STEIN ROE MUTUAL FUNDS
SEMIANNUAL REPORT
MARCH 31, 1998
PHOTO OF: HANDS HOLDING LEAVES
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
SENSIBLE RISKS. INTELLIGENT INVESTMENTS.(SM)
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Contents
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From the President................................................ 1
Tom Butch's thoughts on the markets and investing
Performance....................................................... 3
How the Stein Roe growth funds have done over time
Q&A
Interviews with the portfolio managers and a summary of
investment activity
Growth Stock Fund................................................. 6
Growth Opportunities Fund......................................... 10
Special Fund...................................................... 13
Special Venture Fund.............................................. 17
Capital Opportunities Fund........................................ 21
Portfolio of Investments.......................................... 25
A complete list of investments with market values
Financial Statements.............................................. 38
Statements of assets and liabilities, operations and
changes in net assets
Notes to Financial Statements..................................... 48
Financial Highlights.............................................. 53
Selected per-share data
General Information............................................... 65
Must be preceded or accompanied by a prospectus.
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From the President
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TO OUR SHAREHOLDERS
We are pleased to present this semiannual 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 six months ended
March 31, 1998.
AN UNPRECEDENTED BULL RUN CONTINUES
U.S. equity markets blinked temporarily in the fourth quarter of 1997, when
many Asian markets struggled with currency devaluations and political and
economic turmoil. By the end of October, the S&P 500 had fallen more than 68
points from its October high of 983.12. However, starting in November, the S&P
rebounded sharply, completing its third straight year of gains in excess of 20
percent. Moreover, this momentum carried into the first part of 1998 when,
despite many analysts' predictions of slowing equity market returns, the Dow
Jones Industrial Average surged 11.75 percent, eclipsing 9000 for the first
time.
By all measures, the strength and duration of the current bull market is
unprecedented. The S&P 500's average annual gain of more than 18.94 percent for
the 10-year period ended March 31, 1998, is the largest such gain for any
10-year period. This has obviously been a uniquely prosperous time for stock
investors.
A NEW ERA?
There remains a considerable division of opinion in the financial
community as to the sustainability of returns of this magnitude. Some market
observers suggest that, based on historical data and traditional market
measures, returns of these levels simply cannot continue. Others believe we have
entered a new era of unbridled equity market growth in which a confluence of
economic and demographic factors may render obsolete traditional beliefs and
measurements.
Eventually, we all will learn which of these perspectives proves to be more
accurate. Meanwhile, we believe it is important that investors focus less on
divining where the market will go and more on ensuring that their investments
remain appropriate to their investing goals, risk tolerance and time horizon.
YOUR STEIN ROE FUNDS
We are, of course, gratified that you have chosen to include one or more
Stein Roe equity fund(s) in your personal portfolio. We seek, in this report, to
provide you with useful and approachable information on each of our equity
funds. I hope you will take the time to learn how your portfolio managers are
investing your money and how they assess their funds' performance over the past
six months. You may also want to read about funds other than those you own to
determine whether they might represent an appropriate addition to your span of
investments. In that regard, I might call your attention to another Stein Roe
fund that seeks growth over the long term -- Stein Roe Growth Opportunities
Fund.
A REMINDER
We believe that what's important above all else is that you, as an equity
investor, maintain a long-term perspective. The events in Asia during the fourth
quarter of 1997 -- and their brief but pronounced effect on domestic equity
markets -- served as a healthy reminder that markets can swing rapidly and
violently, and that volatility is a risk inherent in equity investing. To
investors with long-term horizons, volatility, in our opinion, should be the
least important consideration. We believe that risk is an important short-term
consideration, but we've learned that historically, investment risk diminishes
over time. The more genuine risk, in our view, is the risk of losing sight of
long-term investment goals because of short-term market fluctuations.
So remember, whatever the market's course, a long-term perspective is your
best ally.
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 S&P 500 and the Dow Jones Industrial Average 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
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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 PAST 5 PAST 10
YEAR YEARS YEARS YEARS
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GROWTH STOCK FUND 47.09% 30.92% 19.48% 17.81%
SPECIAL FUND 43.16 22.78 16.21 17.19
CAPITAL OPPORTUNITIES FUND 46.27 26.09 22.30 15.25
S&P 500 47.96 32.79 22.38 18.92
S&P MidCap 400 49.04 28.47 19.51 19.25
NASDAQ Industrials 33.77 19.32 13.80 13.50
Russell 2000 42.02 24.42 17.67 14.86
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PAST 1 LIFE
YEAR OF FUND(1)
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SPECIAL VENTURE FUND 27.65% 22.55%
Russell 2000 42.02 22.24
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LIFE
OF FUND(1)
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GROWTH OPPORTUNITIES FUND* 26.60%
S&P 500 Index 25.99
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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. 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.
1 Inception 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.
* A fund's performance, especially for short time periods, should not be the
sole factor in making your investment decision.
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Investment Comparison
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COMPARISON of change in value of a $10,000 investment.
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Growth Stock Fund, Special Fund and Capital Opportunities Line Fund Chart
Date Capital Opportunities S&P 500 Special Fund Growth Stock Fund
9/30/87 10000 10000 10000 10000
9/30/88 7672 8761 9493 7430
9/30/89 10486 11648 13290 9946
9/30/90 6553 10571 12123 9531
9/30/91 10059 13858 16025 13023
9/30/92 10662 15389 17460 14895
9/30/93 14288 17384 22236 15653
9/30/94 14618 18024 22685 15982
9/30/95 20094 23378 25997 20485
9/30/96 30050 28129 30648 24795
9/30/97 28169 39500 40971 33004
3/31/98 32496 46298 43224 38285
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Special Venture Fund Line Chart
Date Special Venture Fund Russell 2000
10/31/94 10000 10000
9/30/95 12401 12389
9/30/96 16343 14016
9/30/97 19892 18668
3/31/98 19704 19858
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. 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.
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Investment Comparison
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COMPARISON of change in value of a $10,000 investment.
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Growth Opportunities Line Fund
Date S&P 500 Growth Opportunities Fund
6/30/97 10000 10000
9/30/97 10748 10770
12/31/97 11058 10960
3/31/98 12599 12660
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. 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>
Q&A
AN INTERVIEW WITH ERIK GUSTAFSON, PORTFOLIO MANAGER OF
SR&F GROWTH STOCK PORTFOLIO
FUND DATA
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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:
$685.3 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.
Q: HOW DID THE FUND PERFORM?
A: The Fund's total return was 16 percent for the six months ended March 31,
1998, outperforming the 12.45 percent return of the Lipper peer group median,
yet underperforming the 17.21 percent return of the S&P 500 Index.
Q: WHAT AFFECTED PERFORMANCE?
A: We invest in large companies that tend to react to the market's ups and
downs. Large-cap stocks performed exceedingly well in the fourth quarter,
outperforming all relative indexes by substantial margins. Conversely, these
stocks returned mixed performance in the first quarter and our holdings followed
suit. Our investments in consumer nondurable global consumer franchise companies
such as Gillette, Procter & Gamble and Disney (3.1 percent, 2.7 percent and 2.1
percent of total net assets, respectively), and in health care companies Merck,
Johnson & Johnson and Pfizer (2.5 percent, 2.4 percent and 3.2 percent of total
net asset, respectively), helped the Fund's perfor m ance throughout the period.
However, strong performance among these stocks was offset by the portfolio's oil
services holdings, which suffered from the downward trend in oil prices.
Performance of the portfolio's technology holdings was mixed, with Motorola and
Intel lagging in performance (2.4 percent and 2.0 percent of total net assets,
respectively).
Q: DO YOU BELIEVE TECHNOLOGY COMPANIES USUALLY LAG IN THE FIRST QUARTER?
A: Yes, the first quarter has historically been tough for certain technology
companies, but this year's seasonal slowness was exacerbated by the turmoil in
Asia. However, our long-term outlook for the technology sector continues to be
favorable. Companies will have to purchase new technology to be able to compete
globally. We invest in technology companies that we think will benefit from this
trend. For example, we own Microsoft, Cisco Systems and Tellabs (2.6 percent,
3.3 percent and 3.1 percent of total net assets, respectively). These companies
each have excellent product lines and are less susceptible to economic
downturns because of their market dominance. Another example is Intel, a
company with a 90 percent market share in micro processors worldwide. We like
this company because it is as globally dominant in its industry as Coca-Cola
and Gillette are in theirs.
<PAGE>
Q: WHAT ARE SOME NEW NAMES WE'LL SEE IN THE PORTFOLIO?
A: We established positions in Time Warner, NationsBank Corp. and Peoplesoft
during the period (2.8 percent, 2.1 percent and 2.4 percent of total net assets,
respectively) because we have faith in their respective abilities to be world
leaders in their industries.
Q: WHAT DID YOU SELL DURING THE PERIOD?
A: We sold our position in McDonald's after it experienced continued decreases
in same-store sales growth. We also sold Wells Fargo, Baker-Hughes and
Thermo-Electron due to weaker-than-expected earnings.
Q: WHAT INVESTMENT THEMES WILL YOU FOLLOW GOING FORWARD?
A: We intend to take advantage of the trend toward global democracy and we will
continue to look for companies that will benefit from increased global consumer
demand. Greater disposable income leads to consumer demand for products. Our
belief is that global consumer franchises that perfect their business in
multiple markets stand to benefit tremendously from this opportunity. For
example, we believe Procter & Gamble is the most globally dominant company
within its respective markets, and it represents 2.7 percent of the portfolio's
total net assets.
We also will continue to focus on companies that we believe stand to benefit
from the aging baby boomer market segment. As these 80 million consumers age, we
believe they're going to demand more and better health care, so we own health
care companies that stand to profit from this demographic trend such as Eli
Lilly and Medtronic (2.5 and 2.7 percent of total net assets, respectively),
Pfizer and Merck. Pharmaceutical maker Eli Lilly, for example, should be driven
by sales of Evista, which is their osteoporosis drug for post-menopausal women.
As market segments change, product demand will change. Therefore, we will
continue to monitor the market and invest in companies that we believe are best
positioned to leverage this trend.
Q: WHAT'S YOUR OUTLOOK?
A: Our long-term outlook for large-cap companies remains positive despite the
possibility that growth may decelerate sometime in the future due to the Asian
crisis. Therefore, we will focus on companies that have delivered consistent
earnings despite the overall strength or weakness of the general market.
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 Growth Stock 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 S&P 500 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 growth fund peer group for the one-, five- and 10-year periods ended
March 31, 1998, were 44.07 percent, 19.11 percent and 16.74 percent,
respectively.
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Fund Highlights
Growth Stock Portfolio
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TOP 10 EQUITY HOLDINGS (% OF TOTAL NET ASSETS)
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Cendant 4.1% Pfizer 3.2%
Travelers Group 3.5 General Electric 3.1
Cisco Systems 3.3 Gillette 3.1
Lucent Technologies 3.3 WorldCom 3.1
Fannie Mae 3.3 Tellabs 3.1
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Total 33.1%
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EQUITY PORTFOLIO HIGHLIGHTS
PORTFOLIO S&P 500
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Number of Holdings 36 500
Dollar Weighted Median Market Capitalization ($ Mil.) $68,029 $40,619
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ECONOMIC SECTOR BREAKDOWN
As of March 31, 1998
Equity Portfolio S&P 500
Basic Materials 1% 4%
Consumer Cyclical 11% 13%
Consumer Noncyclical 27% 23%
Energy 4% 8%
Financial 20% 17%
Industrial 9% 9%
Technology 25% 16%
Utilities 3% 10%
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ASSET ALLOCATION
As of Sept. 30, 1997 As of March 31, 1998
Equities 95.6% 96.7%
Cash & Equivalents 4.4% 3.3%
<PAGE>
Q&A
AN INTERVIEW WITH GLORIA SANTELLA, ERIC MADDIX AND ART MCQUEEN,
PORTFOLIO MANAGERS OF GROWTH OPPORTUNITIES FUND
FUND DATA
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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:
$56.8 million
Photo of: Gloria Santella, Eric Maddix and Art McQueen
Q: HOW DID THE FUND PERFORM?
