Stein Roe Mutual Funds
Semiannual Report
March 31, 1999
Photo of: Hands on Globe.
Stein Roe Equity Funds
International Funds
International Fund
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 international markets and investing
Questions & Answers............................................... 4
International Fund -- An interview with Portfolio Manager
Gita Rao
Portfolios of Investments......................................... 9
A complete list of investments with market values
Financial Statements.............................................. 13
Statements of assets and liabilities, operations and
changes in net assets
Notes to Financial Statements..................................... 19
Financial Highlights.............................................. 22
Selected per-share data
Must be preceded or accompanied by a prospectus.
<PAGE>
Photo of: Thomas W. Butch
From the President
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To Our Shareholders
This past autumn and winter was a critical time for world equity markets.
Plagued by last summer's financial crises in Asia, Latin America and Russia, the
international financial community increased monetary liquidity to ward off a
global recession. The central banks of more than a dozen countries followed the
U.S. Federal Reserve Board's actions last fall by reducing interest rates.
Rate reductions combined with financial support provided by the International
Monetary Fund helped restore investor confidence. As a result, many of last
year's most downtrodden markets--including Japan, Hong Kong, Singapore, Korea,
Malaysia and Russia--bounced back to recoup much of their year-long losses.
I am pleased to report that for the six months ended March 31, 1999, Stein
Roe International Fund delivered strong performance that outpaced the results
provided by the average international mutual fund as shown on page three. On the
pages that follow, Gita R. Rao, International Fund's portfolio manager, reviews
the portfolio's performance and positioning, and provides her outlook for world
markets for the balance of fiscal 1999.
Challenges Await
As I write this letter, the military and refugee crisis in Kosovo has put a
strain on European financial markets. Currency analysts report that regional
instability has prompted some investors to move investment dollars to the United
States. The new euro has fallen sharply in value since its introduction on Jan.
1, 1999.
At this time we believe it is important to reflect on the lessons of history.
Exactly 50 years ago this May, U.S. resolve contained communism in Europe
through the Berlin Airlift. Under the threat of being shot out of the sky, U.S.
warplanes brought food and medicine to the people of East Berlin after Stalin
blockaded the city.
Today a new generation of Europeans and Americans are confronted with the
challenges of assisting a war-torn people, stopping barbarous aggression and
creating a climate where people can look beyond ideology and hate. It's clear to
us that the level of courage and wisdom the United States and our NATO allies
now display will ultimately shape the economic future not just of Eastern
Europe, but the world over.
Ten years after the Berlin Wall was torn down, much work remains to be done
to bring Eastern Europe into the economic and political mainstream, and many
painful setbacks have occurred, generating much cynicism. Still, a lot of
progress has been made. Poland, Hungary and the Czech Republic are now part of
NATO, have equity markets and relatively free economies.
- --------------------------------------------------------------------------------
It's clear to us that the level of courage and wisdom the United States and our
NATO allies now display will ultimately shape the economic future not just of
Eastern Europe, but the world over.
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In the short run, economic growth appears to be slowing in Europe, and that's
a source of concern for us as investors. But the Continent's long-term promise
remains bright, in our view. Over the next few years, we think investors may see
more cross-border business mergers such as DaimlerChrysler and BP Amoco, and
that such a trend may ultimately help reduce the vestiges of nationalism,
enhancing global stability and growth.
Asian Investors Breathe Easier
Elsewhere in the world, we see the groundwork in place for a global economic
recovery. In fact, overseas investors have recently been directing more
investment dollars into Asia's markets based on positive news of corporate
restructurings. As events unfold along the Pacific Rim, we will attempt to
provide consistent returns while being mindful of the risks of international
investing.
On a positive note, the Bank of Japan's April monthly review of economic and
financial developments stated that Japan's economy "appears to have stopped
deteriorating" and that "the market's anxiety about li-quidity and credit risks
of Japanese banks seems to have subsided."
Amid the challenges that lay ahead in the new millennium, we remain committed
to making intelligent global investments and taking sensible risks. We know you
and your families have worked hard for your money. As we have since 1949, all of
us at Stein Roe will do everything we can to help your mutual fund investments
work hard for you.
Sincerely,
/s/Thomas W. Butch
Thomas W. Butch
President
April 16, 1999
<PAGE>
Fund Performance
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Six-Month Cumulative and Average Annual Total Returns
Periods Ended March 31, 1999
SIX ONE FIVE LIFE
MONTHS YEAR YEARS OF FUND+
- --------------------------------------------------------------------------------
Stein Roe
International Fund 18.69% -2.84% 4.76% 4.18%
Morgan Stanley EAFE Index 22.34% 6.06% 8.75% 7.67%
Lipper International
Fund Average 18.22% 0.02% 7.94% 7.00%
Number of Funds in
Peer Group 590 558 165 151
- --------------------------------------------------------------------------------
+ Fund began operating on 3/1/94.
