Stein Roe Mutual Funds
ANNUAL REPORT
SEPT. 30, 1997
PHOTO OF:
Stein Roe Equity Funds
GROWTH FUNDS
GROWTH STOCK FUND
GROWTH OPPORTUNITIES FUND
SPECIAL FUND
SPECIAL VENTURE FUND
CAPITAL OPPORTUNITIES FUND
LOGO: STEIN ROE MUTUAL FUNDS
BUILDING WEALTH FOR GENERATIONS(SM)
<PAGE>
Contents
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................................................. 8
Growth Opportunities Fund......................................... 12
Special Fund...................................................... 16
Special Venture Fund.............................................. 20
Capital Opportunities Fund........................................ 25
Interviews with the portfolio managers and a summary of
investment activity
Investments....................................................... 29
A complete list of investments with market values
Financial Statements.............................................. 42
Balance sheets, statements of operations and
changes in net assets
Notes to Financial Statements..................................... 51
Financial Highlights.............................................. 56
Selected per-share data
Report of Independent
Public Accountants.............................................. 67
General Information............................................... 69
Must be preceded or accompanied by a prospectus.
<PAGE>
FROM THE PRESIDENT
TO OUR SHAREHOLDERS
We're pleased to present this annual report for the Stein Roe growth funds --
Growth Stock Fund, Growth Opportunities Fund, Special Fund, Special Venture Fund
and Capital Opportunities Fund. This report covers the fiscal year ended Sept.
30, 1997.
Like the two years that preceded it, the fiscal year ended Sept. 30, 1997,
was sensational for the U.S. equity market. Rarely in any three-year period in
the history of the U.S. stock exchanges have consecutive annual gains of more
than 20 percent been reported. The cumulative total return of the S&P 500 Index
for the three-year period was 119 percent,* providing investors with the
potential to more than double their money in the stock market in three years'
time.
THE EQUITY MARKETS: A TALE OF TWO PERIODS
The story of the past 12 months, however, is a tale of two periods. The first
half of the fiscal year, which ran from Sept. 30, 1996, through March 31, 1997,
belonged to large-cap, multinational growth stocks. Worldwide markets were
strong, and many of the companies that have international operations were
reporting greater-than-expected earnings. Subsequently, investors rushed in
hoping to take advantage of further returns. Later in the fiscal year, however,
many international economies retreated, causing several of these same companies
to report lower-than-expected earnings. In addition, the Federal Reserve in
March raised the federal funds rate -- the rate banks charge each other to
borrow money -- in an effort to slow down rampant economic growth and tame
inflation fears. Combined, these factors caused turbulence in the U.S.
investment markets, resulting in a major drop in indices, as evidenced by the
Dow Jones Industrial Average's (DJIA) plunge of nearly 300 points over two days
in April.
This retreat, however, was short-lived. The Federal Reserve's tightening in
late March successfully slowed economic growth, and calmed inflation fears, and
the DJIA rapidly recouped its April losses. This slowdown in economic activity
did temporarily affect the performance of smaller growth companies, which
operate primarily in this country. Investors slowly began to realize that
small-and mid-cap stocks offered good earnings growth potential at attractive
valuations. As a result, small-caps rallied in August and eclipsed large-cap
stocks for the second half of the fiscal year.
OTHER MARKETS
In the midst of the tremendous bull market that has propelled U.S. equity
investments to new highs, bond investments have taken a back seat. On an
absolute basis, however, bonds did perform well in the 12 months ended Sept. 30,
1997, and bond markets even enjoyed a few strong rallies when investors sought
shelter from the turbulent equity arenas.
Photo of: Tim Armour.
<PAGE>
International stocks continued to underperform domestic investments for the
fiscal year, primarily reflecting the troubled nature of Japan's economy and, by
extension, its investment markets. As Japan is the second largest market in the
world, international investors still tend to focus their investments there; for
example, the Morgan Stanley Capital International Europe, Australia and Far East
Index (MSCI EAFE) held 29 percent of its investments in Japan on Sept. 30, 1997.
Japan continued to underperform during the fiscal year, accounting for a lot of
the underperformance in international mutual fund investments. Most of the other
large international markets are up through the fiscal year end, but their
currencies are weak against the dollar, lessening the gains when translated.
Latin America and some of the smaller European countries posted solid returns
this year as well, and despite continued currency crises we continue to see some
good values in select issues there.
ASIA FEINTS...AND AMERICA BLINKS
Recently, in late 1997, a sharp selloff in markets around the world -- panicky
investors' response to currency crises and economic uncertainties that spread
through Southeast Asia -- culminated in a surprisingly severe crash in Hong
Kong. This sequence of events finally unnerved investors in the developed
countries, which resulted in sharp declines in all of the major markets --
including the United States, where stocks tumbled 7 percent in one day of
trading and have continued to be volatile. While unsettling, such corrections
are a normal part of investing. No one can predict market events with any
certainty, yet despite the unease caused by the sharp and unexpected selloff, we
believe there is no reason to panic. Not only are interest rates relatively
stable and, in our opinion, likely to remain free of Federal Reserve
manipulation, but domestic economic growth is strong and inflation is low as
well. As a result, we believe the impact on the U.S. economy of the market's
recent confusion will not be large, and may even be moderately positive. In
Asia, we believe the currency crisis still needs time to heal, but that some
necessary corrections are under way. We are on the lookout for attractive
valuations that we believe Asia has the potential to produce in time.
<PAGE>
RESPONDING TO A MARKET CORRECTION
As recent events show, investing can be -- and often is -- more like a walk on
the wild side than a cakewalk. If the market's recent ups and downs have made
you a little nervous, we think it's important to keep things in perspective. If
your mutual fund was appropriate to your investing objectives yesterday, it
still is today. Moreover, Standard & Poor's historical performance statistics
show that there have been six market corrections of 20 percent or more during
the past 30 years. While unsettling, such setbacks are normal. If you're tempted
to exit the market completely, remember this: history has shown that investors
tend to lose opportunities when they bail out of the market. In fact, about the
only thing worse than experiencing a bear market is missing out on the potential
bull market that follows. That's because, on average, based on the 12 bear
markets since 1933, a bear market tends to be followed by a dramatic advance,
averaging 121 percent.+
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
Nov. 10, 1997
* Stein Roe, 1997. Stock market performance is measured by the S&P 500, an
unmanaged group of stocks generally representative of the U.S. stock market. The
S&P 500 differs in composition from any Stein Roe fund; it is not available for
direct investment.
+ Computed using Stocks, Bonds, Bills and Inflation 1997 Yearbook,TM Ibbotson
Associates, Chicago (annually updates work by Roger G. Ibbotson and Rex
Sinquefield). Used with permission. (C)1997 Ibbotson Associates, Inc. All rights
reserved.
<PAGE>
FUND PERFORMANCE
There are several ways to evaluate a fund's historical performance. You can look
at the total percentage change in value, the average annual percentage change or
the growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any dividends
(net investment income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
<TABLE>
Average Annual Total Returns
Periods ended Sept. 30, 1997
<CAPTION>
PAST 1 PAST 3 PAST 5 PAST 10
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
GROWTH STOCK FUND 33.10% 27.34% 17.25% 12.68%
SPECIAL FUND 33.67 21.78 18.60 15.15
CAPITAL OPPORTUNITIES FUND -6.25 24.44 21.45 10.91
S&P 500 40.43 29.89 20.75 14.73
S&P MidCap 39.10 25.88 20.24 16.47
Nasdaq Industrials 24.16 20.94 17.24 11.21
Russell 2000 33.19 22.97 20.51 12.25
<CAPTION>
PAST 1 LIFE
YEAR OF FUND(1)
<S> <C> <C>
SPECIAL VENTURE FUND 21.73% 27.28%
Russell 2000 33.19 23.87
<CAPTION>
SINCE LIFE
INCEPTION OF FUND(1)
<S> <C> <C>
GROWTH OPPORTUNITIES FUND 7.70% --%
S&P 500 Index 7.49 7.49
<FN>
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. A fund's
performance, especially for very short time periods, should not be the sole
factor in making your investment decision. 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.
1Inception Date: Special Venture Fund -- Oct. 17, 1994; Growth Opportunities
Fund -- June 30, 1997. 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>
<PAGE>
INVESTMENT COMPARISON
COMPARISON of change in value of a $10,000 investment.
Special Fund, Growth Stock Fund and Capital Opportunities Fund
LINE CHART:
SPECIAL FUND, GROWTH STOCK FUND AND CAPITAL OPPORTUNITIES FUND
CAPITAL
OPPORTUNITIES SPECIAL GROWTH
FUND S&P 500 FUND STOCK FUND
9/30/87 10000 10000 10000 10000
9/30/88 7673 8761 9493 7429
9/30/89 10488 11648 13291 9945
9/30/90 6554 10571 12124 9530
9/30/91 10062 13858 16026 13022
9/30/92 10664 15389 17462 14893
9/30/93 14291 17384 22238 15652
9/30/94 14621 18024 22688 15981
9/30/95 20097 23378 26001 20484
9/30/96 30056 28123 30653 24794
9/30/97 28178 39500 40973 33001
Special Venture Fund
LINE CHART:
SPECIAL
VENTURE
FUND RUSSELL 2000
10/31/94 10000 10000
12/31/94 10243 9854
3/31/95 10805 10309
6/30/95 11218 11275
9/30/95 12399 12389
12/31/95 13027 12657
3/31/96 14036 13303
6/30/96 15148 13969
9/30/96 16343 14016
12/31/96 16758 14745
3/31/97 15436 13983
6/30/97 17841 16250
9/30/97 19893 18668
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. These
graphs compare the performance of the Stein Roe funds to the S&P 500 or the
Russell 2000, each an 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.
<PAGE>
INVESTMENT COMPARISON
COMPARISON of change in value of a $10,000 investment.
GROWTH OPPORTUNITIES FUND
LINE CHART:
GROWTH
OPPORTUNITIES
FUND S&P 500 INDEX
6/30/97 10000 10000
7/31/97 10470 10795
8/29/97 10220 10191
9/30/97 10770 10749
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. These
graphs compare the performance of the Stein Roe funds to the S&P 500 or the
Russell 2000, each an 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.
<PAGE>
INVESTMENT COMPARISON CONTINUED
MAKING THE MOST OF PERFORMANCE
The wide assortment of performance data available today can be a mixed blessing.
On one hand, a fund's performance results can be a valuable source of
information when considering an investment. On the other hand, even seasoned
investors may find the wide array of data and the different methods of
interpretation confusing.
That's why one of the most important pieces of advice we can give you is to
remember that a fund's past performance is just that -- past. While a fund's
past performance is not a guarantee of how it will perform in the future, it can
help you make rational decisions about the funds you currently hold or about
funds you might be considering. Many equity funds, for example, have a history
of growth over the long term, but will nonetheless experience occasional
downturns in the short term. The price and total return of a mutual fund will
change daily and if you sell your shares during a downturn in the market, you
might lose money. But if you can ride out the market's ups and downs, your fund
might achieve a gain.
When your fund experiences a temporary downturn, it's important to remember
why you chose that fund in the first place. If your fund has an investment
strategy in which you believe and which is properly matched to your financial
goals, there is probably no reason to change course. It can be shortsighted to
sell an investment at its lowest point. In fact, that may be the time when you
should be investing more, to take advantage of a potential upturn.
No one can make your financial decisions better than you. We hope this 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
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:
$607.7 million
Photo of : Erik Gustafson.
Growth Stock Fund closed to new investors on Oct. 15, 1997, subject to the terms
set forth in the prospectus supplement dated Aug. 21, 1997.
Q: How did the Fund perform this year?
A: The Fund's total return for the fiscal year ended Sept. 30, 1997, was 33.10
percent, just shy of the Lipper growth fund peer group, which posted a median
return of 33.52 percent for the same period. The S&P 500 returned 40.34
percent. The Fund's long-term return of 27.34 percent for the three-year
period ended Sept. 30, 1997, outpaced the peer group return of 24.84 percent.
Q: What factors drove performance?
A: In the first half of the fiscal year, our holdings in such global consumer
franchises as Coca-Cola, Gillette and Procter & Gamble (2.7 percent, 2.8 percent
and 2.7 percent of total net assets, respectively) posted strong returns. Later
in the fiscal year, amid speculations of earnings disappointments from large-cap
companies, we saw investors subtly shifting their interest away from growth
companies and into cyclicals in an effort to capture some upside earning
potential.
Financial services was a particular standout. Americans are increasingly
aware of the importance of saving for retirement with pre-tax investments. And
with baby boomers -- one of the largest market forces in action -- slowly
approaching retirement, we have seen an increase of dollars flowing into
financial services companies. As a result, companies in this sector -- such as
Citicorp, Travelers and American International Group -- all proved to be strong
holdings for us (2.4 percent, 3.4 percent and 2.5 percent of total net assets,
respec tively). We also saw positive performance from our technology issues,
including Ericsson, Lucent and Microsoft -- all companies that have continued to
take advantage of consumers' demand for new and existing technology (3.2
percent, 2.7 percent and 2.7 percent of total net assets, respectively).
Q: What hindered performance?
A: Some of our holdings did have disappointing earnings, which affected the
Fund's performance in recent months. Those earnings were hurt by the strong U.S.
dollar. When the dollar is strong, large multinational companies -- companies
that generate a large portion of their revenue overseas -- realize lower
earnings as their foreign profits are translated into the stronger U.S.
currency.
