Stein Roe Mutual Funds
Annual Report
June 30, 1999
[PHOTO OF HANDS HOLDING PLANT]
Stein Roe Growth Fund
Small Company Growth Fund
[STEIN ROE LOGO]
STEIN ROE MUTUAL FUNDS
Sensible Risks. Intelligent Investments (R)
<PAGE>
Contents
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From the President................................................ 1
Tom Butch's thoughts on the markets and investing
Performance Summary............................................... 3
Questions & Answers............................................... 4
Interview with the portfolio manager and
a summary of investment activity
Fund Highlights................................................... 7
Portfolio of Investments.......................................... 9
A complete list of investments with market values
Financial Statements.............................................. 14
Statements of assets and liabilities, operations
and changes in net assets
Notes to Financial Statements..................................... 18
Financial Highlights.............................................. 22
Selected per-share data
Report of Independent Accountants................................. 24
General Information............................................... 25
A guide to products and services
Must be preceded or accompanied by a prospectus.
<PAGE>
From the President
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To Our Shareholders
We are pleased to provide you with the first-ever annual report for Stein Roe
Small Company Growth Fund.
Many small-company stocks outperformed large-company stocks during the second
calendar quarter of 1999, as shown on page 3. While we can't say if this is the
beginning of a trend, we are hopeful that more investors will recognize the
enormous growth potential of smaller companies as we enter a new millennium.
The excellent double-digit returns that small-company stocks provided between
March 1999 and June 1999 were overshadowed by substantial weakness earlier in
fiscal 1999. The net result was that both the Fund's returns and the returns of
small-company stocks -- as measured by the unmanaged S&P SmallCap 600 Index --
were weak for the 12 months ended June 30, 1999.
Still, amid adverse market conditions and a repositioning of the Fund's
portfolio to better reflect a small-company stock focus this past winter, Small
Company Growth Fund achieved positive results. The Fund's fiscal 1999 returns
outpaced its benchmark and were slightly less than the average return of funds
that were fully invested in small-company stocks for the entire fiscal year, as
shown on page 3.
On July 16, 1999, William Garrison assumed full responsibility for managing
the Fund's portfolio. Mr. Garrison, who holds an MBA from the University of
Chicago, had co-managed Small Company Growth Fund since September 1998.
Markets Move in Cycles
We know that history has proven that financial markets move in cycles,
depending on factors such as the economy, interest rates, inflation and consumer
confidence. While large-company stocks have done exceptionally well over the
past four years, small-company stocks have outperformed other domestic asset
classes in seven of the past 20 years (see chart on page 8).* The last such
period was 1991 to 1993, a time of economic and political uncertainty for many
Americans.
Growth: Good News for Small Companies
In recent years, advances in technology -- particularly electronic commerce
- -- as well as prudent Federal Reserve monetary policy, have helped fuel one of
the longest and strongest U.S. economic booms since the end of
[PHOTO OF THOMAS W. BUTCH]
<PAGE>
From the President Continued
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World War II. In May 1999, the nation's unemployment rate dropped to 4.2%, a
level not seen since the 1960s.
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I encourage you to look at your investment
in Small Company Growth Fund as you
would an investment in your own business
or property, one that takes time and
commitment to bear fruit.
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We believe current U.S. economic conditions can help many small companies
thrive over the long term. Our nation's sound economic underpinnings can be easy
to forget amid the barrage of daily headlines about the government's latest
report on inflation, market sentiment and the latest short-term change in
interest rates.
Investing in small-company stocks is a long-term affair. A small company's
prospects can change rapidly and its resources are more limited than a large
company, but rapidly growing businesses can offer potentially higher rewards for
patient investors. I encourage you tO look at your investment in Small Company
Growth Fund as you would an investment in your own business or property, one
that takes time and commitment to bear fruit.
On behalf of Stein Roe, I wish to thank you for your investment in Small
Company Growth Fund. I also wish to extend a special note of appreciation to
shareholders of other Stein Roe funds who have decided to allocate a portion of
their investment dollars to Small Company Growth Fund. We will do everything we
can to maintain your continued confidence in Stein Roe.
Sincerely,
[SIGNATURE HERE]
Thomas W. Butch
President
July 19, 1999
*Source: Weisenberger(R). Past performance does not guarantee future results.
Funds that invest in small companies may experience greater volatility.
<PAGE>
Performance Summary
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Cumulative Three- & Six-Month and Average Annual Total Returns
For Periods Ended June 30, 1999
3 6 LIFE OF
MONTHS MONTHS 1 YEAR FUND
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Stein Roe
Small Company Growth Fund 15.02% 4.87% 1.71% 14.74%
S&P SmallCap 600 Index 15.42% 5.04% -2.30% 13.15%
Russell 2000 Index 15.55% 9.28% 1.50% 11.98%
S&P 500 Index 7.05% 12.38% 22.76% 28.32%
Lipper Small-Cap Fund Average 15.56% 8.56% 1.93% 12.11%
Number of Funds In Peer Group 789 777 698 384
Past performance does not guarantee future results. Share price and investment
return may vary, so you may have a gain or loss when you sell shares. The Fund
began operating on 3/25/96 as the Colonial Aggressive Growth Fund and was
reorganized into the Stein Roe Small Company Growth Fund on 2/2/99. As of
6/30/99, the Fund invested at least 65% of its net assets in small-company
stocks. Between 1996 and 1998, the Fund operated primarily as a multicap fund,
and benefited substantially from its holdings in large-company stocks. Stein Roe
considers a company to be small-cap if its market capitalization is less than
90% of the weighted market capitalization of the S&P SmallCap 600 Index. As of
6/30/99, small-cap companies had market capitalizations of less than $1.8
billion. This amount will change as the S&P SmallCap 600 Index changes. Life of
fund performance for Indices and Lipper is from 3/31/96.
