STEIN ROE MUTUAL FUNDS
SEMIANNUAL REPORT
MARCH 31, 1998
PHOTO OF: HAND ON GLOBE
STEIN ROE EQUITY FUNDS
INTERNATIONAL FUNDS
INTERNATIONAL FUND
EMERGING MARKETS FUND
STEIN ROE MUTUAL FUNDS
SENSIBLE RISKS. INTELLIGENT INVESTMENTS.(SM)
<PAGE>
Contents
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From the President................................................ 1
Tom Butch's thoughts on the markets and investing
Performance....................................................... 3
How the Stein Roe international equity funds have done over time
Making the Most of Performance.................................... 5
Q&A
Interviews with the portfolio manager and summaries of
investment activity
International Fund................................................ 6
Emerging Markets Fund............................................. 9
Fund Highlights................................................... 11
Information about the Funds
Portfolio of Investments.......................................... 15
A complete list of investments with market values
Financial Statements.............................................. 22
Statements of assets and liabilities, operations and
changes in net assets
Notes to Financial Statements..................................... 29
Financial Highlights.............................................. 33
Selected per-share data
Must be preceded or accompanied by a prospectus.
<PAGE>
From the President
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TO OUR SHAREHOLDERS
We are pleased to present this semiannual report for the Stein Roe international
funds -- International Fund and Emerging Markets Fund. This report covers the
six months ended March 31, 1998, which surely was one of the most eventful
periods in the recent history of overseas markets.
AS ASIA DIVES, EUROPE THRIVES
Many Asian markets suffered economic -- and, in some cases, political -- turmoil
in the fourth quarter of 1997 and into 1998, as currency devaluations rocked
what had been some of the world's fastest-growing economies. Some of these
economies rebounded smartly in the first quarter of 1998; however, many
observers believe that economic recovery may continue to vary considerably,
both in strength and in speed, from country to country.
So far, the so-called "Asian flu" seems to have been contained within that
region. In Europe, for example, the economic situation over the past six months
was considerably more favorable and no less historic. European markets rallied
strongly as the long journey toward monetary unification of many major European
nations seemed to be moving steadily toward a January 1999 implementation.
These economic cross-currents serve to remind us that, even in an age of
increasing globalization, world markets do not necessarily move in tandem, and
that the performance of various economies can change rapidly. For example,
stocks in emerging market economies, as measured by the Morgan Stanley Capital
International Emerging Markets Index (MSCI EM), decreased sharply in value in
the fourth quarter of 1997, dropping more than 19 percent. This was followed
by a gain of more than seven percent in the first quarter of 1998.
EAFE BEATS S&P...FINALLY
The change in the performance of stocks from a broader span of nations,
as measured by the Morgan Stanley Capital International Europe Asia and Far East
Index (MSCI EAFE), also was pronounced. The Index dropped by nearly 8 percent in
the fourth quarter of 1997, but rebounded swiftly and decisively, increasing by
almost 15 percent in the first quarter of 1998. At that rate of growth, the MSCI
EAFE outpaced the 13.44 percent return of the S&P 500 -- the Index that tracks
the performance of a wide span of larger U.S. companies -- in the first quarter
of 1998. This marked the first such outperformance in the past 12 quarters.
<PAGE>
In the midst of volatility of this magnitude, we believe it is important to
remember the reasons why you purchased shares in mutual funds investing in
foreign securities:
INVESTING INTERNATIONALLY
First, these funds complement your holdings in funds investing primarily or
exclusively in U.S. stocks. The recent past has again provided a lucid reminder
that world equity markets do not move in unison, and that having exposure to
multiple markets may increase the overall performance potential of your
portfolio.
Second, despite their recent underperformance and volatility, we think the
long-term potential of the world's emerging markets remains intact. These
markets include about 80 percent of the world's population and, their problems
of late notwithstanding, have in recent years exhibited some of the fastest
economic growth rates of any of the world's nations.
Finally, with regard to emerging markets, history suggests that while market
declines in these economies can be sharp and swift, so can the rebounds that
follow them.
As with any stock investment, therefore, we believe a long-term
perspective is essential for successful foreign investing, especially in
emerging markets. These markets entail special risks, including exposure to
potentially greater social, political and economic volatility than the United
States, Japan or Western Europe.
By investing internationally, you have taken an important step toward
creating a well-balanced, well-diversified portfolio of stock investments. We
are, of course, thankful that you have chosen Stein Roe for your international
investments. We seek, in this report, to provide you useful and approachable
information on our International and Emerging Markets funds. We hope you will
take the time to learn how your portfolio manager is investing your money and
how he assesses the funds' performance over the past six months.
Please call us at 800-338-2550 with any comments or suggestions. As always,
we look forward to serving your investment needs.
Sincerely,
Thomas W. Butch
President
April 30, 1998
The MSCI EAFE, MSCI EM and the S&P 500 are unmanaged groups of stocks that
differ from the composition of any Stein Roe fund. They are not available for
direct investment.
For more complete information on any of the Stein Roe funds, including
management fees and expenses, please contact a Stein Roe representative at
800-338-2550. Please read the prospectus carefully before investing.
Photo of: Thomas W. Butch
<PAGE>
Fund Performance
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There are several ways to evaluate a fund's historical performance. You can look
at the total percentage change in value, the average annual percentage change or
the growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any dividends
(net investment income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
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AVERAGE ANNUAL TOTAL RETURNS
Periods ended March 31, 1998
PAST 1 PAST 3 LIFE
YEAR YEARS OF FUND(1)
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INTERNATIONAL FUND 9.40% 9.96% 5.98%
MSCI EAFE Index 18.61 10.57 8.05
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PAST 1 LIFE
YEAR OF FUND1
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EMERGING MARKETS FUND -23.56% -22.66%
MSCI EM Index -14.15 -15.10
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PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Total
return performance includes changes in share price and reinvestment of income
and capital gains distributions. The Morgan Stanley Capital International
Europe, Australia and Far East (MSCI EAFE) Index and the Morgan Stanley Capital
International Emerging Markets (MSCI EM) Index are unmanaged groups of stocks
that differ from the composition of any Stein Roe fund; they are not available
for direct investment.
A fund's performance, especially for short time periods, should not be the sole
factor in making your investment decision.
(1) Inception dates: International Fund -- March 1, 1994; Emerging Markets Fund
- -- Feb. 28, 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 fall closest to the Funds' inception dates.
<PAGE>
Investment Comparison
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COMPARISON of change in value of a $10,000 investment.
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International Fund
Chart:
International Fund MSCI EAFE Index
3/01/94 10000 10000
3/31/94 9760 9569
9/30/94 10610 10068
3/31/95 9535 10151
9/30/95 10475 10651
3/31/96 10913 11402
9/30/96 11337 11568
3/31/97 11586 11568
9/30/97 12452 12977
3/31/98 12676 13721
COMPARISON of change in value of a $10,000 investment.
