STEIN ROE
ASIA PACIFIC FUND
SEMIANNUAL REPORT
Mar. 31, 1999
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STEIN ROE MUTUAL FUNDS
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Sensible Risk. Intelligent Investments(R)
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FROM THE PRESIDENT
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TO OUR SHAREHOLDERS
We are pleased to present the inaugural semiannual report for Stein Roe Asia
Pacific Fund, which began operations on Oct. 19, 1998. Our initial results as
shown below are encouraging, and the region appears to be showing signs of
economic recovery.
CUMULATIVE TOTAL RETURN -- LIFE OF FUND*
Stein Roe Asia Pacific Fund.............................15.40%
MSCI Pacific Index......................................19.65%
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. The ability to purchase
shares of the Fund is limited. An expense limit was in effect for the period
shown. Returns would have been lower without the limit. The MSCI Pacific Index
is an unmanaged group of stocks in Asian countries and is not available for
direct investment. Index returns are for the period from 10/31/98 to 3/31/99.
As of March 31, the Fund's country weightings were: Hong Kong 42%, Japan 30%,
Singapore 15%, Australia 4%, South Korea and the Philippines 1% each, with the
remaining 7% in cash and equivalents.
Last month, the Fund's portfolio management team at Newport Fund
Management, Inc. traveled to Asia, they found that Pacific Rim investors appear
willing to take sensible risks for the first time since the Thai Baht was
devaluated in July 1997. Of course, as with all foreign investments,
particularly emerging market investments, investing in Asia involves market,
political, accounting and currency risks not generally associated with U.S.
securities.
The Pacific Rim's stock markets turned in strong returns for the first
quarter of calendar year 1999. A gradual turnaround in Japan's stock market
began to occur last fall and appeared to accelerate through March 31. The Bank
of Japan cut interest rates in February, sending a strong signal that Japan's
central bank may have shifted to a policy of aggressive monetary stimulus.
On the corporate front in Japan, Sony (1.6% of total net assets) announced
a company-wide restructuring that included closing down unprofitable businesses
and laying off workers. This is considered a first among Japan's blue chip
companies and a positive change in strategic thinking. We think these changes
along with previously announced bank recapitalization plans and tax cuts are
signs that Japan's economy could turn in 1999.
Elsewhere in Asia, equity markets were also strong between October and
March. Low interest rates and large trade surpluses have provided a back drop of
strong liquidity for financial markets. In Hong Kong, interest rates, a measure
of risk, have fallen. Property prices have rebounded 5-10% above their lows and
sales of new property have been brisk. Hong Kong's largest companies have been
flexing their fiscal muscle with Hong Kong Bank snapping up Seoul Bank in Korea
and the conglomerate Hutchison (2.2% of total net assets) buying ports in
Indonesia and Amsterdam.
While many economists focus on China's difficulties such as slowing exports
and rising unemployment, economic progress and restructuring continues. China
has attempted to improve its financial system by closing several bankrupt
International Trust and Investment Corps (ITICs) and forming an asset management
company like the U.S.' former Resolution Trust Corp. An example of private
enterprise in China is the Haidian district in Beijing, where there are more
than 300 high tech companies. Intel and Microsoft have set up their R&D centers
for Asia in Haidian. Our research shows that China is now the world's largest
buyer of cellular telephone equipment and sixth largest for personal computers.
Taiwan, one of the largest manufacturers of computers and computer-related
equipment in the world has moved 30% of its manufacturing to the mainland.
We think the balance of fiscal 1999 is shaping up to be a recovery period
for Asian economies with positive growth expected out of most of Asia excluding
Japan. If Japan can stabilize, we believe this would be a catalyst for the
region's growth. Investment risks include an economic slowdown in the U.S.,
another false start in Japan, and/or a slowdown in Japan's restructuring
process. However, overall, we think Asia's improving economic fundamentals, a
growing will to restructure, and its apparent return to a more normal growth
trend, are encouraging.