Growth of a $10,000 Investment
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March 25, 1996 to June 30, 1999
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Small Company Growth Fund
[LINE CHART HERE]
<TABLE>
<CAPTION>
Lipper
Small Small-Cap
Company S&P Fund Russell
Growth SmallCap Average 2000
Fund 600 Index (384 Funds) Index
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
3/25/96 10000 10000 10000 10000
6/30/96 11300 10521 10767 10500
9/30/96 12110 10858 10966 10536
12/31/96 11549 11475 11265 11084
3/31/97 10658 10838 10551 10511
6/30/97 12671 12802 12317 12215
9/30/97 14023 14872 14328 14032
12/31/97 13851 14412 13628 13562
3/31/98 15639 16007 15098 14927
6/30/98 15403 15291 14474 14231
9/30/98 12427 12095 11388 11363
12/31/98 14938 14223 13529 13217
3/31/99 13621 12944 12731 12500
6/30/99 15667 14940 14656 14443
</TABLE>
Past performance is no guarantee of future results. Share price and investment
return will vary, so you may have a gain or loss when you sell shares. Total
return performance includes changes in share price and reinvestment of income
and capital gains distributions. Chart assumes a $10,000 investment on 3/25/96.
The S&P SmallCap 600 Index is an unmanaged group of small company stocks that
differs from the composition of any Stein Roe fund; it is not available for
direct investment. Source of Lipper data: Lipper, Inc., a monitor of mutual fund
performance.
<PAGE>
Questions & Answers
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An Interview with William Garrison, Portfolio Manager of
Stein Roe Small Company Growth Fund
Q: How did the Fund and the small-cap market perform in fiscal 1999?
Garrison: The Fund provided a return of 1.71% for the 12 months ended June 30,
1999. We outperformed our current benchmark, the unmanaged S&P SmallCap 600
Index, which dropped 2.30% in value during the period. Our results were slightly
lower than the Fund's Lipper peer group average, as shown on page 3.
The small-cap equity market had two distinct phases during the fiscal year.
During the fall of 1998, small-cap stocks as a group lost value and were out of
favor. The low point was Oct. 8, 1998. From the beginning of the fiscal year on
July 1, 1998 through that date, small-cap equities as represented by the S&P 600
fell 32.64%, double the decline of large-cap stocks as represented by the
unmanaged S&P 500 Index. International economic troubles and concerns about
domestic profits during the period caused investors to focus on established
large-company stocks with a reputation for consistent earnings growth.
[PHOTO OF WILLIAM GARRISON]
Fund Data
Investment Strategy
Under normal conditions, Stein Roe Small Company Growth Fund invests at
least 65% of its assets in common stocks of small-cap companies. The Fund
invests in companies that compete in large and growing markets and possess
ready access to capital, leading market share, strong management teams with
ownership interests, and a business strategy designed to fully exploit
future growth opportunities.
Fund Inception:
March 25, 1996
Net Assets:
$9.3 million
Gradually, U.S. equity markets began to revive as the Federal Reserve Board
reduced short-term interest rates by 75 basis points (0.75%) to 4.75%. Global
economic prospects also began to improve. From mid-October through the end of
the fiscal year on June 30, 1999, small-cap stocks performed more in line with
the broader market: the S&P 600's return from Oct. 8, 1998 through June 30, 1999
was 45.04% while the S&P 500's return was 44.45%.
Your Fund -- known as Colonial Aggressive Growth Fund prior to Feb. 3, 1999
- -- began to focus primarily
<PAGE>
Questions & Answers Continued
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on small-cap equities beginning in the fall of 1998. Prior to that time, the
portfolio was a mix of growth stocks of all sizes. The Fund's fiscal 1999 return
benefited from this multicap mix during the first half. The repositioning hurt
results during the first calendar quarter of 1999, but later benefited the Fund
in the second calendar quarter, when small-cap stocks outperformed large-company
stocks, as shown on page 3.
Q: How have you positioned the Fund in fiscal 1999?
Garrison: We've positioned the Fund primarily in smaller-cap companies with
strong growth characteristics. We've increased the number of stocks from 64 to
146 and broadened the portfolio's exposure to different industry groups. This
reflects our desire to manage the greater risks associated with small-cap
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We've increased the number of stocks from 64 to 146 and
broadened the portfolio's exposure to different industry groups.
- --------------------------------------------------------------------------------
investing by maximizing the number of sectors we invest in. In addition to
conducting traditional fundamental research on individual stocks, we use a
number of quantitative processes that help us assess the risk of our portfolio.
We believe our strategy will provide investors with attractive risk-adjusted
returns over the long term.
Q: Can you give some examples of companies where you've found exceptional growth
potential?
Garrison: We realized exceptional growth opportunities in the technology sector
this year. As of June 30, 1999, Inktomi (0.6% of net assets), a company whose
products are helping build the infrastructure for the Internet, had more than
tripled in price since we first bought shares in November 1998. Mercury
Interactive (1.1% of net assets), a company that provides software-testing
products, rose more than 140% between October 1998 and June 30, 1999. Health
care has been another strong area for the Fund, and Visx, a surgical eye laser
producer (0.7% of net assets), has more than doubled since our initial purchase
this February.
