Stein Roe Mutual Funds
Semiannual Report
March 31, 1999
Photo of: small girl.
Stein Roe Equity Funds
Young Investor Fund
LOGO:
STEIN ROE MUTUAL FUNDS
SENSIBLE RISKS. INTELLIGENT INVESTMENTS.(R)
<PAGE>
Contents
From the President............................................... 1
Tom Butch's thoughts on the equity markets and investing
Performance...................................................... 7
The Stocks We Own................................................ 8
Questions & Answers.............................................. 10
An interview with Portfolio Managers David Brady and
Erik Gustafson
Fund Highlights.................................................. 14
Portfolio of Investments......................................... 16
A complete list of investments with market values
Financial Statements............................................. 22
Statements of assets and liabilities, operations and changes
in net assets
Notes to Financial Statements.................................... 28
Financial Highlights............................................. 31
Selected per-share data
Must be preceded or accompanied by a prospectus.
<PAGE>
To Our Shareholders
Dear Investor,
On March 31, 1981 - 18 years ago - 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%.
The newborns of that period are today reaching adulthood in an era that by
many measures may be termed the best of times. In March 1999, the DJIA closed
above the 10,000-point level for the first time. Together, the jobless rate and
inflation - a combination once known as the misery index - stood at less than
6%, a third of its former level. Mortgage rates are half of what they were a
generation ago.
balloon text: The Dow Jones Industrial Average is the oldest indicator of the
stock market's strength and weakness. When this average of 30 large-company
stocks increases or decreases in value, investors see it as a sign the overall
U.S. equity market is moving up or down.
<PAGE>
Two Birthdays: Five and 50
As Stein Roe Young Investor Fund approaches its fifth year of operations on
April 29, we are pleased to report that we have helped tens of thousands of
young Americans capitalize on the growth prospects of the dynamic economy of the
1990s.
For the six months ended March 31, 1999, your Fund provided a total return
of 31.48%. Young Investor Fund's results outpaced the average growth fund for
the period. We also outperformed the Fund's benchmark, the unmanaged Standard &
Poor's 500 Index as shown on page 7.
We are equally pleased to report that Young Investor Fund outperformed the
S&P 500 for its lifetime period ended March 31, 1999. The Fund's lifetime
results also outpaced the returns of more than 92% of growth mutual funds.*
*Young Investor Fund's total return ranked 30th of 391 growth funds and 552nd
of 1,022 growth funds for the life of fund and one-year periods ended 3/31/99,
according to Lipper, Inc. Rankings are based on total return with income and
capital gains distributions reinvested. An expense limit was in effect for part
of the life of fund period. Returns and life of fund ranking would have been
lower without the limit.
<PAGE>
On the pages that follow, David Brady and Erik Gustafson, your Fund's
portfolio managers, detail the strategy that has generated these results. They
attribute our returns to a strong positioning in technology and other growth
sectors that are driving today's robust economy.
At Stein Roe, we've always been focused on long-term growth. This year we
mark 50 years of helping generations of mutual fund investors as they strive to
reach their goals. To us, intelligent investing is like good parenting: each
requires a commitment born of optimism, patience and discipline. In both
endeavors, success is earned, and results are best measured over several years.
** Source: Lipper, Inc.
balloon text: Growth Funds have become more popular with investors. Today
there are more than 1,100 growth funds compared to less than 400 five years
ago.**
<PAGE>
o Our Educational Focus: High Quality, Low Cost
Young Investor Fund has a unique commitment to educating its shareholders
about personal finance and investing. We are delighted to say that we've
provided award-winning educational materials such as the quarterly Dollar
Digest(R) newsletter to a growing readership of nearly 200,000 shareholders
while maintaining an expense ratio of just 1.20%. That's lower than most growth
mutual funds, according to Morningstar, Inc.*
Through our sponsorship of the Young Investor essay contest for the past
three years, we've learned to appreciate just how creative, perceptive and
entrepreneurial America's young people can be. For example, among this year's
more than 2,200 entrants was Roba Bakir, a 6th grader from Durham, N.C. Her
ambition not only includes going to medical school, but owning her own bone
treatment clinic.
*The expense ratio of the average large growth fund tracked by Morningstar was
1.48% as of 3/31/99. This category includes both no-load funds and funds with
sales charges and 12b-1 fees.
<PAGE>
o A Tool for Growth
Providing parents a proven investment and educational tool with the
potential to help kids like Roba achieve their dreams is what Young Investor
Fund is all about. We take our commitment to our shareholders seriously because
we believe the more today's young people know about investing and the economy,
the better citizens they'll make as financially secure adults, and the stronger
our nation will be.
In answering this year's essay question - how she would save to start a
business - Elizabeth Fuller, a 6th grader from Philadelphia, remarked that "the
one great thing is that we have freedom to do these things."