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Emerging Markets Fund
Emerging Markets Fund MSCI EM Index
2/28/97 10000 10000
3/31/97 9900 9727
6/30/97 11240 10539
9/30/97 10240 9524
12/31/97 6860 7669
3/31/98 7567 8188
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 Morgan Stanley
Capital International Europe, Australia and Far East (MSCI EAFE) and Emerging
Markets (MSCI EM) Indices, each an unmanaged group of stocks that differs from
the composition of each Stein Roe fund. The indices are not available for direct
investment. Total return performance includes changes in share price and
reinvestment of income and capital gains distributions.
A fund's performance, especially for short time periods, should not be the sole
factor in making your investment decision.
<PAGE>
Making the Most of Performance
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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
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AN INTERVIEW WITH DAVID HARRIS, PORTFOLIO MANAGER OF SR&F INTERNATIONAL
PORTFOLIO AND EMERGING MARKETS FUND
FUND DATA
INVESTMENT OBJECTIVE:
Seeks long-term growth of capital by investing primarily in a diversified
portfolio of foreign securities. Under normal market conditions, the
portfolio will invest at least 65 percent of its total assets in foreign
securities of at least three countries outside of the United States.
FUND INCEPTION:
March 1, 1994
TOTAL NET ASSETS:
$154.9 million
Photo of: David Harris
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INTERNATIONAL FUND Q&A
Q: THE PAST SIX MONTHS CONSISTED OF AN EXTREMELY VOLATILE FOURTH QUARTER OF
1997 FOLLOWED BY A PERIOD OF RECORD RETURNS IN THE FIRST QUARTER OF 1998. WHAT
WAS THE FUND'S COMBINED RESULT?
A: The Fund delivered an overall return of 1.79 percent for the six-month period
ended March 31, 1998, underperforming both the Lipper peer group median return
of 5.72 percent and the Morgan Stanley Capital International Europe, Asia and
Far East (MSCI EAFE) Index return of 4.93 percent.
Q: WHAT HAPPENED IN THE FOURTH QUARTER?
A: International markets were dominated by turmoil in Asian currencies during
the fourth quarter, negatively impacting the performance of international
investments. The vicious cycle of currency crises spread from Asia to
surrounding southeast Asian countries and then to most other world markets. Most
markets recovered, but certain Asian countries were so severely affected that
they still have yet to recover all that was lost in the fourth quarter of 1997.
Q: WHY DID THE FUND UNDERPERFORM ITS PEERS?
A: We underperformed our peers because we stayed invested in smaller- and
mid-cap stocks which we think are more attractively valued than larger-cap
stocks, but that lagged in performance during this period. When times got tough
in the international markets, some of our competitors fled to the larger-cap
international companies -- most typically those that are traded on the New York
Stock Exchange as American Depositary Receipts (ADRs). Foreign stocks that trade
as ADRs often trade in tandem with the U.S. market and consequently tend to be
top performers when the U.S. market is strong. Our strategy is geared toward
performing best when international markets are strong, allowing small- and
mid-cap international stocks to outperform. We invest for long-term growth and
see the relative weakness in smaller- and mid-cap stocks as a short-term event
and a buying opportunity.
<PAGE>
Q: DID YOUR STRATEGY HELP THE FUND TO OUTPERFORM IN RECENT MONTHS WHEN
INTERNATIONAL EQUITIES OUTPERFORMED U.S. EQUITIES?
A: Yes. When international stocks began their recovery in late-January, the
portfolio rebounded ahead of its peers. The Fund returned 15.60 percent for the
first quarter of 1998, compared to a return of 14.60 percent for the Lipper peer
group and 14.70 percent return for the MSCI EAFE Index. Asian holdings had the
most to gain after experiencing sharp declines during the fourth quarter's
financial crisis. The performance of these holdings during the recovery added to
the Fund's total return. For example, IFCT, a Thai finance company (0.3 percent
of total net assets), has gained more than 300 percent from the beginning of
1998 through March 31, 1998.
Q: WHAT IS AN EXAMPLE OF A STOCK YOU OWN THAT HAD BETTER VALUATION AND GROWTH
POTENTIAL THAN AN ADR THROUGHOUT THE PERIOD?
A: We own Olivetti Group (2.0 percent of total net assets), an Italian
holding company. Olivetti leads a consortium that is the second largest provider
of wireless telecommunications services in Italy. This company recently shifted
its business focus from office equipment to telecommunications. The company was
not widely followed during this transition, providing us the opportunity to
invest in a rapidly growing business at what we believed was an attractive
valuation level. This holding is up more than 180 percent over the past six
months.
Q: DO YOU THINK THAT INTERNATIONAL MARKETS WILL CONTINUE TO FEEL THE EFFECTS OF
THE ASIAN CRISIS?
A: It appears that the worst is over. The crisis did not impact the larger
foreign markets as hard as some investors feared. The best performing markets
have been those in Europe; they are experiencing strong growth due to corporate
restructurings and the increasing enthusiasm surrounding the monetary
unification scheduled for Jan. 1, 1999. We're hopeful that this growth cycle
will continue.
<PAGE>
Q: HOW DO YOU THINK THE TRANSITION TO A UNIFIED CURRENCY -- THE EURO -- WILL
AFFECT TRADING IN THE INTERNATIONAL MARKETS?
A: It appears the transition to the unified currency will take place as
scheduled on Jan 1, 1999. We believe this already has had a positive effect on
some of the smaller markets such as Finland, Italy, Portugal and Spain.
Currently these markets must offer higher short-term interest rates than larger,
more developed countries such as France and Germany. With currency unification,
interest rates will be set by a common central bank -- the European Central Bank
- --and all countries participating will have the same interest rates. The
impending decline in short-term interest rates in the smaller countries has
already boosted equity prices.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURNS WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Holdings
are disclosed as a percentage of the SR&F International Portfolio's total net
assets. Portfolio holdings are as of March 31, 1998, and are subject to change.
Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. The MSCI EAFE Index is an unmanaged
group of stocks that differs from the composition of each Stein Roe fund; it is
not available for direct investment. According to Lipper Analytical Services,
Inc., an independent monitor of mutual fund performance, the median returns for
the Fund's international fund peer group for the one-, three-year and since
inception periods ended March 31, 1998, were 19.35 percent, 13.65 percent and
9.74 percent, respectively.
o Foreign investments involve market, political and currency risks not
generally associated with U.S. investments. Emerging market investments involve
market, political and currency risks not generally associated with investing in
either U.S. securities or more developed international markets.
o Funds that emphasize investments in smaller companies may experience
short-term volaltility.
<PAGE>
Q&A CONTINUED
FUND DATA
INVESTMENT OBJECTIVE:
Seeks long-term growth of capital through emerging market investment
opportunities. Under normal market conditions, the Fund will invest at least
65 percent of its total assets in the equity securities of emerging markets.
FUND INCEPTION:
Feb. 28, 1997
TOTAL NET ASSETS:
$24.2 million
Photo of: David Harris
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EMERGING MARKETS FUND Q&A
Q: HOW DID THE FUND PERFORM?
