STEIN ROE MUTUAL FUNDS
SEMIANNUAL REPORT
MARCH 31, 1999
STEIN ROE EQUITY FUNDS
GROWTH FUNDS
GROWTH STOCK FUND
GROWTH OPPORTUNITIES FUND
SPECIAL FUND
LARGE COMPANY FOCUS FUND
SPECIAL VENTURE FUND
CAPITAL OPPORTUNITIES FUND
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
Management Discussion & Analysis
Portfolio Manager Interviews and Growth of a $10,000
Investment Charts
Growth Stock Fund................................................. 4
Growth Opportunities Fund......................................... 8
Special Fund...................................................... 14
Large Company Focus Fund.......................................... 19
Special Venture Fund.............................................. 24
Capital Opportunities Fund........................................ 28
Portfolio of Investments.......................................... 32
A complete list of investments with market values
Financial Statements.............................................. 50
Statements of assets and liabilities, operations and changes
in net assets
Notes to Financial Statements..................................... 62
Financial Highlights.............................................. 66
Selected per-share data
MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS.
<PAGE>
FROM THE PRESIDENT
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TO OUR SHAREHOLDERS
On March 31, 1981, the Dow Jones Industrial Average (DJIA) stood at just 1,003
points. It was a tough time to start a family. Consumer prices were spiraling
upward at a 10.6% rate. The U.S. unemployment rate was 7.4% and climbing. Home
mortgage rates exceeded 15%.
Today, we live in an era that by many measures may be termed the best of
times. In March 1999, the DJIA briefly reached the 10,000 level. Together, the
jobless rate and inflation - a combination once known as the misery index -
stands at less than 6%, a third of its former level. Mortgage rates are half of
what they were a generation ago.
OUR 50TH YEAR
Such a contrast clearly illustrates that markets run in cycles and that patience
makes sense when it comes to investing. At Stein Roe, we have always taken a
long-term approach to helping people reach their financial goals. In fact, this
August Stein Roe will mark 50 years serving mutual fund investors. I'd like to
note that only a handful of the hundreds of mutual fund families in operation
today could claim half-a-century of continuous commitment to no-load investing.
For the six months ended March 31, 1999, a select group of large-company
growth stocks performed exceptionally well. Growth Stock Fund and Large Company
Focus Fund benefited from this market phenomenon, which has been strongest among
rapidly growing technology and consumer stocks.
Reflecting the performance disparity among stocks of various
capitalizations, the first half of fiscal 1999 was not kind to medium-size and
small-company equities, especially after January. The six-month returns of
Capital Opportunities Fund, Growth Opportunities Fund, Special Fund, Special
Venture Fund and Small Company Growth Fund, which we made available to retail
investors in February, were not compelling.
Over the past year, mutual funds have been operating in a challenging
environment. Stock and bond market volatility increased between September and
March as interest rates rose and investors focused on a narrow mix of large-cap
growth and Internet-related stocks. However, we remain convinced that
maintaining a consistent investment discipline in all our equity funds is a more
sensible long-term approach than following the herd to chase a few favored
stocks.
On the pages that follow, your Funds' portfolio managers detail the
strategies and positioning
photo of Thomas W. Butch
Thomas W. Butch
1
<PAGE>
FROM THE PRESIDENT CONTINUED
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they utilized during the first half of fiscal 1999. I encourage you to review
their analysis and outlook.
A CLEAR OPPORTUNITY
As I write this letter, U.S. stock prices are at historically high levels when
measured by such traditional indicators such as price/earnings ratios and book
value. Still, when one looks at all of the positive change that has occurred
since 1981, and how much potential for growth remains, especially in emerging
technologies and the global economy, one can't help but be heartened and
optimistic about the long-term environment for investing.
Consider that, in less than a generation, personal computers, e-mail,
cellular phones and the Internet have revolutionized our planet. While global
trouble spots remain and the U.S. economy still has many cyclical elements, more
Americans today - from newborns to retirees - enjoy a greater level of
prosperity in a much safer, freer world than when the Dow stood at 1000 points.
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More Americans today -
from newborns to retirees -
enjoy a greater level of
prosperity in a much safer,
freer world than when the
Dow stood at
1,000 points.
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THE CHALLENGE OF THE NEW MILLENNIUM
In the early 1980s, policy makers had the courage to initiate changes that
sharply reduced inflation and interest rates. As investors and as citizens, the
challenge we face today is to carry forward the growth of the 1990s for a new
millennium.
At Stein Roe, we maintain a firm commitment to making intelligent
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 plan to do
everything we can in the 21st Century to help your mutual fund investments work
hard for you.
Sincerely,
/s/ Thomas W. Butch
Thomas W. Butch
President
APRIL 16, 1999
2
<PAGE>
PERFORMANCE SUMMARY
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<TABLE>
<CAPTION>
SIX MONTH CUMULATIVE AND AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 1999
PAST 6 PAST 1 PAST 5 PAST 10 LIFE OF
MONTHS YEAR YEARS YEARS FUND
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
GROWTH STOCK FUND 39.82% 26.18% 25.41% 19.69% 11.81%
LARGE COMPANY FOCUS FUND* 32.65 -- -- -- 15.80
GROWTH OPPORTUNITIES FUND 15.27 -5.21 -- -- 10.99
Standard & Poor's 500 Index 27.32 18.49 26.23 18.95 ++
Lipper Growth Fund Average 28.23 13.56 20.36 16.30 ++
Number of Funds in Peer Group 1105 1022 304 174
++Growth Stock Fund, Large Company Focus Fund and Growth Opportunities Fund
began operating on 7/1/58, 6/26/98 and 6/30/97, respectively. S&P 500 Index
returns for each Fund's respective lifetime period were 12.46%, 14.68% and
25.73%. Lipper growth fund average returns were 11.21% and 20.58%, respectively,
for Large Company Focus Fund's and Growth Opportunities Fund's lifetime periods.
There were 1072 and 818 funds in the Lipper Growth Fund average for each fund's
respective lifetime period. Growth Stock Fund began operating before Lipper
began tracking growth funds.
*A fund's performance, especially for short time periods, should not be the sole
factor in making your investment decision.
</TABLE>
<TABLE>
<CAPTION>
PAST 6 PAST 1 PAST 5 PAST 10 LIFE OF
MONTHS YEAR YEARS YEARS FUND
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
SPECIAL FUND 1.57% -22.18% 9.28% 12.38% 12.90%
Lipper Midcap Fund Average 23.42 0.24 15.79 14.49 ++
Number of Funds in Peer Group 394 354 121 45 ++
CAPITAL OPPORTUNITIES FUND 13.07 -14.95 14.27 13.06 10.55
Lipper Capital Appreciation
Fund Average 28.71 11.84 16.49 13.55 6.58
Number of Funds in Peer Group 277 251 99 54 11
Standard & Poor's
MidCap 400 Index 20.02 0.45 18.20 17.43 ++
++Special Fund and Capital Opportunities Fund began operating on 5/22/68 and
3/31/69, respectively. Both Stein Roe Funds use the unmanaged the S&P MidCap 400
Index as their benchmark, and both Funds are older than the Index, which S&P
began compiling in 1987. Special Fund is older than its Lipper category.
</TABLE>
<TABLE>
<CAPTION>
PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
----------------------------------------
<S> <C> <C> <C>
SPECIAL VENTURE FUND -9.04% -37.60% 5.29%
Russell 2000 Index 10.00 -16.26 12.22
Lipper Small Cap Fund Average 12.53 -15.48 12.73
Number of Funds in Peer Group 728 664 268
Special Venture Fund began operating on 10/17/94 and will be liquidated by
6/28/99. Benchmark performance is from 10/31/94-3/31/99.
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. Each index shown above is an unmanaged group of securities
that differs from the composition of each Stein Roe fund; they are not available
for direct investment. Source: Lipper, Inc., a monitor of mutual fund
performance.
</TABLE>
3
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QUESTIONS & ANSWERS
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AN INTERVIEW WITH ERIK GUSTAFSON, PORTFOLIO MANAGER OF GROWTH STOCK FUND AND
SR&F GROWTH STOCK PORTFOLIO
FUND DATA
INVESTMENT OBJECTIVE:
Stein Roe Growth Stock Fund seeks long-term growth by investing in the common
stocks of companies with large-market capitalizations, with an emphasis in
the technology, financial services, health care and global consumer franchise
sectors.
FUND INCEPTION:
July 1, 1958
Total Net Assets:
$873.2 million
Q: HOW DID THE FUND PERFORM BETWEEN OCTOBER 1998 AND MARCH 1999?
GUSTAFSON: We provided exceptionally strong results. Growth Stock Fund's total
return of 39.82% for the six months ended March 31, 1999, outperformed most
growth funds (as shown on page 3) and the unmanaged Standard & Poor's 500 Index,
which rose 27.32% for the period.
Q: CAN YOU DESCRIBE THE MARKET ENVIRONMENT DURING THIS PERIOD?
GUSTAFSON: It was an excellent environment for large-cap growth stocks,
characterized by a growing economy, low interest rates and an absence of
inflation. Following last summer's market correction, large-cap growth stocks
were attractively priced. Investors seized this opportunity to buy
larger-company stocks with outstanding earnings growth potential, perceived
safety and a high level of liquidity.
photo of : Erik Gustafson
Erik Gustafson
Q: DO YOU THINK LARGE-CAP GROWTH STOCKS CAN SUSTAIN THEIR HIGH VALUATIONS?
GUSTAFSON: They are expensive on a historic basis based on factors such as
price/earnings ratios, but if you look at the underlying fundamentals - their
strong earnings growth rates coupled with the low interest rate environment -
these stocks' prices appear to be in line with their historic valuations. We
think companies that can successfully expand earnings and sales in a highly
competitive global economic environment will provide above-average returns for
the balance of 1999.
4
<PAGE>
Q&A CONTINUED
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Q: WHAT SECTORS PROVIDED THE BEST RESULTS SINCE SEPTEMBER, AND WHERE ARE YOU
CONCENTRATING YOUR CURRENT RESEARCH EFFORTS?
GUSTAFSON: We were overweighted in technology relative to the S&P 500 Index
during the first half of fiscal year 1999, and this served the Fund well.
Currently we are emphasizing companies that build and manage data networks, make
transmission systems, and make retrieval and storage systems. These include
Cisco Systems, MCI WorldCom and EMC Corp. (5.3%, 5.1% and 4.0% of net assets,
respectively). All three stocks were exceptional performers and among the
portfolio's top 10 holdings.
Another area of focus was financial services. Coming off a difficult 1998
marked by global financial crises, financial stocks have done well so far in
1999. We aggressively added to the portfolio's positions late last year,
focusing on premier global franchises such as Citigroup and American
International Group (4.0% and 4.3% of net assets, respectively). Also among the
top 10 holdings, they bolstered the Fund's six-month return.
The portfolio also was overweighted in health care relative to the S&P 500.
As aging baby boomers demand more and better pharmaceuticals and health care
services, this should help drive growth in this sector. Pfizer, Eli Lilly, Merck
and Cardinal Health (3.7%, 3.0%, 2.1% and 3.1% of net assets, respectively)
contributed to the Fund's performance.
Q: DID YOU ADD ANY NEW POSITIONS TO THE PORTFOLIO?
GUSTAFSON: We added Morgan Stanley Dean Witter (1.3% of net assets), which we
think has a powerful financial services franchise. We also added Mattel (1.3% of
net assets), which we believe is poised for a turnaround in light of the
company's recent mergers and restructuring.
Q: WERE ANY OF THE PORTFOLIO'S HOLDINGS AFFECTED BY THE RECENT EUROPEAN SLOWDOWN
OR BY THE CONTINUING ASIAN RECESSION?
GUSTAFSON: Yes, but this was confined to consumer non-durable stocks like
Gillette, Coca-Cola and Procter & Gamble (2.6%, 1.6% and 2.2% of net assets,
respectively). They have been hurt by economic downturns in Asia and emerging
markets. Interestingly, these companies continue to dedicate marketing to those
economies. We believe that when these economies recover, the stocks will be
well-positioned to resume their historical growth rates.
5
<PAGE>
Q&A CONTINUED
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Q: WHAT IS YOUR OUTLOOK FOR THE REST OF FISCAL 1999?
GUSTAFSON: From an economic standpoint, our outlook is positive. We think the
economy will continue to grow without any threat of overheating. We don't think
the Federal Reserve will take any action to raise interest rates; in fact, we
think rates have room to move lower. We believe these factors, combined with an
absence of inflation, will continue to support the excellent environment we've
been seeing for high-quality, large-cap growth stocks.
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We think the economy will
continue to grow without any
threat of overheating.
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PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURNS WILL VARY, SO YOU MAY HAVE GAIN OR LOSS WHEN YOU SELL SHARES. Total
return includes changes in share price and reinvestment of all distributions.
Portfolio holdings are as of 3/31/99 and are subject to change. The S&P 500
Index is an unmanaged group of securities that differs from the composition of
each Stein Roe fund; it is not available for direct investment.
<TABLE>
<CAPTION>
Investment Comparison
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GROWTH of a $10,000 Investment
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Growth Stock Fund
<S> <C> <C> <C>
Date Growth Stock Fund S&P 500 Index Lipper Growth Fund Average
3/31/89 10000 10000 10000
3/31/90 12308 11922 11612
3/31/91 14765 13637 13459
3/31/92 17753 15139 15462
3/31/93 19639 17441 17475
3/31/94 19455 17697 18499
3/31/95 21309 20447 20199
3/31/96 28218 27004 26059
3/31/97 32510 32356 29468
3/31/98 47820 47875 41823
3/31/99 60341 56725 47030
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. The above
illustration assumes a $10,000 investment on March 31, 1989, and reinvestment of
income and capital gains distributions. The S&P 500 Index is an unmanaged group
of securities that differs from the composition of each Stein Roe fund; it is
not available for direct investment.
</TABLE>
6
<PAGE>
FUND HIGHLIGHTS
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<TABLE>
<CAPTION>
SR&F GROWTH STOCK PORTFOLIO
TOP 10 EQUITY HOLDINGS (% OF NET ASSETS)
<S> <C> <S> <C>
Cisco Systems 5.3% EMC Corp. 4.0%
MCI WorldCom 5.1 Time Warner 3.8
American Int'l Group 4.3 Pfizer 3.7
Microsoft 4.0 Home Depot 3.6
Citigroup 4.0 General Electric 3.4
</TABLE>
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<TABLE>
<CAPTION>
EQUITY PORTFOLIO HIGHLIGHTS
<S> <C> <C>
PORTFOLIO S&P 500 INDEX
----------------------------
Number of Holdings 35 500
Dollar Weighted Median Market Capitalization ($ Mil.) $87,988 $60,137
</TABLE>
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<TABLE>
ECONOMIC SECTOR BREAKDOWN
As of March 31, 1999
<S> <C> <C>
Equity Portfolio S&P 500 Index
Basic Materials 0% 2%
Consumer Cyclical 16% 13%
Consumer Noncyclical 25% 21%
Energy 1% 6%
Financial 13% 16%
Industrial 9% 7%
Technology 31% 22%
Utilities 5% 10%
</TABLE>
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<TABLE>
ASSET ALLOCATION
As of March 31, 1998 As of March 31, 1999
<S> <C> <C>
Equities 96.7% 97.6%
Cash & Equivalents 3.3% 2.4%
</TABLE>
7
<PAGE>
QUESTIONS & ANSWERS
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AN INTERVIEW WITH ERIC MADDIX AND ART MCQUEEN, PORTFOLIO MANAGERS OF GROWTH
OPPORTUNITIES FUND*
FUND DATA
INVESTMENT OBJECTIVE:
Stein Roe Growth Opportunities Fund seeks long-term growth by investing
primarily in common stocks of large-, mid- and small- capitalizations that
the portfolio managers believe have long-term growth potential.