Sincerely,
/s/ Thomas W. Butch
Thomas W. Butch
President, Stein Roe Mutual Funds
* A Fund's performance, especially for short time periods, should not be the
sole factor in your investment decision.
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STEIN ROE ASIA PACIFIC FUND
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PORTFOLIO OF INVESTMENTS AT MARCH 31, 1999
(Dollar amounts in thousands)
(Unaudited)
Number Market
COMMON STOCKS (92.8%) of Shares Value
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AUSTRALIA (4.0%)
Austrim Limited..................................... 27,000 $ 54
Tyndall Australia Limited........................... 35,000 61
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115
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HONG KONG (41.6%)
Axa China Region Limited............................ 72,000 51
Cheung Kong Holdings................................ 15,000 114
China Resources Enterprises......................... 46,000 67
China Telecom (a)................................... 70,000 117
Citic Pacific ...................................... 30,000 63
CLP Holdings........................................ 7,500 36
Dah Sing Financial.................................. 30,000 74
Glorios Sun Enterprises............................. 136,000 17
Guangshen Railway Limited-H......................... 154,800 18
Hang Seng Bank Limited.............................. 12,200 112
Hong Kong and China Gas (a)......................... 88,000 124
HSBC Holdings....................................... 4,000 127
Hutchinson Whampoa Limited.......................... 8,000 63
Johnson Electric.................................... 12,000 34
Li & Fung Limited................................... 30,000 64
Sun Hung Kai Properties Limited..................... 13,000 97
Zhejiang Expressway H............................... 126,000 22
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1,200
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JAPAN (30.1%)
Acom Limited........................................ 400 28
Aeon Credit Service Limited......................... 200 14
Aiful Corporation................................... 480 33
Bellsystem 24 ...................................... 100 34
Canon............................................... 1,000 25
Diamond Computer Services........................... 1,000 20
Don Quijote Limited................................. 100 22
Fujimi Film......................................... 400 17
Ito En Limited...................................... 600 30
Kirin Brewery Limited............................... 3,000 35
Matsushita Communication ........................... 1,000 67
Mercian............................................. 4,000 16
Minebea Limited..................................... 2,000 21
Nidec............................................... 400 49
Nippon Telegraph & Telephone ....................... 3 29
Nissin Foods Product................................ 1,000 22
NTT Data Communication Systems...................... 4 31
Orix................................................ 300 22
Park 24 Limited (a)................................. 1,000 27
People Limited (a).................................. 330 13
Ryohin Keikaku Limited.............................. 200 32
Shohkoh Fund........................................ 100 50
Softbank............................................ 300 34
Sony................................................ 500 46
Takeda Chemical..................................... 1,000 39
Takefuji ........................................... 300 23
Terumo.............................................. 1,000 20
Union Tool.......................................... 500 38
Yamada Denki........................................ 1,000 33
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870
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2
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STEIN ROE ASIA PACIFIC FUND CONTINUED
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Number Market
of Shares Value
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PHILIPPINES (1.1%)
SM Prime Holdings................................... 148,000 $ 31
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SINGAPORE (15.0%)
City Developments................................... 16,000 84
Development Bank Singapore.......................... 12,000 91
Oversea-Chinese Banking............................. 16,000 109
Singapore Press..................................... 5,800 64
Singapore Tech Engineering.......................... 40,000 36
United Overseas Bank................................ 8,000 50
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434
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SOUTH KOREA (1.0%)
Korea Electric Power ADR (a)........................ 2,200 28
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SHORT-TERM OBLIGATION (4.3%)
Associates Corp of North America 5.00% 4/1/99....... 125,000 125
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TOTAL INVESTMENTS (97.1%)
(Cost $2,443) (b)................................ 2,803
OTHER ASSETS, LESS LIABILITIES (2.9%)............... 82
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TOTAL NET ASSETS (100.0%)........................... $2,885
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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 the same. Net unrealized appreciation was $360, consisting of gross
unrealized appreciation of $429 and gross unrealized depreciation of $69.
Acronym Name
-------- -----
ADR American Depositary Receipt
See accompanying Notes to Financial Statements.