A: Emerging markets experienced significant fallout during the fourth quarter of
1997, severely affecting the Fund's performance over the six-month period ended
March 31, 1998. The Fund's total return of -26.10 percent for the period
underperformed both the Lipper peer group median return of -12.97 percent and
the Morgan Stanley Capital International Emerging Markets (MSCI EM) Index return
of -14.03 percent.
Q: WHAT HAPPENED IN ASIA?
A: Asia is the largest of the emerging market regions and the largest sector
held by Emerging Markets Fund. In late October, the Asian economies were struck
by a currency crisis that plagued these economies and subsequently their
financial markets. The currency turmoil spread first to surrounding Southeast
Asian countries and then to nearly all of the world's markets to some degree.
Emerging markets overall suffered severe losses over the ensuing months.
Emerging markets recovered somewhat during the first quarter of 1998, but
have yet to recover all that was lost during the fourth quarter of 1997.
Q: WHY DID THE FUND SUFFER WORSE THAN ITS PEERS?
A: It appears to us that many of the funds in our Lipper emerging markets peer
group sold some of their holdings and chased other markets during the volatile
fourth quarter. In our opinion, this type of strategy is too short-term focused
and it goes against our long-term, tax-conscious investment style. We stuck to
our strategy of investing in emerging market companies with the strongest growth
prospects and most attractive valuations throughout the six-month period.
Q: AND THAT'S PAID OFF IN RECENT MONTHS?
A: Yes. In fact, during the first quarter ended March 31, 1998, the Fund
returned 10.31 percent compared to the 4.67 percent return for the peer group
and the 7.22 percent return for the MSCI EM Index. We're an aggressive growth
fund and we strive to reap our rewards when emerging markets perform well. Two
of the Fund's largest country holdings, Korea and Thailand (7.4 percent and 11
percent of total net assets, respectively), experienced significant downturns
during this crisis. These markets experienced the largest rebound, supporting
our belief that staying invested and focusing long term works.
<PAGE>
Q: HAVE YOU RESTRUCTURED THE PORTFOLIO?
A: We held on to many of our holdings and our weightings in individual markets
remain basically unchanged. We sold holdings in Indonesia because the political
outlook remains uncertain and we added holdings in Korea because it has
aggressively embraced economic reforms. We remain fully invested and committed
to our strategy of investing in emerging market stocks with attractive
valuations and long-term growth prospects. We believe the industry sell-off in
the emerging markets was excessive and that these markets are positioned for a
recovery. Moreover, most of the non-Asian emerging markets have moved to levels
exceeding their pre-crisis highs of last fall.
Q: WHAT DO YOU THINK WILL BE THE LONGER-TERM EFFECTS OF THE ASIAN CRISIS?
A: We believe the currency crisis will affect the growth of certain companies.
Certain countries also may suffer from political turmoil and societal unrest
because residents in weak economies historically blame their government when
major problems arise. Although we think Asian economies will certainly be weak
throughout 1998, history suggests that market recovery precedes economic
recovery. Asian markets have been recovering since mid-January and we're hoping
that emerging market economies will follow suit.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURNS WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES.
Portfolio holdings are as of March 31, 1998, and are subject to change. Total
return performance includes changes in share price and reinvestment of income
and capital gains distributions. The MSCI EM Index is an unmanaged group of
stocks that differs from the composition of each Stein Roe 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 emerging markets fund peer group for the one-year and since inception
periods ended March 31, 1998, were -6.80 percent and -8.21 percent,
respectively.
o Foreign investments involve market, political and currency risks
not generally associated with U.S. investments. Emerging market investments
involve market, political and currency risks not generally associated with
investing in either U.S. securities or more developed international markets.
o Funds that emphasize investments in smaller companies may experience
short-term volatility.
<PAGE>
Fund Highlights
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International Fund
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TOP 10 EQUITY HOLDINGS (% OF TOTAL NET ASSETS)
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Telecom Italia 3.6% Henkel KGaA 2.3%
Banque National de Paris 3.2 Banca Populare di Milano 2.2
Deutsche Bank 3.0 Merita 2.2
Fortios Amev 2.4 Inchcape 2.1
Alcatel Alsthom 2.3 Matsushita Electric 2.1
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Total 25.4%
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EQUITY PORTFOLIO HIGHLIGHTS
PORTFOLIO MSCI EAFE
- --------------------------------------------------------------------------------
Number of Holdings 91 1,109
Dollar Weighted Median Market
Capitalization ($ Mil.) $5,623 $20,131
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ECONOMIC SECTOR BREAKDOWN
PIE CHART:
As of March 31, 1998
Equity Portfolio MSCI EAFE
Capital Equipment 15% 10%
Consumer Goods 12 22
Energy 13 11
Finance 24 26
Materials 11 7
Multi-Industry 5 2
Services 20 22
Total 100% 100%
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ASSET ALLOCATION
As of Sept. 30, 1997 As of March 31, 1998
Equities 88.8% 98.6%
Cash & Equivalents 11.2% 1.4%
<PAGE>
Fund Highlights CONTINUED
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Country Allocations
International Fund MSCI EAFE Index
Nordic Countries 16.4% 5.7%
Japan 15.6% 22.3%
United Kingdom 10.0% 21.8%
France 10.2% 8.6%
Germany 9.6% 10.0%
Italy 7.9% 4.8%
Benelux 7.5% 7.1%
Latin America 6.1%
Other Europe 4.3% 12.7%
Other Asia 3.0% 1.7%
Hong Kong 1.9% 2.4%
South Korea 1.9%
Australia/New Zealand 1.9% 2.9%
Multi-Market 1.7%
Middle East/Africa 0.6%
Cash & Equivalent 1.4%
Note: Holdings are disclosed as a percentage of SR&F International Portfolio's
total net assets. The MSCI EAFE Index is an unmanaged group of international
securities that differs from the composition of any Stein Roe fund; it is not
available for direct investment.
<PAGE>
Fund Highlights
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Emerging Markets Fund
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TOP 10 EQUITY HOLDINGS (% OF TOTAL NET ASSETS)
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Telebras 4.3% SABESP 2.8%
GSS Array Technology 3.8 Banco Latinoamericanode Exportaciones 2.8
Guoco Group 3.6 Solidere 2.6
CANTV 3.1 Telecom Argentina 2.6
Dairy Farm International 3.0 IOI Properties 2.6
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Total 31.2%
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EQUITY PORTFOLIO HIGHLIGHTS
MSCI
PORTFOLIO EMERGING MARKETS
- --------------------------------------------------------------------------------
Number of Holdings 59 987
Dollar Weighted Median Market
Capitalization ($ Mil.) $710 $4,204
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ECONOMIC SECTOR BREAKDOWN
- --------------------------------------------------------------------------------
PIE CHART:
As of March 31, 1998
Equity Portfolio MSCI EM
Capital Equipment 7% 9%
Consumer Goods 8% 15%
Energy 10% 16%
Finance 20% 20%
Materials 12% 16%
Multi-Industry 16% 4%
Services 27% 20%
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ASSET ALLOCATION
PIE CHART:
As of Sept. 30, 1997 As of March 31, 1998
EQUITIES 90.8% 91.1%
CASH & EQUIVALENTS 9.2% 8.9%
<PAGE>
Fund Highlights CONTINUED
- --------------------------------------------------------------------------------
COUNTRY ALLOCATIONS
Emerging Markets MSCI EM
Thailand 11.0% 1.9%
Hong Kong 10.9%
Brazil 10.3% 14.7%
South Korea 7.4% 4.1%
Philippines 6.6% 1.9%
Argentina 6.6% 3.9%
Peru 6.0% 1.0%
India 3.8% 5.7%
Indonesia 3.5% 1.3%
Malaysia 3.3% 6.4%
Other Africa 3.2%
Venezuela 3.1% 1.2%
Panama 2.8%
Lebanon 2.6%
Russia 2.4% 4.3%
China 2.1% 0.8%
Israel 2.0% 2.3%
Portugal 1.3%
United Kingdom 1.2%
Mexico 1.0% 10.5%
Chile 3.3%
Colombia 0.7%
Czech Republic 0.9%
Greece 2.9%
Hungary 1.3%
Jordan 0.1%
Pakistan 0.6%
Poland 0.5%
Sri Lanka 0.1%
South Africa 10.6%
Taiwan 16.8%
Turkey 2.1%
Cash & Equivalents 8.9%
Note: Holdings are disclosed as a percentage of total net assets. The MSCI EM
Index is an unmanaged group of international securities that differs from the
composition of any Stein Roe fund; it is not available for direct investment.