FUND INCEPTION:
June 30, 1997
TOTAL NET ASSETS:
$51.4 million
Q: HOW DID THE FUND PERFORM BETWEEN OCTOBER 1998 AND MARCH 1999?
MADDIX: The Fund provided a total return of 15.27% for the six months ended
March 31, 1999, less than the Lipper growth fund peer group return of 28.23%.
The unmanaged S&P 500 Index returned 27.32% for the same period. The S&P MidCap
400 Index and S&P SmallCap 600 Index returned 20.02% and 7.02%, respectively.
Q: WHY DIDN'T THE FUND DO AS WELL AS ITS PEERS?
MCQUEEN: A rebound in small and midcap stocks aided the Fund's performance in
the fourth quarter of 1998. At that time, the Fund had roughly two-thirds of net
assets invested in small and midcap stocks. The remaining one-third was in
large-cap stocks.
photo of : Eric Maddix and Art McQueen
Eric Maddix and Art McQueen
However, as investor sentiment in the first quarter of 1999 shifted back in
favor of large-cap stocks, small- and midcap stocks gave up much of their fourth
quarter gains. Investors continue to pay a premium for large-company stocks with
the most visible earnings, and the Fund's limited exposure to such companies
hurt results.
Given this market environment, we added selectively to the Fund's large-cap
holdings during the first quarter. This allowed the Fund to participate, at
least in part, in the large-cap market rally. The portfolio was evenly split
between large-cap stocks and small/midcap stocks as of the end of March.
8
<PAGE>
Q&A CONTINUED
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Q: IN WHAT SECTORS WAS THE FUND MOST HEAVILY INVESTED?
MADDIX: Technology, health care and consumer cyclical stocks, (31.0%, 21.2% and
30.0% of net assets, respectively) were the Fund's top sector weightings.
Consumer and technology were the Fund's best performing stock groups. In
contrast, the Fund's health care holdings did not perform as well due primarily
to the Fund's overweighting in health care services companies relative to the
S&P 500. These companies' earnings were affected by negative perceptions
surrounding Medicare reform.
Q: WHAT HOLDINGS PERFORMED WELL?
MCQUEEN: Kohl's and Home Depot (1.2% and 1.5% of net assets) were good
performers. We expect to add selectively to our retail holdings, with a focus on
small and midcap stocks where valuations appear more attractive.
Clear Channel Communications (2.0% of net assets), a radio broadcasting and
billboard company, also performed well. So-called "out-of-home" media companies
remain attractive to us because they are well-positioned to take local
advertising revenue away from newspapers. This can produce strong cash flow
without a significant investment of capital.
In the technology and business service sectors, Digital River and Getty
Images, (0.8% and 2.5% of net assets) were the strongest contributors to Fund
performance. Digital River provides viable technology used to deliver software
over the Internet and Getty Images has taken its stock photography business onto
the Internet, thereby lowering its distribution costs and making it easier for
customers to search the company's photo archives.
Microsoft, the Fund's largest technology holding (3.5% of net assets),
reported a 73% earnings growth rate in the fourth quarter. Although Microsoft
continues to experience volatility associated with the U.S. Justice Department's
pending antitrust suit against it, we believe the company's growth prospects
remain strong.
Q: DID YOU ADD ANY NEW POSITIONS TO THE PORTFOLIO?
MADDIX: We selectively added to the Fund's technology holdings with new
positions in Novell and Dell Computer (1.5% and 0.8% of net assets). Dell is
among the world's leading direct computer systems companies. Novell is an old
name in the industry that has gained new strength from its "Directory Services"
technology used in network applications.
9
<PAGE>
Q&A CONTINUED
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We also added Level 3 Communications (0.6% of net assets). Level 3 is
building an advanced international communications network using Internet
Protocol (IP) technology. The network is expected to enable customers to benefit
from the lower cost and service offerings made possible by IP technology.
Q: DID YOU MAKE ANY OTHER NOTEWORTHY ADJUSTMENTS?
MCQUEEN: We reduced holdings in temporary staffing companies to 3% from roughly
10% of net assets last September. A year ago, many staffing companies thrived on
the demand for information technology (IT) personnel; businesses needed
personnel to support new software. But as businesses started to focus on solving
Year 2000 problems and budget money for Internet-based strategies rather than
software, the need for staffing has slowed, as have the profits, for many
staffing companies.
Q: WHAT IS YOUR OUTLOOK FOR THE REST OF FISCAL 1999?
MADDIX: We are optimistic for small- and midcap stocks to stage a rebound; when
this will occur, however, remains uncertain. Small- and midcap stocks are now
trading at historically low prices relative to large-cap stocks while delivering
solid earnings growth. This indicates to us that small- and midcap stocks may
have the potential to outperform in the next market cycle. Until then, we will
continue to invest in strong growth companies regardless of size with a cautious
eye on their valuations.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURNS WILL VARY, SO YOU MAY HAVE GAIN OR LOSS WHEN YOU SELL SHARES.
Total return includes changes in share price and reinvestment of all
distributions. Portfolio holdings are as of 3/31/99 and are subject to change.
Investments in smaller companies may experience greater volatility. Each index
described is an unmanaged group of securities that differs from the composition
of each Stein Roe fund; it is not available for direct investment.
* Effective May 6, 1999, the name of Stein Roe Growth Opportunities Fund was
changed to Stein Roe Midcap Growth Fund.
10
<PAGE>
INVESTMENT COMPARISON
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GROWTH of a $10,000 Investment
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Growth Opportunities Fund
Growth S&P Lipper Growth
Opportunities 500 Fund Average
Date Fund Index (818 Funds)
<S> <C> <C> <C>
6/30/97 10000 10000 10000
9/30/97 10770 10748 11040
12/31/97 10960 11058 10922
3/31/98 12660 12599 12333
6/30/98 12750 13017 12568
9/30/98 10410 11725 12878
12/31/98 12630 14220 13365
3/31/99 12000 14928 13956
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. The above
illustration assumes a $10,000 investment on June 30, 1997, and reinvestment of
income and capital gains distributions. The S&P 500 Index shown is an unmanaged
group of securities that differs from the composition of each Stein Roe fund; it
is not available for direct investment.
</TABLE>
11
<PAGE>
FUND HIGHLIGHTS
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Growth Opportunities Fund
<TABLE>
<CAPTION>
Top 10 Equity Holdings (% of Net Assets)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <S> <C>
Microsoft 3.5% Time Warner 2.2%
Intel 2.6 Snyder Communications 2.2
Getty Images 2.5 Monsanto 2.2
Univision Communications 2.4 Kansas City Southern Industries 2.1
MCI WorldCom 2.4 Solectron 2.1
</TABLE>
<TABLE>
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<CAPTION>
Equity Portfolio Highlights
PORTFOLIO S&P 500 INDEX
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Number of Holdings 72 500
Median Market Value ($ Mil.) $4,579 $60,137
</TABLE>
<TABLE>
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<CAPTION>
Economic Sector Breakdown
As of March 31, 1999
Equity Portfolio S&P 500 Index
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Basic Materials 1 2
Consumer Cyclical 25 14
Consumer Noncyclical 18 21
Energy 0 6
Financial 13 16
Industrial 15 8
Technology 23 22
Utilities 5 10
</TABLE>
<TABLE>
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<CAPTION>
Asset Allocation
As of March 31, 1998 As of March 31, 1999
<S> <C> <C>
Equities 95.0% 97.9%
Cash & Equivalents 5.0% 2.1%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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A Big and Narrow Market
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How Stocks of Different Sizes Performed -- Sept. 30, 1998 to March 31, 1999
<S> <C> <C> <C>
Date S&P 500 Index S&P Midcap 400 Index Russell 2000 Index
9/30/98 0% 0% 0%
10/31/98 8.13 8.92 4.10
11/30/98 14.68 14.36 9.60
12/31/98 21.28 28.16 16.44
1/31/99 26.35 23.16 17.95
2/28/99 22.43 16.72 8.45
3/31/99 27.32 19.99 10.12
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. Each index
shown above is an unmanaged group of securities that differs from the
composition of each Stein Roe fund; they are not available for direct
investment.
Source: Bloomberg Business News.
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Large-company stocks outperformed midcap and small-cap stocks for the six
months ended March 31, 1999, as shown above. Midcap stocks did well this
past fall but faltered in January while prices of large-company and
small-cap stocks rose.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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Questions & Answers
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An Interview with Gerry Sandel, Portfolio Manager of
Special Fund and SR&F Special Portfolio*
Fund Data
Investment Objective:
Stein Roe Special Fund seeks long-term growth by investing primarily in the
common stocks of midcapitalization companies. The Portfolio generally
purchases stocks of companies that the portfolio manager believes are
undervalued, underfollowed or out-of-favor.
Fund Inception:
May 22, 1968
Total Net Assets:
$678 million
Q: How did the Fund perform from September 30, 1998 to March 31, 1999?
Sandel: In general, value investment disciplines remained out-of-favor with many
investors. Growth at any price seemed to be the market's dominant philosophy
during the period and the Fund's performance compared to that of the midcap fund
peer group - a group made up largely of growth funds - lagged.
We repositioned the portfolio last fall, adding many new stocks that we
thought were undervalued and appeared to offer long-term growth potential. This
helped further diversify the portfolio and helped the Fund generate better
results during the first calendar quarter of 1999. However, because of the
timing of the repositioning, the Fund's six-month results were lower than the
results achieved by the average midcap fund and lower than that of the Fund's
benchmark, the S&P MidCap 400 Index. photo: Gerry Sandel Gerry Sandel
The repositioning also had a strong capital gain impact for shareholders at
the end of calendar year 1998. We had been stalling the repositioning in the
interest of managing the capital gain exposure deeply embedded in the portfolio.
We repositioned when we believed the time was right, and although it caused a
large realized capital gain for shareholders (in calendar 1998), we thought it
was in the best interest of the Fund for the long term.
Q: Why did you believe the Fund needed a substantial repositioning last fall?
Sandel: We felt we needed to eliminate stocks that were not performing or did
not fit well with our midcap value strategy.
<PAGE>
Q&A Continued
In addition, we continued to increase the number of stocks because we believed
it could help reduce volatility.
Q: Was the Fund in a position to benefit from the market rally in November
and December?
Sandel: We are a Fund that generally buys when others are selling and sells what
growth funds are buying. Our repositioning last fall resulted in our selling of
some stocks at lower prices than we would have liked. We aggressively sold
stocks in early November, before the large upward move in the market. This
adversely affected fourth quarter performance.
Most of the market's advance during the first half of fiscal 1999 was
generated by large-company growth stocks. To be true to our investment
parameters, we didn't buy any large-cap growth stocks just because this segment
of the market was doing well. We shop where the values are and have recently
been investing in companies with a midcap median market capitalization.
With large caps outperforming other parts of the market, our job has become
more difficult. We'd rather focus on buying smaller undervalued stocks that we
believe offer ample opportunity to provide sustained, attractive long-term
performance. Some short-term oriented investors these days concentrate on growth
stocks with immediate capital appreciation prospects.
Q: Was there a big difference in the type of stocks that did well last fall
compared to the first three months of calendar 1999?
Sandel: The areas that hurt us at the end of last year helped us during the
first quarter of this year, including energy and technology. A rebound in oil
prices from $11 to $16 a barrel during this past winter helped energize stock
prices of major portfolio holdings such as Diamond Offshore (0.9% of net
assets), an offshore drilling company and Tidewater (1.1% of net assets), an
offshore boat and supply company.
Q: What helped performance
turn around in the first quarter of
calendar 1999?
Sandel: Product delays and pricing problems can sometimes cause stock price
volatility but also can create tremendous buying opportunity for a value fund
like ours. Last fall, we saw this happening in the technology sector, and we
purchased shares of Lam Research, Silicon Graphics and Seagate Technologies
(0.2%, 3.0% and 1.4% of net assets, respectively). These companies offered
substantial capital appreciation through March, and enhanced our six-month
results.
We've been watching office furniture makers because they were
<PAGE>
Q&A Continued
also hit pretty hard. Though they are exposed to the economic cycle, they are
not as cyclical as some other areas. One furniture manufacturer, Steelcase,
turned around nicely for us (0.8% of net assets). We think they offer attractive
risk/reward opportunities at this time.
Q: Where else did you focus purchases during the period?
Sandel: At this time last year, the vitamin nutrition supplement area was a
darling of Wall Street but these stocks were hit hard soon after. We found
opportunities there including stocks like Rexall Sundown and General Nutrition
Centers (0.5% and 1.1% of net assets, respectively), two companies with strong
turn around potential.
Rexall Sundown has exclusive distribution rights in the United States and
select countries abroad for Cellasene, a product that reportedly helps reduce
cellulite. Our analysts anticipate Rexall's one-step, easy-to-use products can
attract substantial consumer demand as the company steps up its U.S. marketing
and distribution efforts.
Q: How would you sum up the portfolio's current positioning?
Sandel: We are holding more stocks and we've diversified away from cyclicals
after their strong performance during the first quarter of calendar 1999. We've
kept some exposure in cyclicals and commodities. Offsetting our exposure in
those sectors, technology and energy helped balance the portfolio.
Past performance is no guarantee of future results. Share price and investment
returns will vary, so you may have gain or loss when you sell shares. Total
return includes changes in share price and reinvestment of all distributions.
Portfolio holdings are as of 3/31/99 and are subject to change. Investments in
smaller companies may experience greater market volatility. The S&P MidCap 400
Index is an unmanaged group of securities that differs from the composition of
each Stein Roe fund; it is not available for direct investment.
* Effective May 6, 1999, the names of SR&F Special Portfolio and Stein Roe
Special Fund have been changed to SR&F Disciplined Stock Portfolio and Stein Roe
Disciplined Stock Fund, respectively. On that date, Daniel K. Cantor was named
portfolio manager of the Fund and Portfolio.
