Stein Roe Mutual Funds
SEMIANNUAL REPORT
MARCH 31, 1997
Stein Roe Equity Funds
GROWTH FUNDS
GROWTH STOCK FUND
SPECIAL FUND
SPECIAL VENTURE FUND
CAPITAL OPPORTUNITIES FUND
LOGO:
Stein Roe Mutual Funds
Building Wealth for Generations(sm)
<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 growth funds have done over time
Q&A
Growth Stock Fund................................................. 7
Special Fund...................................................... 11
Special Venture Fund.............................................. 14
Capital Opportunities Fund........................................ 19
Interviews with the portfolio managers and a summary of
investment activity
Investments....................................................... 24
A complete list of investments with market values
Financial Statements.............................................. 34
Balance sheets, statements of operations and
changes in net assets
Notes to Financial Statements..................................... 49
Financial Highlights.............................................. 53
Selected per-share data
General Information............................................... 63
Must be accompanied or preceded by a prospectus.
<PAGE>
Photographic image of Tim Armour.
From the President
To Our Shareholders
We're pleased to present this semiannual report for the Stein Roe growth funds
- -- Growth Stock Fund, Special Fund, Special Venture Fund and Capital
Opportunities Fund. This report covers the six months ended March 31, 1997.
The Economy That Just Won`t Quit
By virtually all measures, the economy finished 1996 a good deal stronger
than anticipated, fueled in large part by renewed consumer spending, strong job
growth, favorable election results, a narrowing of the trade deficit, solid
industrial output and a surprisingly resilient housing market. Investors
responded favorably to this encouraging economic news. And in spite of Federal
Reserve Chairman Alan Greenspan's remark about "irrational exuberance" -- which
briefly touched off a bit of nervousness in mid-December -- the stock market
continued to post record-breaking gains throughout the fourth quarter.
Most economists, however, predicted that economic growth was sure to slow in
1997, putting a possible damper on earnings and, therefore, the stock market's
performance. But as the new year unfolded, the economy showed no signs of
slowing. In response, the stock market, as measured by the Dow Jones Industrial
Average (DJIA), shot past the 7,000-point mark on February 13, buoyed by healthy
economic growth, strong corporate profits and low inflation.*
Greenspan Talks the Talk, and Investors Take a Walk
But not everyone was pleased with this scenario. Stronger-than-expected
economic growth and the rising ratio of stock prices to corporate profits were
enough to set off inflation alarms among a growing number of market watchers,
most notably Federal Reserve Chairman Alan Greenspan. At an address before the
Senate Banking Committee, Greenspan told lawmakers that the economy retained a
"great deal of vigor" and termed the prospects for a continuation of the
six-year-old expansion "quite favorable." But he also made quite clear that the
fate of the economic expansion depended largely on the Federal Reserve staying
ahead of inflation.
As a result, few were surprised when, in late March, the Federal Reserve
raised the federal funds rate by one-quarter percentage point to 5.50 percent in
an attempt to slow economic growth and reduce pressures that might trigger
inflation and undermine the long expansion. Although the financial markets had
factored in this rate hike, they responded erratically. Just moments after the
announcement, the market, as measured by the DJIA, shot up more than 30 points
- -- gaining on what is known as a "relief rally" -- before heading into a
freefall. When the dust finally cleared, the market had fallen nearly 300
points, or 4.3 percent -- the largest two-day point drop since the October 1987
market crash.
<PAGE>
Aging Bull?
Could this be a sign that the bull market is winding down, or is it merely
gathering strength for a fresh charge? Although we expect some additional
volatility in the coming months, we do not think the market's March decline
represented the start of a long-term bear market. It was, we think, merely a
short-term interruption in the market's advance and, in our opinion, the bull
still has plenty of room to run.
We think there are a number of reasons for this. First, the longer-term
economic outlook remains positive. The last time the economy had been growing
for such a prolonged period, warning flags -- including uneasiness about banks,
an overabundance of empty office buildings and state and local budget crises --
already were signaling a recession. Today, however, there are few, if any,
factors on the horizon that we think might adversely affect the positive
economic environment we are currently enjoying. What's more, many companies
continue to meet their earnings estimates, despite a stronger dollar, rising
labor costs and waning pricing pressure.
Nonetheless, we believe it's likely that profit momentum may slow in the
months ahead. We think the Federal Reserve's efforts to fight inflation and
prolong the economic expansion, however, could help keep corporate earnings
strong enough to keep the bear at bay. This combination of steady economic
growth, low inflation and solid earnings growth could, in our opinion, help
shepherd the stock market to healthy -- though probably not spectacular -- gains
in 1997.
<PAGE>
The Basics
While no one can predict what might happen to the stock market or stock funds in
the future, we believe investors must understand the factors that move the
markets -- not just to profit from them, but to gain the patience to ride out
short-term volatility in their investments. As always, no matter what direction
you think the market 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
April 21, 1997
*The Dow Jones Industrial Average is an unmanaged group of stocks that differs
from the composition of any Stein Roe fund; it is 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).
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Average Annual Total Returns
Periods ended March 31, 1997
<TABLE>
<CAPTION>
PAST 1 PAST 3 PAST 5 PAST 10
YEAR YEARS YEARS YEARS
--------------------------------------
<S> <C> <C> <C> <C>
GROWTH STOCK FUND 15.21% 18.67% 12.86% 11.53%
SPECIAL FUND 6.13 11.85 12.05 12.61
CAPITAL OPPORTUNITIES FUND -13.66 16.13 15.30 9.11
S&P 500 19.82 22.28 16.40 13.36
S&P MidCap 10.62 15.51 13.70 13.58
Nasdaq Industrials -0.67 9.33 8.53 8.40
Russell 2000 5.11 12.70 12.78 9.42
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<CAPTION>
PAST 1 LIFE
YEAR OF FUND1
------------------------------------
<S> <C> <C>
SPECIAL VENTURE FUND 9.97% 20.55%
Russell 2000 5.11 14.88
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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. The S&P 500, the S&P MidCap, the Nasdaq
Industrials and the Russell 2000 are unmanaged groups of stocks that differ from
the composition of any Stein Roe fund; they are not available for direct
investment.
<FN>
1 Inception Date: Special Venture Fund -- October 17, 1994. 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 Fund's
inception date.
</FN>
</TABLE>
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<TABLE>
<CAPTION>
Investment Comparison
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COMPARISON of change in value of a $10,000 investment.
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Special Fund, Growth Stock Fund and Capital Opportunities Fund
Capital
Date Opportunities Fund S&P 500 Special Fund Growth Stock Fund
<S> <C> <C> <C> <C>
9/30/86 10000 10000 10000 10000
9/30/87 15099 14342 13821 15103
9/30/88 11584 12565 13120 11222
9/30/89 15833 16705 18368 15022
9/30/90 9894 15162 16755 14396
9/30/91 15188 19875 22147 19671
9/30/92 16098 22070 24131 22498
9/30/93 21573 24932 30731 23643
9/30/94 22071 25850 31352 24140
9/30/95 30339 33529 35929 30943
9/30/96 45372 40343 42357 37453
3/31/97 33548 44877 41722 39311
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Special Venture Fund
<CAPTION>
Date Special Venture Fund 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
3/31/96 14039 13305
6/30/96 15151 13970
9/30/96 16346 14018
12/31/96 16762 14747
3/31/97 15439 13984
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 the Stein Roe funds to the S&P 500 or the
Russell 2000, each a unmanaged group of stocks that differs from the composition
of any Stein Roe fund; they are not available for direct investment. Total
return performance includes changes in share price and reinvestment of income
and capital gains distributions.
</TABLE>
<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
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 Erik Gustafson, Portfolio Manager of
SR&F Growth Stock Portfolio
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Fund Data
Investment Objective:
Seeks long-term capital appreciation by investing in a diversified
portfolio. Under normal conditions, the Portfolio will invest 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:
$458.5 million
- ------------------------------------------------------------------------------
Photographic image of Erik Gustafson.
Q: How has the Fund performed?
A: For the six-month period ended March 31, 1997, Growth Stock Fund's return of
4.96 percent underperformed both the 5.29 percent median return of its Lipper
growth fund peer group and the 11.24 percent return of the S&P 500.
Q: Why didn't Growth Stock Fund participate more strongly in the market's rally?
A: The broader market indices ended the six-month period only slightly off their
all-time highs, but this performance masked a comprehensive market pullback that
was spurred by growing anxiety about earnings, inflation and interest rates.
In fact, we think the indices have obscured what's really been going on,
which is that the stock market increasingly has been driven by a relatively
small group of stocks, many of which also happen to have the largest weightings
in the broad market indices. Therefore, it may seem like the stock market
registered strong gains this period. In reality, however, we believe the stock
market -- and Growth Stock Fund -- weathered a much more serious setback than
the indices indicate.
Q: Which of the Portfolio's holdings stood out over the past six months?
A: Intel (3.0 percent of total net assets) was one of the Portfolio's top
performers this period. It was followed closely by another high-tech giant,
Microsoft (3.0 percent of total net assets). We think this is solid proof of the
incredible strength and vibrancy of America's technology leaders. Rounding out
the Portfolio's top performers were Merck, which benefited handsomely from the
introduction of several new drugs; Travelers Group Inc., which continues to
profit from consolidation efforts; and Motorola, Inc., which remains a leader in
providing wireless communications technology (2.7 percent, 3.1 percent and 3.3
percent of total net assets, respectively).
<PAGE>
Q: What areas did not perform as well as you would have liked?
A: In the waning days of March, some of our financial holdings suffered a
reversal that erased most of the gains they had made earlier in the period.
Likewise, some of our health care holdings, which had been strong performers
over the past six months, also gave back some of their gains. And finally, some
of our technology holdings were negatively affected by increased concern of a
possible sector-wide slowdown in earnings momentum.
Q: What caused financial stocks to retreat?
A: First, the government released a report that credit card delinquencies were
on the rise. This was followed by a report from one of the nation's largest
credit card issuers that it expected to report a much larger-than-expected
first-quarter loss, owing to increased consumer bankruptcies and chargeoffs. But
financial stocks took their biggest beating in late March, when the Federal
Reserve increased the federal funds rate. Historically, when the Federal Reserve
raises interest rates, it tends to hurt financial stocks because investors fear
that tighter credit conditions will reduce loan volumes and, thus, company
profits.
Q: Do you think the financial services sector will hold up in a rising-rate
environment?
A: We think so. Although the knee-jerk reaction is to presume that when
interest rates go up, financial stocks will tumble, we think the recent losses
could be short lived. That's because the banking and finan cial services
industries have undergone massive structural changes over the past few years.
Many banks, for example, now rely less on profits from lending and more on
fee-based businesses. This means that rate hikes may have less impact on
profits. What's more, we think many banks are better-capitalized than in the
past, and many are more focused on the bottom line, as evidenced by the number
of financial institutions that have dramatically cut back expenses and pursued
scale and efficiency through consolidation and acquisitions. In addition, we
think that over the longer term, the financial services sector is well
positioned to benefit from demographic trends -- particularly as more
individuals start to plan for their retirements.
<PAGE>
Q: Since last summer, investors have been fleeing small-cap stocks in favor of
large-cap stocks. Why is that and do you think it will continue?
A: There are a number of reasons that investors have favored large-cap stocks
recently. First, in times of uncertainty, investors tend to seek out the
liquidity and earnings predictability of big stocks. But there's another reason
small stocks have lagged: Their earnings momentum has failed to keep pace. Over
the past few years, large-cap stocks have collectively posted far more robust
increases in corporate profits than their smaller counterparts. In 1996, for
example, the average earnings for a company tracked by the S&P 500 was 9
percent, while the smaller companies tracked by Russell 2000 earned, on average,
just 3 percent.
As a result, investors have funneled an inordinate amount of capital into
large, familiar names. This, in turn, has attracted even more money. What's
more, the terrific growth of index funds has provided an addi tional impetus to
the performance of large-cap stocks, since these stocks make up a much larger
portion of the broader market indices.
Going forward, some market watchers believe that small-cap stocks are now
undervalued and, as a result, are poised to regain some lost ground. While we
think that may indeed happen, we don't think it necessarily precludes large-cap
stocks from continuing to do well. In fact, if the market remains volatile, we
think even more investors might flock to the large-cap market in search of
safety and stability.
Q: What are your expectations for the coming months?
A: We are somewhat concerned about the near-term outlook for the stock market,
since we think undue concern about a possible slowing of earnings momentum is
causing greater-than-usual trepidation. Over the longer term, however, we think
the prospects for the stock market appear bright. We remain committed to
investing in high-quality growth stocks, since we believe investors will
continue to pay a premium for companies that exhibit solid long-term growth
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 March 31, 1997, 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 the Russell 2000 are unmanaged
groups of stocks that differ from the composition of SR&F Growth Stock
Portfolio; 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 ended March 31, 1997, were 12.91 percent, 13.20 percent and
11.54 percent, respectively.