Q: Despite these influences, do you still think that the portfolio's large-cap
holdings have the potential to perform well?
A: We remain positive about the growth stocks of companies we currently own. As
the world continues to modernize, we think the world will continue to
Americanize and companies that dominate in the United States are poised to do so
globally. We will remain true to our strategy, focusing on creating a portfolio
of what we think are among the best businesses in the world.
Q: What's your outlook?
A: We think the economy will continue along its noninflationary growth track. If
it does, we would expect a favorable environment for many of the large U.S.
companies we own -- companies that we think are well positioned competitively
and dominate the marketplace with their products.
Q: What sectors do you believe will perform well in coming months and why?
A: With baby boomers continuing to pour money into financial services, we
believe we are well positioned to take advantage of opportunities in that
sector. We also believe the Fund is well positioned in the energy sector, and
specifically in oil services, where we believe companies such as Schlumberger,
Baker-Hughes and Ensco (3.0 percent, 1.8 percent and 1.3 percent of total net
assets, respectively), have the potential to take advantage of a secular uptrend
in energy driven by supply and demand.
We have overweighted the portfolio in technology, holding 25 percent of the
portfolio's issues in this sector -- a normal weighting is roughly 17 percent.
This reflects our conviction that technology will continue to have a remarkable
impact on all of our personal lives. Specifically, we own telecommunications
companies, including Ericsson, Motorola, Tellabs, Cisco Systems and Lucent
Technologies (3.2 percent, 3.0 percent, 2.1 percent, 3.0 percent and 2.7 percent
of total net assets, respectively). We believe consumers will continue to demand
more capacity from products such as voice, video and Internet, and these
companies will benefit from that demand.
<PAGE>
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Portfolio
holdings are as of Sept. 30, 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 is an unmanaged group of stocks that
differs from the of the Fund; it is not available for direct investment.
According to Lipper Analytical Services, Inc., an independent monitor of mutual
fund performance, the median returns for the Fund's growth fund peer group for
the one-, five- and 10-year periods ended Sept. 30, 1997, were 33.52 percent,
18.62 percent and 13.19 percent, respectively.
<PAGE>
FUND HIGHLIGHTS
<TABLE>
<CAPTION>
Growth Stock Portfolio
Top 10 Equity Holdings (% of Total Net Assets)
<S> <C> <C> <C>
Travelers Group, Inc. 3.4% The Intel Corporation 3.0%
LM Ericsson Telecommunications 3.2 Cisco Systems 3.0
General Electric Company 3.1 Eli Lilly 3.0
Federal National Mortgage Assn. 3.1 Motorola, Inc. 3.0
Schlumberger Limited 3.0 Gillette Company 2.8
- ------------------------------------------------------------------------------------
Total 30.6%
====================================================================================
</TABLE>
Equity Portfolio Highlights
PORTFOLIO S&P 500
Number of Holdings 40 500
Median Market Value ($ Mil.) $41,380 $6,816
PIE CHARTS:
ECONOMIC SECTOR BREAKDOWN
AS OF SEPT. 30, 1997
EQUITY PORTFOLIO S&P 500
Basic Materials 12% 5%
Consumer Cyclical 24% 13%
Consumer Noncyclical 8% 21%
Energy 18% 10%
Financial 10% 16%
Industrial 25% 10%
Technology 3% 17%
Utilities 0% 8%
ASSET ALLOCATION
AS OF SEPT. 30, 1996 AS OF SEPT. 30, 1997
Equities 95.2% 95.6%
Cash & Equivalents 4.8% 4.4%
<PAGE>
Q&A
AN INTERVIEW WITH GLORIA SANTELLA, ERIC MADDIX AND ART MCQUEEN,
PORTFOLIO MANAGERS OF GROWTH OPPORTUNITIES FUND
FUND DATA
INVESTMENT OBJECTIVE:
Seeks long-term capital
appreciation by investing in the stocks of companies believed to offer
substantial long-term earnings growth.
FUND INCEPTION:
June 30, 1997
TOTAL NET ASSETS:
$49.8 million
Photo of : Art McQueen, Gloria Santella, and Eric Maddix.
Q: How has the Fund performed since its launch on June 30, 1997?
A: Growth Opportunities Fund's total return from its recent inception through
Sept. 30, 1997, was 7.70 percent, slightly ahead of the 7.49 percent return
posted by the S&P 500 for the same time period.
Q: How did you structure the portfolio?
A: We concentrate only on those stocks that we believe have sustainable annual
earnings growth potential of at least 10 percent and a minimum market
capitalization of $100 million. Companies considered for inclusion in the
portfolio can be of any capitalization size as long as they meet our minimum
requirements for growth potential. In our initial quarter of operations, we
structured a portfolio that would provide "one-stop shopping" for growth
investors without an inordinate amount of risk in any one stock or market
capitalization range.
Q: Can you elaborate?
A: For example, our investments in larger, more established companies tend to
moderate the investment risks associated with investments in emerging, generally
smaller companies. Smaller companies may present greater opportunities for
capital appreciation because of high potential earnings growth, but also may
involve greater risks. In any event, our objective is to select stocks with
strong growth prospects regardless of size.
<PAGE>
Q: Have you established capitalization weightings for the Fund?
A: No. Our market capitalization weightings going forward will depend on where
we find the most compelling growth prospects. We believe the portfolio's
flexibility to own stocks across market capitalizations -- small, medium and
large -- allows us to help take advantage of favorable conditions in any given
sector or industry of the market.
Q: Did a particular capitalization size or sector contribute to the Fund's
performance?
A: We experienced broad-based performance across all capitalization sizes, with
more than half of our companies reporting stronger-than- anticipated earnings.
The sectors that produced the greatest returns were technology, retail, health
care and media stocks. In general, we make capitalization and sector decisions
on the basis of what we believe is an individual company's ability to generate
and sustain earnings growth over the long term, rather than on the basis of the
near-term growth prospects of a particular company or economic sector.
Q: What are some of the stocks owned in the Fund and how did they contribute to
performance?
A: As of this reporting period, the Fund owned 80 stocks. Over time, the number
of stocks owned in the portfolio may increase to about 100, and likely will
fluctuate between 80 and 120 names, depending on market conditions and the
availability of good investment opportunities. Standouts in this reporting
period included Powerwave (1.9 percent of total net assets), a leading supplier
of amplifiers used in the build out of wireless communications around the world;
Powerwave was the Fund's best performer. Also, Paul Harris (1.7 percent of total
net assets), a moderately priced women's specialty retailer that has begun an
aggressive unit expansion strategy, and Documentum (1.5 percent of total net
assets), a document management software company, produced solid gains.
Q: What is your outlook for the Fund?
A: We are hopeful for a relatively stable growth, stable inflation U.S.
environment entering 1998 and therefore believe that the market environment
should provide compelling investment opportunities. A tight labor market and the
relative strength of the dollar may temporarily hamper revenue growth and
earnings from some companies and U.S. exporters. Nonetheless, we are optimistic
and believe that current valuations are attractive for the types of stocks we
want to own.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Portfolio
holdings are as of Sept. 30, 1997, and are subject to change. Total return
performance includes changes in share price and reinvestment of income and
capital gains distributions. The Adviser currently limits expenses to 1.25
percent of average net assets; absent this limit, total return would be less.
Life of Fund is from Fund inception on June 30, 1997. The S&P 500 is an
unmanaged group of stocks that differs from the composition of the Fund; it is
not available for direct investment.
<PAGE>
FUND HIGHLIGHTS
<TABLE>
<CAPTION>
Growth Opportunities Portfolio
Top 10 Equity Holdings (% of Total Net Assets)
<S> <C> <C> <C>
Powerwave Technologies, Inc. 1.9% Caribiner International, Inc. 1.6%
PAREXEL International Corp. 1.8 Washington Mutual, Inc. 1.5
CUC International Inc. 1.7 Documentum, Inc. 1.5
AccuStaff Incorporated 1.7 Univision Communications Inc. 1.5
Paul Harris Stores, Inc. 1.7 Schlumberger Limited 1.5
- -----------------------------------------------------------------------------------
Total 16.4%
===================================================================================
</TABLE>
Equity Portfolio Highlights
PORTFOLIO S&P 500
Number of Holdings 80 500
Median Market Value ($ Mil.) $2,355 $6,816
PIE CHARTS:
ECONOMIC SECTOR BREAKDOWN
AS OF SEPT. 30, 1997
EQUITY PORTFOLIO S&P 500
Basic Materials 1% 5%
Consumer Cyclical 18% 13%
Consumer Noncyclical 21% 21%
Energy 2% 10%
Financial 12% 16%
Industrial 16% 10%
Technology 30% 17%
Utilities 0% 8%
ASSET ALLOCATION
AS OF SEPT. 30, 1997
Equities 90.5%
Cash & Equivalents 9.5%
<PAGE>
Q&A
AN INTERVIEW WITH GERRY SANDEL, PORTFOLIO MANAGER OF
SR&F SPECIAL PORTFOLIO
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:
$1,327.6 million
Photo: Gerry Sandel.
Gerry Sandel was named portfolio manager of Stein Roe Special Fund in July 1997,
replacing Bruce Dunn, who retired as the Fund's portfolio manager.
Q: How did the Fund perform?
A: The Fund posted a total return of 33.67 percent for the year ended Sept. 30,
1997, modestly outperforming the Lipper peer group return of 33.52 percent and
trailing the 40.34 percent return of the S&P 500 Index. We are pleased with the
Fund's long-term performance as well. For the three-year period ended Sept. 30,
1997, the Fund returned 21.78 percent, compared to the 24.84 percent return of
its peer group, and the 29.89 percent return of the S&P 500 Index. Although the
S&P 500 is the Fund's published index, it is an index comprised mainly of
large-cap industrial issues. Special Fund tends to invest largely in mid-cap
companies (50 percent of holdings), although it does own stocks of small- and
large-cap companies as well (21 percent and 29 percent of the portfolio's
holdings, respectively).
Q: What factors drove performance?
A: The fiscal year started out with a surge by investors into large-cap stocks,
which provided us with opportunities to buy into less popular mid-cap stocks at
attractive prices. That strategy was rewarded when, toward January, mid-caps
began gaining favor, and some of our mid-cap holdings benefited substantially.
In fact, during the most recent quarter, the Fund returned 14.31 percent,
compared to the S&P 500 Index return of 7.49 percent.
Q: Which of the portfolio's holdings made positive contributions during the past
12 months?
A: Borders Group, Kent Electronics and Progressive Corporation -- up 70 percent,
79 percent and 97 percent respectively for the past 12 months (3.4 percent, 2.5
percent and 3.5 percent of total net assets, respectively.) These are the kinds
of investments Special Fund looks to invest in -- companies that are benefiting
from industry consolidation, acquisitions and streamlining of product lines.
<PAGE>
Q: You took over as portfolio manager in July 1997. What is your strategy for
Special Fund?
A: The strategy will remain largely the same. We look to buy out-of-favor and
neglected stocks that we believe sell at a discount, not only to their intrinsic
value, but also relative to their competitors in the market. We tend to buy when
others are not very interested in owning the stock, and sell when others are
crowding to buy. This is a result of our efforts to purchase high-quality
companies that have been neglected and that appear to us to have the potential
for a positive "turnaround" event.
Q: What makes Special Fund different from other long-term investments?
A: We think our contrarian style sets us apart. In general, most investors are
looking for securities that are performing well now. We're willing to be more
patient. We look for securities that investors are not favoring, but which we
believe have two characteristics: attractive valuations and a potential catalyst
- -- something that could happen within the next couple of years and that has the
potential to push the stock to higher valuation levels.
Q: What changes will you make in the portfolio?
A: We're looking to trim our positions in some of our issues that have worked
well over the past few years and as a result have become somewhat overpriced. We
will then shift into stocks that we think offer better upside potential relative
to the risk we are willing to take. Of course, we will remain sensitive to the
tax consequences of our sell decisions.
Q: Can you give an example of a company that benefited the performance of the
Fund during the period?
A: Borders Group, the world's second largest retailer of books, music and other
informational, educational and entertainment products, has been a good
investment for us (3.4 percent of total net assets). It is continuing to make
acquisitions, buying up existing stores and adding new stores at the rate of
approximately one per week. It also has high cash flows, which tends to allow
the company to finance its own growth.
Q: What are your expectations through the end of 1997?
A: The consensus among investors seems to be that valuation levels in the market
in general are still attractive. Although we agree the outlook is positive, some
of the "blue chip" companies have warned that they may experience
lower-than-expected earnings in the near term primarily because the stronger
U.S. dollar has affected sales internationally. Although we tend not to hold
securities of such companies in Special Fund, we will continue to monitor all of
our holdings, looking for any that may disappoint in the earnings arena. We plan
to trim stocks that have weakened or that have reached a valuation level that
makes us uncomfortable.
<PAGE>
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Portfolio
holdings are as of Sept. 30, 1997, and are subject to change. Total return
performance includes changes in share price and reinvestment of income and
capital gains distributions. The Adviser reduced it management fee by .05
percent through June 30, 1997; absent this limit, total return would be less.
The S&P 500 and the S&P MidCap are unmanaged groups of stocks that differ from
the composition of the Fund; they are not available for direct investment.
According to Lipper Analytical Services, Inc., an independent monitor of mutual
fund performance, the median returns for the Fund's growth fund peer group for
the one-, five- and 10-year periods were 33.52 percent, 18.62 percent and 13.19
percent, respectively.