<PAGE>
- --------------------------------------------------------------------------------
Investment Comparison
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth of a $10,000 Investment
- --------------------------------------------------------------------------------
Special Fund
<S> <C> <C> <C>
Date Special Fund S&P MidCap 400 Index Lipper Mid-cap Fund Average
3/31/89 10000 10000 10000
3/31/90 12817 11987 11733
3/31/91 14280 14435 13552
3/31/92 16324 17532 16224
3/31/93 19481 20368 18251
3/31/94 20608 21619 19938
3/31/95 22304 23420 21701
3/31/96 27167 30119 28015
3/31/97 28833 33318 29039
3/31/98 41279 49656 41117
3/31/99 32123 49880 40156
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. The above
illustration assumes a $10,000 investment on March 31, 1989, and reinvestment of
income and capital gains distributions. The S&P MidCap 400 Index shown is an
unmanaged group of securities that differs from the composition of each Stein
Roe fund; it is not available for direct investment.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
Fund Highlights
- -------------------------------------------------------------------------------
SR&F Special Portfolio
<TABLE>
<CAPTION>
Top 10 Equity Holdings (% of Net Assets)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Silicon Graphics 3.0% Telephone & Data Systems 2.5%
Invacare 2.9 Superior Industries International 2.5
Acuson 2.8 Carlisle Companies 2.3
Perrigo 2.8 Washington Mutual 2.3
20th Century Industries 2.6 OM Group 2.2
</TABLE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Equity Portfolio Highlights
PORTFOLIO S&P MIDCAP 400 INDEX
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Number of Holdings 77 400
Median Market Value ($ Mil.) $1,023 $2,724
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Economic Sector Breakdown
As of March 31, 1999
Equity Portfolio S&P MidCap 400 Index
<S> <C> <C>
Basic Materials 16 3
Consumer Cyclical 20 14
Consumer Noncyclical 13 21
Energy 4 6
Financial 9 16
Industrial 19 8
Technology 16 22
Utilities 3 10
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Asset Allocation
As of March 31, 1998 As of March 31, 1999
<S> <C> <C>
Equities 87.8% 87.4%
Cash & Equivalents 12.2% 12.6%
</TABLE>
<PAGE>
Questions & Answers
An Interview with Dave Brady,
Portfolio Manager of Large Company Focus Fund
Fund Data
Investment Objective:
Stein Roe Large Company Focus Fund seeks long-term growth
of capital by investing in a
non-diversified portfolio of equity securities believed to have above-average
growth potential.
Fund Inception:
June 26, 1998
Total Net Assets:
$53.6 million
Q: How did the Fund perform for the six months ended March 31, 1999?
Brady: We outperformed both the S&P 500 Index and the average growth fund for
the six months ended March 31, 1999, as shown on page 3.
Q: On June 26, 1999, the Fund will mark its first anniversary. Has it
been challenging to build and maintain a diversified mix of stocks in the
current market environment?
Brady: Many stocks have been volatile since mid-1998, particularly in the
industrial and global consumer products areas, where concerns about a slowdown
in earnings growth have been pronounced. It's prompted us to more closely
examine the stocks we select for the portfolio. We attempt to focus on the most
attractive stocks in sectors with the most promising and sustainable long-term
growth prospects.
photo of Dave Brady
Dave Brady
Still, we have been able to build a portfolio of companies that represent 10
of the 11 major sectors within the S&P 500 Index. As of March 31, the Fund had
24 holdings, all of which have above-average earnings per share (EPS) and sales
growth.
Q: What caused the stock market to move up so much after its big decline last
summer?
Brady: Last fall, the Federal Reserve cut short-term interest rates and
this bolstered investor confidence in corporate earnings growth. Meanwhile,
consumer prices remained low, easing fears of inflation, and international
financial markets began to stabilize. Since September, U.S. economic growth has
been much better than expected. GDP (gross domestic product, or the amount of
goods and services produced in the United
<PAGE>
Q&A Continued
States) rose a strong 6% in the fourth quarter of 1998, and many economists
believe America will continue to grow without much inflation in 1999. Growth
stocks have historically thrived in such an environment.
- --------------------------------------------------------------------------------
This past autumn we substantially increased our positioning in
telecommunications and technology stocks, and these groups helped us achieve
exceptional results for the first half of fiscal 1999.
- --------------------------------------------------------------------------------
Q: What sectors performed well since your last report to shareholders on
September 30, 1998?
Brady: We benefited from Vodofone's planned takeover of AirTouch Communications
(4.8% of net assets) and strong capital appreciation from MCI WorldCom (5.4% of
net assets).
Since my initial report to you this past summer, we have broadened the range
of technology companies within the portfolio. We added EMC Corp. (2.7% of net
assets), a data storage and retrieval company and Sun Microsystems (2.3% of net
assets).
Energy stocks, on the other hand, have provided mixed results. As it became
clear to us that Exxon Corp. would not grow as fast as we would have liked, we
sold our position this past winter.
Financial services stocks were sluggish in the fourth quarter of calendar
year 1998 but were a solid contributor to first quarter 1999 performance. Our
largest holding at the end of 1998, Associates First Capital (7.7% of net
assets) did well, as did Household International (6.4% of net assets). Our
investments in this area reflect our belief that continued U.S. economic growth
will bolster personal income and help maintain consumer credit quality.
Q: What are some of the risks of managing a concentrated portfolio?
Brady: In a mutual fund that focuses on just two dozen stocks, price
fluctuations of one stock generally have more of an impact on the portfolio than
in a fund with 100 or more holdings. A concentrated portfolio can augment a
fund's results when stock selections perform as expected, but it can also lead
to substantial underperformance compared to the overall stock market if several
of the fund's holdings do not meet expectations. To try to help mitigate this
risk, we carefully monitor Large Company Focus Fund's holdings, and we may sell
a stock quickly if uncertainties about earnings or operations arise.
<PAGE>
- --------------------------------------------------------------------------------
Q&A Continued
- --------------------------------------------------------------------------------
Q: What's your outlook for the Fund?
Brady: We think telecom munications, technology and financial stocks will
continue to be among the market's best performers. As of March 31, some 48% of
the Fund's net assets were concentrated in these sectors, and we believe this
positioning will serve us well. Government statistics show the U.S. consumer is
in great shape - wages have been rising and prices for many consumer goods -
thanks in part to inexpensive imports - have not been rising. We also believe
consumer demand for cellular, Internet and computer products is likely to remain
strong for many months to come, boosting growth prospects for companies with the
managerial talent and financial resources to capitalize on new technology.
Past performance is no guarantee of future results. Share price and investment
returns will vary, so you may have gain or loss when you sell shares. Total
return includes changes in share price and reinvestment of all distributions.
Portfolio holdings are as of 3/31/99 and are subject to change. The S&P 500
Index is an unmanaged group of securities that differs from the composition of
each Stein Roe fund; it is not available for direct investment. A fund's
performance, especially for short time periods, should not be the sole factor in
making your investment decision.
<PAGE>
- --------------------------------------------------------------------------------
Investment Comparison
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth of a $10,000 Investment
- ------------------------------------------------------------------------------------------------------------------------------------
Large Company Focus Fund
Date Large Company Focus Fund S&P 500 Index Lipper Growth Fund Average
<S> <C> <C> <C>
6/30/98 10000 10000 10000
7/31/98 9770 9894 9773
8/31/98 8194 8465 8180
9/30/98 8713 9008 8668
10/31/98 9092 9739 9280
11/30/98 9790 10329 9849
12/31/98 10309 10924 10635
1/31/99 10788 11381 11090
2/28/99 10569 11027 10635
3/31/99 11557 11468 11113
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. The above
illustration assumes a $10,000 investment on June 26, 1998, and reinvestment of
income and capital gains distributions. The S&P 500 Index is an unmanaged group
of securities that differs from the composition of each Stein Roe fund; it is
not available for direct investment. Lipper data is from 6/30/98 to 3/31/99.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Fund Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Large Company Focus Fund
Top 10 Equity Holdings (% of Net Assets)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <S> <C>
Associates First Capital 7.7% MCI WorldCom 5.4%
Microsoft 7.6 Clorox 5.1
Interpublic Group of Companies 6.5 AirTouch Communications 4.8
Household International 6.4 American Home Products 4.5
SouthTrust 6.0 Cisco Systems 4.1
</TABLE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Equity Portfolio Highlights
PORTFOLIO S&P 500 INDEX
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Number of Holdings 24 500
Median Market Value ($ Mil.) $26,510 $60,137
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Economic Sector Breakdown
As of March 31, 1999
Equity Portfolio S&P 500 Index
<S> <C> <C>
Basic Materials 2 2
Consumer Cyclical 14 14
Consumer Noncyclical 18 21
Energy 2 7
Financial 21 16
Industrial 2 8
Technology 27 22
Utilities 14 10
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Asset Allocation
As of March 31, 1999
<S> <C>
Equities 4.8%
Cash & Equivalents 95.2
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Q&A
- --------------------------------------------------------------------------------
An Interview with Michael Rega and James Haynie, Portfolio Managers
of Special Venture Fund and SR&F Special Venture Portfolio*
Fund Data
Investment Objective:
Stein Roe Special Venture
Fund seeks long-term growth with a diversified portfolio that invests in
attractively valued companies. The portfolio emphasizes investments in
financially strong small and midsized companies.
Fund Inception:
Oct. 17, 1994
Total Net Assets:
$65.8 million
On October 7, 1998, Michael Rega and James Haynie became portfolio managers for
Special Venture Fund and Special Venture Portfolio.
Q: How did the Fund perform between October 1998 and March 1999?
Rega: The Fund had a disappointing total return of -9.04% for the six months
ended March 31, 1999. We underperformed the average small-cap fund as well as
the unmanaged Russell 2000 Index as shown on page 3. This was due in part to a
restructuring of the portfolio.
Q: Since you began managing the Fund in October, what has been your strategic
positioning?
Haynie: Our management philosophy is this:
In selecting stocks, we look for
evidence that the company's management is committed to becoming a leader in its
industry. Or, in the case of a company that has strong growth prospects but has
experienced a temporary setback, we evaluate what management has done to turn
around the situation.
We also evaluate a stock's price relative to its peers. We try to buy stocks
of companies that are doing good things at good prices. Since October, we have
reduced our commitments to some sectors and added more emphasis in areas where
the Fund had not been heavily invested.
We generally do not let any stock in the portfolio appreciate so much that it
grows beyond 5% of total net assets.
photo of James Haynie Michael Rega
James Haynie Michael Rega
<PAGE>
- --------------------------------------------------------------------------------
Q&A Continued
- --------------------------------------------------------------------------------
We made three significant changes to the Fund since October. We:
oSold many names formerly held in the portfolio
oIncreased the number of holdings and
oBroadened the Fund's sector diversification.
Q: Aside from the restructuring, was there anything about the makeup of the Fund
that resulted in negative returns compared to the Fund's peer group average and
benchmark for the six-month period?
Rega: Since September, investors have favored large-company stocks. Bigger was
better, and the smallest stocks generally performed the worst. The Fund did
not own stocks with direct Internet business exposure. Internet-related
stocks were the strongest performers of the small-cap market over the past six
months, and their absence from the portfolio negatively affected our short-term
results.
The Fund also lost value in stocks that turned in poor operating results.
These included Staffmark (0.3% of net assets), a staffing services company hurt
by lower demand for staffing; LandAmerica Financial Group (0.5% of net assets),
which suffered from a decrease in refinancing activity, and Brightpoint Inc.,
(0.4% of net assets), a wireless phone equipment distributor whose sales in
Latin America and Asia declined.
Q: What kinds of stocks performed well?
Haynie: The Fund benefited from Ames Department Stores, CEC Entertainment and
Comair Holdings Corp. (2.2%, 1.2% and 0.9% of net assets, respectively). Ames is
an example of a positive turnaround story driven by strong management. Revenues
have increased as store remodelings, better promotions, and the acquisition of
Hill's Department Stores have helped restore top line growth. We started buying
Ames in November 1998; since then, its share price has risen more than 30%.
Q: What is the current market environment?
Rega: We haven't seen small-cap stocks priced this low relative to large-cap
stocks since the early 1970s. While valuation is our friend, current market
psychology is not. We believe the divergence between small- and large-cap stocks
will ultimately narrow, but it's difficult to predict how soon this will occur.
Past performance is no guarantee of future results. Share price and investment
return will vary, so you may have gain or loss when you sell shares. Total
return includes changes in share price and reinvestment of all distributions.
Portfolio holdings are as of 3/31/99 and are subject to change. Investments in
smaller companies may experience greater volatility. The Russell 2000 Index is
an unmanaged group of securities that differs from the composition of each Stein
Roe fund; it is not available for direct investment.
* SR&F Special Venture Portfolio and Stein Roe Special Venture Fund closed to
new investors effective May 10, 1999 and will be liquidated on or before June
28, 1999.
<PAGE>
- --------------------------------------------------------------------------------
Investment Comparison
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth of a $10,000 Investment
- -----------------------------------------------------------------------------------------------------------------------------------
Special Venture Fund
Date Fund Russell 2000 Index Lipper Small-cap Fund Average
<S> <C> <C> <C> <C>
10/01/94 10000 10000 10000
3/31/95 10805 10309 10416
9/30/95 12399 12389 12706
3/31/96 14036 13303 13762
9/30/96 16343 14016 15051
3/31/97 15436 13983 14343
9/30/97 19894 18668 19472
3/31/98 19704 19858 20440
9/30/98 13517 15118 15359
3/31/99 12283 16630 17187
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. The above
illustration assumes a $10,000 investment on October 17, 1994, and reinvestment
of income and capital gains distributions. The Russell 2000 Index shown is an
unmanaged group of small-company stocks that differs from the composition of
each Stein Roe fund; it is not available for direct investment. Lipper data is
from 10/31/94 to 3/31/99.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Fund Highlights
- --------------------------------------------------------------------------------
SR&F Special Venture Portfolio
<TABLE>
<CAPTION>
Top 10 Equity Holdings (% of Net Assets)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <S> <C>
Regis 4.3% Black Box 2.2%
Interim Services 2.8 Xomed Surgical Products 1.9
Catalina Marketing 2.7 Metamor Worldwide 1.8
National Computer Systems 2.3 Petroleum Geo-Services 1.6
Ames Department Stores 2.2 Semtech 1.6
</TABLE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Equity Portfolio Highlights
RUSSELL 2000
PORTFOLIO INDEX
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Number of Holdings 147 2,000
Weighted Median Market Value ($ Mil.) 784 390
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Economic Sector Breakdown
As of March 31, 1999
Equity Portfolio Russell 2000 Index
<S> <C> <C>
Basic Materials 2 2
Consumer Cyclical 24 14
Consumer Noncyclical 13 21
Energy 4 7
Financial 15 16
Industrial 20 8
Technology 20 22
Utilities 2 10
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Asset Allocation
As of March 31, 1998 As of March 31, 1999
<S> <C> <C>
Equities 95.2% 97.6%
Cash & Equivalents 4.8 2.4
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Q&A
- --------------------------------------------------------------------------------
An Interview with Gloria Santella, Portfolio Manager
of Stein Roe Capital Opportunities Fund*
Fund Data
Investment Objective:
Stein Roe Capital Opportunities Fund seeks long-term growth by investing
primarily in the common stocks of aggressive growth companies.
Fund Inception:
Sept. 30, 1969
Total Net Assets:
$586 million
Q: How did the Fund perform for the six months ended March 31, 1999?