<PAGE>
<TABLE>
<CAPTION>
Fund Highlights
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Growth Stock Portfolio
Top 10 Equity Holdings (% of Total Net Assets)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Motorola, Inc. 3.3% Intel Corporation 3.0%
The Coca-Cola Company 3.3 General Electric Company 3.0
HFS Incorporated 3.2 The Procter & Gamble Co. 3.0
Gillette Company 3.2 Microsoft Corporation 3.0
Travelers Group, Inc. 3.1 Federal National Mortgage Assn. 2.9
- -------------------------------------------------------------------------------
Total 31.0%
- -------------------------------------------------------------------------------
<CAPTION>
Equity Portfolio Highlights
PORTFOLIO S&P 500
---------------------------------
<S> <C> <C>
Number of Holdings 43 500
Median Market Value ($ Mil.) $25,697 $5,442
</TABLE>
<TABLE>
<CAPTION>
PIE CHART:
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Economic Sector Breakdown
As of March 31, 1997
EQUITY PORTFOLIO S&P 500
<S> <C> <C>
Basic Materials 0% 5%
Consumer Cyclical 14 13
Consumer Noncyclical 29 23
Energy 4 10
Finance 16 15
Industrial 8 10
Technology 26 16
Utilities 3 8
<CAPTION>
PIE CHART:
- -------------------------------------------------------------------------------
Asset Allocation
As of September 30, 1996 As of March 31, 1997
<S> <C> <C>
EQUITIES $397.7 (95.2%) $434.4 (94.1%)
CASH & EQUIVALENTS $20.2 (4.8%) $27.1 ( 5.9%)
</TABLE>
<PAGE>
Q&A
An Interview with Bruce Dunn and Dick Peterson, Portfolio Managers of SR&F
Special Portfolio and SR&F Special Venture Portfolio
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Fund Data
Investment Objective:
Seeks to achieve capital appreciation by investing primarily in a
diversified portfolio of 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:
$1,048.5 million
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Photographic image of Bruce Dunn and Dick Peterson.
Effective June 30, 1997, Bruce Dunn will retire.
Special Fund Q&A
Q: How did Special Fund perform?
A: For the six months ended March 31, 1997, Special Fund fell 1.50
percent. This performance lagged both the 5.29 percent median return of the
Lipper growth fund peer group and the 11.24 percent return of the S&P 500. It's
important to note, however, that large-cap stocks -- the primary drivers of
mutual fund performance over the past six months -- accounted for nearly 90
percent of the S&P's portfolio as of March 31. Special Fund, on the other hand,
tends to keep a majority of its portfolio in small- and mid-cap issues. Less
than a third of Special Fund's portfolio was held in large-cap stocks
on March 31.
The Fund's median market capitalization as of March 31, 1997, was $1.3
billion. Since mid-cap companies typically range in capitalization from $1
billion to $5 billion, we think it also might be useful to compare the Fund to
the S&P MidCap, one of the most comprehensive mid-cap stock indices. For the six
months ended March 31, 1997, the S&P MidCap posted a return of 4.48 percent.
Q: Clearly, small-cap stocks as a group have been struggling in recent months.
Why?
A: Simply put, large-cap stocks have been more interesting to investors than
small-cap stocks because of the relative stability they offer. In fact, while
net flows into mutual funds reached record levels during the reporting period,
that money was directed primarily toward large-caps. We think that's a function
of the high cost of disappointment -- when a smaller to mid-sized stock
experiences a shortfall and loses a disproportionate amount of its market value.
Many experts agree: investors are focusing on risk rather than reward. Their
desire to avoid disappointments has, we think, spurred them into large-cap
stocks, where the perceived risk of disappointment is lower.*
Will this trend continue? Certainly small-cap stock valuations are attractive
now. We believe earnings influence stock prices, and we think many mid- and
small-cap companies have the ability to increase their earnings.
<PAGE>
Q: Can you give an example of a company that you think has the potential to
increase earnings in today's market?
A: One example is Littelfuse (3.1 percent of total net assets), which makes
small automobile fuses and miniature electronic fuses. In the electronics
industry, and in the auto industry to some degree, Littelfuse is employing new
techniques to expand its markets overseas, particularly in Japan and Asia, and
we think it has enviable cash-generating and financial characteristics.
Q: Which of the Portfolio's holdings made positive contributions during the past
six months?
A: Gains were distributed broadly across the Portfolio, with strong performances
from a number of our largest holdings, including Borders Group Inc., The
Interpublic Group of Companies Inc., Boston Scientific Corporation and
Consolidated Stores Corp. (3.1 percent, 2.1 percent, 3.7 percent and 1.6 percent
of total net assets, respectively). Novartis AG (2.5 percent of total net
assets), a Swiss drug maker benefiting from a merger, also fared well.
The Portfolio's financial stocks also have done well in recent months. Solid
performers included American Express Co., which is benefiting from new product
develop ment and improved relationships with vendors around the world, and The
Progressive Corporation, a provider of non standard insurance that is making
changes to broaden its business (2.2 percent and 4.2 percent of total net
assets, respec tively). Finally, Household International Inc. (2.8 percent of
total net assets) has been a terrific holding for us. The company has overhauled
its business and significantly enhanced its efficiency ratios while expanding
its operations and pre empting credit risks.
Q: What held the Portfolio back?
A: Balancing our gains were flat first-quarter returns for energy stocks,
including Renaissance Energy Ltd. (2.7 percent of total net assets), which was
negatively affected by seasonally weaker commodity prices.
Early in the reporting period, The Olsten Corporation, a provider of
temporary help and home health care, and General Instrument Corp., which serves
the cable industry, suffered earnings disappointments -- Olsten's margins were
severely compressed, while General Instrument experienced weaker-than-expected
demand. We sold both positions during the fourth quarter of 1996.
<PAGE>
Q: What themes are emerging in the Portfolio?
A: We think pricing power -- the ability to command a premium price because you
have a product the market is willing to pay for -- will be the key to
performance going forward. We believe a number of the companies in the Portfolio
exhibit pricing power. Boston Scientific is a good example. This company makes
less-invasive surgical devices, for which it is receiving high reimbursement
rates in relatively unpenetrated overseas markets, such as Japan. Boston
Scientific offers a complete range of products, and they've done this by
acquiring businesses and building products around the doctor. And they're
getting pricing power, not by increasing the prices of their products, but by
continually delivering new, improved products.
Q: What are your expectations for the balance of the year?
A: With large-cap stocks having held the attention of investors in recent
months, we think small- and mid-cap stock valuations look attractive. As we've
said before, we believe earnings growth drives the price of stocks, and we think
many smaller- and mid-cap companies with strong fundamentals have the potential
to turn market opportunity to their advantage. We think the Portfolio is well
positioned, as its earnings outlook and valuation levels are positive relative
to the overall market. Finally, risk management continues to be an important
part of our strategy, as the Portfolio's relatively low historical beta -- 0.67
on March 31, 1997 -- shows.+
*Source: "Mutual Fund Struggle: Small Stocks, Big Aches," The New York
Times, March 10, 1997.
+Historical beta illustrates a fund's sensitivity to price movements in
relation to a benchmark index; assuming a high correlation between the fund's
return and that of the index, a fund with a beta lower than the benchmark may
rise and fall more slowly than the benchmark.
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 March 31, 1997, 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 the S&P MidCap are
unmanaged groups of stocks that differ from the composition of SR&F Special
Portfolio; 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 12.91 percent, 13.20 percent and 11.54 percent,
respectively.
<PAGE>
Q&A
- ------------------------------------------------------------------------------
Fund Data
Investment Objective:
Seeks to achieve long-term capital appreciation by investing primarily in a
diversified portfolio which invests in entrepreneurially managed companies. The
Portfolio 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:
$166.2 million
- ------------------------------------------------------------------------------
Special Venture Fund Q&A
Q: How did the Fund fare?
A: For the six months ended March 31, 1997, Special Venture Fund fell 5.55
percent, underperforming the 3.01 percent median decline of the Lipper small
company fund peer group and the 0.24 percent decline of the Russell 2000.
Q: What issues have hampered performance?
A: Performance was restrained during the last three months by our energy
holdings, which suffered from a combination of profit taking and seasonally
weaker oil and gas prices. With valuation levels high, we sold two energy stocks
in January 1997 -- United Meridian Corporation and Diamond Offshore Drilling,
Inc. -- and we sold part of our holding in another energy stock, Renaissance
Energy Ltd. (0.9 percent of total net assets). As of the end of the first
quarter, the Portfolio held close to 7 percent of its total assets in energy
stocks, down from almost 14 percent at year-end 1996. We think our remaining
energy holdings are well positioned for the long term, and we believe they will
grow their net reserves per share over time at a low cost per barrel.
In addition, we have been underweighted in the financial sector, particularly
bank stocks -- as of March 31, financial holdings represented 18.5 percent of
total net assets for the Portfolio, versus 25 percent for the Russell 2000.
While bank and thrift stocks in general have performed well over the past six
months, we are concerned that deterioration in the quality of consumer credit
may slow the rate of earnings growth in these stocks over the next year.
Q: What other factors contributed to the Fund's underperformance?
A: On an individual basis, the Portfolio holdings that hindered the Fund's
performance in recent months include Garden Botanika, Inc. (1.1 percent of total
net assets), a specialty retailer of personal care products that continues to be
hurt by a difficult retail environment, and National Processing, which entered a
much more competi tive operating environment. We sold our holdings of National
Processing during the reporting period.
<PAGE>
Q: What were your strongest contributors?
A: On balance, some of our best performers over the last six months were in the
financial sector. Within this area, our real estate holdings, represented by
three real estate investment trusts (REITs) that focus on office real estate --
Beacon Properties Corporation, Reckson Associates Realty Corporation and Speiker
Properties, Inc. (2.6 percent, 2.9 percent and 2.3 percent of total net assets,
respectively) -- posted solid returns. The stock of CB Commercial Real Estate
Services Group, Inc. (2.7 percent of total net assets), the former commercial
real estate arm of Coldwell Banker, also fared well, benefiting from the overall
strength in the commercial real estate sector and from the trend toward
outsourcing of real estate services.
Another standout was Ballantyne of Omaha, Inc. (2.1 percent of total net
assets), which manufactures roughly two thirds of all movie projectors sold in
the United States and half of those sold worldwide. Ballantyne continues to
experience growth driven by the trend toward multiplexing and rising per-capita
income overseas.
Finally, Carabiner International and DuPont Photomasks both performed well
during this reporting period -- and over the past year. In fact, they became
overvalued, so we eliminated our positions in these stocks.
Q: The market just hasn't been interested in small-cap stocks in the last six
months. Has that affected your outlook for the Portfolio?
A: Not really. History shows that small-cap stocks tend to outperform over long
periods of time. For example, Ibbotson Associates has tracked the compounded
annual returns for small-cap stocks versus large cap stocks over the past 71
years and small stocks have outperformed large stocks by more than 3.0 percent
annually over the past 20 years and more than 2.0 percent annually over the past
71 years. Of course, past performance is no guarantee of future results.+
In our opinion, well-selected small company stocks still seem relatively
inexpensive. We think an investor can gain exposure to high earnings growth
potential without having to pay any premium over the general stock market --
this is demonstrated by the fact that the earnings outlook for the companies in
the Portfolio appears to be considerably brighter than for the market as a
whole, yet the Portfolio's price/earnings ratio is only a modest premium to that
of the market.
The Portfolio's current allocation to equities falls at approximately the
midpoint of our normal equity range, measured as a percent of total net assets.
While we are tempted to push the equity ratio higher, reflecting our positive
bias toward small-caps, that view is tempered somewhat by our cautious view of
the overall domestic stock market.*
<PAGE>
Q: Any last thoughts?
A: Although small-cap stocks have underperformed larger-cap stocks, we would
encourage investors with longer-term time horizons to view this current weakness
as a buying opportunity.
While past performance is no guarantee of future results, historically these
periods of relative underperformance for small-cap stocks have been followed by
periods of relative outperformance that have rewarded investors with superior
long-term returns.+ While it is difficult to predict exactly when the next
period of outperformance will occur, in our opinion, investors should find
comfort in the fact that small-cap stocks currently combine positive earnings
potential with what we think are very reasonable valuation levels.
In the meantime, we will continue to select small company stocks with what we
believe are successful entrepreneurial management teams, large market
opportunities, sustainable competitive advantages and strong financial positions
that we think are undervalued relative to their public market business value. We
believe our individual company selections should have the above-average levels
of earnings growth necessary to drive their stock prices higher.
+ Source: Ibbotson Associates, 1997
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 March 31, 1997, 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 SR&F Special Venture Portfolio; 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 5.16 percent and 15.08 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.
Prior to January 31, 1997, Special Venture Fund's Adviser limited expenses to
1.25 percent of average net assets. Absent past limits, total return would have
been less.
*Funds that invest in smaller companies may experience short-term volatility.