A: For the six months ended March 31, 1998, the Fund's total return was 17.55
percent, outpacing both the Lipper peer group median return of
12.45 percent and the S&P 500 Index return of 17.21 percent.
Q: WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A: The Fund's holdings returned good performance across all market
capitalization segments. We repositioned the Fund slightly in recent months to
take advantage of the attractive valuations we found among small-cap stocks.*
The Fund's increased exposure to small-cap stocks proved timely given the recent
turnaround of this market segment during the first quarter of 1998.
Q: WHICH OF THE FUND'S HOLDINGS PERFORMED WELL DURING THE PERIOD?
A: Health care, media and technology holdings all performed well in the past six
months. The Fund's health care investments include a broad spectrum of companies
in the areas of pharmaceuticals, medical devices, services and information
systems. Each of these areas is experiencing growth. Media stocks continue
to realize strong operating results because the industry is experiencing
consolidation. Contribution from technology holdings came mainly from software,
services and telecommunications-infrastructure related investments.
Q: DID YOU ADD ANY NAMES TO THE FUND DURING THE PERIOD?
A: We bought seven stocks over the past six months. New purchases focused on the
small-cap* sector where, in our opinion, we found the best valuations relative
to long-term growth opportunities. An example is IDT Corp., a provider of
diversified telecommunication services in the United States and abroad (1.3
percent of total net assets). Other new purchases came from the business
services sector. Companies in this sector have historically exhibited high
recurring revenue and continue to benefit from corporate outsourcing trends.
Q: ARE YOU FOLLOWING ANY EMERGING INVESTMENT THEMES?
A: The common theme for companies in the Fund is strong long-term earnings
growth. We continue to believe that growth companies come in all sizes, which
gives the portfolio the advantage of not being limited to any particular market
capitalization.
Q: HOW DO THE DIFFERENT CAPITALIZATION SIZES AFFECT THE FUND?
A: Our large-company holdings provide greater liquidity and visibility to the
portfolio. At the other end of the spectrum, smaller companies provide
tremendous long-term growth potential. Without capitalization restrictions, we
can hold a company's stock as it matures from a small-cap company to a
larger-cap company, allowing the portfolio to potentially benefit from the
compounding of earnings growth over many years.
Q: WHAT DO YOU BELIEVE WILL DRIVE THE PORTFOLIO IN COMING MONTHS?
A: We believe that earnings growth will be the driving factor behind the
portfolio's long-term performance. While different capitalization ranges may
move in and out of favor over short periods of time, we plan to continue to
maintain exposure to companies that we believe have superior earnings growth
potential regardless of their size or industry.
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. A fund's
performance, especially for short time periods, should not be the sole factor
in making your investment decision. 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 S&P 500
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 return for the Fund's growth fund peer group for the since-inception
period ended March 31, 1998 was 23.71 percent.
* Funds that emphasize investments in smaller companies may experience
short-term volatility.
<PAGE>
Fund Highlights
Growth Opportunities Fund
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TOP 10 EQUITY HOLDINGS (% OF TOTAL NET ASSETS)
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INSpire Insurance Solutions 2.0% CCC Information Services Group 1.7%
Fiserv 1.9 TJX 1.7
Cendant 1.7 Federal Home Loan Mortgage Corporation 1.7
ALZA 1.7 Health Management Associates 1.6
Carnival 1.7 HBO & Company 1.6
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Total 17.3%
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EQUITY PORTFOLIO HIGHLIGHTS
PORTFOLIO S&P 500
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Number of Holdings 79 500
Dollar Weighted Median Market Capitalization ($ Mil.) $3,613 $40,619
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ECONOMIC SECTOR BREAKDOWN
As of March 31, 1998
Equity Portfolio S&P 500
Basic Materials 2% 4%
Consumer Cyclical 16% 13%
Consumer Noncyclical 22% 23%
Energy 1% 8%
Financial 15% 17%
Industrial 22% 9%
Technology 20% 16%
Utilities 2% 10%
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ASSET ALLOCATION
As of Sept. 30, 1997 As of March 31, 1998
Equities 90.5% 95.0%
Cash & Equivalents 9.5% 5.0%
<PAGE>
Q&A
AN INTERVIEW WITH GERRY SANDEL, PORTFOLIO MANAGER OF SR&F SPECIAL PORTFOLIO
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Photo of: Gerry Sandel
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:
$1,348.3 million
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 FOR THE SIX-MONTH PERIOD ENDING MARCH 31, 1998?
A: The Fund's total return was 5.50 percent for the period, underperforming
the 8.87 percent return of the Lipper peer group median and the 17.21 percent
return of the S&P 500. 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 more heavily in mid-cap companies (43 percent of holdings), although it
does own stocks of small and large companies as well (26 percent and 31 percent
of holdings, respectively). For this reason, we feel it is more useful to
compare the Fund to the S&P 400 Mid-Cap Index, which returned 11.94 percent for
the six months ending March 31, 1998.
Q: WHAT CAUSED THE FUND TO UNDERPERFORM?
A: Our investment style does not always coincide with the markets. We invest in
strong companies that have large or dominant positions in their industries,
yet, for one reason or another, have lost favor with investors. We hold these
investments until they experience the turnaround we believe is eminent. Once the
turnaround has occurred and the price reaches a lofty valuation level, we scale
back or sell the holding. Traditionally, these companies have been the hottest
performing stocks in the market. While these stocks may continue to grow after
we sell, we believe we reduce our risk level by selling stocks that we think are
overvalued.
Q: WHAT'S AN EXAMPLE OF A STOCK THAT WORKED WELL WITH YOUR STRATEGY DURING THE
PERIOD?
A: We bought Danka Business Systems (1.1 percent of total net assets) after many
investors sold the stock last year. Since the company's earnings remained
strong, we anticipated that its stock price would rebound, and it did -- 22
percent during the first quarter of 1998. Likewise, Boston Scientific (1.2
percent of total net assets) rebounded 55 percent during the first quarter as
the company's fundamentals improved.
Q: WHAT OTHER HOLDINGS PERFORMED WELL IN RECENT MONTHS?
A: We overweighted the portfolio in consumer cyclical companies several quarters
back when they were out of favor with investors, believing that their
performance would improve. It did, and we benefited from this improvement, as
companies such as the bookstore chain Borders Group and Carnival, the cruise
line operator (1.2 percent and 1.8 percent of total net assets, respectively),
gained significant investor favor. Now that the market has pushed these stocks
to valuation levels that exceed our price targets, we'll consider selling the
positions.
The Fund also benefited from the performance of Scandinavian Broadcasting*
(0.7 percent of total net assets). This company is developing the television
market in several of the emerging Eastern European countries that are just
opening up to consumerism. The stock's price grew 38 percent during the past six
months. This is an example of how the portfolio tries to take advantage of
unique global opportunities.
Q: WHAT ARE SOME OUT-OF-FAVOR NAMES THAT YOU ADDED TO THE PORTFOLIO DURING THE
PERIOD?
A: One new position is Barrick Gold (2.1 percent of total net assets). The
stock's price went down as gold prices sank to their lowest levels this decade.
Barrick Gold viewed this as an opportunity to streamline productivity and
therefore improve its profitability. The company is phasing out high-cost
production mines and focusing on lower-cost production. We think it should
benefit from this strategy when gold prices rebound.
Other new positions include Columbia/HCA Healthcare; Stewart & Stevenson
Services, a distributor of engines; and Silicon Graphics, a computer graphics
company (2.4 percent, 2.1 percent and 1.7 percent of total net assets,
respectively).
Q: SINCE YOU BUY WHAT OTHERS SELL, ARE YOU FINDING OPPORTUNITIES IN BEATEN-DOWN
ASIAN COMPANIES?
A: We're investing in U.S. companies that may benefit from buying foreign
competitors or certain of their plants or facilities. With the strength in the
U.S. dollar and the economic weakness in some foreign countries, U.S. companies
can often buy these facilities at extremely low prices and subsequently lower
their operating costs.
Q: HOW ABOUT IN THE TECHNOLOGY SECTOR?
A: Two stocks we purchased were Silicon Graphics, as mentioned previously, and
Seagate Technologies, a disk drive manufacturer (1.7 percent and 1.0 percent of
total net assets, respectively). These companies have disappointed investors and
have seen their stock prices deflate. However, we believe their long-term
fundamentals remain intact, and that they continue to offer good earnings
turnaround potential.
Q: HOW DO YOU EXPECT THE MARKET TO PERFORM IN COMING MONTHS?
A: We expect the global economy to be slower, which may impact the earnings
potential of some U.S. companies. This type of market environment may provide us
opportunities to invest in companies that disappoint near term, but still have
good long-term growth potential.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND
INVESTMENT RETURNS WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL
SHARES. Holdings are disclosed as a percentage of the SR&F Special 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 Fund's adviser
reduced its management fee by .05 percent through June 30, 1997. Absent this
limit, total return would have been less. The S&P 500 and the S&P 400 are
unmanaged groups of stocks that differ from the composition of each Stein Roe
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 ended March 31, 1998, were 44.07 percent, 19.11 percent and
16.74 percent, respectively.
* Foreign investments involve market, political and currency risks not
generally associated with other investments.
<PAGE>
Fund Highlights
Special Portfolio
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TOP 10 EQUITY HOLDINGS (% OF TOTAL NET ASSETS)
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Cross Timbers Oil 3.0% Interpublic Group of Companies 2.3%
Progressive 3.0 Carlisle 2.2
Columbia/HCA Healthcare 2.4 Stewart & Stevenson Services 2.1
Interim Services 2.4 Harley-Davidson 2.1
Invacare 2.3 Barrick Gold 2.1
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Total 23.9%
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EQUITY PORTFOLIO HIGHLIGHTS
PORTFOLIO S&P 500
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Number of Holdings 60 500
Dollar Weighted Median Market Capitalization ($ Mil.) $2,279 $40,619
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ECONOMIC SECTOR BREAKDOWN
As of March 31, 1998
Equity Portfolio S&P 500
Basic Materials 9% 4%
Consumer Cyclical 22% 13%
Consumer Noncyclical 18% 23%
Energy 7% 8%
Financial 13% 17%
Industrial 14% 9%
Technology 12% 16%
Utilities 5% 10%
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ASSET ALLOCATION
As of Sept. 30, 1997 As of March 31, 1998
Equities 89.4% 87.8%
Cash & Equivalents 10.6% 12.2%
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<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 of
entrepreneurially managed companies. The portfolio emphasizes investments in
financially strong, small- and medium-sized companies based principally on
its management appraisal and the stock valuation of the companies. Funds that
emphasize investments in smaller companies may experience short-term
volatility.
FUND INCEPTION:
Oct. 17, 1994
TOTAL NET ASSETS:
$232.4 million
John McLandsborough joined Dick Peterson as co-portfolio manager of Special
Venture Fund on June 30, 1997.
Q: HOW DID THE FUND PERFORM?
A: The Fund's total return was -0.95 percent for the six months ended March 31,
1998 versus a return of 5.82 percent for the Lipper peer group median and 6.37
percent for the benchmark Russell 2000 Index. The Fund was weak in the first
half of the period, returning -7.61 percent for the three months ended Dec. 31,
1997, before rebounding 7.21 percent for the three months ended March 31, 1998.
While the short-term performance of the Fund lagged our benchmark, we
continue to believe that our strategy of investing in small companies* that are
well positioned, entrepreneurially managed and have reasonable valuations will
continue to be successful over a long-term time horizon. We are encouraged by
the Fund's 22.55 percent average annual total return since its inception on Oct.