Santella: The Fund had a total return of 13.07% for the six months ended March
31. That compares with a total return of 28.71% for the average fund in Lipper,
Inc.'s capital appreciation category.
As a whole, the outperformance of large-cap stocks persisted for the
six-month period. Because the median market capitalization of the Fund's peer
group is in the large-cap sector, the poor market performance of small- and
midcap holdings was the primary force in the Fund's underperformance relative to
its Lipper category. Last year's third quarter market correction extended into
early October, culminating in a substantial sell-off in the small- and midcap
sectors. From the end of the third quarter through October 8, the S&P MidCap 400
Index fell 10% and the small-cap Russell 2000 Index fell 15%, versus only a 1.4%
decline in the Dow Jones Industrial Average.
Photo of: Gloria Santella
Gloria Santella
After the market bottom of October 8, the small- and midcap
sectors rebounded strongly with the portfolio's holdings rebounding 43%, as a
group, off their 1998 calendar year-end lows. This rally continued early into
1999, but reversed in February when interest rates began to rise. Although the
Dow Jones Industrial Average (DJIA) set record levels, the small- and midcap
sectors sold off again, as evidenced by the 5.42% decline in the Russell 2000,
and the 6.38% decline in the S&P MidCap 400 Index first quarter of 1999. This
compares to a gain of 4.98% for the S&P 500.
<PAGE>
- --------------------------------------------------------------------------------
Q&A Continued
- --------------------------------------------------------------------------------
Q: How did you respond to the market's volatility?
Santella: We have historically used periods of market declines as opportunities
to purchase stocks. We were very active in the recent quarters, purchasing 18
new companies for the Portfolio at what we believe were attractive prices.
Q: In what sectors are the portfolio's investments now focused?
Santella: The portfolio is focused on the higher growth segments of the economy.
The Fund continues to have substantial exposure to strong consumer spending
through its leisure, media and specialty retail stocks. Some of our top holdings
include the world's largest cruise line operator, Carnival, Clear Channel
Communications, a leading operator of radio stations, and Best Buy, a dominant
retailer of consumer electronics (3.0%, 4.1% and 2.6% of total net assets,
respectively). We also continue to favor the technology sector, especially
companies that are benefiting from the rapid growth in the tele communications,
global networking and Internet sectors. Two of our top technology holdings are
telecom equipment manufacturer Tellabs, and Flextronics, a provider of contract
manufacturing services for the electronics and telecom industry (2.3% and 1.6%
of net assets, respectively).
Q: What sectors or stocks have provided a boost to performance in the portfolio?
Santella: The top performing sector for the six-month period was the specialty
retail sector. This reflects robust consumer spending trends. Our top performing
retail stock, Best Buy, generated a return of 124% since its purchase in
October. As a leading retailer of consumer electronics, it is a direct
beneficiary of consumer spending on electronics and appliances for the home, and
is also well-positioned to benefit from an emerging product cycle in digital
electronics. Other retailers that performed well include department store
operator Kohl's Corp. and office supplies retailer Staples Inc. (1.2% and 1.8%
of net assets, respectively), which were up 85% and 63%, respectively during the
first half of fiscal 1999.
Q: Were there any specific sectors or issues that hurt performance?
Santella: Our health care exposure negatively impacted performance. One
stock in particular, Omnicare (1.9% of net assets), declined 52% over the past
six months. The stock underperformed due to the uncertainty presented by ongoing
Medicare changes. The market perception is that the change in Medicare
reimbursement policy will hit this operator of nursing home pharmacies hard. The
<PAGE>
- -------------------------------------------------------------------------------
Q&A Continued
- -------------------------------------------------------------------------------
company, on the other hand, has little direct Medicare exposure. In fact, they
believe they will be a long-term beneficiary of Medicare reform since it will
serve to eliminate inefficient competitors. We have found Omnicare to be a
consistent operator based on 16 straight quarters of at least 25% earnings
growth.
As future earnings come through, we believe the company will generate solid
investment results.
Past performance is no guarantee of future results. Share price and investment
returns will vary, so you may have gain or loss when you sell shares. Total
return includes changes in share price and reinvestment of all distributions.
Portfolio holdings are as of 3/31/99 and are subject to change. Investments in
smaller companies may experience greater volatility. Each index mentioned is an
unmanaged group of securities that differs from the composition of each Stein
Roe fund; they are not available for direct investment. Lipper, Inc. is a
monitor of mutual fund performance.
* Erik P. Gustafson and David P. Brady were
named portfolio managers of Stein Roe Capital Opportunities Fund effective May
6, 1999.
Investment Comparison
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Growth of a $10,000 Investment
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Opportunities Fund
Date Cap Opp Fund S&P MidCap 400 Index Lipper Fund Average
<S> <C> <C> <C>
3/31/89 10000 10000 10000
3/31/90 11826 11987 11405
3/31/91 10876 14435 12693
3/31/92 13463 17532 14964
3/31/93 14668 20368 16861
3/31/94 17521 21619 18288
3/31/95 20021 23420 19525
3/31/96 31778 30119 25352
3/31/97 27438 33318 26744
3/31/98 40135 49656 37457
3/31/99 34133 49880 40885
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. The above
illustration assumes a $10,000 investment
on March 31, 1989, and reinvestment of income and capital gains distributions.
The S&P MidCap 400 Index is an unmanaged group of securities that differs from
the composition of each Stein Roe fund; it is not available for direct
investment.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Fund Highlights
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Opportunities Fund
Top 10 Equity Holdings (% of Net Assets)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <S> <C>
Papa John's International 4.5% Paychex 3.2%
Clear Channel Communications 4.1 Carnival 3.0
Fiserv 4.1 Best Buy 2.6
Ceridian 3.3 Steiner Leisure 2.6
Visx 3.3 Heftel Broadcasting 2.4
</TABLE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Equity Portfolio Highlights
S&P MIDCAP
PORTFOLIO 400 INDEX
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Number of Holdings 53 400
Weighted Median Market Value ($ Mil.) 3,806 2,724
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Economic Sector Breakdown
As of March 31, 1999
Equity Portfolio Russell 2000 Index
<S> <C> <C>
Basic Materials 41 4
Consumer Cyclical x 18
Consumer Noncyclical 16 12
Energy x 4
Financial 13 15
Industrial x 13
Technology 30 23
Utilities x 11
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Asset Allocation
As of March 31, 1998 As of March 31, 1999
<S> <C> <C>
Equities 94.2% 91.8%
Cash $ Equivalents 5.8 8.2
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SR&F Growth Stock Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Portfolio of Investments at March 31, 1999
(Dollar amounts in thousands)
(Unaudited)
NUMBER MARKET
Common Stocks (97.6%) OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Business Services (5.3%)
<S> <C> <C>
America Online....................................... 200,000 $ 29,200
Paychex.............................................. 650,000 30,834
----------
60,034
Capital Equipment (1.6%)
Applied Materials.................................... 300,000 18,506
Computer and Computer Software (13.3%)
Cisco Systems (a).................................... 550,000 60,259
EMC Corp. ........................................... 350,000 44,712
Microsoft (a)........................................ 500,000 44,813
----------
149,784
Consumer-Related (4.8%)
Gillette............................................. 500,000 29,719
Procter & Gamble..................................... 250,000 24,484
----------
54,203
Distribution - Retail (8.5%)
Home Depot........................................... 650,000 40,462
Kohl's (a)........................................... 500,000 35,438
Walgreen Co.......................................... 700,000 19,775
----------
95,675
Electrical Equipment (3.4%)
General Electric..................................... 350,000 38,719
Financial Services (8.4%)
Citigroup............................................ 700,000 44,712
Fannie Mae........................................... 500,000 34,625
Morgan Stanly Dean Witter............................ 150,000 14,991
----------
94,328
Food, Beverage and Tobacco (1.6%)
Coca-Cola............................................ 300,000 18,413
Health Care (3.1%)
Johnson & Johnson.................................... 250,000 23,422
Monsanto............................................. 250,000 11,484
----------
34,906
Insurance (4.3%)
American International Group......................... 400,000 48,250
Leisure and Entertainment (5.6%)
Walt Disney.......................................... 650,000 20,231
Time Warner.......................................... 600,000 42,638
----------
62,869
Manufacturing (2.6%)
Tyco International................................... 400,000 28,700
Medical Supplies (6.3%)
Cardinal Health...................................... 525,000 34,650
Medtronic............................................ 500,000 35,875
----------
70,525
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SR&F Growth Stock Portfolio Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Oil and Gas (1.6%)
Schlumberger Limited................................. 300,000 $ 18,056
Pharmaceutical (11.5%)
Eli Lilly & Co....................................... 400,000 33,950
Merck & Co........................................... 300,000 24,056
Pfizer............................................... 300,000 41,625
Warner-Lambert....................................... 450,000 29,784
----------
129,415
Semi-Conductor Manufacturer (2.1%)
Intel................................................ 200,000 23,775
Telecommunications (12.3%)
Lucent Technologies.................................. 300,000 32,325
MCI WorldCom (a)..................................... 650,000 57,566
Motorola............................................. 200,000 14,650
Tellabs (a).......................................... 350,000 34,213
----------
138,754
Toys (1.3%)
Mattel............................................... 600,000 14,925
----------
Total Common Stocks (Cost $539,923).................. 1,099,837
----------
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
Short-Term Obligations (2.9%) AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
Commercial Paper (2.9%)
Associates Corp. of North America 5.000% 4/1/99
(Cost $32,645)....................................... $ 32,645 32,645
----------
- -----------------------------------------------------------------------------------------------------------------------------------
Total Investments (100.5%)
(Cost $572,568)...................................... 1,132,482
Other Assets, Less Liabilities (-0.5%)............... (5,571)
----------
Total Net Assets (100.0%)............................ $1,126,911
==========
- ------------------------------------------------------------------------------------------------------------------------------------
Notes to Portfolio of Investments
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Non-income producing security.
(b) At March 31, 1999, the cost of investments for financial reporting and
federal income tax purposes was identical. Net unrealized appreciation was
$559,914, consisting of gross unrealized appreciation of $566,783 and gross
unrealized depreciation of $6,869.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Growth Opportunities Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Portfolio of Investments at March 31, 1999
(Dollar amounts in thousands)
(Unaudited)
NUMBER MARKET
Common Stocks (98.1%) OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Business Services (8.4%)
ABR Information Services (a)......................... 13,000 $ 226
AHL Services (a)..................................... 24,000 492
Getty Images (a)..................................... 60,000 1,260
Iron Mountain (a).................................... 26,500 828
Romac International.................................. 43,000 366
Snyder Communications................................ 40,000 1,115
--------
4,287
Computer Software (11.3%)
Digital River........................................ 10,000 400
HNC Software (a)..................................... 20,000 655
Mercury Interactive.................................. 16,000 570
Microsoft (a)........................................ 20,000 1,793
Novell............................................... 30,000 756
Oracle Corp.......................................... 14,500 382
Smith-Gardner........................................ 30,000 424
Synopsys Inc. (a).................................... 10,000 538
Webtrends............................................ 6,000 292
--------
5,810
Computer and Telecommunications Hardware (7.0%)
Cisco Systems (a).................................... 7,000 767
Dell Computer........................................ 10,000 409
EMC Corp............................................. 4,000 511
Intel Corp........................................... 11,000 1,308
Sun Microsystems..................................... 5,000 624
--------
3,619
Financial Services (7.7%)
Associates First Capital, Class A.................... 14,000 630
Citigroup............................................ 15,000 958
Freddie Mac.......................................... 13,000 743
Kansas City Southern Industries...................... 19,000 1,083
Wells Fargo ......................................... 15,000 526
--------
3,940
Health Care (21.2%)
Alza (a)............................................. 12,000 459
Biogen............................................... 8,000 915
Biomet............................................... 17,000 713
Bausch & Lomb........................................ 12,000 780
Cardinal Health...................................... 12,000 792
Forest Laboratories, Class A (a)..................... 17,000 958
Health Management Associates, Class A (a)............ 55,000 670
IMS Health........................................... 20,000 662
Medtronic............................................ 3,500 251
Merck................................................ 10,000 802
Monsanto............................................. 24,000 1,102
Omnicare............................................. 40,000 762
Orthodontic Centers of America (a)................... 26,000 410
PAREXEL International (a)............................ 30,000 621
Shire Pharmaceuticals Group (a)...................... 14,000 319
VISX................................................. 6,000 645
--------
10,861
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Growth Opportunities Fund Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Leisure and Entertainment (2.6%)
Carnival, Class A.................................... 18,000 $ 874
Sunterra (a)......................................... 48,000 468
--------
1,342
Media (14.6%)
Chancellor Media (a)................................. 18,000 848
Clear Channel Communications......................... 15,000 1,006
Comcast.............................................. 3,500 220
Fox Entertainment.................................... 35,000 949
Infinity Broadcasting................................ 25,000 644
Infospace.com........................................ 5,000 443
Market Watch.com..................................... 5,000 369
Outdoor Systems (a).................................. 20,000 600
Time Warner.......................................... 16,000 1,137
Univision Communications, Class A (a)................ 25,000 1,250
--------
7,466
Retail (7.9%)
Children's Place..................................... 16,000 431
Dollar Tree Stores (a)............................... 18,000 557
Home Depot........................................... 12,000 747
Kohl's (a)........................................... 9,000 638
MSC Industrial Direct................................ 27,500 468
Papa John's International (a)........................ 15,000 662
Select Comfort....................................... 19,000 530
--------
4,033
Technology Services (7.7%)
Fiserv (a)........................................... 18,000 965
International Telecommunications Data Systems (a).... 40,000 495
Solectron (a)........................................ 22,000 1,068
Sterling Commerce (a)................................ 13,000 400
Sungard Data Systems (a)............................. 26,000 1,040
--------
3,968
Telecommunications (9.7%)
AT&T ................................................ 12,000 958
Covad................................................ 5,600 368
Equant N V........................................... 6,500 489
Level 3 Communications............................... 4,000 291
Lucent Technologies.................................. 8,000 862
MCI WorldCom (a)..................................... 14,000 1,240
Pinnacle Holdings.................................... 50,000 756
--------
.................................................. 4,964
--------
Total Common Stocks (Cost $40,077)................... 50,290
--------
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
Short-Term Obligations (2.8%) AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
Commercial Paper (2.8%)
Associates First Capital 5.000% 04/01/99............ $ 1,410 1,410
--------
Total Short-Term Obligations (Cost $1,410)........... 1,410
--------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Growth Opportunities Fund Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Total Investments (100.9%)
(Cost $41,487) (b)................................... $ 51,700
Other Assets, Less Liabilities (-0.9%)............... (451)
--------
Total Net Assets (100.0%)............................ $ 51,249
========
- ------------------------------------------------------------------------------------------------------------------------------------
Notes to Portfolio of Investments
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Non-income producing security.