Investment Comparison
Growth of a $10,000 Investment
Stein Roe International Fund
Line Chart:
International Fund MSCI EAFE Lipper International
Index Fund Average
(151 Funds)
3/1/94 10000 10000 10000
3/31/95 9769 10608 9769
3/31/96 11181 11916 11515
3/31/97 11871 12089 12495
3/31/98 12987 14338 14841
3/31/99 12619 14232 14553
- --------------------------------------------------------------------------------
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 includes changes in share price and reinvestment of income and capital
gains distributions. The above illustration assumes a $10,000 investment on
March 1, 1994, and reinvestment of income and capital gains distributions. The
MSCI Europe Australasia Far East Index is an unmanaged group of securities that
differs from the composition of any Stein Roe fund; it is not available for
direct investment. Foreign investing involves market, political, currency and
accounting risks not associated with domestic securities. The Lipper
international fund average represents an average total return for mutual funds
with similar investment objectives as the Fund (peer group) as calculated by
Lipper, Inc.
<PAGE>
Photo of:: Gita R. Rao
Q&A
- --------------------------------------------------------------------------------
An Interview with Gita R. Rao, Portfolio Manager of Stein Roe International
Fund and SR&F International Portfolio
On October 26, 1998, Gita R. Rao was named the portfolio manager for
International Fund and SR&F International Portfolio. Ms. Rao has eight years of
investment experience that includes managing global and international portfolios
for Colonial Management Associates, Inc. since 1995. She holds an MBA degree
from the Indian Institute of Management and master of science and doctoral
degrees from the University of Rochester.
Q: How did the Fund perform between October 1998 and March 1999?
Rao: The Fund's 18.69% total return for the six months ended March 31, 1999,
outpaced the results provided by the average international fund. The unmanaged
Morgan Stanley Capital International Europe, Australasia, Far East (MSCIEAFE)
Index rose 22.34% for the period.
Q: Was there much of a difference in performance in the first quarter of 1999
compared to last fall?
Rao: The Fund had a total return of 17.81% between October and the end of
December, but we lost steam in the first quarter, returning less than 1%. The
MSCI EAFE Index had similar results. Part of the reason was a rise in the value
of the U.S. dollar, particularly against the Japanese yen in early 1999. The yen
showed astonishing strength, appreciating 24% in U.S. dollar terms during the
fourth quarter. This translated into higher dollar-based returns for the Fund--
as well as the MSCI EAFE Index--given that Japan then represented the
portfolio's second largest country allocation (16.1% of net assets as of March
31).
In the first quarter, the yen weakened substantially. At the same time,
Europe's new unified currency, the euro, declined roughly 8% in U.S. dollar
terms through the end of March due to stronger than expected U.S. economic
growth and weakening economic growth in Europe. These currency losses hurt the
Fund's per-formance given its weighting in Japan and in established and emerging
European markets (approximately 70% of net assets).
<PAGE>
Q: What steps has Japan taken to improve its economy?
Rao: In October, Japan's parliament approved a plan to inject 60 trillion yen
($506 billion) into the country's failed banking system. The plan uses
taxpayers' money to recapitalize the banks, thus enabling banks to make new
loans despite their enormous debts. In exchange for public funding, the banks
agreed to restructure by cutting costs and improving lending standards.
Since Japan enacted the plan, the credit crunch that made it difficult for
small and mid-sized companies to borrow money has eased somewhat. We have also
seen signs that Japan's economy is stabilizing. However, we don't think Japan is
out of the woods yet and it remains to be seen whether a full-scale recovery can
be achieved.
Q: Where did the Fund invest?
Rao: Among the nearly 30 countries represented in the portfolio, the United
Kingdom was the Fund's largest country allocation at the end of March. We
increased our weighting from 12.1% of net assets in September to 19.3% of net
assets at March 31, and this helped perform-ance. This repositioning brought the
Fund's UK weighting closer in line with that of the MSCI EAFE Index (22.1% as of
March 31). One of the Fund's top performing stocks was UK-based Colt Telecom
Group (0.9% of net assets); it outperformed the market during the first quarter
of 1999.
Japan and France (16.1% and 11.4% of net assets, respectively) were the
Fund's other largest country allocations. We decreased the Fund's weightings in
France, as well as Germany and Italy, based on our expectations for slower
economic growth in Europe and concerns that companies may be unable to deliver
earnings in such an environment.
Q: Did you invest in any markets that were not previously represented in the
portfolio?
Rao: Since September, we invested in Portugal and Spain (4.6% and 0.8% of net
assets, respectively). We like these smaller countries in Western Europe because
they have lower labor costs. In part because they have less government
bureaucracy, these countries are economically more nimble than some larger
European nations like France, Italy and Germany.
Q: Did you alter the Fund's holdings in any particular industries?
Rao: We had modest expectations for international growth since last fall, and we
focused on industries that are not as sensitive to the ups and downs of a
country's economy. In our view, telecommunications and retail companies fit that
bill. We added new positions in those sectors, including three UK-based
companies: Vodafone Group, one of the largest cellular providers in the world,
BP Amoco and Dixon's, a retail store operator (1.1% each of net assets.)
<PAGE>
Q: What is your outlook for established and emerging markets?
Rao: We are concerned that slowing growth in core European countries,
particularly in Germany, could create significant economic problems across the
continent. If U.S. growth slows, some international companies that export their
products to the United States may face reduced demand.
We are watching carefully for signs that Asia's economies are stabilizing. We
think this has begun. If a recovery develops, and if oil prices continue to
rise, this may provide a floor for many commodity-based emerging markets to gain
strength. When this happens, we expect to reallocate assets from more defensive
sectors (telecommunications, retail and insurance) into more economically
sensitive ones.