<PAGE>
<TABLE>
<CAPTION>
Fund Highlights
- ------------------------------------------------------------------------------
Special Portfolio
Top 10 Equity Holdings (% of Total Net Assets)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
The Progressive Corporation 4.2% Household International Inc. 2.8%
Boston Scientific Corporation 3.7 OM Group, Inc. 2.7
Borders Group Inc. 3.1 Renaissance Energy Ltd. 2.7
Littelfuse, Inc. 3.1 Profitt's Inc. 2.5
Harley-Davidson, Inc. 3.0 Novartis AG 2.5
- ------------------------------------------------------------------------------
Total 30.3%
- ------------------------------------------------------------------------------
<CAPTION>
Equity Portfolio Highlights
PORTFOLIO S&P 500
--------------------------------
<S> <C> <C>
Number of Holdings 53 500
Median Market Value ($ Mil.) $1,339 $5,442
</TABLE>
<TABLE>
<CAPTION>
PIE CHART:
- ------------------------------------------------------------------------------
Economic Sector Breakdown
As of March 31, 1997
Equity Portfolio S&P 500
<S> <C> <C>
Basic Materials 5% 5%
Consumer Cyclical 29 13
Consumer Noncyclical 20 23
Energy 7 10
Finance 18 15
Industrial 11 10
Technology 7 16
Utilities 3 8
<CAPTION>
PIE CHART:
- ------------------------------------------------------------------------------
Asset Allocation
As of September 30, 1996 As of March 31, 1997
<S> <C> <C>
Equities $1,047.3 (90.4%) $995.5 (94.6%)
Cash & Equivalents $111.2 (9.6%) $56.3 (5.4%)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Fund Highlights
- ------------------------------------------------------------------------------
Special Venture Portfolio
Top 10 Equity Holdings (% of Total Net Assets)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Central European Media Ent. Ltd. 3.4% Interim Services, Inc. 2.8%
Fiserv, Inc. 3.2 Meadow Brook Insurance Group Inc. 2.8
Xomed Surgical Products Inc. 3.2 AmeriSource Distribution Corp. 2.8
20th Century Industries 2.9 Metro Networks, Inc. 2.8
Reckson Associates Realty Corp. 2.9 AVX Corporation 2.8
- ------------------------------------------------------------------------------------
Total 29.6%
- ------------------------------------------------------------------------------------
<CAPTION>
Equity Portfolio Highlights
PORTFOLIO RUSSELL 2000
----------------------------------
<S> <C> <C>
Number of Holdings 51 500
Median Market Value ($ Mil.) $448 $337
</TABLE>
<TABLE>
<CAPTION>
PIE CHART:
- ---------------------------------------------------------------------------------
Economic Sector Breakdown
As of March 31, 1997
Equity Portfolio Russell 2000
<S> <C> <C>
Basic Materials 3% 4%
Consumer Cyclical 19 16
Consumer Noncyclical 17 12
Energy 7 5
Finance 20 25
Industrial 14 14
Technology 18 18
Utilities 2 6
<CAPTION>
PIE CHART:
- ---------------------------------------------------------------------------------
Asset Allocation
As of September 30, 1996 As of March 31, 1997
<S> <C> <C>
Equities $136.0 (94.1%) $156.8 (94.3%)
Cash & Equivalents $8.5 (5.9%) $9.5 (5.7%)
</TABLE>
<PAGE>
Q&A
An Interview with Gloria Santella and Eric Maddix, Portfolio Managers
of Capital Opportunities Fund
- --------------------------------------------------------------------------------
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:
$991.3 million
- --------------------------------------------------------------------------------
Photo: Gloria Santella and Eric Maddix.
Q: How has the Fund performed?
A: For the six months ended March 31, 1997, the Fund's return was down
26.06 percent. While we certainly do not mean to dismiss this performance, and
understand that some of our investors are concerned about it, we think it's
important to note that corrections of this magnitude are not uncommon in the
aggressive growth arena. In fact, although past performance is no guarantee of
future results, the Fund has successfully weathered short-term periods of
double-digit declines in four of the past five years.
Q: The stock market recorded new highs throughout the period, yet the Fund
underperformed. Why was that?
A: Since last summer, investors have become more cautious. As a result, most of
the market's biggest gains have come from an increasingly narrow range of stocks
- -- many of them large-cap, blue-chip stocks. These gains were enough, however,
to prop up many of the more popular stock market indices, such as the Dow Jones
Industrial Average (DJIA).
The Fund does not -- and never has -- invested in the companies that make up
the DJIA. Instead, we invest in smaller aggressive growth companies -- a corner
of the market that often isn't reflected in the broader market indices. And, as
many other aggressive growth investors can attest, small- and mid-cap stocks --
unlike their larger-cap counterparts -- have suffered severe setbacks over the
past six months.
<PAGE>
We don't think this selloff had anything to do with the underlying
fundamentals of the companies involved, however. In fact, although the stock
prices of many of our holdings have dropped dramatically, these companies
continue to execute their business plans and we think their long-term earnings
potential remains strong. Nonetheless, concern about the earnings outlook for
some of the highest growth sectors -- undue concern, in our view -- led many
investors to shy away from smaller high-growth stocks in favor of the liquidity
and predictability of large-cap stocks.
Q: That explains the Fund's underperformance relative to large-cap stocks. But
why hasn't the Fund kept pace with the Nasdaq market?
A: The Nasdaq market is often referred to as the market for small stocks, and,
under normal market conditions, the Fund's performance should closely track
Nasdaq. But, while many small aggressive growth companies do trade on Nasdaq, it
is in no way dominated by them. In fact, some of America's largest companies
trade on Nasdaq -- Microsoft, Intel and MCI, to name a few.
Over the past six months, the market has experienced a divergence in
performance based almost solely on size. As a result, the larger-cap Nasdaq
stocks had a far greater impact on the performance of the Nasdaq Composite Index
than the smaller companies in which we invest, thus causing the disconnect
between the performance of the Index and the Fund.
Q: Is there any index that accurately reflects the performance of the types of
stocks in which you invest?
A: Unfortunately, there's not an index that we think adequately explains what's
been going on in the small- to mid-cap aggressive growth sector. The Russell
2000, which measures the bottom two-thirds of the market's top 2,000 companies,
is widely considered the best measure of performance for smaller stocks. But,
while it tracks small stock performance, we don't think it captures what's been
going on in the aggressive growth universe, since it's weighted more heavily
toward smaller moderate growth companies, more than half of which have growth
rates of less than 20 percent. The companies we hold in the Fund, on the other
hand, have an average growth rate closer to 40 percent.
Q: Which of the Fund's holdings were hardest hit?
A: Although the Fund's weakness was broadbased, our technology and business
services holdings were the worst performers. We should point out, however, that
while these sectors have contributed to the Fund's recent underperformance, they
<PAGE>
have been the top-performing sectors since the middle of 1994. What's more,
although we expect some continued near-term concern about slowing growth in
these sectors, we don't see the long-term growth potential of these types of
companies diminishing greatly, if at all. Consequently, we have maintained
exposure to both of these sectors.
Q: Given the current market environment, why are you continuing to invest
in aggressive growth companies?
A: The reason is quite simple: We believe that, over the long term,
earnings growth is what determines the value of stock prices. It would be
inconsistent with our investment objective to change our investment style
mid-course and start buying large-cap companies just to be defensive. In the
long run, we think our investors will be best served if we continue to
concentrate on investing in those companies that we think have the best
long-term earnings prospects.
Despite the short-term underperformance, we don't think the case for
investing in growth has changed. We remain confident in the companies we own.
And, as others realize that the underlying fundamentals have not changed, we
believe they too will return to the aggressive growth sector in search of the
long-term return potential these companies can provide.
Q: There's no doubt that Capital Opportunities Fund has been a solid performer
over the long term. But what about the Fund's newer investors, who might feel
like they missed out?
A: The most important thing we can stress to our newer -- as well as our
long-time -- investors is to maintain the same long-term perspective we use when
selecting stocks for the Fund, namely three to five years. We also would like to
remind them that we're not doing anything differently. We're doing the same
thing we did last year at this time, when the Fund dramatically outperformed the
S&P 500. And we're doing the same thing that we did six years ago. That is, we
are investing in those companies which, in our opinion, have superior long-term
earnings potential. This commitment to growth can lead to big swings in
performance, particularly since the more aggressive, high-growth companies that
we invest in can go in and out of favor. But, over the long term, we believe the
companies in which the Fund invests can add solid growth potential to any
long-term financial plan.
Q: Have you made any changes to the Fund's holdings?
A: We expect the rebound to be fueled by those companies with the highest
quality, most visible earnings growth. Therefore, we reduced the number of
<PAGE>
holdings we own in order to increase our exposure to those companies in which we
have the most confidence in earnings. On September 30, 1996, the Fund had 65
issues; as of March 31, 1997, the Fund had only 42. We think this should help
enhance our return potential when the aggressive growth sector eventually
rebounds.
Q: Since you focus on looking for stocks with rapid earnings growth potential,
how do you try to protect against inevitable earnings shortfalls?
A: We can't prevent these surprises, which is why we emphasize high-quality
companies with characteristics that we think lend themselves to predictable
earnings growth. If, for some reason, a company doesn't meet our expectations,
we usually will sell it outright. But not every company that experiences an
earnings slowdown is headed for disaster. If we remain confident about a
company's long-term prospects, we'll hold on to it.
Q: What's your outlook for the coming months?
A: We think that reported earnings growth, and not market sentiment, is the
catalyst that ultimately drives stock prices. Consequently, as companies begin
to report that they will indeed meet their earnings expectations, we are
confident that fundamentals, rather than psychology, will once again determine
the direction of stock prices. And, on that basis, we continue to believe that
the Fund is well positioned.
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 March 31, 1997, and are subject to change. Total
return performance includes changes in share price and reinvestment of income
and capital gains distributions. The Dow Jones Industrial Average, the Nasdaq
Composite Index and the Russell 2000 are unmanaged groups of stocks that differs
from the composition of Stein Roe 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 the
Fund's capital appreciation fund peer group for the one-, five- and 10-year
periods ended March 31, 1997, were 5.28 percent, 12.82 percent and 10.79
percent, respectively.