(b)At March 31, 1999, the cost of investments for federal income tax purposes
was $41,546. Net unrealized appreciation was $10,154, consisting of gross
unrealized appreciation of $12,248 and gross unrealized depreciation of
$2,094.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SR&F Special Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Portfolio of Investments at March 31, 1999
(Dollar amounts in thousands)
(Unaudited)
NUMBER MARKET
Common Stocks (87.9%) OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aerospace (0.4%)
B. F. Goodrich ...................................... 88,000 $ 3,020
Banks (4.4%)
Golden West Financial................................ 153,900 14,697
Washington Mutual.................................... 382,600 15,639
--------
30,336
Building - Residential/Commercial (0.3%)
Standard Pacific..................................... 150,000 1,931
Business Services (1.2%)
Interim Services (a)................................. 550,000 8,250
Chemicals (0.9%)
Wellman.............................................. 700,000 6,213
Computer Services (3.9%)
Creative Technology.................................. 367,000 4,198
Sequent Computer Systems............................. 265,000 2,402
Silicon Graphics (a)................................. 1,230,000 20,526
--------
27,126
Diversified Operations (2.3%)
Aeroquip-Vickers..................................... 40,500 2,321
Alexander & Baldwin.................................. 298,000 5,848
Eaton................................................ 59,000 4,218
U.S. Industries...................................... 204,900 3,368
--------
15,755
Drugs (2.8%)
Perrigo.............................................. 2,621,500 19,006
Electrical Equipment (2.8%)
Littelfuse (a)....................................... 690,000 12,679
Littelfuse warrants (a).............................. 547,200 6,703
--------
19,382
Electronics and Instrumentation (3.0%)
AVX.................................................. 880,300 14,085
Kent Electronics (a)................................. 511,000 5,078
Lam Research......................................... 45,000 1,305
--------
20,468
Energy and Related Services (4.8%)
Cross Timbers Oil.................................... 1,766,225 12,474
Diamond Offshore Drilling............................ 192,000 6,072
Petroleum Geo-Services ADRs (a)...................... 447,400 6,823
Tidewater............................................ 291,000 7,530
--------
32,899
Financial Services (0.3%)
The PMI Group........................................ 50,000 2,319
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SR&F Special Portfolio Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Health Services and Equipment (10.8%)
Acuson (a)........................................... 1,306,700 $ 19,519
Columbia/HCA Healthcare.............................. 604,900 11,455
First Health Group (a)............................... 895,200 14,379
HEALTHSOUTH.......................................... 210,000 2,178
Invacare............................................. 821,850 19,981
Mallinckrodt......................................... 262,700 6,994
--------
74,506
Industrial Products (2.3%)
Carlisle Companies................................... 342,000 15,989
Insurance Companies (3.5%)
20th Century Industries.............................. 1,091,700 17,740
IPC Holdings......................................... 175,000 3,478
Travelers Property Casualty - Class A................ 73,000 2,610
--------
23,828
Leisure and Entertainment (0.4%)
Brunswick............................................ 146,000 2,783
Machinery (4.4%)
AGCO ................................................ 500,000 3,281
Albany International - Class A....................... 256,840 4,816
Flowserve............................................ 315,000 4,902
Regal Beloit......................................... 106,000 1,915
Robbins & Myers...................................... 139,300 2,403
Stewart & Stevenson Services......................... 1,724,400 13,256
--------
30,573
Manufacturing - General Industry (1.8%)
Dexter Corp.......................................... 275,000 8,662
Smith (A.O).......................................... 193,000 3,667
--------
12,329
Metals (2.9%)
Barrick Gold......................................... 550,000 9,384
Freeport-McMoRan Copper & Gold....................... 600,000 6,525
Newmont Mining....................................... 216,400 3,787
--------
19,696
Metal Processors (0.9%)
Timken............................................... 398,900 6,482
Mining and Agriculture (2.8%)
Cyprus Amax Minerals................................. 715,000 8,669
Placer Dome.......................................... 947,300 10,597
--------
19,266
Motor Vehicles (3.3%)
Dana................................................. 150,000 5,700
Superior Industries International.................... 735,200 17,093
--------
22,793
Office Furnishings (0.9%)
Steelcase - Class A.................................. 384,000 5,832
Packaging (1.5%)
Crown Cork & Seal.................................... 336,000 9,597
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SR&F Special Portfolio Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paper & Related Products (0.5%)
Glatfelter (P. H.)................................... 308,000 $ 3,446
Steel (1.1%)
Carpenter Technology................................. 300,000 7,781
Retail (4.3%)
Borders Group (a).................................... 310,000 4,359
Consolidated Stores (a).............................. 417,250 12,648
General Nutrition.................................... 535,800 7,501
Pier 1 Imports....................................... 375,000 3,047
Toys "R" Us.......................................... 121,000 2,276
--------
29,831
Rubber (1.1%)
Bandag 85,000 2,391
Cooper Tire & Rubber 300,000 5,512
--------
7,903
Security (1.8%)
Pittston Brink's Group 540,200 12,695
Specialty Chemicals (5.2%)
Imperial Chemical Industries ADRs.................... 375,400 13,444
Minerals Technologies................................ 150,500 7,224
OM Group............................................. 459,500 15,164
--------
35,832
Technology Services (1.4%)
Seagate Technology (a)............................... 335,800 9,927
Telecommunications (4.4%)
Andrew Corp. (a)..................................... 1,053,900 12,976
Telephone & Data Systems............................. 308,000 17,402
--------
30,378
Textiles and Apparel (4.5%)
Guilford Mills....................................... 220,000 1,925
Nautica Enterprises.................................. 165,000 1,867
Reebok International................................. 211,000 3,350
Springs Industries - Class A......................... 126,000 3,410
Unifi................................................ 785,475 10,015
Wolverine World Wide................................. 1,061,000 10,080
--------
30,647
Vitamins & Nutrition Products (0.5%)
Rexall Sundown....................................... 175,000 3,358
Wire & Cable Products (0.5%)
Belden............................................... 185,000 3,157
--------
Total Common Stocks (Cost $604,750).................. 605,334
--------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SR&F Special Portfolio Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
Short-Term Obligations (12.2%) AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial Paper (12.2%)
Associates First Capital 5.000% 4/1/99............... $ 32,040 $ 32,040
Safeway 5.150% 4/1/99................................ 22,075 22,075
Volvo Treasury 5.100% 4/1/99......................... 30,000 30,000
--------
Total Short-Term Obligations (Cost $84,115).......... 84,115
--------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments (100.1%)
(Cost $688,865) (b).................................. 689,449
Other Assets, Less Liabilities (-0.1%)............... (538)
--------
Total Net Assets (100.0%)............................ $688,911
========
- ------------------------------------------------------------------------------------------------------------------------------------
Notes to Portfolio of Investments
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Non-income producing security.
(b) At March 31, 1999, the cost of investments for federal income tax purposes
was $692,047. Net unrealized depreciation was $2,598, consisting of gross
unrealized appreciation of $91,604 and gross unrealized depreciation of
$94,202.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Large Company Focus Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Portfolio of Investments at March 31, 1999
(Dollar amounts in thousands)
(Unaudited)
NUMBER MARKET
Common Stocks (95.2%) OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Basic Materials (2.2%)
E.I. du Pont de Nemours.............................. 20,700 $ 1,202
Capital Goods (5.7%)
Avery Dennison....................................... 35,100 2,018
Dover................................................ 31,400 1,032
--------
3,050
Communication Services (10.2%)
AirTouch Communications (a).......................... 26,800 2,590
MCI WorldCom (a)..................................... 32,400 2,869
--------
5,459
Consumer Cyclicals (11.2%)
Interpublic Group of Companies....................... 44,800 3,489
Mattel............................................... 65,000 1,617
New York Times....................................... 30,400 866
--------
5,972
Consumer Staples (7.4%)
Clorox............................................... 23,100 2,707
Comcast, Class A..................................... 20,000 1,259
--------
3,966
Energy (2.2%)
Schlumberger Limited................................. 19,500 1,174
Financials (20.1%)
Associates First Capital............................. 92,000 4,140
Household International.............................. 74,800 3,413
SouthTrust........................................... 85,800 3,201
--------
10,754
Healthcare (11.5%)
American Home Products............................... 36,900 2,408
Becton, Dickinson & Co............................... 49,400 1,893
Eli Lilly & Co....................................... 21,500 1,825
--------
6,126
Technology (21.9%)
Cisco Systems (a).................................... 19,950 2,186
EMC ................................................. 11,400 1,456
Intel................................................ 16,900 2,009
Intuit .............................................. 7,000 712
Microsoft (a)........................................ 45,600 4,087
Sun Microsystems..................................... 10,000 1,249
--------
11,699
Utilities (2.8%)
AES.................................................. 41,200 1,535
--------
Total Common Stocks (Cost $44,166)................... 50,937
--------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Large Company Focus Fund Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
Short-Term Obligation (4.1%) AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial Paper (4.1%)
Associates Corp. of North America 5.000% 4/1/99
(Cost $2,185)........................................ $ 2,185 $ 2,185
--------
Total Investments (99.3%)
(Cost $46,351) (b)................................... 53,122
Other Assets, Less Liabilities (0.7%)................ 349
--------
Total Net Assets (100.0%)............................ $ 53,471
========
- ------------------------------------------------------------------------------------------------------------------------------------
Notes to Portfolio of Investments
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Non-income producing security.
(b) At March 31, 1999, the cost of investments for financial reporting and
federal income tax purposes was identical. Net unrealized appreciation was
$6,771, consisting of gross unrealized appreciation of $9,308 and gross
unrealized depreciation of $2,537.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SR&F Special Venture Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Portfolio of Investments at March 31, 1999
(Dollar amounts in thousands)
(Unaudited)
NUMBER MARKET
Common Stocks (97.6%) OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Construction (2.1%)
Building Construction (1.5%)
Lennar Corp.......................................... 9,800 $ 219
NVR Inc. ............................................ 7,000 295
Toll Brothers Inc. .................................. 27,400 497
--------
1,011
Heavy Construction-Non Building (0.6%)
Granite Construction Inc. ........................... 17,000 397
Finance, Insurance & Real Estate (12.7%)
Depository Institution (2.7%)
Astoria Financial Corp............................... 5,000 250
Bank United Corp., Class A........................... 9,300 380
Downey Financial Corp................................ 23,000 421
Firstfed Financial Corp.............................. 33,300 535
Webster Financial Corp............................... 7,500 216
--------
1,802
Insurance Carriers (7.1%)
ARM Financial Group Inc., Class A.................... 27,600 412
Chicago Title Corp................................... 8,000 291
CMAC Investment Corp................................. 14,400 562
Capital Re Corp...................................... 31,600 545
Delphi Financial Corp., Class A...................... 11,500 390
Enhance Financial Services Group..................... 20,200 460
Fidelity National Financial Inc. .................... 17,600 264
Fremont General Corp................................. 52,600 1,003
Landamerica Financial Group.......................... 10,900 316
Orion Capital Corp................................... 15,000 469
--------
4,712
Nondepository Credit (1.5%)
Consumer Portfolio Services.......................... 110,000 309
Resource America Inc., Class A....................... 21,400 185
Resource Bancshares Management Group................. 37,600 484
--------
978
Security Brokers & Dealers (1.4%)
Advest Group Inc. ................................... 9,200 170
Jefferies Group Inc. ................................ 4,700 223
Raymond James Financial Inc. ........................ 27,000 533
--------
926
Manufacturing (31.5%)
Apparel (0.9%)
Kellwood Co.......................................... 8,700 192
Nautica Enterprises Inc. ............................ 38,000 430
--------
622
Chemicals & Allied Products (3.5%)
Schulman Inc. (A).................................... 16,200 221
Barr Laboratories Inc. .............................. 5,600 171
Dexter Corp.......................................... 18,000 567
Ferro Corp........................................... 3,000 74
Jones Pharma Inc. ................................... 17,700 615
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SR&F Special Venture Portfolio Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Chemicals & Allied Products (continued)
Medicis Pharmaceutical Corp.......................... 13,500 $ 405
Zonagen Inc. ........................................ 11,800 253
--------
2,306
Electronic & Electrical Equipment (1.0%)
Applied Micro Circuits Corp.......................... 14,800 633
Electronic Components (4.4%)
Park Electrochemical Corp............................ 19,400 456
Plexus Corp.......................................... 18,900 527
Qlogic Corp.......................................... 13,300 893
Semtech Corp......................................... 32,600 1,039
--------
2,915
Fabricated Metal (1.1%)
Alliant Techsystems Inc. ............................ 3,100 241
Barnes Group Inc. ................................... 19,000 356
Nortek Inc. ......................................... 4,700 116
--------
713
Food & Kindred Products (1.8%)
Canandaigua Brands Inc., Class A..................... 10,600 534
Michael Foods Inc. .................................. 24,700 471
Smithfield Foods Inc. ............................... 7,300 166
--------
1,171
Furniture & Fixtures (1.3%)
Furniture Brands International Inc. ................. 38,900 861
Machinery & Computer Equipment (6.0%)
Bell & Howell Co..................................... 5,800 170
Black Box Corp. (a).................................. 46,400 1,438
Gehl Co.............................................. 2,300 34
J. Ray McDermott S.A. Inc. .......................... 11,700 350
Manitowoc Inc. ...................................... 6,500 272
Nacco Industries Inc., Class A....................... 5,800 430
Pentair Inc. ........................................ 5,600 189
SPS Technologies Inc. ............................... 2,900 114
Terex Corp........................................... 10,900 263
Xircom Inc. ......................................... 18,200 457
Zebra Technologies Corp., Class A.................... 11,500 273
--------
3,990
Measuring & Analyzing Instruments (4.3%)
ADAC Laboratories.................................... 20,000 273
Colorado Medtech Inc. ............................... 17,200 191
Fossil Inc. ......................................... 14,900 444
Maxxim Medical Inc. ................................. 7,700 145
Ocular Sciences Inc. ................................ 10,800 310
Visx Inc. ........................................... 2,200 237
Xomed Surgical Products Inc. ........................ 31,950 1,254
--------
2,854
Paper Products (0.4%)
Wausau-Mosinee Paper Corp............................ 17,100 239
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SR&F Special Venture Portfolio Continued
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Primary Metal (1.9%)
Mueller Industries Inc. ............................. 14,800 $ 331
Precision Castparts Corp............................. 14,100 568
RTI International Metals............................. 28,300 265
Ryerson Tull Inc. ................................... 8,700 128
--------
1,292
Printing & Publishing (0.9%)
Valassis Communications Inc. ........................ 11,000 569