Past performance is no guarantee of future results. Total return performance
includes changes in share price and reinvestment of income and capital gains
distributions. Share price and investment return will vary, so you may have a
gain or loss when you sell shares. Portfolio holdings are as of March 31, 1999
and are subject to change. The MSCI EAFE Index is an unmanaged group of stocks
not associated with any Stein Roe fund; it is not available for direct
investment. Foreign investing involves market, political, currency and
accounting risks not associated with domestic securities. Emerging market
investing also involves these risks, and emerging market equities are generally
more volatile and less liquid than securities in either the U.S. or countries
with established equity markets.
World's Top Performing/Worst Performing Stock Markets
Sept. 30, 1998 to March 31, 1999
South Korea (Korea Composite Index) 126.1%
Russia (Russian Trading System Index) 83.4%
Philippines (Philippines Composite Index) 82.0%
Indonesia (Jakarta Composite Index) 77.3%
Finland (HEX 20 Index) 59.7%
- -------------------------------------------------------------------
China (Shenzhen B Index) -24.2%
Denmark (Borsen BMCX Index) -12.8%
Czech Republic (Prague Stock Exch.) -8.3%
Panama (Panama Stock General Index) -7.1%
Colombia (Colombia Stock Market) -3.3%
Past performance is no guarantee of future results. Each above index is an
unmanaged group of securities that differs from the composition of any Stein
Roe fund; none are available for direct investment. Returns shown are in U.S.
dollars and include reinvestment of dividends, if any. Source: Bloomberg
Business News.
<PAGE>
Fund Highlights
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SR&F International Portfolio
Top 10 Equity Holdings (% of Net Assets)
- --------------------------------------------------------------------------------
Banque Nationale de Paris 2.6% Vivendi 1.8%
Total S.A. 2.6 Koninklijke Phillips Electronic 1.8
SmithKline Beecham 2.3 Banca Popolare di Milano 1.8
Michelin 2.1 Alcatel 1.8
Telecom Italia 1.9 Olivetti 1.7
- --------------------------------------------------------------------------------
Total 20.4%
- --------------------------------------------------------------------------------
Equity Portfolio Highlights
MSCI
PORTFOLIO EAFE INDEX
- --------------------------------------------------------------------------------
Number of Holdings 119 1,028
Dollar Weighted Median
Market Capitalization ($ Mil) 6,965 23,522
Pie Chart:
Economic Sector Breakdown
As of March 31, 1999
Equity Portfolio MSCI EAFE INDEX
Capital Equipment 18% 9%
Consumer Goods 11% 22%
Energy 11% 11%
Financial 20% 25%
Materials 7% 6%
Multi-Industry 2% 1%
Services 31% 26%
<PAGE>
Fund Highlights Continued
- --------------------------------------------------------------------------------
Country Allocations
International Fund MSCI EAFE Index
United Kingdom 19.3% 22.1%
Japan 16.1% 23.1%
France 11.4% 9.3%
Netherlands 7.2% 5.9%
Germany 5.5% 9.5%
Italy 5.4% 5.0%
Portugal 4.6% 0.6%
Sweden 4.4% 2.7%
Finland 3.6% 1.8%
Switzerland 3.5% 7.3%
South Korea 3.0%
Norway 3.0% 0.4%
Brazil 2.3%
Argentina 2.2% 1.6%
Hong Kong 1.0% 2.1%
Spain 0.8% 3.0%
Australia 0.8% 2.8%
Mexico 0.7%
Philippines 0.6%
Malaysia 0.2%
Thailand 0.2%
Indonesia 0.2%
New Zealand 0.1% 0.2%
Belgium 0.1% 0.1%
Other Assets 3.8%
Note: Holdings are disclosed as a percentage of SR&F International Portfolio's
total net assets. The MSCI EAFE Index is an unmanaged group of international
securities that differs from the composition of any Stein Roe fund; it is not
available for direct investment.
