 2,474 209 1,744 243
Administrative fees............................... 1,500 46 1,064 49
Custodian fees.................................... 152 34 33 169
SEC and state registration fees................... 29 46 465 39
Accounting fees................................... 52 26 44 27
Trustees' fees.................................... 53 19 23 18
Amortization of organization expenses............. -- 4 -- --
Other............................................. 1,054 79 572 66
--------- -------- --------- --------
13,235 1,271 9,640 1,666
Reimbursement of expenses by
investment adviser............................. -- (85) -- --
--------- -------- --------- --------
Total Expenses................................. 13,235 1,186 9,640 1,666
--------- -------- --------- --------
Net Investment Income (Loss)................... 347 (208) (3,155) 1,114
--------- -------- --------- --------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS
Net realized gains (losses) on investments........ 91,665 9,004 (8,425) 2,994
Net realized gains (losses) on foreign
currency transactions.......................... 1,336 -- -- (18)
Net realized gains on futures transactions........ -- -- -- --
Net change in unrealized appreciation
or depreciation of investments and
foreign currency transactions................... 89,107 19,130 261,649 4,858
--------- -------- --------- --------
Net Gains on Investments and Foreign
Currency Transactions........................ 182,108 28,134 253,224 7,834
--------- -------- --------- --------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $182,455 $27,926 $250,069 $8,948
============ ========== ============ ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
===========================================================================================================================
For The Years Ended September 30, 1995 And 1996
(All Amounts In Thousands)
BALANCED FUND GROWTH &INCOME FUND GROWTH STOCK FUND
1995 1996 1995 1996 1995 1996
---------------------- ---------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income............................ $ 11,415 $ 7,824 $ 2,253 $ 2,728 $ 1,800 $ 1,235
Net realized gains on investments and foreign
currency transactions.......................... 4,680 15,855 12,531 7,660 35,566 34,712
Net change in unrealized appreciation
or depreciation of investments and
foreign currency transactions.................. 13,869 7,704 9,832 23,196 44,475 37,878
========== ========== ========= ========== ======== ========
Net Increase in Net Assets Resulting
from Operations.............................. 29,964 31,383 24,616 33,584 81,841 73,825
--------- --------- --------- --------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income.............. (10,573) (7,977) (1,706) (2,954) (1,950) (1,400)
Capital gain distributions........................ (2,423) (5,662) (5,016) (12,376) (39,914) (32,877)
--------- --------- --------- --------- -------- --------
Total Distributions to Shareholders............ (12,996) (13,639) (6,722) (15,330) (41,864) (34,277)
--------- --------- --------- --------- -------- --------
SHARE TRANSACTIONS
Subscriptions to fund shares...................... 27,078 24,623 27,756 70,627 30,276 56,575
Investment income dividends reinvested............ 8,385 6,213 1,429 2,409 1,611 1,157
Capital gain distributions reinvested............. 2,142 4,955 4,619 11,090 35,003 28,785
Redemptions of fund shares........................ (55,287) (51,032) (41,839) (37,532) (68,033) (68,437)
--------- --------- --------- --------- -------- --------
Net Increase (Decrease) from
Share Transactions........................... (17,682) (15,241) (8,035) 46,594 (1,143) 18,080
--------- --------- --------- --------- -------- --------
Net Increase (Decrease) in Net Assets.......... (714) 2,503 9,859 64,848 38,834 57,628
TOTAL NET ASSETS
Beginning of Year................................. 229,274 228,560 129,680 139,539 321,502 360,336
--------- --------- --------- --------- -------- --------
End of Year...................................... $228,560 $231,063 $139,539 $204,387 $360,336 $417,964
========== ========== ========= ========== ======== ========
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME
AT END OF PERIOD............................... $ 1,180 $ (555) $ 942 $ 716 $ 1,122 $ 957
========== ========== ========= ========== ======== ========
ANALYSES OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to fund shares...................... 1,052 852 1,884 4,094 1,358 2,124
Investment income dividends reinvested............ 329 219 99 144 80 47
Capital gain distributions reinvested............. 89 180 337 698 1,733 1,166
--------- --------- --------- --------- -------- --------
1,470 1,251 2,320 4,936 3,171 3,337
Redemptions of fund shares (2,146) (1,783) (2,856) (2,201) (3,017) (2,610)
--------- --------- --------- --------- -------- --------
Net increase (decrease) in fund shares............ (676) (532) (536) 2,735 154 727
Shares outstanding at beginning of year........... 8,893 8,217 8,917 8,381 13,636 13,790
--------- --------- --------- --------- -------- --------
Shares outstanding at end of year................. 8,217 7,685 8,381 11,116 13,790 14,517
========== ========== ========= ========== ======== ========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
===========================================================================================================================
For The Period Ended September 30, 1995 And The Year Ended September 30, 1996
(All Amounts In Thousands)
SPECIAL
SPECIAL FUND VENTURE FUND
1995 1996 1995* 1996
---------------------------- -------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss)...................... $ 6,683 $ 347 $ 39 $ (208)
Net realized gains (losses) on investments
and foreign currency transactions.............. 85,576 93,001 3,073 9,004
Net change in unrealized appreciation
or depreciation of investments
and foreign currency transactions.............. 70,232 89,107 5,934 19,130
----------- ----------- -------- ---------
Net Increase (Decrease) in Net Assets