Stone, Clay, Glass & Concrete (0.9%)
Centex Construction Products Inc. ................... 2,400 84
Lone Star Industries Inc. .......................... 16,400 508
--------
592
Textile Mill Products (1.0%)
Interface Inc. ...................................... 69,800 672
Transportation Equipment (2.1%)
AAR Corp............................................. 25,600 456
Arvin Industries Inc. ............................... 9,000 303
Varlen Corp.......................................... 22,000 484
Winnebago Industries Inc. ........................... 11,900 167
--------
1,410
Mining & Energy (3.1%)
Oil & Gas Extraction (2.9%)
Petroleum Geo-Services ADRs (a)...................... 70,000 1,068
Pride International Inc. ............................ 64,000 528
Stolt Comex Seaway S.A............................... 30,900 297
--------
1,893
Oil & Gas Field Servicing (0.2%)
Pool Energy Services Co............................. 6,900 106
Retail Trade (9.1%)
Apparel & Accessory Stores (0.6%)
Ross Stores Inc. .................................... 8,800 386
Auto Dealers & Gas Stations (0.3%)
United Auto Group Inc. .............................. 25,100 191
General Merchandise Stores (3.7%)
Ames Department Stores Inc. ......................... 38,900 1,444
Fred Meyer Inc. ..................................... 5,500 324
Shopko Stores Inc. .................................. 22,000 657
--------
2,425
Miscellaneous Retail (1.3%)
Zale Corp............................................ 19,100 653
Musicland Stores Corp................................ 21,800 192
--------
845
Restaurants (3.2%)
CEC Entertainment Inc. .............................. 22,000 789
CKE Restaurants Inc. ................................ 27,500 543
Foodmaker Inc. ...................................... 29,800 760
--------
2,092
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SR&F Special Venture Portfolio Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Services (30.3%)
Amusement & Recreation (0.5%)
Anchor Gaming........................................ 7,200 $ 315
Auto Repair, Rental & Parking (0.6%)
Midas Inc. .......................................... 5,900 197
XTRA Corp............................................ 5,400 207
--------
404
Business Services (5.5%)
ADVO Inc. ........................................... 41,000 792
Interim Services Inc. (a)............................ 123,000 1,845
Ogden Corp........................................... 19,000 457
Rent-Way Inc. ....................................... 22,000 528
--------
3,622
Computer Related Services (6.9%)
Catalina Marketing Corp. (a)......................... 21,100 1,812
DSP Group Inc. ...................................... 26,000 382
Health Management Systems Inc. ...................... 26,000 124
Henry (Jack) & Associates............................ 10,900 401
National Computer Systems Inc. ...................... 61,600 1,509
Personnel Group of America Inc. ..................... 12,600 91
Staffmark Inc. ...................................... 25,000 197
--------
4,516
Computer Software (4.1%)
Acclaim Entertainment Inc. .......................... 18,300 164
BMC Software Inc. ................................... 5805 215
Computer Horizons Corp............................... 8,300 91
Computer Task Group Inc. ............................ 7,100 152
Data Dimensions Inc. ................................ 75,600 350
Hyperion Solutions Corp.............................. 28,500 413
PRI Automation Inc. ................................. 22,500 473
Progress Software Corp. ............................. 17,000 580
Symantec Corp. ...................................... 16,300 276
--------
2,714
Engineering, Accounting, Research Management (1.6%)
Core Laboratories N.V................................ 7,100 125
EG&G Inc. ........................................... 7,400 195
Jacobs Engineering Group............................. 6,500 256
Kendle International Inc. ........................... 11,200 225
Quest Diagnostics Inc. .............................. 4,400 98
URS Corp............................................. 8,600 155
--------
1,054
Health Services (4.0%)
Curative Health Services Inc. ....................... 19,000 218
Hooper Holmes Inc. .................................. 42,800 669
IDEXX Laboratories Inc. ............................. 10,500 251
Ostetech Inc. ....................................... 19,800 681
Pediatrix Medical Group Inc. ........................ 10,000 281
Rehabcare Group Inc. ................................ 20,600 310
Total Renal Care Holdings............................ 19,000 209
--------
2,619
Other Services (2.8%)
Metamor Worldwide Inc. .............................. 86,100 1,205
U.S.A. Floral Products Inc. (a)...................... 105,200 664
--------
1,869
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SR&F Special Venture Portfolio Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Personal Services (4.3%)
Regis Corp........................................... 106,350 $ 2,831
Transportation, Commercial, Electrical, Gas & Sanitary Services (4.0%)
Air Transportation (1.8%)
Airborne Freight Corp................................ 11,000 342
Comair Holdings Inc. ................................ 24,000 567
Midwest Express Holdings............................. 9,200 270
--------
1,179
Electric Services (1.2%)
CMP Group Inc. ...................................... 14,700 270
Public Service Co. of New Mexico..................... 30,000 510
--------
780
Sanitary Services (0.9%)
Piedmont Natural Gas Co.............................. 17,500 612
Transportation Services (0.1%)
Avis Rent-A-Car Inc. ................................ 2,200 61
Wholesale Trade (4.8%)
Durable Goods (2.4%)
Brightpoint Inc. .................................... 45,300 268
Ha-Lo Industries Inc. ............................... 37,000 456
Owens & Minor Holding Co............................. 18,600 188
Patterson Dental Co.................................. 15,300 662
--------
1,574
Nondurable Goods (2.4%)
Bindley Western Industries Inc. ..................... 12,600 360
Fresh Del Monte Produce.............................. 13,900 258
Priority Healthcare Corp., Class B................... 5,644 255
United Stationers Inc. .............................. 20,700 316
Universal Holdings Corp.............................. 14,500 370
--------
1,559
--------
Total Common Stocks ($70,889)........................ 64,312
--------
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
Short-Term Obligations (0.1%) AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
Cash Equivalents-Taxable (0.1%)
Warburg Repurchase Agreement 4.900% 4/1/99
(Cost $74)........................................... $ 74 74
--------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments (97.7%)
(Cost $70,963)(b).................................... 64,386
Other Assets, Less Liabilities (2.3%)................ 1,512
--------
Total Net Assets (100.0%)............................ $ 65,898
========
- ------------------------------------------------------------------------------------------------------------------------------------
Notes to Portfolio of Investments
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Non-income producing security.
(b) At March 31, 1999, the cost of investments for federal income tax purposes
was $71,911. Net unrealized depreciation was $7,525 consisting of gross
unrealized appreciation of $4,431 and gross unrealized depreciation of
$11,956.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Capital Opportunities Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Portfolio of Investments at March 31, 1999
(Dollar amounts in thousands)
(Unaudited)
NUMBER MARKET
Common Stocks (91.8%) OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Business Services (11.3%)
ABR Information Services (a)......................... 600,000 $ 10,425
Ceridian............................................. 540,000 19,744
Cintas............................................... 180,000 11,768
Iron Mountain (a).................................... 180,000 5,625
Paychex.............................................. 400,000 18,975
---------
66,537
Consumer Products and Services (4.0%)
Jones Apparel Group (a).............................. 300,000 8,381
Steiner Leisure (a).................................. 500,000 15,375
---------
23,756
Data Processing Services (6.0%)
BISYS Group (a)...................................... 200,000 11,250
Fiserv (a)........................................... 450,000 24,131
---------
35,381
Education & Training (2.7%)
ITT Educational Services............................. 240,000 9,015
Provant.............................................. 380,000 6,792
---------
15,807
Health Care (12.7%)
Cardinal Health...................................... 160,000 10,560
Omnicare............................................. 600,000 11,438
Quintiles Transnational (a).......................... 300,000 11,325
Shire Pharmaceuticals Group ADRs (a)................. 480,000 10,950
STERIS (a)........................................... 420,000 11,183
VISX................................................. 180,000 19,361
---------
74,817
Industrial Products (4.7%)
Gentex............................................... 600,000 12,938
MSC Industrial Direct, Class A (a)................... 600,000 10,200
Wilmar Industries (a)................................ 300,000 4,444
---------
27,582
Leisure and Entertainment (7.7%)
Carnival, Class A (a)................................ 360,000 17,483
Imax................................................. 220,000 4,290
International Speedway, Class A...................... 60,000 3,165
Promus Hotel (a)..................................... 240,000 8,730
Royal Caribbean Cruises.............................. 210,000 8,190
Speedway Motorsports................................. 40,000 1,650
Sunterra (a)......................................... 200,000 1,950
---------
45,458
Media (8.9%)
Chancellor Media..................................... 300,000 14,137
Clear Channel Communications......................... 360,000 24,142
Heftel Broadcasting.................................. 330,000 14,314
---------
52,593
Miscellaneous (3.0)
American Tower, Class A (a).......................... 450,000 11,025
Stewart Enterprises, Class A......................... 440,000 7,067
---------
18,092
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Capital Opportunities Fund Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Restaurants (4.5%)
Papa John's International (a)........................ 600,000 $ 26,475
Retail (10.9%)
Bed Bath & Beyond (a)................................ 240,000 8,760
Best Buy............................................. 300,000 15,600
Children's Place..................................... 100,000 2,694
Dollar Tree (a)...................................... 210,000 6,497
Kohl's (a)........................................... 100,000 7,087
Men's Warehouse...................................... 440,000 12,705
Staples (a).......................................... 330,000 10,849
---------
64,192
Technology (15.4%)
BMC Software......................................... 180,000 6,671
Broadcom, Class A.................................... 50,000 3,081
Compuware ........................................... 200,000 4,775
Flextronics International............................ 180,000 9,180
Genesis Microchip.................................... 100,000 2,375
Inktomi.............................................. 80,000 6,860
Lexmark International Group, Class A................. 40,000 4,470
Novell .............................................. 270,000 6,801
Sanmina.............................................. 120,000 7,650
SunGard Data Systems (a)............................. 330,000 13,200
Tellabs.............................................. 140,000 13,685
Verisign ............................................ 45,000 6,930
Yahoo................................................ 30,000 5,051
---------
90,729
---------
Total Common Stocks (Cost $362,051)................. 541,419
---------
- --------------------------------------------------------------------------------
PRINCIPAL
Short-Term Obligations (8.7%) AMOUNT
- --------------------------------------------------------------------------------
Commercial Paper
Associates First Capital 5.000% 4/1/99............... $ 26,260 26,260
Sprint Capital Corp. 5.100% 4/6/99................... 20,000 19,986
Volvo Treasury NA 5.100% 4/1/99...................... 5,000 5,000
---------
Total Short-Term Obligations (Cost $51,246).......... 51,246
---------
- --------------------------------------------------------------------------------
Total Investments (100.5%)
(Cost $413,297) (b) ................................. 592,665
Other Assets, Less Liabilities (-0.5%)............... (3,067)
---------
Total Net Assets (100.0%)............................ $589,598
=========
- --------------------------------------------------------------------------------
Notes to Portfolio of Investments
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b)At March 31, 1999, the cost for financial reporting and federal income tax
purposes was identical. Net unrealized appreciation was $179,368, consisting
of gross unrealized appreciation of $194,516 and gross unrealized
depreciation of $15,148.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
March 31, 1999
(All amounts in thousands, except per-share data)
(Unaudited)
<TABLE>
<CAPTION>
Large
Growth Growth Company Special Capital
Stock Opportunities Special Focus Venture Opportunities
Fund Fund Fund Fund Fund Fund
---------- -------------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Dividends
Assets
Investments in Portfolio, at value........... $868,567 $ -- $688,757 $ -- $ 65,824 $ --
Investments, at market value (cost $41,487,
$46,351 and $413,297, respectively)....... -- 51,700 -- 53,122 -- 592,665
Receivable for investments sold.............. -- 175 -- 386 -- 7,860
Receivable for fund shares sold.............. 860 7 202 270 165 245
Dividends receivable......................... -- 10 -- 41 -- 4
Cash......................................... 25 28 25 4 25 3
Other assets................................. 56 -- 117 -- 16 103
---------- --------- --------- --------- --------- ---------
Total assets.............................. 869,508 51,920 689,101 53,823 66,030 600,880
---------- --------- --------- --------- --------- ---------
Liabilities
Payable for investments purchased............ -- 463 -- 183 -- 6,035
Payable for fund shares redeemed............. 1,183 138 4,389 91 179 3,961
Payable to investment adviser and
transfer agent............................ 311 36 215 12 15 494
Other liabilities............................ 200 34 638 66 181 792
---------- --------- --------- --------- --------- ---------
Total liabilities......................... 1,694 671 5,242 352 375 11,282
---------- --------- --------- --------- --------- ---------
Net assets................................ $867,814 $51,249 $683,859 $53,471 $ 65,655 $589,598
========== ========= ========= ========= ========= =========
Analysis of Net Assets
Paid-in capital.............................. $332,099 $42,478 $510,005 $46,179 $105,191 $378,495
Net unrealized appreciation (depreciation)
on investments and foreign
currency translations..................... 499,642 10,213 558 6,771 (6,570) 179,368
Accumulated undistributed net investment
income (loss)............................. (363) (243) 1,683 (101) (147) (2,342)
Accumulated net realized gain (loss) on
investments and foreign
currency transactions..................... 36,436 (1,199) 171,613 622 (32,819) 34,077
---------- --------- --------- --------- --------- ---------
Net assets................................ $867,814 $51,249 $683,859 $53,471 $ 65,655 $589,598
========== ========= ========= ========= ========= =========
Shares outstanding (unlimited
number authorized)........................ 17,882 4,269 33,820 4,616 6,872 20,653
========== ========= ========= ========= ========= =========
Net asset value per share.................... $ 48.53 $ 12.00 $ 20.22 $ 11.58 $ 9.55 $ 28.55
========== ========= ========= ========= ========= =========
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Statements of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six Months Ended March 31, 1999 (All amounts in thousands, except
per-share data) (Unaudited)
Large
Growth Growth Company Special Capital
Stock Opportunities Special Focus Venture Opportunities
Fund Fund Fund Fund Fund Fund
---------- -------------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Investment Income
Dividends allocated from Portfolio............ $ 2,126 $ -- $ 4,279 $ -- $ 117 $ --
Dividends..................................... -- 62 -- 228 -- 334
Interest allocated from Portfolio............. 1,208 -- 3,912 -- 420 --
Interest...................................... -- 55 -- 34 -- 1,130
-------- ------ -------- ------- ------- -------
3,334 117 8,191 262 537 1,464
Foreign taxes withheld allocated
from Portfolio............................. -- -- (14) -- -- --
-------- ------ -------- ------- ------- -------
Total investment income.................... 3,334 117 8,177 262 537 1,464
-------- ------ -------- ------- ------- -------
Expenses
Expenses allocated from Portfolio............. 2,208 -- 3,143 -- 464 --
Management fees............................... -- 191 -- 182 -- 2,211
Transfer agent fees........................... 857 90 1,012 53 111 916
Administrative fees........................... 571 40 543 36 69 401
Printing and postage.......................... 7 2 8 -- 14 223
Accounting fees............................... 21 12 22 12 13 20
SEC and state registration fees............... 12 27 26 -- 1 18
Audit and legal fees.......................... 5 8 6 -- 4 13