<PAGE>
FUND HIGHLIGHTS
<TABLE>
<CAPTION>
Special Portfolio
Top 10 Equity Holdings (% of Total Net Assets)
<S> <C> <C> <C>
Harley-Davidson, Inc. 3.7% Cross Timbers Oil Co. 2.7%
The Progressive Corporation 3.5 Molex, Inc. 2.5
Borders Group Inc. 3.4 Kent Electronics 2.5
OM Group, Inc. 3.0 Carlisle Companies 2.5
Profitt's Inc. 2.9 Cardinal Health 2.4
- -----------------------------------------------------------------------------------
Total 29.1%
===================================================================================
</TABLE>
Equity Portfolio Highlights
PORTFOLIO S&P 500
Number of Holdings 52 500
Median Market Value ($ Mil.) $2,043 $6,816
PIE CHARTS:
ECONOMIC SECTOR BREAKDOWN
AS OF SEPT. 30, 1997
EQUITY PORTFOLIO S&P 500
Basic Materials 7% 5%
Consumer Cyclical 31% 13%
Consumer Noncyclical 17% 21%
Energy 7% 10%
Financial 17% 16%
Industrial 11% 10%
Technology 7% 17%
Utilities 3% 8%
ASSET ALLOCATION
AS OF SEPT. 30, 1996 AS OF SEPT. 30, 1997
Equities 90.4% 89.4%
Cash & Equivalents 9.6% 10.6%
<PAGE>
Q&A
AN INTERVIEW WITH DICK PETERSON AND JOHN MCLANDSBOROUGH,
PORTFOLIO MANAGERS FOR SR&F SPECIAL VENTURE PORTFOLIO
FUND DATA
INVESTMENT OBJECTIVE:
Seeks to achieve long-term capital appreciation by investing primarily in a
diversified portfolio that 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:
Oct. 17, 1994
TOTAL NET ASSETS:
$235.8 million
Photo of: Dick Peterson and John McLandsborough.
John McLandsborough joined Dick Peterson as co-portfolio manager of Special
Venture Fund on June 30, 1997.
Q: How was the Fund's short- and long-term performance?
A: In our opinion, our strategy of investing in what we believe are
well-positioned, entrepreneurially managed companies has been
successful over the long term, which we define as three years or more. As of
Sept. 30, 1997, Special Venture Fund posted returns of 21.73 percent for the
year and 27.28 percent since its inception three years ago -- our long-term
return handily beat the 24.91 percent median peer group return and the 23.87
percent return for the Fund's benchmark index, the Russell 2000.
While under most circumstances a one-year return of 21.73 percent would be
considered a successful result, the Fund nonetheless lagged the 29.79 percent
return of the Lipper small-cap funds peer group and the 33.19 percent return of
the Russell 2000 for the one-year period.
Q: How do you interpret your one-year results?
A: The portfolio was under weighted relative to the Russell 2000 in the bank and
thrift sector, one of the year's strongest finishers. In addition, we had more
exposure to oil and gas stocks, which declined early in the year but recently
have recovered nicely.
In addition, with valuations at near-record highs, the year saw a shift in
investor interest from growth to value stocks. The disparity between growth and
value performance in the last 12 months is dramatically underscored when you
look at the growth and value components of the Russell 2000. While there is a
value component to our investment style, our historical performance has been
more correlated with small-cap growth indices. For the year ended Sept. 30,
1997, the Russell 2000 Value Index returned 42.7 percent, while the Russell 2000
Growth Index returned 23.4 percent -- Special Venture's return on its equity
holdings was roughly in line with the Russell 2000 Growth Index. As a small and
recently created fund, however, we typically have held 8 percent to 10 percent
in cash reserves against contingencies -- this dampened our return during last
year's "hot" stock market.
<PAGE>
Q: What stocks were disappointing?
A: We experienced some weakness in the shares of Central European Media (2.5
percent of total net assets), which were negatively affected by regulatory
uncertainty and depreciation in the Czech currency. We retained this stock
because we think it has outstanding long-term prospects given rising consumer
confidence and prosperity in Central and Eastern Europe. For the most part,
however, we have eliminated positions in stocks that disappointed as a result of
changes in the competitive environment or management. These included Garden
Botanika, National Processing, Microware and Firearms Training Services.
Q: Where have you found your strongest contributors?
A: Financial services -- primarily real estate investment trusts (REITs) real
estate services and specialty insurance -- proved to be good sectors for us. Our
technology investments have been profitable, with the standout being Zytec
Corporation, whose stock price tripled and which was recently purchased by a
leading industry competitor at a substantial premium.
Standouts among our real estate holdings include companies specializing in
owning office properties, such as Beacon Properties -- whose stock price rose
sharply when Sam Zell's Equity Office Properties announced an intention to
purchase the company -- and Reckson Associates (3.1 percent and 2.6 percent of
total net assets, respectively). CB Commercial and LaSalle Partners, both real
estate management and brokerage firms (3.4 percent and 1.9 percent of total net
assets), also fared well.
On the insurance side, Twentieth Century Industries, MeadowBrook Insurance
and Mutual Risk Associates (3.4 percent, 2.4 percent and 1.6 percent of total
net assets, respectively) finished the reporting period with solid gains.
<PAGE>
Q: The financial services sector as a whole did well in the last 12 months.
What's driving that rally in the real estate segment?
A: Positive supply-demand dynamics has led to rising rents in the commercial
real estate sector -- we think the glut in commercial buildings left over from
the late 1980s has finally worked itself out. In addition, there has been a
shift from direct investment in real estate properties by pension funds and
other institutional investors to indirect investment through owning shares of
publicly owned REITs. This has led to an increased demand for shares of REITs.
We're very focused in the office real estate sector, where we believe
supply-demand dynamics are better than they are in most other real estate
sectors. Two of our REITs, Reckson Associates and Speiker Properties, are both
entrepreneurially managed companies that focus on office properties in specific
geographic markets. Given that market dynamics can differ greatly in each
geographic market, we believe this local market knowledge provides a competitive
advantage for these companies and often can lead to better opportunities and
decision making.
Q: What type of investment ideas are you pursuing now?
A: We're sticking to our knitting: investing in entrepreneurially managed
companies with attractive growth businesses trading at reasonable valuation
levels. We've made recent purchases in energy stocks, where valuations have come
down to more attractive levels. Despite some turbulence in the early part of the
Fund's fiscal year, the sector has begun to experience some seasonal strength,
as typically happens going into winter, and has performed well recently. With
purchases in exploration and production companies like Renaissance Energy and
Meridian Resources (1.7 percent and 1.8 percent of total net assets,
respectively), we've expanded our exposure to energy from as low as 5.9 percent
of total net assets in June to 12.4 percent on Sept. 30, 1997.
Other recent purchases include CMP Media, a leading publisher of technology
trade periodicals; NuSkin Asia, a direct marketer and distributor of consumer
products focused on the Asian markets; and SPSS, a statistical software company
(1.9 percent, 1.5 percent and 1.6 percent of total net assets, respectively).
<PAGE>
Q: What's your outlook?
A: Despite the rally in the small cap sector, valuations still seem attractive
especially relative to large-cap stocks. Between small-cap and large-cap stocks,
we've seen only a small tightening in the divergence of valuation levels
relative to growth rates.
On a final note, after repeatedly telling our investors about the
attractiveness of small-cap stocks in our recent quarterly shareholder reports,
we're encouraged that the sector, beginning in May, has finally begun to
outperform large-cap stocks. Studies performed by the Center for Research in
Security Prices (CRISP) show that periods of small-cap sector outperformance
historically have lasted several years on average. This, coupled with the
current attractive growth outlook and valuation characteristics of the small-cap
sector, supports our belief that the recovery in small-cap stocks may continue
for some time.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Portfolio
holdings are as of Sept. 30, 1997, and are subject to change. Total return
performance includes changes in share price and reinvestment of income and
capital gains distributions. Life of Fund is from Fund inception on Oct. 17,
1994; benchmark performance is from Oct. 31, 1994. Prior to Jan. 31, 1997, the
Adviser limited expenses to 1.25 percent of average net assets; absent this
limit, total return would be less.The Russell 2000, Russell 2000 Value and
Russell 2000 Growth indices are unmanaged groups of stocks that differ from the
composition of the 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 small-cap fund peer group for the
one-year and Life of Fund periods were 29.79 percent and 24.91 percent,
respectively.
<PAGE>
FUND HIGHLIGHTS
<TABLE>
<CAPTION>
Special Venture Portfolio
Top 10 Equity Holdings (% of Total Net Assets)
<S> <C> <C> <C>
Interim Services, Inc. 3.5% Beacon Properties 3.1%
20th Century Industries 3.4 Alternative Resources 3.0
CB Commercial Real Estate 3.4 FiServ, Inc. 3.0
AVX Corporation 3.4 Reckson Associates Realty Corp. 2.6
Metro Networks, Inc. 3.3 Central European Media Ent. Ltd. 2.6
- -----------------------------------------------------------------------------------
Total 31.3%
===================================================================================
</TABLE>
Equity Portfolio Highlights
PORTFOLIO RUSSELL 2000
Number of Holdings 52 2000
Median Market Value ($ Mil.) $621 $491
PIE CHARTS:
ECONOMIC SECTOR BREAKDOWN
AS OF SEPT. 30, 1997
EQUITY PORTFOLIO RUSSELL 2000
Basic Materials 4% 4%
Consumer Cyclical 15% 17%
Consumer Noncyclical 16% 12%
Energy 12% 4%
Financial 25% 22%
Industrial 10% 15%
Technology 17% 19%
Utilities 1% 7%
ASSET ALLOCATION
AS OF SEPT. 30, 1996 AS OF SEPT. 30, 1997
Equities 94.1% 91.1%
Cash & Equivalents 5.9% 8.9%
<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:
Sept. 30, 1969
TOTAL NET ASSETS:
$1,110.6 million
Photo of: Gloria Santella and Eric Maddix.
Q: How did the Fund perform this year?
A: For the one-year period ended Sept. 30, 1997, the Fund's return was down 6.25
percent. The portfolio's underperformance largely was due to the extreme
volatility aggressive growth stocks experienced over the past 12 months. At the
start of the fiscal year, these stocks experienced a severe correction
reflecting excessive concerns about the earnings outlook for some of the
highest-growth sectors. During the second half of the fiscal year, concerns
about aggressive growth stock earnings abated and solid earnings reports fueled
a powerful rally, aligning the Fund's performance with that of the S&P 500 over
this period. This is evidenced by the Fund's second six-month total return of
26.8 percent, compared with the 26.3 percent return of the Fund's benchmark, the
S&P 500.
Q: What can you do when the portfolio falls out of favor?
A: We believe the worst thing we could do would be to abandon our strategy in
response to market conditions. So, what we don't do is try to time the market or
buy stocks outside of our investment universe to temporarily inflate
performance. For example, even though the market currently is favoring low P/E
small-cap and economically sensitive stocks, these types of stocks are alien to
Capital Opportunities Fund's investment strategy. Similarly, large-cap stocks
dominated the market for the better part of this year, but large-cap stocks also
are outside Capital Opportunities Fund's universe. Generally, in periods of
decline we try to focus the portfolio more tightly and add to those investments
we believe have the best earnings potential. During past declines, we believe
this strategy allowed us to be well positioned when the aggressive growth sector
rebounded. It is also worth noting that because our portfolio is concentrated,
periods of underperformance are more dramatic than if we owned a more
diversified portfolio of stocks. By the same token, periods of outperformance
also have been more pronounced.
<PAGE>
Q: The current market environment has been solid, yet the Fund under performed.
Why was that?
A: Our commitment to aggressive growth can lead to big swings in performance,
particularly since the more aggressive, high-growth companies in which we invest
can go in and out of favor despite the overall strength of the general market.
This type of zigzag volatility was evident most of the year. While the market
continued its advance, the stocks in our portfolio did not participate fully in
the ascent. Rather, aggressive growth stocks experienced an abrupt descent from
their peak valuation levels last October. Since our stocks tend to move
independently of the strength or weakness in the market, hitting peaks and
valleys along the way, we believe the key to investing in an aggressive growth
fund is to adopt a buy-and-hold attitude and think of holding your shares of the
Fund for at least three to five years.
Q: There is no doubt that 1997 can be characterized as a volatile year for
Capital Opportunities Fund. How much longer can this last?
A: Since we have no way to predict the future, what we can say is that the Fund
has generated above-average long-term returns, despite periods (two to seven
months) of double-digit declines in four of the past six years. For the
three-year period ended Sept. 30, 1997, the Fund has returned 24.44 percent. For
the five-year period ended Sept. 30, 1997, the Fund has returned 21.45 percent.
That's 2.34 percent and 3.53 percent above the Lipper peer group median returns
of 22.10 and 17.92 percent for the same periods, respectively.
Q: What sectors have hampered performance?
A: Although the Fund's weakness was broad-based, technology and business
services were the worst performers. To dampen volatility, we reduced our most
volatile sector -- technology -- to 15 percent, below our customary 20 percent
to 25 percent. Although these sectors have contributed to the Fund's
underperformance, we should point out that they also have been the Fund's
top-performing sectors over longer periods of time, and we don't see the
long-term growth potential of these companies diminishing greatly.
<PAGE>
Q: What are your expectations for the Fund over the next year?