Some stocks we bought while they were small-cap stocks have grown in such
dramatic proportion that they have now exceeded the parameters by which a stock
is categorized small-cap. When this happens, we reconsider the stock's inclusion
in the portfolio, and
<PAGE>
Questions & Answers Continued
- --------------------------------------------------------------------------------
consider selling the position to find other small-cap opportunities that have
the potential to repeat the growth pattern.
Q: Obviously there must have been disappointments. What didn't work out?
Garrison: Financial stocks were weak during the first six months of calendar
1999. Investors were concerned that rising interest rates would hurt earnings
prospects. One stock we held as of June 30, 1999 despite weak performance has
been Centura Banks, a North Carolina bank holding company (0.9% of net assets).
We believe that recent investments in technology by the bank will help it expand
revenue and improve its efficiency ratio -- a key measure of bank profitability.
Q: What do you expect for small-cap stocks for the remainder of calendar year
1999?
Garrison: For the balance of calendar year 1999, we expect more investors will
focus on the size of an investment opportunity rather than the size of a
company. We expect
- --------------------------------------------------------------------------------
We expect more investors will focus on the size of an
investment opportunity rather than the size of a company.
- --------------------------------------------------------------------------------
some market volatility surrounding year 2000 issues, and will work diligently to
try to ensure that we avoid any potential related pitfalls.
Past performance is no guarantee of future results. Share price and investment
return will vary so you may have a gain or loss when you sell shares. Holdings
are as of June 30, 1999 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 Index and S&P SmallCap 600 Index are unmanaged groups
of stocks that differ from the composition of any Stein Roe fund; they are not
available for direct investment. Invest ments in small company stocks may
experience greater volatility.
<PAGE>
Fund Highlights
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(All data as of June 30, 1999)
Small Company Growth Fund
Top 10 Equity Holdings (% of Net Assets)
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Alpharma 1.3% CTS 1.3%
Roberts Pharmaceutical 1.3 Jones Pharmaceuticals 1.3
Stillwater Mining 1.3 American Management Systems 1.1
Whittman-Hart 1.3 Hambrecht & Quist Group 1.1
US Freightways 1.3 Barrett Resources 1.1
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- --------------------------------------------------------------------------------
Portfolio Statistics
S&P SMALLCAP
PORTFOLIO 600 INDEX
- --------------------------------------------------------------------------------
Number of Equities 146 600
Dollar-Weighted Median Market
Capitalization (Billions $) $1.2 $1.8
Price/Earnings Ratio 30.2x 22.2x
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Economic Sector Breakdown
[PIE CHART HERE]
Portfolio S&P SmallCap 600 Index
Consumer Cyclicals 18% 21%
Technology 36% 24%
Consumer Noncyclicals 13% 12%
Industrial 13% 17%
Financial 10% 15%
Energy 6% 3%
Utilities 1% 5%
Basic Materials 3% 3%
<PAGE>
Top-Performing Domestic Asset Classes 1979-1998
- --------------------------------------------------------------------------------
While large-company stocks have done exceptionally well over the past four
years, small-company stocks have outperformed other asset classes in seven of
the past 20 years. The last such period was 1991 to 1993.
Year Asset Class Total Return
- --------------------------------------------------------------------------------
1979 Small-Company Stocks 43.1%
1980 Small-Company Stocks 38.6%
1981 U.S. Treasury Bills 14.2%
1982 Long-Term Government Bonds 42.1%
1983 Small-Company Stocks 29.1%
1984 Long-Term Corporate Bonds 16.6%
1985 Large-Company Stocks 31.7%
1986 Long-Term Government Bonds 24.1%
1987 Large-Company Stocks 5.3%
1988 Small-Company Stocks 24.9%
1989 Large-Company Stocks 31.7%
1990 Intermediate-Term Gov't Bonds 9.6%
1991 Small-Company Stocks 46.0%
1992 Small-Company Stocks 18.6%
1993 Small-Company Stocks 18.9%
1994 U.S. Treasury Bills 3.6%
1995 Large-Company Stocks 37.6%
1996 Large-Company Stocks 22.9%
1997 Large-Company Stocks 33.4%
1998 Large-Company Stocks 28.6%
Past performance does not guarantee future results. Source: Weisenberger(R). The
asset classes, small-company stocks, U.S. Treasury bills, long-term government
bonds, long-term corporate bonds, large-company stocks and intermediate-term
government bonds are represented by the following indices: the Russell 2000
Index, U.S. 30-day Treasury Bills Index, Lehman Brothers Long Government Index,
Lehman Brothers Corporate Bond Index, S&P 500 Index and the Lehman Brothers
Intermediate Government Index, respectively. Total return potential and risk
vary with different types of securities. While stocks historically have offered
the highest long-term total return of any asset class, their value may fluctuate
significantly over time. Investments in small companies may experience greater
volatility. Unlike Treasuries and other U.S. government securities, the interest
and principal of corporate bonds are not guaranteed. The above performance is
not intended to be representative of any Stein Roe fund. Asset class returns are
based on index returns. Indices are not available for direct investment and do
not reflect the expenses of running a mutual fund.