<PAGE>
SR&F International Portfolio
- --------------------------------------------------------------------------------
Portfolio of Investments at March 31, 1999
(Dollar amounts in thousands)
(Unaudited)
NUMBER MARKET
Equity Securities (96.2%) OF SHARES VALUE
- --------------------------------------------------------------------------------
Argentina (2.2%)
Telecom Argentina SA ADRs............................ 32,700 $ 897
YPF Sociedad Anonima ADRs............................ 54,600 1,723
--------
2,620
Australia (0.8%)
Brierley Investments Limited......................... 1,824,883 452
Reinsurance Australia................................ 401,009 473
--------
925
Belgium (0.1%)
Fortis (B) CVG....................................... 12,992 60
Fortis (B) Strips VVPR (a)........................... 116,928 1
--------
61
Brazil (2.3%)
Embratel Participacoes ADRs.......................... 33,400 557
Tele Celular Sul Participacoes ADRs.................. 3,340 64
Tele Centro Oeste Cel ADRs........................... 11,133 41
Tele Centro Sul Participacoes ADRs................... 6,680 309
Tele Leste Celular Participacoes ADRs................ 668 21
Tele Nordeste Celular Participacoes ADRs............. 1,670 37
Tele Norte Celular Participacoes ADRs................ 668 20
Tele Norte Leste Part ADRs........................... 33,400 515
Tele Sudeste Celular Part ADRs....................... 6,680 135
Telebras ADRs........................................ 33,400 5
Telemig Celular Participacoes ADRs................... 1,670 44
Telesp Celular Participacoes ADRs.................... 13,360 280
Telesp Participacoes SA ADRs......................... 33,400 689
--------
2,717
Finland (3.6%)
Enso, R shares ...................................... 157,600 1,562
Kemira .............................................. 38,300 239
Merita, A shares..................................... 245,400 1,312
Metsa-Serla, B shares............................... 164,500 1,205
--------
4,318
France (11.4%)
Alcatel ............................................. 18,466 2,119
Banque Nationale de Paris............................ 35,977 3,125
Michelin, B shares................................... 56,850 2,545
Moulinex (a)......................................... 49,300 537
Vivendi.............................................. 8,780 2,156
Vivendi warrants (a)................................. 17,673 43
Total, B shares...................................... 24,896 3,061
--------
13,586
Germany (5.5%)
DaimlerChrysler..................................... 13,050 1,133
Deutsche Bank........................................ 28,550 1,466
Henkel KGaA
Preferred shares.................................. 16,500 1,209
MAN ................................................. 46,000 1,286
Mannesmann .......................................... 11,440 1,458
--------
6,552
<PAGE>
SR&F International Portfolio Continued
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NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
Hong Kong (1.0%)
Companion Building Materials Holdings................ 11,118,752 $ 128
Hong Kong Ferry...................................... 633,000 662
Vitasoy International Holdings....................... 1,530,455 444
--------
1,234
Indonesia (0.2%)
Charoen Pokphand Indonesia........................... 1,037,500 18
Ever Shine Textile (a)............................... 2,019,688 47
Matahari Putra Prima (a)............................. 6,083,000 158
--------
223
Italy (5.4%)
Banca Popolare di Milano............................. 229,000 2,122
Olivetti (a)......................................... 642,320 2,002
Telecom Italia, savings shares....................... 390,825 2,320
--------
6,444
Japan (16.1%)
Bank of Tokyo Mitsubishi Ltd......................... 95,000 1,305
Bridgestone ......................................... 52,000 1,321
Canon ............................................... 45,000 1,109
Daiwa House Industry................................. 104,000 1,183
Honda Motor.......................................... 27,000 1,215
Ito-Yokado........................................... 26,000 1,667
JF Japan OTC Fund (a)................................ 840 515
Kaneshita Construction............................... 43,000 242
KAO Corporation...................................... 31,000 682
Murata Manufacturing................................. 24,000 1,272
Nichiei.............................................. 6,000 536
Nippon Telegraph & Telephone......................... 107 1,044
NTT Mobile Communication Network..................... 25 1,231
Promise.............................................. 34,800 1,833
Sony ................................................ 8,000 737
Sumitomo Heavy Industries............................ 573,000 1,229
Tokyo Style.......................................... 130,000 1,313
World Equity Benchmark Shares - Japan Index Series... 72,300 832
--------
19,266
Malaysia (0.2%)
IOI Properties (b)................................... 298,000 257
Mexico (0.7%)
Grupo Carso, series A1............................... 198,000 813
Netherlands (7.2%)
Fortis Amev.......................................... 46,858 1,795
Koninklijke Ahold NV................................. 17,300 662
Koninklijke Philips Electronics ADRs................. 26,000 2,143
Koninklijke Sphinx Gustavsberg (a)................... 52,427 291
KPN.................................................. 43,271 1,718
TNT Post Groep ...................................... 43,710 1,314
Vendex NV............................................ 26,700 643
--------
8,566
New Zealand (0.1%)
Brierley Investments................................. 560,000 138
Norway (3.0%)
Helicopter Services Group............................ 113,800 660
Norsk Hydro ......................................... 39,400 1,600
Saga Petroleum ...................................... 122,700 1,337
--------
3,597
<PAGE>
SR&F International Portfolio Continued
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
Philippines (0.6%)
Metro Pacific........................................ 11,451,460 $ 556
Southeast Asia Cement Holdings (a)................... 15,753,900 211
--------
767
Portugal (4.6%)
Banco Comercial Portugures .......................... 32,100 968
Banco Pinto & Sotto Mayor ........................... 50,600 996
Cimpor Cementos...................................... 30,700 857
Jeronimo Martins .................................... 21,500 765
Portugal Telecom ADRs................................ 25,057 1,098
Telecel Comunicacaoes Pessoais....................... 5,300 842
--------
5,526
South Korea (3.0%)
Samchully ........................................... 31,443 846
Samsung Electronics
GDRs.............................................. 6,834 280
Ordinary shares................................... 6,428 498
Preferred shares.................................. 59,374 1,884
SK Telecom........................................... 110 96
--------
3,604
Spain (0.8%)
Centros Comerciales Continente ...................... 34,400 955
Sweden (4.4%)
Asticus (a).......................................... 95,650 1,344
Avesta-Sheffield..................................... 225,900 862
Biora ADRs (a)....................................... 29,100 382
Diligentia........................................... 185,900 1,463
SSAB, B shares....................................... 94,475 1,155
--------
5,206
Switzerland (3.5%)
Bucher Holding....................................... 1,651 1,360