17, 1994, which is about equal to the 22.24 percent return for the Russell 2000
Index over the same time period.
Q: WHAT AFFECTED SMALL-CAP STOCKS' PERFORMANCE DURING THE PAST SIX MONTHS?
A: Small-cap stocks outperformed large-cap stocks from April 1997 through
October 1997 until the Asian currency crisis led to a flight to large-cap
stocks. As a result, small-cap stocks lagged their large-cap counterparts over
the past six months. The Russell 2000, the proxy for the small-cap market,
trailed the large-cap S&P 500 benchmark by 10.84 percent during the period.
Q: WHAT AFFECTED THE FUND'S PERFORMANCE?
A: During the past six months, the Fund's performance was driven by a
combination of factors. Several of our larger holdings returned strong
performance, but were offset by several additional holdings that significantly
underperformed.
Top performing stocks for the quarter included Metamor Worldwide (3.1 percent
of total net assets), a company benefiting from the trend toward outsourcing
information-technology staff and consulting services, and CB Commercial Real
Estate Services (5.3 percent of total net assets), a company benefiting from its
growing real estate brokerage and related services.
Other issues that performed well were Metro Networks (5.0 percent of total
net assets), a dominant and growing player in the niche business of providing
radio and television traffic and news reports, and FiServ (1.9 percent of total
net assets), a data processing company providing services for the financial
services industry.
Q: WHAT HOLDINGS DRAGGED DOWN PERFORMANCE?
A: Two sectors that underperformed for the Fund were energy and technology. Our
oil and gas exploration and production holdings, including Barrett Resources and
Meridian Resources (1.1 percent and 1.4 percent of total net assets,
respectively), suffered given the weakened outlook for oil and gas prices. We
reduced our exposure to the energy sector by selling three of our energy
holdings: Renaissance Energy, Devon Energy and Cross Timbers Oil.
AVX (2.5 percent of total net assets), Kent Electronics (1.4 percent of total
net assets), and Danka Business Systems (1.1 percent of total net assets), all
historically successful technology holdings for the Fund, underperformed during
this period. We remain optimistic about the longer-term outlook for these three
companies.
Q: WHEN SOME OF YOUR HOLDINGS DRAG DOWN SHORT-TERM PERFORMANCE, HOW DO YOU
DETERMINE WHETHER TO CONTINUE TO HOLD OR TO SELL THESE PARTICULAR ISSUES?
A: A beaten-down stock price is not enough to prompt us to sell a holding. Some
of our best long-term holdings have been purchased following periods of
underperformance. There are four circumstances under which we are likely to sell
a holding: an unexpected change in top management, a sudden change in business
strategy, deteriorating company or industry fundamentals or shares that we
believe are overvalued.
Q: WHAT IS YOUR OUTLOOK FOR THE SMALL-CAP MARKET IN THE COMING MONTHS? BASED ON
THAT, WHAT IS YOUR OUTLOOK FOR THE FUND?
A: We are optimistic regarding the outlook for the small-cap market as well as
for Special Venture Fund.
The small-cap sector, in our opinion, appears relatively cheap. The earnings
growth outlook for small-cap stocks continues to be strong, and yet, the
valuations seem attractive. Since 1979, the Russell 2000 has, on average, traded
at a higher price-to-earnings ratio than the S&P 500. Currently, the Russell
2000 trades at a substantial discount to the S&P 500 for only the fourth time in
the last 20 years. We believe continued strong growth in the earnings of
small-cap companies, relative to their large-cap counterparts, should eventually
lead to the outperformance of small-cap stocks.
Based on this data, we feel positive about the outlook for the portfolio in
the year ahead. When we compare Special Venture Fund to its benchmark, the
Russell 2000, the Fund has a higher forecasted long-term earnings per share
(EPS) growth rate, but trades at a discount in terms of valuation. Even more
compelling is the comparison of the portfolio to the large-cap stock sector, as
measured by the S&P 500 Index. The portfolio has almost three times the
estimated long-term EPS growth, yet currently trades at comparable valuation
levels.
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 Special Venture 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 S&P 500 and the Russell 2000 are
unmanaged groups of stocks that differ from the composition of each Stein Roe
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-,
three-year and since inception periods ended March 31, 1998, were 43.67 percent,
24.94 percent and 22.86 percent, respectively.
* Funds that emphasize investments in smaller companies may experience
short-term volatility.
Fund Highlights
Special Venture Fund
- --------------------------------------------------------------------------------
TOP 10 EQUITY HOLDINGS (% OF TOTAL NET ASSETS)
- --------------------------------------------------------------------------------
CB Commercial Real Estate 5.3% Central European Media 3.6%
Services Group
Metro Networks 5.0 Xomed Surgical Products 3.4
Meadowbrook Insurance 4.1 Reckson Associates 3.2
Alternative Resources 3.8 Metamor Worldwide 3.1
Sola International 3.8 CMP Media 2.9
- --------------------------------------------------------------------------------
Total 38.2%
- --------------------------------------------------------------------------------
EQUITY PORTFOLIO HIGHLIGHTS
PORTFOLIO RUSSELL 2000
- --------------------------------------------------------------------------------
Number of Holdings 47 2000
Dollar Weighted Median Market Capitalization ($ Mil.) 645 823
- --------------------------------------------------------------------------------
ECONOMIC SECTOR BREAKDOWN
As of March 31, 1998
Equity Portfolio Russell 2000
Pie Chart:
Basic Materials 3% 3%
Consumer Cyclical 23 18
Consumer Noncyclical 16 12
Energy 3 3
Financial 23 24
Industrial 13 14
Technology 18 19
Utilities 1 7
- --------------------------------------------------------------------------------
ASSET ALLOCATION
As of Sept. 30, 1997 As of March 31, 1998
Equities 91.1% 95.2%
Cash & Equivalents 8.9 4.8
<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 companies of any size that offer strong earnings growth
potential. Funds that emphasize investments in smaller companies may
experience short-term volatility.
FUND INCEPTION:
March 31, 1969
TOTAL NET ASSETS:
$1,017.6 million
Photo: GLORIA SANTELLA, ERIC MADDIX.
Q: HOW DID THE FUND PERFORM?
A: The Fund performed strong, returning 15.36 percent for the six-month period
ended March 31, 1998. It significantly outperformed the 11.94 percent return of
the S&P 400 Mid-Cap Index and the 7.73 percent return of the Lipper peer group
median, but underperformed the 17.21 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. Capital Opportunities Fund traditionally
invests more heavily in mid-cap companies percent of holdings), although it does
own stocks of small and large companies as well (23 percent and 31 percent of
holdings, respectively). For this reason we feel it is more useful to compare
the Fund to the S&P 400 Mid-Cap Index.
Q: DIDN'T THE LAST FEW MONTHS REPRESENT A RECOVERY PERIOD FOR AGGRESSIVE
GROWTH STOCKS?
A: Yes. The fourth quarter of 1997 was a down market for many small-cap* growth
stocks -- especially those with economically sensitive, commodity-like product
offerings. These stocks lost favor when the Asian currency crisis incented
investors to abandon more aggressive small- and mid-cap holdings in favor of
safer large-cap growth stocks. However, during this time, high-quality,
consistently growing aggressive growth stocks continued to return solid
performance. Because these are the types of companies the portfolio owns, the
Fund returned solid performance as well. Aggressive growth stocks, in general,
rebounded in the first quarter of 1998, supporting the Fund's return of 12.50
percent for the same period.
Q: WHAT STOCKS PERFORMED WELL?
A: Our top performing stocks were the bellwether aggressive growth stocks: HBO,
Paychex and Cendant (4.2 percent, 4.2 percent and 3.5 percent of total net
assets, respectively). We've held those names for an average of 45 months. The
stocks' returns over that period reflect our belief that high-quality aggressive
growth companies are capable of generating solid returns over an extended period
of time. These companies suffered during the market's sell-off of aggressive
growth stocks, but because their sell-off had little reasoning behind it -- and
their earnings growth continued -- they bounced back.
Q: SO YOU BELIEVE THE PERFORMANCE OF COMPANIES YOU OWN IS TIED TO MARKET
SENTIMENT?
A: Our view is that, on a short-term basis, all stocks are tied to market
sentiment to some degree. However, we believe that over an investment time
horizon of 3-5 years, the effects of market sentiment take a back seat to a
company's fundamentals in terms of stock price performance.
Q: WHAT SECTORS PERFORMED THE BEST OVER THE PAST SIX MONTHS?
A: Leisure, entertainment and technology holdings outperformed this period. In
the leisure sector, the top stocks were Clear Channel Communications, an
operator of radio stations, television stations and billboards, and Carnival,
the cruise line operator (4.0 percent and 4.2 percent of total net assets,
respectively). We feel that both companies are benefiting from a strong economy
and from consumers' high level of disposable income.
The Fund's top performing technology holdings were Peoplesoft and Saville
(2.5 percent and 2.4 percent of total net assets, respectively). The software
company Peoplesoft is benefiting from the corporate trend toward network
computing. Saville is being used by telephone companies to provide streamlined
billing for customers who utilize multiple forms of service, i.e., long
distance, cellular and local.
Q: THE FUND'S RECENT SHORTER-TERM RETURNS EXHIBIT VOLATILITY, WHICH LEADS TO
QUESTIONS ABOUT STYLE CONSISTENCY. DO YOU FOLLOW A CONSISTENT STRATEGY?
A: We follow an extremely consistent investment style. Our goal is not to rotate
in and out of sectors, but to hold stocks for the long term. Our long-term focus
discourages us from making trades that can only be justified in response to
short-term market momentum. The consistency of our investment style is precisely
why the Fund is subject to short-term performance swings. For the year ending
1997, the portfolio's turnover rate was 35 percent. That compares to the peer
group average turnover rate of 141 percent.+ Our low turnover rate proves that
we follow a consistent strategy and it also helps to enhance the Fund's
after-tax return.
This strategy has been in place for seven years and coincidentally, the
aggressive growth market has run a full cycle in that time period. The
aggressive growth market bottomed out in late 1990 and again in the spring of
1997. We maintained our strategy throughout those periods. The result was a
20.51 percent annualized return over the seven-year period ending March 31,
1998, which beats the S&P 500 Index return of 19.73 percent, and the 17.30
percent return of the Fund's Lipper peer group for the same time period.
Q: WHAT'S YOUR OUTLOOK?
A: Our long-term outlook for the portfolio is a function of our long-term
earnings outlook for the companies in the portfolio, which continues to be
positive.
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 S&P 500 and the S&P 400 are unmanaged
groups of stocks that differ from the composition of each Stein Roe fund; they
are not available for direct investment. According to Lipper Analytical
Services, Inc., an independent monitor of mutual fund performance, the median
returns for the Fund's capital appreciation fund peer group for the one-, five-
and 10-year periods ended March 31, 1998, were 46.27 percent, 22.30 percent and
15.25 percent, respectively.
* Funds that emphasize investments in smaller companies may experience
short-term volatility.
+ Source: Morningstar Inc., an independent monitor of mutual fund data.
