STEIN ROE MUTUAL FUNDS
SEMIANNUAL REPORT
MARCH 31, 1999
PHOTO OF: HANDS HOLDING SMALL PLANT.
STEIN ROE EQUITY FUNDS
GROWTH FUND
GROWTH INVESTOR FUND
logo
STEIN ROE MUTUAL FUNDS
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Sensible Risk. Intelligent Investments(R).
<PAGE>
CONTENTS
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PERFORMANCE SUMMARY................................................... 1
How the Stein Roe Growth Investor Fund has done over time
MANAGEMENT DISCUSSION & ANALYSIS...................................... 2
An Interview with the Portfolio Managers
Growth of a $10,000 Investment Chart
PORTFOLIO OF INVESTMENTS.............................................. 5
A complete list of investments with market values
FINANCIAL STATEMENTS.................................................. 8
Statements of assets and liabilities, operations and changes in net assets
NOTES TO FINANCIAL STATEMENTS......................................... 13
FINANCIAL HIGHLIGHTS.................................................. 15
Selected per-share data
Must be accompanied or preceded by a prospectus.
<PAGE>
FUND PERFORMANCE
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There are several ways to evaluate a fund's historical performance. You can look
at the total percentage change in value, the average annual percentage change or
the growth of a hypothetical $10,000 investment.
Each performance figure includes changes in a fund's share price, plus
reinvestment of any dividends (net investment income) and capital gains (the
profits the fund earns when it sells stocks that have grown in value).
Six Month Cumulative and Average Annual Total Returns
Periods ended March 31, 1999
Past 6 Past 1 Past 3 Life of
Months Year Years Fund
-----------------------------------------
GROWTH INVESTOR FUND* 31.48% 13.43% 25.81% 27.30%
Standard & Poor's 500 Index 27.32 18.49 28.07 26.39
Lipper Growth Fund Average 28.23 13.56 21.73 20.62
Number of Funds in Peer Group 1105 1022 619 391
*Growth Investor Fund commenced operations on 3/31/99. The Fund is a feeder fund
in a master/feeder structure and invests all of its assets in the SR&F Growth
Investor Portfolio, which has the same investment objective and policies as the
Fund. The Fund's historical performance for all periods prior to 3/31/99 is the
performance of Young Investor Fund, which began operating 4/29/94 and is a
separate feeder fund of the SR&F Growth Investor Portfolio. Performance for
Growth Investor Fund is not restated for any difference in expenses between the
Fund and Young Investor Fund. An expense limit of 1.10% of average daily net
assets is in effect for the Fund; absent these limits, total return would be
less.
Past performance is no guarantee of future results. Share price and investment
return will vary, so you may have a gain or loss when you sell shares. Total
return includes changes in share price and reinvestment of income and capital
gains distributions. The 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. Source: Lipper, Inc., a monitor of mutual fund performance.
QUESTIONS & ANSWERS
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AN INTERVIEW WITH DAVID BRADY AND ERIK GUSTAFSON,
PORTFOLIO MANAGERS OF GROWTH INVESTOR FUND AND SR&F GROWTH INVESTOR PORTFOLIO
FUND DATA
Investment Objective:
Seeks to achieve long-term growth by investing in a portfolio primarily made up
of common stocks.
FUND INCEPTION:
March 31, 1999
Stein Roe Growth Investor Fund began operating on March 31, 1999. The Fund
invests all of its assets in SR&F Growth Investor Portfolio, the portfolio where
the assets of Young Investor Fund are also invested.
Q: WHAT IS THE BACKGROUND OF GROWTH INVESTOR PORTFOLIO?
GUSTAFSON: The Fund invests in what we believe are the best growth-oriented
companies available -- regardless of size. Over the past six months, investors
focused primarily on large-company stocks with pure, proven growth
characteristics -- and that's also where the majority of the portfolio's assets
were invested.