Danzas Holding....................................... 2,855 1,050
Novartis............................................. 1,118 1,812
--------
4,222
Thailand (0.2%)
IFCT................................................. 851,100 266
United Kingdom (19.3%)
Allied Irish Bank.................................... 38,400 662
Allied Zurich ....................................... 80,000 1,064
Billiton ............................................ 91,600 220
BG .................................................. 279,264 1,640
BP Amoco ADRs........................................ 13,000 1,312
British American Tobacco............................. 116,000 962
Carlton Communications............................... 83,000 813
Celsis International (a)............................. 551,405 182
Centrica (a)......................................... 618,000 1,091
Colt Telecom Group................................... 62,000 1,094
CRH.................................................. 33,300 571
Dixons Group......................................... 61,000 1,286
GKN.................................................. 73,000 1,113
Inchcape............................................. 835,002 1,911
Lloyds TSB Group..................................... 80,000 1,230
<PAGE>
SR&F International Portfolio Continued
- --------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
United Kingdom (19.3%) (continued)
Powerscreen International ........................... 514,916 $ 1,236
Racal Electronics.................................... 261,300 1,678
SmithKline Beecham .................................. 189,235 2,727
Tesco ............................................... 348,000 931
Vodafone Group....................................... 68,000 1,268
--------
22,991
--------
Total Equity Securities
(Cost $107,973)................................... 114,854
- --------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS (3.1%)
United States (3.1%)
Repurchase Agreement (3.1%)
Warburg Repurchase Agreement 4.900% 4/1/99
(Cost $3,699)..................................... 3,699 3,699
Total Investments (99.3%)
(Cost $111,672) (c)............................... 118,553
Other Assets, Less Liabilities (0.7%)................ 779
--------
Total Net Assets (100.0%)............................ $119,332
========
- --------------------------------------------------------------------------------
Notes to Portfolio of Investments
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Security is illiquid. At March 31, 1999 the value of this security was 0.2
percent of total net assets.
(c) At March 31, 1999, the cost of investments for federal income tax purposes
was $111,781. Net unrealized appreciation was $6,772, consisting of gross
unrealized appreciation of $27,336 and gross unrealized depreciation of
$20,564.
See accompanying Notes to Financial Statements.
<PAGE>
Stein Roe International Fund
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
March 31, 1999
(All amounts in thousands, except per-share data)
(Unaudited)
Assets
Investments in SR&F International Portfolio, at value .......... $ 119,226
Other assets ................................................... 117
Receivable for fund shares sold ................................ 1
---------
Total assets ................................................ 119,344
---------
Liabilities
Payable for fund shares redeemed ............................... 2,106
Payable to investment adviser and transfer agent ............... 37
Other liabilities .............................................. 144
---------
Total liabilities ........................................... 2,287
---------
Net assets .................................................. $ 117,057
=========
Analysis of Net Assets
Accumulated overdistributed net investment income .............. (803)
Accumulated net realized loss on investments ................... (435)
Net unrealized appreciation on investments and foreign
currency translations ....................................... 6,831
---------
Net assets .................................................. $ 117,057
=========
Shares outstanding (unlimited number authorized) ............... 10,870
=========
Net asset value per share ...................................... $ 10.77
=========
See accompanying Notes to Financial Statements.
<PAGE>
Stein Roe International Fund
- --------------------------------------------------------------------------------
Statement of Operations
For the Six Months Ended March 31, 1999
(All amounts in thousands)
(Unaudited)
Investment Income
Dividends allocated from SR&F International Portfolio ............ $ 448
Interest allocated from SR&F International Portfolio ............. 106
--------
554
Foreign taxes withheld allocated from
SR&F International Portfolio .................................. (49)
--------
Total investment income .......................................... 505
--------
Expenses
Expenses allocated from SR&F International Portfolio ............. 621
Transfer agent fees .............................................. 156
Administrative fees .............................................. 91
SEC and state registration fees .................................. 19
Accounting fees .................................................. 13
Audit and legal fees ............................................. 9
Trustees' fees ................................................... 7
Custodian fees ................................................... 1
--------
Total expenses ................................................ 917
--------
Net investment income ......................................... (412)
--------
Realized and Unrealized Gains (Losses) on Investments
Net realized gain on investments allocated from SR&F
International Portfolio ....................................... 7,963
Net realized loss on foreign currency transactions allocated
from SR&F International Portfolio ............................. (23)
--------
Net realized gain ............................................. 7,940
Net change in unrealized appreciation or depreciation on
investments and foreign currency translations ................. 13,396
--------
Net gain on investments .......................................... 29,276
--------
Net Increase in Net Assets Resulting from Operations ............. $ 20,924
========
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
Stein Roe International Fund
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
(All amounts in thousands)
<CAPTION>
(Unaudited)
Six Months Year Ended
Ended March 31, September 30,
1999 1998
--------- ---------
<S> <C> <C>
Operations
Net investment income (loss) ....................................... $ (412) $ 919
Net realized gain (loss) on investments and
foreign currency transactions ................................... 7,940 (7,353)
Net change in unrealized appreciation or depreciation on
investments and foreign currency translations ................... 13,396 (18,814)
--------- ---------
Net increase (decrease) in net assets resulting
from operations ............................................... 20,924 (25,248)
--------- ---------
Distributions to Shareholders
Distributions from net investment income ........................... (1,136) (1,450)
Distributions from net capital gains ............................... -- (8,026)
--------- ---------
Total distributions to shareholders ............................. (1,136) (9,476)