Back in 1981, much of the world was unable to enjoy the challenges and
fruits of a free enterprise system. Consider that, in less than a generation,
personal computers, e-mail, cellular phones and the Internet have revolutionized
our world. More people today - from newborns to retirees - enjoy greater levels
of prosperity in a much safer, freer world than when the Dow stood at 1000
points.
<PAGE>
In my opinion, Young Investor Fund remains well positioned to take
advantage of the trends in technology and business that we think are likely to
foster further growth in the new millennium.
At Stein Roe, we maintain a firm commitment to making intelligent
investments and taking sensible risks. 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
<PAGE>
Six-Month Cumulative
and Average Annual Total Returns Through March 31, 1999
Six Months One Year Three Years Life of Fund
Young 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 1,105 1,022 619 391
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
stocks that differs from the composition of the Fund and is not available for
direct investment. The Fund began operating on 4/29/94; benchmark performance is
from 4/30/94 to 3/31/99.
balloon text: Lipper, Inc. is a company that ranks the performance of
thousands of mutual funds in categories that relate to one another. Fund
managers strive to outperform the average.
<PAGE>
The Stocks We Own
Arrow with balloon text pointing to Annual Earnings Growth Rate As of 3/31/99**:
balloon text: This column shows how fast a company's profits have been growing
over the past year. Young Investor Fund looks for companies whose earnings are
growing rapidly.
If you could travel back in time, you'd see that the fastest-growing
companies in America in the 19th Century were a lot different than today.
Railroads were a new technology back then and brought our country together.
You may have read about the joining of the Union Pacific and Central Pacific
railroads in 1869 in Utah. Investors back then bought railroad stocks to
participate in America's growth potential. In fact, nine of the 11 stocks in the
first U.S. stock index, the Dow Jones Transportation Average, were railroads.
Today, the Internet is bringing the world together, creating opportunities
that we believe are as vast as the American West must have seemed to a traveler
in a Pullman railcar. Some 150 years after gold was discovered in California,
many companies in that state and elsewhere now aim to profit from
Internet-related technology that helps people communicate and transact business.
In managing Young Investor Fund, we seek technology, consumer and other
stocks that we think offer long-term potential rewards for investors. Mindful of
the lessons of history, we carefully analyze the risks of investing in rapidly
growing companies.
As of March 31, 1999, five of the portfolio's top 10 holdings were
technology companies, as shown on the next page. One of the portfolio's most
successful new holdings since our last report to you in the fall of 1998 has
been 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.
<TABLE>
<CAPTION>
Top 10 Holdings Main Annual
As of March 31,1999* Percent of Product Earnings
Company Net Assets Or Service Growth Rate
As of 3/31/99**
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
1 America Online 4.5% Internet access 49%
- ---------------------------------------------------------------------------------------------------------
2 Cisco Systems 3.5 Computer networking 29
- ---------------------------------------------------------------------------------------------------------
3 MCI WorldCom 3.1 Telecommunications 29
- ---------------------------------------------------------------------------------------------------------
4 Microsoft 2.7 Computer software 24
- ---------------------------------------------------------------------------------------------------------
5 Tellabs 2.5 Computer access systems 28
- ---------------------------------------------------------------------------------------------------------
6 Outdoor Systems 2.4 Billboards 31
- ---------------------------------------------------------------------------------------------------------
7 McDonald's 2.4 Restaurants 12
- ---------------------------------------------------------------------------------------------------------
8 Mattel 2.3 Toys 21
- ---------------------------------------------------------------------------------------------------------
9 Household International 2.3 Consumer loans 16
- ---------------------------------------------------------------------------------------------------------
Engines, appliances,
10 General Electric 2.3 financial services 13
</TABLE>
*Holdings disclosed as a percentage of SR&F Growth Investor Portfolio.
**Source of earnings growth rate: Consensus of stock analysts' current estimates
for the 1999 calendar year as submitted to Bloomberg Business News by I/B/E/S
International as of 3/31/99.
<PAGE>
An Interview with the Portfolio Managers
Q&A with David Brady and Erik Gustafson, portfolio managers of
Young Investor Fund and SR&F Growth Investor Portfolio
Photo of: Erik Gustafson and David Brady
How did the Fund perform between October 1998 and March 1999?
Gustafson: We delivered exceptional results. Young Investor Fund fully
participated in the stock market's recovery last fall and continued to provide
above-average returns this past winter. The Fund's 31.48% total return outpaced
the returns of both the unmanaged S&P 500 Index and most growth funds for the
six months ended March 31, 1999, as shown on page 7.
What contributed to the Fund's performance?