For the six months ended March 31, 1999, Growth Investor Fund's results
outpaced its benchmark, the unmanaged Standard & Poor's 500 Index, as shown on
page 1. The Portfolio lifetime results also outpaced the S&P 500 Index and the
returns of most growth mutual funds also shown on page 1.
Q: IN WHAT AREAS DO YOU FOCUS INVESTMENTS?
BRADY: Compared to most growth funds in its category, the portfolio is
positioned in an above-average weighting of technology and telecommunications
stocks, two sectors that have recently been providing strong double-digit
returns. As of March 31, 1999, five of the portfolio's top 10 holdings were
technology companies. One of the portfolio's largest holdings is America Online
(4.5% of net assets). The company is a leader in Internet communications and has
proven itself by reporting several quarters of consistent growth. We believe
America Online is on track to show further earnings growth and capital
appreciation potential. Other Internet holdings include Inktomi Corp. (0.9% of
net assets), a company that makes search engine software and Entrust
Technologies, which develops security products that assure privacy when
transacting on the web (0.9% of net assets).
A top telecommunications holding is MCI WorldCom (3.1% of net assets)
which was also among the top performing stocks in the S&P 500 Index over the
past six months.
Q: GROWTH INVESTOR FUND OWNS SMALL-COMPANY AND MIDCAP STOCKS IN ADDITION TO
LARGE-CAP STOCKS. HOW DID THESE STOCKS DO DURING THE FIRST HALF OF THE 1999
FISCAL YEAR?
BRADY: Generally not as well as large-company stocks, except in
technology. For that reason, we have positioned the Fund to try to benefit from
the current demand for high-quality growth stocks. More than 80% of the
portfolio's net assets were invested in large-cap companies as of March 31.
GUSTAFSON: Our flexible strategy allows us to invest the portfolio's assets in
companies where we see the greatest growth potential. We focus specifically on
those businesses we think can consistently meet or exceed analysts' earnings
expectations, and lately that's led us toward large-cap companies. Because
small-company stocks have been so out-of-favor, we've become extremely selective
in this area. Brady: However, we maintain a broad mix of stocks because we
believe this is a sensible approach that can help reduce risk, especially given
that many large-company stocks currently sell at prices that seem much higher
than historical norms. Having companies of all sizes in the portfolio served us
well a few years ago and it remains an important part of our long-term strategy.
Q: WHAT CAUSED THE STOCK MARKET TO MOVE UP SO MUCH AFTER ITS BIG DECLINE LAST
SUMMER?
GUSTAFSON: Investors became more confident in corporate earnings
prospects after the Federal Reserve Board reduced short-term interest rates last
fall. Consumer prices remained low, and international financial markets began to
stabilize. Also, U.S. economic growth has been much better than expected. GDP
(gross domestic product, or the nation's output of goods and services) rose a
strong 6% in the fourth quarter of 1998. Many economists believe the United
States will continue to grow without undue inflation in 1999. This environment
has historically been positive for growth stocks.
Q: WHAT'S YOUR OUTLOOK FOR THE U.S. ECONOMY?
BRADY: We spend about 10% to 15% of our time looking at macro-economic trends.
Generally, we think the current U.S. environment of low inflation, and healthy
consumer demand can continue. In our view, this bodes wells for growth stocks
and we remain fully invested. We're stock-pickers at heart, and invest most of
our resources evaluating whether individual companies can grow regardless of
economic conditions
<PAGE>
Q: WHAT WOULD YOU TELL INVESTORS TO EXPECT GOING FORWARD?
GUSTAFSON: In our opinion, Growth Investor Fund is well-positioned to take
advantage of the trends in technology and business that we think are likely to
foster further growth into the new millennium. We will continue to monitor
trends and utilize our flexible investment parameters to invest for growth where
we see the greatest long-term potential.