<PAGE>
<TABLE>
<CAPTION>
Fund Highlights
- ------------------------------------------------------------------------------------
Capital Opportunities Fund
Top 10 Equity Holdings (% of Total Net Assets)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
HFS Incorporated 5.0% Tellabs, Inc. 3.6%
Clear Channel Communications, Inc. 4.7 Omnicare, Inc. 3.3
HBO & Company 4.5 CBT Group Plc 3.2
Paychex, Inc. 4.1 Ascend Communications, Inc. 3.1
Gartner Group, Inc. 3.7 Carnival Corporation 3.0
- -------------------------------------------------------------------------------------
Total 38.2%
- -------------------------------------------------------------------------------------
<CAPTION>
Equity Portfolio Highlights
PORTFOLIO S&P 500
----------------------------------
<S> <C> <C>
Number of Holdings 42 500
Median Market Value ($ Mil.) $1,631 $5,442
</TABLE>
<TABLE>
<CAPTION>
PIE CHART:
- ---------------------------------------------------------------------------------
Economic Sector Breakdown
As of March 31, 1997
Equity Portfolio S&P 500
<S> <C> <C>
Basic Materials 0% 5%
Consumer Cyclical 21 13
Consumer Noncyclical 19 23
Energy 0 10
Finance 0 15
Industrial 36 10
Technology 24 16
Utilities 0 8
<CAPTION>
PIE CHART:
- ---------------------------------------------------------------------------------
Asset Allocation
As of September 30, 1996 As of March 31, 1997
<S> <C> <C>
Equities $1,448.6 (86.0%) $941.5 (94.9%)
Convertibles $12.6 (0.7%) 0.0
Cash & Equivalents $223.3 (13.3%) $49.8 (5.1%)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SR&F Growth Stock Portfolio
- --------------------------------------------------------------------------------------
Investments as of March, 31, 1997
(Dollar Amounts In Thousands)
(Unaudited)
Number Market
COMMON STOCKS (94.1%) of Shares Value
<S> <C> <C>
BANKS & SAVINGS AND LOANS (4.3%)
Citicorp ......................................................... 110,000 $11,908
Fifth Third Bancorp .............................................. 50,000 3,875
Wells Fargo & Company ............................................ 15,000 4,262
-------
20,045
BUSINESS SERVICES (4.7%)
*Cascade Communications Corp. .................................... 200,000 5,275
Electronic Data Systems Corporation .............................. 150,000 6,056
First Data Corporation ........................................... 300,000 10,162
-------
21,493
COMPUTERS AND COMPUTER SOFTWARE (8.7%)
*Cisco Systems Inc. .............................................. 150,000 7,219
Intel Corporation ................................................ 100,000 13,912
*Microsoft Corporation ........................................... 150,000 13,753
*Sterling Commerce, Inc. ......................................... 175,000 5,075
-------
39,959
CONSUMER-RELATED (10.3%)
*CUC International Inc. .......................................... 450,000 10,125
Gillette Company ................................................. 200,000 14,525
*Kohl's Corporation .............................................. 220,000 9,322
The Procter & Gamble Co. ......................................... 120,000 13,800
-------
47,772
DISTRIBUTION-RETAIL (2.3%)
The Home Depot, Inc. ............................................. 200,000 10,700
ELECTRICAL EQUIPMENT (5.0%)
General Electric Company ......................................... 140,000 13,895
*Thermo Electron Corp. ........................................... 300,000 9,263
-------
23,158
ENERGY (4.2%)
*Renaissance Energy Ltd. ......................................... 300,000 8,546
Schlumberger Ltd. ................................................ 100,000 10,725
-------
19,271
FINANCIAL SERVICES (5.0%)
Federal National Mortgage Association ............................ 370,000 13,366
MBNA Corp. ....................................................... 350,000 9,756
-------
23,122
FOOD, BEVERAGE & TOBACCO (5.4%)
The Coca-Cola Company ............................................ 270,000 15,086
Philip Morris Companies Inc. ..................................... 85,000 9,701
-------
24,787
HEALTH CARE (4.7%)
Johnson & Johnson ................................................ 230,000 12,161
United Healthcare Corporation .................................... 200,000 9,525
-------
21,686
HOTELS (4.7%)
*HFS Incorporated ................................................ 250,000 14,719
*Sun International Hotels Ltd. ................................... 200,000 7,000
-------
21,719
<PAGE>
<CAPTION>
SR&F Growth Stock Portfolio CONTINUED
- --------------------------------------------------------------------------------------
Number Market
of Shares Value
<S> <C> <C>
INSURANCE (5.7%)
American International Group, Inc. ............................... 100,000 $11,737
Travelers Group, Inc. ............................................ 300,000 14,362
-------
26,099
LEISURE & ENTERTAINMENT (2.1%)
The Walt Disney Company .......................................... 135,000 9,855
MEDICAL SUPPLIES (3.9%)
Baxter International Inc. ........................................ 200,000 8,625
Medtronic, Inc. .................................................. 150,000 9,337
-------
17,962
PHARMACEUTICAL (6.9%)
Eli Lilly & Co. .................................................. 150,000 12,338
Merck and Company, Inc. .......................................... 150,000 12,638
SmithKline Beecham Plc ADRs ...................................... 100,000 7,000
-------
31,976
RESTAURANTS (1.8%)
McDonald's Corporation ........................................... 175,000 8,269
RUBBER, PLASTIC & RELATED (2.2%)
Illinois Tool Works Inc. ......................................... 125,000 10,203
TECHNOLOGY SERVICES (1.6%)
*Tellabs Inc. .................................................... 200,000 7,225
TELECOMMUNICATIONS (10.6%)
*Airtouch Communications ......................................... 200,000 4,600
LM Ericsson Telecommunications ADRs Class B....................... 375,000 12,680
Lucent Technologies, Inc. ........................................ 150,000 7,913
Motorola, Inc. ................................................... 250,000 15,094
*WorldCom, Inc. .................................................. 400,000 8,800
-------
49,087
-------
Total Common Stocks (Cost $272,158) ........................................ 434,388
- --------------------------------------------------------------------------------------
<CAPTION>
Principal
Amount
- --------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM OBLIGATIONS (6.9%)
COMMERCIAL PAPER (6.9%)
UBS Finance 6.750% 4/01/97................................. $ 20,335 20,335
Windmill Funding 5.400% 4/01/97............................ 11,500 11,500
--------
TOTAL SHORT-TERM OBLIGATIONS
(Amortized cost $31,835)................................................ 31,835
- --------------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.0%)
(Cost $303,993)......................................................... 466,223
OTHER ASSETS, LESS LIABILITIES (-1.0%).................................. (4,699)
--------
TOTAL NET ASSETS (100.0%)............................................... $461,524
========
- --------------------------------------------------------------------------------------
<FN>
*Non-income producing.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SR&F Special Portfolio
- --------------------------------------------------------------------------------------
Investments as of March 31, 1997
(Dollar Amounts In Thousands)
(Unaudited)
Number Market
COMMON STOCKS (94.7%) of Shares Value
<S> <C> <C>
ADVERTISING (2.1%)
The Interpublic Group of Companies Inc. ...................... 425,000 $ 22,419
AUTOMOTIVE (1.7%)
Superior Industries International, Inc. ...................... 801,000 18,123
BANKS (3.2%)
Golden West Financial Corporation ............................ 380,000 23,845
Washington Mutual, Inc. ...................................... 200,000 9,662
---------
33,507
BROADCASTING (3.5%)
*Cox Communications .......................................... 500,000 10,313
Grupo Radio Centro, S.A. de C.V. ADSs ........................ 474,800 4,095
*Scandinavian Broadcasting System S.A ........................ 460,000 8,280
Westinghouse Electric Corp. .................................. 800,000 14,200
---------
36,888
BUSINESS SERVICES (2.7%)
*Interim Services Inc. ....................................... 475,000 18,466
Unitog Company ............................................... 488,850 9,960
---------
28,426
CONSUMER-RELATED (1.7%)
Newell Company ............................................... 535,000 17,923
DRUGS (2.5%)
Novartis AG .................................................. 21,000 26,035
ELECTRICAL EQUIPMENT (3.1%)
*Littelfuse, Inc.
Common .................................................... 475,000 21,969
Warrants .................................................. 273,600 10,191
---------
32,160
ELECTRONICS & INSTRUMENTATION (5.9%)
AVX Corporation .............................................. 718,400 14,997
*Kent Electronics Corp. ...................................... 1,000,000 23,000
Molex Inc. Class A ........................................... 688,827 24,109
---------
62,106
ENERGY & RELATED SERVICES (6.5%)
Cross Timbers Oil Company .................................... 1,494,150 23,346
*Renaissance Energy Ltd. ..................................... 985,000 28,058
*Petroleum Geo-Services ASA ADRs ............................. 400,000 17,200
---------
68,604
FINANCIAL SERVICES (5.0%)
American Express Co. ......................................... 385,000 23,052
Household International Inc. ................................. 340,000 29,282
---------
52,334
HEALTH SERVICES AND EQUIPMENT (16.6%)
*Boston Scientific Corporation ............................... 623,000 38,470
Cardinal Health Inc. ......................................... 475,000 25,828
*Healthcare Compare Corp. .................................... 450,000 18,281
Invacare Corp. ............................................... 923,550 21,703
*Lincare Holdings Inc. ....................................... 550,000 22,688
<PAGE>
<CAPTION>
SR&F Special Portfolio CONTINUED.
- --------------------------------------------------------------------------------------
Number Market
of Shares Value
<S> <C> <C>
HEALTH SERVICES AND EQUIPMENT (CONTINUED)
Medtronic, Inc. .......................................... 94,400 $ 5,876
*Steris Corporation ...................................... 300,000 7,313
*Stryker Corporation ..................................... 749,600 18,646
*Sybron International Corporation ........................ 550,000 15,263
-----------
174,068
INDUSTRIAL PRODUCTS (2.1%)
Carlisle Corp. ........................................... 770,200 22,528
INSURANCE COMPANIES (8.1%)
National Mutual Asia Ltd. ................................ 21,450,000 22,422
The Progressive Corporation .............................. 692,300 44,221
20th Century Industries .................................. 1,042,700 18,247
-----------
84,890
LEISURE & ENTERTAINMENT (4.8%)
Carnival Corp. Class A ................................... 500,000 18,500
Harley-Davidson, Inc. .................................... 937,000 31,741
-----------
50,241
MACHINERY - GENERAL INDUSTRY (0.2%)
Robbins & Myers, Inc. .................................... 100,000 2,650
OFFICE PRODUCTS (1.6%)
Ikon Office Solutions Inc. ............................... 494,000 16,549
PROPERTY (1.0%)
Beacon Properties Corporation ............................ 326,500 10,815
RETAIL (8.7%)
*Borders Group Inc. ...................................... 1,720,000 32,465
*Consolidated Stores Corp. ............................... 475,000 16,744
*Proffitt's, Inc. ........................................ 701,600 26,485
*Zale Corp. .............................................. 837,200 15,384
-----------
91,078
SCHOOLS (0.5%)
*Devry Inc. .............................................. 238,400 5,245
SECURITY (1.5%)
Pittston Brink's Group ................................... 637,600 16,099
SPECIALTY CHEMICALS (6.8%)
*CIBA Specialty Chemicals AG ............................. 21,000 1,735
*Lydall, Inc. ............................................ 1,029,000 20,837
Minerals Technology Corp. Class A ........................ 624,200 20,755
OM Group, Inc. ........................................... 1,009,500 28,392
-----------
71,719
TEXTILES & APPAREL (2.3%)
Unifi, Inc. .............................................. 778,475 23,743
TELECOMMUNICATIONS (2.6%)
*AirTouch Communications, Inc. ........................... 874,500 20,113
*PriCellular Corporation ................................. 875,000 7,219
-----------
27,332
-----------
TOTAL COMMON STOCKS
(Cost $673,008) ........................................................ $ 995,482
- --------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
SR&F Special Portfolio CONTINUED
- --------------------------------------------------------------------------------------
Principal Market
Amount Value
<S> <C> <C>
SHORT-TERM OBLIGATIONS (5.3%)
COMMERCIAL PAPER (5.3%)
Price/Costco 7.100% 4/01/97 ...................................... $50,000 $ 50,000
Source One Mortgage 7.100% 4/01/97................................ 5,110 5,110
UBS Finance 6.750% 4/01/97 ....................................... 860 860
-------
TOTAL SHORT-TERM OBLIGATIONS
(Amortized cost $55,970) ................................................... 55,970
- ----------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.0%)
(Cost $728,978)............................................................ 1,051,452
OTHER ASSETS, LESS LIABILITIES (0.0%)...................................... 344
----------
TOTAL NET ASSETS (100.0%).................................................. $ 1,051,796
==========
- ----------------------------------------------------------------------------------------
<FN>
*Non-income producing.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SR&F Special Venture Portfolio
- ---------------------------------------------------------------------------------
Investments as of March 31, 1997
(Dollar Amounts In Thousands)
(Unaudited)
Number Market
COMMON STOCKS (94.3%) of Shares Value
<S> <C> <C>
AUTOMOTIVE ACCESSORIES (2.0%)
Superior Industries International, Inc. ......................... 147,000 $ 3,326
BROADCAST/MEDIA (8.9%)
*Central European Media Enterprises Ltd. ......................... 169,900 5,649
Hollinger International, Inc. .................................... 290,000 2,646
*Metro Networks, Inc. ............................................ 200,100 4,602
*United Video Satelite Group, Inc. ............................... 115,000 1,926
-------
14,823
BUSINESS SERVICES (10.6%)
*Alternative Resources Corporation ............................... 240,300 3,635
*Covance, Inc. ................................................... 209,400 3,377
Danka Business Systems Plc ADRs .................................. 51,000 1,603
G & K Services, Inc. Class A ..................................... 141,000 4,230
*Interim Services, Inc. .......................................... 121,100 4,708
-------
17,553
COMPUTERS AND COMPUTER SOFTWARE (1.9%)
*Dr. Solomon's Group Plc ADRs .................................... 105,600 2,323
*Storm Technology, Inc. .......................................... 203,600 840
-------
3,163
COMPUTER SERVICES (5.8%)
*Fiserv, Inc. .................................................... 142,400 5,304
*Microware Systems Corporation ................................... 135,300 862
*Zebra Technologies Corporation .................................. 154,000 3,542
-------
9,708
CONSUMER ELECTRONICS/APPLIANCES (1.6%)
*Helen of Troy Ltd. .............................................. 110,700 2,629
DRUGS (0.8%)
*Ligand Pharmaceuticals .......................................... 120,000 1,350
EDUCATIONAL SERVICES (1.9%)
*Firearms Training Systems, Inc. ................................. 245,500 3,069
ELECTRICAL EQUIPMENT (7.5%)
AVX Corporation .................................................. 219,000 4,572
*Ballantyne of Omaha, Inc. ....................................... 225,000 3,459
*Kent Electronics Corp. .......................................... 142,200 3,271
*Littelfuse, Inc. Warrants ....................................... 30,000 1,118
-------
12,420
ELECTRONIC COMPONENTS (1.9%)
*Zytec Corporation ............................................... 297,900 3,128
EQUIPMENT RENTAL & LEASING (2.1%)
*U.S. Rentals, Inc. .............................................. 190,600 3,455
FABRICATED METAL PRODUCTS (1.0%)