<PAGE>
<TABLE>
<CAPTION>
SR&F International Portfolio
- --------------------------------------------------------------------------------
Portfolio of Investments at March 31, 1998
(Dollar amounts in thousands)
(Unaudited)
NUMBER MARKET
EQUITY SECURITIES (98.6%) OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
ARGENTINA (2.3%)
Telecom Argentina ADRs............................... 28,100 $ 1,006
YPF Sociedad Anonima ADRs............................ 75,000 2,550
--------
3,556
AUSTRALIA (1.1%)
Reinsurance Australia ............................... 658,301 1,764
BELGIUM (1.9%)
Generale de Banque................................... 5,670 3,002
BRAZIL (2.1%)
Globex Utilidades, preference shares................. 71,000 600
Perdigao, preference shares ......................... 364,700,000 577
SABESP............................................... 4,740,000 1,092
Telebras ADRs........................................ 7,700 1,000
-------
3,269
FINLAND (7.8%)
Enso, R shares ...................................... 259,100 2,391
Kemira .............................................. 179,200 1,868
Merita, A shares..................................... 568,000 3,421
Metsa-Serla, B shares................................ 287,800 2,564
Neste................................................ 66,000 1,952
--------
12,196
FRANCE (10.2%)
Alcatel Alsthom...................................... 19,386 3,639
Banque Nationale de Paris............................ 64,300 4,997
Compagnie Generale des Eaux.......................... 16,990 2,759
Compagnie Generale des Eaux, warrants (a)............ 17,673 20
Moulinex (a)......................................... 52,300 1,300
Total, B shares...................................... 25,916 3,112
--------
15,827
GERMANY (9.6%)
AGIV (a)............................................. 79,400 1,709
Deutsche Bank........................................ 62,800 4,708
Friedrich Grohe ..................................... 6,800 1,930
Henkel KGaA
Ordinary shares................................... 6,500 415
Preferred shares.................................. 44,500 3,205
Mannesmann .......................................... 4,130 2,988
--------
14,955
HONG KONG (1.9%)
Companion Building Materials......................... 11,118,752 257
Hong Kong Ferry...................................... 683,000 648
HSBC Holdings........................................ 52,200 1,597
Vitasoy International Holdings....................... 1,320,364 477
--------
2,979
INDIA (0.6%)
Indian Petrochemicals GDRs........................... 92,000 518
Reliance Industries GDSs (a)......................... 58,000 486
--------
1,004
<PAGE>
<CAPTION>
SR&F International Portfolio CONTINUED
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NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
INDONESIA (0.4%)
Charoen Pokphand Indonesia........................... 1,037,500 $ 57
Ever Shine Textile................................... 2,019,688 99
Kawasan Industri Jababeka............................ 1,516,333 171
Matahari Putra Prima................................. 6,083,000 334
Putra Surya Multidana (a)............................ 743,500 28
--------
689
ISRAEL (0.6%)
Koor Industries ADRs................................. 39,500 978
ITALY (7.9%)
Banca Popolare di Milano............................. 382,100 3,469
Olivetti Group (a)................................... 2,216,320 3,155
Telecom Italia, savings shares....................... 910,325 5,578
--------
12,202
JAPAN (15.6%)
Canon ............................................... 94,000 2,122
Hitachi.............................................. 210,000 1,528
Ito-Yokado........................................... 49,000 2,653
JF Japan OTC Fund (a)................................ 840 336
JUSCO................................................ 125,000 2,240
Kaneshita Construction............................... 73,000 449
Kokusai Securities................................... 123,000 1,098
Matsushita Electric Industrial....................... 201,000 3,226
Murata Manufacturing................................. 55,000 1,518
Nippon Telegraph & Telephone (a)..................... 314 2,614
Promise.............................................. 39,500 2,047
Tokyo Style.......................................... 140,000 1,375
World Equity Benchmark Shares - Japan Index Series... 204,800 2,035
Yamazen ............................................. 521,000 1,043
--------
24,284
MALAYSIA (0.2%)
IOI Properties ...................................... 298,000 255
NETHERLANDS (5.6%)
Fortis Amev.......................................... 61,886 3,652
KPN.................................................. 45,069 2,335
Philips Electronics, NY shares....................... 28,000 2,056
Koninklijke Sphinx Gustavsberg....................... 55,227 668
--------
8,711
NEW ZEALAND (0.8%)
Brierley Investments................................. 2,154,883 1,218
NORWAY (3.8%)
Helikopter Services Group............................ 124,000 1,415
Norsk Hydro ......................................... 44,400 2,201
Saga Petroleum ...................................... 132,700 2,358
--------
5,974
PANAMA (1.2%)
Banco Latinoamericanode Exportaciones, class E....... 47,800 1,799
PERU (0.5%)
Southern Peru Copper................................. 48,100 728
<PAGE>
<CAPTION>
SR&F International Portfolio CONTINUED
- --------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
PHILIPPINES (0.7%)
Metro Pacific........................................ 12,451,460 $ 769
Southeast Asia Cement Holdings (a)................... 15,000,000 249
--------
1,018
PORTUGAL (0.9%)
Portugal Telecom ADRs................................ 26,757 1,403
RUSSIA (0.5%)
Fleming Russia Securities Fund (a)................... 40,400 717
SOUTH KOREA (1.9%)
Samchully ........................................... 28,543 682
Samsung Electronics
GDRs, private placement (b)....................... 65,253 691
GDRs, registered.................................. 248 7
Ordinary shares................................... 1,337 70
Preferred shares.................................. 25,774 411
SK Corporation....................................... 110,920 969
SK Telecom........................................... 107 60
--------
2,890
SWEDEN (4.8%)
Asticus (a).......................................... 86,950 1,001
Avesta-Sheffield..................................... 243,900 1,525
Biora ADRs (a)....................................... 32,200 805
Diligentia........................................... 203,900 1,964
SSAB, B shares....................................... 115,400 2,122
--------
7,417
SWITZERLAND (3.4%)
Bucher Holding....................................... 1,791 1,844
Danzas Holding....................................... 5,100 1,322
Novartis............................................. 1,170 2,071
--------
5,237
THAILAND (0.6%)
IFCT................................................. 851,100 499
Siam Commercial Bank................................. 283,666 419
--------
918
UNITED KINGDOM (10.0%)
Billiton ............................................ 515,500 1,388
BG .................................................. 531,164 2,749
Celsis International (a)............................. 616,405 387
Centrica (a)......................................... 638,000 1,207
Inchcape............................................. 888,002 3,235
Powerscreen International ........................... 368,930 1,437
Racal Electronics.................................... 455,800 2,595
SmithKline Beecham .................................. 197,806 2,478
--------
15,476
UNITED STATES (1.7%)
Tele-Communications International, Class A (a)....... 134,600 2,709
--------
TOTAL EQUITY SECURITIES (Cost $136,072).............. 153,175
- --------------------------------------------------------------------------------
<PAGE>
<CAPTION>
SR&F International Portfolio CONTINUED
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
Short-Term Obligations (2.3%) AMOUNT VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (2.3%)
COMMERCIAL PAPER (2.3%)
Associates Corp. of North America 6.050% 4/01/98
(Amortized cost $3,550)........................... $ 3,550 $ 3,550
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.9%)
(Cost Basis $139,622) (c)......................... 156,725
OTHER ASSETS, LESS LIABILITIES (-0.9%)............... (1,375)
--------
TOTAL NET ASSETS (100.0%)............................ $155,350
========
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a)Non-income producing security.