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 income and capital
gains distributions. Growth Investor Portfolio holdings are as of 3/31/99 and
are subject to change. Investments in smaller companies may experience greater
volatility. The Fund is a feeder fund in a master/feeder structure and invests
all of its assets in the SR&F Growth Investor Portfolio, which has the same
investment objective and policies as the Fund. The Fund's historical performance
for all periods prior to 3/31/99 is the performance of Young Investor Fund,
which began operating 4/29/94 and is a separate feeder fund of the SR&F Growth
Investor Portfolio. Performance for Young Investor Fund is not restated for any
difference in expenses between the Fund and Young Investor Fund.
An expense limit of 1.10% of average daily net assets is in effect for the Fund;
absent these limits, total returns would be less. The S&P 500 Index is an
unmanaged group of stocks that differs from the composition of the Fund and is
not available for direct investment.
INVESTMENT COMPARISON
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GROWTH of a $10,000 Investment since Inception of Growth Investor Portfolio
CHART
GROWTH INVESTOR S&P 500 LIPPER GROWTH FUND
FUND INDEX AVERAGE (391 funds)
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4/30/94 10000 10000 10000
9/30/94 10240 10399 10242
3/31/95 11414 11408 10865
9/30/95 14395 13488 12966
3/31/96 16466 15066 14007
9/30/96 19513 16228 15065
3/31/97 19294 18052 15826
9/30/97 24659 22789 20214
3/31/98 28909 26711 22627
9/30/98 24940 24859 20008
3/31/99 32791 31649 25671
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. This
illustration assumes a $10,000 investment on April 29, 1994, and reinvestment of
income and capital gains distributions. The S&P 500 Index is an unmanaged group
of stocks that differs from the composition of the Fund and is not available for
direct investment. Lipper, Inc. is a monitor of mutual fund performance. Growth
Investor Fund commenced operations on 3/31/99. The Fund is a feeder fund in a
master/feeder structure and invests all of its assets in the SR&F Growth
Investor Portfolio, which has the same investment objective and policies as the
Fund. The Fund's historical performance for all periods prior to 3/31/99 is the
performance of Young Investor Fund, which began operating 4/29/94 and is a
separate feeder fund of the SR&F Growth Investor Portfolio. Performance for
Growth Investor Fund is not restated for any difference in expenses between the
Fund and Young Investor Fund. An expense limit 1.10% of average daily net assets
is in effect for the Fund; absent these limits, total return would be less.
<PAGE>
FUND HIGHLIGHTS
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GROWTH INVESTOR PORTFOLIO
AS OF MARCH 31, 1999
TOP 10 EQUITY HOLDINGS (% OF TOTAL NET ASSETS)
America Online..................4.5% Outdoor Systems.................2.4%
Cisco Systems...................3.5 McDonald's......................2.4
MCI WorldCom....................3.1 Mattel..........................2.3
Microsoft.......................2.7 Household International.........2.3
Tellabs.........................2.5 General Electric................2.3
EQUITY PORTFOLIO HIGHLIGHTS
Portfolio S&P 500 Index
----------------------------------------
Number of Holdings 58 500
Weighted Median Market Value ($ Mil.) $31,947 $60,137
Economic Sector Breakdown
CHART
EQUITY PORTFOLIO
Basic Materials 2%
Consumer Cyclical 21%
Consumer Noncyclical 20%
Energy 0%
Financial 14%
Industrial 6%
Technology 27%
Utilities 10%
S&P 500 INDEX
Basic Materials 2%
Consumer Cyclical 14%
Consumer Noncyclical 21%
Energy 7%
Financial 16%
Industrial 8%
Technology 22%
Utilities 10%
ASSET ALLOCATION
Equities Cash & Equivalents
96.6% 3.4%
<PAGE>
SR&F GROWTH INVESTOR PORTFOLIO
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Portfolio of Investments at March 31, 1999
(Dollar amounts in thousands)
(Unaudited)
Number Market
COMMON STOCKS (96.6%) of Shares Value
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ADVERTISING (2.0%)
Interpublic Group...................................... 250,000 $ 19,469
BANKS (1.0%)
Texas Regional Bancshares, Class A..................... 350,000 9,450
COMMERCIAL SERVICES (1.4%)
Paychex................................................ 300,000 14,231
COMPUTER SOFTWARE AND SERVICES (15.4%)
America Online......................................... 300,000 43,800
Cisco Systems (a)...................................... 316,500 34,677