Quanex Corporation ............................................... 64,400 1,618
<PAGE>
<CAPTION>
SR&F Special Venture Portfolio CONTINUED
- --------------------------------------------------------------------------------------
Number Market
of Shares Value
<S> <C> <C>
FOOD DISTRIBUTOR (1.8%)
Richfood Holdings, Inc. ................................... 160,000 $ 3,000
HEALTH SERVICES & EQUIPMENT (8.1%)
*Urologix, Inc. ........................................... 134,800 2,292
Invacare Corp. ............................................ 108,100 2,540
Stryker Corp. ............................................. 90,100 2,241
*Uroquest Medical Corporation.............................. 170,000 1,169
*Xomed Surgical Products Inc. ............................. 318,600 5,257
--------
13,499
INSURANCE (7.9%)
Meadowbrook Insurance Group, Inc. ......................... 202,300 4,628
Mutual Risk Management Ltd. ............................... 100,433 3,641
20th Century Industries.................................... 278,100 4,867
--------
13,136
OIL/GAS (6.5%)
*Barrett Resources Corp. .................................. 112,500 3,361
*Renaissance Energy Ltd. .................................. 52,400 1,493
Cross Timbers Oil Company.................................. 227,700 3,558
Devon Energy Corporation................................... 81,200 2,436
--------
10,848
OPTICAL SUPPLIES (2.1%)
*Sola International, Inc. ................................. 153,700 3,554
REAL ESTATE (10.6%)
Beacon Properties Corporation.............................. 132,200 4,379
*CB Commercial Real Estate Services Group, Inc. ........... 191,000 4,536
Reckson Associates Realty Corporation...................... 104,900 4,838
Spieker Properties, Inc. .................................. 100,000 3,900
--------
17,653
RETAIL (3.3%)
*Garden Botanika, Inc. .................................... 257,400 1,770
*Proffitt's Inc. .......................................... 29,800 1,125
*Video Update, Inc. ....................................... 520,200 2,633
--------
5,528
SPECIALTY CHEMICALS (2.9%)
ChemFirst Inc. ............................................ 164,300 3,491
*CFC International, Inc. .................................. 113,200 1,330
--------
4,821
TELECOMMUNICATIONS (1.7%)
*Western Wireless Corporation.............................. 232,000 2,900
WHOLESALE DISTRIBUTION (3.4%)
*AmeriSource Distribution Corp. ........................... 105,400 4,611
*Henry Schein, Inc. ....................................... 35,000 1,015
--------
5,626
--------
TOTAL COMMON STOCKS (Cost $155,747)..................................... 156,807
- --------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
SR&F Special Venture Portfolio CONTINUED
- --------------------------------------------------------------------------------------
Principal Market
Amount Value
SHORT-TERM OBLIGATIONS (9.1%)
COMMERCIAL PAPER (9.1%)
UBS Finance 6.750% 4/01/97................................. $ 7,625 $ 7,625
Windmill Funding 5.400% 4/01/97............................ 7,500 7,500
--------
TOTAL SHORT-TERM OBLIGATIONS
(Amortized cost $15,125)................................................ 15,125
- --------------------------------------------------------------------------------------
TOTAL INVESTMENTS (103.4%)
(Cost $170,872)......................................................... 171,932
OTHER ASSETS, LESS LIABILITIES (-3.4%).................................. (5,618)
--------
TOTAL NET ASSETS (100.0%)............................................... $166,314
========
- --------------------------------------------------------------------------------------
<FN>
* Non-income producing.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Capital Opportunities Fund
- --------------------------------------------------------------------------------
Investments as of March 31, 1997
(Dollar Amounts In Thousands)
(Unaudited)
Number Market
COMMON STOCKS (95.0%) of Shares Value
<S> <C> <C>
BUSINESS SERVICES (23.0%)
*ABR Information Services, Inc....................... 1,250,000 $ 22,500
*APAC TeleServices, Inc.............................. 940,000 24,440
*The BISYS Group, Inc. .............................. 500,000 15,750
*CBT Group Plc....................................... 630,000 31,421
Danka Business Systems Plc........................... 600,000 18,862
First Data Corporation............................... 800,000 27,100
*Gartner Group, Inc. ................................ 1,700,000 36,763
Paychex, Inc......................................... 1,000,000 41,125
*Sykes Enterprises, Incorporated..................... 300,000 9,788
--------
227,749
CONSUMER PRODUCTS & SERVICES (5.0%)
*HFS Incorporated.................................... 840,000 49,455
HEALTH CARE (17.6%)
Cardinal Health, Inc................................. 400,000 21,750
HBO & Company........................................ 940,000 44,650
*HCIA Inc............................................ 350,000 5,863
*IDEXX Laboratories, Inc. ........................... 1,000,000 14,000
Omnicare, Inc........................................ 1,400,000 32,900
*PhyCor, Inc......................................... 1,000,000 27,250
*Physician Sales & Service, Inc...................... 480,000 6,060
*Quintiles Transnational Corp. ...................... 400,000 21,550
--------
174,023
INDUSTRIAL PRODUCTS (7.4%)
*Gentex Corporation.................................. 810,000 15,997
*MSC Industrial Direct Co., Inc...................... 600,000 17,475
OEA, Inc............................................. 371,200 15,498
*United States Filter Corporation.................... 800,000 24,700
--------
73,670
LEISURE & ENTERTAINMENT (11.5%)
Carnival Corporation................................. 800,000 29,600
*Clear Channel Communications, Inc................... 1,100,000 47,163
*Heftel Broadcasting Corporation..................... 200,000 9,300
*Promus Hotel Corporation............................ 840,000 27,930
--------
113,993
RESTAURANTS (2.2%)
*Papa John's International, Inc. .................... 825,000 21,759
SPECIALTY RETAILING (1.5%)
PETsMART, Inc........................................ 750,000 15,188
<PAGE>
<CAPTION>
Capital Opportunities Fund CONTINUED
- ---------------------------------------------------------------------------------
Number Market
of Shares Value
<S> <C> <C>
TECHNOLOGY (23.2%)
*ADC Telecommunications, Inc. ....................... 840,000 $ 22,575
*Andrew Corporation.................................. 495,000 17,882
*Ascend Communications, Inc.......................... 750,000 30,562
*Aspen Technology, Inc............................... 420,000 11,445
*Cascade Communications Corp. ....................... 1,000,000 26,375
*Cisco Systems, Inc.................................. 450,000 21,656
*Parametric Technology Corporation .................. 540,000 24,367
*Peoplesoft, Inc..................................... 500,000 20,000
*Pure Atria Corporation ............................. 580,000 9,896
*Synopsys, Inc....................................... 360,000 9,000
*Tellabs, Inc........................................ 1,000,000 36,125
--------
229,883
MISCELLANEOUS (3.5%)
*Apollo Group, Inc................................... 510,000 12,495
*Corrections Corporation of America.................. 900,000 21,825
--------
34,320
MISCELLANEOUS SECURITIES (0.1%)...................... 100,000 1,475
--------
TOTAL COMMON STOCKS (Cost $929,766)............................... 941,515
<CAPTION>
- -------------------------------------------------------------------------------
Principal
Amount
<S> <C> <C>
SHORT-TERM OBLIGATIONS (5.5%)
COMMERCIAL PAPER (5.5%)
Marriott International 6.050% 4/03/97 $ 7,000 6,998
UBS Finance 6.750% 4/01/97........................... 48,045 48,045
--------- --------
TOTAL SHORT-TERM OBLIGATIONS (Amortized Cost $55,043)............. 55,043
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.5%)
(Cost $984,809)................................................... 996,558
OTHER ASSETS, LESS LIABILITIES (-0.5%)............................ (5,262)
--------
TOTAL NET ASSETS (100.0%)......................................... $991,296
========
- --------------------------------------------------------------------------------
<FN>
* Non-income producing.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Balance Sheets
- ----------------------------------------------------------------------------------------------------------------------------------
March 31, 1997
(All amounts in thousands, except per-share data)
(Unaudited)
GROWTH SPECIAL CAPITAL
STOCK SPECIAL VENTURE OPPORTUNITIES
FUND FUND FUND FUND
---------- --------- --------- --------------
<S> <C> <C> <C> <C>
ASSETS
Investment in Portfolio, at market value........................ $461,436 $1,051,705 $166,223 $ --
Investments, at market value.................................... -- -- -- 996,558
Receivable for investments sold................................. -- -- -- 2,695
Receivable for fund shares sold................................. 305 657 215 2,392
Dividends and interest receivable............................... 3 51 -- 48
Cash and other assets........................................... 107 181 71 480
---------- ----------- ---------- -----------
Total Assets................................................. $461,851 $1,052,594 $166,509 $1,002,173
========== =========== ========== ===========
LIABILITIES
Payable for fund shares redeemed................................ $ 3,023 $ 3,444 $ 117 $ 6,698
Payable for investments purchased............................... -- -- -- 3,208
Payable to investment adviser and transfer agent................ 188 349 90 897
Other liabilities............................................... 141 346 115 74
---------- ----------- ---------- -----------
Total Liabilities............................................ 3,352 4,139 322 10,877
---------- ----------- ---------- -----------
CAPITAL
Paid-in capital ................................................ 281,816 697,130 157,025 1,050,759
Net unrealized appreciation of investments...................... 162,235 324,395 1,061 11,749
Accumulated net investment loss................................. (160) (2,627) (269) (7,914)
Accumulated undistributed net realized gains (losses) on
investments and foreign currency transactions.................. 14,608 29,557 8,370 (63,298)
---------- ---------- ---------- -----------
Total Capital (Net Assets)................................... 458,499 1,048,455 166,187 991,296
---------- ----------- ---------- -----------
Total Liabilities and Capital................................ $461,851 $1,052,594 $166,509 $1,002,173
========== =========== ========== ===========
Shares Outstanding (Unlimited Number Authorized)................ 16,476 42,112 12,273 43,185
========== =========== ========== ===========
Net Asset Value (Capital) Per Share............................. $ 27.83 $ 24.90 $ 13.54 $ 22.95
========== =========== ========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of Operations
- ----------------------------------------------------------------------------------------------------------------------------------
For the Six Months Ended March 31, 1997
(All amounts in thousands)
(Unaudited)
GROWTH SPECIAL CAPITAL
STOCK SPECIAL VENTURE OPPORTUNITIES
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends ....................................................... $ 1,299 $ 2,116 $ 273 $ 711
Dividends allocated from Portfolio .............................. 622 1,271 271 --
Interest ........................................................ 303 1,289 286 2,846
Interest allocated from Portfolio ............................... 264 576 142 --
--------- --------- --------- ---------
Total Investment Income ...................................... 2,488 5,252 972 3,557
--------- --------- --------- ---------
EXPENSES
Management fees ................................................. 933 2,638 396 5,046
Transfer agent fees ............................................. 513 1,253 175 1,585
Expenses allocated from Portfolio ............................... 498 1,224 211 --
Administrative fees ............................................. 348 756 119 902
Printing and postage ............................................ 81 318 20 272
Custodian fees .................................................. 19 67 8 40
Accounting fees ................................................. 18 26 14 30
SEC and state registration fees ................................. 16 18 12 44
Trustees' fees .................................................. 11 20 7 28
Other ........................................................... 68 207 43 316
--------- --------- --------- ---------
Total Expenses ............................................... 2,505 6,527 1,005 8,263
--------- --------- --------- ---------
Net Investment Loss .......................................... (17) (1,275) (33) (4,706)
--------- --------- --------- ---------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS
Net realized gains (losses) on investments ...................... 7,676 20,251 14,663 (54,874)
Net realized gains (losses) on investments allocated
from Portfolio ............................................... 6,994 10,693 (848) --
Net realized gains on foreign currency transactions ............. -- 1,259 -- --
Net change in unrealized appreciation or
depreciation of investments .................................. 3,566 (44,570) (24,003) (330,535)
--------- --------- --------- ---------
Net Gains (Losses) on Investments and Foreign
Currency Transactions .................................... 18,236 (12,367) (10,188) (385,409)
--------- --------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS .............................................. $ 18,219 $ (13,642) $ (10,221) $(390,115)
========= ========= ========= =========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For The Year Ended September 30, 1996
and Six Months Ended March 31, 1997
(All amounts in thousands)
(Unaudited)
Growth Stock Fund Special Fund
1996 1997 1996 1997
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss) ........................................ $ 1,235 $ (17) $ 347 $ (1,275)
Net realized gains (losses) on investments and foreign
currency transactions ...................................... 34,712 14,670 93,001 32,203
Net change in unrealized appreciation or depreciation
of investments ............................................. 37,878 3,566 89,107 (44,570)
----------- ----------- ----------- -----------
Net Increase (Decrease) in Net Assets Resulting
from Operations .......................................... 73,825 18,219 182,455 (13,642)
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ................................ (1,400) (1,100) (4,825) --
Capital gains distributions ......................................... (32,877) (33,201) (85,187) (86,857)
----------- ----------- ----------- -----------
Total Distributions to Shareholders ........................ (34,277) (34,301) (90,012) (86,857)
----------- ----------- ----------- -----------
SHARE TRANSACTIONS
Subscriptions to fund shares ........................................ 56,575 108,592 139,995 92,723
Investment income dividends reinvested .............................. 1,157 828 4,332 --
Capital gains distributions reinvested .............................. 28,785 26,323 79,821 76,025
Redemptions of fund shares .......................................... (68,437) (79,126) (359,562) (178,292)
----------- ----------- ----------- -----------
Net Increase (Decrease) from Share Transactions ............ 18,080 56,617 (135,414) (9,544)
----------- ----------- ----------- -----------
Net Increase (Decrease) in Net Assets ...................... 57,628 40,535 (42,971) (110,043)
TOTAL NET ASSETS
Beginning of Period ................................................. 360,336 417,964 1,201,469 1,158,498
----------- ----------- ----------- -----------
End of Period ....................................................... $ 417,964 $ 458,499 $ 1,158,498 $ 1,048,455
=========== =========== =========== ===========
Accumulated Undistributed (Overdistributed)
Net Investment Income at End of Period ..................... $ 957 $ (160) $ (2,611) $ (2,627)
=========== =========== =========== ===========
ANALYSES OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to fund shares ........................................ 2,124 3,616 5,554 3,504
Investment income dividends reinvested .............................. 47 31 187 --