<PAGE>
Fund Highlights
Capital Opportunities Fund
- --------------------------------------------------------------------------------
TOP 10 EQUITY HOLDINGS (% OF TOTAL NET ASSETS)
- --------------------------------------------------------------------------------
Paychex 4.2% Cendant 3.5%
Carnival 4.2 CBT Group 3.4
HBO & Company 4.2 Tellabs 3.2
Clear Channel Communications 4.0 Omnicare 3.0
MSC Industrial Direct 3.8 Papa John's International 3.0
- --------------------------------------------------------------------------------
Total 36.5%
- --------------------------------------------------------------------------------
EQUITY PORTFOLIO HIGHLIGHTS
PORTFOLIO S&P 500
- --------------------------------------------------------------------------------
Number of Holdings 42 500
Dollar Weighted Median Market Capitalization ($ Mil.) $2,811 $40,619
- --------------------------------------------------------------------------------
ECONOMIC SECTOR BREAKDOWN
As of March 31, 1998
Equity Portfolio S&P 500
Pie Chart:
Basic Materials 2% 4%
Consumer Cyclical 22 13
Consumer Noncyclical 21 23
Energy 2 8
Financial 2 17
Industrial 23 9
Technology 28 16
Utilities 2 10
- --------------------------------------------------------------------------------
ASSET ALLOCATION
As of Sept. 30, 1997 As of March 31, 1998
Equities 90.2% 94.2%
Cash & Equivalents 9.8 5.8
<PAGE>
<TABLE>
<CAPTION>
SR&F Growth Stock Portfolio
- --------------------------------------------------------------------------------
Portfolio of Investments at March 31, 1998
(Dollar amounts in thousands)
(Unaudited)
NUMBER MARKET
COMMON STOCKS (96.7%) OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
BANKS AND SAVINGS & LOANS (4.9%)
Citicorp............................................. 150,000 $ 21,300
NationsBank.......................................... 225,000 16,411
--------
37,711
BUSINESS SERVICES (3.0%)
Paychex.............................................. 400,000 23,075
CHEMICALS (1.4%)
Monsanto............................................. 200,000 10,400
COMPUTERS AND COMPUTER SOFTWARE (10.4%)
Cisco Systems........................................ 375,000 25,641
Intel................................................ 200,000 15,613
Microsoft (a)........................................ 225,000 20,136
PeopleSoft (a)....................................... 350,000 18,441
--------
79,831
CONSUMER-RELATED (10.0%)
Cendant (a).......................................... 800,000 31,700
Gillette............................................. 200,000 23,738
Procter & Gamble..................................... 250,000 21,094
--------
76,532
DISTRIBUTION - RETAIL (5.3%)
Home Depot........................................... 300,000 20,231
Kohl's (a)........................................... 250,000 20,438
--------
40,669
ELECTRICAL EQUIPMENT (3.1%)
General Electric..................................... 280,000 24,132
FINANCIAL SERVICES (7.8%)
American Express..................................... 235,000 21,576
Charles Schwab....................................... 350,000 13,300
Fannie Mae........................................... 400,000 25,300
--------
60,176
FOOD, BEVERAGE AND TOBACCO (5.2%)
Coca-Cola............................................ 270,000 20,908
Philip Morris........................................ 450,000 18,759
--------
39,667
HEALTH CARE (2.4%)
Johnson & Johnson.................................... 250,000 18,328
INSURANCE (6.4%)
American International Group......................... 175,000 22,039
Travelers Group...................................... 450,000 27,000
--------
49,039
LEISURE AND ENTERTAINMENT (4.9%)
Walt Disney.......................................... 150,000 16,013
Time Warner.......................................... 300,000 21,600
--------
37,613
<CAPTION>
<PAGE>
SR&F Growth Stock Portfolio CONTINUED
- --------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
MEDICAL SUPPLIES (2.7%)
Medtronic............................................ 400,000 $ 20,750
OIL AND GAS (3.8%)
R & B Falcon (a)..................................... 350,000 10,369
Schlumberger Limited................................. 250,000 18,937
--------
29,306
PHARMACEUTICAL (8.3%)
Eli Lilly & Company.................................. 325,000 19,378
Merck & Company...................................... 150,000 19,256
Pfizer............................................... 250,000 24,922
--------
63,556
RUBBER, PLASTIC AND RELATED (2.5%)
Illinois Tool Works.................................. 300,000 19,425
TELECOMMUNICATIONS (14.6%)
LM Ericsson Telecommunications ADRs, class B......... 450,000 21,403
Lucent Technologies.................................. 200,000 25,575
Motorola............................................. 300,000 18,188
Tellabs (a).......................................... 350,000 23,494
WorldCom (a)......................................... 550,000 23,684
--------
112,344
--------
TOTAL COMMON STOCKS (Cost $380,800).................. 742,554
- --------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
SHORT-TERM OBLIGATION (3.3%) AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER (3.3%)
Associates Corp. of North America 6.050% 4/01/98
(Cost $25,255).................................... $ 25,255 25,255
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.0%)
(Cost $406,055) (b).................................. 767,809
OTHER ASSETS, LESS LIABILITIES (0.0%)................ 267
--------
TOTAL NET ASSETS (100.0%)............................ $768,076
========
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) At March 31, 1998, the cost of investments for federal income tax purposes
was $406,055. Net unrealized appreciation and gross unrealized appreciation
were $361,754. There was no gross unrealized depreciation.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Growth Opportunities Fund
- --------------------------------------------------------------------------------
Portfolio of Investments at March 31, 1998
(Dollar amounts in thousands)
(Unaudited)
NUMBER MARKET
COMMON STOCKS (95.0%) OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
BUSINESS SERVICES (17.9%)
AHL Services (a)..................................... 24,000 $ 783
AccuStaff (a)........................................ 24,000 828
Bright Horizons (a).................................. 30,000 765
CCC Information Services Group (a)................... 35,000 963
Caribiner International (a).......................... 17,000 655
Gartner Group (a).................................... 20,000 748
INSpire Insurance Solutions (a)...................... 34,000 1,131
Iron Mountain (a).................................... 19,000 712
Romac International.................................. 30,000 825
SOS Staffing Services (a)............................ 30,000 795
Sylvan Learning Systems (a).......................... 17,000 801
Viking Office Products (a)........................... 26,000 604
Vincam Group......................................... 20,000 580
--------
10,190
CONSUMER PRODUCTS AND SERVICES (4.4%)
Blyth Industries (a)................................. 24,000 819
Cendant (a).......................................... 25,000 991
St. John Knits....................................... 15,000 709
--------
2,519
DATA PROCESSING SERVICES (1.9%)
Fiserv (a)........................................... 17,000 1,077
FINANCIAL SERVICES (10.5%)
Capital Re........................................... 10,000 642
Citicorp............................................. 4,000 568
Federal Home Loan Mortgage Corporation (a)........... 20,000 949
HCC Insurance Holdings............................... 30,000 690
Kansas City Southern Industries...................... 19,000 836
MGIC Investment Corporation ......................... 12,000 788
Norwest ............................................. 18,000 748
Washington Mutual.................................... 10,000 717
--------
5,938
HEALTH CARE (17.7%)
ALZA (a)............................................. 22,000 986
Bergen Brunswig (a).................................. 10,000 426
Biomet .............................................. 23,000 690
Boron, LePore & Associates (a)....................... 15,000 497
Cardinal Health...................................... 3,000 264
Guidant ............................................. 8,000 587
HBO & Company........................................ 15,000 906
Health Management Associates (a)..................... 32,000 916
Orthodontic Centers of America (a)................... 26,000 564
PAREXEL International (a)............................ 24,000 750
Pfizer............................................... 7,000 698
Shire Pharmaceuticals Group (a)...................... 30,000 643
Sofamor Danek Group (a).............................. 8,000 682
United HealthCare ................................... 12,000 777
Warner-Lambert ...................................... 4,000 681
--------
10,067
Growth Opportunities Fund CONTINUED
- --------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL PRODUCTS (9.7%)
Advanced Lighting Technologies (a)................... 18,000 $ 466
Barnett (a).......................................... 20,000 430
Borg-Warner Automotive............................... 9,000 577
Ecolab............................................... 18,000 522
Honeywell ........................................... 8,000 661
Hub Group (a)........................................ 18,000 503
Monsanto ............................................ 16,000 832
Pameco (a)........................................... 24,000 441
Schlumberger Limited................................. 8,000 606
Wilmar Industries (a)................................ 19,000 473
--------
5,511
LEISURE AND ENTERTAINMENT (4.1%)
Carnival, class A.................................... 14,000 977
Promus Hotel (a)..................................... 12,000 573
Signature Resorts (a)................................ 25,000 494
Suburban Lodges of America (a)....................... 16,000 254
--------
2,298
MEDIA (6.8%)
Chancellor Media (a)................................. 15,000 688
Cox Communications (a)............................... 19,000 798
Getty Images (a)..................................... 33,000 829
Outdoor Systems (a).................................. 25,000 877
Univision Communications (a)......................... 18,000 670
--------
3,862
RETAIL (5.7%)
Dollar General....................................... 17,500 677
Home Depot........................................... 10,000 674
Kohl's (a)........................................... 10,000 817
Paul Harris Stores (a)............................... 10,000 112
TJX ................................................. 21,000 950
--------
3,230
TECHNOLOGY SERVICES (13.2%)
Analog Devices (a)................................... 20,000 665
Cambridge Technology Partners (a).................... 14,000 694
Cisco Systems (a).................................... 9,000 615
Documentum (a)....................................... 13,000 704
FlexiInternational Software (a)...................... 30,000 375
HNC Software (a)..................................... 14,000 527
Molex, class A ...................................... 21,250 570
PeopleSoft (a)....................................... 15,000 790
Saville Systems (a) ................................. 13,000 666
Solectron (a)........................................ 14,000 592
Sterling Commerce (a)................................ 14,000 649
Vantive (a).......................................... 18,000 658
--------
7,505
<PAGE>
<CAPTION>
Growth Opportunities Fund CONTINUED
- --------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (3.1%)
CIENA (a)............................................ 12,000 $ 511
IDT (a).............................................. 20,000 750
WorldCom (a)......................................... 12,000 517
--------
1,778
--------
TOTAL COMMON STOCKS (Cost $41,771)................... 53,975
<CAPTION>
- --------------------------------------------------------------------------------
PRINCIPAL
SHORT-TERM OBLIGATIONS (6.2%) AMOUNT
- --------------------------------------------------------------------------------
COMMERCIAL PAPER (6.2%)
Associates Corp. of North America 6.050% 04/01/98.... $ 1,495 1,495
Circus Circus 6.200% 04/01/98........................ 2,000 2,000
--------
TOTAL SHORT-TERM OBLIGATIONS (Cost $3,495).......... 3,495
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.2%)
(Cost $45,266) (b)................................... 57,470
OTHER ASSETS, LESS LIABILITIES (-1.2%)............... (677)
--------
TOTAL NET ASSETS (100.0%)............................ $ 56,793
========
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) At March 31, 1998, the cost of investments for federal income tax purposes
was $45,266. Net unrealized appreciation was $12,204, consisting of gross
unrealized appreciation of $12,886 and gross unrealized depreciation of
$682.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SR&F Special Portfolio
- --------------------------------------------------------------------------------
Portfolio of Investments at March 31, 1998
(Dollar amounts in thousands)
(Unaudited)
NUMBER MARKET
COMMON STOCKS (87.8%) OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
ADVERTISING (2.3%)
Interpublic Group of Companies....................... 490,000 $ 30,441
BANKS (2.5%)
Golden West Financial................................ 200,000 19,162
Washington Mutual.................................... 200,000 14,343
----------
33,505
BROADCASTING (1.2%)
Grupo Radio Centro ADRs.............................. 429,800 6,098
Scandinavian Broadcasting System (a)................. 285,600 9,425
----------
15,523
BUSINESS SERVICES (4.3%)
Danka Business Systems ADRs.......................... 822,000 15,104
Interim Services (a)................................. 950,000 32,062
Unitog .............................................. 506,550 11,714
----------
58,880
COMPUTER SERVICES (1.7%)
Silicon Graphics (a)................................. 1,695,000 23,624
CONSUMER-RELATED (1.3%)
Newell .............................................. 355,000 17,195
DRUGS (2.7%)
Novartis ............................................ 13,000 23,008
Perrigo (a) ......................................... 1,121,500 13,738
----------
36,746
ELECTRICAL EQUIPMENT (2.1%)
Littelfuse (a)....................................... 690,000 17,940
Littelfuse warrants (a).............................. 547,200 10,944
----------
28,884
ELECTRONICS AND INSTRUMENTATION (5.6%)
AVX ................................................. 1,106,700 22,272
Kent Electronics (a)................................. 1,236,000 26,033
Molex, class A....................................... 1,029,416 27,601
----------
75,906
ENERGY AND RELATED SERVICES (6.0%)
Cross Timbers Oil.................................... 2,016,225 40,577
Renaissance Energy Limited (a) ...................... 935,000 19,034
Petroleum Geo-Services ADRs (a)...................... 370,900 22,022
----------
81,633
FINANCIAL SERVICES (2.5%)