--------- ---------
Share Transactions
Subscriptions to fund shares ....................................... 61,041 61,513
Value of distributions reinvested .................................. 777 7,003
Redemptions of fund shares ......................................... (78,793) (85,636)
--------- ---------
Net decrease from share transactions ............................ (16,975) (17,120)
--------- ---------
Net increase (decrease) in net assets ........................... 2,813 (51,844)
Total Net Assets
Beginning of period ................................................ 114,244 166,088
--------- ---------
End of period ...................................................... $ 117,057 $ 114,244
========= =========
Undistributed (Overdistributed) Net Investment Income .............. $ (803) $ 745
========= =========
Analysis of Changes in Shares of Beneficial Ownership
Subscriptions to fund shares ....................................... 5,858 5,773
Issued in reinvestment of distributions ............................ 76 738
Redemptions of fund shares ......................................... (7,538) (8,127)
--------- ---------
Net decrease in fund shares ..................................... (1,604) (1,616)
Shares outstanding at beginning of period .......................... 12,474 14,090
--------- ---------
Shares outstanding at end of period ................................ 10,870 12,474
========= =========
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
SR&F International Portfolio
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
March 31, 1999
(All amounts in thousands)
(Unaudited)
Assets
Investments, at market value (cost $111,672) ...................... $118,553
Dividends receivable .............................................. 814
Receivable for investments sold ................................... 74
Cash .............................................................. 1
--------
Total assets ................................................... 119,442
--------
Liabilities
Payable for investments purchased ................................. 4
Payable to investment adviser ..................................... 99
Other liabilities ................................................. 7
--------
Total liabilities .............................................. 110
--------
Net assets applicable to investors' beneficial interest ........ $119,332
========
See accompanying Notes to Financial Statements.
<PAGE>
SR&F International Portfolio
- --------------------------------------------------------------------------------
Statement of Operations
For the Six Months Ended March 31, 1999
(All amounts in thousands)
(Unaudited)
Investment Income
Dividends .......................................................... $ 448
Interest ........................................................... 106
--------
554
Foreign taxes withheld ............................................. (48)
--------
Total investment income ......................................... 506
--------
Expenses
Management fees .................................................... 430
Custodian fees ..................................................... 56
Administrative fees ................................................ 54
Accounting fees .................................................... 14
Trustees' fees ..................................................... 12
Audit and legal fees ............................................... 5
Transfer agent fees ................................................ 3
Other .............................................................. 48
--------
Total expenses .................................................. 622
--------
Net investment loss ............................................. (116)
--------
Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency Transactions
Net realized gain on investments ................................... 7,869
Net realized loss on foreign currency transactions ................. (23)
--------
Net gain ........................................................... 7,846
Net change in unrealized appreciation or depreciation on
investments and foreign currency translations ................... 13,532
--------
Net gain on investments and foreign currency transactions ....... 21,378
--------
Net Increase in Net Assets Resulting from Operations ............... $ 21,262
========
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
SR&F International Portfolio
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
(All amounts in thousands)
<CAPTION>
(Unaudited)
Six Months Year Ended
Ended March 31, September 30,
1998 1997 (a)
--------- ---------
<S> <C> <C>
Operations
Net investment income (loss) ......................................... $ (116) $ 1,687
Net realized gain (loss) on investments and foreign
currency transactions ............................................. 7,846 (7,697)
Net change in unrealized appreciation or depreciation
on investments and foreign currency translations .................. 13,532 (18,940)
--------- ---------
Net increase (decrease) in net assets resulting
from operations ................................................. 21,262 (24,950)
--------- ---------
Transactions in Investors' Beneficial Interest
Contributions ........................................................ 34,305 39,808
Withdrawals .......................................................... (50,945) (66,578)
--------- ---------
Net decrease from transactions in investors'
beneficial interest ............................................. (16,640) (26,770)
--------- ---------
Net increase (decrease) in net assets ............................. 4,622 (51,720)
Total Net Assets
Beginning of period .................................................. 114,710 166,430
--------- ---------
End of period ........................................................ $ 119,332 $ 114,710
========= =========
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
Notes to Financial Statements
(All amounts in thousands) (Unaudited)
Note 1. Organization
Stein Roe International Fund (the "Fund") is a series of Stein Roe Investment
Trust (the "Trust"), an open-end management investment company organized as a
Massachusetts business trust. International Fund invests substantially all of
its assets in SR&F International Portfolio (the "Portfolio"), which seeks
long-term growth by investing primarily in the stocks of large foreign
companies.
The Portfolio is a series of SR&F Base Trust, a Massachusetts common law
trust organized under an Agreement and Declaration of Trust dated August 23,
1993. The Portfolio commenced operations on February 3, 1997. At commencement,
Stein Roe International Fund contributed $132,942 in securities and other assets
in exchange for beneficial ownership of the Portfolio. The Portfolio allocates
income, expenses, realized and unrealized gains and losses to each investor on a
daily basis, based on their respective percentage of ownership. At March 31,
1999, Stein Roe International Fund owned 99.9 percent, of the Portfolio.
Note 2. Significant
Accounting Policies
The following summarizes the significant accounting policies of the Fund and the
Portfolio. These policies are in conformity with generally accepted accounting
principles, which require management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
The books and records of the Fund and Portfolio are maintained in
U.S. dollars.