Capital gains distributions reinvested .............................. 1,166 980 3,445 3,016
----------- ----------- ----------- -----------
3,337 4,627 9,186 6,520
Redemptions of fund shares .......................................... (2,610) (2,668) (14,448) (6,715)
----------- ----------- ----------- -----------
Net increase (decrease) in fund shares .............................. 727 1,959 (5,262) (195)
Shares outstanding at beginning of period ........................... 13,790 14,517 47,569 42,307
----------- ----------- ----------- -----------
Shares outstanding at end of period ................................. 14,517 16,476 42,307 42,112
=========== =========== =========== ===========
<PAGE>
<CAPTION>
Capital
Special Venture Fund Opportunities Fund
1996 1997 1996 1997
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss) ........................... $ (208) $ (33) $ (3,155) $ (4,706)
Net realized gains (losses) on investments and foreign
currency transactions ......................... 9,004 13,815 (8,425) (54,874)
Net change in unrealized appreciation or depreciation
of investments ................................ 19,130 (24,003) 261,649 (330,535)
----------- ----------- ----------- -----------
Net Increase (Decrease) in Net Assets Resulting
from Operations ............................. 27,926 (10,221) 250,069 (390,115)
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ................... -- -- (150) --
Capital gains distributions ............................ (3,016) (14,445) (12,960) --
----------- ----------- ----------- -----------
Total Distributions to Shareholders ........... (3,016) (14,445) (13,110) --
----------- ----------- ----------- -----------
SHARE TRANSACTIONS
Subscriptions to fund shares ........................... 71,954 66,092 1,801,763 316,076
Investment income dividends reinvested ................. -- -- 128 --
Capital gains distributions reinvested ................. 2,899 13,220 11,772 --
Redemptions of fund shares ............................. (15,768) (32,987) (608,465) (619,203)
----------- ----------- ----------- -----------
Net Increase (Decrease) from Share Transactions 59,085 46,325 1,205,198 (303,127)
----------- ----------- ----------- -----------
Net Increase (Decrease) in Net Assets ......... 83,995 21,659 1,442,157 (693,242)
TOTAL NET ASSETS
Beginning of Period .................................... 60,533 144,528 242,381 1,684,538
----------- ----------- ----------- -----------
End of Period .......................................... $ 144,528 $ 166,187 $ 1,684,538 $ 991,296
=========== =========== =========== ===========
Accumulated Undistributed (Overdistributed)
Net Investment Income at End of Period ........ $ (214) $ (269) $ (3,208) $ (7,914)
=========== =========== =========== ===========
ANALYSES OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to fund shares ........................... 5,177 4,424 64,836 10,910
Investment income dividends reinvested ................. -- -- 6 --
Capital gains distributions reinvested ................. 237 931 527 --
----------- ----------- ----------- -----------
5,414 5,355 65,369 10,910
Redemptions of fund shares ............................. (1,114) (2,188) (22,280) (21,987)
----------- ----------- ----------- -----------
Net increase (decrease) in fund shares ................. 4,300 3,167 43,089 (11,077)
Shares outstanding at beginning of period .............. 4,806 9,106 11,173 54,262
----------- ----------- ----------- -----------
Shares outstanding at end of period .................... 9,106 12,273 54,262 43,185
=========== =========== =========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SR&F Growth Stock Portfolio
Balance Sheet
(All amounts in thousands)
(Unaudited)
MARCH 31,
1997
---------
<S> <C>
ASSETS
Investments, at market value................................... $466,223
Dividends receivable........................................... 467
Cash........................................................... 2
----------
Total Assets................................................ $466,692
==========
LIABILITIES
Payable for investments purchased.............................. $ 4,905
Payable to investment adviser.................................. 263
----------
Total Liabilities............................................ 5,168
----------
Net Assets Applicable to Investors' Beneficial Interest........ $461,524
==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SR&F Growth Stock Portfolio
Statement of Operations
(All amounts in thousands)
(Unaudited)
PERIOD
ENDED
MARCH 31,
1997 (A)
----------
<S> <C>
INVESTMENT INCOME
Dividends...................................................... $ 622
Interest....................................................... 264
----------
Total Investment Income...................................... 886
----------
EXPENSES
Management fees................................................ 466
Accounting fees................................................ 6
Trustees' fees................................................. 4
Audit and legal fees........................................... 3
Custodian fees................................................. 2
Transfer agent fees............................................ 1
Other.......................................................... 16
----------
Total Expenses.............................................. 498
----------
Net Investment Income.......................................... 388
----------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains on investments ............................. 6,988
Net change in unrealized appreciation or depreciation
of investments ............................................. (49,574)
----------
Net Losses on Investments ................................... (42,586)
----------
Net Decrease in Net Assets Resulting from Operations........... $ (42,198)
==========
<FN>
(a) The Portfolio commenced operations on February 3, 1997.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
SR&F Growth Stock Portfolio
Statement of Changes in Net Assets
(All amounts in thousands)
(Unaudited)
<CAPTION>
PERIOD
ENDED
MARCH 31,
1997 (A)
----------
<S> <C>
OPERATIONS
Net investment income.......................................... $ 388
Net realized gains on investments.............................. 6,988
Net change in unrealized appreciation or depreciation of
investments................................................. (49,574)
----------
Net Decrease in Net Assets Resulting from Operations........... (42,198)
----------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions.................................................. 524,541
Withdrawals.................................................... (20,819)
----------
Net Increase from Transactions in Investors' Beneficial Interest 503,722
----------
Net Increase in Net Assets.................................. 461,524
TOTAL NET ASSETS
Beginning of Period............................................ --
----------
End of Period.................................................. $461,524
==========
<FN>
(a) The Portfolio commenced operations on February 3, 1997.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
SR&F Special Portfolio
Balance Sheet
(All amounts in thousands)
(Unaudited)
<CAPTION>
MARCH 31,
1997
------------
<S> <C>
ASSETS
Investments, at market value.................................... $1,051,452
Receivable for investments sold and forward contracts........... 28,965
Dividends receivable........................................... 248
Cash........................................................... 4
Interest receivable............................................ 1
-----------
Total Assets................................................. $1,080,670
===========
LIABILITIES
Payable for investments sold and forward contracts............. $ 28,222
Payable to investment adviser.................................. 652
-----------
Total Liabilities........................................... 28,874
-----------
Net Assets Applicable to Investors' Beneficial Interest........ $1,051,796
===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
SR&F Special Portfolio
Statement of Operations
(All amounts in thousands)
(Unaudited)
<CAPTION>
PERIOD
ENDED
MARCH 31,
1997 (A)
----------
<S> <C>
INVESTMENT INCOME
Dividends...................................................... $ 1,271
Interest....................................................... 574
----------
Total Investment Income...................................... 1,845
----------
EXPENSES
Management fees................................................ 1,153
Accounting fees................................................ 9
Trustees' fees................................................. 7
Audit and legal fees........................................... 3
Custodian fees................................................. 2
Transfer agent fees............................................ 1
Other.......................................................... 49
----------
Total Expenses.............................................. 1,224
----------
Net Investment Income.......................................... 621
----------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gains on investments ............................. 10,687
Net change in unrealized appreciation or depreciation
of investments and foreign currency transactions............ (85,583)
----------
Net Losses on Investments and Foreign Currency Transactions (74,896)
----------
Net Decrease in Net Assets Resulting from Operations........... $ (74,275)
==========
<FN>
(a) The Portfolio commenced operations on February 3, 1997.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
SR&F Special Portfolio
Statement of Changes in Net Assets
(All amounts in thousands)
(Unaudited)
<CAPTION>
PERIOD
ENDED
MARCH 31,
1997 (A)
----------
<S> <C>
OPERATIONS
Net investment income.......................................... $ 621
Net realized gains on investments and futures contracts........ 10,687
Net change in unrealized appreciation or depreciation
of investments and futures contracts........................ (85,583)
------------
Net Decrease in Net Assets Resulting from Operations........... (74,275)
------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions.................................................. 1,167,598
Withdrawals.................................................... (41,527)
------------
Net Increase from Transactions in Investors' Beneficial Interest 1,126,071
------------
Net Increase in Net Assets................................... 1,051,796
TOTAL NET ASSETS
Beginning of Period............................................ --
------------
End of Period.................................................. $1,051,796
============
<FN>
(a) The Portfolio commenced operations on February 3, 1997.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
SR&F Special Venture Portfolio
Balance Sheet
(All amounts in thousands)
(Unaudited)
<CAPTION>
MARCH 31,
1997
-----------
<S> <C>
ASSETS
Investments, at market value................................... $171,932
Dividends receivable........................................... 158
Cash........................................................... 3
--------
Total Assets................................................ $172,093
========
LIABILITIES
Payable for investments purchased.............................. $ 5,671
Payable to investment adviser.................................. 108
---------
Total Liabilities........................................... 5,779
---------
Net Assets Applicable to Investors' Beneficial Interest........ $166,314
=========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
SR&F Special Venture Portfolio
Statement of Operations
(All amounts in thousands)
(Unaudited)
<CAPTION>
PERIOD
ENDED
MARCH 31,
1997 (A)
--------
<S> <C>
INVESTMENT INCOME
Dividends ......................................................... $ 271
Interest .......................................................... 142
--------
Total Investment Income ........................................ 413
--------
EXPENSES
Management fees ................................................... 200
Accounting fees ................................................... 4
Trustees' fees .................................................... 3
Audit and legal fees .............................................. 2
Custodian fees .................................................... 2
Transfer agent fees ............................................... 1
--------
Total Expenses ................................................. 212
--------
Net Investment Income ............................................. 201
--------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized losses on investments ................................ (855)
Net change in unrealized appreciation or depreciation of
investments and foreign currency transactions .................. (14,273)
--------
Net Losses on Investments ...................................... (15,128)
--------
Net Decrease in Net Assets Resulting from Operations .............. $(14,927)
========
<FN>
(a) The Portfolio commenced operations on February 3, 1997.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
SR&F Special Venture Portfolio
Statement of Changes in Net Assets
(All amounts in thousands)
(Unaudited)
<CAPTION>
PERIOD
ENDED
MARCH 31,
1997 (A)
---------
<S> <C>
OPERATIONS
Net investment income ................................................. $ 201
Net realized gains on investments ..................................... (855)
Net change in unrealized appreciation or depreciation
of investments ..................................................... (14,273)
---------
Net Decrease in Net Assets Resulting from Operations .................. (14,927)
---------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions ......................................................... 186,411
Withdrawals ........................................................... (5,170)
---------
Net Increase from Transactions in Investors' Beneficial Interest ... 181,241
---------
Net Increase in Net Assets ......................................... 166,314
TOTAL NET ASSETS
Beginning of Period ................................................... --
---------
End of Period ......................................................... $ 166,314
=========
<FN>
(a) The Portfolio commenced operations on February 3, 1997.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
Note 1. Organization of the Portfolios
SR&F Growth Stock Portfolio, SR&F Special Portfolio and SR&F Special Venture
Portfolio (the "Portfolios") are separate series of the SR&F Base Trust, a
Massachusetts common law trust organized under an Agreement and Declaration of
Trust dated August 23, 1993. The Declaration of Trust permits the Trustees to
issue nontransferable interests in the Portfolios. The Portfolios commenced
operations February 3, 1997. At commencement, Stein Roe Growth Stock Fund, Stein
Roe Special Fund and Stein Roe Special Venture Fund contributed $474,071,
$1,096,221 and $160,983 in securities and other assets, respectively, to their
respective portfolios. At February 14, 1997, Stein Roe Advisor Growth Stock
Fund, Stein Roe Advisor Special Fund and Stein Roe Advisor Special Venture Fund
each contributed cash of $100 to their respective Portfolios.
The Portfolios allocate net asset value, income and expenses based on
respective percentage ownership of each investor on a daily basis. At March 31,
1997, Growth Stock Fund and Advisor Growth Stock Fund owned 99.98 percent and
.02 percent, respectively, of the SR&F Growth Stock Portfolio, Special Fund and
Advisor Special Fund owned 99.99 percent and .01 percent, respectively, of SR&F
Special Portfolio, and Special Venture Fund and Advisor Special Venture Fund
owned 99.94 percent and .06 percent, respectively, of SR&F Special Venture
Portfolio.
Note 2. Significant Accounting Policies
The following are the significant accounting policies of Stein Roe Growth Stock
Fund, Stein Roe Special Fund, Stein Roe Special Venture Fund and Stein Roe
Capital Opportunities Fund (the "Funds"), each a series of the Stein Roe
Investment Trust (a Massachusetts business trust) and the SR&F Growth Stock
Portfolio, SR&F Special Portfolio and SR&F Special Venture Portfolio (the
"Portfolios"), each a series of the SR&F Base Trust (a Massachusetts common law
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.