(b)Security is subject to contractual or legal restrictions on its resale. At
March 31, 1998, the value of all such securities represented 0.4 percent of
total net assets.
(c) At March 31, 1998, the cost of investments for federal income tax purposes
was $140,757. Net unrealized appreciation was $15,968, consisting of gross
unrealized appreciation of $38,323 and gross unrealized depreciation of $22,355.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Emerging Markets Fund
- --------------------------------------------------------------------------------
Portfolio of Investments at March 31, 1998
(Dollar amounts in thousands)
(Unaudited)
NUMBER MARKET
EQUITY SECURITIES (91.1%) OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
ARGENTINA (6.6%)
Banco Rio de La Plata ADRs........................... 36,000 $ 450
Telecom Argentina ADRs............................... 17,600 630
YPF Sociedad Anonima ADRs............................ 15,000 510
--------
1,590
BRAZIL (10.3%)
Globex Utilidades, preference shares................. 37,000 313
Perdigao, preference shares.......................... 295,000,000 467
SABESP............................................... 3,000,000 691
Telebras ADRs........................................ 8,000 1,038
--------
2,509
CHINA (2.1%)
Beijing Datung Power Generation...................... 750,000 346
Yanzhou Coal Mining ADRs (a)......................... 10,000 160
--------
506
HONG KONG (10.9%)
Companion Building Materials......................... 700,000 16
Dairy Farm International Holdings.................... 600,000 720
Guoco Group ......................................... 352,000 863
Hong Kong Ferry...................................... 310,000 294
HSBC Holdings........................................ 16,400 502
Vitasoy International Holdings....................... 670,000 242
--------
2,637
INDIA (3.8%)
Indian Petrochemicals GDRs........................... 35,000 197
Reliance Industries GDSs (a)......................... 34,000 285
Videsh Sanchar Nigam GDRs (a)(b)..................... 35,000 437
--------
919
INDONESIA (3.5%)
Charoen Pokphand Indonesia........................... 1,367,500 75
Ever Shine Textile................................... 1,220,400 60
HM Sampoerna ........................................ 170,000 154
Kawasan Industri Jababeka............................ 601,150 68
Lautan Luas.......................................... 1,400,000 218
Matahari Putra Prima................................. 4,509,000 248
Putra Surya Multidana (a)............................ 793,500 30
--------
853
ISRAEL (2.0%)
Koor Industries ADRs................................. 20,000 495
LEBANON (2.6%)
Solidere GDRs (a).................................... 45,000 639
MALAYSIA (3.3%)
IOI Corporation...................................... 240,000 184
IOI Properties....................................... 723,000 620
--------
804
MEXICO (1.0%)
Grupo Carso, series A1............................... 40,000 248
<PAGE>
<CAPTION>
- --------------------------------------------------------------------------------
Emerging Markets Fund CONTINUED
- --------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
MIDDLE EAST / AFRICA (3.2%)
Foreign & Colonial Emerging Middle East Fund......... 20,000 $ 323
Morgan Stanley Africa Investment Fund................ 33,000 466
--------
789
PANAMA (2.8%)
Banco Latinoamericanode Exportaciones, class E....... 18,000 677
PERU (6.0%)
Cementos Norte Pacasmayo............................. 430,244 605
Southern Peru Copper................................. 35,000 529
Telefonica del Peru ADRs............................. 15,000 323
--------
1,457
PHILIPPINES (6.6%)
Digital Telecom Philippines (a)...................... 11,470,000 593
Metro Pacific........................................ 4,017,240 248
Southeast Asia Cement Holdings (a)................... 26,950,000 448
Universal Robina..................................... 1,500,000 317
--------
1,606
PORTUGAL (1.3%)
Portugal Telecom ADRs................................ 6,000 315
RUSSIA (2.4%)
Fleming Russia Securities Fund (a)................... 32,800 582
SOUTH KOREA (7.4%)
Housing & Commercial Bank GDRs....................... 20,000 139
Korea Circuit Company
Preferred shares.................................. 9,680 72
Ordinary shares................................... 8,000 283
LG Electronics, preferred shares (a)................. 41,960 171
Samchully ........................................... 18,692 447
Samsung Electronics
GDRs, private placement (b)....................... 3,000 32
GDRs, registered.................................. 48 1
Ordinary shares................................... 64 4
Preferred shares.................................. 3,903 62
SK Telecom........................................... 295 166
Yukong GDRs (a)(b)................................... 243,900 421
--------
1,798
THAILAND (11.0%)
GSS Array Technology (a)............................. 200,000 917
IFCT ................................................ 430,900 253
Land & House......................................... 265,843 132
National Finance and Securities...................... 801,000 444
Pizza Company........................................ 83,000 290
Precious Shipping.................................... 859,700 520
Property Perfect (a)................................. 10,000 1
Siam Commercial Bank................................. 68,667 101
--------
2,658
UNITED KINGDOM (1.2%)
Billiton ............................................ 105,400 284
<PAGE>
<CAPTION>
- --------------------------------------------------------------------------------
Emerging Markets Fund CONTINUED
- --------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
VENEZUELA (3.1%)
CANTV ADRs........................................... 18,000 $ 753
--------
TOTAL EQUITY SECURITIES (Cost $29,058)............... 22,119
- --------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
Short-Term Obligations (9.8%) AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (9.8%)
COMMERCIAL PAPER (9.8%)
Associates Corp. of North America 6.050% 4/01/98..... $ 1,185 1,185
Circus Circus 6.200% 4/01/98......................... 1,190 1,190
-------
TOTAL SHORT-TERM OBLIGATIONS
(Amortized Cost $2,375)........................... 2,375
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.9%)
(Cost Basis $31,433) (c)............................. 24,494
OTHER ASSETS, LESS LIABILITIES (-0.9%)............... (221)
-------
TOTAL NET ASSETS (100.0%)............................ $24,273
=======
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a)Non-income producing security.