A: Since the companies in our portfolio move independently of the relative
strength or weakness in the economy, we believe that many aggressive growth
stocks have the potential to continue to grow at higher rates than those
companies tied to a strong economic environment. The case for aggressive growth
investing is further supported by comparing earnings growth rates relative to
current market valuations. The market is presently selling for three times its
estimated 1998 earnings growth rate, while Capital Opportunities Fund is selling
at less than one times its estimated growth rate. On that basis, we continue to
believe the outlook for aggressive growth stocks is positive and that the
portfolio is well positioned for future opportunities within this sector.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Portfolio
holdings are as of Sept. 30, 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 is an unmanaged group of stocks that
differs from the composition of the Fund; it is not available for direct
investment. According to Lipper Analytical Services, Inc., an independent
monitor of mutual fund performance, the median returns for this capital
appreciation fund category for the one-, five- and 10-year periods ended Sept.
30, 1997, were 27.47 percent, 17.92 percent and 11.90 percent, respectively.
<PAGE>
Fund Highlights
<TABLE>
<CAPTION>
Capital Opportunities Fund
Top 10 Equity Holdings (% of Total Net Assets)
<S> <C> <C> <C>
Tellabs, Inc. 4.4% Gartner Group, Inc. 3.8%
Paychex, Inc. 4.4 Omnicare, Inc. 3.5
HFS Incorporated 4.2 MSC Industrial Direct 3.5
HBO & Company 4.1 CBT Group Plc 3.2
Clear Channel Communications, Inc. 3.9 Promus Hotel Corp. 3.2
- -----------------------------------------------------------------------------------
Total 38.2%
===================================================================================
</TABLE>
Equity Portfolio Highlights
PORTFOLIO S&P 500
Number of Holdings 34 500
Median Market Value ($ Mil.) $2,766 $6,816
PIE CHARTS:
ECONOMIC SECTOR BREAKDOWN
AS OF SEPT. 30, 1997
EQUITY PORTFOLIO S&P 500
Basic Materials 0% 5%
Consumer Cyclical 23% 13%
Consumer Noncyclical 20% 21%
Energy 0% 10%
Financial 0% 16%
Industrial 42% 10%
Technology 15% 17%
Utilities 0% 8%
ASSET ALLOCATION
AS OF SEPT. 30, 1996 AS OF SEPT. 30, 1997
Equities 86.0% 90.2%
Convertibles 0.7 0%
Cash & Equivalents 13.3% 9.8%
<PAGE>
<TABLE>
SR&F GROWTH STOCK PORTFOLIO
Investments as of September 30, 1997
(Dollar amounts in thousands)
<CAPTION>
Number Market
COMMON STOCKS (95.6%) of Shares Value
<S> <C> <C>
BANKS & SAVINGS AND LOANS (4.2%)
Citicorp............................................. 110,000 $ 14,733
Wells Fargo & Company................................ 40,000 11,000
--------
25,733
BUSINESS SERVICES (3.9%)
First Data Corporation............................... 300,000 11,269
Paychex, Inc......................................... 350,000 12,206
--------
23,475
COMPUTERS AND COMPUTER SOFTWARE (8.8%)
*Cisco Systems Inc................................... 250,000 18,266
Intel Corporation.................................... 200,000 18,463
*Microsoft Corporation............................... 125,000 16,539
--------
53,268
CONSUMER-RELATED (7.9%)
*CUC International Inc............................... 450,000 13,950
Gillette Company..................................... 200,000 17,263
The Procter & Gamble Co.............................. 240,000 16,575
--------
47,788
DISTRIBUTION-RETAIL (5.1%)
The Home Depot, Inc.................................. 300,000 15,638
*Kohl's Corporation.................................. 220,000 15,620
--------
31,258
ELECTRICAL EQUIPMENT (5.1%)
General Electric Company............................. 280,000 19,058
*Thermo Electron Corp................................ 300,000 12,000
--------
31,058
ENERGY (1.6%)
*Renaissance Energy Ltd.............................. 400,000 9,980
FINANCIAL SERVICES (7.0%)
American Express Company............................. 200,000 16,375
The Charles Schwab Corporation....................... 200,000 7,150
Federal National Mortgage Association................ 400,000 18,800
--------
42,325
FOOD, BEVERAGE & TOBACCO (4.8%)
The Coca-Cola Company................................ 270,000 16,453
Philip Morris Companies Inc.......................... 300,000 12,469
--------
28,922
HEALTH CARE (3.8%)
Johnson & Johnson.................................... 230,000 13,254
United Healthcare Corporation........................ 200,000 10,000
--------
23,254
HOTELS (2.7%)
*HFS Incorporated.................................... 225,000 16,748
INSURANCE (5.9%)
American International Group, Inc.................... 150,000 15,478
Travelers Group, Inc................................. 300,000 20,475
--------
35,953
<PAGE>
<CAPTION>
SR&F GROWTH STOCK PORTFOLIO CONTINUED
Number Market
of Shares Value
<S> <C> <C>
LEISURE & ENTERTAINMENT (1.8%)
The Walt Disney Co................................... 135,000 $ 10,884
MEDICAL SUPPLIES (4.5%)
Baxter International Inc............................. 200,000 10,450
Medtronic, Inc....................................... 360,000 16,920
--------
27,370
OIL/GAS (6.1%)
Baker Hughes, Inc.................................... 250,000 10,937
Ensco International, Inc............................. 200,000 7,888
Schlumberger Ltd..................................... 220,000 18,521
--------
37,346
PHARMACEUTICAL (5.4%)
Eli Lilly & Co....................................... 150,000 18,103
Merck and Company, Inc............................... 150,000 14,991
--------
33,094
RESTAURANTS (1.4%)
McDonald's Corporation............................... 175,000 8,334
RUBBER, PLASTIC & RELATED (2.1%)
Illinois Tool Works Inc.............................. 250,000 12,484
TECHNOLOGY SERVICES (2.1%)
*Tellabs Inc......................................... 250,000 12,875
TELECOMMUNICATIONS (11.4%)
LM Ericsson Telecommunications ADRs Class B.......... 400,000 19,175
Lucent Technologies, Inc............................. 200,000 16,275
Motorola, Inc........................................ 250,000 17,969
*Worldcom, Inc....................................... 450,000 15,919
--------
69,338
--------
TOTAL COMMON STOCKS (Cost $315,644)............................... 581,487
<CAPTION>
Principal
Amount
<S> <C> <C>
SHORT-TERM OBLIGATIONS (5.3%)
COMMERCIAL PAPER (5.3%)
Associates Corp. of North America 6.400% 10/01/97.... $ 22,175 22,175
Goldman Sachs Group 5.600% 10/2/97................... 10,000 9,998
--------
TOTAL SHORT-TERM OBLIGATIONS
(Amortized cost $32,173).......................................... 32,173
TOTAL INVESTMENTS (100.9%)
(Cost $347,817)................................................... 613,660
OTHER ASSETS, LESS LIABILITIES (-0.9%)............................ (5,289)
--------
TOTAL NET ASSETS (100.0%)......................................... $608,371
========
<FN>
*Non-income producing.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
GROWTH OPPORTUNITIES FUND
Investments as of September 30, 1997
(Dollar amounts in thousands)
Number Market
COMMON STOCKS (90.4%) of Shares Value
<S> <C> <C>
BUSINESS SERVICES (13.4%)
*AHL Services, Inc................................... 10,000 $ 182
*AccuStaff Incorporated.............................. 27,000 850
*CCC Information Services Group Inc.................. 23,000 489
*Caribiner International, Inc........................ 19,000 774
Danka Business Systems Plc........................... 14,000 623
*Gartner Group, Inc.................................. 20,000 600
*INSpire Insurance Solutions, Inc.................... 34,000 616
*Iron Mountain Incorporated.......................... 17,000 595
*Learning Tree International, Inc.................... 12,000 344
*Sylvan Learning Systems, Inc........................ 12,000 527
*Viking Office Products, Inc......................... 33,000 718
*The Vincam Group, Inc............................... 12,000 345
--------
6,663
CONSUMER PRODUCTS & SERVICES (3.4%)
*Blyth Industries, Inc............................... 14,000 392
*CUC International Inc............................... 28,000 868
St. John Knits, Inc.................................. 9,000 404
--------
1,664
DATA PROCESSING SERVICES (3.4%)
*The BISYS Group, Inc................................ 14,000 450
First Data Corporation............................... 13,000 488
*Fiserv, Inc......................................... 17,000 746
--------
1,684
FINANCIAL SERVICES (8.5%)
Capital Re Corporation............................... 8,000 488
Citicorp............................................. 4,000 536
Federal National Mortgage Association................ 13,000 611
HCC Insurance Holdings, Inc.......................... 23,000 611
MGIC Investment Corporation.......................... 13,000 745
Norwest Corporation.................................. 8,000 490
Washington Mutual, Inc............................... 11,000 767
--------
4,248
HEALTH CARE (15.7%)
*Applied Analytical Industries, Inc.................. 18,000 365
Biomet, Inc.......................................... 27,000 648
*Boron, LePore & Associates, Inc..................... 25,000 578
*Boston Scientific Corporation....................... 11,000 607
Cardinal Health, Inc................................. 10,000 710
Guidant Corporation.................................. 12,000 672
HBO & Company........................................ 18,000 679
*HEALTHSOUTH Corporation............................. 23,000 614
*Health Management Associates, Inc................... 19,000 601
*PAREXEL International Corporation................... 23,000 908
Pfizer Inc........................................... 7,000 420
*PhyCor, Inc......................................... 15,000 436
United HealthCare Corporation........................ 12,000 600
--------
7,838
<PAGE>
<CAPTION>
GROWTH OPPORTUNITIES FUND CONTINUED
Number Market
of Shares Value
<S> <C> <C>
INDUSTRIAL PRODUCTS (9.7%)
*Advanced Lighting Technologies, Inc................. 15,000 $ 405
*Barnett Inc......................................... 14,000 297
Borg-Warner Automotive, Inc.......................... 8,000 455
Ecolab Inc........................................... 8,000 388
Honeywell Inc........................................ 7,000 470
*Hub Group, Inc...................................... 12,000 446
Monsanto Company..................................... 11,000 429
*Pameco Corporation.................................. 20,000 355
Schlumberger Limited................................. 9,000 758
*Solutia Inc......................................... 2,200 44
*Wilmar Industries, Inc.............................. 14,000 378
*Wisconsin Central Transportation Corporation........ 13,000 414
--------
4,839
LEISURE & ENTERTAINMENT (5.2%)
Carnival Corporation................................. 16,000 740
*Doubletree Corporation.............................. 14,000 676
La Quinta Inns, Inc.................................. 25,000 589
*Signature Resorts, Inc.............................. 12,000 570
--------
2,575
MEDIA (5.5%)
*CMP Media Inc....................................... 11,000 275
*Cox Communications, Inc............................. 15,000 413
*Getty Communications Plc............................ 37,000 685
*Outdoor Systems, Inc................................ 23,000 604
*Univision Communications Inc........................ 14,000 770
--------
2,747
RETAIL (6.2%)
Dollar General Corporation........................... 17,500 596
The Home Depot, Inc.................................. 10,000 521
*Kohl's Corporation.................................. 9,000 639
*Paul Harris Stores, Inc............................. 30,000 829
The TJX Companies, Inc............................... 17,000 520
--------
3,105
TECHNOLOGY SERVICES (15.4%)
*Analog Devices, Inc................................. 19,000 636
*Cambridge Technology Partners, Inc.................. 19,000 680
*Cisco Systems, Inc.................................. 8,000 585
*Documentum, Inc..................................... 23,000 765
*HNC Software Inc.................................... 11,000 437
Intel Corporation.................................... 4,000 369
Molex Incorporated................................... 15,000 611
*PeopleSoft, Inc..................................... 11,000 657
*Saville Systems Plc................................. 8,000 562
*Siebel Systems, Inc................................. 15,000 639
*Solectron Corporation............................... 17,000 757
*Sterling Commerce, Inc.............................. 15,000 539
*The Vantive Corporation............................. 19,000 456
--------
7,693
<PAGE>
<CAPTION>
GROWTH OPPORTUNITIES FUND CONTINUED
Number Market
of Shares Value
<S> <C> <C>
TELECOMMUNICATIONS (4.0%)
*CIENA Corporation................................... 12,000 $ 594
LM Ericsson Telecommunications....................... 10,000 480
*Powerwave Technologies, Inc......................... 24,000 930
--------
2,004
--------
TOTAL COMMON STOCKS (Cost $41,338)................................ 45,060
<CAPTION>
Principal
Amount
<S> <C> <C>
SHORT-TERM OBLIGATIONS (9.5%)
COMMERCIAL PAPER (9.5%)
Associates Corp. of North America 6.400% 10/01/97.... $ 2,435 2,435
UBS Finance 6.750% 10/01/97.......................... 2,308 2,308
--------
TOTAL SHORT-TERM OBLIGATIONS
(Amortized Cost $4,743)........................................... 4,743
TOTAL INVESTMENTS (99.9%)
(Cost $46,081).................................................... $ 49,803
OTHER ASSETS, LESS LIABILITIES (0.1%)............................. 27
--------
TOTAL NET ASSETS (100.0%)......................................... $ 49,830
========
<FN>
*Non-income producing.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
SR&F SPECIAL PORTFOLIO
Investments as of September 30, 1997
(Dollar amounts in thousands)
Number Market
COMMON STOCKS (89.8%) of Shares Value
<S> <C> <C>
ADVERTISING (1.9%)
The Interpublic Group of Companies, Inc.............. 490,000 $ 25,143
AUTOMOTIVE (1.5%)
Superior Industries International, Inc............... 701,000 19,409
BANKS (3.3%)
Golden West Financial Corporation.................... 340,000 30,514
Washington Mutual, Inc............................... 200,000 13,950
----------
44,464
BROADCASTING (2.7%)
Grupo Radio Centro, S.A. de C.V. ADSs................ 429,800 7,441
*Scandinavian Broadcasting System S.A................ 510,600 12,254
Westinghouse Electric Corp........................... 600,000 16,238
----------
35,933
BUSINESS SERVICES (3.0%)
Interim Services Inc................................. 950,000 26,719
Unitog Company....................................... 488,850 12,527
----------
39,246
CONSUMER-RELATED (1.5%)
Newell Company....................................... 505,000 20,200
DRUGS (1.8%)
Novartis AG.......................................... 16,000 24,570
ELECTRICAL EQUIPMENT (3.1%)
*Littelfuse, Inc.