<PAGE>
Security Valuations
All securities are valued as of March 31, 1997. Securities are valued at,
depending on the security involved, the last reported sales price, last bid or
asked price, or the mean between last bid and asked price as of the close of the
appropriate exchange or other designated time. A security that is listed or
traded on more than one exchange is valued at the quotation on the exchange
determined to be the primary exchange for such security. Other assets and
securities of the Funds and Portfolios are valued by a method that the Board of
Trustees believes represents a fair value.
Federal Income Taxes
No provision is made for federal income taxes since each Fund elects to be
taxed as a "regulated investment company" and makes such distributions to its
shareholders as to be relieved of all federal income taxes under provisions of
current federal tax law.
The Funds intend to utilize provisions of the federal income tax laws, which
allow them to carry a realized capital loss forward up to eight years following
the year of the loss, and offset such losses against any future realized capital
gains.
At September 30, 1996, Capital Opportunities Fund had a capital loss
carryforward of $8,401, which expires in 2004.
Distributions to Shareholders
Dividends from net investment income and capital gains, if any, are distributed
annually. Distributions in excess of tax basis earnings are reported in the
financial statements as a return of capital. Differences in the recognition or
classification of income between the financial statements and tax earnings that
result in temporary overdistributions are classified as distributions in excess
of net investment income or net realized gains, and any permanent differences
are reclassified to paid-in capital.
Other Information
The books and records of the Funds and Portfolios 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 3. Trustees' Fees and Transactions with Affiliates
The Funds and Portfolios 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 fee for SR&F Growth Stock Portfolio is computed at an annual
rate of .60 of 1 percent of average daily net assets up to $500 million, .55 of
1 percent of the next $500 million, and .50 of 1 percent thereafter. The
management fee for SR & F Special Portfolio and Capital Opportunities Fund is
computed at an annual rate of .75 of 1 percent of average daily net assets up to
$500 million, .70 of 1 percent of the next $500 million, .65 of 1 percent of the
next $500 million, and .60 of 1 percent thereafter. The management fee for SR&F
Special Venture Portfolio is .90 of 1 percent of average daily net assets. The
administrative fees for Growth Stock Fund and Special Fund are computed at an
annual rate of .15 of 1 percent of average daily net assets up to $500 million,
.125 of 1 percent of the next $500 million, and .10 of 1 percent thereafter. The
administrative fees for Special Venture Fund are .15 of 1 percent of average
daily net assets. The administrative fees for Capital Opportunities Fund are .15
percent 1 percent of average daily net assets up to $500 million, .125 of 1
percent of the next $500 million, .10 of 1 percent of the next $500 million, and
.075 of 1 percent thereafter.
The administrative agreement provides 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. Prior to January 31, 1997, the Adviser limited Special Venture Fund's
expenses to 1.25 percent of average daily net assets.
The transfer agent fees are paid to SteinRoe Services Inc. (SSI), an
indirect, majority-owned subsidiary of Liberty Mutual Insurance Company. SSI has
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 certain fund accounting services. For the period
ended March 31, 1997, Growth Stock Fund, Special Fund, Special Venture Fund,
Capital Opportunities Fund, SR&F Growth Stock Portfolio, SR&F Special Portfolio
and SR&F Special Venture Portfolio incurred charges of $18, $26, $14, $30, $6,
$9 and $4, respectively.
<PAGE>
Certain officers and trustees of the Trust are also officers of the Adviser.
The compensation of trustees not affiliated with the Adviser for Growth Stock
Fund, Special Fund, Special Venture Fund, Capital Opportunities Fund, SR&F
Growth Stock Portfolio, SR&F Special Portfolio and SR&F Special Venture
Portfolio for the period ended March 31, 1997, was $11, $20, $7, $28, $4, $7 and
$3, respectively. No remuneration was paid to any other trustee or officer of
the Trust.
Note 4. Short-Term Debt
To facilitate portfolio liquidity, the Funds and Portfolios maintain
borrowing arrangements under which they can borrow against portfolio securities.
Neither the Funds nor the Portfolios had borrowings during the period ended
March 31, 1997.
Note 5. Investment Transactions
The aggregate cost of purchases and proceeds from sales other than short-term
obligations for the period ended March 31, 1997, were:
<TABLE>
FUND/PORTFOLIO Purchases Sales
--------- ---------
<S> <C> <C>
Growth Stock Fund (a)............................. $ 38.185 $ 22,581
SR&F Growth Stock Portfolio....................... 35,975 33,072
Special Fund (a).................................. 76,085 98,248
SR&F Special Portfolio............................ 35,536 47,534
Special Venture Fund (a).......................... 72,931 60,743
SR&F Special Venture Portfolio.................... 40,999 23,685
Capital Opportunities Fund........................ 241,117 369,841
<FN>
(a) Prior to commencement of operations of the respective Portfolio (see Note 1
to Financial Statements).
</FN>
At March 31, 1997, 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:
<CAPTION>
Cost of Investments
Federal
Net Financial Income
FUND/PORTFOLIO Appreciation Depreciation Appreciation Reporting Tax
<S> <C> <C> <C> <C> <C>
Growth Stock Portfolio ..... $168,570 $ 6,340 $162,230 $303,993 $303,993
Special Portfolio .......... 338,826 17,869 320,957 728,978 730,495
Special Venture Portfolio .. 13,246 12,200 1,046 170,872 170,886
Capital Opportunities Fund . 138,707 127,087 11,620 984,809 984,938
</TABLE>
<PAGE>
<TABLE>
Financial Highlights
Special Venture Fund
(All amounts in thousands, except per-share data)
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<CAPTION>
SIX
PERIOD YEAR MONTHS
ENDED ENDED ENDED
SEPT. 30, SEPT. 30, MARCH 31,
1995(A) 1996 1997
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD .... $ 10.00 $ 12.60 $ 15.87
------------ ------------- -------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ................ 0.01 (0.02) 0.00
Net realized and unrealized gains
(losses) on investments ............ 2.67 3.86 (0.81)
------------ ------------- -------------
Total from investment operations .. 2.68 3.84 (0.81)
------------ ------------- -------------
DISTRIBUTIONS
Net investment income ................ (0.03) -- --
Net realized capital gains ........... (0.05) (0.57) (1.52)
------------ ------------- -------------
Total distributions ............... (0.08) (0.57) (1.52)
------------ ------------- -------------
NET ASSET VALUE, END OF PERIOD .......... $ 12.60 $ 15.87 $ 13.54
============ ============= =============
Ratio of net expenses to average
net assets (b) ...................... 1.25%* 1.25% 1.26%*
Ratio of net investment income to average
net assets (c) ....................... 0.12%* (2.19%) (0.04%)*
Portfolio turnover rate ................. 84% 72% 44%(d)
Average commissions (per share) ......... -- $ 0.0378 $ 0.0390(d)
Total return ............................ 26.96% 31.81% (5.55%)
Net assets, end of period ............... $ 60,533 $ 144,528 $ 166,187
<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.
(d) Prior to commencement of operations of the Portfolio (See Note 1 to
Financial Statements).
</FN>
</TABLE>
<PAGE>
<TABLE>
Financial Highlights Continued
Growth Stock Fund
(All amounts in thousands, except per-share data)
Selected per-share data (for a share outstanding throughout each period), ratios and supplemental data.
<CAPTION>
Nine
Year Months
Ended Ended
Dec. 31, Sept. 30, Years Ended Sept. 30,
1987 1988 1989 1990
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ..................... $ 16.97 $ 14.67 $ 14.60 $ 19.05
----------- ----------- ----------- -----------
Income From Investment Operations
Net investment income ........................... 0.24 0.19 0.34 0.39
Net realized and unrealized gains
(losses) on investments ....................... 0.46 (0.11) 4.51 (1.17)
----------- ----------- ----------- -----------
Total from investment operations ....... 0.70 0.08 4.85 (0.78)
----------- ----------- ----------- -----------
Distributions
Net investment income ........................... (0.29) (0.15) (0.34) (0.37)
Net realized capital gains ...................... (2.71) -- (0.06) --
----------- ----------- ----------- -----------
Total distributions .................... (3.00) (0.15) (0.40) (0.37)
----------- ----------- ----------- -----------
Net Asset Value, End of Period ........................... $ 14.67 $ 14.60 $ 19.05 $ 17.90
=========== =========== =========== ===========
Ratio of net expenses to average net assets .............. 0.65% 0.76%* 0.77% 0.73%
Ratio of net investment income to average net assets ..... 1.25% 1.62%* 2.05% 2.03%
Portfolio turnover rate .................................. 143% 84% 47% 40%
Average commissions (per share) .......................... -- -- -- --
Total return ............................................. 5.57% 0.54% 33.86% (4.17%)
Net assets, end of period ................................ $ 232,658 $ 195,641 $ 206,476 $ 206,031
<PAGE>
<CAPTION>
Years Ended Sept. 30,
1991 1992 1993 1994
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ....................... $ 17.90 $ 22.79 $ 24.65 $ 24.89
----------- ----------- ----------- -----------
Income From Investment Operations
Net investment income ............................. 0.33 0.18 0.15 0.13
Net realized and unrealized gains
(losses) on investments ........................ 5.90 3.01 1.14 0.41
----------- ----------- ----------- -----------
Total from investment operations ......... 6.23 3.19 1.29 0.54
----------- ----------- ----------- -----------
Distributions
Net investment income ............................. (0.42) (0.16) (0.10) (0.12)
Net realized capital gains ........................ (0.92) (1.17) (0.95) (1.73)
----------- ----------- ----------- -----------
Total distributions ...................... (1.34) (1.33) (1.05) (1.85)
----------- ----------- ----------- -----------
Net Asset Value, End of Period ............................. $ 22.79 $ 24.65 $ 24.89 $ 23.58
=========== =========== =========== ===========
Ratio of net expenses to average net assets ................ 0.79% 0.92% 0.93% 0.94%
Ratio of net investment income to average net assets ....... 1.63% 0.75% 0.59% 0.50%
Portfolio turnover rate .................................... 34% 23% 29% 27%
Average commissions (per share) ............................ -- -- -- --
Total return ............................................... 36.64% 14.37% 5.09% 2.10%
Net assets, end of period .................................. $ 291,767 $ 372,758 $ 373,921 $ 321,502
<PAGE>
<CAPTION>
Six
Months
Ended
Years Ended Sept. 30, March 31,
1995 1996 1997
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ............... $ 23.58 $ 26.13 $ 28.79
----------- ------------- -----------
Income From Investment Operations
Net investment income ..................... 0.12 0.08 --
Net realized and unrealized gains
(losses) on investments ................ 5.60 5.01 1.34
----------- ------------- -----------
Total from investment operations . 5.72 5.09 1.34
----------- ------------- -----------
Distributions
Net investment income ..................... (0.15) (0.10) (0.07)
Net realized capital gains ................ (3.02) (2.33) (2.23)
----------- ------------- -----------
Total distributions .............. (3.17) (2.43) (2.30)
----------- ------------- -----------
Net Asset Value, End of Period ..................... $ 26.13 $ 28.79 $ 27.83
=========== ============= ===========
Ratio of net expenses to average net assets ........ 0.99% 1.08% 1.07%*
Ratio of net investment income to average net assets 0.56% 0.32% (0.01%)*
Portfolio turnover rate ............................ 36% 39% 5% (a)
Average commissions (per share) .................... -- $ 0.0528 $ 0.0582 (a)
Total return ....................................... 28.18% 21.04% 4.96%
Net assets, end of period .......................... $ 360,336 $ 417,964 $ 458,499
<FN>
*Annualized
(a) Prior to commencement of operations of the Portfolio (See Note 1 to
Financial Statements). 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>
Financial Highlights Continued
Special Fund
(All amounts in thousands, except per-share data)
Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.