Brady: We held an above-average weighting in technology and telecommunications
stocks, and these sectors provided strong double-digit returns. Last fall, we
repositioned the portfolio to more fully participate in the growth potential of
the Internet and this served us well. Your Fund held large company stocks such
as America Online and MCI WorldCom (4.5% and 3.1% of net assets, respectively)
that were among the top performing stocks in the S&P 500 Index for the period.
Over the past six months, investors focused primarily on large-company stocks
with what we consider to be pure, proven growth characteristics -- the type of
stocks that make up a majority of the portfolio.
We made America Online (AOL), the largest Internet service provider, one of
our top 10 holdings because we think the company is well-positioned to benefit
from the growing use of the Internet. It appears to have a competitive advantage
over its peers, and unlike many small technology companies, AOL has a proven
product and management team.
<PAGE>
Since September, the portfolio also benefited from merger announcements
affecting two holdings: Frontier Corp., a telecommunications company (0.3% of
net assets) and Petersen Companies, a magazine publisher we sold. The company
was acquired by Emap plc of the U.K.
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 amount of goods and services produced in the United
States) rose a strong 6% in the fourth quarter of 1998, and many economists
believe the United States will continue to grow without much inflation in 1999.
This environment has historically been positive for growth stocks.
<PAGE>
balloon text:
A company's earnings per share is the amount of profit divided by the number of
outstanding shares of common stock.
Young Investor Fund also owns small-company and midcap 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. We
have increased the average size of companies (median market capitalization)
in the portfolio to position the Fund to benefit from the current demand for
high-quality growth stocks. More than 80% of the Portfolio's net assets were
invested in companies with a market capitalization of more than $5 billion as of
March 31.
Gustafson: Because small-company stocks have been so out of favor, we've become
extremely selective in this area. We focus exclusively on those companies we
think can consistently meet or exceed analysts' earnings expectations.
<PAGE>
During the first three months of 1999, we strategically increased our
position in smaller technology stocks that we think are well-positioned to
benefit from Internet growth. These 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).
Brady: We hold a broad mix of stocks because we believe this is a sensible
approach that can 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.
<PAGE>
Were there any disappointments among large-company stocks in the portfolio?
Brady: Mattel, the toy manufacturer, (2.3% of net assets) remained weak.
However, we retained our position because we believe the company's brands are
well-established and inventory reduction by retailers is slowing. Last year,
many stores cut back on the amount of toys they keep in stock and this hurt
Mattel's profits.
Gustafson: We also sold Kellogg Corp. and Quaker Oats. Increased competition in
the breakfast foods section of supermarkets appears to have limited both
companies' growth prospects.
The health care and pharmaceutical sectors provided mixed results. Stocks
such as Johnson & Johnson (1.9% of net assets) were weak in the fourth quarter
but rebounded in the first quarter of 1999.
What's your outlook for the U.S. economy?
Brady: We spend about 10% to 15% of our time looking at macro-economic trends.
We're stock-pickers at heart, and expend most of our resources evaluating
whether individual companies can grow regardless of economic conditions.
Generally, we think the current U.S. environment of low inflation, moderate
interest rates and healthy consumer demand can continue. In our view, this bodes
wells for growth stocks and we remain fully invested.
Past performance is no guarantee of future results. Share price and investment
returns will vary, so you may have a gain or loss when you sell shares. Total
return includes changes in share price and reinvestment of income and capital
gains distributions. Portfolio holdings are as of 3/31/99 and are subject to
change. Investments in smaller companies may experience greater volatility. The
unmanaged S&P 500 Index differs from the composition of any Stein Roe Fund; it
is not available for direct investment.
<PAGE>
Fund Highlights
As of March 31, 1999
Growth of a $10,000 Investment
Since Young Investor Fund Began Operating in 1994
- --------------------------------------------------------------------------------
Line Chart:
Young S&P 500 Index Lipper Growth
Investor Fund Fund Average
(391 funds)
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 25651
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.
Fund Data
- --------------------------------------------------------------------------------
Investment Objective:
Seeks to achieve long-term growth by investing in a portfolio primarily made
up of common stocks. The Fund also has an educational objective to teach
children and teenagers about mutual funds, basic economic principles and
personal finance through a variety of educational materials paid for by
the Fund.
Age of Fund: 4 years, 11 months
Net Assets: $905 million
Number of Shareholders: 184,659
<PAGE>
Arrows of balloon text pointing to chart: Businesses whose fortunes depend on
the ups and downs of the economy such as retailers and auto companies are called
cyclicals.