3
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Stein Roe Asia Pacific Fund
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Statements of Assets and Liabilities
March 31, 1999
<TABLE>
<CAPTION>
(All amounts in thousands, except per-share data)
(Unaudited)
ASSETS
<S> <C>
Investments, at market value (cost $2,443)..................................... $ 2,803
Cash........................................................................... 111
Dividends receivable........................................................... 10
Receivable for investments sold................................................ 2
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Total assets................................................................. 2,926
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LIABILITIES
Payable for investments purchased............................................... 21
Payable to investment adviser................................................... 2
Other liabilities............................................................... 18
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Total liabilities............................................................ 41
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NET ASSETS.................................................................. $ 2,885
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ANALYSIS OF NET ASSETS
Paid-in capital................................................................. $ 2,500
Accumulated net realized gain on investments.................................... 25
Net unrealized appreciation on investments and foreign currency translations.... 360
---------
Net assets................................................................... $ 2,885
=========
SHARES OUTSTANDING (UNLIMITED NUMBER AUTHORIZED)................................ 250
=========
NET ASSET VALUE PER SHARE....................................................... $ 11.54
=========
</TABLE>
See accompanying Notes to Financial Statements.
4
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STEIN ROE ASIA PACIFIC FUND
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STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED MARCH 31, 1999*
<TABLE>
<CAPTION>
(ALL AMOUNTS IN THOUSANDS)
(Unaudited)
INVESTMENT INCOME
<S> <C>
Dividend income........................................................................... $ 15
Interest.................................................................................. 9
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24
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Foreign taxes withheld ................................................................... (1)
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Total investment income................................................................ 23
EXPENSES
Management fees........................................................................... 10
Accounting fees........................................................................... 10
Organization costs........................................................................ 6
Audit and legal fees...................................................................... 4
Transfer agent fees....................................................................... 4
Administrative fees....................................................................... 2
Custodian fees............................................................................ 1
Trustees' fees............................................................................ 1
Other..................................................................................... 7
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Total expenses......................................................................... 45
Reimbursement of expenses by investment adviser....................................... (22)
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Net expenses........................................................................ 23
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Net investment income.................................................................. --
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REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments.......................................................... 31
Net realized loss on foreign currency transactions ....................................... (6)
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25
Net change in unrealized appreciation on investments and foreign currency translations.... 360
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Net gain on investments................................................................ 385
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Net Increase in Net Assets Resulting from Operations................................... $ 385
=========
</TABLE>
* From commencement of operations on October 19, 1999.
See accompanying Notes to Financial Statements
5
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STEIN ROE ASIA PACIFIC FUND
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STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
(ALL AMOUNTS IN THOUSANDS)
(UNAUDITED)
1999 *
---------
OPERATIONS
<S> <C>
Net investment income..................................................................... $ --
Net realized gain on investments and foreign currency transactions........................ 25
Net change in unrealized appreciation on investments and foreign currency translations.... 360
---------
Net increase in net assets resulting from operations................................... 385
---------
SHARE TRANSACTIONS
Subscriptions to fund shares.............................................................. 2,500
Value of distributions reinvested......................................................... --
Redemptions of fund shares................................................................ --
---------
Net increase from share transactions................................................... 2,500
---------
Net increase in net assets............................................................. 2,885
TOTAL NET ASSETS
Beginning of period....................................................................... --
---------
End of period............................................................................. $ 2,885
---------
ACCUMULATED UNDISTRIBUTED
NET INVESTMENT INCOME.................................................................. $ --
=========
ANALYSIS OF CHANGES IN SHARES
OF BENEFICIAL INTEREST
Subscriptions to fund shares ............................................................. 250
Issued in reinvestment of distributions................................................... --
Redemptions of fund shares............................................................... --
---------
Net increase in fund shares............................................................ 250
Shares outstanding at beginning of period................................................. --
---------
Shares outstanding at end of period....................................................... 250
=========
</TABLE>
See accompanying Notes to Financial Statements.
* From commencement of operations on October 19, 1998.