Resulting from Operations.................... 162,491 182,455 9,046 27,926
----------- ----------- -------- ---------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income.............. (7,700) (4,825) (45) --
Capital gain distributions....................... (69,358) (85,187) (82) (3,016)
----------- ----------- -------- ---------
Total Distributions to Shareholders............ (77,058) (90,012) (127) (3,016)
----------- ----------- -------- ---------
SHARE TRANSACTIONS
Subscriptions to fund shares...................... 189,907 139,995 57,989 71,954
Investment income dividends reinvested............ 7,014 4,332 33 (3)
Capital gain distributions reinvested............. 65,654 79,821 79 2,899
Redemptions of fund shares........................ (390,424) (359,562) (6,487) (15,765)
----------- ----------- -------- ---------
Net Increase (Decrease) from S
hare Transactions.............................. (127,849) (135,414) 51,614 59,085
----------- ----------- -------- ---------
Net Increase (Decrease) in Net Assets......... (42,416) (42,971) 60,533 83,995
TOTAL NET ASSETS
Beginning of Period............................... 1,243,885 1,201,469 -- 60,533
----------- ----------- -------- ---------
End of Period..................................... $1,201,469 $1,158,498 $60,533 $144,528
============ ============ ========= ==========
Accumulated Undistributed Net
Investment Income (loss) at End of Period...... $ 4,642 $ (2,611) $ (6) $ (214)
============ ============ ========= ==========
ANALYSES OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to fund shares...................... 8,272 5,554 5,362 5,177
Shares issued in connection with stock split**.... -- -- -- --
Investment income dividends reinvested............ 327 187 3 --
Capital gain distributions reinvested............. 3,064 3,445 8 237
----------- ----------- -------- ---------
11,663 9,186 5,373 5,414
Redemptions of fund shares (16,938) (14,456) (567) (1,114)
----------- ----------- -------- ---------
Net increase (decrease) in fund shares............ (5,275) (5,270) 4,806 4,300
Shares outstanding at beginning of period......... 52,844 47,569 -- 4,806
----------- ----------- -------- ---------
Shares outstanding at end of period............... 47,569 42,299 4,806 9,106
============ ============ ========= ==========
CAPITAL
OPPORTUNITIES FUND INTERNATIONAL FUND
1995 1996 1995 1996
---------------------- ---------------------
<CAPTION>
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss)...................... $ 152 $ (3,155) $ 1,031 $ 1,114
Net realized gains (losses) on investments
and foreign currency transactions.............. 18,194 (8,425) (1,820) 2,976
Net change in unrealized appreciation
or depreciation of investments
and foreign currency transactions.............. 45,624 261,649 (33) 4,858
--------- ----------- -------- ---------
Net Increase (Decrease) in Net Assets
Resulting from Operations.................... 63,970 250,069 (822) 8,948
--------- ----------- -------- ---------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income.............. (105) (150) (340) (1,075)
Capital gain distributions........................ -- (12,960) (1,229) --
--------- ----------- -------- ---------
Total Distributions to Shareholders............ (105) (13,110) (1,569) (1,075)
--------- ----------- -------- ---------
SHARE TRANSACTIONS
Subscriptions to fund shares...................... 90,143 1,801,763 26,531 62,994
Investment income dividends reinvested............ 87 128 242 760
Capital gain distributions reinvested............. -- 11,772 1,153 --
Redemptions of fund shares........................ (87,401) (608,465) (17,332) (19,102)
--------- ----------- -------- ---------
Net Increase (Decrease) from S
hare Transactions.............................. 2,829 1,205,198 10,594 44,652
--------- ----------- -------- ---------
Net Increase (Decrease) in Net Assets.......... 66,694 1,442,157 8,203 52,525
TOTAL NET ASSETS
Beginning of Period............................... 175,687 242,381 74,817 83,020
--------- ----------- -------- ---------
End of Period..................................... $242,381 $1,684,538 $83,020 $135,545
========== ============ ========= ==========
Accumulated Undistributed Net
Investment Income (loss) at End of Period...... $ 97 $ (3,208) $ 865 $ 933
========== ============ ========= ==========
ANALYSES OF CHANGES IN SHARES OF BENEFICIAL INTERES
Subscriptions to fund shares...................... 2,765 64,836 2,669 6,004
Shares issued in connection with stock split**.... 5,511 -- -- --
Investment income dividends reinvested............ 2 6 25 76
Capital gain distributions reinvested............. -- 527 118 --
--------- --------- -------- ---------
8,278 65,369 2,812 6,080
Redemptions of fund shares (2,669) (22,280) (1,766) (1,811)
--------- --------- -------- ---------
Net increase (decrease) in fund shares............ 5,609 43,089 1,046 4,269
Shares outstanding at beginning of period......... 5,564 11,173 7,054 8,100
--------- --------- -------- ---------
Shares outstanding at end of period............... 11,173 54,262 8,100 12,369
========== ========== ========= ==========
<FN>
* From commencement of operations on October 17, 1994.
** Capital Opportunities declared a 2 for 1 stock split effective August 25,
1995.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
Notes to Financial Statements
- ------------------------------------------------------------------------------
NOTE 1. SIGNIFICANT
ACCOUNTING POLICIES
The following are the significant accounting policies of Stein Roe Balanced
Fund, Stein Roe Growth & Income Fund, Stein Roe Growth Stock Fund, Stein Roe
Special Fund, Stein Roe Special Venture Fund, Stein Roe Capital Opportunities
Fund, and Stein Roe International Fund (the "Funds"), each a series of the
Stein Roe Investment Trust (a Massachusetts business trust). The policies are
in conformity with generally accepted accounting principles. The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of increases and decreases in net assets from operations
during the reporting period. Actual results could differ from those estimates.