Your Fund and Its Benchmark
Sector Weightings vs. the S&P 500 Index
As of March 31, 1999
- --------------------------------------------------------------------------------
Young S&P 500
Investor Fund Index
- --------------------------------------------------------------------------------
Technology 27% 22%
Retailers/Restaurants/Entertainment** 21% 14%
Health Care/Pharmaceuticals/Media* 20% 21%
Financial 14% 16%
Utilities 10% 10%
Autos/Machinery+ 6% 9%
Mining/Chemicals++ 2% 2%
Energy 0% 6%
*Consumer non-cyclicals
**Consumer cyclicals
+Industrial ++Basic materials
Holdings disclosed as a percentage of SR&F Growth Investor Portfolio.
How Young Investor Fund Performed Amid Market
Volatility October 1, 1998 to March 31, 1999
- --------------------------------------------------------------------------------
Line Chart:
Young S&P 500 Dow Jones
Investor Fund Index Industrial Average
10/31/98 6.88% 8.13% 9.61%
11/30/98 13.18 14.68 16.60
12/31/99 20.53 21.28 17.58
1/31/99 26.12 26.35 19.89
2/28/99 21.66 22.43 19.51
3/31/99 31.48 27.32 25.87
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 reinvestment of income and capital gains distributions. The
S&P 500 Index and Dow Jones Industrial Average are unmanaged groups of stocks
that differ from the composition of the Fund and are not available for direct
investment.
<PAGE>
SR&F Growth Investor Portfolio
PORTFOLIO OF INVESTMENTS AT MARCH 31, 1999
(Dollar amounts in thousands)
(Unaudited)
NUMBER MARKET
COMMON STOCKS (96.6%) OF SHARES VALUE
-------- -------
Advertising (2.0%)
Interpublic Group
(Owns and operates advertising agencies) 250,000 $ 19,469
Banks (1.0%)
Texas Regional Bancshares, Class A
(Commercial bank operating in the Rio Grande
Valley of Texas) 350,000 9,450
Commercial Services (1.4%)
Paychex
(Provides computerized payroll accounting services
to businesses) 300,000 14,231
Computer Software and Services (15.4%)
America Online
(Internet service provider) 300,000 43,800
Cisco Systems (a)
(Worldwide leader in networking equipment
for the Internet) 316,500 34,677
EMC Corp.
(Leading supplier of intelligent enterprise storage
and retrieval technology) 50,000 6,388
Entrust Technologies
(Develops security products to ensure privacy of
transactions across the Internet) 250,000 8,438
Inktomi
(Develops and markets scalable software
applications) 100,000 8,575
Microsoft (a)
(Manufactures computer and software products
and operating systems) 290,000 25,991
Sun Microsystems
(Supplies network computing products) 75,000 9,370
Transaction Systems Architects (a)
(Develops software to facilitate electronic
payments and e-commerce) 375,000 13,500
-------
150,739
<PAGE>
SR&F Growth Investor Portfolio
PORTFOLIO OF INVESTMENTS (CONTINUED)
(Dollar amounts in thousands)
NUMBER MARKET
OF SHARES VALUE
-------- -------
Consumer Products (2.6%)
Gillette
(Manufactures and markets shaving and personal
care products) 225,000 $ 13,373
Procter & Gamble
(Produces personal-care products, pharmaceuticals,
food and beverages) 125,000 12,242
-------
25,615
Distribution - Retail (6.0%)
Hasbro
(Manufactures and sells children's toys) 600,000 17,363
Mattel
(Designs, manufactures and markets
children's toys) 925,000 23,009
Walgreen Co.
(Large retail drugstore chain) 652,400 18,430
-------
58,802
Electrical Equipment (2.3%)
General Electric
(Appliances, broadcasting, communications and
transportation) 200,000 22,125
Electrical Generation (1.2%)
AES
(Provider of electricity to U.S. and
international customers) 325,000 12,106
Entertainment (4.2%)
Cedar Fair L.P.
(Owns and operates amusement theme parks) 315,000 7,914
Time Warner
(Media and entertainment company) 250,000 17,766
Walt Disney
(Operates theme parks and resorts,
and produces motion pictures) 500,000 15,563
-------
41,243
<PAGE>
SR&F Growth Investor Portfolio
PORTFOLIO OF INVESTMENTS (CONTINUED)
(Dollar amounts in thousands)
NUMBER MARKET
OF SHARES VALUE
-------- -------
Financial Services (11.9%)
Alliance Capital Management L.P.
(Provides investment services to pension
funds, endowments, insurance companies,
banks and individual investors) 350,000 $ 8,859
American International Group
(Provides financial services and insurance to U.S.
and International companies) 150,000 18,094
Citigroup
(Provider of financial services to consumers
and corporations) 300,000 19,163
Fannie Mae
(Buys and hold mortages, and issues and
sells mortage-backed securities) 250,000 17,312
Freddie Mac
(Purchases mortgages from lenders and
resells in pools or packages) 300,000 17,138
Household International
(Provides financial and banking services) 500,000 22,813
Providian Financial
(Provides lending and deposit products to consumers) 125,000 13,750
-------
117,129
Food and Beverage (5.2%)
Coca-Cola
(Producer and distributor of soft drink products) 350,000 21,481
Groupe Danone ADRs
(Produces packaged foods and beverages) 270,000 13,466
Wm. Wrigley Jr.