American Express .................................... 235,000 21,576
Household International.............................. 90,000 12,398
----------
33,974
HEALTH SERVICES AND EQUIPMENT (13.9%)
Acuson (a)........................................... 810,300 14,687
Boston Scientific (a)................................ 244,600 16,511
Cardinal Health...................................... 100,000 8,819
Columbia/HCA Healthcare.............................. 1,000,000 32,250
First Health Group (a)............................... 390,500 21,185
Invacare ............................................ 1,173,550 30,512
<PAGE>
<CAPTION>
SR&F Special Portfolio CONTINUED
- --------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
HEALTH SERVICES AND EQUIPMENT (CONTINUED)
MedPartners (a)...................................... 1,100,000 $ 11,275
Steris (a)........................................... 200,000 10,800
Stryker ............................................. 464,600 21,778
Sybron International (a) ............................ 800,000 20,900
----------
188,717
INDUSTRIAL PRODUCTS (2.2%)
Carlisle ............................................ 595,200 29,239
INSURANCE COMPANIES (6.1%)
National Mutual Asia Limited......................... 18,450,000 15,240
Progressive.......................................... 298,200 40,164
20th Century Industries.............................. 992,700 26,679
----------
82,083
LEISURE AND ENTERTAINMENT (2.6%)
Carnival, class A.................................... 350,000 24,413
CBS ................................................. 300,000 10,181
----------
34,594
MACHINERY - GENERAL INDUSTRY (3.2%)
Robbins & Myers...................................... 135,100 5,151
Stewart & Stevenson Services......................... 1,206,400 29,029
Singer............................................... 812,000 8,577
----------
42,757
METALS (2.0%)
Barrick Gold ........................................ 1,284,000 27,767
MINING AND AGRICULTURE (1.4%)
Cyprus Amax Minerals ................................ 678,000 11,272
Placer Dome.......................................... 626,600 8,263
----------
19,535
MOTOR VEHICLES (3.8%)
Harley-Davidson...................................... 864,000 28,512
Superior Industries International.................... 701,000 23,264
----------
51,776
OFFICE PRODUCTS (1.5%)
Ikon Office Solutions................................ 589,000 20,357
SECURITY (1.3%)
Pittston Brink's Group............................... 437,600 18,056
RETAIL (4.8%)
Borders Group (a).................................... 460,000 15,669
Consolidated Stores (a) ............................. 519,250 22,295
Proffitt's (a)....................................... 433,200 15,704
Zale (a)............................................. 404,600 11,683
----------
65,351
SPECIALTY CHEMICALS (5.9%)
Imperial Chemical Industries ADRs.................... 325,000 23,359
Lydall (a)........................................... 929,000 16,780
Minerals Technologies................................ 274,200 13,813
OM Group............................................. 624,000 26,286
----------
80,238
TECHNOLOGY SERVICES (1.0%)
Seagate Technology (a)............................... 522,000 13,181
<PAGE>
<CAPTION>
SR&F Special Portfolio CONTINUED
- --------------------------------------------------------------------------------
NUMBER OF MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS (4.1%)
AirTouch Communications (a).......................... 349,500 $ 17,104
PriCellular (a)...................................... 1,081,000 13,783
Telephone & Data Systems............................. 509,000 24,178
----------
55,065
TEXTILES AND APPAREL (1.8%)
Unifi................................................ 648,475 24,156
----------
TOTAL COMMON STOCKS (Cost $590,897).................. 1,189,182
- --------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
SHORT-TERM OBLIGATIONS (12.1%) AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER (12.1%)
Associates Corp. of North America 6.050% 4/01/98..... $ 13,150 13,150
Circus Circus 6.050% 04/01/98........................ 50,000 50,000
Merrill Lynch 6.050% 04/01/98........................ 50,000 50,000
Texas Utilities 5.950% 04/02/98...................... 50,000 49,992
----------
TOTAL SHORT-TERM OBLIGATIONS (Cost $134,452) (b)..... 163,142
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.9%)
(Cost $725,349)...................................... 1,352,324
OTHER ASSETS, LESS LIABILITIES (0.1%)................ 1,794
----------
TOTAL NET ASSETS (100.0%)............................ $1,354,118
==========
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) At March 31, 1998, the cost of investments for federal income tax purposes
was $868,617. Net unrealized appreciation was $483,707, consisting of gross
unrealized appreciation of $493,669 and gross unrealized depreciation of
$9,962.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SR&F Special Venture Portfolio
- --------------------------------------------------------------------------------
Portfolio of Investments at March 31, 1998
(Dollar amounts in thousands)
(Unaudited)
NUMBER MARKET
COMMON STOCKS (95.2%) OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
AUTOMOTIVE ACCESSORIES (2.5%)
Superior Industries International.................... 172,600 $ 5,728
BROADCAST AND MEDIA (8.6%)
Central European Media Enterprises Limited (a)....... 285,200 8,306
Metro Networks (a)................................... 273,000 11,739
--------
20,045
BUSINESS SERVICES (10.8%)
Alternative Resources (a) ........................... 418,700 8,819
Danka Business Systems ADRs ......................... 143,500 2,637
Interim Services (a)................................. 189,900 6,409
Metamor Worldwide (a)................................ 192,900 7,246
--------
25,111
COMMERCIAL BANKS (1.2%)
National Bancorp of Alaska........................... 18,700 2,842
COMPUTER SERVICES (5.2%)
BARRA (a)............................................ 161,200 4,594
Fiserv (a)........................................... 71,400 4,525
SPSS (a)............................................. 133,800 3,144
--------
12,263
COSMETICS (2.5%)
Nu Skin Asia (a)..................................... 226,200 5,825
DENTAL PRODUCTS (1.1%)
National Dentex (a) ................................. 101,700 2,568
DIVERSIFIED OPERATIONS (3.6%)
Fisher Companies..................................... 39,500 2,528
Triarc Companies (a)................................. 227,300 5,967
--------
8,495
DRUGS (3.4%)
Ligand Pharmaceuticals (a)........................... 124,800 1,989
Shire Pharmaceuticals Group (a) ..................... 85,200 1,826
Teva Pharmaceutical Industries Limited ADRs.......... 95,000 4,061
--------
7,876
ELECTRICAL EQUIPMENT (9.0%)
AVX ................................................. 289,800 5,832
Ballantyne of Omaha (a).............................. 313,700 4,941
Black Box (a) ....................................... 50,000 1,844
Computer Products (a)................................ 221,000 5,152
Kent Electronics (a) ................................ 153,200 3,227
--------
20,996
HEALTH SERVICES & EQUIPMENT (7.4%)
Biosource International (a).......................... 312,000 2,009
Complete Management (a).............................. 222,500 1,891
Urologix (a)......................................... 175,800 1,632
Uroquest Medical (a)................................. 301,700 1,207
Xomed Surgical Products (a).......................... 285,900 7,862
Young Innovations (a)................................ 165,900 2,571
--------
17,172
SR&F Special Venture Portfolio CONTINUED
- --------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
INSURANCE (7.3%)
Meadowbrook Insurance Group.......................... 310,900 $ 9,521
PAULA Financial...................................... 230,500 5,474
20th Century Industries.............................. 77,800 2,091
--------
17,086
OIL AND GAS (2.5%)
Barrett Resources (a)................................ 72,500 2,533
Meridian Resource (a) ............................... 411,500 3,292
--------
5,825
OPTICAL SUPPLIES (3.7%)
Sola International (a)............................... 210,800 8,735
PACKAGING (1.5%)
Siligan Holdings (a)................................. 96,600 3,393
PUBLISHING (2.9%)
CMP Media (a)........................................ 268,100 6,736
REAL ESTATE DEVELOPMENT AND MANAGEMENT (13.3%)
CB Commercial Real Estate Services Group (a)......... 308,900 12,356
LaSalle Partners (a)................................. 138,800 4,511
Reckson Associates .................................. 286,300 7,551
Spieker Properties................................... 162,000 6,682
--------
31,100
RETAIL (1.3%)
Video Update (a)..................................... 878,000 3,018
SPECIALTY CHEMICALS (2.8%)
ChemFirst............................................ 247,000 6,546
TELECOMMUNICATIONS (2.1%)
Andrew .............................................. 107,000 2,120
Western Wireless (a)................................. 123,800 2,847
--------
4,967
TEXTILE AND APPAREL (0.6%)
Columbia Sportswear (a).............................. 61,900 1,308
WHOLESALE DISTRIBUTION (1.9%)
Henry Schein (a)..................................... 105,000 4,359
--------
TOTAL COMMON STOCKS (Cost $187,849).................. 221,994
- --------------------------------------------------------------------------------
SR&F Special Venture Portfolio CONTINUED
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
SHORT-TERM OBLIGATIONS (6.0%) AMOUNT VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMERICAL PAPER (6.0%)
Associates Corp. of North America 6.050% 4/01/98..... $ 9,845 $ 9,845
Conagra 6.100% 4/01/98............................... 4,000 4,000
--------
TOTAL SHORT-TERM OBLIGATIONS (Cost $13,845).......... 13,845
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.2%)
(Cost $204,694) (b).................................. 235,839
OTHER ASSETS, LESS LIABILITIES (-1.2%)............... (2,721)
--------
TOTAL NET ASSETS (100.0%)............................ $233,118
========
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) At March 31, 1998, the cost of investments for federal income tax purposes
was $205,786. Net unrealized appreciation was $30,053, consisting of gross
unrealized appreciation of $38,393 and gross unrealized depreciation of
$8,340.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Capital Opportunities Fund
- --------------------------------------------------------------------------------
Portfolio of Investments at March 31, 1998
(Dollar amounts in thousands)
(Unaudited)
NUMBER MARKET
COMMON STOCKS (93.5%) OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
BUSINESS SERVICES (20.9%)
ABR Information Services (a)......................... 1,000,000 $ 28,125
Caribiner International (a).......................... 660,000 25,410
CBT Group ADRs (a) .................................. 660,000 34,155
CCC Information Services Group (a)................... 200,000 5,500
Gartner Group (a) ................................... 700,000 26,163
IDT (a).............................................. 600,000 22,500
Paychex.............................................. 750,000 43,266
Romac International (a).............................. 600,000 16,500
Sykes Enterprises (a)................................ 500,000 10,500
----------
212,119
CONSUMER PRODUCTS & SERVICES (6.7%)
Cendant (a).......................................... 900,000 35,663
Jones Apparel Group (a).............................. 400,000 22,025
Steiner Leisure Limited (a).......................... 200,000 10,162
----------
67,850
DATA PROCESSING SERVICES (3.4%)
BISYS Group (a) ..................................... 400,000 14,100
Fiserv (a)........................................... 330,000 20,914
----------
35,014
ENERGY SERVICES (1.5%)
Stolt Comex Seaway (a)............................... 600,000 15,112
HEALTH CARE (15.3%)
Cardinal Health...................................... 120,000 10,583
HBO & Company........................................ 700,000 42,262
Health Management Associates, class A (a)............ 690,000 19,751
Omnicare............................................. 780,000 30,907
PAREXEL International (a)............................ 780,000 24,375
Quintiles Transnational (a).......................... 570,000 27,467
----------
155,345
INDUSTRIAL PRODUCTS (7.2%)
Gentex (a)........................................... 690,000 23,417
MSC Industrial Direct (a)............................ 720,000 39,015
Wilmar Industries (a)................................ 440,000 10,945
----------
73,377
LEISURE & ENTERTAINMENT (17.6%)
Carnival, class A ................................... 620,000 43,245
Chancellor Media (a)................................. 250,000 11,469
Clear Channel Communications (a)..................... 420,000 41,160
Extended Stay America (a)............................ 800,000 11,750
Heftel Broadcasting (a) ............................. 570,000 25,507
Promus Hotel (a)..................................... 600,000 28,650
Signature Resorts (a)................................ 900,000 17,775
----------
179,556
RESTAURANTS (3.0%)
Papa John's International (a) ....................... 800,000 30,700
RETAIL (1.6%)
Kohl's (a)........................................... 200,000 16,350
<PAGE>
<CAPTION>
Capital Opportunities Fund CONTINUED
- --------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (14.6%)
Aspen Technology (a)................................. 660,000 $ 27,225
Cambridge Technology Partners (a).................... 320,000 15,860
CIENA (a)............................................ 400,000 17,050
Molex, class A....................................... 250,000 6,703
PeopleSoft (a)....................................... 480,000 25,290
Saville Systems (a) ................................. 480,000 24,600
Tellabs (a).......................................... 480,000 32,220
----------
148,948
MISCELLANEOUS (1.7%)
Corrections Corporation of America (a)............... 500,000 17,063
----------
TOTAL COMMON STOCKS (Cost $576,058).................. 951,434
- --------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
SHORT-TERM OBLIGATIONS (5.6%) AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER (5.6%)
American Stores 6.250% 4/01/98....................... $ 6,775 6,775
Associates Corp. of North America 6.050% 4/01/98..... 50,000 50,000
----------
TOTAL SHORT-TERM OBLIGATIONS (Cost $56,775).......... 56,775
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.1%)
(Cost $632,833) (b).................................. 1,008,209
OTHER ASSETS, LESS LIABILITIES (0.9%)................ 9,368
----------
TOTAL NET ASSETS (100.0%)............................ $1,017,577
==========
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) At March 31, 1998, the cost of investments for federal income tax purposes
was $633,016. Net unrealized appreciation was $375,193, consisting of gross
unrealized appreciation of $392,590 and gross unrealized depreciation of
$17,397.