EMC Corp. ............................................. 50,000 6,388
Entrust Technologies................................... 250,000 8,438
Inktomi................................................ 100,000 8,575
Microsoft (a).......................................... 290,000 25,991
Sun Microsystems....................................... 75,000 9,370
Transaction Systems Architects (a)..................... 375,000 13,500
-----------
150,739
CONSUMER PRODUCTS (2.6%)
Gillette............................................... 225,000 13,373
Procter & Gamble....................................... 125,000 12,242
-----------
25,615
DISTRIBUTION - RETAIL (6.0%)
Hasbro................................................. 600,000 17,363
Mattel................................................. 925,000 23,009
Walgreen Co. .......................................... 652,400 18,430
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58,802
ELECTRICAL EQUIPMENT (2.3%)
General Electric....................................... 200,000 22,125
ELECTRICAL GENERATION (1.2%)
AES.................................................... 325,000 12,106
ENTERTAINMENT (4.2%)
Cedar Fair L.P.)....................................... 315,000 7,914
Time Warner............................................ 250,000 17,766
Walt Disney............................................ 500,000 15,563
-----------
41,243
FINANCIAL SERVICES (11.9%)
Alliance Capital Management L.P........................ 350,000 8,859
American International Group........................... 150,000 18,094
Citigroup ............................................. 300,000 19,163
Fannie Mae............................................. 250,000 17,312
Freddie Mac............................................ 300,000 17,138
Household International................................ 500,000 22,813
Providian Financial.................................... 125,000 13,750
-----------
117,129
FOOD AND BEVERAGE (5.2%)
Coca-Cola.............................................. 350,000 21,481
Groupe Danone ADRs..................................... 270,000 13,466
Wm. Wrigley Jr......................................... 175,000 15,827
-----------
50,774
<PAGE>
Number Market
of Shares Value
- --------------------------------------------------------------------------------
HEALTH CARE (4.2%)
American Home Products................................. 270,000 $ 17,618
Johnson & Johnson...................................... 200,000 18,737
Orthodontic Centers of America (a)..................... 325,000 5,119
-----------
41,474
MACHINERY (1.0%)
McDermott International............................... 400,000 10,125
MEDICAL - INSTRUMENTS (3.0%)
Becton Dickinson...................................... 400,000 15,325
Medtronic............................................. 200,000 14,350
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29,675
MEDICAL - PHARMACEUTICAL (5.7%)
Eli Lilly & Company................................... 150,000 12,731
Pfizer................................................ 150,000 20,812
Watson Pharmaceuticals (a)............................ 500,000 22,062
-----------
55,605
PUBLISHING, BROADCASTING AND MEDIA (6.9%)
AT&T Liberty Media A.................................. 200,000 10,525
Clear Channel Communications (a)...................... 300,000 20,119
Heftel Broadcasting, Class A (a)...................... 300,000 13,013
Outdoor Systems (a)................................... 800,000 24,000
-----------
67,657
RESTAURANT (2.4%)
McDonald's............................................ 525,000 23,789
SEMICONDUCTORS (3.3%)
Intel................................................. 135,000 16,048
Maxim Integrated Products (a)......................... 300,000 16,237
-----------
32,285
SPECIALTY CHEMICALS (1.5%)
Minerals Technologies................................. 300,000 14,400
TELECOMMUNICATIONS (9.1%)
American Tower, Class A (a)........................... 500,000 12,250
Equant................................................ 157,500 11,852
Frontier.............................................. 50,000 2,594
Global Telesystems.................................... 200,000 11,187
MCI WorldCom (a)...................................... 345,000 30,554
Qwest Communications International (a)................ 291,525 21,017
-----------
89,454
TELECOMMUNICATIONS EQUIPMENT (5.1%)
Loral Space & Communications (a)...................... 400,000 5,775
Lucent Technologies................................... 180,000 19,394
Tellabs (a)........................................... 250,000 24,438