SECURITY VALUATIONS
All securities are valued as of September 30, 1996. 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 sale 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 of the Funds are valued by a method that the
Board of Trustees believes represents a fair value.
FUTURES CONTRACTS
During the year ended September 30, 1996, Growth & Income 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.
<PAGE>
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.
FORWARD CURRENCY EXCHANGE CONTRACTS
At September 30, 1996, Special Fund had entered into forward currency exchange
contracts under which it is obligated to exchange currencies at specified
future dates. Risks arise from the possible inability of counter parties to
meet the terms of their contracts and from movements in currency values. The
Fund had the following outstand ing contracts at September 30, 1996:
Settlement Contract to
DATE RECEIVE DELIVER
Dec. 13, 1996 $18,545 23,144 CHF
Net unrealized depreciation of $43 on these contracts at September 30,
1996, is included in the accompany ing financial statements.
FEDERAL INCOME TAXES
No provision is made for federal income taxes since each Fund elects to
be taxed as a "regulated invest ment company" and makes such distrib utions 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.
At September 30, 1996, Capital Opportunities Fund had a capital
loss carryforward of $8,401, which expires 2004.
DISTRIBUTIONS TO SHAREHOLDERS
On October 30, 1996, the Board of Trustees declared a dividend from net
investment income of $0.22 per share for Balanced Fund and $0.05 per share for
Growth & Income Fund, payable November 20, 1996, to share holders of record on
November 10, 1996.
Distributions in excess of tax basis earnings are reported in the financial
statements as a return of capital. Differ ences in the recognition or
classification of income between the financial statements and tax earnings
that result in temporary overdistribu tions are classified as distributions in
excess of net investment income or net realized gains, and any perma nent
differences are reclassified to paid-in capital.
OTHER INFORMATION
The books and records of the Funds are maintained in U.S. dollars. Dividend
income is recognized on the ex-dividend date and interest income is recognized
on an accrual basis.
Realized gains or losses from sales of securities are determined on the
specific identified cost basis.
All amounts, except per-share amounts, are shown in thousands.
<PAGE>
NOTE 2. TRUSTEES' FEES AND TRANSACTIONS WITH AFFILIATES
The Funds pay monthly management and administrative fees to Stein Roe & Farnham
Incorporated (the "Adviser"), an indirect, majority-owned subsidiary of Liberty
Mutual Insurance Company, for its services as investment adviser and manager.
The management and admin istrative fees for the following Funds are
computed at annual rates as a percentage of average daily net assets as
follows:
BALANCED FUND
Management Fees
0.55% up to $500 million
0.50% of next $500 million
0.45% thereafter
Administrative Fees
0.15% up to $500 million
0.125% of next $500 million
0.10% thereafter
GROWTH & INCOME FUND AND
GROWTH STOCK FUND
Management Fees
0.60% up to $500 million
0.55% of next $500 million
0.50% thereafter
Administrative Fees
0.15% up to $500 million
0.125% of next $500 million
0.10% thereafter
CAPITAL OPPORTUNITIES FUND AND SPECIAL FUND
Management Fees
0.75% up to $500 million
0.70% of next $500 million
0.65% of next $500 million
0.60% thereafter
Administrative Fees
0.15% up to $500 million
0.125% of next $500 million
0.10% of next $500 million
0.075% thereafter
Effective July 1, 1996, the management fees for Special Venture Fund and
International Fund are computed at an annual rate of .75 percent and .85
percent of average daily net assets, respectively. The administrative fees are
computed at an annual rate of .15 percent of average daily net assets. Prior
to July 1, 1996, the Adviser provided both portfolio management and
administrative services under an investment advisory agreement. The fee under
this agreement for Special Venture Fund was computed at .90 percent of average
daily net assets, and for International Fund, 1 percent of average daily net
assets.
The administrative agreement for all Funds 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 the
Fund's shares are offered for sale. In addition, the Adviser has agreed to
reimburse Special Venture Fund and International Fund to the extent that their
expenses exceed 1.25 percent and 1.65 percent, respectively, of average daily
net assets. These expense limitations expire on January 31, 1997, subject to
earlier termination by the Adviser on 30 days' notice.
<PAGE>
The transfer agent fees are paid to SteinRoe Services Inc. (SSI), an
indirect, majority-owned subsidiary of Liberty Mutual Insurance Company.
Effective July 3, 1996, SSI entered into an agreement with Colonial Investors
Service Center, Inc., an indirect, majority-owned subsidiary of Liberty Mutual
Insurance Company, to act as sub-transfer agent for the Funds.
The Adviser also provides the Funds with certain fund accounting services.
For the year ended September 30, 1996, Balanced Fund, Growth & Income Fund,
Growth Stock Fund, Special Fund, Special Venture Fund, Capital Opportunities
Fund and International Fund incurred charges of $29, $28, $34, $52, $26, $44
and $27, respectively.
Certain officers and trustees of the Trust are also officers of the
Adviser. The compensation of trustees not affiliated with the Adviser for
Balanced Fund, Growth & Income Fund, Growth Stock Fund, Special Fund, Special
Venture Fund, Capital Opportunities Fund and International Fund for the year
ended September 30, 1996, was $18, $18, $25, $53, $19, $23 and $18,
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. The Funds had no
borrowings during the year ended September 30, 1996.