6
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NOTES TO FINANCIAL STATEMENTS
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(ALL AMOUNTS, EXCEPT PER-SHARE AMOUNTS, IN THOUSANDS)
(Unaudited)
NOTE 1. ORGANIZATION
Stein Roe Asia Pacific 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 seeks growth of capital by investing
primarily in the common stocks and equity-related securities of medium to large
capitalization growth companies located in Asia and the Pacific Basin.
The Fund commenced operations on October 19, 1998.
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NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following summarizes the significant accounting policies of the Fund. These
policies are in conformity with generally accepted accounting principles, which
require management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.
The books and records of the Fund are maintained in U.S. dollars.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on trade date. Dividend income is
recorded on the ex-dividend date, and interest income is recorded on the accrual
basis. Interest income includes discount accretion on fixed income securities.
Realized gains and losses from investment transactions are reported on an
identified cost basis.
SECURITY VALUATIONS
All securities are valued as of March
31, 1999. Securities are valued at, depending on the security involved, the last
reported sales price, last bid or asked price, or the mean between the last bid
and asked prices as of the close of the appropriate exchange or other designated
time. A security that is listed or traded on more than one exchange is valued at
the quotation on the exchange determined to be the primary exchange for such
security. Securities and other assets for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Trustees. Short-term securities with
remaining maturities of 60 days or less are valued at amortized cost.
CURRENCY TRANSLATIONS
For purposes of valuation, assets and liabilities are translated into U.S.
dollars using that day's currency exchange rates that represent the midpoint
between the bid and asked rates. Purchases and sales of securities are
translated into U.S. dollars using the prevailing exchange rate on the dates of
such transactions. The effect of changes in foreign exchange rates on realized
and unrealized security gains and losses is reflected as a component of such
gains and losses.
FORWARD CURRENCY EXCHANGE CONTRACTS
The Fund may enter into forward foreign currency exchange contracts under which
the Fund is obligated to exchange currencies at specified rates on specified
future dates. Risks arise from the possible inability of counter parties to meet
the terms of their contracts and from movements in currency values. The Fund did
not have any open contracts at March 31, 1999.
OTHER
Corporate actions are recorded on ex-date (except for certain foreign securities
which are recorded as soon after ex-date as the Fund becomes aware of such), net
of nonrebatable tax withholdings. Where a high level of uncertainty as to
collection exists, income on securities is recorded net of all tax withholdings
with any rebates recorded when received.
FEDERAL INCOME TAXES
No provision is made for federal income taxes since 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.
The Fund intends to utilize provisions of federal income tax law, which
allows for carrying 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 March 31, 1999 the Fund had no capital loss carryforwards.
DISTRIBUTIONS TO SHAREHOLDERS
The Fund annually declares and pays dividends of any net investment income and
net realized capital gains, which are recorded on the ex-dividend date.
Dividends are determined in accordance with income tax principles, which may
treat certain transactions differently from generally accepted
7
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NOTES TO FINANCIAL STATEMENTS CONTINUED
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accounting principles. Distributions in excess of tax-basis earnings are
reported in the financial statements as a return of capital. Permanent
differences in the recognition or classification of income between the financial
statements and tax earnings are reclassified to paid-in capital.
Reclassifications in the Fund's accompanying analysis of net assets can be
made in 1999 in order to reflect differences between financial reporting and
income tax results. The differences are primarily related to treatment of
investments in passive foreign investment companies and foreign currency gains
and losses.
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NOTE 3. TRUSTEES' FEES AND TRANSACTIONS WITH AFFILIATES
The Fund pays monthly management and administrative fees, computed and accrued
daily, to Stein Roe & Farnham Incorporated (the "Adviser"), an indirect,
wholly-owned subsidiary of Liberty Financial Companies, Inc. ("Liberty"), for
its services as investment adviser and administrator. Newport Fund Management,
Inc. has been engaged as sub-adviser to provide investment advisory services to
the Fund, subject to overall management by the Adviser. The management fees for
the Fund are computed at an annual rate of .95 percent of average daily net
assets, respectively. The administrative fees for the Fund are computed at an
annual rate of .15 percent of average daily net assets.