-----------
49,607
TRAVEL SERVICES (1.2%)
Sabre Group Holdings (a).............................. 250,000 11,344
-----------
Total Common Stocks (Cost $641,335)................... 947,098
-----------
SR&F GROWTH INVESTOR PORTFOLIO CONTINUED
Number Market
SHORT TERM OBLIGATIONS (4.5%) of Shares Value
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COMMERCIAL PAPER (4.5%)
Associates Corp. of North America 5.00% 4/1/99.......... $ 43,685 $ 43,685
-----------
TOTAL SHORT-TERM OBLIGATIONS
(Cost $43,685).......................................... 43,685
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TOTAL INVESTMENTS (101.1%)
(Cost $685,019) (b)..................................... 990,783
OTHER ASSETS, LESS LIABILITIES (-1.1%).................. (10,653)
-----------
TOTAL NET ASSETS (100.0%)............................... $980,130
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NOTES TO PORTFOLIO OF INVESTMENTS
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(a) Non-income producing security.
(b) At March 31, 1999, the cost of investments for federal income tax
purposes was $685,027. Net unrealized appreciation of $305,756,
consisting of gross unrealized appreciation of $323,673 and gross
unrealized depreciation of $17,917.
See accompanying Notes to Financial Statements.
<PAGE>
STEIN ROE GROWTH INVESTOR FUND
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STATEMENTS OF ASSETS AND LIABILITIES
For the Period Ended March 31, 1999
(All amounts in thousands, except per-share data)
(Unaudited)
ASSETS
Investments in Portfolio, at value.................................... $ 25
Receivable for fund shares sold....................................... 3
--------
Total assets................................................. 28
--------
LIABILITIES
Other liabilities..................................................... --
--------
Total liabilities............................................ --
--------
Net assets................................................... $ 28
========
ANALYSIS OF NET ASSETS
Paid-in capital....................................................... $ 28
Net unrealized appreciation (depreciation) on investments............. --
Accumulated undistributed net investment income (loss)................ --
Accumulated net realized gain (loss) on investments................... --
--------
Net assets................................................... $ 28
========
Shares outstanding (unlimited number authorized)...................... 3
========
Net asset value per share............................................. $10.00
========
See accompanying Notes to Financial Statements.
<PAGE>
STEIN ROE GROWTH INVESTOR FUND
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STATEMENTS OF CHANGES IN NET ASSETS
(All amounts in thousands)
(Unaudited)
Period
ended
March 31,
1999(a)
--------------
OPERATIONS
Net investment income (loss)................................ $ --
Net realized gain (loss) on investments..................... --
Net change in unrealized appreciation or
depreciation on investments........................ --
---------
Net increase (decrease) in net assets
resulting from operations...................... --
---------
Distributions to Shareholders
Distributions from net investment income.................... --
Distributions from net capital gains........................ --
---------
Total distributions to shareholders................ --
---------
SHARE TRANSACTIONS
Subscriptions to fund shares................................ 28
Value of distributions reinvested........................... --
Redemptions of fund shares.................................. --
---------
Net increase from share transactions............... 28
---------
Net increase in net assets......................... 28
TOTAL NET ASSETS
Beginning of period......................................... --
---------
End of period............................................... $ 28
---------
Accumulated Undistributed Net Investment Income (Loss)...... $ --
=========
ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to fund shares................................ 3
Issued in reinvestment of distributions..................... --
Redemptions of fund shares.................................. --
---------
Net increase in fund shares........................ 3
Shares outstanding at beginning of period................... --
---------
Shares outstanding at end of period......................... 3
=========
(a) From commencement of operations on March 31, 1999.