Trustees' fees................................ 15 7 7 9 7 --
Custodian fees................................ 1 1 1 -- 1 4
Other......................................... -- -- 34 97 -- --
-------- ------ -------- ------- ------- -------
Total expenses............................. 3,697 378 4,802 389 684 3,806
Reimbursement of expenses by
investment adviser......................... -- (44) -- (26) -- --
-------- ------ -------- ------- ------- -------
Net expenses............................... 3,697 334 4,802 363 684 3,806
-------- ------ -------- ------- ------- -------
Net investment income (loss)............... (363) (217) 3,375 (101) (147) (2,342)
-------- ------ -------- ------- ------- -------
Realized and Unrealized Gain
(Loss) on Investments
Net realized gain (loss) on investments
allocated from Portfolio................... 40,025 -- 174,379 -- (25,751) --
Net realized gain on investments.............. -- 586 -- 2,619 -- 42,873
Net realized loss on foreign currency
transactions allocated from Portfolio...... -- -- (525) -- -- --
-------- ------ -------- ------- ------- -------
Net Gain (Loss)............................... 40,025 586 173,854 2,619 (25,751) 42,873
-------- ------ -------- ------- ------- -------
Net change in unrealized appreciation
or depreciation on investments
and foreign currency translations........ 203,976 7,433 (159,003) 11,330 18,685 40,508
-------- ------ -------- ------- ------- -------
Net gain (loss) on investments and
foreign currency transactions............ 244,001 8,019 14,851 13,949 (7,066) 83,381
-------- ------ -------- ------- ------- -------
Net Increase (Decrease) in Net Assets
Resulting from Operations.................. $243,638 $7,802 $ 18,226 $13,848 $ (7,213) $81,039
======== ====== ======== ======= ======= =======
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
(All amounts in thousands)
<TABLE>
<CAPTION>
Growth Stock Fund Growth Opportunities Fund Special Fund
----------------------- ------------------------- -----------------------
(Unaudited) (Unaudited) (Unaudited)
Six Months Year Six Months Year Six Months Year
Ended Ended Ended Ended Ended Ended
March 31,September 30, March 31,September 30, March 31,September 30,
1999 1998 1999 1998 1999 1998
----------------------- ------------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment income (loss)................... $ (363)$ (652) $ (217) $ (347) $ 3,375 $ 2,562
Net realized gain (loss) on investments
and foreign currency transactions........... 40,025 (894) 586 (1,412) 173,854 212,315
Net change in unrealized appreciation
or depreciation on investments and
foreign currency transactions............... 203,976 29,857 7,433 (942) (159,003) (441,669)
-------- -------- ------- ------- -------- ----------
Net increase (decrease) in net
assets resulting from operations.......... 243,638 28,311 7,802 (2,701) 18,226 (226,792)
-------- -------- ------- ------- -------- ----------
Distributions to Shareholders
Distributions from net investment income....... -- -- -- -- (3,890) --
Distributions from net capital gains........... -- (36,957) -- -- (160,427) (130,064)
-------- -------- ------- ------- -------- ----------
Total distributions to shareholders......... -- (36,957) -- -- (164,317) (130,064)
-------- -------- ------- ------- -------- ----------
Share Transactions
Subscriptions to fund shares................... 205,465 110,244 8,803 26,168 83,296 197,598
Value of distributions reinvested.............. -- 29,289 -- -- 152,046 115,138
Redemptions of fund shares..................... (196,634) (123,211) (15,330) (23,323) (317,042) (371,808)
-------- -------- ------- ------- -------- ----------
Net increase (decrease) from
share transactions........................ 8,831 16,322 (6,527) 2,845 (81,700) (59,072)
-------- -------- ------- ------- -------- ----------
Net increase (decrease) in
net assets................................ 252,469 7,676 1,275 144 (227,791) (415,928)
Total Net Assets
Beginning of period............................ 615,345 607,669 49,974 49,830 911,650 1,327,578
-------- -------- ------- ------- -------- ----------
End of period.................................. $867,814 $615,345 $51,249 $49,974 $683,859 $ 911,650
======== ======== ======= ======= ======== ==========
Accumulated Undistributed Net
Investment Income (Loss).................... $ (363) $ -- $ (243) $ (26) $ 1,683 $ 2,198
======== ======== ======= ======= ======== ==========
Analysis of Changes in Shares
of Beneficial Interest
Subscriptions to fund shares................... 4,579 2,955 795 2,178 4,597 6,671
Issued in reinvestment
of distributions............................ -- 876 -- -- 6,461 4,013
Redemptions of fund shares..................... (4,427) (3,319) (1,328) (2,001) (14,479) (12,731)
-------- -------- ------- ------- -------- ----------
Net increase (decrease) in
fund shares............................... 152 512 (533) 177 (3,421) (2,047)
Shares outstanding at beginning
of period................................... 17,730 17,218 4,802 4,625 37,241 39,288
-------- -------- ------- ------- -------- ----------
Shares outstanding at end of period............ 17,882 17,730 4,269 4,802 33,820 37,241
======== ======== ======= ======= ======== ==========
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(All amounts in thousands)
Large Company Focus Fund Special Venture Fund Capital Opportunities Fund
---------------------- ----------------------- ----------------------
(Unaudited) (Unaudited) (Unaudited)
Six Months Period Six Months Year Six Months Year
Ended Ended Ended Ended Ended Ended
March 31,September 30, March 31,September 30, March 31,September 30,
1999 1998 (a) 1999 1998 1999 1998
---------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment loss.......................... $ (101) $ (14) $ (147) $ (1,024) $ (2,342) $ (6,791)
Net realized gain (loss) on investments...... 2,619 (1,997) (25,751) 910 42,873 110,560
Net change in unrealized appreciation
or depreciation........................... 11,330 (4,559) 18,685 (67,561) 40,508 (195,885)
------- ------- -------- -------- -------- ----------
Net increase (decrease) in net assets
resulting from operations............... 13,848 (6,570) (7,213) (67,675) 81,039 (92,116)
------- ------- -------- -------- -------- ----------
Distributions to Shareholders
Distributions from net investment income..... -- -- -- -- -- --
Distributions from net capital gains......... -- -- -- (24,530) -- --
------- ------- -------- -------- -------- ----------
Total distributions to shareholders....... -- -- -- (24,530) -- --
------- ------- -------- -------- -------- ----------
Share Transactions
Subscriptions to fund shares................. 7,471 55,706 10,572 52,678 118,927 264,307
Value of distributions reinvested............ -- -- -- 22,807 -- --
Redemptions of fund shares................... (12,564) (4,420) (53,783) (102,956) (291,501) (601,700)
------- ------- -------- -------- -------- ----------
Net increase (decrease) from
share transactions...................... (5,093) 51,286 (43,211) (27,471) (172,574) (337,393)
------- ------- -------- -------- -------- ----------
Net increase (decrease) in
net assets.............................. 8,755 44,716 (50,424) (119,676) (91,535) (429,509)
Total Net Assets
Beginning of period.......................... 44,716 -- 116,079 235,755 681,133 1,110,642
------- ------- -------- -------- -------- ----------
End of period................................ $53,471 $44,716 $ 65,655 $116,079 $589,598 $681,133
======== ======== ======== ======== ======== ==========
Accumulated Undistributed Net
Investment Loss........................... $ (101) $ -- $ (147) $ -- $ (2,342) $--
======== ======== ======== ======== ======== ==========
Analysis of Changes in Shares
of Beneficial Interest
Subscriptions to fund shares................. 751 5,607 1,005 3,547 4,520 8,722
Issued in reinvestment of distributions...... -- -- -- 1,653 -- --
Redemptions of fund shares................... (1,257) (485) (5,179) (7,665) (10,829) (19,933)
------- ------- -------- -------- -------- ----------
Net increase (decrease) in fund shares.... (506) 5,122 (4,174) (2,465) (6,309) (11,211)
Shares outstanding at beginning of period.... 5,122 -- 11,046 13,511 26,962 38,173
------- ------- -------- -------- -------- ----------
Shares outstanding at end of period.......... 4,616 5,122 6,872 11,046 20,653 26,962
======== ======== ======== ======== ======== ==========
(a)From commencement of operations on June 26, 1998.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, 1999
(All amounts in thousands)
(Unaudited)
SR&F SR&F
Growth SR&F Special
Stock Special Venture
Portfolio Portfolio Portfolio
-------- -------- --------
<S> <C> <C> <C>
Assets
Investments, at market value (cost of $572,568,
$688,865 and $70,963, respectively)........ $1,132,482 $689,449 $64,386
Receivable for investments sold............... 6,239 1,011 1,659
Dividends receivable.......................... 346 935 32
Cash.......................................... 4 5 1
Other assets.................................. -- -- 11
---------- -------- -------
Total assets............................... 1,139,071 691,400 66,089
---------- -------- -------
Liabilities
Payable for investments purchased............. 11,525 1,920 --
Payable to investment adviser................. 530 525 45
Other liabilities............................. 105 44 146
---------- -------- -------
Total liabilities......................... 12,160 2,489 191
---------- -------- -------
Net assets applicable to investors'
beneficial interest...................... $1,126,911 $688,911 $65,898
========== ======== =======
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Statements of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six Months Ended March 31, 1999
(All amounts in thousands)
(Unaudited)
SR&F SR&F
Growth SR&F Special
Stock Special Venture
Portfolio Portfolio Portfolio
-------- -------- --------
<S> <C> <C> <C>
Investment Income
Dividends..................................... $ 2,608 $ 4,280 $ 117
Interest...................................... 1,478 3,913 421
-------- -------- -------
4,086 8,193 538
Foreign taxes withheld........................ -- (15) --
-------- -------- -------
Total investment income.................... 4,086 8,178 538
-------- -------- -------
Expenses
Management fees............................... 2,639 3,077 345
Accounting fees............................... 25 26 13
Trustees' fees................................ 12 7 11
Audit and legal fees.......................... 8 9 8
Custodian fees................................ 7 15 1
Other......................................... 30 -- 86
-------- -------- -------
Total expenses............................. 2,721 3,144 464
-------- -------- -------
Net investment income...................... 1,365 5,034 74
-------- -------- -------
Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss) on investments....... 36,831 174,527 (25,853)
Net realized loss on foreign
currency transactions -- (524) --
-------- -------- -------
Net Gain (Loss) .............................. 36,831 174,003 (25,853)
-------- -------- -------
Net change in unrealized appreciation
or depreciation on investments and
foreign currency translations 261,875 (159,149) 18,779
-------- -------- -------
Net gain (loss) on investments and foreign
currency transactions................... 298,706 14,854 (7,074)
-------- -------- -------
Net Increase (Decrease) in Net Assets
Resulting from Operations.................. $300,071 $ 19,888 $ (7,000)
======== ======== =======
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(All amounts in thousands)
SR&F Growth SR&F Special SR&F Special
Stock Portfolio Portfolio Venture Portfolio
--------------------- --------------------- -----------------------
(Unaudited) (Unaudited) (Unaudited)
Six Months Year Six Months Year Six Months Year
Ended Ended Ended Ended Ended Ended
March 31,September 30, March 31,September 30, March 31,September 30,
1999 1998 1999 1998 1999 1998
--------------------- --------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment income (loss).................... $ 1,365 $ 2,268 $ 5,034 $ 7,424 $ 74 $ (82)
Net realized gain (loss) on investments......... 36,831 (7,814) 174,003 211,299 (25,853) 823
Net change in unrealized appreciation or
depreciation on investments.................. 261,875 32,197 (159,149) (441,553) 18,779 (67,684)
----------- --------- --------- ----------- -------- ---------
Net increase (decrease) in net assets
resulting from operations.................. 300,071 26,651 19,888 (222,830) (7,000) (66,943)
----------- --------- --------- ----------- -------- ---------
Transactions in Investors' Beneficial Interest
Contributions................................... 236,362 151,248 27,589 60,926 3,630 25,934
Withdrawals..................................... (141,065) (54,727) (275,717) (249,583) (47,117) (78,647)
----------- --------- --------- ----------- -------- ---------
Net increase (decrease) from transactions
in investors' beneficial interest.......... 95,297 96,521 (248,128) (188,657) (43,487) (52,713)
----------- --------- --------- ----------- -------- ---------
Net increase (decrease) in net assets........ 395,368 123,172 (228,240) (411,487) (50,487) (119,656)
Total Net Assets
Beginning of period............................. 731,543 608,371 917,151 1,328,638 116,385 236,041
----------- --------- --------- ----------- -------- ---------
End of period................................... $1,126,911 $731,543 $688,911 $ 917,151 $65,898 $116,385
=========== ========= ========= =========== ======== =========
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
(All amounts in thousands)
(Unaudited)
Note 1. Organization
Stein Roe Growth Stock Fund, Stein Roe Growth Opportunities Fund, Stein Roe
Special Fund, Stein Roe Large Company Focus Fund, Stein Roe Special Venture Fund
and Stein Roe Capital Opportunities Fund (the "Funds") are series of Stein Roe
Investment Trust (the "Trust"), an open-end management investment company
organized as a Massachusetts business trust. Growth Stock Fund, Special Fund and
Special Venture Fund invest substantially all of their assets in SR&F Growth
Stock Portfolio, SR&F Special Portfolio and SR&F Special Venture Portfolio (the
"Portfolios"), respectively.
The Portfolios are series of SR&F Base Trust, a Massachusetts common law
trust organized under an Agreement and Declaration of Trust dated August 23,
1993. The Portfolios commenced operations on February 3, 1997. At com mencement,
Growth Stock Fund, Special Fund and Special Venture Fund contributed $474,861,
$1,096,779 and $160,940 in securities and other assets to SR&F Growth Stock
Portfolio, SR&F Special Portfolio and SR&F Special Venture Portfolio,
respectively, in exchange for beneficial ownership of those Portfolios. The
Portfolios allocate 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, Growth Stock Fund owned 77.08 percent of the SR&F
Growth Stock Portfolio; Special Fund owned 99.98 percent of the SR&F Special
Portfolio; and Special Venture Fund owned 99.89 percent of the SR&F Special
Venture Portfolio.
- --------------------------------------------------------------------------------
Note 2. Significant
Accounting Policies
The following summarizes the significant accounting policies of the Funds and
Portfolios. These policies are in conformity with generally accepted accounting
principles, which require management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates. Investment Transactions and
Investment Income Investment transactions are accounted for on trade date.
Dividend income is recorded on the ex-dividend date, and interest income is
recorded on the accrual basis. Interest income includes discount accretion on
fixed income
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements Continued
- --------------------------------------------------------------------------------
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 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 SR&F Special Portfolio may enter into forward foreign currency
exchange contracts under which the 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. The Portfolio had no outstanding contracts at
March 31, 1999. Federal Income Taxes No provision is made for federal income
taxes since (a) the Funds elect to be taxed as "regulated investment companies"
and make distributions to their shareholders to be relieved of all federal
income taxes under provisions of current federal tax law; and (b) the Portfolios
are treated as partnerships for federal income tax purposes and all of their
income is allocated to their owners based on their respective percentages of
ownership.
The Funds intend to utilize provisions of federal income tax law, which allow
them to carry a realized capital loss forward up to eight years following the
year of the loss, and offset such losses against any future realized gains. At
September 30, 1998, Growth Opportunities Fund had a capital loss carryforward of
$1,727, which expires in 2005 and 2006; Large Company Focus Fund had a capital
loss carryforward of $1,997
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements Continued
- --------------------------------------------------------------------------------
which expires in 2006; and Capital Opportunities Fund had a capital loss
carryforward of $7,137 which expires in 2005. Distributions to Shareholders Each
Fund declares and pays dividends of any net investment income and net realized
capital gains annually, which are recorded on the ex-dividend date. Dividends
are determined in accordance with income tax principles, which may treat certain
transactions differently than generally accepted accounting principles.