(Manufactures chewing gum) 175,000 15,827
-------
50,774
Health Care (4.2%)
American Home Products
(Discovers, develops, manufactures, distributes
and sells health care products) 270,000 17,618
Johnson & Johnson
(Manufactures and markets a broad range of
health care and other products) 200,000 18,737
Orthodontic Centers of America (a)
(Provides management and consulting services
to orthodontic practices) 325,000 5,119
-------
41,474
<PAGE>
SR&F Growth Investor Portfolio
PORTFOLIO OF INVESTMENTS (CONTINUED)
(Dollar amounts in thousands)
NUMBER MARKET
OF SHARES VALUE
-------- -------
Machinery (1.0%)
McDermott International
(Manufacturer of steam generating and
environmental machinery) 400,000 $ 10,125
Medical - Instruments (3.0%)
Becton Dickinson
(Manufactures and sells a variety of
medical supplies and devices) 400,000 15,325
Medtronic
(Manufactures various cardiovascular
medical instruments) 200,000 14,350
-------
29,675
Medical - Pharmaceutical (5.7%)
Eli Lilly & Company
(Creates and delivers pharmaceutical-based
health care solutions) 150,000 12,731
Pfizer
(Researches and provides global health
care products) 150,000 20,812
Watson Pharmaceuticals (a)
(Develops, produces, markets and
distributes pharmaceutical products) 500,000 22,062
-------
55,605
Publishing, Broadcasting and Media (6.9%)
AT&T Liberty Media A
(Holds interests in globally branded
entertainment networks) 200,000 10,525
Clear Channel Communications (a)
(Owns, operates and manages radio and
television stations) 300,000 20,119
Heftel Broadcasting, class A (a)
(Spanish language radio broadcasting company) 300,000 13,013
Outdoor Systems (a)
(Provides outdoor advertising mediums) 800,000 24,000
-------
67,657
Restaurant (2.4%)
McDonald's
(Develops, licenses, leases and services a
worldwide system of restaurants) 525,000 23,789
<PAGE>
SR&F Growth Investor Portfolio
PORTFOLIO OF INVESTMENTS (CONTINUED)
(Dollar amounts in thousands)
NUMBER MARKET
OF SHARES VALUE
-------- -------
Semiconductors (3.3%)
Intel
(Produces and sells microcomputer components
and related products) 135,000 $ 16,048
Maxim Integrated Products (a)
(Develops, manufactures and markets 300,000 16,237
integrated circuits)
-------
32,285
Specialty Chemicals (1.5%)
Minerals Technologies
(Develops, produces and markets specialty minerals,
mineral-based and synthetic mineral products) 300,000 14,400
Telecommunications (9.1%)
American Tower, class A (a)
(Operator of wireless telecommunication towers) 500,000 12,250
Equant
(Provider of international data network systems) 157,500 11,852
Frontier
(Offers integrated communications services for
business and residential customers) 50,000 2,594
Global Telesystems
(Provider of broadband, internet, international and
domestic long distance services) 200,000 11,187
MCI WorldCom (a)
(Provides facilities-based and fully integrated
local, long distance, international and
Internet services) 345,000 30,554
Qwest Communications International (a)
(Provides communication services to interexchange
carriers, businesses and consumers) 291,525 21,017
-------
89,454
Telecommunications Equipment (5.1%)
Loral Space & Communications (a)
(High technology company concentrated on satellite
manufacturing and satellite-based
communication services) 400,000 5,775
Lucent Technologies
(Produces public and private networks,
communication systems and software) 180,000 19,394
<PAGE>
SR&F Growth Investor Portfolio
PORTFOLIO OF INVESTMENTS (CONTINUED)
(Dollar amounts in thousands)
NUMBER MARKET
OF SHARES VALUE
-------- -------
Telecommunications Equipment (Continued)
Tellabs (a)
(Designs, assembles, markets and services voice
and data networking products) 250,000 $24,438
-------
49,607
Travel Services (1.2%)
Sabre Group Holdings (a)
(Provider of a travel reservation system) 250,000 11,344
-------
Total Common Stocks (Cost $641,334) 947,098
-------
PRINCIPAL
SHORT-TERM OBLIGATIONS (4.5%) AMOUNT
--------
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
-------
Total Investments (101.1%)
(Cost $685,019) (b) 990,783
Other Assets, Less Liabilities (-1.1%) (10,653)
--------
Total Net Assets (100%) $980,130
========
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 $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 Young Investor Fund
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1999
(All amounts in thousands, except per-share data)
(Unaudited)
Assets
Investment in SR&F Growth Investor Portfolio, at value $ 907,036
Receivable for fund shares sold 429
Cash 25
Other assets 8
---------
Total assets 907,498
---------
Liabilities
Payable for fund shares redeemed 900
Payable to investment adviser and transfer agent 350
Other liabilities 396
---------
Total liabilities 1,646
---------
Net assets $ 905,852
=========
Analysis of Net Assets
Paid-in capital $ 618,143
Net unrealized appreciation on investments 290,655
Accumulated net realized loss on investments (1,544)
Accumulated net investment loss (1,402)
---------
Net assets $ 905,852
=========
Shares outstanding (unlimited number authorized) 31,128
=========
Net asset value per share $ 29.10
=========
See accompanying Notes to Financial Statements.