See accompanying Notes to Financial Statements.
<PAGE>
SR&F GROWTH INVESTOR PORTFOLIO
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STATEMENTS OF ASSETS AND LIABILITIES
March 31, 1999
(All amounts in thousands)
(Unaudited)
ASSETS
Investments, at market value (cost of $685,019).................. $990,783
Dividends receivable.............................................. 309
Cash.............................................................. 1,858
------------
Total assets............................................. 992,950
------------
LIABILITIES
Payable for investments purchased................................ 12,290
Payable to investment adviser.................................... 482
Other liabilities................................................ 48
------------
Total liabilities....................................... 12,820
------------
Net assets applicable to investors' beneficial interest $980,130
============
See accompanying Notes to Financial Statements.
<PAGE>
SR&F GROWTH INVESTOR PORTFOLIO
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STATEMENTS OF OPERATIONS
For the Six Months Ended March 31, 1999
(All amounts in thousands)
(Unaudited)
INVESTMENT INCOME
Dividends..................................................... $ 2,746
Interest...................................................... 911
-----------
Total investment income.............................. 3,657
-----------
EXPENSES
Management fees............................................... 2,484
Accounting fees............................................... 22
Trustees' fees................................................ 9
Audit and legal fees.......................................... 8
Custodian fees................................................ 17
Other......................................................... --
-----------
Total expenses....................................... 2,540
-----------
Net investment income................................ 1,117
-----------
Realized and Unrealized Gain (Loss) on Investments
Net realized loss on investments.............................. (2,534)
-----------
Net change in unrealized appreciation on investments.......... 233,951
-----------
Net gain on investments.............................. 231,417
-----------
Net Increase in Net Assets Resulting from Operations.......... $232,534
===========
See accompanying Notes to Financial Statements.
<PAGE>
SR&F GROWTH INVESTOR PORTFOLIO
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STATEMENTS OF CHANGES IN NET ASSETS
(All amounts in thousands)
(Unaudited)
Six months
ended Year ended
March 31, September 30,
1999 1998
-------------- -------------
Operations
Net investment income....................... $ 1,117 $ 2,659
Net realized gain (loss) on investments..... (2,534) 12,629
Net change in unrealized appreciation or
depreciation on investments.......... 233,951 (30,644)
----------- -----------
Net increase (decrease) in net assets
resulting from operations.......... 232,534 (15,356)
----------- -----------
Transactions in Investors' Beneficial Interest
Contributions............................... 65,949 389,527
Withdrawals................................. (41,023) (127,041)
----------- -----------
Net increase from transactions in
investors' beneficial interest..... 24,926 262,486
----------- -----------
Net increase in net assets......... 257,460 247,130
Total Net Assets
Beginning of period......................... 722,670 475,540
----------- -----------
End of period............................... $980,130 $722,670
=========== ===========
See accompanying Notes to Financial Statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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(All amounts in thousands) (Unaudited)
NOTE 1. ORGANIZATION
Stein Roe Growth Investor Fund (the "Fund") is a series of Stein Roe Investment
Trust (the "Trust"), an open-end management investment company organized as a
Massachusetts business trust. The Fund invests substantially all of its assets
in SR&F Growth Investor Portfolio (the "Portfolio").
The Portfolio is a series of SR&F Base Trust, a Massachusetts common
law trust organized under an Agreement and Declaration of Trust dated August 23,
1993. The Portfolio commenced operations on February 3, 1997. On March 31, 1999,
Growth Investor Fund contributed $25 in other assets to SR&F Growth Investor
Portfolio in exchange for beneficial ownership of that Portfolio. The Portfolio
allocates income, expenses, realized and unrealized gains and losses to each
investor on a daily basis, based on their respective percentage of ownership. At
March 31, 1999, Growth Investor Fund owned 0.00 percent of the SR&F Growth
Investor Portfolio.