<PAGE>
Small Company Growth Fund
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Portfolio of Investments at June 30, 1999
(All amounts in thousands)
Number Market
Common Stocks (91.5%) of Shares Value
- --------------------------------------------------------------------------------
Aerospace and Defense Equipment (1.0%)
Alliant Techsystems (a).............................. 900 $ 78
Orbital Sciences..................................... 800 19
------
97
Airlines (0.8%)
Skywest.............................................. 2,900 72
Auto Parts and Equipment (0.9%)
Tower Automotive (a)................................. 3,100 79
Banks and Savings & Loans (3.5%)
Centura Banks........................................ 1,500 85
Commerce Bancorp..................................... 1,800 77
Cullen Frost Bankers................................. 2,800 77
U.S. Trust Co. of New York........................... 900 83
------
322
Beverages (0.6%)
Canandaigua Wine - Class A (a)....................... 1,000 53
Broadcasting and Media (0.9%)
Jones Intercable - Class A (a)....................... 700 34
Metro Networks (a)................................... 900 48
------
82
Building (1.9%)
Champion Enterprises (a)............................. 1,900 35
D. R. Horton......................................... 2,700 45
Lone Star Industries................................. 1,800 68
Standard Pacific..................................... 2,500 32
------
180
Broadcast Services (0.4%)
TV Guide - Class A (a)............................... 900 33
Business Services (1.4%)
Ha-Lo Industries (a)................................. 2,900 29
Interim Services (a)................................. 1,200 25
Labor Ready (a)...................................... 1,400 46
Paychex.............................................. 1,050 33
------
133
Chemicals - Plastics (0.8%)
Geon Company......................................... 2,300 74
Circuits (2.2%)
Lam Research (a)..................................... 600 28
Micrel (a)........................................... 1,300 96
Vitesse Semiconductor (a)............................ 1,200 81
------
205
<PAGE>
Small Company Growth Fund Continued
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Number Market
of Shares Value
- --------------------------------------------------------------------------------
Commercial Services (2.1%)
Iron Mountain (a).................................... 1,100 $ 31
Lason (a)............................................ 800 40
Plexus (a)........................................... 2,000 60
Profit Recovery Group International (a).............. 1,400 66
------
197
Communications Equipment and Services (2.6%)
Covad Communications (a)............................. 650 35
ITC Deltacom (a)..................................... 1,800 50
Inter-Tel............................................ 1,600 29
Lucent Technologies.................................. 600 40
Radio One (a)........................................ 1,200 56
Uniphase (a)......................................... 200 33
------
243
Computer Hardware, Software, and Services (11.0%)
The Bisys Group (a).................................. 1,700 99
Cisco Systems (a).................................... 600 39
Comverse Technology (a).............................. 850 64
EMC (a).............................................. 400 22
Entrust Technologies (a)............................. 2,100 70
Jack Henry & Associates.............................. 400 16
Kronos (a)........................................... 1,200 55
Macromedia (a)....................................... 2,500 88
Mercury Interactive (a).............................. 2,800 99
Microsoft (a)........................................ 500 45
National Computer Systems............................ 2,200 74
National Instruments (a)............................. 1,500 61
Pixar (a)............................................ 600 26
Sapient (a).......................................... 900 51
Transaction Systems Architects - Class A (a)......... 1,400 55
Veritas Software (a)................................. 400 38
Whittman-Hart (a).................................... 3,800 121
------
1,023
Consulting Services (2.4%)
Ciber (a)............................................ 2,400 46
Comdisco............................................. 900 23
E.W. Blanch Holdings................................. 900 61
Metzler Group (a).................................... 1,100 30
Tetra Tech (a)....................................... 3,900 64
------
224
Data Processing and Management (2.7%)
Acxiom (a)........................................... 2,500 62
American Management Systems (a)...................... 3,300 106
SEI Investments...................................... 900 79
------
247
Diversified Operations (1.2%)
SPS Technologies (a)................................. 1,400 53
Tyco International................................... 600 57
------
110
Educational Institutions (0.9%)
DeVry (a)............................................ 3,800 85
<PAGE>
Small Company Growth Fund Continued
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Number Market
of Shares Value
- --------------------------------------------------------------------------------
Electronic Components (4.5%)
Burr Brown (a)....................................... 1,300 $ 48
C-Cube Microsystems (a).............................. 2,400 76
CTS.................................................. 1,700 119
ETEC Systems (a)..................................... 1,300 43
Gentex (a)........................................... 2,500 70
Novellus Systems (a)................................. 500 34
Qlogic (a)........................................... 200 26
------
416
Fertilizers (0.5%)
Scotts (a)........................................... 900 43
Finance (2.9%)
Hambrecht and Quist Group (a)........................ 2,800 104
Legg Mason........................................... 2,600 100
Prism Financial (a).................................. 3,300 67
------
271
Food Products (1.9%)
J&J Snack Foods (a).................................. 2,200 53
Ralcorp Holdings (a)................................. 2,400 39
Smithfield Foods (a)................................. 1,500 50
Whole Foods Market (a)............................... 700 34
------
176
Health Services and Equipment (6.6%)
Biomatrix (a)........................................ 1,400 30
CYTYC (a)............................................ 3,200 62
Express Scripts - Class A (a)........................ 700 42
Liposome (a)......................................... 4,600 88