Investment Transactions and Investment Income
Investment transactions are accounted for on trade date. Dividend income is
recorded on the ex-dividend date, and interest income is recorded on the accrual
basis. Interest income includes discount accretion on fixed income securities.
Realized gains and losses from investment transactions are reported on an
identified cost basis.
Security Valuations
All securities are valued as of March 31, 1999. Securities are valued at,
depending on the security involved, the last reported sales price, last bid or
asked price, or the mean between the last bid and asked prices as of the close
of the appropriate exchange or other designated time. A security that is listed
or traded on more than one exchange is valued at the quotation on the exchange
determined to be the primary exchange for such security. Securities and other
assets for which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the Board of
Trustees.
Currency Translations
For purposes of valuation, assets and liabilities are translated into U.S.
dollars using that day's currency exchange rates that represent the midpoint
between the bid and asked rates. Purchases and sales of securities are
translated into U.S. dollars using the prevailing exchange rate on the dates of
such transactions. The effect of changes in foreign exchange rates on realized
and unrealized security gains and losses is reflected as a component of such
gains and losses.
Forward Currency Exchange Contracts
The Fund and Portfolio may enter into forward foreign currency exchange
contracts under which each Fund or Portfolio is obligated to exchange currencies
at specified rates on specified future dates. Risks arise from the possible
inability of counterparties to meet the terms of their contracts and from
movements in currency values. Neither the Fund nor the Portfolio had open
contracts at March 31, 1999.
Federal Income Taxes
No provision is made for federal income taxes since (a) the Fund elects to be
taxed as a "regulated investment company" and make distributions to its
shareholders to be relieved of all federal income taxes under provisions of
current federal tax law; and (b) the Portfolio is treated as a partnership for
federal income tax purposes and all of its income is allocated to its owners
based on their respective percentages of ownership.
The Fund intends to utilize provisions of federal income tax law, which
allows it 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, 1998, International Fund had a capital loss carryforward of
$8,255, which expires in 2006.
Distributions to Shareholders
Each Fund annually declares and pays dividends of any net investment income
and net realized capital gains, which are recorded on the ex-dividend date.
Dividends are determined in accordance with income tax principles, which may
treat certain transactions differently from generally accepted accounting
principles. Distributions in excess of tax-basis earnings are reported in the
financial statements as a return of capital. Permanent differences in the
recognition or classification of income between the financial statements and tax
earnings are reclassified to paid-in capital.
Reclassifications in the Funds' accompanying analysis of net assets could be
made in 1999 in order to reflect differences between financial reporting and
income tax results. The differences primarily relate to treatment of investments
in passive foreign investment companies and foreign currency gains and losses.
Note 3. Trustees' Fees and Transactions with Affiliates
The Fund and the Portfolio pay monthly management and administrative fees,
computed and accrued daily, to Stein Roe & Farnham Incorporated (the "Adviser"),
an indirect, wholly-owned subsidiary of Liberty Financial Companies, Inc.
("Liberty"), for its services as investment adviser and administrator. The
management fee for SR&F International Portfolio is computed at an annual rate of
.85 percent of average daily net assets. The administrative fee for the Fund is
computed at an annual rate of .15 percent of average daily net assets.
The Adviser also provides fund accounting services. For the six months ended
March 31, 1999, the Fund and the Portfolio incurred charges of $13 and $14,
respectively.
Transfer agent fees are paid to SteinRoe Services Inc. ("SSI"), a direct,
wholly-owned subsidiary of Liberty. SSI has entered into an agreement with
Liberty Funds Services, Inc., an indirect, wholly-owned subsidiary of Liberty,
to act as subtransfer agent for the Fund.
Certain officers and trustees of the Trust are also officers of the Adviser.
The compensation of trustees not affiliated with the Adviser for the Fund and
the Portfolio for the six months ended March 31, 1999, was $7 and $12,
respectively. No remuneration was paid to any other trustee or officer of the
Trust.
Note 4. Short-Term Debt
To facilitate portfolio liquidity, the Fund and Portfolio maintain borrowing
arrangements under which they can borrow against portfolio securities. There
were no borrowings during the six months ended March 31, 1999.
Note 5. Investment Transactions
The aggregate cost of purchases and proceeds from sales other than short-term
obligations for the six months ended March 31, 1999 were $34,128 and $42,077,
respectively.