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NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following summarizes the significant accounting policies of the Fund and the
Portfolio. These policies are in conformity with generally accepted accounting
principles, which require management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on trade date. Dividend income is
recorded on the ex-dividend date, and interest income is recorded on the accrual
basis. Interest income includes discount accretion on fixed income securities.
Realized gains and losses from investment transactions are reported on an
identified cost basis.
SECURITY VALUATIONS
All securities are valued as of March 31, 1999. Securities are valued at,
depending on the security involved, the last reported sales price, last bid or
asked price, or the mean between last bid and asked prices as of the close of
the appropriate exchange or other designated time. A security that is listed or
traded on more than one exchange is valued at the quotation on the exchange
determined to be the primary exchange for such security. Securities and other
assets for which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the Board of
Trustees.
FEDERAL INCOME TAXES
No provision is made for federal
income taxes since (a) the Fund elects to be taxed as "regulated investment
company" and makes distributions to its shareholders to be relieved of all
federal income taxes under provisions of current federal tax law; and (b) the
Portfolio is treated as a partnership for federal income tax purposes and all of
its income is allocated to its owners based on their
respective percentages of ownership.
The Fund intends to utilize provisions of federal income tax law, which
allows the Fund 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.
DISTRIBUTIONS TO SHAREHOLDERS
The Fund declares and pays dividends of any net investment income and net
realized capital gains annually, which are recorded on the ex-dividend date.
Dividends are determined in accordance with income tax principles, which may
treat certain transactions differently than generally accepted accounting
principles. Distributions in excess of tax basis earnings are reported in the
financial statements as a return of capital. Permanent differences in the
recognition or classification of income between the financial statements and tax
earnings are reclassified to paid-in capital.
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------
NOTE 3. TRUSTEES' FEES AND TRANSACTIONS WITH AFFILIATES
The Fund and the Portfolio pays a 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:
- --------------------------------------------------------------------------------
SR&F GROWTH INVESTOR PORTFOLIO GROWTH INVESTOR FUND
MANAGEMENT FEE ADMINISTRATIVE FEE
-------------- ------------------
.600% up to $500,000, .200% up to $500,000,
.550% of the next $500,000, .150% of the next $500,000,
.500% thereafter .125% thereafter
- --------------------------------------------------------------------------------
The Adviser also provides fund accounting services.
The Adviser has agreed to reimburse Growth Investor Fund for its
operating expenses to the extent that annual expenses exceed 1.10 percent 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 Fund.
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 Fund and the Portfolio maintain borrowing
arrangements under which the Fund can borrow against portfolio securities.
Neither the Fund nor the Portfolio had borrowings during the period ended March
31, 1999.
NOTE 5. INVESTMENT TRANSACTIONS
The Portfolio's aggregate cost of purchases and proceeds from sales other than
short-term obligations for the six months ended March 31,1999, were $278,134 and
$217,521, respectively.
- --------------------------------------------------------------------------------
NOTE 6. GROWTH INVESTOR FUND
The Growth Investor Fund commenced operations on March 31, 1999. The Fund had a
beginning and ending net asset value of $10.00 for that day. The Fund was not
allocated any income, expenses, realized or unrealized gain or loss for March
31, 1999 from the SR&F Growth Investor Portfolio. There is no Statement of
Operations or Financial Highlights for purposes of this financial report.
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SR&F GROWTH INVESTOR PORTFOLIO
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(a)
---------------- -------------- --------------
<S> <C> <C> <C>
Ratio of net expenses to average net assets................ 0.59%(b) 0.62% 0.63%(b)
Ratio of net investment income to average net assets....... 0.26%(b) 0.42% 0.54%(b)
Portfolio turnover rate ................................... 26% 45% 38%
</TABLE>
(a) From commencement of operations on February 3, 1997.
(b) Annualized.
<PAGE>
STEIN ROE INVESTMENT TRUST
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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