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)
GROWTH GROWTH
STOCK OPPORTUNITIES SPECIAL
FUND FUND FUND
---------- -------------- -----------
<S> <C> <C> <C>
ASSETS
Investments in Portfolio, at value $686,330 $ -- $1,353,570
Investments, at market value (cost $45,266 and $632,833, respectively) -- 57,470 --
Cash 50 1 50
Receivable for investments sold -- -- --
Receivable for fund shares sold 194 22 340
Dividends receivable -- 6 --
Other assets 63 16 125
---------- --------- -----------
Total assets 686,637 57,515 1,354,085
---------- --------- -----------
LIABILITIES
Payable for investments purchased -- 607 --
Payable for fund shares redeemed 905 24 4,509
Payable to investment adviser and transfer agent 217 69 413
Other liabilities 230 22 817
---------- --------- -----------
Total liabilities 1,352 722 5,739
---------- --------- -----------
Net assets $685,285 $56,793 $1,348,346
======== ======= ==========
ANALYSIS OF NET ASSETS
Paid-in capital $326,920 $45,051 $ 696,624
Net unrealized appreciation on investments and
foreign currency translations 352,449 12,204 485,069
Accumulated undistributed net investment income (loss) 54 (156) 708
Accumulated net realized gains (losses) on investments 5,862 (306) 165,945
---------- --------- -----------
Net assets $685,285 $56,793 $1,348,346
======== ======= ==========
Shares outstanding (unlimited number authorized) 17,819 4,485 45,201
======== ======= ==========
Net asset value per share $ 38.46 $ 12.66 $ 31.95
======== ======= ==========
<PAGE>
<CAPTION>
Statements of Assets and Liabilities
March 31, 1998
(All amounts in thousands, except per-share data)
(Unaudited)
SPECIAL CAPITAL
VENTURE OPPORTUNITIES
FUND FUND
--------- --------------
<S> <C> <C>
ASSETS
Investments in Portfolio, at value $232,655 $ --
Investments, at market value (cost $45,266 and $632,833, respectively) -- 1,008,209
Cash 50 3
Receivable for investments sold -- 15,553
Receivable for fund shares sold 172 545
Dividends receivable -- 23
Other assets 16 118
---------- -----------
Total assets 232,893 1,024,451
---------- -----------
LIABILITIES
Payable for investments purchased -- 3,788
Payable for fund shares redeemed 210 1,444
Payable to investment adviser and transfer agent 77 956
Other liabilities 221 686
---------- -----------
Total liabilities 508 6,874
---------- -----------
Net assets $232,385 $1,017,577
======== ==========
ANALYSIS OF NET ASSETS
Paid-in capital $200,803 $ 662,815
Net unrealized appreciation on investments and
foreign currency translations 31,115 375,376
Accumulated undistributed net investment income (loss) (457) (3,841)
Accumulated net realized gains (losses) on investments 924 (16,773)
---------- -----------
Net assets $232,385 $1,017,577
======== ==========
Shares outstanding (unlimited number authorized) 15,169 30,315
======== ==========
Net asset value per share $ 15.32 $ 33.57
======== ==========
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of Operations
For the Six Months Ended March 31, 1998
(All amounts in thousands)
(Unaudited)
GROWTH GROWTH
STOCK OPPORTUNITIES SPECIAL
FUND FUND FUND
--------- -------------- ---------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends allocated from Portfolio $ 2,474 $ -- $ 3,802
Dividends -- 60 --
Interest allocated from Portfolio 769 -- 4,366
Interest -- 96 --
--------- ------- ----------
Total investment income 3,243 156 8,168
--------- ------- ----------
EXPENSES
Expenses allocated from Portfolio 1,931 -- 4,745
Management fees -- 188 --
Transfer agent fees 688 55 1,413
Administrative fees 453 38 829
Printing and postage 75 11 192
SEC and state registration fees 26 17 19
Accounting fees 20 13 28
Audit and legal fees 6 13 6
Trustees' fees 3 6 3
Other 42 32 225
--------- ------- ----------
Total expenses 3,244 373 7,460
Reimbursement of expenses by investment adviser -- (59) --
--------- ------- ----------
Net expenses 3,244 314 7,460
--------- ------- ----------
Net investment income (loss) (1) (158) 708
--------- ------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments allocated from Portfolio 8,612 -- 186,809
Net realized gain on investments -- 67 --
Net realized loss on foreign currency transactions
allocated from Portfolio -- -- (1,345)
Net change in unrealized appreciation or depreciation
on investments and foreign currency translations 86,640 8,482 (116,161)
--------- ------- ----------
Net gain (loss) on investments 95,252 8,549 69,303
--------- ------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $95,251 $8,391 $ 70,011
========= ======= ==========
<PAGE>
<CAPTION>
SPECIAL CAPITAL
VENTURE OPPORTUNITIES
FUND FUND
--------- --------------
<S> <C> <C>
INVESTMENT INCOME
Dividends allocated from Portfolio $ 526 $ --
Dividends -- 516
Interest allocated from Portfolio 508 --
Interest -- 1,811
--------- ----------
Total investment income 1,034 2,327
--------- ----------
EXPENSES
Expenses allocated from Portfolio 927 --
Management fees -- 3,619
Transfer agent fees 248 1,100
Administrative fees 169 685
Printing and postage 24 300
SEC and state registration fees 15 21
Accounting fees 15 24
Audit and legal fees 7 11
Trustees' fees 3 23
Other 83 385
--------- ----------
Total expenses 1,491 6,168
Reimbursement of expenses by investment adviser -- --
--------- ----------
Net expenses 1,491 6,168
--------- ----------
Net investment income (loss) (457) (3,841)
--------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments allocated from Portfolio 8,718 --
Net realized gain on investments -- 102,583
Net realized loss on foreign currency transactions
allocated from Portfolio -- --
Net change in unrealized appreciation or depreciation
on investments and foreign currency translations (11,191) 40,631
--------- ----------
Net gain (loss) on investments (2,473) 143,214
--------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $(2,930) $139,373
========= ==========
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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)
GROWTH
OPPORTUNITIES
GROWTH STOCK FUND FUND
1998 1997 19981997(A)
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss)............................ $ (1) $ 198 $ (158) $ 2
Net realized gain (loss) on investments................. 8,612 34,268 67 (373)
Net change in unrealized appreciation or
depreciation on investments........................... 86,640 107,140 8,482 3,722
------- -------- ------ ------
Net increase (decrease) in net assets resulting
from operations.................................... 95,251 141,606 8,391 3,351
------- -------- ------ ------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income................ -- (1,100) -- --
Distributions from net capital gains.................... (36,957) (33,200) -- --
------- -------- ------ ------
Total distributions to shareholders.................. (36,957) (34,300) -- --
------- -------- ------ ------
SHARE TRANSACTIONS
Subscriptions to fund shares............................ 48,655 196,106 8,990 50,017
Value of distributions reinvested....................... 29,289 27,151 -- --
Redemptions of fund shares.............................. (58,622) (140,858) (10,418) (3,538)
------- -------- ------ ------
Net increase (decrease) from share transactions...... 19,322 82,399 (1,428) 46,479
------- -------- ------ ------
Net increase (decrease) in net assets................ 77,616 189,705 6,963 49,830
TOTAL NET ASSETS
Beginning of period..................................... 607,669 417,964 49,830 --
------- -------- ------ ------
End of period........................................... $685,285 $607,669 $56,793 $49,830
======== ======== ======= =======
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME (LOSS).. $ 54 $ 55 $ (156)$ 2
======== ======== ======= =======
ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to fund shares........................... 1,376 6,268 791 4,965
Issued in reinvestment of distributions................. 876 1,011 -- --
Redemptions of fund shares.............................. (1,651) (4,578) (931) (340)
------- -------- ------ ------
Net increase (decrease) in fund shares............... 601 2,701 (140) 4,625
Shares outstanding at beginning of period............... 17,218 14,517 4,625 --
------- -------- ------ ------
Shares outstanding at end of period..................... 17,819 17,218 4,485 4,625
======== ======== ======= =======
<PAGE>
<CAPTION>
SPECIAL FUND SPECIAL VENTURE FUND
1998 1997 1998 1997
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss)............................ $ 708 $ (1,983) $ (457) $ (330)
Net realized gain (loss) on investments................. 185,464 113,915 8,718 22,532
Net change in unrealized appreciation or
depreciation on investments........................... (116,161) 232,265 (11,191) 17,242
---------- ---------- -------- --------
Net increase (decrease) in net assets resulting
from operations................................... 70,011 344,197 (2,930) 39,444
---------- ---------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income................ -- -- -- --
Distributions from net capital gains................... (130,064) (86,856) (24,530) (14,445)
---------- ---------- -------- --------
Total distributions to shareholders................. (130,064) (86,856) (24,530) (14,445)
---------- ---------- -------- --------
SHARE TRANSACTIONS
Subscriptions to fund shares............................ 94,525 170,964 37,285 112,054
Value of distributions reinvested....................... 115,138 76,025 22,807 13,220
Redemptions of fund shares.............................. (128,842) (335,250) (36,002) (59,046)
---------- ---------- -------- --------
Net increase (decrease) from share transactions...... 80,821 (88,261) 24,090 66,228
---------- ---------- -------- --------
Net increase (decrease) in net assets................ 20,768 169,080 (3,370) 91,227
TOTAL NET ASSETS
Beginning of period..................................... 1,327,578 1,158,498 235,755 144,528
---------- ---------- -------- --------
End of period........................................... $1,348,346 $1,327,578 $232,385 $235,755
========== ========== ======== ========
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME (LOSS).. $ 708 $ -- $ (457) $ --
========== ========== ======== ========
ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to fund shares........................... 3,068 6,195 2,354 7,337
Issued in reinvestment of distributions................. 4,013 3,016 1,653 931
Redemptions of fund shares.............................. (4,168) (12,222) (2,349)(3,863)
---------- ---------- -------- --------
Net increase (decrease) in fund shares............... 2,913 (3,011) 1,658 4,405
Shares outstanding at beginning of period............... 39,288 42,299 13,511 9,106
---------- ---------- -------- --------
Shares outstanding at end of period..................... 42,201 39,288 15,169 13,511
========== ========== ======== ========
<PAGE>
<CAPTION>
CAPITAL
OPPORTUNITIES FUND
1998 1997
<S> <C> <C>
OPERATIONS
Net investment income (loss)............................ $ (3,841) $ (8,808)
Net realized gain (loss) on investments................. 102,583 (110,932)
Net change in unrealized appreciation or depreciation
on investments........................................ 40,631 (7,539)
---------- ----------
Net increase (decrease) in net assets resulting
from operations.................................... 139,373 (127,279)
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income................ -- --
Distributions from net capital gains................... -- --
---------- ----------
Total distributions to shareholders................. -- --
---------- ----------
SHARE TRANSACTIONS
Subscriptions to fund shares............................ 139,870 543,838
Value of distributions reinvested....................... -- --
Redemptions of fund shares.............................. (372,308) (990,455)
---------- ----------
Net increase (decrease) from share transactions...... (232,438) (446,617)
---------- ----------
Net increase (decrease) in net assets................ (93,065) (573,896)
TOTAL NET ASSETS
Beginning of period..................................... 1,110,642 1,684,538
---------- ----------
End of period........................................... $1,017,577 $1,110,642
========== ==========
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME (LOSS).. $ (3,841) $ --
========== ==========
ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to fund shares........................... 4,798 19,657
Issued in reinvestment of distributions................. -- --
Redemptions of fund shares.............................. (12,656) (35,746)
---------- ----------
Net increase (decrease) in fund shares............... (7,858) (16,089)
Shares outstanding at beginning of period............... 38,173 54,262
---------- ----------
Shares outstanding at end of period..................... 30,315 38,173
========== ==========
(a)From commencement of operations on June 30, 1997.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Assets and Liabilities
March 31, 1998
(All amounts in thousands)
(Unaudited)
<CAPTION>
SR&F SR&F SR&F
GROWTH STOCK SPECIAL SPECIAL VENTURE
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
ASSETS
Investments, at market value