Medquist (a)......................................... 1,000 44
Orthodontic Centers of America (a)................... 2,200 31
Patterson Dental (a)................................. 1,600 56
Priority Healthcare - Class B (a).................... 700 24
Renal Care Group (a)................................. 2,100 54
Techne (a)........................................... 2,000 51
Visx (a)............................................. 800 63
Xomed Surgical Products (a).......................... 1,400 68
------
613
Home Furnishings (1.2%)
Ethan Allen Interiors................................ 1,900 72
Mohawk Industries (a)................................ 1,200 36
------
108
Insurance (0.9%)
Mutual Risk Management Limited....................... 2,400 80
Internet (0.9%)
Ask Jeeves (a)....................................... 100 1
At Home - Class A (a)................................ 208 11
Inktomi (a).......................................... 400 53
Northpoint Communications (a)........................ 600 22
------
87
<PAGE>
Small Company Growth Fund Continued
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Number Market
of Shares Value
- --------------------------------------------------------------------------------
Machinery Tools and Products (1.8%)
Applied Power - Class A.............................. 2,600 $ 71
Motivepower Industries (a)........................... 5,500 98
------
169
Manufacturing Services (0.7%)
Sanmina (a).......................................... 800 61
Marketing Services (1.6%)
Advo................................................. 1,500 31
Catalina Marketing (a)............................... 900 83
Harte-Hanks Communications........................... 1,100 30
------
144
Metals (1.3%)
Stillwater Mining (a)................................ 3,700 121
Miscellaneous Manufacturing (1.5%)
Aptargroup........................................... 2,600 78
IDEXX Laboratories (a)............................... 2,800 65
------
143
Networking (0.8%)
Xircom (a)........................................... 2,500 75
Oil and Gas (5.3%)
Barrett Resources (a)................................ 2,700 104
Cal Dive International (a)........................... 2,300 69
Clarcor.............................................. 1,600 31
Devon Energy......................................... 2,500 89
Marine Drilling (a).................................. 1,800 25
New Jersey Resources................................. 1,900 71
Patterson Energy (a)................................. 6,000 59
Santa Fe Snyder (a).................................. 6,740 51
------
499
Pharmaceuticals (5.3%)
Alpharma............................................. 3,500 125
IDEC Pharmaceuticals (a)............................. 1,200 92
Jones Pharmaceuticals................................ 3,000 118
Medimmune (a)........................................ 600 41
Roberts Pharmaceutical (a)........................... 5,000 121
------
497
Power Producers (0.9%)
Calpine (a).......................................... 1,500 81
Printing Services (0.8%)
Consolidated Graphics (a)............................ 1,000 50
New England Business Services........................ 800 25
------
75
Publishing (0.3%)
Hollinger International.............................. 2,800 33
Rental Auto/Equipment (0.2%)
Rent-A-Center (a).................................... 1,000 24
<PAGE>
Small Company Growth Fund Continued
- --------------------------------------------------------------------------------
Number Market
of Shares Value
- --------------------------------------------------------------------------------
Retail (8.5%)
Ames Department Stores (a)........................... 2,200 $ 100
Ann Taylor Stores (a)................................ 1,200 54
Applebees International.............................. 2,300 69
CEC Entertainment (a)................................ 400 17
K-Swiss - Class A.................................... 1,400 65
Linens 'n Things..................................... 2,000 88
The Men's Wearhouse.................................. 1,600 41
99 Cents Only Stores................................. 1,000 50
O'Reilly Automotive.................................. 1,700 86
Ruby Tuesday......................................... 2,100 40
Tuesday Morning...................................... 2,000 51
Williams Sonoma...................................... 1,500 52
Zale................................................. 2,000 80
------
793
Retirement/Aged Care (0.6%)
Sunrise Assisted Living.............................. 1,600 56
Scientific Instruments (0.8%)
Dionex............................................... 1,800 73
Supply Services (0.8%)
G&K Services - Class A............................... 1,400 73
Transportation (3.3%)
American Freightways................................. 1,800 35
Expeditors International Washington.................. 2,700 74
Forward Air.......................................... 600 17
Polaris Industries................................... 1,400 61
U.S. Freightways..................................... 2,600 120
------
307
Wireless Equipment (0.3%)
DSP Communications................................... 900 26
------
Total Common Stocks
(Cost $7,526) (b)................................. 8,503
------
- --------------------------------------------------------------------------------
Short-Term Obligations (15.9%) Par
- --------------------------------------------------------------------------------
Repurchase Agreement (15.9%)
Repurchase agreement with SBC Warburg, dated 06/30/99,
due 07/01/99 at 4.800%, collateralized by a U.S.
Treasury bond maturing in 2020, market value $1,516
(repurchase proceeds $1,476)...................... $1,476 1,476
------
Total Short-Term Obligations......................... 1,476
------
- --------------------------------------------------------------------------------
Total Investments (107.4%)
(Cost $9,002)..................................... 9,979
Other Assets, Less Liabilities (-7.4%)............... (686)
------
Total Net Assets (100%).............................. $9,293
======
- --------------------------------------------------------------------------------
Notes to Portfolio of Investments
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) At June 30, 1999, the cost of investments for financial reporting and
federal income tax purposes was identical. Net unrealized appreciation was
$977, consisting of gross unrealized appreciation of $1,267 and gross
unrealized depreciation of $290.
See accompanying Notes to Financial Statements.