<PAGE>
Stein Roe Young Investor Fund
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1999
(All amounts in thousands)
(Unaudited)
Investment Income
Dividends allocated from SR&F Growth Investor Portfolio $ 2,573
Interest allocated from SR&F Growth Investor Portfolio 856
---------
Total investment income 3,429
---------
Expenses
Expenses allocated from SR&F Growth Investor Portfolio 2,379
Transfer agent fees 1,291
Administrative fees 756
SEC and state registration fees 48
Accounting fees 22
Trustees' fees 8
Legal and audit fees 7
Printing and postage 5
Other 315
---------
Total expenses 4,831
---------
Net investment loss (1,402)
---------
Realized and Unrealized Gain (Loss) on Investments
Net realized loss on investments allocated from SR&F Growth
Investor Portfolio (1,546)
Net change in unrealized appreciation or depreciation
on investments 218,438
---------
Net gain on investments 216,892
---------
Net Increase in Net Assets Resulting from Operations $ 215,490
=========
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
Stein Roe Young Investor Fund
STATEMENTS OF CHANGES IN NET ASSETS
(All amounts in thousands)
<CAPTION>
(Unaudited)
Six Months Year
Ended Ended
March 31, September 30,
1999 1998
--------- ---------
<S> <C> <C>
Operations
Net investment loss $ (1,402) $ (1,746)
Net realized gain (loss) on investments (1,546) 18,158
Net change in unrealized appreciation or depreciation
on investments 218,438 (31,047)
--------- ---------
Net increase (decrease) in net assets resulting
from operations 215,490 (14,635)
--------- ---------
Distributions to Shareholders
Distributions from net capital gains (18,153) (7,157)
--------- ---------
Total distributions to shareholders (18,153) (7,157)
--------- ---------
Share Transactions
Subscriptions to fund shares 109,808 452,618
Value of distributions reinvested 17,876 7,013
Redemptions of fund shares (105,193) (227,321)
--------- ---------
Net increase from share transactions 22,491 232,310
--------- ---------
Net increase in net assets 219,828 210,518
Total Net Assets
Beginning of period 686,024 475,506
--------- ---------
End of period $ 905,852 $ 686,024
========= =========
Undistributed Net Investment Income (Loss) at
End of Period $ (1,402) $ --
========= =========
Analysis of Changes in Shares of Beneficial Interest
Subscriptions to fund shares 4,249 18,030
Issued in reinvestment of distributions 741 315
Redemptions of fund shares (4,107) (8,999)
--------- ---------
Net increase in fund shares 883 9,346
Shares outstanding at beginning of period 30,245 20,899
--------- ---------
Shares outstanding at end of period 31,128 30,245
========= =========
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
SR&F Growth Investor Portfolio
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1999
(All amounts in thousands)
(Unaudited)
Assets
Investments, at market value (cost $685,019) $990,783
Cash 1,858
Dividends receivable 309
--------
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
STATEMENT 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
Custodian fees 17
Trustees' fees 9
Audit and legal fees 8
---------
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 or depreciation
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>
<TABLE>
SR&F Growth Investor Portfolio
STATEMENTS OF CHANGES IN NET ASSETS
(All amounts in thousands)
<CAPTION>
(Unaudited)
Six Months Year
Ended Ended
March 31, September 30,
1999 1998
--------- ---------
<S> <C> <C>
Operations
Net investment income $ 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.
</TABLE>
<PAGE>
Notes to Financial Statements
(ALL AMOUNTS IN THOUSANDS)
Note 1. Organization
- --------------------------------------------------------------------------------
Stein Roe Young 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"), which seeks to achieve long-term growth by investing
primarily in common stocks believed to have long-term growth potential.
The Fund also has an educational objective to teach investors,
especially young people, about basic economic principles and personal
finance through a variety of educational materials prepared and paid
for by the Fund.