(cost of $406,055, $867,063
and $204,694, respectively) .......................... $ 767,809 $1,352,324 $ 235,839
Cash ..................................................... 5 4 --
Receivable for investments sold .......................... -- 5,108 2,244
Dividends receivable ..................................... 687 634 99
---------- ---------- ----------
Total assets .......................................... 768,501 1,358,070 238,182
---------- ---------- ----------
LIABILITIES
Payable for investments purchased ........................ -- 3,000 4,864
Payable to investment adviser ............................ 385 834 154
Other liabilities ........................................ 40 118 46
---------- ---------- ----------
Total liabilities ..................................... 425 3,952 5,064
---------- ---------- ----------
Net assets applicable to investors'
beneficial interest ................................ $ 768,076 $1,354,118 $ 233,118
========== ========== ==========
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>
SR&F SR&F SR&F
GROWTH STOCK SPECIAL SPECIAL VENTURE
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends .................................................. $ 2,629 $ 3,803 $ 526
Interest ................................................... 815 4,367 509
--------- --------- ---------
Total investment income ................................. 3,444 8,170 1,035
--------- --------- ---------
EXPENSES
Management fees ............................................ 1,943 4,553 848
Accounting fees ............................................ 20 28 15
Trustees' fees ............................................. 15 21 7
Audit and legal fees ....................................... 10 9 10
Other ...................................................... 55 134 47
--------- --------- ---------
Total expenses .......................................... 2,043 4,745 927
--------- --------- ---------
Net investment income ................................... 1,401 3,425 108
--------- --------- ---------
REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS
Net realized gains on investments .......................... 7,841 186,319 8,719
Net realized losses on foreign
currency transactions ................................... -- (1,338) --
Net change in unrealized appreciation or
depreciation on investments and foreign
currency translations ................................... 95,912 (116,156) (11,183)
--------- --------- ---------
Net gains (losses) on investments and
foreign currency transactions ........................ 103,753 68,825 (2,464)
--------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS ......................................... $ 105,154 $ 72,250 $ (2,356)
========= ========= =========
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 Period Ended September 30, 1997
(All amounts in thousands)
(Unaudited)
<CAPTION>
SR&F GROWTH
STOCK PORTFOLIO
1998 1997 (A)
<S> <C> <C>
OPERATIONS
Net investment income ......................................... $ 1,401 $ 1,842
Net realized gains on investments ............................. 7,841 26,585
Net change in unrealized appreciation or depreciation
on investments ............................................. 95,912 53,294
--------- ---------
Net increase (decrease) in net assets resulting
from operations ......................................... 105,154 81,721
--------- ---------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions ................................................. 86,443 571,598
Withdrawals ................................................... (31,892) (44,948)
--------- ---------
Net increase (decrease) from transactions in investors'
beneficial interest ..................................... 54,551 526,650
--------- ---------
Net increase (decrease) in net assets ...................... 159,705 608,371
TOTAL NET ASSETS
Beginning of period ........................................... 608,371 --
--------- ---------
End of period ................................................. $ 768,076 $ 608,371
========= =========
(a) From commencement of operations on February 3, 1997.
See accompanying Notes to Financial Statements.
<PAGE>
<CAPTION>
SR&F SPECIAL PORTFOLIO
1998 1997(A)
<S> <C> <C>
OPERATIONS
Net investment income .......................................... $ 3,425 $ 2,236
Net realized gains on investments .............................. 184,981 92,652
Net change in unrealized appreciation or depreciation
on investments .............................................. (116,156) 190,726
----------- -----------
Net increase (decrease) in net assets resulting
from operations .......................................... 72,250 285,614
----------- -----------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions .................................................. 28,205 1,189,884
Withdrawals .................................................... (74,975) (146,860)
----------- -----------
Net increase (decrease) from transactions in investors'
beneficial interest ...................................... (46,770) 1,043,024
----------- -----------
Net increase (decrease) in net assets ....................... 25,480 1,328,638
TOTAL NET ASSETS
Beginning of period ............................................ 1,328,638 --
----------- -----------
End of period .................................................. $ 1,354,118 $ 1,328,638
=========== ===========
<PAGE>
<CAPTION>
SR&F SPECIAL
VENTURE PORTFOLIO
1998 1997 (A)
<S> <C> <C>
OPERATIONS
Net investment income .......................................... $ 108 $ 387
Net realized gains on investments .............................. 8,719 7,866
Net change in unrealized appreciation or depreciation
on investments .............................................. (11,183) 27,038
--------- ---------
Net increase (decrease) in net assets resulting
from operations .......................................... (2,356) 35,291
--------- ---------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions .................................................. 20,859 218,483
Withdrawals .................................................... (21,426) (17,733)
--------- ---------
Net increase (decrease) from transactions in investors'
beneficial interest ...................................... (567) 200,750
--------- ---------
Net increase (decrease) in net assets ....................... (2,923) 236,041
TOTAL NET ASSETS
Beginning of period ............................................ 236,041 --
--------- ---------
End of period .................................................. $ 233,118 $ 236,041
========= =========
(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 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") are series of the Stein Roe Investment Trust (the "Trust"),
an open-end management investment company organized as a Massachusetts business
trust. Growth Stock Fund, Special Fund and Special Venture Fund invest
substantially all of their assets in SR&F Growth Stock Portfolio, SR&F Special
Portfolio and SR&F Special Venture Portfolio (the "Portfolios"), respectively.
The Portfolios are 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 Portfolios commenced operations on February 3, 1997. At commencement,
Growth Stock Fund, Special Fund and Special Venture Fund contributed $474,861,
$1,096,779 and $160,940 in securities and other assets to SR&F Growth Stock
Portfolio, SR&F Special Portfolio and SR&F Special Venture Portfolio,
respectively, in exchange for beneficial ownership of those Portfolios. At
February 14, 1997, Stein Roe Advisor Growth Stock Fund, Stein Roe Advisor
Special Fund and Stein Roe Advisor Special Venture Fund each contributed cash of
$100 to their respective Portfolios. The Portfolios allocate net asset value,
income and expenses to each investor on a daily basis, based on their respective
percentage of ownership. At March 31, 1998, Growth Stock Fund and Advisor Growth
Stock Fund owned 89.36 percent and 10.64 percent, respectively, of SR&F Growth
Stock Portfolio; Special Fund and Advisor Special Fund owned 99.96 percent and
.04 percent, respectively, of SR&F Special Portfolio; and Special Venture Fund
and Advisor Special Venture Fund owned 99.80 percent and .20 percent,
respectively, of SR&F Special Venture Portfolio.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following summarizes the significant accounting policies of the Funds and
Portfolios. 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.
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.
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 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
During the period ended March 31, 1998, SR&F Special Portfolio entered into
forward currency exchange contracts under which it was 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. There were no outstanding 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 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.
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. Permanent differences in the
recognition or classification of income between the financial statements and tax
earnings are reclassified to paid-in capital.
NOTE 3. TRUSTEES' FEES AND TRANSACTIONS WITH AFFILIATES
The Funds and Portfolios pay monthly management and administrative fees to Stein
Roe & Farnham Incorporated (the "Adviser"), an indirect, majority-owned
subsidiary of Liberty Mutual Insurance Company, for its services as investment
adviser and manager. The management fee for SR&F Growth Stock Portfolio is
computed at an annual rate of .60 of 1 percent of average daily net assets up to
$500 million, .55 of 1 percent of the next $500 million, and .50 of 1 percent
thereafter. The management fee for Growth Opportunities Fund, SR&F Special
Portfolio and Capital Opportunities Fund is computed at an annual rate of .75 of
1 percent of average daily net assets up to $500 million, .70 of 1 percent of
the next $500 million, .65 of 1 percent of the next $500 million and .60 of 1
percent thereafter. The manage ment fee for SR&F Special 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
computed at .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.
The Adviser also provides certain fund accounting services. For the period
ended March 31, 1998, 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 incurred
charges of $20, $13, $28, $15, $24, $20, $28 and $15, respectively.
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, 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 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 March 31, 1998, was $3, $6, $3,
$3, $23, $15, $21 and $7, respectively. No remuneration was paid to any other
trustee or officer of the Trust.
NOTE 4. SHORT-TERM DEBT
To facilitate portfolio liquidity, the Funds and Portfolios maintain borrowing
arrangements under which they can borrow against portfolio securities. Neither
the Funds nor the Portfolios had borrowings during the period ended March 31,
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 Growth Stock Portfolio..................... $173,110 $115,795
SR&F Growth Opportunities Fund.................. 16,490 16,124
SR&F Special Portfolio.......................... 255,300 328,594
SR&F Special Venture Portfolio.................. 110,425 100,915
SR&F Capital Opportunities Fund................. 207,606 411,676
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
Special Venture Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
SIX MONTHS
ENDED PERIOD
MARCH 31, YEARS ENDED ENDED
1998 SEPTEMBER 30, SEPT. 30,
(UNAUDITED) 1997 1996 1995(E)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ....... $ 17.45 $ 15.87 $ 12.60 $ 10.00
----------- ------------- ------------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) ............ (0.03) (0.02) (0.02) 0.01
Net realized and unrealized
gains (losses)
on investments ....................... (0.33) 3.12 3.86 2.67
----------- ------------- ------------- ----------
Total from
investment operations .............. (0.36) 3.10 3.84 2.68
----------- ------------- ------------- ----------
DISTRIBUTIONS
Net investment income ................... -- -- -- (0.03)
Net realized capital gains .............. (1.77) (1.52) (0.57) (0.05)
----------- ------------- ------------- ----------
Total distributions .................. (1.77) (1.52) (0.57) (0.08)
----------- ------------- ------------- ----------
NET ASSET VALUE, END OF PERIOD ............. $ 15.32 $ 17.45 $ 15.87 $ 12.60
========== ============= ============= ==========
Ratio of net expenses to average
net assets (b) .......................... 1.32%(a) 1.29% 1.25% 1.25%(a)
Ratio of net investment income
(loss) to average net
assets (c) .............................. (0.40%)(a) (0.18%) (2.19%) 0.12%(a)
Portfolio turnover rate .................... -- 44%(d) 72% 84%
Average commissions per share .............. -- $ 0.0390(d) $ 0.0378 --
Total return (c) ........................... (0.95%) 21.73% 31.81% 26.96%
Net assets, end of period (000's) ......... $ 232,385 $ 235,755 $ 144,528 $ 60,533
(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 1.34 percent for the year ended
September 30, 1996, and 2.87 percent for the period ended September 30, 1995.