<PAGE>
Small Company Growth Fund
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
June 30, 1999
(All amounts in thousands, except per-share amount)
Assets
Investments at value (cost $7,526)..................... $ 8,503
Short-term obligations ................................ 1,476
--------
9,979
Receivable for:
Investments sold.................................... $ 60
Fund shares sold.................................... 51
Expense reimbursement due from Advisor.............. 39
Dividends........................................... 2
Other.................................................. 6 158
------- --------
Total assets........................................ 10,137
Liabilities
Payable for:
Investments purchased............................... 796
Fund shares repurchased............................. 2
Other.................................................. 46
-------
Total liabilities................................... 844
--------
Net Assets............................................. $ 9,293
========
Shares outstanding (unlimited number authorized)....... 727
========
Net asset value per share........................... $ 12.79
========
Analysis of Net Assets
Capital paid in........................................ $ 8,078
Overdistributed net investment income.................. (42)
Accumulated net realized gain.......................... 280
Net unrealized appreciation ........................... 977
--------
$ 9,293
========
See accompanying Notes to Financial Statements.
<PAGE>
Small Company Growth Fund
- --------------------------------------------------------------------------------
Statement of Operations
For the year Ended June 30, 1999
(All amounts in thousands)
Investment Income
Dividends.............................................. $ 14
Interest............................................... 21
--------
Total Investment Income............................. 35
Expenses
Management fee......................................... $ 36
Administrative fees.................................... 7
Service fee ........................................... 6
Distribution fee - Class B............................. 1
Distribution fee - Class C............................. 1
Transfer agent ........................................ 11
Bookkeeping fee........................................ 26
Trustees fee........................................... 9
Audit fees............................................. 12
Legal fee.............................................. 9
Registration fee....................................... 11
Reports to shareholders................................ 3
Amortization of deferred organization costs............ 29
Other.................................................. 34
--------
195
Fees and expenses waived or borne by the Advisor ...... (120) 75
-------- --------
Net Investment Loss............................. (40)
--------
Net Realized & Unrealized Gain (Loss) On Portfolio Positions
Net realized gain on investments....................... 730
Net change in unrealized appreciation or depreciation
on investments....................................... (277)
--------
Net Gain on Investments........................ 453
--------
Net Increase in Net Assets Resulting from Operations... $ 413
========
See accompanying Notes to Financial Statements.
<PAGE>
Small Company Growth Fund
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
(All amounts in thousands)
Year Ended Year Ended
June 30, June 30,
1999 1998
----------------------
Operations
Net investment loss.................................. $ (40) $ (50)
Net realized gain ................................... 730 256
Net unrealized appreciation (depreciation)........... (277) 610
--------- ---------
Net Increase from Operations...................... 413 816
Distributions:
From net realized gains - Class A.................... (465) (227)
From net realized gains - Class B.................... (47) (23)
From net realized gains - Class C.................... (47) (23)
--------- ---------
(146) 543
------- -------
Fund Share Transactions:
Receipts for shares sold............................. 4,400 8
Value of distributions reinvested.................... -- 227
Cost of shares repurchased........................... (142) (12)
Reorganization of Fund (See Note 6).................. 4,303 --
------- -------
8,561 223
------- -------
Receipts for shares sold - Class A................... 11 8
Value of distributions reinvested - Class A.......... 465 227
Cost of shares repurchased - Class A................. (14) (12)
Exchange of Class A shares (See Note 6).............. (3,601) --
------- -------
(3,139) 223
------- -------
Receipts for shares sold - Class B................... -- --
Value of distributions reinvested - Class B.......... 47 23
Cost of shares repurchased - Class B................. -- --
Termination of Class B shares (See Note 6)........... (351) --
------- -------
(304) 23
------- -------
Receipts for shares sold - Class C................... -- --
Value of distributions reinvested - Class C.......... 47 23
Cost of shares repurchased - Class C................. -- --
Termination of Class C shares (See Note 6)........... (351) --
------- -------
(304) 23
------- -------
Net Increase from Fund Share Transactions............ 4,814 269
------- -------
Total increase (decrease)....................... 4,668 812
Net Assets
Beginning of period.................................. 4,625 3,813
------- -------
End of period (net of overdistributed net investment
income of $42 and $2, respectively) .............. $ 9,293 $ 4,625
======= =======
See accompanying Notes to Financial Statements.
<PAGE>
Small Company Growth Fund
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets Continued
(All amounts in thousands)
Year Ended Year Ended
June 30 June 30,
1999 1998
---------- ----------
Number of Fund Shares
Sold..................................................... 371 --
Issued for distributions reinvested...................... -- --
Repurchased.............................................. (12) --
Reorganization of Fund (See Note 6)...................... 368 --
------- -------
727 --
------- -------
Sold - Class A........................................... 1 1
Issued for distributions reinvested - Class A ........... 39 17
Repurchased - Class A.................................... (1) (1)
Exchange of Class A shares (See Note 6).................. (308) --
------- -------
(269) 17
------- -------
Sold - Class B........................................... -- --
Issued for distributions reinvested - Class B............ 4 2
Repurchased - Class B.................................... -- --
Termination of Class B shares (See Note 6)............... (31)
------- -------
(27) 2
------- -------
Sold - Class C........................................... -- --
Issued for distributions reinvested - Class C............ 4 2
Repurchased - Class C.................................... -- --
Termination of Class C shares (See Note 6)............... (31)
------- -------
(27) 2
------- -------
See accompanying Notes to Financial Statements.
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 1. Organization
Stein Roe Small Company Growth Fund (the "Fund"), formerly Colonial Aggressive
Growth Fund, is a series of Stein Roe Investment Trust (the "Trust"), an
open-end management investment company organized as a Massachusetts business
trust.