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 February 3,
1997. At commencement, the Fund contributed $292,104 in securities and
other assets in exchange for beneficial ownership of the Portfolio. The
Portfolio allocates income, expenses, realized and unrealized gains and
losses to each investor on a daily basis, based on their respective
percentage of ownership. At March 31, 1999, Stein Roe Young Investor
Fund owned 92.5 percent of the Portfolio.
Note 2. Significant Accounting Policies
- --------------------------------------------------------------------------------
The following summarizes the significant accounting policies of the
Fund and Portfolio. The 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.
Security Valuations
All securities are valued as of March 31, 1999, the last business day
of the period. Securities traded on national securities exchanges are
valued at the last reported sales price or, if there are no sales, at
the latest bid quotation. Each over-the-counter security for which the
last sale price is available from NASDAQ is valued at that price. All
other over-the-counter securities for which reliable quotations are
available are valued at the latest bid quotation. 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 Trust's Board of Trustees.
<PAGE>
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.
Federal Income Taxes
No provision is made for federal income taxes since (a) the Fund elects
to be taxed as a "regulated investment company" and make distributions
to its shareholders to be relieved of all federal income taxes under
provisions of current federal tax law; and (b) the Portfolio is treated
as a partnership for federal income tax purposes and all of its income
is allocated to its owners based on their respective percentages of
ownership.
Distribution 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
from generally accepted accounting principles. Distributions in excess
of tax basis earnings are reported in the financial statements as a
return of capital. Permanent differences in the recognition or
classification of income between the financial statements and tax
earnings are reclassified to paid-in capital.
<PAGE>
Note 3. Trustees' Fees and Transactions with Affiliates
- --------------------------------------------------------------------------------
The Portfolio pays a monthly management fee and the Fund pays a monthly
administrative fee 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 manager.
The management fee for the Portfolio is computed at an annual rate
of .60 of 1 percent of average daily net assets up to $500 million, .55
of 1 percent of the next $500 million, and .50 of 1 percent thereafter.
The administrative fee for the Fund is computed at an annual rate of
.20 of 1 percent of average daily net assets up to $500 million, .15 of
1 percent of the next $500 million, and .125 of 1 percent thereafter.
The Adviser also provides fund accounting services. For the six
months ended March 31, 1999, the Fund and Portfolio incurred charges of
$22 and $22, respectively.
Transfer agent fees are paid to SteinRoe Services Inc. (SSI), a
direct, wholly-owned subsidiary of Liberty, to act as subtransfer agent
for the Fund.
Certain officers and trustees of the Trust are also officers of
the Adviser. The compensation of trustees not affiliated with the
Adviser for the Fund and the Portfolio for the six months ended March
31, 1999, was $8 and $9, respectively. No remuneration was paid to any
other trustee or officer of the Trust.
Note 4. Short-Term Debt
- --------------------------------------------------------------------------------
To facilitate portfolio liquidity, the Fund and Portfolio maintain
borrowing arrangements under which they can borrow against portfolio
securities. Neither the Fund nor the Portfolio had borrowings during
the six months 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.
<PAGE>
<TABLE>
SR&F Growth Investor Portfolio
Financial Highlights
<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%
(a) From commencement of operations on February 3, 1997.
(b) Annualized.
</TABLE>
<PAGE>
<TABLE>
Stein RoeYoung Investor Fund
Financial Highlights
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<CAPTION>
(Unaudited)
Six months ended
March 31, Years Ended September 30,
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 22.68 $ 22.75 $ 18.64
---------- ---------- ----------
Income From Investment Operations
Net investment income (loss) (0.05) (0.06) (0.04)
Net realized and unrealized gain on investments 7.07 0.31 4.79
---------- ---------- ----------
Total from investment operations 7.02 0.25 4.75
---------- ---------- ----------
Distributions
Net investment income -- -- (0.02)
Net realized capital gains (0.60) (0.32) (0.62)
---------- ---------- ----------
Total distributions (0.60) (0.32) (0.64)
---------- ---------- ----------
Net Asset Value, End of Period $ 29.10 $ 22.68 $ 22.75
========== ========== ==========
Ratio of net expenses to average net assets (b) 1.20%(d) 1.31% 1.43%
Ratio of net investment income (loss) to average net assets (c) (0.35%)(d) (0.28%) (0.25%)
Portfolio turnover rate N/A N/A 22% (e)
Total return 31.48% 1.14% 26.37% (c)
Net assets, end of period (000's) $905,852 $686,024 $475,506
<CAPTION>
Period
Ended
Years Ended September 30, September 30,
1996 1995 1994 (a)
--------- --------- ---------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 14.29 $ 10.24 $10.00
--------- --------- ---------
Income From Investment Operations
Net investment income (loss) 0.05 0.06 0.03
Net realized and unrealized gain on investments 4.86 4.07 0.21
--------- --------- ---------
Total from investment operations 4.91 4.13 0.24
--------- --------- ---------
Distributions
Net investment income (0.05) (0.08) --
Net realized capital gains (0.51) -- --
--------- --------- ---------
Total distributions (0.56) (0.08) --
--------- --------- ---------
Net Asset Value, End of Period $ 18.64 $ 14.29 $ 10.24
========= ========= =========
Ratio of net expenses to average net assets (b) 1.21% 0.99% 0.99% (d)
Ratio of net investment income (loss) to average net assets (c) 0.30% 0.47% 1.07% (d)
Portfolio turnover rate 98% 55% 12%
Total return 35.55% (c) 40.58% (c) 2.40% (c)
Net assets, end of period (000's) $179,089 $31,401 $8,176
(a) From commencement of operations on April 29, 1994.