(b)Security is subject to contractual or legal restrictions on its resale. At
March 31, 1998, the value of all such securities represented 3.1 percent of
total net assets.
(c)At March 31, 1998, the cost of investments for federal income tax purposes
was $31,745. Net unrealized depreciation was $7,251 consisting of gross
unrealized appreciation of $2,368 and gross unrealized depreciation of
$9,619.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
March 31, 1998
(All amounts in thousands, except per-share data)
(Unaudited)
EMERGING
INTERNATIONAL MARKETS
FUND FUND
--------- --------
<S> <C> <C>
ASSETS
Investments in SR&F International Portfolio, at value $154,731 $ --
Investments, at market value (cost $31,433)....... -- 24,494
Dividends receivable.............................. -- 115
Receivable for fund shares sold................... 623 65
Receivable for investments sold................... -- 55
Other assets...................................... 31 2
--------- --------
Total assets................................... 155,385 24,731
--------- --------
LIABILITIES
Payable for investments purchased................. -- 339
Payable for fund shares redeemed.................. 191 16
Payable to investment adviser and transfer agent.. 51 71
Other liabilities................................. 220 32
--------- --------
Total liabilities.............................. 462 458
--------- --------
Net assets..................................... $154,923 $24,273
========= ========
ANALYSIS OF NET ASSETS
Paid-in capital................................... $142,779 $38,378
Net unrealized appreciation (depreciation) on
investments and foreign currency translations.. 17,052 (6,944)
Accumulated overdistributed net investment income. (805) (204)
Accumulated net realized loss on investments ..... (4,103) (6,957)
--------- --------
Net assets..................................... $154,923 $24,273
======== =======
Shares outstanding (unlimited number authorized).. 13,843 3,844
======== =======
Net asset value per share......................... $ 11.19 $ 6.31
======== =======
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Operations
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 1998
(All amounts in thousands)
(Unaudited)
<CAPTION>
EMERGING
INTERNATIONAL MARKETS
FUND FUND
------- ------
<S> <C> <C>
INVESTMENT INCOME
Dividends allocated from SR&F International Portfolio $ 1,116 $ --
Dividends......................................... -- 399
Interest allocated from SR&F International Portfolio 272 --
Interest.......................................... -- 87
-------- ---------
1,388 486
Foreign taxes withheld allocated from
SR&F International Portfolio................... (137) --
Foreign taxes withheld............................ -- (23)
-------- ---------
Total investment income........................ 1,251 463
-------- ---------
EXPENSES
Expenses allocated from SR&F International Portfolio 787 --
Management fees................................... -- 145
Transfer agent fees............................... 162 29
Custodian fees.................................... -- 22
Administrative fees............................... 111 20
Printing and postage.............................. 28 15
SEC and state registration fees................... 19 15
Accounting fees................................... 14 12
Audit and legal fees.............................. 6 17
Other............................................. 33 41
-------- ---------
Total expenses................................. 1,160 316
Reimbursement of expenses by investment adviser... -- (53)
-------- ---------
Net expenses................................... 1,160 263
-------- ---------
Net investment income.......................... 91 200
-------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments allocated from
SR&F International Portfolio................... (3,658) --
Net realized loss on investments.................. -- (6,437)
Net realized loss on foreign currency transactions allocated
from SR&F International Portfolio.............. (46) --
Net realized loss on foreign currency transactions -- (85)
Net change in unrealized appreciation or depreciation on
investments and foreign currency translations.. 4,803 (4,665)
-------- ---------
Net gain (loss) on investments................. 1,099 (11,187)
-------- ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS................................ $ 1,190 $(10,987)
=========== ==========
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For The Six Months Ended March 31, 1998
and The Year Ended September 30, 1997
(All amounts in thousands)
(Unaudited)
<CAPTION>
INTERNATIONAL FUND
1998 1997
--------------------------
<S> <C> <C>
OPERATIONS
Net investment income............................................................ $ 91 $ 802
Net realized gain (loss) on investments and foreign currency transactions........ (3,704) 8,273
Net change in unrealized appreciation or depreciation on investments and
foreign currency translations.................................................. 4,803 4,650
--------- ---------
Net increase (decrease) in net assets resulting from operations............... 1,190 13,725
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income......................................... (1,450) (1,000)
Distributions from net capital gains............................................. (8,026) (1,837)
--------- ---------
Total distributions to shareholders........................................... (9,476) (2,837)
--------- ---------
SHARE TRANSACTIONS
Subscriptions to fund shares..................................................... 27,860 55,775
Value of distributions reinvested................................................ 7,003 2,154
Redemptions of fund shares....................................................... (37,742) (38,274)
--------- ---------
Net increase (decrease) from share transactions............................... (2,879) 19,655
--------- ---------
Net increase (decrease) in net assets......................................... (11,165) 30,543
TOTAL NET ASSETS
Beginning of period.............................................................. 166,088 135,545
--------- ---------
End of period................................................................... $154,923 $166,088
========== ==========
ACCUMULATED UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME................ $ (805) $ 554
========== ==========
ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to fund shares .................................................... 2,699 4,883
Issued in reinvestment of distributions.......................................... 738 203
Redemptions of fund shares....................................................... (3,684) (3,365)
--------- ---------
Net increase (decrease) in fund shares........................................ (247) 1,721
Shares outstanding at beginning of period........................................ 14,090 12,369
--------- ---------
Shares outstanding at end of period.............................................. 13,843 14,090
========== ==========
<PAGE>
<CAPTION>
EMERGING MARKETS FUND
1998 1997(A)
-------------------------
<S> <C> <C>
OPERATIONS
Net investment income............................................................ $ 200 $ 233
Net realized gain (loss) on investments and foreign currency transactions........ (6,522) 2,407
Net change in unrealized appreciation or depreciation on investments and
foreign currency translations................................................. (4,665) (2,279)
-------- --------
Net increase (decrease) in net assets resulting from operations............... (10,987) 361
-------- --------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income......................................... (550) --
Distributions from net capital gains............................................. (2,929) --
-------- --------
Total distributions to shareholders........................................... (3,479) --
-------- --------
SHARE TRANSACTIONS
Subscriptions to fund shares..................................................... 6,375 46,204
Value of distributions reinvested................................................ 2,754 --
Redemptions of fund shares....................................................... (12,007) (4,948)
-------- --------
Net increase (decrease) from share transactions............................... (2,878) 41,256
-------- --------
Net increase (decrease) in net assets......................................... (17,344) 41,617
TOTAL NET ASSETS
Beginning of period.............................................................. 41,617 --
-------- --------
End of period................................................................... $24,273 $41,617
========= =========
ACCUMULATED UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME................ $ (204) $ 146
========= =========
ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to fund shares .................................................... 906 4,529
Issued in reinvestment of distributions.......................................... 498 --
Redemptions of fund shares....................................................... (1,622) (467)