<PAGE>
Notes to Financial Statements CONTINUED
- ------------------------------------------------------------------------------
NOTE 4. INVESTMENT TRANSACTIONS
The aggregate cost of purchases and proceeds from sales other than short-term
obligations for the year ended September 30, 1996, were:
FUND Purchases Sales
----------- ---------
Balanced............................................. $ 186,693 $227,692
Growth & Income...................................... 46,347 17,120
Growth Stock......................................... 140,618 155,312
Special.............................................. 330,743 602,310
Special Venture...................................... 116,720 61,157
Capital Opportunities................................ 1,128,038 161,548
International........................................ 91,398 44,422
At September 30, 1996, unrealized appreciation and depreciation on a tax
basis and the cost of investments for federal income tax purposes and for
financial reporting purposes were as follows:
<TABLE>
<CAPTION>
Cost of Investments
Federal
Net Financial Income
FUND Appreciation Depreciation Appreciation Reporting Tax
--------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balanced.................... $ 49,032 $ 1,220 $ 47,812 $ 184,396 $ 183,964
Growth & Income............. 54,571 1,225 53,346 150,783 150,783
Growth Stock................ 159,299 630 158,669 258,859 258,859
Special..................... 385,039 17,179 367,860 789,199 790,347
Special Venture............. 26,993 1,929 25,064 120,786 120,786
Capital Opportunities....... 354,641 12,380 342,261 1,363,105 1,363,128
International............... 16,237 8,637 7,600 129,259 129,259
</TABLE>
<PAGE>
Financial Highlights
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Special Venture Fund
Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.
PERIOD YEAR
ENDED ENDED
SEPT. 30, SEPT. 30,
1995(A) 1996
<S> <C> <C>
------- --------
NET ASSET VALUE, BEGINNING OF PERIOD............ $ 10.00 $ 12.60
------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)................. 0.01 (0.02)
Net realized and unrealized gains on investments 2.67 3.86
------- --------
Total from investment operations.......... 2.68 3.84
------- --------
DISTRIBUTIONS
Net investment income ....................... (0.03) --
Net realized capital gains................... (0.05) (0.57)
------- --------
Total distributions....................... (0.08) (0.57)
------- --------
NET ASSET VALUE, END OF PERIOD.................. $ 12.60 $ 15.87
=========== =============
Ratio of net expenses to average net assets (b). 1.25%* 1.25%
Ratio of net investment income to average net assets (c) 0.12%* (2.19%)
Portfolio turnover rate......................... 84% 72%
Average Commissions (Per Share)................. -- $ 0.0378
Total return.................................... 26.96% 31.81%
Net assets, end of period....................... $60,533 $144,528
<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 by the investment Adviser, this ratio would have been 2.87
percent for the period ended September 30, 1995, and 1.34 percent for the year
ended September 30, 1996.
(c) Computed giving effect to investment Adviser's expense limitation undertaking.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights CONTINUED
=======================================================================================================================
Balanced Fund
Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.
NINE
MONTHS
YEARS ENDED ENDED
DEC. 31, SEPT. 30, YEARS ENDED SEPT. 30,
1986 1987 1988 1989 1990
<S> <C> <C> <C> <C> <C>
-------- -------- -------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 25.04 $ 25.07 $ 22.25 $ 22.66 $ 25.41
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ........................ 1.33 1.32 0.97 1.37 1.28
Net realized and unrealized gains
(losses) on investments..................... 2.75 (1.06) 0.45 3.10 (2.92)
-------- -------- -------- -------- --------
Total from investment operations........... 4.08 0.26 1.42 4.47 (1.64)
-------- -------- -------- -------- --------
DISTRIBUTION
Net investment income ........................ (1.35) (1.63) (0.90) (1.34) (1.36)
Net realized capital gains.................... (2.70) (1.45) (0.11) (0.38) (0.73)
-------- -------- -------- -------- --------
Total distributions........................ (4.05) (3.08) (1.01) (1.72) (2.09)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD................... $ 25.07 $ 22.25 $ 22.66 $ 25.41 $ 21.68
========= ======== ======== ======== ======
Ratio of net expenses to average net assets...... 0.79% 0.80% 0.87%* 0.90% 0.88%
Ratio of net investment income to
average net assets............................ 5.21% 5.12% 5.68%* 5.83% 5.36%
Portfolio turnover rate.......................... 108% 86% 85% 93% 75%
Average Commissions (Per Share).................. -- -- -- -- --
Total return..................................... 17.11% 0.74% 6.51% 20.76% (6.86%)
Net assets, end of period........................ $149,831 $140,279 $134,225 $144,890 $124,592
YEARS ENDED SEPT. 30,
1991 1992 1993 1994 1995 1996
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 21.68 $ 26.08 $ 26.91 $ 27.57 $ 25.78 $ 27.82
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ........................ 1.32 1.31 1.26 1.15 1.33 1.00
Net realized and unrealized gains
(losses) on investments..................... 4.85 1.48 2.37 (1.06) 2.22 2.96
-------- -------- -------- --------- ------ --------
Total from investment operations........... 6.17 2.79 3.63 0.09 3.55 3.96
-------- -------- -------- -------- ------- -------
DISTRIBUTIONS
Net investment income ........................ (1.26) (1.34) (1.30) (1.17) (1.23) (1.01)
Net realized capital gains.................... (0.51) (0.62) (1.67) (0.71) (0.28) (0.70)
-------- -------- -------- --------- ------ -------
Total distributions........................ (1.77) (1.96) (2.97) (1.88) (1.51) (1.71)
-------- -------- -------- -------- ------- ------
NET ASSET VALUE, END OF PERIOD................... $ 26.08 $ 26.91 $ 27.57 $ 25.78 $ 27.82 $ 30.07
=========== ========= ========= ======== ======= =======
Ratio of net expenses to average net assets...... 0.87% 0.85% 0.81% 0.83% 0.87% 1.05%
Ratio of net investment income to
average net assets............................ 5.50% 4.94% 4.69% 4.53% 5.14% 3.45%
Portfolio turnover rate.......................... 71% 59% 53% 29% 45% 87%
Average Commissions (Per Share).................. -- -- -- -- -- $ 0.0537
Total return..................................... 29.67% 11.13% 14.57% 0.36% 14.49% 14.83%
Net assets, end of period........................ $150,689 $173,417 $222,292 $229,274 $228,560 $231,063
<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.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights CONTINUED
==============================================================================================================================
Growth & Income Fund
Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.