(b) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by the investment adviser, this ratio would have
been 1.49 percent, 2.04 percent and 2.87 percent for the years ended
September 30, 1997, 1996 and 1995, respectively, and 4.58 percent for the
period ended September 30, 1994.
(c) Computed giving effect to the investment adviser's expense limitation
undertaking.
(d) Annualized.
(e) Prior to commencement of operations of the Portfolio (See Note 1 to
Financial Statements).
</TABLE>
<PAGE>
To Contact Us...
By Phone 800-338-2550
You can discuss your investment questions with a Stein Roe account
representative by calling us toll free. We'll be happy to answer questions about
your current account, or to provide you with information about opening a Stein
Roe fund account, including Stein Roe traditional, Roth and Education IRAs.
We're available seven days a week, from 7 a.m. to 8 p.m. weekdays and from 9
a.m. to 2 p.m. Saturday and Sunday (Central time).
Stein Roe's Funds-on-Call(R) 24-Hour Service Line
Using a touch-tone phone, call our toll-free number, day or night, for your
current account balance, the latest Stein Roe fund prices and yields, and other
information. In addition, if you have a Personal Identification Number (PIN),
you may place orders for the following transactions 24 hours a day:
o Exchange shares between your Stein Roe accounts;
o Purchase shares by electronic transfer;
o Order additional account statements and money market fund checks;
o Redeem shares by check, wire or electronic transfer.
Retirement Plan Accounts
Call us for information about how we can assist you with your defined
contribution plan, including 401(k) plans. You can reach us toll free at
800-322-1130. For information on IRA plans, including the new Roth and Education
IRAs, call us toll free at 800-338-2550.
By Mail or E-Mail
If you prefer to contact us by mail, please address all correspondence to:
P.O. Box 8900, Boston, MA 02205-8900. To contact us by e-mail, send
correspondence directly to [email protected] or visit us at
www.steinroe.com on the Internet.
In Person
If you are in the Chicago area, please visit our Investor Center located in
downtown Chicago at One South Wacker Drive, 32nd Floor. Our account
representatives can answer questions about your current fund investments or
provide you with information about any of the Stein Roe funds and retirement
plans. Stop by weekdays between 8 a.m. and 5:15 p.m.
<PAGE>
Stein Roe Investment Trust
Trustees
- --------------------------------------------------------------------------------
John A. Bacon Jr.
Private Investor
William W. Boyd
Chairman and Director, Sterling Plumbing
Group Inc.
Lindsay Cook
Senior Vice President, Liberty Financial
Companies, Inc.
Douglas A. Hacker
Senior Vice President and Chief Financial Officer,
United Airlines
Janet Langford Kelly
Senior Vice President, Secretary and General
Counsel, Sara Lee Corporation
Charles R. Nelson
Van Voorhis Professor of Political Economy,
University of Washington
Thomas C. Theobald
Managing Partner, William Blair Capital Partners
Agents and Advisers
- --------------------------------------------------------------------------------
Stein Roe & Farnham Incorporated
Investment Adviser
State Street Bank and Trust Company
Custodian
SteinRoe Services, Inc.
Transfer Agent
Bell, Boyd & Lloyd
Legal Counsel to the Fund
Ernst & Young LLP
Independent Auditors
<PAGE>
Stein Roe Investment Trust
(continued)
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
Sharon R. Robertson, Controller
Scott E. Volk, Treasurer
<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
Special Venture Fund
Midcap Growth Fund**
Capital Opportunities Fund
International Fund
Small Company Growth Fund
* Formerly Special Fund
** Formerly Growth Opportunities Fund
Stein Roe Mutual Funds
P.O. Box 8900
Boston, MA 02205-8900
Financial Advisors call: 800-322-0593
Shareholders call: 800-338-2550
www.steinroe.com
In Chicago, visit our Fund Center at One South Wacker Drive.
Liberty Funds Distributor, Inc.
YI11A 5/99