Note 2. Significant Accounting Policies
The following summarizes the significant accounting policies of the Fund. 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. Realized gains and losses from investment transactions are reported on an
identified cost basis.
Security Valuations
All securities are valued as of June 30, 1999. 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.
Federal Income Taxes
No provision is made for federal income taxes since the Fund elects to be taxed
as a "regulated investment company" and makes distributions to its shareholders
to be relieved of all federal income taxes.
The Fund intends to utilize provisions of federal income tax law, which allow
it to carry a realized capital loss forward up to eight years following the year
of the loss, and to offset such losses against any future realized gains. At
June 30, 1999, Small Company Growth Fund had no capital loss carryforwards.
<PAGE>
Notes to Financial Statements Continued
- --------------------------------------------------------------------------------
Distributions to Shareholders
The 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 recog
nition 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 Fund pays monthly management and administrative fees to Stein Roe & Farnham
Incorporated (the "Advisor"), an indirect, wholly-owned subsidiary of Liberty
Mutual Insurance Company ("Liberty"), for its services as investment advisor and
administrator.
The Advisor receives a monthly management fee equal to 0.85% annually of the
Fund's average daily net assets. From September 15, 1998 through February 2,
1999, this fee was equal to 0.60% of average daily net assets. From July 1, 1998
through September 14, 1998, Colonial Management Associates, Inc. was the
investment Advisor of the Fund and furnished accounting and other services and
office facilities for a monthly fee equal to 0.85% of the Fund's average net
assets.
The Fund pays a separate monthly administrative fee to the Advisor equal to
0.15% of average daily net assets. From September 15, 1998 through February 2,
1999, Colonial Management Associates, Inc. (CMA), an affiliate of the Advisor,
provided accounting and other services and office facilities for a monthly fee
equal to 0.25% of average net assets.
The Advisor also provides fund accounting services.
The Advisor has agreed to reimburse the Fund to the extent that expenses
exceed 1.50% of average annual net assets. This commitment expires January 31,
2000, subject to earlier termination by the Advisor on 30 days notice to the
Fund. Through February 2, 1999, the Advisor or CMA as applicable, waived fees
and bore certain Fund expenses (exclusive of service fees, distribution fees,
brokerage commissions, interest, taxes and extraordinary expenses, if any) which
exceeded 1.30% annually of the Fund's average net assets.
<PAGE>
Notes to Financial Statements Continued
- --------------------------------------------------------------------------------
Certain officers and trustees of the Trust are also officers of the Advisor.
No remuneration was paid to any trustee or officer of the Trust who is
affiliated with the Advisor.
Note 4. Short-Term Debt
To facilitate portfolio liquidity, the Fund maintains borrowing arrangements
under which it can borrow against portfolio securities. The Fund had no
borrowings during the year ended June 30, 1999.
Note 5. Investment Transactions
The aggregate cost of purchases and proceeds from sales other than short-term
obligations for the year ended June 30, 1999, was $8,391,163 and $4,809,726,
respectively.
<PAGE>
Notes to Financial Statements Continued
- --------------------------------------------------------------------------------
Note 6. Reorganization, Underwriting Discounts, Service and Distribution Fees
The Fund was reorganized into a single class fund as of February 3, 1999. On
that date, Class A shares of the Colonial Aggressive Growth Fund (CAGF) were
exchanged into a single series of the Fund. Class B and Class C shares were
terminated. For the period July 1, 1998 through February 2, 1999, Liberty Funds
Distributor, Inc., (the Distributor), an affiliate of the Advisor, was CAGF's
principal underwriter. The Distributor retained no net underwriting discounts on
CAGF's Class A shares and no con-tingent deferred sales charges on Class A,
Class B or Class C share redemptions.
From July 1, 1998 through February 2, 1999, CAGF operated under a 12b-1 plan,
which required the payment of a service fee to the Distributor equal to 0.25%
annually of CAGF's net assets as of the 20th of each month. The plan also
required the payment of a distribution fee to the Distributor equal to 0.75%
annually of the average net assets attributable to Class B and Class C shares
only. Any CDSC and fees received from the 12b-1 plan were used principally as
repayment to the Distributor for amounts paid by the Distributor to dealers who
sold such shares.
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.