(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).
(e)From commencement of operations on October 17, 1994.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights CONTINUED
Growth Opportunities Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
SIX MONTHS
ENDED PERIOD
MARCH 31, ENDED
1998 SEPTEMBER 30,
(UNAUDITED) 1997 (D)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................. $ 10.77 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment loss............................... (0.04) --
Net realized and unrealized gains on investments.. 1.93 .77
------- -------
NET ASSET VALUE, END OF PERIOD....................... $ 12.66 $ 10.77
======= =======
Ratio of net expenses to average net assets (b)...... 1.25%(a) 1.25%(a)
Ratio of net investment loss to average net assets (c) (0.63%)(a) 0.02%(a)
Portfolio turnover rate.............................. 34% 3%
Average commissions per share........................ $0.0622 $0.0708
Total return (c)..................................... 17.55% 7.70%
Net assets, end of period (000's).................... $56,793 $49,830
(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 1.48 percent for the six months
ended March 31, 1998, and 1.74 percent for the period ended September 30,
1997.
(c)Computed giving effect to investment adviser's expense
limitation undertaking.
(d)From commencement of operations on June 30, 1997.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights CONTINUED
Growth Stock Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
SIX MONTHS
ENDED
MARCH 31,
1998 YEARS ENDED SEPTEMBER 30,
(UNAUDITED) 1997 1996
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............................ $ 35.29 $ 28.79 $ 26.13
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income........................................ -- 0.01 0.08
Net realized and unrealized gains on investments............ 5.32 8.79 5.01
-------- -------- --------
Total from investment operations.......................... 5.32 8.80 5.09
-------- -------- --------
DISTRIBUTIONS
Net investment income........................................ -- (0.07) (0.10)
Net realized capital gains.................................. (2.15) (2.23) (2.33)
-------- -------- --------
Total distributions...................................... (2.15) (2.30) (2.43)
-------- -------- --------
NET ASSET VALUE, END OF PERIOD.................................. $ 38.46 $ 35.29 $ 28.79
======== ======== ========
Ratio of net expenses to average net assets .................... 1.04%(a) 1.07% 1.08%
Ratio of net investment income to average net assets ........... 0.00%(a) 0.04% 0.32%
Portfolio turnover rate......................................... -- 5%(b) 39%
Average commissions per share................................... -- $ 0.0582(b) $ 0.0528
Total return ................................................... 16.00% 33.10% 21.04%
Net assets, end of period (000's)............................... $685,285 $607,699 $417,964
(a)Annualized
(b)Prior to commencement of operations of the Portfolio (see Note 1 to
Financial Statements).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights CONTINUED
Growth Stock Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
YEARS ENDED SEPTEMBER 30,
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......................... $ 23.58 $ 24.89 $ 24.65
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income..................................... 0.12 0.13 0.15
Net realized and unrealized gains on investments.......... 5.60 0.41 1.14
-------- -------- --------
Total from investment operations....................... 5.72 0.54 1.29
-------- -------- --------
DISTRIBUTIONS
Net investment income..................................... (0.15) (0.12) (0.10)
Net realized capital gains................................ (3.02) (1.73) (0.95)
-------- -------- --------
Total distributions.................................... (3.17) (1.85) (1.05)
-------- -------- --------
NET ASSET VALUE, END OF PERIOD............................... $ 26.13 $ 23.58 $ 24.89
======== ======== ========
Ratio of net expenses to average net assets ................. 0.99% 0.94% 0.93%
Ratio of net investment income to average net assets ........ 0.56% 0.50% 0.59%
Portfolio turnover rate...................................... 36% 27% 29%
Average commissions per share................................ -- -- --
Total return ................................................ 28.18% 2.10% 5.09%
Net assets, end of period (000's)............................ $360,336 $321,502 $373,921
(a)Annualized
(b)Prior to commencement of operations of the Portfolio (see Note 1 to
Financial Statements).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights CONTINUED
Special Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
SIX MONTHS
ENDED
MARCH 31,
1998 YEARS ENDED SEPTEMBER 30,
(UNAUDITED) 1997 1996
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............................ $ 33.79 $ 27.39 $ 25.26
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)................................ 0.02 (0.06) 0.01
Net realized and unrealized gains on investments............ 1.46 8.57 4.14
---------- ---------- ----------
Total from investment operations.......................... 1.48 8.51 4.15
---------- ---------- ----------
DISTRIBUTIONS
Net investment income........................................ -- -- (0.11)
Net realized capital gains.................................. (3.32) (2.11) (1.91)
---------- ---------- ----------
Total distributions...................................... (3.32) (2.11) (2.02)
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD.................................. $ 31.95 $ 33.79 $ 27.39
========== ========== ==========
Ratio of net expenses to average net assets .................... 1.16%(a) 1.14% 1.18%
Ratio of net investment income (loss) to average net assets .... 0.11%(a) (0.17%) 0.03%
Portfolio turnover rate......................................... -- 7%(b) 32%
Average commissions per share................................... -- $ 0.0382(b) $ 0.0482
Total return ................................................... 5.50% 33.67% 17.89%
Net assets, end of period (000's)............................... $1,348,346 $1,327,578 $1,158,498
(a)Annualized
(b)Prior to commencement of operations of the Portfolio (see Note 1 to
Financial Statements).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights CONTINUED
Special Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
YEARS ENDED SEPTEMBER 30,
1995 1994 1993
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............................ $ 23.54 $ 25.04 $ 20.90
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)................................ 0.13 0.15 0.17
Net realized and unrealized gains on investments............ 3.05 0.33 5.31
---------- ---------- ----------
Total from investment operations.......................... 3.18 0.48 5.48
---------- ---------- ----------
DISTRIBUTIONS
Net investment income........................................ (0.15) (0.21) (0.18)
Net realized capital gains.................................. (1.31) (1.77) (1.16)
---------- ---------- ----------
Total distributions...................................... (1.46) (1.98) (1.34)
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD.................................. $ 25.26 $ 23.54 $ 25.04
=========== ========== ==========
Ratio of net expenses to average net assets .................... 1.02% 0.96% 0.97%
Ratio of net investment income (loss) to average net assets .... 0.56% 0.91% 0.92%
Portfolio turnover rate......................................... 41% 58% 42%
Average commissions per share................................... -- -- --
Total return ................................................... 14.60% 2.02% 27.35%
Net assets, end of period (000's)............................... $1,201,469 $1,243,885 $1,076,818
(a)Annualized
(b)Prior to commencement of operations of the Portfolio (see Note 1 to
Financial Statements).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights CONTINUED
Capital Opportunities Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
SIX MONTHS
ENDED
MARCH 31,
1998 YEARS ENDED SEPTEMBER 30,
(UNAUDITED) 1997 1996
---------- ---------- ----------
NET ASSET VALUE, BEGINNING OF PERIOD............................ $ 29.10 $ 31.04 $ 21.69
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)................................ (0.03) (0.17) (0.06)
Net realized and unrealized gains (losses) on investments... 4.60 (1.77) 10.41
---------- ---------- ----------
Total from investment operations......................... 4.47 (1.94) 10.35
---------- ---------- ----------
DISTRIBUTIONS
Net investment income........................................ -- -- (0.01)
Net realized capital gains.................................. -- -- (0.99)
---------- ---------- ----------
Total from investment operations......................... -- -- (1.00)
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD.................................. $ 33.57 $ 29.10 $ 31.04
========== ========== ==========
Ratio of net expenses to average net assets .................... 1.23%(a) 1.17% 1.22%
Ratio of net investment income to average net assets ........... (0.77%)(a) (0.69%) (0.40%)
Portfolio turnover rate......................................... 22% 35% 22%
Average commissions per share................................... $ 0.0535 $ 0.0487 $ 0.0555
Total return ................................................... 15.36% (6.25%) 49.55%
Net assets, end of period (000's)............................... $1,017,577 $1,110,642 $1,684,538
<PAGE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
1995 1994 1993
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............................ $ 15.79 $ 15.44 $ 11.56
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)................................ 0.01 0.02 0.01
Net realized and unrealized gains (losses) on investments... 5.91 0.34 3.91
-------- -------- --------
Total from investment operations......................... 5.92 0.36 3.92
-------- -------- --------
DISTRIBUTIONS
Net investment income........................................ (0.02) (0.01) (0.04)
Net realized capital gains.................................. -- -- --
-------- -------- --------
Total from investment operations......................... (0.02) (0.01) (0.04)
-------- -------- --------
NET ASSET VALUE, END OF PERIOD.................................. $ 21.69 $ 15.79 $ 15.44
======== ======== ========
Ratio of net expenses to average net assets .................... 1.05% 0.97% 1.06%
Ratio of net investment income to average net assets ........... 0.08% 0.04% 0.09%
Portfolio turnover rate......................................... 60% 46% 55%
Average commissions per share................................... -- -- --
Total return ................................................... 37.46% 2.31% 34.01%
Net assets, end of period (000's)............................... $242,381 $175,687 $153,101
(a) Annualized
(b) Prior to commencement of operations of the Portfolio (see Note 1 to
Financial Statements).
(c) All per-share amounts reflect a two-for-one stock split effective
August 25, 1995.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights CONTINUED
SR&F Growth Stock Portfolio
SIX MONTHS
ENDED PERIOD
MARCH 31, ENDED
1998 SEPTEMBER 30,
(UNAUDITED) 1997 (B)
<S> <C> <C>
Ratio of net expenses to average net assets ...... 0.62%(a) 0.63%(a)
Ratio of net investment income to average net assets 0.42%(a) 0.52%(a)
Portfolio turnover rate........................... 18% 22%
Average commissions per share..................... $0.0566 $0.0575
(a)Annualized
(b)From commencement of operations on February 3, 1997.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights CONTINUED
SR&F Special Portfolio
SIX MONTHS
ENDED PERIOD
MARCH 31, ENDED
1998 SEPTEMBER 30,
(UNAUDITED) 1997 (B)
<S> <C> <C>
Ratio of net expenses to average net assets ...... 0.74%(a) 0.75%(a)
Ratio of net investment income to average net assets 0.53%(a) 0.31%(a)
Portfolio turnover rate........................... 22% 8%
Average commissions per share..................... $0.0556 $0.0382
(a)Annualized
(b)From commencement of operations on February 3, 1997.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights CONTINUED
SR&F Special Venture Portfolio
SIX MONTHS
ENDED PERIOD
MARCH 31, ENDED
1998 SEPTEMBER 30,
(UNAUDITED) 1997 (B)
<S> <C> <C>
Ratio of net expenses to average net assets ...... 0.82%(a) 0.82%(a)
Ratio of net investment income to average net assets 0.10%(a) 0.31%(a)
Portfolio turnover rate........................... 48% 58%
Average commissions per share..................... $0.0592 $0.0456
(a)Annualized
(b)From commencement of operations on February 3, 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 Director, 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.
EQ12A 5/98