-------- --------
Net increase (decrease) in fund shares........................................ (218) 4,062
Shares outstanding at beginning of period........................................ 4,062 --
-------- --------
Shares outstanding at end of period.............................................. 3,844 4,062
========= =========
(a) From commencement of operations on February 28, 1997.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SR&F International Portfolio
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
March 31, 1998
(All amounts in thousands)
(Unaudited)
<CAPTION>
<S> <C>
ASSETS
Investments, at market value (cost $139,622)................... $156,725
Cash ........................................................... 57
Dividends receivable............................................ 715
Receivable for investments sold................................. 52
Other assets.................................................... 1
----------
Total assets................................................. 157,550
----------
LIABILITIES
Payable for investments purchased............................... 2,057
Payable to investment adviser................................... 116
Other liabilities............................................... 27
----------
Total liabilities............................................ 2,200
----------
Net assets applicable to investors' beneficial interest...... $155,350
==========
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SR&F International Portfolio
- --------------------------------------------------------------------------------
Statement of Operations
For the Six Months Ended March 31, 1998
(All amounts in thousands)
(Unaudited)
<CAPTION>
<S> <C>
INVESTMENT INCOME
Dividends....................................................... $ 1,119
Interest........................................................ 272
--------
1,391
Foreign taxes withheld.......................................... (138)
--------
Total investment income...................................... 1,253
--------
EXPENSES
Management fees................................................. 628
Custodian fees.................................................. 39
Accounting fees................................................. 14
Other........................................................... 6
--------
Total expenses............................................... 687
--------
Net investment income........................................ 566
--------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS
Net realized losses on investments.............................. (3,670)
Net realized losses on foreign currency transactions............ (46)
Net change in unrealized appreciation or depreciation on
investments and foreign currency translations................ 4,839
--------
Net gains on investments and foreign currency transactions... 1,123
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $ 1,689
=======
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SR&F International Portfolio
- --------------------------------------------------------------------------------
<CAPTION>
Statement of Changes in Net Assets
(All amounts in thousands)
(Unaudited)
SIX MONTHS PERIOD
ENDED ENDED
MARCH 31, SEPTEMBER 30,
1998 1997 (A)
-------- -----------
<S> <C> <C>
OPERATIONS
Net investment income............................. $ 566 $ 1,563
Net realized gains (losses) on investments and foreign
currency transactions.......................... (3,716) 5,995
Net change in unrealized appreciation or depreciation
on investments and foreign currency translations 4,839 5,615
---------- ----------
Net increase in net assets resulting from operations 1,689 13,173
---------- ----------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions..................................... 13,699 171,752
Withdrawals....................................... (26,468) (18,495)
---------- ----------
Net increase (decrease) from transactions in
investors' beneficial interest............... (12,769) 153,257
---------- ----------
Net increase (decrease) in net assets.......... (11,080) 166,430
TOTAL NET ASSETS
Beginning of period............................... 166,430 --
---------- ----------
End of period..................................... $155,350 $166,430
========== ==========
(a) From commencement of operations on February 3, 1997.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
(All amounts, except per-share amounts, in thousands)
NOTE 1. ORGANIZATION
The Stein Roe International Fund and the Stein Roe Emerging Markets Fund (the
"Funds") are series of the Stein Roe Investment Trust (the "Trust"), an open-end
management investment company organized as a Massachusetts business trust. The
International Fund invests substantially all of its assets in the SR&F
International Portfolio (the "Portfolio"), which seeks long-term growth of
capital by investing primarily in a diversified mix of foreign securities. The
Emerging Markets Fund seeks long-term growth of capital through emerging market
investment opportunities.
The Portfolio is a 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 Portfolio commenced operations on February 3, 1997. At commencement,
Stein Roe International Fund contributed $132,942 in securities and other assets
in exchange for beneficial ownership of the Portfolio. On February 14, 1997,
Stein Roe Advisor International Fund contributed cash of $100. The Portfolio
allocates net asset value, income and expenses to each investor on a daily
basis, based on their respective percentage of ownership. At March 31, 1998,
Stein Roe International Fund and Stein Roe Advisor International Fund owned
99.60 percent and .40 percent, respectively, of the Portfolio.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following summarizes the significant accounting policies of the Funds and
the Portfolio. These policies are in conformity with generally accepted
accounting principles, which require management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
The books and records of the Funds and Portfolio are maintained in
U.S. dollars.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on trade date. Dividend income is
recorded on the ex-dividend date, and interest income is recorded on the accrual
basis. Interest income includes discount accretion on fixed income securities.
Realized gains and losses from investment transactions are reported on an
identified cost basis.
<PAGE>
SECURITY VALUATIONS
All securities are valued as of March 31, 1998. Securities are valued at,
depending on the security involved, the last reported sales price, last bid or
asked price, or the mean between the last bid and asked prices 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. Securities and other
assets for which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the Board of
Trustees.
CURRENCY TRANSLATIONS
For purposes of valuation, assets and liabilities are translated into U.S.
dollars using currency exchange rates that represent the midpoint between the
bid and asked rates as of 4 p.m., London time. Purchases and sales of securities
are translated into U.S. dollars using the prevailing exchange rate on the dates
of such transactions. The effect of changes in foreign exchange rates on
realized and unrealized security gains and losses is reflected as a component of
such gains and losses.
FORWARD CURRENCY EXCHANGE CONTRACTS
The Funds and Portfolio may enter into forward currency exchange contracts
under which each Fund and Portfolio 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. Neither the Funds nor the Portfolio had open contracts at March
31, 1998.
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 Portfolio is treated as a partnership for
federal income tax purposes and all of its income is allocated to its owners
based on respective percentages of ownership.
DISTRIBUTIONS TO SHAREHOLDERS
Each Fund annually declares and pays dividends of any net investment income
and net realized capital gains, which are recorded on the ex-dividend date.
Dividends are determined in accordance with income tax principles, which may
treat certain transactions differently from generally accepted accounting
principles. Distributions in excess of tax-basis earnings are reported in the
financial statements as a return of capital. Permanent differences in the
recognition or classification of income between the financial statements and tax
earnings are reclassified to paid-in capital.
<PAGE>
NOTE 3. TRUSTEES' FEES AND TRANSACTIONS WITH AFFILIATES
The Funds and the Portfolio pay monthly management and administrative fees,
computed and accrued daily, 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 fees for SR&F
International Portfolio and Emerging Markets Fund are computed at an annual rate
of .85 percent and 1.10 percent of average daily net assets, respectively. The
administrative fees for the Funds are computed at an annual rate of .15 percent
of average daily net assets.
The Adviser also provides certain fund accounting services. For the period
ended March 31, 1998, International Fund, Emerging Markets Fund and the
Portfolio incurred charges of $14, $12 and $14, respectively.