The Adviser also provides fund accounting services. For the period ended
March 31, 1999, the Fund incurred charges of $10.
The Adviser has agreed, until further notice, to reimburse the Fund to the
extent that its annual expenses, excluding certain expenses, exceed 2.00 percent
of average daily net assets.
Transfer agent fees are paid to Stein Roe Services, Inc. ("SSI"), a direct,
wholly-owned subsidiary of Liberty. SSI has entered into an agreement with
Liberty Funds Services, Inc., an indirect, wholly-owned subsidiary of Liberty,
to act as subtransfer agent for the Fund.
Certain officers and trustees of the Trust are also officers of the
Adviser. The compensation of trustees not affiliated with the Adviser for the
Fund for the period ended March 31, 1999 was $8. No remuneration was paid to any
other trustee or officer of the Trust.
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NOTE 4. SHORT-TERM DEBT
To facilitate portfolio liquidity, the Fund maintains borrowing arrangements
under which they can borrow against portfolio securities. There were no
borrowings during the period ended March 31, 1999.
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NOTE 5. INVESTMENT TRANSACTIONS
The aggregate cost of purchases and proceeds from sales other than short-term
obligations for the period ended March 31, 1999 was $4,310 and $376,
respectively.
8
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STEIN ROE ASIA PACIFIC FUND
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FINANCIAL HIGHLIGHTS
Selected per-share data (for a share outstanding throughout the period), ratios
and supplemental data.
PERIOD ENDED
MARCH 31,1999*
(UNAUDITED)
--------------
NET ASSET VALUE, BEGINNING OF PERIOD...................... $ 10.00
--------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................................. --
Net realized and unrealized gains on investments....... 1.54
--------------
Total from investment operations.................... 1.54
--------------
NET ASSET VALUE, END OF PERIOD............................ $ 11.54
--------------
Ratio of net expenses to average net assets (a) 2.00%(b)
Ratio of net investment income to average net assets (c).. (0.01)%(b)
Portfolio turnover rate................................... 14%
Total return (c).......................................... 15.40%
Net assets, end of period (000's)......................... $ 2,885
* From commencement of operations on October 19, 1998.
(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 3.74
percent for the period ended March 31, 1999.
(b) Annualized.
(c) Computed giving effect to investment adviser's expense limitation
undertaking.
9
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STEIN ROE ASIA PACIFIC FUND
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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 PARTNER, WILLIAM BLAIR CAPITAL PARTNERS
OFFICERS
Thomas W. Butch, PRESIDENT
William D. Andrews, EXECUTIVE VICE PRESIDENT
Loren A. Hansen, EXECUTIVE VICE PRESIDENT
Gary A. Anetsberger, SENIOR VICE PRESIDENT,
CHIEF FINANCIAL OFFICER
David P. Brady, VICE PRESIDENT
Daniel K. Cantor, VICE PRESIDENT
Kevin M. Carome, VICE PRESIDENT, ASSISTANT SECRETARY
J. Kevin Connaughton, VICE PRESIDENT
William M. Garrison, VICE PRESIDENT
Erik P. Gustafson, VICE PRESIDENT
James P. Haynie, VICE PRESIDENT
Harvey B. Hirschhorn, VICE PRESIDENT
Timothy Jacoby, VICE PRESIDENT
Gail D. Knudsen, VICE PRESIDENT
Eric S. Maddix, VICE PRESIDENT
Lynn C. Maddox, VICE PRESIDENT
Arthur J. McQueen, VICE PRESIDENT
Nicolette D. Parrish, VICE PRESIDENT, ASSISTANT SECRETARY
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
Scott E. Volk, TREASURER
AGENTS AND ADVISORS
Stein Roe & Farnham Incorporated
INVESTMENT ADVISOR
Newport Fund Management, Inc.
SUBADVISOR
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
10
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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
Growth Opportunities 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 Funds
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.
AP12A 5/99