Common............................................ 690,000 24,064
Warrants.......................................... 547,200 16,690
----------
40,754
ELECTRONICS & INSTRUMENTATION (6.6%)
AVX Corporation...................................... 618,400 20,021
*Kent Electronics Corp............................... 850,000 33,575
Molex, Inc. Class A.................................. 823,533 33,559
----------
87,155
ENERGY & RELATED SERVICES (6.5%)
Cross Timbers Oil Company............................ 1,494,150 36,420
*Renaissance Energy Ltd.............................. 935,000 23,329
*Petroleum Geo-Services ASA ADRs..................... 388,800 26,293
----------
86,042
FINANCIAL SERVICES (4.5%)
American Express Co.................................. 385,000 31,522
Household International, Inc......................... 250,000 28,297
----------
59,819
HEALTH SERVICES AND EQUIPMENT (12.8%)
*Boston Scientific Corporation....................... 344,600 19,018
Cardinal Health, Inc................................. 450,000 31,950
Columbia HCA Healthcare Corp......................... 350,000 10,063
*Healthcare Compare Corp............................. 350,000 22,356
Invacare Corp........................................ 1,173,550 27,577
*Steris Corporation.................................. 300,000 12,338
<PAGE>
<CAPTION>
Number Market
of Shares Value
<S> <C> <C>
HEALTH SERVICES AND EQUIPMENT (CONTINUED)
Stryker Corporation.................................. 464,600 $ 20,297
*Sybron International Corporation.................... 600,000 25,763
----------
169,362
INDUSTRIAL PRODUCTS (2.5%)
Carlisle Corp........................................ 745,200 33,115
INSURANCE COMPANIES (7.0%).
National Mutual Asia Ltd............................. 18,450,000 19,789
The Progressive Corporation.......................... 433,200 46,407
20th Century Industries.............................. 1,042,700 27,045
----------
93,241
LEISURE & ENTERTAINMENT (5.4%)
Carnival Corp. Class A............................... 500,000 23,125
Harley-Davidson, Inc................................. 1,664,000 48,568
----------
71,693
MACHINERY - GENERAL INDUSTRY (1.1%)
Robbins & Myers, Inc................................. 135,100 5,201
Stewart & Stevenson Services, Inc.................... 400,000 9,625
----------
14,826
METALS (0.7%)
Barrick Gold Corp.................................... 400,000 9,900
OFFICE PRODUCTS (1.0%)
Ikon Office Solutions, Inc........................... 510,000 13,037
RETAIL (9.2%)
*Borders Group, Inc.................................. 1,660,000 45,650
*Consolidated Stores Corp............................ 656,250 27,480
*Proffitt's, Inc..................................... 651,600 38,607
*Zale Corp........................................... 404,600 10,494
----------
122,231
SCHOOLS (0.5%)
*Devry, Inc.......................................... 238,400 7,122
SECURITY (1.2%)
Pittston Brinks Group................................ 402,600 16,129
SPECIALTY CHEMICALS (6.9%)
*CIBA Specialty Chemicals AG......................... 21,000 2,032
*Lydall, Inc......................................... 929,000 21,773
Minerals Technology Corp. Class A.................... 624,200 27,816
OM Group, Inc........................................ 1,009,500 40,317
----------
91,938
TEXTILES & APPAREL (2.3%)
Unifi, Inc........................................... 748,475 30,641
TELECOMMUNICATIONS (2.8%)
*Airtouch Communications............................. 799,500 28,332
*PriCellular......................................... 875,000 8,695
----------
37,027
----------
TOTAL COMMON STOCKS (Cost $590,897)............................... 1,192,997
<PAGE>
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
SHORT-TERM OBLIGATIONS (10.1%)
COMMERCIAL PAPER (10.1%)
Associates Corp. of North America 6.400% 10/01/97.... $ 44,460 $ 44,460
Goldman Sachs 5.750% 10/02/97........................ 50,000 49,992
Texas Utilities 5.750% 10/01/97...................... 40,000 40,000
----------
TOTAL SHORT-TERM OBLIGATIONS
(Amortized cost $134,452)......................................... 134,452
TOTAL INVESTMENTS (99.9%)
(Cost $725,349)................................................... 1,327,449
OTHER ASSETS, LESS LIABILITIES (0.1%)............................. 1,189
----------
TOTAL NET ASSETS (100.0%)......................................... $1,328,638
==========
<FN>
*Non-income producing.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SR&F SPECIAL VENTURE PORTFOLIO
Investments as of September 30, 1997
(Dollar amounts in thousands)
Number Market
COMMON STOCKS (91.1%) of Shares Value
<S> <C> <C>
AUTOMOBILE RENTAL (0.1%)
*Avis Rent A Car..................................... 9,000 $ 215
AUTOMOTIVE ACCESSORIES (1.8%)
Superior Industries International, Inc............... 152,000 4,209
BROADCAST/MEDIA (5.8%)
*Central European Media Enterprises Ltd.............. 224,700 6,011
*Metro Networks, Inc................................. 254,900 7,679
--------
13,690
BUSINESS SERVICES (12.0%)
*Alternative Resources Corporation................... 303,100 7,161
*CORESTAFF, Inc...................................... 30,000 971
*Covance, Inc........................................ 273,600 5,917
Danka Business Systems PLC ADRs...................... 79,000 3,516
G & K Services Inc. Class A.......................... 70,000 2,433
Interim Services, Inc................................ 293,800 8,263
--------
28,261
COMPUTER SERVICES (6.0%)
*Fiserv, Inc......................................... 159,300 6,989
*American Business Information....................... 131,700 3,572
*SPSS, Inc........................................... 130,000 3,721
--------
14,282
CONSUMER ELECTRONICS/APPLIANCES (1.2%)
*Helen of Troy Ltd................................... 142,400 2,812
COSMETICS (1.5%)
*Nu Skin Asia........................................ 180,000 3,476
DENTAL PRODUCTS (0.6%)
*National Dentex Corporation......................... 65,000 1,381
DIVERSIFIED OPERATIONS (0.7%)
Fisher Companies..................................... 14,000 1,694
DRUGS (2.4%)
*Chirex, Inc......................................... 150,000 3,825
*Ligand Pharmaceuticals.............................. 120,000 1,980
--------
5,805
ELECTRONIC COMPONENTS (0.1%)
*Sheldahl Company.................................... 5,000 108
ELECTRICAL EQUIPMENT (6.3%)
AVX Corporation...................................... 248,800 8,055
*Ballantyne of Ohama, Inc............................ 200,000 3,850
*Kent Electronics Corporation........................ 77,200 3,049
--------
14,954
ELECTRICAL POWER GENERATION (1.0%)
AES Corporation...................................... 52,000 2,275
FINANCIAL SERVICES (0.6%)
Investors Financial Services......................... 35,000 1,444
<PAGE>
<CAPTION>
Number Market
of Shares Value
<S> <C> <C>
FOOD DISTRIBUTOR (1.2%)
Richfood Holdings, Inc............................... 115,000 $ 2,983
HEALTH SERVICES & EQUIPMENT (4.4%)
*Urologix, Inc....................................... 184,800 4,389
*Uroquest Medical Corporation........................ 255,200 1,467
*Xomed Surgical Products, Inc........................ 231,000 4,591
--------
10,447
INSURANCE (7.5%)
Meadowbrook Insurance Group, Inc..................... 233,700 5,653
Mutual Risk Management Ltd........................... 75,433 3,832
20th Century Industries, Inc......................... 312,800 8,113
--------
17,598
OIL/GAS (11.5%)
*Barrett Resources Corp.............................. 151,300 5,891
*Renaissance Energy Ltd.............................. 160,000 3,992
Cross Timbers Oil Company............................ 227,700 5,550
Devon Energy Corporation............................. 81,200 3,573
*Hanover Compressor.................................. 154,000 3,773
*Meridian Resource Corporation....................... 324,800 4,283
--------
27,062
OPTICAL SUPPLIES (2.0%)
*Sola International, Inc............................. 137,000 4,701
PUBLISHING (1.9%)
*CMP Media........................................... 180,900 4,523
REAL ESTATE DEVELOPMENT/MANAGEMENT (14.7%)
Beacon Properties Corporation........................ 160,000 7,331
*CB Commercial Real Estate Services Group, Inc....... 252,300 8,073
*LaSalle Partners.................................... 129,700 4,540
Reckson Associates Realty Corporation................ 233,900 6,227
*Security Capital Group.............................. 115,400 3,967
Spieker Properties, Inc.............................. 110,000 4,462
--------
34,600
RETAIL (3.3%)
*Moovies, Inc........................................ 60,000 146
*Video Update, Inc................................... 694,200 2,559
*Whole Foods Market, Inc............................. 129,000 4,983
--------
7,688
SPECIALTY CHEMICALS (2.1%)
ChemFirst, Inc....................................... 200,500 5,038
TELECOMMUNICATIONS (1.0%)
*Western Wireless Corporation........................ 127,700 2,394
WHOLESALE DISTRIBUTION (1.4%)
*Henry Schein, Inc................................... 92,500 3,307
--------
TOTAL COMMON STOCKS (Cost $172,619)............................... 214,947
<PAGE>
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
SHORT-TERM OBLIGATIONS (8.5%)
Associates Corporation of North America 6.400% 10/01/97 $ 9,770 $ 9,770
Goldman Sachs Group 5.750% 10/02/97.................. 8,000 7,999
UBS Finance 6.350% 10/01/97.......................... 2,367 2,367
--------
TOTAL SHORT-TERM OBLIGATIONS
(Amortized cost $20,136).......................................... 20,136
TOTAL INVESTMENTS (99.6%)
(Cost $192,755)................................................... 235,083
OTHER ASSETS, LESS LIABILITIES (0.4%)............................. 958
--------
TOTAL NET ASSETS (100.0%)......................................... $236,041
========
<FN>
* Non-income producing.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAPITAL OPPORTUNITIES FUND
Investments as of September 30, 1997
(Dollar amounts in thousands)
Number Market
COMMON STOCKS (90.2%) of Shares Value
<S> <C> <C>
BUSINESS SERVICES (20.1%)
*ABR Information Services, Inc....................... 1,100,000 $ 30,387
*Caribiner International, Inc........................ 540,000 22,005
*CBT Group Plc....................................... 450,000 36,112
Danka Business Systems Plc........................... 540,000 24,030
*Gartner Group, Inc.................................. 1,400,000 42,000
Paychex, Inc......................................... 1,400,000 48,825
*Sykes Enterprises, Incorporated..................... 750,000 20,063
----------
223,422
CONSUMER PRODUCTS & SERVICES (4.2%)
*HFS Incorporated.................................... 630,000 46,896
DATA PROCESSING SERVICES (3.5%)
*The BISYS Group, Inc................................ 500,000 16,062
First Data Corporation............................... 600,000 22,538
----------
38,600
HEALTH CARE (18.0%)
Cardinal Health, Inc................................. 450,000 31,950
HBO & Company........................................ 1,200,000 45,300
Omnicare, Inc........................................ 1,200,000 39,000
*PAREXEL International Corporation................... 600,000 23,700
*PhyCor, Inc......................................... 900,000 26,156
*Quintiles Transnational Corp........................ 400,000 33,700
----------
199,806
INDUSTRIAL PRODUCTS (8.7%)
*Gentex Corporation.................................. 810,000 20,098
*Wilmar Industries, Inc.............................. 277,500 7,493
*MSC Industrial Direct Co., Inc...................... 840,000 38,640
*United States Filter Corporation.................... 700,000 30,144
----------
96,375
LEISURE & ENTERTAINMENT (13.3%)
Carnival Corporation................................. 740,000 34,225
*Clear Channel Communications, Inc................... 680,000 44,115
*Extended Stay America, Inc.......................... 840,000 12,600
*Heftel Broadcasting Corporation..................... 280,000 21,210
*Promus Hotel Corporation............................ 800,000 35,850
----------
148,000
RESTAURANTS (2.8%)
*Papa John's International, Inc...................... 900,000 30,769
RETAIL ( 0.6%)
*Kohl's Corporation.................................. 100,000 7,100
<PAGE>
<CAPTION>
Number Market
of Shares Value
<S> <C> <C>
TECHNOLOGY (13.2%)
*ADC Telecommunications, Inc......................... 700,000 $ 22,750
*Aspen Technology, Inc............................... 690,000 24,236
*CIENA Corporation................................... 400,000 19,812
*PeopleSoft, Inc..................................... 500,000 29,875
*Tellabs, Inc........................................ 960,000 49,440
----------
146,113
MISCELLANEOUS (5.8%)
*Apollo Group, Inc................................... 800,000 33,900
*Corrections Corporation of America.................. 700,000 30,450
----------
64,350
----------
TOTAL COMMON STOCKS (Cost $666,686)............................... 1,001,431
<CAPTION>
Principal
Amount
<S> <C> <C>
SHORT-TERM OBLIGATIONS (10.5%)
COMMERCIAL PAPER (10.5%)
Associates Corp. of North America 6.400% 10/01/97.... $ 32,715 32,715
GATX Capital 6.600% 10/01/97......................... 35,330 35,330
Merrill Lynch 5.800% 10/01/97........................ 48,650 48,650
----------
TOTAL SHORT-TERM OBLIGATIONS (Amortized Cost $116,695)............ 116,695
TOTAL INVESTMENTS (100.7%)
(Cost $783,381)................................................... 1,118,126
OTHER ASSETS, LESS LIABILITIES (-0.7%)............................ (7,484)
----------
TOTAL NET ASSETS (100.0%)......................................... $1,110,642
==========
<FN>
* Non-income producing.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
BALANCE SHEETS
September 30, 1997
(All amounts in thousands, except per-share data)
<CAPTION>
GROWTH GROWTH SPECIAL CAPITAL
STOCK OPPORTUNITIES SPECIAL VENTURE OPPORTUNITIES
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in Portfolio, at value..................................$608,119 $ -- $1,328,513 $235,922 $ --
Investments, at market value....................................... -- 49,803 -- -- 1,118,126
Receivable for investments sold.................................... -- -- -- -- 4,093
Receivable for fund shares sold.................................... 518 56 429 151 507
Dividends and interest receivable.................................. -- 5 43 -- 47
Cash............................................................... 50 101 50 50 107
Other assets....................................................... 71 31 124 21 125
-------- ------- ---------- -------- ----------
Total Assets....................................................$608,758 $49,996 $1,329,159 $236,144 $1,123,005
======== ======= ========== ======== ==========
LIABILITIES
Payable for fund shares redeemed...................................$ 614 $ 44 $ 570 $ 118 $ 8,504
Payable for investments purchased.................................. -- -- -- -- 2,583
Payable to investment adviser and transfer agent................... 222 82 412 109 912
Other liabilities.................................................. 253 40 599 162 364
-------- ------- ---------- -------- ----------
Total Liabilities............................................... 1,089 166 1,581 389 12,363
-------- ------- ---------- -------- ----------
CAPITAL
Paid-in capital ................................................... 307,598 46,479 615,803 176,713 895,253
Net unrealized appreciation of investments and foreign currencies.. 265,809 3,722 601,230 42,306 334,745
Accumulated undistributed net investment income.................... 55 2 -- -- --
Accumulated undistributed net realized gains (losses) on
investments and foreign currency transactions................ . 34,207 (373) 110,545 16,736 (119,356)
-------- ------- ---------- -------- ----------
Total Capital (Net Assets)...................................... 607,669 49,830 1,327,578 235,755 1,110,642
-------- ------- ---------- -------- ----------