<TABLE>
<CAPTION>
Year ended June 30
-------------------------------------------------------------------------------------------
1998 1997 1996(h)
1999(i) Class A Class B Class C Class A Class B Class C Class A Class B Class C
------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period. $14.390 $ 12.650 $ 12.540 $ 12.540 $ 11.300 $ 11.280 $ 11.280 $ 10.110 $ 10.110 $ 10.110
------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Income From Investment Operations:
Net investment loss (a)(b)............. (0.094) (0.143) (0.244) (0.244) (0.114) (0.200) (0.200) (0.016) (0.036) (0.036)
Net realized and unrealized gain....... 0.194 2.783 2.754 2.754 1.484 1.475 1.475 1.206 1.206 1.206
------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from Investment Operations.... 0.100 2.640 2.510 2.510 1.370 1.275 1.275 1.190 1.170 1.170
------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Less Distributions Declared To
Shareholders:
From net investment income............. -- -- -- -- (0.005) -- -- -- -- --
From net realized gains................ (1.700) (0.900) (0.900) (0.900) (0.015) (0.015) (0.015) -- -- --
------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Distributions Declared to
Shareholders...................... (1.700) (0.900) (0.900) (0.900) (0.020) (0.015) (0.015) -- -- --
------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value - End of period........ $12.790 $ 14.390 $ 14.150 $ 14.150 $ 12.650 $ 12.540 $ 12.540 $ 11.300 $ 11.280 $ 11.280
======= ======== ======== ======== ======== ======== ======== ======== ======== ========
Total return (c)(d).................... 1.71% 21.56% 20.68% 20.68% 12.14% 11.31% 11.31% 11.77%(f)11.57%(f)11.57%(f)
======= ======== ======== ======== ======== ======== ======== ======== ======== ========
Ratios To Average Net Assets:
Expenses (e)........................... 1.52% 1.55% 2.30% 2.30% 1.55% 2.30% 2.30% 1.55%(g) 2.30%(g) 2.30%(g)
Fees and expenses waived or borne by
the Advisor (e)..................... 2.53% 2.21% 2.21% 2.21% 2.57% 2.57% 2.57% 1.38%(g) 1.38%(g) 1.38%(g)
Net investment loss (e)................ (0.78)% (1.04)% (1.79)% (1.79)% (0.99)% (1.74)% (1.74)%(0.58)%(g)(1.33)%(g)(1.33)%(g)
Portfolio turnover .................... 105% 70% 70% 70% 54% 54% 54% 0%(f) 0%(f) 0%(f)
Net assets, end of period (000s)....... $ 9,293 $ 3,867 $ 379 $ 379 $ 3,185 $ 314 $ 314 $ 2,826 $ 282 $ 282
(a) Net of fees and expenses waived or
borne by the Advisor which
amounted to: ....................... $ 0.305 $ 0.301 $ 0.301 $ 0.301 $ 0.297 $ 0.297 $ 0.297 $ 0.038 $ 0.038 $ 0.038
</TABLE>
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(d) Had the Advisor not waived or reimbursed a portion of expenses, total
return would have been reduced.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(f) Not annualized.
(g) Annualized.
(h) The Fund commenced investment operations on March 25, 1996. The activity
shown is from the effective date of registration (March 31, 1996) with the
Securities and Exchange Commission.
(i) On February 3, 1999, Class B and Class C shares were terminated. Please see
Note 6 in Notes to Financial Statements.
<PAGE>
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Trustees of Stein Roe Investment Trust and the Shareholders of Stein Roe
Small Company Growth Fund
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Stein Roe Small Company Growth Fund
(the "Fund"), formerly Colonial Aggressive Growth Fund (a series of Stein Roe
Investment Trust), at June 30, 1999, the results of its operations, the changes
in its net assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and the financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of portfolio positions at June 30, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 11, 1999
<PAGE>
Investment Trust
- --------------------------------------------------------------------------------
Trustees
John A. Bacon, Jr.
Private Investor
William W. Boyd
Chairman and Director, Sterling Plumbing
Group Inc.
Lindsay Cook
Senior Vice President, Liberty Financial
Companies, Inc.
Douglas A. Hacker
Senior Vice President and Chief Financial Officer,
United Airlines
Janet Langford Kelly
Senior Vice President, Secretary and General
Counsel, Sara Lee Corporation
Charles R. Nelson
Van Voorhis Professor of Political Economy,
University of Washington
Thomas C. Theobald
Managing Partner, William Blair Capital Partners
Officers
Thomas W. Butch, President
William D. Andrews, Executive Vice President
Kevin M. Carome, Executive Vice President,
Assistant Secretary
Loren A. Hansen, Executive Vice President
Gary A. Anetsberger, Senior Vice President,
Treasurer
David P. Brady, Vice President
Daniel K. Cantor, Vice President
J. Kevin Connaughton, Vice President
William M. Garrison, Vice President
Erik P. Gustafson, Vice President
James P. Haynie, Vice President
Harvey B. Hirschhorn, Vice President
Timothy Jacoby, Vice President
Gail D. Knudsen, Vice President
Lynn C. Maddox, Vice President
Arthur J. McQueen, Vice President
Nicolette D. Parrish, Vice President,
Assistant Secretary
Gita R. Rao, Vice President
Michael E. Rega, Vice President
Sharlene Thomas, Vice President
Heidi J. Walter, Vice President, Secretary
Janet B. Rysz, Assistant Secretary
Patricia Judge, Controller
Agents and Advisors
Stein Roe & Farnham Incorporated
Investment Advisor
State Street Bank and Trust Company
Custodian
Liberty Funds Services Inc.
Transfer Agent
Bell, Boyd & Lloyd
Legal Counsel to the Trust
PricewaterhouseCoopers LLP
Independent Accountants
<PAGE>
The Stein Roe Mutual Funds
Fixed Income Funds
Cash Reserves Fund
Municipal Money Market Fund
Intermediate Municipals Fund
Managed Municipals Fund
High-Yield Municipals Fund
Intermediate Bond Fund
Income Fund
High Yield Fund
Equity Funds
Balanced Fund
Growth & Income Fund
Disciplined Stock Fund*
Growth Stock Fund
Growth Investor Fund
Young Investor Fund
Large Company Focus Fund
Midcap Growth Fund**
Capital Opportunities Fund
International Fund
Small Company Growth Fund
* Formerly Special Fund
** Formerly Growth Opportunities Fund
Stein Roe Mutual Funds
P.O. Box 8900
Boston, MA 02205-8900
Financial Advisors call: 800-322-0593
Shareholders call: 800-338-2550
www.steinroe.com
In Chicago, visit our Fund Center at One South Wacker Drive
Liberty Funds Distributor, Inc.
SC11A 8/99