PERIOD ENDED
SEPT. 30, YEARS ENDED SEPTEMBER 30,
1987(A) 1988 1989 1990 1991
<S> <C> <C> <C> <C> <C>
------- ------- ------- ------- -------
NET ASSET VALUE, BEGINNING OF PERIOD............ $ 10.00 $ 10.49 $ 8.88 $ 11.34 $ 10.49
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ....................... 0.05 0.17 0.22 0.26 0.26
Net realized and unrealized gains (losses)
on investments............................ 0.47 (1.64) 2.46 (0.85) 2.17
------- ------- ------- ------- -------
Total from investment operations.......... 0.52 (1.47) 2.68 (0.59) 2.43
------- ------- ------- ------- -------
DISTRIBUTIONS
Net investment income ....................... (0.03) (0.14) (0.22) (0.26) (0.29)
Net realized capital gains................... -- -- -- -- (0.36)
------- ------- ------- ------- -------
Total distributions....................... (0.03) (0.14) (0.22) (0.26) (0.65)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD.................. $ 10.49 $ 8.88 $ 11.34 $ 10.49 $ 12.27
========== ========== ========== ========== ========
Ratio of net expenses to average net assets (b). 1.91%* 1.47% 1.24% 1.08% 1.00%
Ratio of net investment income to average net
assets (c) 1.43%* 2.03% 2.28% 2.40% 2.27%
Portfolio turnover rate......................... 32% 105% 63% 51% 48%
Average Commissions (Per Share)................. -- -- -- -- --
Total return.................................... 5.20% (13.90%) 30.63% (5.25%) 24.12%
Net assets, end of period....................... $22,863 $23,002 $32,562 $43,446 $54,820
YEARS ENDED SEPTEMBER 30,
1992 1993 1994 1995 1996
<CAPTION>
<S> <C> <C> <C> <C> <C>
------- -------- -------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD............ $ 12.27 $ 13.42 $ 14.83 $ 14.54 $ 16.65
------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ....................... 0.19 0.17 0.18 0.34 0.27
Net realized and unrealized gains (losses)
on investments............................ 1.49 2.16 0.40 2.56 3.22
------- -------- -------- -------- --------
Total from investment operations.......... 1.68 2.33 0.58 2.90 3.49
------- -------- -------- -------- --------
DISTRIBUTIONS
Net investment income ....................... (0.18) (0.16) (0.16) (0.20) (0.32)
Net realized capital gains................... (0.35) (0.76) (0.71) (0.59) (1.43)
------- -------- -------- -------- --------
Total distributions....................... (0.53) (0.92) (0.87) (0.79) (1.75)
------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD.................. $ 13.42 $ 14.83 $ 14.54 $ 16.65 $ 18.39
========== ========== ========== ========= =========
Ratio of net expenses to average net assets (b). 0.97% 0.88% 0.90% 0.96% 1.18%
Ratio of net investment income to average net
assets (c) 1.46% 1.23% 1.18% 1.78% 1.65%
Portfolio turnover rate......................... 40% 50% 85% 70% 13%
Average Commissions (Per Share)................. -- -- -- -- $ 0.0683
Total return.................................... 14.00% 17.98% 4.03% 21.12% 22.67%
Net assets, end of period....................... $70,724 $100,365 $129,680 $139,539 $204,387
<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.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights CONTINUED
===============================================================================================================================
Growth Stock Fund
Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.