Total Liabilities and Capital...................................$608,758 $49,996 $1,329,159 $236,144 $1,123,005
======== ======= ========== ======== ==========
Shares Outstanding (Unlimited Number Authorized)................... 17,218 4,625 39,288 13,511 38,173
======== ======= ========== ======== ==========
Net Asset Value (Capital) Per Share................................$ 35.29 $ 10.77 $ 33.79 $ 17.45 $ 29.10
======== ======= ========== ======== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Operations
For the Year Ended September 30, 1997
(All amounts in thousands)
<CAPTION>
<CAPTION>
GROWTH GROWTH SPECIAL CAPITAL
STOCK OPPORTUNITIES SPECIAL VENTURE OPPORTUNITIES
FUND FUND(A) FUND FUND FUND
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends allocated from Portfolio................................$ 2,887 $ -- $ 4,675 $ 814 $ --
Dividends......................................................... 1,299 28 2,116 273 1,266
Interest allocated from Portfolio................................. 1,190 -- 3,083 600 --
Interest.......................................................... 302 118 1,485 286 4,987
-------- ------ --------- -------- ----------
5,678 146 11,359 1,973 6,253
Foreign taxes withheld........................................... -- -- (41) -- --
-------- ------ --------- -------- ----------
Total Investment Income....................................... 5,678 146 11,318 1,973 6,253
-------- ------ --------- -------- ----------
EXPENSES
Expenses allocated from Portfolio................................ 2,235 -- 5,481 1,028 --
Management fees.................................................. 933 86 2,638 396 9,098
Transfer agent fees.............................................. 1,125 25 2,558 392 2,829
Administrative fees.............................................. 757 17 1,538 268 1,655
Printing and postage............................................. 135 18 327 40 537
Audit and legal fees............................................. 15 23 15 18 28
Custodian fees................................................... 17 7 58 6 89
Other............................................................ 263 24 686 155 825
-------- ------ --------- -------- ----------
5,480 200 13,301 2,303 15,061
Reimbursement of expenses by investment adviser............... -- (56) -- -- --
-------- ------ --------- -------- ----------
Total Expenses................................................ 5,480 144 13,301 2,303 15,061
-------- ------ --------- -------- ----------
Net Investment Income (loss).................................. 198 2 (1,983) (330) (8,808)
-------- ------ --------- -------- ----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS
Net realized gains (losses) on investments....................... 7,676 (373) 20,251 14,663 (110,932)
Net realized gains on investments allocated from Portfolio....... 26,592 -- 90,144 7,869 --
Net realized gains on foreign currency transactions.............. -- -- 1,003 -- --
Net realized gains on foreign currency transactions allocated
from Portfolio................................................. -- -- 2,517 -- --
Net change in unrealized appreciation or depreciation
of investments and foreign currency transactions............... 107,140 3,722 232,265 17,242 (7,539)
-------- ------ --------- -------- ----------
Net Gains (Losses) on Investments and Foreign Currency
Transactions............................................... 141,408 3,349 346,180 39,774 (118,471)
-------- ------ --------- -------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.. $141,606 $3,351 $344,197 $39,444 $ (127,279)
======== ====== ========= ======== ==========
<FN>
(a) From commencement of operations on June 30, 1997.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
For The Years Ended September 30, 1996 and 1997
(All amounts in thousands)
<CAPTION>
GROWTH
OPPORTUNITIES
GROWTH STOCK FUND FUND SPECIAL FUND
1996 1997 1997 (A) 1996 1997
<S> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss) ............................ $ 1,235 $ 198 $ 2 $ 347 $ (1,983)
Net realized gains (losses) on investments and foreign
currency transactions ................................ 34,712 34,268 (373) 93,001 113,915
Net change in unrealized appreciation or depreciation
of investments .......................................... 37,878 107,140 3,722 89,107 232,265
----------- ----------- ----------- ----------- -----------
Net Increase (Decrease) in Net Assets Resulting
from Operations ................................... 73,825 141,606 3,351 182,455 344,197
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income .................... (1,400) (1,100) -- (4,825) --
Capital gain distributions .............................. (32,877) (33,200) -- (85,187) (86,856)
----------- ----------- ----------- ----------- -----------
Total Distributions to Shareholders .................. (34,277) (34,300) -- (90,012) (86,856)
----------- ----------- ----------- ----------- -----------
SHARE TRANSACTIONS
Subscriptions to fund shares ............................ 56,575 196,106 50,017 139,995 170,964
Investment income dividends reinvested .................. 1,157 828 -- 4,332 --
Capital gain distributions reinvested ................... 28,785 26,323 -- 79,821 76,025
Redemptions of fund shares .............................. (68,437) (140,858) (3,538) (359,562) (335,250)
----------- ----------- ----------- ----------- -----------
Net Increase (Decrease) from Share Transactions ...... 18,080 82,399 46,479 (135,414) (88,261)
----------- ----------- ----------- ----------- -----------
Net Increase (Decrease) in Net Assets ................ 57,628 189,705 49,830 (42,971) 169,080
TOTAL NET ASSETS
Beginning of Period ..................................... 360,336 417,964 -- 1,201,469 1,158,498
----------- ----------- ----------- ----------- -----------
End of Period ........................................... $ 417,964 $ 607,669 $ 49,830 $ 1,158,498 $ 1,327,578
=========== =========== =========== =========== ===========
Accumulated Undistributed
Net Investment Income at End of Period ............... $ 957 $ 55 $ 2 $ -- $ --
=========== =========== =========== =========== ===========
ANALYSES OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to fund shares ............................ 2,124 6,268 4,965 5,554 6,195
Investment income dividends reinvested .................. 47 31 -- 187 --
Capital gain distributions reinvested ................... 1,166 980 -- 3,445 3,016
----------- ----------- ----------- ----------- -----------
3,337 7,279 4,965 9,186 9,211
Redemptions of fund shares .............................. (2,610) (4,578) (340) (14,456) (12,222)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in fund shares .................. 727 2,701 4,625 (5,270) (3,011)
Shares outstanding at beginning of period ............... 13,790 14,517 -- 47,569 42,299
----------- ----------- ----------- ----------- -----------
Shares outstanding at end of period ..................... 14,517 17,218 4,625 42,299 39,288
=========== =========== =========== =========== ===========
<PAGE>
<CAPTION>
Statements of Changes in Net Assets
For The Years Ended September 30, 1996 and 1997
(All amounts in thousands)
CAPITAL
SPECIAL VENTURE FUND OPPORTUNITIES FUND
1996 1997 1996 1997
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss) ............................ $ (231) $ (330) $ (3,155) $ (8,808)
Net realized gains (losses) on investments and foreign
currency transactions ................................ 9,027 22,532 (8,425) (110,932)
Net change in unrealized appreciation or depreciation
of investments ....................................... 19,130 17,242 261,649 (7,539)
----------- ----------- ----------- -----------
Net Increase (Decrease) in Net Assets Resulting
from Operations .................................. 27,926 39,444 250,069 (127,279)
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income .................... -- -- (150) --
Capital gain distributions .............................. (3,016) (14,445) (12,960) --
----------- ----------- ----------- -----------
Total Distributions to Shareholders .................. (3,016) (14,445) (13,110) --
----------- ----------- ----------- -----------
SHARE TRANSACTIONS
Subscriptions to fund shares ............................ 71,954 112,054 1,801,763 543,838
Investment income dividends reinvested .................. (3) -- 128 --
Capital gain distributions reinvested ................... 2,899 13,220 11,772 --
Redemptions of fund shares .............................. (15,765) (59,046) (608,465) (990,455)
----------- ----------- ----------- -----------
Net Increase (Decrease) from Share Transactions ...... 59,085 66,228 1,205,198 (446,617)
----------- ----------- ----------- -----------
Net Increase (Decrease) in Net Assets ................ 83,995 91,227 1,442,157 (573,896)
TOTAL NET ASSETS
Beginning of Period ..................................... 60,533 144,528 242,381 1,684,538
----------- ----------- ----------- -----------
End of Period ........................................... $ 144,528 $ 235,755 $ 1,684,538 $ 1,110,642
=========== =========== =========== ===========
Accumulated Undistributed
Net Investment Income at End of Period ............... $ -- $ -- $ -- $ --
=========== =========== =========== ===========
ANALYSES OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to fund shares ............................ 5,177 7,337 64,836 19,657
Investment income dividends reinvested .................. -- -- 6 --
Capital gain distributions reinvested ................... 237 931 527 --
----------- ----------- ----------- -----------
5,414 8,268 65,369 19,657
Redemptions of fund shares .............................. (1,114) (3,863) (22,280) (35,746)
----------- ----------- ----------- -----------
Net increase (decrease) in fund shares .................. 4,300 4,405 43,089 (16,089)
Shares outstanding at beginning of period ............... 4,806 9,106 11,173 54,262
----------- ----------- ----------- -----------
Shares outstanding at end of period ..................... 9,106 13,511 54,262 38,173
=========== =========== =========== ===========
<FN>
(a) From commencement of operations on June 30, 1997.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Balance Sheets
September 30, 1997
(All amounts in thousands, except per-share data)
<CAPTION>
SR&F
SR&F SR&F SPECIAL
GROWTH STOCK SPECIAL VENTURE
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
ASSETS
Investments, at market value ............ $ 613,660 $1,327,449 $ 235,083
Receivable for investments sold ......... 506 10,372 1,723
Dividends receivable .................... -- 296 70
Cash .................................... -- 4 5
Other assets ............................ 5 11 3
---------- ---------- ----------
Total Assets ......................... 614,171 1,338,132 236,884
---------- ---------- ----------
LIABILITIES
Payable for investments purchased ....... 5,450 8,614 665
Payable to investment advisor ........... 314 809 152
Other liabilities ....................... 36 71 26
---------- ---------- ----------
Total Liabilities .................... 5,800 9,494 843
---------- ---------- ----------
Net Assets Applicable to Investors'
Beneficial Interest .................. $ 608,371 $1,328,638 $ 236,041
========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Operations
For the Period Ended September 30, 1997 (a)
(All amounts in thousands)
<CAPTION>
SR&F SR&F SR&F
GROWTH STOCK SPECIAL SPECIAL VENTURE
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends ....................................................... $ 2,888 $ 4,676 $ 814
Interest ........................................................ 1,190 3,083 601
--------- --------- ---------
4,078 7,759 1,415
Foreign taxes withheld .......................................... -- (41) --
--------- --------- ---------
Total Investment Income ...................................... 4,078 7,718 1,415
--------- --------- ---------
EXPENSES
Management fees ................................................. 2,120 5,249 943
Custodian fees .................................................. 28 87 19
Accounting fees ................................................. 25 35 19
Trustees fees ................................................... 16 32 11
Audit and legal fees ............................................ 17 18 18
Other ........................................................... 30 61 18
--------- --------- ---------
Total Expenses ............................................... 2,236 5,482 1,028
--------- --------- ---------
Net Investment Income ........................................ 1,842 2,236 387
--------- --------- ---------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains on investments ............................... 26,585 90,138 7,866
Net realized gains on foreign
currency transactions ........................................ -- 2,514 --
Net change in unrealized appreciation or
depreciation of investments and foreign
currency transactions ........................................ 53,294 190,726 27,038
--------- --------- ---------
Net Gains on Investments ..................................... 79,879 283,378 34,904
--------- --------- ---------
Net Increase in Net Assets Resulting
from Operations .............................................. $ 81,721 $ 285,614 $ 35,291
========= ========= =========
<FN>
(a) From commencement of operations on February 3, 1997.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
For the Period Ended September 30, 1997 (a)
(All amounts in thousands)
<CAPTION>
SR&F SR&F SR&F
GROWTH STOCK SPECIAL SPECIAL VENTURE
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
OPERATIONS
Net investment income ....................................... $ 1,842 $ 2,236 $ 387
Net gains on investments and foreign
currency transactions .................................... 26,585 92,652 7,866
Net change in unrealized appreciation or
depreciation of investments and foreign
currency transactions .................................... 53,294 190,726 27,038
----------- ----------- -----------
Net Increase in Net Assets Resulting
from Operations ........................................ 81,721 285,614 35,291
----------- ----------- -----------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions ............................................... 571,598 1,189,884 218,483
Withdrawals ................................................. (44,948) (146,860) (17,733)
----------- ----------- -----------
Net Increase from Transactions in Investors'
Beneficial Interest .................................... 526,650 1,043,024 200,750
----------- ----------- -----------
Net Increase in Net Assets ............................... 608,371 1,328,638 236,041
TOTAL NET ASSETS
Beginning of Period ......................................... -- -- --
----------- ----------- -----------
End of Period ............................................... $ 608,371 $ 1,328,638 $ 236,041
=========== =========== ===========
<FN>
(a) From commencement of 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,
Special Fund and Special Venture Fund contributed $474,861, $1,096,779 and
$160,940 in securities and other assets, respectively, to their respective
Portfolios. At February 14, 1997, Stein Roe Advisor Growth Stock Fund, Advisor
Special Fund and 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 September
30, 1997, Growth Stock Fund and Advisor Growth Stock Fund owned 99.96 percent
and .04 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 99.95 percent and .05 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 Growth Opportunities 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 Portfolios. 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>
NOTES TO FINANCIAL STATEMENTS continued
SECURITY VALUATIONS
All securities are valued as of September 30, 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 priced 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.