The administrative agreements for the Funds provide that the Adviser will
reimburse each Fund to the extent that annual expenses, excluding certain
expenses, exceed the applicable limits prescribed by any state in which the
Fund's shares are offered for sale. In addition, the Adviser has agreed to
reimburse Emerging Markets Fund to the extent that expenses exceed 2 percent of
average daily net assets. This expense limitation expires on January 31, 1999,
subject to earlier termination by the Adviser on 30 days' notice.
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.
Certain officers and trustees of the Trust are also officers of the Adviser.
The compensation of trustees not affiliated with the Adviser for International
Fund, Emerging Markets Fund and the Portfolio for the period ended March 31,
1998, was $3, $4 and $8, respectively. No remuneration was paid to any other
trustee or officer of the Trust.
<PAGE>
NOTE 4. SHORT-TERM DEBT
To facilitate portfolio liquidity, the Funds and the Portfolio maintain
borrowing arrangements under which they can borrow against portfolio securities.
Neither the Funds nor the Portfolio had borrowings during the period ended March
31, 1998.
NOTE 5. INVESTMENT TRANSACTIONS
The aggregate cost of purchases and proceeds from sales other than short-term
obligations for the period ended March 31, 1998, were:
Purchases Sales
-------- --------
SR&F International Portfolio...................... $30,252 $26,037
Emerging Markets Fund............................. 9,755 15,407
<PAGE>
<TABLE>
Financial Highlights
- --------------------------------------------------------------------------------
SR&F International Portfolio
<CAPTION>
SIX MONTHS
ENDED PERIOD
MARCH 31, ENDED
1998 SEPTEMBER 30,
(UNAUDITED) 1997 (C)
---------- -------
<S> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Ratio of net expenses to average net assets ...... 0.93%(a) 0.98%(a)
Ratio of net investment income to average net assets 0.77%(a) 1.58%(a)
Portfolio turnover rate........................... 19% 18%
Average commissions per share (b)................. $0.0062 $0.0002
(a)Annualized
(b)Foreign commissions are generally lower than U.S. commissions when expressed
as cents per share due to the lower per-share price of many
non-U.S. securities.
(c)From commencement of operations on February 3, 1997.
</TABLE>
<PAGE>
<TABLE>
Financial Highlights CONTINUED
- --------------------------------------------------------------------------------
International Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
SIX MONTHS
ENDED PERIOD
MARCH 31, ENDED
1998 YEARS ENDED SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) 1997 1996 1995 1994 (D)
---------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.79 $ 10.96 $ 10.25 $ 10.61 $ 10.00
-------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.01 0.06 0.09 0.12 0.03
Net realized and unrealized gains (losses)
on investments 0.08 0.99 0.74 (0.26) 0.58
-------- -------- -------- ------- -------
Total from investment operations 0.09 1.05 0.83 (0.14) 0.61
-------- -------- -------- ------- -------
DISTRIBUTIONS
Net investment income (0.11) (0.08) (0.12) (0.05) --
Net realized capital gains (0.58) (0.14) -- (0.17) --
-------- -------- -------- ------- -------
Total distributions (0.69) (0.22) (0.12) (0.22) --
-------- -------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 11.19 $ 11.79 $ 10.96 $ 10.25 $ 10.61
======== ======== ======== ======= =======
Ratio of net expenses to average net assets 1.57% (a) 1.55% 1.51% 1.59% 1.61% (a)
Ratio of net investment income to average net assets 0.12% (a) 0.55% 1.01% 1.41% 0.61% (a)
Portfolio turnover rate -- 11% (b) 42% 59% 48%
Average commissions per share (c) -- $0.0067 (b) $ 0.0010 -- --
Total return 1.79% 9.84% 8.23% (1.28%) 6.10%
Net assets, end of period (000's) $154,923 $166,088 $135,545 $83,020 $74,817
(a) Annualized
(b) Prior to commencement of operations of the Portfolio (see Note 1 to
Financial Statements).
(c) Foreign commissions are generally lower than U.S. commissions when expressed
as cents per share due to the lower per-share price of many non-U.S.
securities.
(d) From commencement of operations on March 1, 1994.
</TABLE>
<PAGE>
<TABLE>
Financial Highlights CONTINUED
- --------------------------------------------------------------------------------
Emerging Markets Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<CAPTION>
SIX MONTHS
ENDED PERIOD
MARCH 31, ENDED
1998 SEPTEMBER 30,
(UNAUDITED) 1997 (E)
----------- -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........... $ 10.24 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income....................... 0.09 0.06
Net realized and unrealized gains
(losses) on investments................... (2.92) 0.18
------- -------
Total from investment operations......... (2.83) 0.24
------- -------
DISTRIBUTIONS
Net investment income....................... (0.17) --
Net realized gains.......................... (0.93) --
------- -------
Total distributions...................... (1.10) --
------- -------
NET ASSET VALUE, END OF PERIOD................. $ 6.31 $ 10.24
======= =======
Ratio of net expenses to average net assets (b) 2.00% (a) 2.00% (a)
Ratio of net investment income to average
net assets (c).............................. 1.52% (a) 1.04% (a)
Portfolio turnover rate........................ 40% 30%
Total return (c)............................... (26.10%) 2.40%
Average commissions per share (d).............. $0.0035 $0.0007
Net assets, end of period (000's).............. $24,273 $41,617
(a)Annualized
(b)If the Fund had paid all of its expenses and there had been no reimbursement
by the Adviser, this ratio would have been 2.40 percent for the six months
ended March 31, 1998, and 2.27 percent for the period ended September 30,
1997.
(c)Computed giving effect to investment adviser's expense limitation
undertaking.
(d)Foreign commissions are generally lower than U.S. commissions when expressed
as cents per share due to the lower per-share price of many non-U.S.
securities.
(e)From commencement of operations on February 28, 1997.
</TABLE>
<PAGE>
Investment Trust
- --------------------------------------------------------------------------------
TRUSTEES
Thomas W. Butch
President, Mutual Fund Division and Director,
Stein Roe & Farnham Incorporated
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
Charles R. Nelson
Van Voorhis Professor of Political Economy,
University of Washington
Thomas C. Theobald
Managing Partner, William Blair Capital Partners
OFFICERS
Thomas W. Butch, President
William D. Andrews, Executive Vice President
Loren A. Hansen, Executive Vice President
Hans P. Ziegler, Executive Vice President
Gary A. Anetsberger, Senior Vice President,
Chief Financial Officer
David P. Brady, Vice President
Kevin M. Carome, Vice President,
Assistant Secretary
Daniel K. Cantor, 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, Secretary
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 Municipal Money Market Fund
Stein Roe Intermediate Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Intermediate Bond Fund
Stein Roe Income Fund
Stein Roe High Yield 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 Large Company Focus 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, MA 02205-8900
1-800-338-2550
www.steinroe.com
In Chicago, visit our Fund Center at One South Wacker Drive, 32nd Floor
Liberty Financial Investments, Inc., Distributor.
IN12A 5/98
<PAGE>