NINE
MONTHS
YEARS ENDED ENDED
DEC. 31, SEPT. 30, YEARS ENDED SEPT. 30,
1986 1987 1988 1989 1990
<S> <C> <C> <C> <C> <C>
-------- -------- -------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 17.43 $ 16.97 $ 14.67 $ 14.60 $ 19.05
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ........................ 0.26 0.24 0.19 0.34 0.39
Net realized and unrealized gains (losses) on
investments 2.75 0.46 (0.11) 4.51 (1.17)
-------- -------- -------- -------- --------
Total from investment operations........... 3.01 0.70 0.08 4.85 (0.78)
-------- -------- -------- -------- --------
DISTRIBUTIONS
Net investment income ........................ (0.25) (0.29) (0.15) (0.34) (0.37)
Net realized capital gains.................... (3.22) (2.71) -- (0.06) --
-------- -------- -------- -------- --------
Total distributions........................ (3.47) (3.00) (0.15) (0.40) (0.37)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD................... $ 16.97 $ 14.67 $ 14.60 $ 19.05 $ 17.90
============ ========= ======== =========== ========
Ratio of net expenses to average net assets...... 0.67% 0.65% 0.76%* 0.77% 0.73%
Ratio of net investment income to average net assets 1.34% 1.25% 1.62%* 2.05% 2.03%
Portfolio turnover rate.......................... 137% 143% 84% 47% 40%
Average Commissions (Per Share).................. -- -- -- -- --
Total return..................................... 16.91% 5.57% 0.54% 33.86% (4.17%)
Net assets, end of period........................ $226,604 $232,658 $195,641 $206,476 $206,031
YEARS ENDED SEPT. 30,
1991 1992 1993 1994 1995 1996
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 17.90 $ 22.79 $ 24.65 $ 24.89 $ 23.58 $ 26.13
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ........................ 0.33 0.18 0.15 0.13 0.12 0.08
Net realized and unrealized gains (losses) on
investments 5.90 3.01 1.14 0.41 5.60 5.01
-------- -------- -------- -------- ------- --------
Total from investment operations........... 6.23 3.19 1.29 0.54 5.72 5.09
-------- -------- -------- -------- -------- -------
DISTRIBUTIONS
Net investment income ........................ (0.42) (0.16) (0.10) (0.12) (0.15) (0.10)
Net realized capital gains.................... (0.92) (1.17) (0.95) (1.73) (3.02) (2.33)
-------- -------- -------- -------- -------- --------
Total distributions........................ (1.34) (1.33) (1.05) (1.85) (3.17) (2.43)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD................... $ 22.79 $ 24.65 $ 24.89 $ 23.58 $ 26.13 $ 28.79
=========== ========= ========= ========== ======== =======
Ratio of net expenses to average net assets...... 0.79% 0.92% 0.93% 0.94% 0.99% 1.08%
Ratio of net investment income to average net assets 1.63% 0.75% 0.59% 0.50% 0.56% 0.32%
Portfolio turnover rate.......................... 34% 23% 29% 27% 36% 39%
Average Commissions (Per Share).................. -- -- -- -- -- $ 0.0528
Total return..................................... 36.64% 14.37% 5.09% 2.10% 28.18% 21.04%
Net assets, end of period........................ $291,767 $372,758 $373,921 $321,502 $360,336 $417,964
<FN>
*Annualized
Note:For the year ended September 30, 1989, the average amount of debt
outstanding was $124, the average number of shares outstanding was
11,745, and the average amount of debt outstanding per share was $0.0106.
The Fund had no borrowings during any other periods.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights CONTINUED
==================================================================================================================================
Special Fund
Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.
NINE
MONTHS
YEARS ENDED ENDED
DEC. 31, SEPT. 30, YEARS ENDED SEPT. 30,
1986 1987 1988 1989 1990
<S> <C> <C> <C> <C> <C>
-------- -------- -------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 18.41 $ 16.95 $ 12.83 $ 15.12 $ 20.79
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ........................ 0.35 0.23 0.14 0.36 0.42
Net realized and unrealized gains (losses) on
investments 2.33 0.12 2.16 5.58 (2.10)
-------- -------- -------- -------- --------
Total from investment operations........... 2.68 0.35 2.30 5.94 (1.68)
-------- -------- -------- -------- --------
DISTRIBUTIONS
Net investment income ........................ (0.34) (0.57) (0.01) (0.21) (0.39)
Net realized capital gains.................... (3.80) (3.90) -- (0.06) (2.08)
-------- -------- -------- -------- --------
Total distributions........................ (4.14) (4.47) (0.01) (0.27) (2.47)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD................... $ 16.95 $ 12.83 $ 15.12 $ 20.79 $ 16.64
=========== ========= ======== ======= =======
Ratio of net expenses to average net assets...... 0.92% 0.96% 0.99%* 0.96% 1.02%
Ratio of net investment income to average net assets 1.75% 1.32% 1.31%* 2.12% 2.33%
Portfolio turnover rate.......................... 116% 103% 42% 85% 70%
Average Commissions (Per Share).................. -- -- -- -- --
Total return..................................... 14.70% 4.27% 17.94% 40.00% (8.78%)
Net assets, end of period........................ $253,693 $187,997 $224,628 $322,056 $361,065
YEARS ENDED SEPT. 30,
1991 1992 1993 1994 1995 1996
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
-------- --------- ------- -------- --------- --------
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 16.64 $ 19.87 $ 20.90 $ 25.04 $ 23.54 $ 25.26
-------- --------- ------- --------- ---------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ........................ 0.34 0.21 0.17 0.15 0.13 0.01
Net realized and unrealized gains (losses) on
investments 4.55 1.50 5.31 0.33 3.05 4.14
-------- -------- --------- -------- ------- --------
Total from investment operations........... 4.89 1.71 5.48 0.48 3.18 4.15
-------- -------- --------- -------- ------- --------
DISTRIBUTIONS
Net investment income ........................ (0.34) (0.37) (0.18) (0.21) (0.15) (0.11)
Net realized capital gains.................... (1.32) (0.31) (1.16) (1.77) (1.31) (1.91)
-------- -------- --------- -------- -------- --------
Total distributions........................ (1.66) (0.68) (1.34) (1.98) (1.46) (2.02)
-------- -------- --------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD................... $ 19.87 $ 20.90 $ 25.04 $ 23.54 $ 25.26 $ 27.39
========= ======== ======== ======= ======== =========
Ratio of net expenses to average net assets...... 1.04% 0.99% 0.97% 0.96% 1.02% 1.18%
Ratio of net investment income to average net assets 2.11% 0.99% 0.92% 0.91% 0.56% 0.03%
Portfolio turnover rate.......................... 50% 40% 42% 58% 41% 32%
Average Commissions (Per Share).................. -- -- -- -- -- $ 0.0482
Total return..................................... 32.18% 8.96% 27.35% 2.02% 14.60% 17.89%
Net assets, end of period........................ $587,259 $626,080$1,076,818 $1,243,885 $1,201,469 $1,158,498
<FN>
*Annualized
Note:For the year ended December 31, 1986, the average amount of debt
outstanding was $203, the average number of shares outstanding was
15,251, and the average amount of debt outstanding per share was $0.0133.