FORWARD CURRENCY EXCHANGE CONTRACTS
At September 30, 1997, SR&F Special Portfolio had entered into forward
currency exchange contracts under which it is obligated to exchange currencies
at specified future dates. Risks arise from the possible inability of
counterparties to meet the terms of their contracts and from movements in
currency values. The Portfolio had the following outstanding contracts at
September 30, 1997:
SETTLEMENT CONTRACT TO
DATE RECEIVE DELIVER
Nov. 6, 1997 $17,430 26,387 CHF
Net unrealized depreciation of $831 on these contracts at September 30, 1997,
is included in "payable for investments purchased" in the accompanying financial
statements.
FEDERAL INCOME TAXES
No provision is made for federal income taxes since (a) the Funds elect to be
taxed as "regulated investment companies" and make distributions to their
shareholders to be relieved of all federal income taxes under provisions of
current federal tax law; and (b) the Portfolios are treated as partnerships for
federal income tax purposes and all of their income is allocated to their owners
based on respective percentages of ownership.
The Funds intend to utilize provisions of the federal income tax laws, which
allow them to carry a realized capital loss forward up to eight years following
the year of the loss, and offset such losses against any future realized gains.
At September 30, 1997, Growth Opportunities Fund had a capital loss carryforward
of $373, which expires in 2005. At September 30, 1997, Capital Opportunities
Fund had a capital loss carryforward of $119,174 which expires in 2004 and 2005.
For purposes of federal income tax reporting, $33,936 of distributions made
by Growth Stock Fund in December 1996 were designated as capital gain dividends.
<PAGE>
DISTRIBUTIONS TO SHAREHOLDERS
Each Fund declares and pays dividends of any net investment income and net
realized capital gains annually, which are recorded on the ex-dividend date.
Dividends are determined in accordance with income tax principles, which may
treat certain transactions differently than generally accepted accounting
principles. 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. Permanent differences are
reclassified to the appropriate capital account.
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.
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&FGrowth 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 Growth Opportunities Fund, SR&FSpecial 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&FSpecial Venture Portfolio is .75 of 1 percent of average
daily net assets. The administrative fees for Growth Stock 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 Growth
Opportunities Fund, Special Fund and Capital Opportunities Fund are .15 of 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.
<PAGE>
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. In addition, the Adviser has undertaken to reimburse Growth
Opportunities Fund for its operating expenses to the extent such expenses exceed
1.25 percent of its annual average net assets. This commitment expires on
January 31, 1998, subject to earlier termination by the Adviser on 30 days'
notice.
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 subtransfer agent for the Funds.
The Adviser also provides certain fund accounting services. For the period
ended September 30, 1997, Growth Stock Fund, Growth Opportunities Fund, Special
Fund, Special Venture Fund, Capital Opportunities Fund, SR&FGrowth Stock
Portfolio, SR&FSpecial Portfolio and SR&FSpecial Venture Portfolio incurred
charges of $37, $6, $53, $28, $56, $25, $35 and $19, respectively.
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, Growth Opportunities 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 September 30, 1997, was $14,
$2, $23, $10, $53, $16, $32 and $11, 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 September
30, 1997.
<PAGE>
NOTE 5. INVESTMENT TRANSACTIONS
The aggregate cost of purchases and proceeds from sales other than short-
term obligations for the period ended September 30, 1997, were:
<TABLE>
FUND/PORTFOLIO Purchases Sales
<S> <C> <C>
Growth Stock Fund (a)............................. $ 38,185 $ 22,581
SR&FGrowth Stock Portfolio........................ 152,614 111,186
Growth Opportunities Fund......................... 42,965 1,253
Special Fund (a).................................. 76,085 98,248
SR&FSpecial Portfolio............................. 91,059 266,715
Special Venture Fund (a).......................... 72,819 60,743
SR&FSpecial Venture Portfolio..................... 128,841 101,744
Capital Opportunities Fund........................ 428,413 769,505
<FN>
(a) Prior to commencement of operations of the respective Portfolio (see Note 1
to Financial Statements).
</FN>
</TABLE>
At September 30, 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:
<TABLE>
<CAPTION>
Cost of Investments
Federal
Net Financial Income
FUND/PORTFOLIO Appreciation Depreciation Appreciation Reporting Tax
<S> <C> <C> <C> <C> <C>
SR&F Growth Stock Portfolio..... $267,105 $1,262 $265,843 $347,817 $347,817
Growth Opportunities Fund....... 5,002 1,280 3,722 46,081 46,081
SR&F Special Portfolio.......... 601,693 1,147 600,546 725,349 726,903
SR&F Special Venture Portfolio.. 43,593 1,881 41,712 192,755 193,371
Capital Opportunities Fund...... 337,535 2,972 334,563 783,381 783,563
</TABLE>
NOTE 6. SUBSEQUENT EVENT
Growth Stock Fund closed to new investors on October 15, 1997, subject to the
terms set forth in the prospectus supplement dated August 21, 1997.
<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>
PERIOD
ENDED YEARS ENDED
SEPTEMBER 30, SEPTEMBER 30,
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 (loss)................. 0.01 (0.02) (0.02)
Net realized and unrealized gains (losses)
on investments............................ 2.67 3.86 3.12
------------ ------------ ------------
Total from investment operations.......... 2.68 3.84 3.10
------------ ------------ ------------
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 $ 17.45
============ ============ ============
Ratio of net expenses to average net assets (b). 1.25%* 1.25% 1.29%
Ratio of net investment income (loss) to average
net assets (c)............................. 0.12%* (2.19%) (0.18%)
Portfolio turnover rate......................... 84% 72% 44% (d)
Average commissions (per share)................. -- $ 0.0378 $ 0.0390 (d)
Total return.................................... 26.96% 31.81% 21.73%
Net assets, end of period....................... $60,533 $144,528 $235,755
<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 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 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>
PERIOD
ENDED
SEPTEMBER 30,
1997 (A)
---------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............................ $ 10.00
-------
INCOME FROM INVESTMENT OPERATIONS
Net investment income........................................ --
Net realized and unrealized gains (losses) on investments.... .77
-------
Total from investment operations.......................... .77
DISTRIBUTIONS
Net investment income........................................ --
Net realized capital gains................................... --
-------
Total distributions....................................... --
NET ASSET VALUE, END OF PERIOD.................................. $ 10.77
=======
Ratio of net expenses to average net assets (b)................. 1.25%*
Ratio of net investment income to average net assets (c)........ 0.02%*
Portfolio turnover rate......................................... 3%
Average commissions (per share)................................. $0.0708
Total return ................................................... 7.70%
Net assets, end of period....................................... $49,830
<FN>
*Annualized
(a) From commencement of operations on June 30, 1997.
(b) If the Fund had paid all of its expenses and there had been no reimbursement
by the Adviser, this ratio would have been 1.74 percent for the period ended
September 30, 1997.
(c) Computed giving effect to the Adviser's expense limitation undertaking.
</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
DECEMBER SEPTEMBER
31, 1987 30, 1988 1989
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 16.97 $ 14.67 $ 14.60
------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ........................ 0.24 0.19 0.34
Net realized and unrealized gains (losses)
on investments.............................. 0.46 (0.11) 4.51
------------ ------------ ------------
Total from investment operations........... 0.70 0.08 4.85
------------ ------------ ------------
DISTRIBUTIONS
Net investment income ........................ (0.29) (0.15) (0.34)
Net realized capital gains.................... (2.71) -- (0.06)
------------ ------------ ------------
Total distributions........................ (3.00) (0.15) (0.40)
------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD................... $ 14.67 $ 14.60 $ 19.05
============ ============ ============
Ratio of net expenses to average net assets ..... 0.65% 0.76%* 0.77%
Ratio of net investment income to average
net assets.................................. 1.25% 1.62%* 2.05%
Portfolio turnover rate.......................... 143% 84% 47%
Average commissions (per share).................. -- -- --
Total return..................................... 5.57% 0.54% 33.86%
Net assets, end of period........................ $232,658 $195,641 $206,476
<PAGE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
1990 1991 1992 1993
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 19.05 $ 17.90 $ 22.79 $ 24.65
------------ ------------ ------------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ........................ 0.39 0.33 0.18 0.15
Net realized and unrealized gains (losses)
on investments.............................. (1.17) 5.90 3.01 1.14
------------ ------------ ------------- -----------
Total from investment operations........... (0.78) 6.23 3.19 1.29
------------ ------------ ------------- -----------
DISTRIBUTIONS
Net investment income ........................ (0.37) (0.42) (0.16) (0.10)
Net realized capital gains.................... -- (0.92) (1.17) (0.95)
------------ ------------ ------------- -----------
Total distributions........................ (0.37) (1.34) (1.33) (1.05)
------------ ------------ ------------- -----------
NET ASSET VALUE, END OF PERIOD................... $ 17.90 $ 22.79 $ 24.65 $ 24.89
============ ============ ============= ============
Ratio of net expenses to average net assets ..... 0.73% 0.79% 0.92% 0.93%
Ratio of net investment income to average
net assets.................................. 2.03% 1.63% 0.75% 0.59%
Portfolio turnover rate.......................... 40% 34% 23% 29%
Average commissions (per share).................. -- -- -- --
Total return..................................... (4.17%) 36.64% 14.37% 5.09%
Net assets, end of period........................ $206,031 $291,767 $372,758 $373,921
<PAGE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
1994 1995 1996 1997
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 24.89 $ 23.58 $ 26.13 $ 28.79
------------ ------------ ------------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ........................ 0.13 0.12 0.08 0.01
Net realized and unrealized gains (losses)
on investments.............................. 0.41 5.60 5.01 8.79
------------ ------------ ------------- -----------
Total from investment operations........... 0.54 5.72 5.09 8.80
------------ ------------ ------------- -----------
DISTRIBUTIONS
Net investment income ........................ (0.12) (0.15) (0.10) (0.07)
Net realized capital gains.................... (1.73) (3.02) (2.33) (2.23)
------------ ------------ ------------- -----------
Total distributions........................ (1.85) (3.17) (2.43) (2.30)
------------ ------------ ------------- -----------
NET ASSET VALUE, END OF PERIOD................... $ 23.58 $ 26.13 $ 28.79 $ 35.29
============ ============ ============= ============
Ratio of net expenses to average net assets ..... 0.94% 0.99% 1.08% 1.07%
Ratio of net investment income to average
net assets.................................. 0.50% 0.56% 0.32% 0.04%
Portfolio turnover rate.......................... 27% 36% 39% 5% (a)
Average commissions (per share).................. -- -- $ 0.0528 $ 0.0582 (a)
Total return..................................... 2.10% 28.18% 21.04% 33.10%
Net assets, end of period........................ $321,502 $360,336 $417,964 $607,699
<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 YEARS ENDED
DECEMBER SEPTEMBER SEPTEMBER 30,
31, 1987 30, 1988 1989
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 16.95 $ 12.83 $ 15.12
------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss).................. 0.23 0.14 0.36
Net realized and unrealized gains (losses)
on investments.............................. 0.12 2.16 5.58
------------ ------------ ------------
Total from investment operations........... 0.35 2.30 5.94
------------ ------------ ------------
DISTRIBUTIONS
Net investment income ........................ (0.57) (0.01) (0.21)
Net realized capital gains.................... (3.90) -- (0.06)
------------ ------------ ------------
Total distributions........................ (4.47) (0.01) (0.27)
------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD................... $ 12.83 $ 15.12 $ 20.79
============ ============ ============
Ratio of net expenses to average net assets ..... 0.96% 0.99%* 0.96%
Ratio of net investment income (loss) to average
net assets.................................. 1.32% 1.31%* 2.12%
Portfolio turnover rate.......................... 103% 42% 85%
Average commissions (per share).................. -- -- --
Total return..................................... 4.27% 17.94% 40.00%
Net assets, end of period........................ $187,997 $224,628 $322,056
<PAGE>
<CAPTION>
Selected per-share data (for a share outstanding
throughout each period), ratios and supplemental data.