<CAPTION>
Nine
Year Months
Ended Ended
Dec. 31, Sept. 30, Years Ended Sept. 30,
1987 1988 1989 1990
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...................... $ 16.95 $ 12.83 $ 15.12 $ 20.79
----------- ----------- ------------- -------------
Income From Investment Operations
Net investment income ............................ 0.23 0.14 0.36 0.42
Net realized and unrealized gains
(losses) on investments ....................... 0.12 2.16 5.58 (2.10)
----------- ----------- ------------- -------------
Total from investment operations ........ 0.35 2.30 5.94 (1.68)
----------- ----------- ------------- -------------
Distributions
Net investment income ............................ (0.57) (0.01) (0.21) (0.39)
Net realized capital gains ....................... (3.90) -- (0.06) (2.08)
----------- ----------- ------------- -------------
Total distributions ..................... (4.47) (0.01) (0.27) (2.47)
----------- ----------- ------------- -------------
Net Asset Value, End of Period ............................ $ 12.83 $ 15.12 $ 20.79 $ 16.64
=========== =========== ============= =============
Ratio of net expenses to average net assets ............... 0.96% 0.99%* 0.96% 1.02%
Ratio of net investment income to average net assets ...... 1.32% 1.31%* 2.12% 2.33%
Portfolio turnover rate ................................... 103% 42% 85% 70%
Average commissions (per share) ........................... -- -- -- --
Total return .............................................. 4.27% 17.94% 40.00% (8.78%)
Net assets, end of period ................................. $ 187,997 $ 224,628 $ 322,056 $ 361,065
<PAGE>
<CAPTION>
Years Ended Sept. 30,
1991 1992 1993 1994
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .................... $ 16.64 $ 19.87 $ 20.90 $ 25.04
----------- ----------- ------------- -------------
Income From Investment Operations
Net investment income .......................... 0.34 0.21 0.17 0.15
Net realized and unrealized gains
(losses) on investments ..................... 4.55 1.50 5.31 0.33
----------- ----------- ------------- -------------
Total from investment operations ...... 4.89 1.71 5.48 0.48
----------- ----------- ------------- -------------
Distributions
Net investment income .......................... (0.34) (0.37) (0.18) (0.21)
Net realized capital gains ..................... (1.32) (0.31) (1.16) (1.77)
----------- ----------- ------------- -------------
Total distributions ................... (1.66) (0.68) (1.34) (1.98)
----------- ----------- ------------- -------------
Net Asset Value, End of Period .......................... $ 19.87 $ 20.90 $ 25.04 $ 23.54
=========== =========== ============= =============
Ratio of net expenses to average net assets ............. 1.04% 0.99% 0.97% 0.96%
Ratio of net investment income to average net assets .... 2.11% 0.99% 0.92% 0.91%
Portfolio turnover rate ................................. 50% 40% 42% 58%
Average commissions (per share) ......................... -- -- -- --
Total return ............................................ 32.18% 8.96% 27.35% 2.02%
Net assets, end of period ............................... $ 587,259 $ 626,080 $ 1,076,818 $ 1,243,885
<PAGE>
<CAPTION>
Six
Months
Ended
Years Ended Sept. 30, March 31,
1995 1996 1997
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ............... $ 23.54 $ 25.26 $ 27.39
------------- --------------- -------------
Income From Investment Operations
Net investment income ..................... 0.13 0.01 --
Net realized and unrealized gains
(losses) on investments ................ 3.05 4.14 (0.38)
------------- --------------- -------------
Total from investment operations . 3.18 4.15 (0.38)
------------- --------------- -------------
Distributions
Net investment income ..................... (0.15) (0.11) --
Net realized capital gains ................ (1.31) (1.91) (2.11)
------------- --------------- -------------
Total distributions .............. (1.46) (2.02) (2.11)
------------- --------------- -------------
Net Asset Value, End of Period ..................... $ 25.26 $ 27.39 $ 24.90
============= =============== =============
Ratio of net expenses to average net assets ........ 1.02% 1.18% 1.15%*
Ratio of net investment income to average net assets 0.56% 0.03% (0.22%)*
Portfolio turnover rate ............................ 41% 32% 7% (a)
Average commissions (per share) .................... -- $ 0.0482 $ 0.0382 (a)
Total return ....................................... 14.60% 17.89% (1.50%)
Net assets, end of period .......................... $ 1,201,469 $ 1,158,498 $ 1,048,455
<FN>
*Annualized
(a) Prior to commencement of operations of the Portfolio (See Note 1 to
Financial Statements).
</FN>
</TABLE>
<PAGE>
<TABLE>
Financial Highlights Continued
Capital Opportunities Fund
(All amounts in thousands, except per-share data)
Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.
<CAPTION>
Nine
Year Months
Ended Ended
Dec. 31, Sept. 30, Years Ended Sept. 30,
1987 1988 1989 1990
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ....................... $ 13.38 $ 10.62 $ 10.78 $ 14.58
----------- ----------- ----------- -----------
Income From Investment Operations
Net investment income (loss) ...................... 0.03 0.03 0.05 0.06
Net realized and unrealized gains
(losses) on investments ........................ 0.62 0.13 3.86 (4.72)
----------- ----------- ----------- -----------
Total from investment operations ......... 0.65 0.16 3.91 (4.66)
----------- ----------- ----------- -----------
Distributions
Net investment income ............................. (0.05) -- (0.05) (0.06)
Net realized capital gains ........................ (3.36) -- (0.06) (2.54)
----------- ----------- ----------- -----------
Total distributions ...................... (3.41) -- (0.11) (2.60)
----------- ----------- ----------- -----------
Net Asset Value, End of Period ............................. $ 10.62 $ 10.78 $ 14.58 $ 7.32
=========== =========== =========== ===========
Ratio of net expenses to average net assets ................ 0.95% 1.01%* 1.09% 1.14%
Ratio of net investment income to average net assets ....... 0.18% 0.34%* 0.42% 0.43%
Portfolio turnover rate .................................... 133% 164% 245% 171%
Average commissions (per share) ............................ -- -- -- --
Total return ............................................... 9.38% 1.51% 36.68% (37.51%)
Net assets, end of period .................................. $ 171,973 $ 194,160 $ 272,805 $ 86,342
<PAGE>
<CAPTION>
Years Ended Sept. 30,
1991 1992 1993 1994
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...................... $ 7.32 $ 11.00 $ 11.56 $ 15.44
----------- ----------- ----------- -----------
Income From Investment Operations
Net investment income (loss) ..................... 0.11 0.06 0.01 0.02
Net realized and unrealized gains
(losses) on investments ....................... 3.73 0.60 3.91 0.34
----------- ----------- ----------- -----------
Total from investment operations ........ 3.84 0.66 3.92 0.36
----------- ----------- ----------- -----------
Distributions
Net investment income ............................ (0.08) (0.10) (0.04) (0.01)
Net realized capital gains ....................... (0.08) -- -- --
----------- ----------- ----------- -----------
Total distributions ..................... (0.16) (0.10) (0.04) (0.01)
----------- ----------- ----------- -----------
Net Asset Value, End of Period ............................ $ 11.00 $ 11.56 $ 15.44 $ 15.79
=========== =========== =========== ===========
Ratio of net expenses to average net assets ............... 1.18% 1.06% 1.06% 0.97%
Ratio of net investment income to average net assets ...... 1.19% 0.42% 0.09% 0.04%
Portfolio turnover rate ................................... 69% 46% 55% 46%
Average commissions (per share) ........................... -- -- -- --
Total return .............................................. 53.51% 5.99% 34.01% 2.31%
Net assets, end of period ................................. $ 129,711 $ 118,726 $ 153,101 $ 175,687
<PAGE>
<CAPTION>
Six
Months
Ended
Years Ended Sept. 30, March 31,
1995 1996 1997
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ............... $ 15.79 $ 21.69 $ 31.04
----------- --------------- -------------
Income From Investment Operations
Net investment income (loss) .............. 0.01 (0.06) (0.12)
Net realized and unrealized gains
(losses) on investments ................ 5.91 10.41 (7.97)
----------- --------------- -------------
Total from investment operations . 5.92 10.35 (8.09)
----------- --------------- -------------
Distributions
Net investment income ..................... (0.02) (0.01) --
Net realized capital gains ................ -- (0.99) --
----------- --------------- -------------
Total distributions .............. (0.02) (1.00) --
----------- --------------- -------------
Net Asset Value, End of Period ..................... $ 21.69 $ 31.04 $ 22.95
=========== =============== =============
Ratio of net expenses to average net assets ........ 1.05% 1.22% 1.15%*
Ratio of net investment income to average net assets 0.08% (0.40%) (0.65%)*
Portfolio turnover rate ............................ 60% 22% 18%
Average commissions (per share) .................... -- $ 0.0555 $ 0.0480
Total return ....................................... 37.46% 49.55% (26.06%)
Net assets, end of period .......................... $ 242,381 $ 1,684,538 $ 991,296
<FN>
*Annualized
All per-share amounts and Average Shares Outstanding During Period on the debt
table reflect a two-for-one stock split effective August 25, 1995.
</FN>
Note: For the periods indicated below, bank borrowing activity was as follows:
<CAPTION>
Debt Outstanding Average Average Shares
at End Debt Outstanding Outstanding Average Debt
of Period During Period During Period Per Share
Period Ended (in thousands) (in thousands) (in thousands) During Period
- ------------ ------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C>
December 31, 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>
Financial Highlights CONTINUED
SR&F Growth Stock Portfolio
<CAPTION>
PERIOD
ENDED
MARCH 31,
1997 (A)
---------
<S> <C>
RATIOS TO AVERAGE NET ASSETS
Ratio of net investment income to average net assets............ 0.50%*
Ratio of net expenses to average net assets..................... 0.64%*
Portfolio turnover rate......................................... 7%
Average commissions (per share)................................ $ 0.0588
<FN>
*Annualized
(a) The Portfolio commenced operations on February 3, 1997.
</FN>
</TABLE>
<PAGE>
<TABLE>
Financial Highlights CONTINUED
SR&F Special Portfolio
<CAPTION>
PERIOD
ENDED
MARCH 31,
1997 (A)
---------
<S> <C>
RATIOS TO AVERAGE NET ASSETS
Ratio of net investment income to average net assets............ 0.36%*
Ratio of net expenses to average net assets..................... 0.71%*
Portfolio turnover rate......................................... 3%
Average commissions (per share)................................ $ 0.0381
<FN>
*Annualized
(a) The Portfolio commenced operations on February 3, 1997.
</FN>
</TABLE>
<PAGE>
<TABLE>
Financial Highlights CONTINUED
SR&F Special Venture Portfolio
<CAPTION>
PERIOD
ENDED
MARCH 31,
1997 (A)
---------
<S> <C>
RATIOS TO AVERAGE NET ASSETS
Ratio of net investment income to average net assets....... 0.75%*
Ratio of net expenses to average net assets................ 0.79%*
Portfolio turnover rate.................................... 15%
Average commissions (per share)............................ $ 0.0374
<FN>
*Annualized
(a) The Portfolio commenced operations on February 3, 1997.
</FN>
</TABLE>
<PAGE>
To Contact Us. . .
- -------------------------------------------------------------------------------
By Phone 800-338-2550
You can discuss your investment questions with a Stein Roe account
representative by calling us toll free. We'll be happy to answer questions about
your current account, or to provide you with information about opening a Stein
Roe Fund account, including Stein Roe IRAs. We're available seven days a week,
from 7 a.m. to 8 p.m. weekdays and from 9 a.m. to 2 p.m. Saturday and Sunday
(Central time).
Stein Roe's Funds-on-Call(R)
24-Hour Service Line
Using a touch-tone phone, call our toll-free number, day or night, for your
current account balance, the latest Stein Roe Fund prices and yields, and other
information. In addition, if you have a Personal Identification Number (PIN),
you may place orders for the following transactions 24 hours a day:
o Exchange shares between your Stein Roe accounts;
o Purchase Fund shares by electronic transfer;
o Order additional account statements and money market fund checks;
o Redeem shares by check, wire or electronic transfer.
Retirement Plan Accounts
Call us for information about how we can assist you with your defined
contribution plan, including 401(k) plans. You can reach us toll free at
800-322-1130. For information on IRA plans, call us toll free at 800-338-2550.
By Mail or E-Mail
If you prefer to contact us by mail, please address all correspondence to:
P.O. Box 8900, Boston, MA 02205-8900. To contact us by e-mail, send
correspondence directly to comments @steinroe.com or visit us at
www.steinroe.com on the Internet.
In Person
If you are in the Chicago area, please visit our Investor Center located in
downtown Chicago at One South Wacker Drive, 32nd Floor. Our account
representatives can answer questions about your current fund investments or
provide you information about any of the Stein Roe funds and retirement plans.
Stop by weekdays between 8 a.m. and 5:15 p.m.
Must be preceded or accompanied by a prospectus.
<PAGE>
Investment Trust
Trustees
Timothy K. Armour
President, Mutual Fund Division and Director,
Stein Roe & Farnham Incorporated
Kenneth L. Block
Chairman Emeritus, A.T. Kearney, Inc.
William W. Boyd
Chairman and Director, Sterling Plumbing
Group Inc.
Lindsay Cook
Senior Vice President, Liberty Financial
Companies, Inc.
Douglas A. Hacker
Senior Vice President and Chief Financial
Officer, United Airlines
Janet Langford Kelly
Senior Vice President, Secretary and General
Counsel, Sara Lee Corporation
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 Director, William Blair Capital Partners
Officers
Timothy K. Armour, President
Jilaine H. Bauer, Executive Vice President, Secretary
Thomas W. Butch, Executive Vice President
Hans P. Ziegler, Executive Vice President
Gary A. Anetsberger, Senior Vice President,
Chief Financial Officer
Bruno Bertocci, Vice President
David P. Brady, Vice President
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
Arthur J. McQueen, 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
Stacy H. Winick, Vice President
Sharon R. Robertson, Controller
Judith E. Perrie, Treasurer
Margaret O. Zwick, Assistant 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>
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 & 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
Stein Roe Emerging Markets Fund
Stein Roe Mutual Funds
P.O. Box 8900
Boston, Massachusetts 02205-8900
1-800-338-2550
http://www.steinroe.com
In Chicago, visit our Fund Center at One South Wacker Drive, 32nd Floor
Liberty Securities Corporation, Distributor
Member SIPC
EQ12A 5/97