The Fund had no borrowings during any other periods.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights CONTINUED
===============================================================================================================================
Capital Opportunities Fund
Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.
NINE
MONTHS
YEARS ENDED ENDED
DEC. 31, SEPT. 30, YEARS ENDED SEPT. 30,
1986 1987 1988 1989 1990
<S> <C> <C> <C> <C> <C>
-------- -------- -------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 11.91 $ 13.38 $ 10.62 $ 10.78 $ 14.58
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss).................. 0.03 0.03 0.03 0.05 0.06
Net realized and unrealized gains (losses) on
investments 1.97 0.62 0.13 3.86 (4.72)
-------- -------- -------- -------- --------
Total from investment operations........... 2.00 0.65 0.16 3.91 (4.66)
-------- -------- -------- -------- --------
DISTRIBUTIONS
Net investment income ........................ (0.10) (0.05) -- (0.05) (0.06)
Net realized capital gains.................... (0.43) (3.36) -- (0.06) (2.54)
-------- -------- -------- -------- --------
Total distributions........................ (0.53) (3.41) -- (0.11) (2.60)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD................... $ 13.38 $ 10.62 $ 10.78 $ 14.58 $ 7.32
======== ======== ======== ======== ========
Ratio of net expenses to average net assets...... 0.95% 0.95% 1.01%* 1.09% 1.14%
Ratio of net investment income to average net assets 0.19% 0.18% 0.34%* 0.42% 0.43%
Portfolio turnover rate.......................... 116% 133% 164% 245% 171%
Average Commissions (Per Share).................. -- -- -- -- --
Total return..................................... 16.77% 9.38% 1.51% 36.68% (37.51%)
Net assets, end of period........................ $191,415 $171,973 $194,160 $272,805 $86,342
YEARS ENDED SEPT. 30,
1991 1992 1993 1994 1995 1996
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
------- -------- -------- -------- ------ -------
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 7.32 $ 11.00 $ 11.56 $ 15.44 $ 15.79 $21.69
------- -------- -------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss).................. 0.11 0.06 0.01 0.02 0.01 (0.06)
Net realized and unrealized gains (losses) on
investments 3.73 0.60 3.91 0.34 5.91 10.41
------- -------- ------- ------- ------- -------
Total from investment operations........... 3.84 0.66 3.92 0.36 5.92 10.35
------- -------- -------- -------- -------- -------
DISTRIBUTIONS
Net investment income ........................ (0.08) (0.10) (0.04) (0.01) (0.02) (0.01)
Net realized capital gains.................... (0.08) -- -- -- -- (0.99)
------- -------- -------- -------- -------- -------
Total distributions........................ (0.16) (0.10) (0.04) (0.01) (0.02) (1.00)
------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD................... $ 11.00 $ 11.56 $ 15.44 $ 15.79 $ 21.69 $ 31.04
======== ======== ========= ======== ======== ========
Ratio of net expenses to average net assets...... 1.18% 1.06% 1.06% 0.97% 1.05% 1.22%
Ratio of net investment income to average net assets 1.19% 0.42% 0.09% 0.04% 0.08% (0.40%)
Portfolio turnover rate.......................... 69% 46% 55% 46% 60% 22%
Average Commissions (Per Share).................. -- -- -- -- -- $ 0.0555
Total return..................................... 53.51% 5.99% 34.01% 2.31% 37.46% 49.55%
Net assets, end of period........................ $129,711 $118,726 $153,101 $175,687 $242,381 $1,684,538
<FN>
*Annualized
</FN>
</TABLE>
<TABLE>
<CAPTION>
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:
DEBT OUTSTANDING AVERAGE DEBT AVERAGE SHARES
AT END 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, 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
The Fund had no borrowings during any other periods.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights CONTINUED
- -----------------------------------------------------------------------------------
International Fund
Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.