<PAGE>
<TABLE>
Financial Highlights
- --------------------------------------------------------------------------------
International Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<CAPTION>
(Unaudited)
Six months ended
March 31, Year ended September 30,
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period............................ $ 9.16 $ 11.79 $ 10.96
-------- -------- --------
Income From Investment Operations
Net investment income........................................ (0.03) 0.07 0.06
Net realized and unrealized gains (loss) on investments...... 1.74 (2.01) 0.99
-------- -------- --------
Total from investment operations........................... 1.71 (1.94) 1.05
-------- -------- --------
Distributions
Net investment income........................................ (0.10) (0.11) (0.08)
Net realized capital gains................................... -- (0.58) (0.14)
-------- -------- --------
Total distributions........................................ (0.10) (0.69) (0.22)
-------- -------- --------
Net Asset Value, End of Period.................................. $ 10.77 $ 9.16 $ 11.79
======== ======== ========
Ratio of net expenses to average net assets..................... 1.50%(c) 1.53% 1.55%
Ratio of net investment income to average net assets............ (0.67)%(c) 0.62% 0.55%
Portfolio turnover rate......................................... N/A N/A 11%(a)
Total return ................................................... 18.69%(d) (16.67%) 9.84%
Net assets, end of period (000's)............................... $117,057 $114,244 $166,088
<CAPTION>
Period
Ended
Year ended September 30, Sept. 30,
1996 1995 1994 (b)
------- ------- -------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period............................ $ 10.25 $ 10.61 $ 10.00
------- ------- -------
Income From Investment Operations
Net investment income........................................ 0.09 0.12 0.03
Net realized and unrealized gains (loss) on investments...... 0.74 (0.26) 0.58
------- ------- -------
Total from investment operations........................... 0.83 (0.14) 0.61
------- ------- -------
Distributions
Net investment income........................................ (0.12) (0.05) --
Net realized capital gains................................... -- (0.17) --
------- ------- -------
Total distributions........................................ (0.12) (0.22) --
------- ------- -------
Net Asset Value, End of Period.................................. $ 10.96 $ 10.25 $ 10.61
======= ======= =======
Ratio of net expenses to average net assets..................... 1.51% 1.59% 1.61%(c)
Ratio of net investment income to average net assets............ 1.01% 1.41% 0.61%(c)
Portfolio turnover rate......................................... 42% 59% 48%
Total return ................................................... 8.23% (1.28%) 6.10%
Net assets, end of period (000's)............................... $135,545 $83,020 $74,817
(a) Prior to commencement of operations of the Portfolio.
(b) From commencement of operations on March 1, 1994.
(c) Annualized
(d)
</TABLE>
<TABLE>
<CAPTION>
SR&F International Portfolio
(Unaudited)
Six Months Ended Year Ended Period Ended
March 31, September 30, September 30,
1999 1998 1997(a)
----------- ----------- -----------
<S> <C> <C> <C>
Ratio of net expenses to average net assets .............. 1.01%(b) 1.02% 0.98%(b)
Ratio of net investment income to average net assets ..... (0.19)%(b) 1.13% 1.58%(b)
Portfolio turnover rate .................................. 30% 32% 18%
(a) From commencement of operations on February 3, 1997.
(b) Annualized
</TABLE>
<PAGE>
To Contact Us. . .
- --------------------------------------------------------------------------------
By Phone 800-338-2550
You can discuss your investment questions with a Stein Roe account
representative by calling us toll free. We'll be happy to answer questions about
your current account, or to provide you with information about opening a Stein
Roe account, including Stein Roe Traditional, Roth and Education IRAs. We're
available seven days a week, from 7 a.m. to 7 p.m. weekdays and from 9 a.m. to
1 p.m. Saturday and Sunday (Central time).
Stein Roe's Funds-on-Call(R)
24-Hour Service Line
Using a touch-tone phone, call our toll-free number, day or night, for your
current account balance, the latest Stein Roe Fund prices and yields and other
information. In addition, if you have a Personal Identification Number (PIN),
you may place orders for the following transactions 24 hours a day:
o Exchange shares between your Stein Roe accounts;
o Purchase fund shares by electronic transfer;
o Order additional account statements and money market fund checks;
o Redeem shares by check, wire or electronic transfer.
Retirement Plan Accounts
Call us for information about how we can assist you with your defined
contribution plan, including 401(k) plans. You can reach us toll free at
800-322-1130. For information on Traditional, Roth and Education IRA plans, call
us toll free at 800-338-2550.
By Mail or E-Mail
If you prefer to contact us by mail, please address all correspondence to:
P.O. Box 8900, Boston, MA 02205-8900. To contact us by e-mail, send
correspondence directly to: [email protected] or visit us at
www.steinroe.com on the Internet.
In Person
If you are in the Chicago area, please visit our Investor Center located in
downtown Chicago at One South Wacker Drive, 32nd Floor. Our account
representatives can answer questions about your current Fund investments or
provide you with information about any of the Stein Roe Funds and retirement
plans. Stop by weekdays between 8 a.m. and 5:15 p.m.
Must be preceded or accompanied by a prospectus.
<PAGE>
Investment Trust
Trustees
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
Loren A. Hansen, Executive Vice President
Gary A. Anetsberger,
Senior Vice President, Chief Financial Officer
David P. Brady, Vice President
Daniel K. Cantor, Vice President
Kevin M. Carome,
Vice President, Assistant Secretary
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
Eric S. Maddix, Vice President
Lynn C. Maddox, Vice President
Arthur J. McQueen, Vice President
Nicolette D. Parrish,
Vice President, Assistant Secretary
Brian J. Pollard, Vice President
Gita R. Rao, Vice President
Michael E. Rega, Vice President
Steven M. Salopek, Vice President
M. Gerard Sandel, Vice President
Gloria J. Santella, Vice President
Sharlene A. Thomas, Vice President
Heidi J. Walter, Vice President, Secretary
Janet B. Rysz, Assistant Secretary
Scott E. Volk, Treasurer
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 Fund
Ernst & Young LLP
Independent Auditors
<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
Floating Rate Income 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**
Special Venture 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.
IN11A 5/99