YEARS ENDED SEPTEMBER 30,
1990 1991 1992 1993
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 20.79 $ 16.64 $ 19.87 $ 20.90
------------ ------------ ------------- ------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss).................. 0.42 0.34 0.21 0.17
Net realized and unrealized gains (losses)
on investments.............................. (2.10) 4.55 1.50 5.31
------------ ------------ ------------- ------------
Total from investment operations........... (1.68) 4.89 1.71 5.48
------------ ------------ ------------- ------------
DISTRIBUTIONS
Net investment income ........................ (0.39) (0.34) (0.37) (0.18)
Net realized capital gains.................... (2.08) (1.32) (0.31) (1.16)
------------ ------------ ------------- ------------
Total distributions........................ (2.47) (1.66) (0.68) (1.34)
------------ ------------ ------------- ------------
NET ASSET VALUE, END OF PERIOD................... $ 16.64 $ 19.87 $ 20.90 $ 25.04
============ ============ ============= ============
Ratio of net expenses to average net assets ..... 1.02% 1.04% 0.99% 0.97%
Ratio of net investment income (loss) to average
net assets.................................. 2.33% 2.11% 0.99% 0.92%
Portfolio turnover rate.......................... 70% 50% 40% 42%
Average commissions (per share).................. -- -- -- --
Total return..................................... (8.78%) 32.18% 8.96% 27.35%
Net assets, end of period........................ $361,065 $587,259 $626,080 $1,076,818
<PAGE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
1994 1995 1996 1997
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 25.04 $ 23.54 $ 25.26 $ 27.39
------------ ------------ ------------- ------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss).................. 0.15 0.13 0.01 (0.06)
Net realized and unrealized gains (losses)
on investments.............................. 0.33 3.05 4.14 8.57
------------ ------------ ------------- ------------
Total from investment operations........... 0.48 3.18 4.15 8.51
------------ ------------ ------------- ------------
DISTRIBUTIONS
Net investment income ........................ (0.21) (0.15) (0.11) --
Net realized capital gains.................... (1.77) (1.31) (1.91) (2.11)
------------ ------------ ------------- ------------
Total distributions........................ (1.98) (1.46) (2.02) (2.11)
------------ ------------ ------------- ------------
NET ASSET VALUE, END OF PERIOD................... $ 23.54 $ 25.26 $ 27.39 $ 33.79
============ ============ ============= ============
Ratio of net expenses to average net assets ..... 0.96% 1.02% 1.18% 1.14%
Ratio of net investment income (loss) to average
net assets.................................. 0.91% 0.56% 0.03% (0.17%)
Portfolio turnover rate.......................... 58% 41% 32% 7% (a)
Average commissions (per share).................. -- -- $ 0.0482 $ 0.0382 (a)
Total return..................................... 2.02% 14.60% 17.89% 33.67%
Net assets, end of period........................ $1,243,885 $1,201,469 $1,158,498 $1,327,578
<FN>
*Annualized
(a) Prior to commencement of operations of the Portfolio (See Note 1 to
Financial Statements).
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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.
NINE
YEAR MONTHS
ENDED ENDED YEARS ENDED
DECEMBER SEPTEMBER SEPTEMBER 30,
31, 1987 30, 1988 1989
------------ ------------ ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............ $ 13.38 $ 10.62 $ 10.78
------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)................. 0.03 0.03 0.05
Net realized and unrealized gains (losses)
on investments............................. 0.62 0.13 3.86
------------ ------------ ------------
Total from investment operations........... 0.65 0.16 3.91
------------ ------------ ------------
DISTRIBUTIONS
Net investment income ....................... (0.05) -- (0.05)
Net realized capital gains................... (3.36) -- (0.06)
------------ ------------ ------------
Total distributions........................ (3.41) -- (0.11)
------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD.................. $ 10.62 $ 10.78 $ 14.58
============ ============ ============
Ratio of net expenses to average net assets..... 0.95% 1.01%* 1.09%
Ratio of net investment income (loss) to
average net assets......................... 0.18% 0.34%* 0.42%
Portfolio turnover rate......................... 133% 164% 245%
Average commissions (per share)................. -- -- --
Total return.................................... 9.38% 1.51% 36.68%
Net assets, end of period....................... $171,973 $194,160 $272,805
<PAGE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
1990 1991 1992 1993
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............ $ 14.58 $ 7.32 $ 11.00 $ 11.56
------------ ------------ ------------- ------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)................. 0.06 0.11 0.06 0.01
Net realized and unrealized gains (losses)
on investments............................. (4.72) 3.73 0.60 3.91
------------ ------------ ------------- ------------
Total from investment operations........... (4.66) 3.84 0.66 3.92
------------ ------------ ------------- ------------
DISTRIBUTIONS
Net investment income ....................... (0.06) (0.08) (0.10) (0.04)
Net realized capital gains................... (2.54) (0.08) -- --
------------- ------------ ------------- ------------
Total distributions........................ (2.60) (0.16) (0.10) (0.04)
------------ ------------ ------------- ------------
NET ASSET VALUE, END OF PERIOD.................. $ 7.32 $ 11.00 $ 11.56 $ 15.44
============ ============ ============= ============
Ratio of net expenses to average net assets..... 1.14% 1.18% 1.06% 1.06%
Ratio of net investment income (loss) to average
net assets................................. 0.43% 1.19% 0.42% 0.09%
Portfolio turnover rate......................... 171% 69% 46% 55%
Average commissions (per share)................. -- -- -- --
Total return.................................... (37.51%) 53.51% 5.99% 34.01%
Net assets, end of period....................... $86,342 $129,711 $118,726 $153,101
<PAGE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
1994 1995 1996 1997
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............ $ 15.44 $ 15.79 $ 21.69 $ 31.04
------------ ------------ ------------- ------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)................. 0.02 0.01 (0.06) (0.17)
Net realized and unrealized gains (losses)
on investments........................ 0.34 5.91 10.41 (1.77)
------------ ------------ ------------- ------------
Total from investment operations........... 0.36 5.92 10.35 (1.94)
------------ ------------ ------------- ------------
DISTRIBUTIONS
Net investment income ....................... (0.01) (0.02) (0.01) --
Net realized capital gains................... -- -- (0.99) --
------------ ------------ ------------- ------------
Total distributions........................ (0.01) (0.02) (1.00) --
------------ ------------ ------------- ------------
NET ASSET VALUE, END OF PERIOD.................. $ 15.79 $ 21.69 $ 31.04 $ 29.10
============ ============ ============= ============
Ratio of net expenses to average net assets..... 0.97% 1.05% 1.22% 1.17%
Ratio of net investment income (loss) to average
net assets................................. 0.04% 0.08% (0.40%) (0.69%)
Portfolio turnover rate......................... 46% 60% 22% 35%
Average commissions (per share)................. -- -- $ 0.0555 $ 0.0487
Total return.................................... 2.31% 37.46% 49.55% (6.25%)
Net assets, end of period....................... $175,687 $242,381 $1,684,538 $1,110,642
<FN>
*Annualized
All per-share amounts and Average Shares Outstanding During Period on the debt
table reflect a two-for-one stock split effective August 25, 1995.
Note: For the periods indicated below, bank borrowing activity was as follows:
</FN>
<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>
<CAPTION>
FINANCIAL HIGHLIGHTS CONTINUED
SR&F GROWTH STOCK PORTFOLIO
PERIOD
ENDED
SEPTEMBER 30,
1997 (A)
---------
<S> <C>
RATIOS TO AVERAGE NET ASSETS
Ratio of net investment income to average net assets...... 0.52%*
Ratio of net expenses to average net assets............... 0.63%*
Portfolio turnover rate................................... 22%
Average commissions (per share)........................... $ 0.0575
<FN>
*Annualized
(a) From commencement of operations on February 3, 1997.
</FN>
</TABLE>
<PAGE>
<TABLE>
Financial Highlights CONTINUED
SR&F Special Portfolio
<CAPTION>
PERIOD
ENDED
SEPTEMBER 30,
1997 (A)
<S> <C>
RATIOS TO AVERAGE NET ASSETS
Ratio of net investment income to average net assets....... 0.31%*
Ratio of net expenses to average net assets................ 0.75%*
Portfolio turnover rate.................................... 8%
Average commissions (per share)............................ $ 0.0382
<FN>
*Annualized
(a) From commencement of operations on February 3, 1997.
</FN>
</TABLE>
<PAGE>
<TABLE>
Financial Highlights CONTINUED
SR&F Special Venture Portfolio
<CAPTION>
PERIOD
ENDED
SEPTEMBER 30,
1997 (A)
<S> <C>
RATIOS TO AVERAGE NET ASSETS
Ratio of net investment income to average net assets...... 0.31%*
Ratio of net expenses to average net assets............... 0.82%*
Portfolio turnover rate................................... 58%
Average commissions (per share)........................... $ 0.0456
<FN>
*Annualized
(a) From commencement of operations on February 3, 1997.
</FN>
</TABLE>
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and
Shareholders of:
Stein Roe Investment Trust
Stein Roe Growth Stock Fund
Stein Roe Growth
Opportunities Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Capital
Opportunities Fund
SR&F Base Trust
SR&F Growth Stock Portfolio
SR&F Special Portfolio
SR&F Special Venture Portfolio
We have audited the accompanying balance sheets of Stein Roe Growth Stock Fund,
Stein Roe Special Fund and Stein Roe Special Venture Fund and the accompanying
balance sheets, including the schedules of investments, of SR&F Growth Stock
Portfolio, Stein Roe Growth Opportunities Fund, SR&F Special Portfolio, SR&F
Special Venture Portfolio and Stein Roe Capital Opportunities Fund as of
September 30, 1997, and the related statements of operations, statements of
changes in net assets, and financial highlights for the periods indicated
thereon. These financial statements and financial highlights are the
responsibility of the Funds' and Portfolios' management. Our responsibility is
to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures for SR&F Growth Stock Portfolio, Stein Roe Growth
Opportunities Fund, SR&F Special Portfolio, SR&F Special Venture Portfolio and
Stein Roe Capital Opportunities Fund included confirmation of securities owned
as of September 30, 1997, by corre spondence with the custodian and brokers. As
to securities purchased but not received, we requested confirmation from brokers
and, when replies were not received, we carried out alternative auditing
procedures. An audit also includes assessing the estimates made by management,
as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Stein Roe Growth Stock Fund,
Stein Roe Growth Opportunities Fund, Stein Roe Special Fund, Stein Roe Special
Venture Fund, Stein Roe Capital Opportunities Fund, SR&F Growth Stock Portfolio,
SR&FSpecial Portfolio and SR&F Special Venture Portfolio, as of September 30,
1997, the results of their operations, the changes in their net assets and their
financial highlights for the periods indicated thereon, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
November 11, 1997
<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
William D. Andrews, Executive Vice President
Jilaine H. Bauer, Executive Vice President, Secretary
Thomas W. Butch, Executive Vice President
Loren A. Hanson, 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
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
John S. McLandsborough, Vice President
Arthur J. McQueen, Vice President
Nicolette D. Parrish, Vice President,
Assistant Secretary
Richard B. Peterson, Vice President
M. Gerard Sandel, Vice President
Gloria J. Santella, Vice President
Heidi J. Walter, Vice President
Stacy H. Winick, Vice President
Sharon R. Robertson, Controller
Scott E. Volk, 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 MUTUAL FUNDS
Stein Roe Cash Reserves 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 Growth Opportunities 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
www.steinroe.com
In Chicago, visit our Fund Center at One South Wacker Drive, 32nd Floor
Liberty Securities Corporation, Distributor
Member SIPC
Effective Jan. 1, 1998, the Funds will be distributed
by Liberty Financial Investments, Inc.
Member, SIPC
EQ11A 11/97