PERIOD
ENDED YEARS ENDED
SEPT. 30, SEPTEMBER 30,
1994 (A) 1995 1996
<S> <C> <C> <C>
------- ------- -------
NET ASSET VALUE, BEGINNING OF PERIOD............ $ 10.00 $ 10.61 $ 10.25
------- ------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ....................... 0.03 0.12 0.09
Net realized and unrealized gains (losses) on investments
and foreign currency transactions......... 0.58 (0.26) 0.74
------- ------- --------
Total from investment operations.......... 0.61 (0.14) 0.83
------- ------- --------
DISTRIBUTIONS
Net investment income ....................... -- (0.05) (0.12)
Net realized capital gains................... -- (0.17) --
------- ------- --------
Total distributions....................... -- (0.22) (0.12)
------- ------- --------
NET ASSET VALUE, END OF PERIOD.................. $ 10.61 $ 10.25 $ 10.96
=========== =========== ===========
Ratio of net expenses to average net assets..... 1.61%* 1.59% 1.51%
Ratio of net investment income to average net assets 0.61%* 1.41% 1.01%
Portfolio turnover rate......................... 48% 5 42%
Average Commissions (Per Share).................. -- -- $ 0.0010
Total return.................................... 6.10% (1.28%) 8.23%
Net assets, end of period....................... $74,817 $83,020 $135,545
<FN>
*Annualized
(a) From commencement of operations on March 1, 1994.
</FN>
</TABLE>
<PAGE>
Report of Independent Auditors
- ---------------------------------------------------------------------------
To the Board of Trustees and
Shareholders of Stein Roe
Investment Trust
Stein Roe Balanced Fund
Stein Roe Growth & Income Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Capital Opportunities
Fund
Stein Roe International Fund
We have audited the accompanying balance sheets, including the schedule of
investments, of Stein Roe Balanced Fund, Stein Roe Growth & Income Fund, Stein
Roe Growth Stock Fund, Stein Roe Special Fund, Stein Roe Special Venture Fund,
Stein Roe Capital Opportunities Fund and Stein Roe International Fund as of
September 30, 1996, and the related statements of operations and statements of
changes in net assets for the periods indicated thereon, and the financial
highlights of Stein Roe Balanced Fund for the periods subsequent to December
31, 1987 and the financial highlights of Stein Roe Growth & Income Fund, Stein
Roe Growth Stock Fund, Stein Roe Special Fund, Stein Roe Special Venture Fund,
Stein Roe Capital Opportunities Fund and Stein Roe 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, 1996, 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
alternative 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 Stein Roe Balanced Fund,
Stein Roe Growth & Income Fund, Stein Roe Growth Stock Fund, Stein Roe Special
Fund, Stein Roe Special Venture Fund, Stein Roe
<PAGE>
Capital Opportunities Fund and Stein Roe International Fund, as of September
30, 1996, the results of their operations and the changes in their net assets
for the periods indicated thereon, and the financial highlights of Stein Roe
Balanced Fund for periods subsequent to December 31, 1987, and the financial
highlights of Stein Roe Growth & Income Fund, Stein Roe Growth Stock Fund,
Stein Roe Special Fund, Stein Roe Special Venture Fund, Stein Roe Capital
Opportunities Fund and Stein Roe International Fund for the periods indicated
thereon, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
November 11, 1996
<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.
Douglas A. Hacker
Senior Vice President and Chief Financial
Officer, United Airlines
Francis W. Morley
Chairman, Employer Plan Administrators
and Consultants Co.
Charles R. Nelson
Van Voorhis Professor of Political Economy,
University of Washington
Thomas C. Theobald
Managing Partner, William Blair Capital Partners
Gordon R. Worley
Private Investor
OFFICERS
Timothy K. Armour, President
Jilaine H. Bauer, Executive Vice President, Secretary
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
Philip J. Crosley, Vice President
E. Bruce Dunn, Vice President
Erik P. Gustafson, Vice President
David P. Harris, Vice President
Harvey B. Hirschhorn, Vice President
Eric S. Maddix, Vice President
Lynn C. Maddox, Vice President
Anne E. Marcel, Vice President
Nicolette D. Parrish, Vice President,
Assistant Secretary
Cynthia A. Prah, Vice President
Richard B. Peterson, Vice President
Gloria J. Santella, Vice President
Thomas P. Sorbo, Vice President
Heidi J. Walter, Vice President
Sharon R. Robertson, Controller
Margaret O. Zwick, Treasurer
Janet B. Rysz, Assistant Secretary
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 Public Accountants
<PAGE>
STEIN ROE MUTUAL FUNDS
Building Wealth for Generations
THE STEIN ROE FUNDS
STEIN ROE GOVERNMENT RESERVES FUND
STEIN ROE CASH RESERVES FUND
STEIN ROE GOVERNMENT INCOME FUND
STEIN ROE INTERMEDIATE BOND FUND
STEIN ROE INCOME FUND
STEIN ROE HIGH YIELD FUND
STEIN ROE MUNICIPAL MONEY MARKET FUND
STEIN ROE INTERMEDIATE MUNICIPALS FUND
STEIN ROE MANAGED MUNICIPALS FUND
STEIN ROE HIGH-YIELD MUNICIPALS FUND
STEIN ROE BALANCED FUND
STEIN ROE GROWTH AND INCOME FUND
STEIN ROE GROWTH STOCK FUND
STEIN ROE YOUNG INVESTOR FUND
STEIN ROE SPECIAL FUND
STEIN ROE SPECIAL VENTURE FUND
STEIN ROE CAPITAL OPPORTUNITIES FUND
STEIN ROE INTERNATIONAL FUND
P.O. BOX 8900
Bostonn Massachusetts 02205-8900
800-338-2550
http://www.steinroe.com
In Chicago, visit our Fund center at One South Wacker Drive
Liberty Securities Corporation, Distributor
Member SIPC. 11/96
EQ11A