Distributions in excess of tax basis earnings are reported in the financial
statements as a return of capital. Permanent differences in the recognition or
classification of income between the financial statements and tax earnings are
reclassified to paid-in capital.
- --------------------------------------------------------------------------------
Note 3. Trustees' Fees and Transactions with Affiliates
The Funds and Portfolios pay monthly management and administrative fees to Stein
Roe & Farnham Incorporated (the "Adviser"), an indirect, wholly-owned subsidiary
of Liberty Financial Companies, Inc. ("Liberty"), for its services as investment
adviser and administrator. The annual rates, as a percentage of average daily
net assets, are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Management Fee Administrative Fee
<S> <C> <C>
Growth Stock Fund N/A .150% up to $500,000,
.125% of the next $500,000,
.100% thereafter
SR&F Growth Stock Portfolio .600% up to $500,000, N/A
.550% of the next $500,000,
.500% thereafter
Special Fund N/A .150% up to $500,000,
.125% of the next $500,000,
.100% of the next $500,000,
.075% thereafter
SR&F Special Portfolio .750% up to $500,000, N/A
.700% of the next $500,000,
.650% of the next $500,000,
.600% thereafter
Special Venture Fund N/A .150%
SR&F Special Venture Portfolio .750% N/A
Notes to Financial Statements Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Management Fee Administrative Fee
Growth Opportunities Fund .750% up to $500,000, .150% up to $500,000,
Large Company Focus Fund .700% of the next $500,000, .125% of the next $500,000,
Capital Opportunities Fund .650% of the next $500,000, .100% of the next $500,000,
.600% thereafter .075% thereafter
- --------------------------------------------------------------------------------
</TABLE>
The Adviser also provides fund accounting services.
The Adviser has agreed to reimburse Growth Opportunities Fund and Large
Company Focus Fund for their operating expenses to the extent that annual
expenses exceed 1.25 percent and 1.50 percent, receptively, of average daily net
assets. This commitment expires on January 31, 2000, subject to earlier
termination by the Adviser on 30 days notice.
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 Funds.
Certain officers and trustees of the Trust are also officers of the Adviser.
No remuneration was paid to any trustee or officer of the Trust who is
affiliated with the Adviser.
- --------------------------------------------------------------------------------
Note 4. Short-Term Debt
To facilitate portfolio liquidity, the Funds and Portfolios maintain borrowing
arrangements under which they can borrow against portfolio securities. Neither
the Funds nor the Portfolios had borrowings during the 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:
<TABLE>
<CAPTION>
Purchases Sales
--------- ---------
<S> <C> <C>
SR&F Growth Stock Portfolio....................... $386,840 $249,663
Growth Opportunities Fund......................... 32,559 36,247
SR&F Special Portfolio............................ 258,327 384,786
Large Company Focus Fund.......................... 12,536 17,966
SR&F Special Venture Portfolio.................... 59,171 78,588
Capital Opportunities Fund........................ 191,075 368,220
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights Continued
- --------------------------------------------------------------------------------
Growth Stock Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<TABLE>
<CAPTION>
(Unaudited)
Six Months
Ended
March 31, Years Ended September 30,
1999 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........ $ 34.71 $ 35.29 $ 28.79 $ 26.13 $ 23.58 $ 24.89
-------- -------- -------- -------- -------- --------
Income From Investment Operations
Net investment income (loss)............. (0.02) (0.04) 0.01 0.08 0.12 0.13
Net realized and unrealized gain
on investments......................... 13.84 1.61 8.79 5.01 5.60 0.40
-------- -------- -------- -------- -------- --------
Total from investment operations...... 13.82 1.57 8.80 5.09 5.72 0.54
-------- -------- -------- -------- -------- --------
Distributions
Net investment income.................... -- -- (0.07) (0.10) (0.15) (0.12)
Net realized capital gains............... -- (2.15) (2.23) (2.33) (3.02) (1.73)
-------- -------- -------- -------- -------- --------
Total distributions................... -- (2.15) (2.30) (2.43) (3.17) (1.85)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period.............. $ 48.53 $ 34.71 $ 35.29 $ 28.79 $ 26.13 $ 23.58
======== ======== ======== ======== ======== ========
Ratio of net expenses to average
net assets............................... 0.96%(a) 1.03% 1.07% 1.08% 0.99% 0.94%
Ratio of net investment income (loss)
to average net assets.................... 0.09%(a) (0.10)% 0.04% 0.32% 0.56% 0.50%
Portfolio turnover rate..................... N/A N/A 5%(b) 39% 36% 27%
Total return................................ 39.82% 4.69% 33.10% 21.04% 28.18% 2.10%
Net assets, end of period (000's)........... $867,814 $615,345 $607,699 $417,964 $360,336 $321,502
(a) Annualized.
(b) Prior to commencement of operations of the Portfolio.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Growth Opportunities Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<TABLE>
<CAPTION>
(Unaudited)
Six Months Ended Year Ended Period Ended
March 31, September 30, September 30,
1999 1998 1997 (c)
--------------- --------------- ---------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.41 $ 10.77 $ 10.00
------- ------- -------
Income From Investment Operations
Net investment loss........... (0.05) (0.07) --
Net realized and unrealized gain (loss)
on investments.............. 1.64 (0.29) 0.77
------- ------- -------
Total from investment operations. 1.59 (0.36) 0.77
------- ------- -------
Net Asset Value, End of Period... $ 12.00 $ 10.41 $ 10.77
======= ======= =======
Ratio of net expenses to average
net assets (a)................ 1.25%(d) 1.25% 1.25%(d)
Ratio of net investment income (loss) to
average net assets (b)........ (0.80)%(d) (0.64)% 0.02%(d)
Portfolio turnover rate.......... 63% 75% 3%
Total return (b)................. 15.27% (3.34)% 7.70%
Net assets, end of period (000's) $51,249 $49,974 $49,830
(a)If the Fund had paid all of its expenses and there had been no reimbursement
by the investment adviser, this ratio would have been 1.40 percent for the
six months ended March 31, 1999, 1.44 percent for the year ended September
30, 1998, and 1.74 percent for the period ended September 30, 1997.
(b)Computed giving effect to investment adviser's expense limitation undertaking.
(c)From commencement of operations on June 30, 1997.
(d)..................................Annualized.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights Continued
- --------------------------------------------------------------------------------
Large Company Focus Fund
Selected per-share data (for a share outstanding throughout the period), ratios
and supplemental data.
<TABLE>
<CAPTION>
(Unaudited)
Six Months Ended Period Ended
March 31, September 30,
1999 1998(a)
------- -------
<S> <C> <C>
Net Asset Value, Beginning of Period.............. $ 8.73 $ 10.00
------- -------
Income From Investment Operations
Net investment loss............................ (0.02) --
Net realized and unrealized gain
(loss) on investments 2.87 (1.27)
------- -------
Total from investment operations.................. 2.85 (1.27)
------- -------
Net Asset Value, End of Period.................... $ 11.58 $ 8.73
======= =======
Ratio of net expenses to average net assets (b)... 1.50%(d) 1.50%(d)
Ratio of net investment loss to average net assets (c) (0.41)%(d) (0.12)%(d)
Portfolio turnover rate........................... 26% 21%
Total return (c).................................. 32.65% (12.70)%
Net assets, end of period (000's)................. $53,471 $44,716
(a)From commencement of operations on June 26, 1998.
(b)If the Fund had paid all of its expenses and there had been no reimbursement
by the investment adviser, this ratio would have been 1.59 percent for the
six months ended March 31, 1999 and 1.61 percent for the period ended
September 30, 1998.
(c)Computed giving effect to investment adviser's expense limitation undertaking.
(d)..................................Annualized.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Special Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
(Unaudited)
Six Months
Ended
March 31, Years Ended September 30,
1999 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period......... $ 24.48 $ 33.79 $ 27.39 $ 25.26 $ 23.54 $ 25.04
-------- -------- -------- -------- -------- --------
Income From Investment Operations
Net investment income (loss).............. 0.09 0.07 (0.06) 0.01 0.13 0.15
Net realized and unrealized gain (loss)
on investments and foreign
currency transactions................... 0.33 (6.06) 8.57 4.14 3.05 0.33
-------- -------- -------- -------- -------- --------
Total from investment operations....... 0.42 (5.99) 8.51 4.15 3.18 0.48
-------- -------- -------- -------- -------- --------
Distributions
Net investment income..................... (0.11) -- -- (0.11) (0.15) (0.21)
Net realized capital gains................ (4.57) (3.32) (2.11) (1.91) (1.31) (1.77)
-------- -------- -------- -------- -------- --------
Total distributions.................... (4.68) (3.32) (2.11) (2.02) (1.46) (1.98)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period............... $ 20.22 $ 24.48 $ 33.79 $ 27.39 $ 25.26 $ 23.54
======== ======== ======== ======== ======== ========
Ratio of net expenses to average net assets.. 1.14%(a) 1.13% 1.14% 1.18% 1.02% 0.96%
Ratio of net investment income (loss) to
average net assets........................ 0.80%(a) 0.21% (0.17)% 0.03% 0.56% 0.91%
Portfolio turnover rate...................... N/A N/A 7%(b) 32% 41% 58%
Total return................................. 1.57% (19.17)% 33.67% 17.89% 14.60% 2.02%
Net assets, end of period (000's)............ $683,859 $911,650 $1,327,578 $1,158,498 $1,201,469 $1,243,885
(a) Annualized.
(b) Prior to commencement of operations of the Portfolio.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights Continued
- --------------------------------------------------------------------------------
Special Venture Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<TABLE>
<CAPTION>
(Unaudited)
Six Months Period
Ended Ended
March 31, Years Ended September 30, September 30,
1999 1998 1997 1996 1995 (a)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................. $ 10.51 $ 17.45 $ 15.87 $ 12.60 $ 10.00
-------- -------- -------- -------- --------
Income From Investment Operations
Net investment income (loss)...................... (0.02) (0.09) (0.02) (0.02) 0.01
Net realized and unrealized gain (loss)
on investments.................................. (0.94) (5.08) 3.12 3.86 2.67
-------- -------- -------- -------- --------
Total from investment operations............... (0.96) (5.17) 3.10 3.84 2.68
-------- -------- -------- -------- --------
Distributions
Net investment income............................. -- -- -- -- (0.03)
Net realized capital gains........................ -- (1.77) (1.52) (0.57) (0.05)
-------- -------- -------- -------- --------
Total distributions............................ -- (1.77) (1.52) (0.57) (0.08)
-------- -------- -------- -------- --------
Net Asset Value, End of Period....................... $ 9.55 $ 10.51 $ 17.45 $ 15.87 $ 12.60
======== ======== ======== ======== ========
Ratio of net expenses to average net assets.......... 1.46%(b) 1.28% 1.29% 1.25%(d) 1.25%(b)(d)
Ratio of net investment income (loss) to
average net assets................................ (0.31)%(b) (0.50)% (0.18)% (2.19)%(e) 0.12%(b)(e)
Portfolio turnover rate.............................. N/A N/A 44%(c) 72% 84%
Total return......................................... (9.04)% (32.05)% 21.73% 31.81%(e) 26.96%(e)
Net assets, end of period (000's).................... $65,655 $116,079 $235,755 $144,528 $60,533
(a) From commencement of operations on October 17, 1994.
(b) Annualized.
(c) Prior to commencement of operations of the Portfolio.
(d) If the Fund had paid all of its expenses and there had been no reimbursement
by the investment adviser, this ratio would have been 1.34 percent for the
year ended September 30, 1996, and 2.87 percent for the period ended
September 30, 1995.
(e) Computed giving effect to investment adviser's expense limitation
undertaking.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights Continued
- --------------------------------------------------------------------------------
Capital Opportunities Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<TABLE>
<CAPTION>
(Unaudited)
Six Months
Ended
March 31, Years Ended September 30,
1999 1998 1997 1996 1995(b) 1994(b)
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.......... $ 25.25 $ 29.10 $ 31.04 $ 21.69 $ 15.79 $ 15.44
-------- -------- -------- -------- -------- --------
Income From Investment Operations
Net investment income (loss)............... (0.10) (0.25) (0.17) (0.06) 0.01 0.02
Net realized and unrealized gain (loss)
on investments.......................... 3.40 (3.60) (1.77) 10.41 5.91 0.34
-------- -------- -------- -------- -------- --------
Total from investment operations........ 3.30 (3.85) (1.94) 10.35 5.92 0.36
-------- -------- -------- -------- -------- --------
Distributions
Net investment income...................... -- -- -- (0.01) (0.02) (0.01)
Net realized capital gains................. -- -- -- (0.99) -- --
-------- -------- -------- -------- -------- --------
Total distributions..................... -- -- -- (1.00) (0.02) (0.01)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period................ $ 28.55 $ 25.25 $ 29.10 $ 31.04 $ 21.69 $ 15.79
======== ======== ======== ======== ======== ========
Ratio of net expenses to average net assets... 1.15%(a) 1.20% 1.17% 1.22% 1.05% 0.97%
Ratio of net investment income (loss) to
average net assets......................... (0.71)%(a) (0.72)% (0.69)% (0.40)% 0.08% 0.04%
Portfolio turnover rate....................... 31% 47% 35% 22% 60% 46%
Total return.................................. 13.07% (13.23)% (6.25)% 49.55% 37.46% 2.31%
Net assets, end of period (000's)............. $589,598 $681,133 $1,110,642 $1,684,538 $242,381 $175,687
(a) Annualized.
(b) All per-share amounts reflect a two-for-one stock split effective August 25,
1995.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SR&F Growth Stock 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.................... 0.57%(b) 0.61% 0.63%(b)
Ratio of net investment income to
average net assets............ 0.28%(b) 0.31% 0.52%(b)
Portfolio turnover rate.......... 29% 39% 22%
(a)From commencement of operations on February 3, 1997.
(b)Annualized.
- --------------------------------------------------------------------------------
SR&F Special Portfolio
(Unaudited)
Six Months Ended Year Ended Period Ended
March 31, September 30, September 30,
1999 1998 1997(a)
--------------- --------------- ---------------
Ratio of net expenses to average
net assets ................... 0.75%(b) 0.73% 0.75%(b)
Ratio of net investment income to
average net assets ........... 1.20%(b) 0.60% 0.31%(b)
Portfolio turnover rate.......... 37% 46% 8%
(a)From commencement of operations on February 3, 1997.
(b)Annualized.
- --------------------------------------------------------------------------------
SR&F Special Venture Portfolio
(Unaudited)
Six Months Ended Year Ended Period Ended
March 31, September 30, September 30,
1999 1998 1997(a)
--------------- --------------- ---------------
Ratio of net expenses to average
net assets.................... 0.99%(b) 0.82% 0.82%(b)
Ratio of net investment income (loss) to
average net assets............ 0.16%(b) (0.04)% 0.31%(b)
Portfolio turnover rate.......... 75% 91% 58%
(a)From commencement of operations on February 3, 1997.
(b)Annualized.
</TABLE>
<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 Director, 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 D. 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 Trust
Arthur Andersen LLP
Independent Public 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
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.
GW12A 5/99
